Schipp v Cameron, Harrison & ors [1999] NSWSC 997 | Case summary | Zoe

NSWNSWSC

Schipp v Cameron, Harrison & ors

[1999] NSWSC 997

Supreme Court of NSW|1998-07-09|Before: Einstein J

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

1998-07-09

Before

Einstein J

Source

Original judgment source is linked above.

Judgment (442 paragraphs)

[1]

Introduction to Mr Harrison 163 Shortly after Mrs Schipp and Mr Cameron's first visit to the Mary Street property and payment of the deposit, that is to say within a week or so of the initial inspection and payment of the deposit, Mr Cameron telephoned Mrs Schipp and said that he would pick her up in his car and they could have another look at the land. Mr Cameron picked Mrs Schipp up. Mr Harrison was in the car. Mr Harrison was introduced to her in the words: "This is George Harrison. He's a solicitor". Prior to the time when she met him, Mrs Schipp did not even know that Mr Harrison existed. Mrs Schipp had never heard of Mr Harrison in relation to this venture. 164 During the next few hours conversations took place between Mr Cameron, Mrs Schipp and Mr Harrison. Mr Cameron said that it was possible to fit three townhouses on the site and that one would have to have garage facilities underneath. He said that it would have to be an upmarket development with a "top finish" inside and out. 165 Mrs Schipp said that she did not know anything about building and did not want any more involvement beyond buying the property. She said that she did not need any added stress or worry at the time. 166 Mr Cameron said that Mrs Schipp would not have to have any involvement beyond buying the property, as "[Mr Harrison's and Mr Cameron's] role would be as project managers so that [they] would organise the development of the units and then, once the units [were] developed and sold, [they] would share in the profits one-third each". [Paragraph13 Affidavit of Mrs Schipp dated 10-11-92, emphasis added] Mr Cameron said that they would have to get some plans drawn up and that he knew a good architect named Rob Skelcher. He said that what they could do would be to sell one to two units off the plan and that this could fund the building. He said "Harrison could do the legals and so you also won't have that part of it to worry about and no added expense as he won't charge you for the legals". Mrs Schipp said that she did not have enough cash to finance any outgoings and asked what they would do about this. 167 Mr Cameron said that he and Mr Harrison would arrange all of these matters and that all they needed Mrs Schipp to do was to buy the property up front.

[2]

Mr Harrison Interrogates Mrs Schipp as to her circumstances 168 After Mrs Schipp had inspected Mary Street with Mr Harrison and Mr Cameron and had the above described conversation, Mr Harrison drove her home and they had a lengthy conversation on this occasion. She told Mr Harrison about her former husband, her divorce and her distress at being separated from her children. 169 Mr Harrison wanted to know about Mrs Schipp's children and whether she had very much contact with them. She said that she hardly saw them. Mr Harrison asked if she was on her own. She said that she was on her own and was very distressed because she missed her children and was very lonely. 170 Mrs Schipp's recollection of this event as set out in the letter, was "George was very interested in what relationship I had with my ex-husband and children and he knew by our conversation that I had no contact at all with my ex and through him little contact with my children. In fact I was very much on my own and very alone, and had had and was having a very stressful life without my children". 171 I find that, in the course of this conversation, Mr Harrison closely examined Mrs Schipp in relation to her personal circumstances and ascertained that she had assets and funds to invest and was essentially alone and divorced and unhappy and without the protection of close family or advisers. 172 One matter which occupied some attention during the hearing, concerned Mrs Schipp's evidence that Mr Harrison had driven her home in a van. Mr Harrison denied ever having owned a light coloured van in 1988 and denied that the restaurant had owned a van with registration number OFJ 896 in 1987. Ultimately the matter was one of little significance although I formed the view that Mr Harrison's strenuous attempts to deny association at the relevant time with a van suggested that the issue tendered as to the early enquiry of Mrs Schipp's personal circumstances was a sensitive point. Mr Harrison did not prove what he set out to establish.

[4]

Further Conversations Leading to Joint Venture Agreement 176 During the same period, Mrs Schipp had several other conversations with Mr Cameron in his office and also on the telephone in relation to the proposed development of Mary Street. They discussed several details of the proposed development. In the course of the discussions, Mr Cameron said that coloured washing machines and dryers and bidets and spa baths would be put into the bathrooms. He said that it had to be an upmarket development and that he believed that the top unit would go for at least $195,000. He said that the middle and bottom units would go for a little less as their aspects were not quite as good as the aspect of the top unit. 177 At some time on or prior to 13 February 1988, Mr Cameron and Mr Harrison said that they would pay 14% interest on the purchase price to Mrs Schipp. On 16 February 1988 Mrs Schipp paid a further deposit of $5,000 and received a refund of the initial deposit. 178 On a number of occasions Mr Cameron, while updating Mrs Schipp with details of progress, asked her whether she would consider putting her unit up as security if this was required. She replied that she would in no way consider doing this as she would never put her home at risk. 179 During meetings between Mr Cameron, Mr Harrison and Mrs Schipp prior to 25 February 1988, Mrs Schipp was advised by Mr Cameron and Mr Harrison that the arrangement was : · that Mrs Schipp was to purchase the property; · that Mr Cameron and Mr Harrison would build [i.e. arrange for the building of] three townhouses on the property and would arrange for the selling of the townhouses; · that the building would be financed by selling units off the plan; · that Mr Harrison would "look after all the legal aspects"; · that Mr Cameron would arrange for the plans to be drawn up; · that when the units had been built and were sold, Mr Cameron and Mr Harrison would each have one third of the profits; · that Mrs Schipp would be paid by Mr Harrison and Mr Cameron 14% on the moneys she was to advance on the purchase; · that all Mrs Schipp would have to do was to outlay the purchase moneys and expenses incidental to the purchase. 180 At some time thereafter Mr Cameron said to Mrs Schipp that Mr Harrison had drawn up a contract for the three of them. He said that she would have to sign up when she was next in the office.

[20]

Mrs Schipp's Beliefs as to the Transaction 183 At the time that Mrs Schipp signed the agreement and resulting from so much as Mr Harrison had explained to her as he quickly read through the agreement, Mrs Schipp believed that she was buying the property at Mary Street and that the land would be in her name and would belong to her. She understood that Mr Cameron and Mr Harrison would be project managers for the development and sale of the three units upon the property. She understood that in payment for Mr Cameron and Mr Harrison's efforts in managing and selling the development project, they would each be entitled to one-third of the profits upon the sale of the three units after the development was completed. She understood that Mr Cameron and Mr Harrison's rights to a one third share in the profits each was dependent upon and contingent upon the development and sale of the units. 184 She did not understand what the significance of a trust was. At the time she signed the Joint Venture Agreement she did not intend to sign an agreement which provided that she would hold Mary Street "upon trust" for Mr Cameron and Mr Harrison. She understood that the land was hers and that she did not have any obligation to transfer it or hold it upon trust for anyone else. She simply believed that after the development was completed and in payment for Mr Cameron and Mr Harrison's efforts as project managers in relation to the development and sale of the three units, they would be entitled to one-third each of the profits upon the sale of the three units. 185 Mrs Schipp also understood at the time she was signing the Joint Venture Agreement that Mr Cameron and Mr Harrison would pay her 14% interest on the moneys she was to advance as the purchase price of the Mary Street property and for stamp duty, as Mr Cameron and Mr Harrison were, upon completion of the development, to share equally in the profits on the investment without making any capital contribution. 186 Mrs Schipp, at the time she signed the Joint Venture Agreement, was totally unaware that the agreement provided for the balance of funds required to complete the project to be funded by an outside borrowing from a bank or building society to be agreed upon by herself, Mr Cameron and Mr Harrison, using the land as security - see Clause 9(b). She did not agree to use the land as security for the balance of funds required to complete the project. No one had said to her that the land would be required for security in this way. She had been told and believed and understood that the development of the building would be funded by the pre-sale of units off the plan. Had she been informed that funds would be required to be borrowed using the property as security and that this could involve her giving a personal guarantee, she would not have agreed to participate in the venture as she had strong views about exposing her home unit to any risk. Indeed some months later, Mrs Schipp expressly declined the suggestion that, if necessary, she put up her home unit as security for any borrowings upon the basis that the unit was all she had and that she would never consider risking it.

[27]

Exchange and Conveyance of Mary Street 195 The agreement for sale of the land in relation to Mary Street was signed by Mrs Schipp in late February and was exchanged on 26 February 1988. The conveyance was settled on 3 May 1988. 196 A substantial issue of fact arose in relation to how it came about that the date shown upon the counterpart signed by the vendor of the agreement for the sale of the Mary Street property appeared as 17 March 1988. The issue gives rise to an important adverse finding in relation to Mr Harrison's credit and in relation to the significance which the Court can place on Mr Harrison's diary note entries. 197 It is quite plain that the contracts were exchanged on 26 February 1988. There can be no doubt about this matter. A letter from the vendor's solicitors to the vendor, dated 6 May 1988, confirms that contracts were exchanged on 26 February 1988. A letter from the vendor to the vendor's solicitor, dated 26 April 1988, confirms that according to the vendor's records, contracts were exchanged on 26 February 1988. Mr Harrison conceded in evidence that the exchange of contracts had occurred on 26 February 1988. Mr Cameron was the one who actually exchanged contracts and he did so at Mr Harrison's invitation. Mr Cameron's evidence was that the date of exchange was 26 February 1988. 198 Mr Cameron in paragraphs 18(a) and 18(e) of his first affidavit deposed that the contracts were exchanged on 17 March 1988. 199 Mr Harrison deposed in paragraph 34 of his first affidavit that contracts were not exchanged until 17 March 1988. Mr Harrison repeated in paragraph 61 of his first affidavit that contracts were exchanged on 17 March 1988. 200 Exhibit D3U is the counterpart of the contract signed by the vendor. It bears the date 17 March 1988. 201 Mr Harrison's 1988 diary includes an entry in his own handwriting on 17 March 1988 which reads 'Exchange contracts re Mary Street'. 202 Stamp duty was paid on the contract at about the time when the Mary Street transaction was settled, that is to say early May 1988. 203 Part of Exhibit D3T is a form of lodgment of documents, including the contract for sale, at the stamp duties office dated 6 May 1988. 204 It was put to Mr Harrison that the contract had been incorrectly dated to avoid payment of penalty stamp duty. It was put to Mr Harrison that it was unnecessary for him to have in his diary a note of the exchange of contracts but that he had put this note into his diary against the event that there might have been an enquiry from the Stamp Duties Office as to the date of exchange. 205 Mr Harrison swore that he had first ascertained that the date on the front of the contract [Exhibit D3U] was incorrect when he was involved with the Solano proceedings. Mr Harrison gave evidence that he gave the file to Mr Mathey on or after 25 March 1988 when he negotiated a fee with Mr Mathey who told Mr Harrison that he would complete the conveyancing transaction for $300. He said that he had asked Mr Mathey where the date had come from and that Mr Mathey had said to Mr Harrison: "I was out of time and I put a date on the contract. I'm going to be reprimanded for it. I'll take the consequences." Mr Harrison was unable to explain a number of aspects of these incidents. He had personally been negotiating with the vendor's solicitor when the vendor had threatened to rescind. 206 Mr Mathey was called to respond to Mr Harrison's grave allegation as to his conduct. Mr Mathey denied informing Mr Harrison that he had been out of time stamping the contract and had post-dated it so that a fine would not be incurred. I accept Mr Mathey's evidence as reliable and reject Mr Harrison's evidence on this issue. 207 Mr Mathey's evidence was that in about April 1988 Mr Harrison gave him a number of files including the purchase by Schipp file and that Mr Harrison had said to him: "This is a file that must be settled quickly and we only have a very short time to do so"; and that Mr Harrison had asked him to do whatever was necessary to get the matter settled, which included doing the enquiries, preparing the transfer, submitting it to the other solicitor and arranging settlement. Mr Mathey denied that he had told Mr Harrison that he wished to be paid for whatever work he did and said that he had not actually charged any costs for the Schipp but had only covered his disbursements. 208 Mr Mathey was unable to recall whether he had been told of what date to place upon the contract or had estimated the date from the file. On being shown the file whilst in evidence, he was unable to locate any document which, had he seen it in 1988, would have been the source of the information that the date of the exchange was 17 March 1988. 209 Naturally this evidence assumed, possibly incorrectly, that no documents had been removed from the file which could have been the source of the information. 210 It seems to me highly likely and I find that Mr Harrison told Mr Mathey to put the date 17 March 1988 on the contract and that Mr Harrison placed the incorrect diary note into his diary against the event that there might have been an enquiry from the Stamp Duties Office about the matter. Mr Harrison's false evidence that Mr Mathey had later conceded that he had been out of time and had dated the contract is strongly corroborative of an intent to cast the blame upon Mr Mathey to avoid the obvious inference that Mr Harrison was the source of the incorrect date. 211 As Mr Harrison was content to insert an incorrect diary note to give support in the event of a Stamp Duty Office enquiry, I am of the view that his diary notes generally cannot be relied upon as correct.

[49]

Mr Cameron's Evidence 241 According to Mr Cameron, it was many months earlier than this when he learned from Mr Harrison on 25 March 1988, that Mrs Schipp wanted to urgently see both of them, and the three then met during the afternoon on 25 March 1988. Mr Cameron's evidence was that Mrs Schipp said at this time that she wanted to get out of the agreement because she was frightened about the price increase and about the market. She said that she had to spend some money on her unit and could not afford to risk her capital unless Mr Cameron and Mr Harrison could guarantee that she was not going to lose her money. 242 Mr Cameron's evidence was that he said that he and Mr Harrison could not guarantee Mrs Schipp a profit and that there was a risk factor in all developments. Mr Cameron's evidence was that he said to Mrs Schipp that she should know that if she pulled out of the joint venture and they made a profit then Mr Harrison and he would give Mrs Schipp a gratuitous payment out of the profits. This way Mrs Schipp would not be risking anything and would get back her money plus interest whether or not there was a profit. 243 According to Mr Cameron, Mrs Schipp said that she felt better now that Mr Cameron and Mr Harrison had agreed to let her out of the agreement, as she was very distressed. She said that she was happy to leave the money in there that she had paid up to that point in time and would lend the rest of the money to Mr Cameron and Mr Harrison at the same interest but did not want any losses. 244 Mr Cameron's evidence was that amendments were made on a word processor to the form of the First Joint Venture Agreement previously signed and a copy of the new Joint Venture Agreement ("the Second Joint Venture Agreement") was given to Mr Harrison and Mrs Schipp and Mr Cameron to read. 245 The Second Joint Venture Agreement was in the following terms : 'This agreement made the 25th day of March, 1988. PARTIES 1. Delcie Joan Schipp C/- 39 Beatson Street, Wollongong in the State of New South Wales (hereinafter called the trustee).

[61]

Signed for and on behalf of Emibarb Pty Limited by its duly appointed agent in the presence of :' 246 The significant differences between the two Joint Venture Agreements are : Joint Venture Joint Venture Agreement 1 Agreement 2 Trustee Mrs Schipp to hold land Mrs Schipp to hold land [Cl.1] upon trust for the three participants upon trust for the two participants Participants Don Cameron Real Estate P/L Don Cameron Real Estate [Recital 2] Emibarb as to a one third share Mrs Schipp Emibarb as to a two thirds share The three participants entitled Shares of Participants to one third profit and liable for one third loss. The two participants entitled [Cl.6] to profit and liable for loss as to Don Cameron Real Estate - one third, and as to Emibarb - two thirds Distribution of income to participants in same one third/ two third ratio. Distribution of income to participants equally. Contribution of Funds Mrs Schipp to lend trust full amount of purchase price and stamp duty. Mrs Schipp to lend trust full amount of purchase price and stamp duty. [Cl.9(a)] Mrs Schipp to be paid interest on loan at 14% p.a. commencing on exchange of contracts to date of loan repayment. Mrs Schipp to also lend trust any other amounts payable in respect of the project No reference to security being provided to Mrs Schipp. [Cl.9(b)] Balance of funds required to complete project to be received from Commonwealth Bank or any other bank or building society as shall be agreed by participants using land as security. No reference to borrowings outside of Mrs Schipp's loan. Participants to pay interest at 14% p.a. on all amounts from date when amounts contributed by Mrs Schipp. Participants' obligations Harrison and Cameron to be Project Managers without being paid remuneration. No provision as to this matter. [Cl.10(a)] [Cl.10(b)] The three participants covenant to execute such further documents as required/necessary for effectuating provisions of Agreement. No provision as to this matter.

[70]

Findings 253 I find that no such conversation took place and reject the evidence of Mr Cameron and Mr Harrison which I find to be a total fabrication. I find that the Second Joint Venture Agreement was prepared and executed well after completion of the sale of Mary Street. Mr Baird gave evidence which I accept that he had not been shown the Second Joint Venture Agreement until 1991. This matter of the circumstances in which the Second Joint Venture Agreement was prepared is dealt with later in the judgment. 254 Mrs Schipp never met Mr Frank Mathey, solicitor, and gave him no instructions in relation to the conveyance and never spoke to him. She directed any enquiries she had in relation to the Mary Street conveyance to Mr Harrison or to Mr Cameron. 255 There never was an occasion when Mrs Schipp approached Mr Cameron and Mr Harrison seeking to be let out of the Mary Street joint venture or indicating that she could not afford to risk her capital unless Mr Cameron and Mr Harrison could guarantee that she was not going to lose her money. She was not at this stage asked to agree to the so called 'gratuitous payment' arrangement. 256 In fact, what occurred was that at some stage shortly before 12 September 1988, Mr Cameron said to Mrs Schipp that the units were going to be too small, that there was some difficulty with the design of balconies and that the units would never be able to be sold for the price they had been asking and that he thought the land should be auctioned. 257 Mrs Schipp said that she really did not want to auction the land and Mr Cameron repeated that the units were too small and, in fact, smaller than Mrs Schipp's unit. In cross-examination, Mr Cameron admitted that he knew the size of the units from early May 1988 [Transcript page 1247] and that at that size they were attracting attention in the market [Transcript page 1248]. 258 Shortly after this conversation, Mr Cameron telephoned Mrs Schipp and said that there was a contract drawn up in relation to the auction of the site and that Mr Harrison had the contract in Mr Cameron's office to sign. Mrs Schipp reminded Mr Cameron that she had already told him she did not want to sell the land and she said she was coming around to see Mr Cameron about the matter.

[71]

The Children's Meeting 259 Following this conversation, Mrs Schipp went to Mr Cameron's office where there were present, in addition to Mr Cameron, Mr Harrison and some of Mr Harrison's children. This was a day when Mrs Schipp had returned from teaching music in Sydney from 8.30am until the late afternoon. The meeting started at approximately 7.30pm and continued until about 10.30pm. Mrs Schipp, who was very tired and wished to voice her strong objection to the sale of Mary Street, listened while Mr Cameron talked about the need to sell the units. Mr Cameron repeated that the units were really too small. He said that they could not sell the units off the plan. 260 The date of the meeting is able to be fixed as I accept Mrs Schipp's evidence that at the end of the meeting she signed the exclusive selling agency agreement. It is dated 12 September 1988. 261 Mrs Schipp said that she could not believe that the project would not work. She said that the land was right next to the beach and she thought that it was just perfect. 262 Mr Cameron said that it was not possible to make the development viable. He said that he had a contract in relation to the auction of the site which he wanted her to look at and wanted her to sign. She did not sign the contract but put it back on the table and said that she was not signing it. 263 Mr Cameron and Mr Harrison said that the units were really too small and that they would not be able to get the money for them that they had expected. 264 Mr Cameron said that if the price of the units was reduced the costs would be too great given the fit-out expenses. He said that they had had to scale down the balconies for the Council and that the units just would not have the same prestige as they previously would have had. He said that he and Mr Harrison thought that one should sell them as a concept and would do well out of it anyway. He said that the time was right just then to auction the property. 265 At about this point in the meeting, Mr Harrison said that he had to take his children home and left in order to do that. While he was away, Mr Cameron said to Mrs Schipp that Mr Harrison really needed the money for the bank. Mrs Schipp did not take much notice of this comment at the time but since then has come to realise that Mr Harrison had a foreign currency loan at the time with the Commonwealth Bank of Australia. In fact, the principal reason why Mr Cameron and Mr Harrison pressured Mrs Schipp to agree to a sale was Mr Harrison's pressing financial difficulties at the time. 266 After the return of Mr Harrison to the meeting, the discussion continued when Mr Cameron said that it was a great time to auction the property. He said that the development idea would not work any longer and was too expensive and that Mrs Schipp really had no option but to sell. 267 Mrs Schipp was very tired after this very lengthy session and by about 10.30pm she said "Well all right if you really think that this is the best thing - go ahead." 268 Mrs Schipp then signed a handwritten note giving Mr Potter "permission to sell my property at 16 Mary Street and appointing Mr Harrison as my appointee", as well as the exclusive selling agency agreement dated 12 September 1988 giving exclusive selling rights over the property to Don Cameron Real Estate. At the time of signing the documents Mrs Schipp was not aware of what Mr Cameron or Mr Harrison would be entitled to receive under their arrangements. 269 Before the auction of Mary Street, Mrs Schipp had had no discussions with Mr Cameron nor Mr Harrison regarding what they would be paid, if anything, in relation to the Mary Street joint venture which was not to proceed into a development.

[82]

Mr Cameron's Evidence 287 Mr Cameron gave a number of different versions which were inconsistent, as to when Mrs Schipp and he and Mr Harrison had resolved to go ahead with the Kembla Street development. 288 In his first affidavit, he deposed that on 12 September 1988 he had a conversation with Mrs Schipp and Mr Harrison in the course of which Mrs Schipp said that she thought it was a good idea to test the market in relation to sale of Mary Street. She said that if they could get a good price they may sell and consider developing an office block on the corner of Kembla and Market Streets, Wollongong. According to Mr Cameron, she said that she did not have any superannuation for herself, and that if they could build an office block and lease it out, this would give her a good income for her future when she stopped teaching music. According to Mr Cameron, she said that she thought he was right, and that they should write a letter to the Commonwealth Bank to enquire about a loan, and that the bank should do something for them as they all banked with the Commonwealth. According to Mr Cameron, she said that she had been involved in similar projects and thought this would be a much better development than the residential units in Mary Street. According to Mr Cameron, she said that, as he had pointed out, there was no one interested in buying the Mary Street units anyhow. According to Mr Cameron, she said that if they were anything like her former husband and she had been, they would have the building up in no time. 289 Mr Cameron repeated in his first affidavit a statement that at meetings of 9 and 12 September 1988 when, so he said, the decision to sell Mary Street in the first instance was made, and later, when Mrs Schipp attended to sign the auction agency agreement, Mrs Schipp brought up the question of developing Kembla and Market Streets. In paragraph 24(c) of Mr Cameron's first affidavit, he said that he never suggested to her that she should invest her money into Kembla and Market Streets. 290 In his first affidavit, Mr Cameron deposed that the first meeting held concerning the Kembla Street project after Mrs Schipp, so he said, had raised it on 9 September 1988, was on 8 December 1988. Mr Cameron deposed that on 8 December 1988 Mrs Schipp, himself and Mr Harrison were present and "at this point each of us had resolved to go ahead with the project". 291 In cross-examination, Mr Cameron was closely tested on this matter and then sought to suggest that on 8 December, he and Mr Harrison and Mrs Schipp had merely resolved to look at proceeding with the project, as opposed to being committed to going ahead with the project. 292 In cross-examination, Mr Cameron sought to suggest that the month of December included a number of meetings of the 7th, 8th, 10th, 20th and 28th December. He said quite clearly that on 28 December Mrs Schipp finally committed or resolved to go ahead with Mr Cameron and himself in the Kembla Street project.

[92]

The recent sale of the development site located at Thirroul, of which Harrison was a one-third partner has netted some $300,000 with Harrison's share being $100,000. These funds were originally earmarked for further property speculation, however, following settlement, due within 2 weeks, Harrison's share is to be deposited with CBA. . . . Having apparently realised the seriousness of his position, Harrison also proposes to realise on personal assets including gold bullion and coins which he anticipates are worth $100,000 to $120,000. Realisation of these assets will bridge the gap to meet the required rollover costs/settlement obligations. We have clearly informed Harrison that all funds are to be placed with the Commonwealth Bank before rollover date.' [Emphasis added] 305 I find that Harrison had informed the Commonwealth Bank that his share of the Mary Street property sale entitled him to $100,000 of the proceeds of sale. This was an untrue statement made, as I find, to assist Mr Harrison in the extremely difficult financial position which, by this point in time, he had in relation to his borrowings from the Commonwealth Bank. 306 At about this time, that is to say in about late November 1988, Mr Harrison spoke to Mr Watson. Initially, the conversations revolved around meeting the holding costs of the bank of the loan. Subsequent discussions between Mr Watson and Mr Harrison also revolved around the need for Mr Harrison's company to divest itself of assets to reduce exposure because of the company's growing inability to be able to meet its interest obligations. 307 In one of these discussions, Mr Harrison telephoned Mr Watson concerning the level of debt and said that he was selling his interests in Harrison and Biddle which was the legal partnership he had in Wollongong, and that he was going to use those funds to meet the interest costs on a particular rollover. Mr Watson asked Mr Harrison how much longer he was going to be in a position to be able to continue to sell such assets without actually having to start to reduce the loan, and Mr Harrison said to Mr Watson that it was getting near to the point where he had to start divesting himself of principal assets to reduce the exposure because Mr Harrison agreed that he was running out of other assets to sell. 308 Mr Watson's evidence, which I accept, was that he was constantly pressuring Mr Harrison to put forward proposals similar to this for divesting of assets. He had similar conversations to the conversation described above from time to time with Mr Harrison throughout 1988 and 1989.

[93]

Late November 1988 - Settlement and Pregnant Silence 309 In late November 1988, Mr Cameron told Mrs Schipp that the Mary Street sale was due to be settled within the next week. 310 Mrs Schipp did not hear further from Mr Cameron nor Mr Harrison in relation to this matter. Settlement had in fact taken place on 6 December. On settlement a cheque was made payable to Mr Harrison in the sum of $285,406.51. [Exhibit D3X at page 289E] The cheque was deposited on 7 December 1988 into an account with the Commonwealth Bank of Australia in the name of the Third Defendant in trust for the Third Defendant, the Plaintiff and the First Defendant. [See paragraph 322 and following]. 311 On or about 9 December 1988, Mrs Schipp telephoned Mr Cameron. She asked him when they were going to settle and he said that settlement had taken place a few days before this. Mrs Schipp said: "Well where's the money?" Mr Cameron said: "In Harrison's bank". Mrs Schipp said: "Why didn't you tell me?" Mr Cameron said: "You knew about settlement anyway". 312 Immediately after this conversation, Mrs Schipp telephoned Mr Harrison who she was not able to speak with as he was not available, so she was informed, until 13 December. When she was finally able to speak to Mr Harrison on 13 December she said to him: "Where's the money from the settlement". Mr Harrison answered by saying: "The money is in the Commonwealth Bank. You can contact them and they will tell you where it is". 313 The off-handed way in which Mrs Schipp learned that settlement had taken place and was told that she could contact the Commonwealth Bank in order to find out where the money from the settlement was, did much to worry Mrs Schipp who was due to fly to Queensland where she was visiting her sister on the following day. 314 Mr Cameron in his affidavit, said that Mrs Schipp had instructed Mr Harrison to invest the funds in a trust account with the Commonwealth Bank so that a credit line should be established with the bank making it easier to obtain development finance for the Kembla Street property. I reject this evidence. No such instruction was ever given. At the time Mrs Schipp learned that settlement had taken place, she had not had any recent discussions with Mr Cameron and Mr Harrison in relation to investing in Kembla Street. The matter had not been put to her since she had previously indicated that she would need to think about it. As to the diary note dated 30 November 1988, part of Exhibit P32, I find that this diary note was not then entered into Mr Cameron's diary but was inserted into the diary at a much later date.

[96]

Reasons why the moneys were placed with the Commonwealth Bank in Mr Harrison's name 318 Mr Cameron was asked why the money received on settlement of the Mary Street property sale was not paid directly to Mrs Schipp, to himself and to Mr Harrison by bank cheque by direction to the purchaser at settlement. He was asked why, as he recalled it, the funds went into the account with the Commonwealth Bank in Mr Harrison's name. 319 Mr Cameron's evidence was that the funds were put into this account in order to earn interest to which Mrs Schipp had agreed. He gave evidence that the funds were paid into a central bank account in order that the funds be there as Mrs Schipp was entering also into the Kembla Street project and therefore, so Mr Cameron said, the funds would be set aside until a point of time of an agreed situation; that they would be dispersed and then projected into the Kembla Street project development. 320 Mr Cameron was asked : "Q. So do you say before Mrs Schipp was told on . . . 8 December . . . that settlement had taken place and that the money was invested in the Commonwealth Bank, she had already said to you and to Mr Harrison that the money was to be invested in Kembla Street? A. That the money would be put aside and that the money would be - that the structure of going into Kembla Street would be coming from at a point of time when that disbursement was going to happen, which happened on 30 January". 321 I do not accept this evidence of Mr Cameron. Mrs Schipp was not told that the funds from the sale of Mary Street would be placed into the Commonwealth Bank in order that they be held until projected into the Kembla Street project development. Mrs Schipp, as I find, had received no information whatever about the proceeds of the Mary Street settlement. She was unaware before the settlement as to what would occur with the funds, and after the settlement and until she spoke to Mr Harrison, she was totally unaware of the funds having been placed in the Commonwealth Bank. She gave no permission for the funds, or any part of the funds, to be placed with the Commonwealth Bank. It was a surprise to her to learn, and to learn in the off-handed fashion to which I have already referred, that the funds had been placed in the Commonwealth Bank. She was entitled to be anxious, and extremely anxious, as to what it was that was going on in relation to these moneys. Mr Cameron and Mr Harrison played upon this anxiety in their later discussions with Mrs Schipp in relation to Kembla Street. This parameter of the later discussions lay beneath the surface but represented a fact of life and a significant bargaining chip in the armoury of the Cameron Harrison Interests.

[97]

The Net Proceeds of Sale of Mary Street are placed into a Solicitor's Settlement Deposit Account 322 On 7 December 1988 [Transcript page 1628] an account entitled 'Solicitors Settlement Deposit Account' was opened by Mr Harrison with the Commonwealth Bank. The net proceeds of the Mary Street sale were deposited into the account. 323 On 23 December 1988 Mr Harrison wrote a letter which Mrs Schipp could not recall receiving. In that letter Mr Harrison informed Mrs Schipp that 'the net proceeds of [the sale of Mary Street] were invested with the Commonwealth Bank in a Solicitors Settlement Account . . .'. 324 The account opening card, signed by Mr Harrison, read 'George Andrew Harrison in trust for George Andrew Harrison, Donald Ross Cameron and Delcie May Schipp'. 325 I reject Mr Harrison's evidence that the Bank, not he, determined to call the account a solicitors settlement account. Mr Harrison was asked: 'Q. . . . did you or did you not regard that [solicitors settlement account] as an apt description of that account? A. That's how the bank described it, yes. Q. Did you, Mr Harrison, regard it as an apt description of the account? A. No.' 326 This evidence was, in my opinion, false and was given because Mr Harrison well knew in being cross examined, that Mrs Schipp's case sought to place the mantle 'solicitor' upon the capacity in which Mr Harrison acted in opening and retaining the account. 327 Mr Cameron, at Transcript pages 1291 and 1292, recalled Mr Harrison using the words 'solicitors trust account' and possibly also 'solicitors settlement account', albeit in a conversation said to have taken place with Mrs Schipp. I reject the evidence that such conversation took place. The evidence does, however, confirm me in the holding that Mr Harrison well knew and intended that the account be styled 'solicitors settlement account'. 328 The relevance of this is that Mr Harrison continued to act as a solicitor for the vendor in opening the account and to so act until, in late January 1989, the proceeds of the deposit were paid out. 329 I reject Mr Cameron's evidence that there was a meeting on 8 December 1988 between himself, Mr Harrison and Mrs Schipp in the course of which Mrs Schipp had asked when the matter was to be settled, and in which Mr Harrison had said that settlement took place on the Tuesday, and that he had invested the money in the Commonwealth Bank "as we agreed". 330 Mrs Schipp was asked whether, as at 8 December 1988, she did not trust Mr Harrison at all. Her answer was: "I did trust him in the first instance. It was only when he offhandedly said to me "Find the money in the bank" that I suddenly became wary". I accept this evidence.

[98]

Mr French expresses the view that he is concerned as to the viability of the venture and the looseness of the financial projections 331 Mr French was a lecturer at TAFE who met, became friendly with and then carried on work for Mr Cameron from the early 1980's up to the late 1980's and later in about 1993 and 1994. His initial task was to maintain trust accounts in providing bookkeeping expertise to Mr Cameron's business. He was paid for his services. He regarded himself as obtaining exposure to 'real life' business to assist him in his lecturing and at the same time was being paid for imparting his expertise. Initially he would keep a record of the hours which he spent, on the basis of which record he was reimbursed, and later he was employed on a retainer basis, being paid an amount per week. He understood his role as to supervise the trust accounting bookkeeping aspects of Mr Cameron's business. 332 In about 1993/94 when Mr Cameron moved back into the residential real estate business again, Mr French who had ceased to work for Mr Cameron since 1988, returned and this time his function was again the maintaining of trust records. On this occasion, the reason Mr French became involved, was because Mr Cameron had become involved in the residential property management market in which he had not previously been involved, so that the trust records required to be changed slightly to adapt to the new business interests of Mr Cameron. Here again in 1993/94, Mr French was paid on an hourly basis which then moved to a retainer. 333 Mr French's income, received from Mr Cameron's businesses, supplemented his income from the university. 334 Mr French gave evidence that to his observation, in early December 1988 when he first heard of the Mary Street project, most of the details of the development were vague and financial projections were quite loose. His evidence was that when he attended a meeting some two weeks later, on about 20 December, the details of the development appeared no more precise or definite to him than at the previous meeting. His further evidence was that at the meeting of 6 January, he expressed concern as to the viability of the venture and the looseness of the financial projections.

[99]

8 - 20 December 1988 335 Mr French gave evidence that he first met Mrs Schipp on Thursday 8 December 1988 at a meeting held in Mr Cameron's office at which Mr Harrison and Mr Cameron were present and that Mr Murphy of AGC joined the meeting. His evidence was that he observed that the parties were at ease with each other and were confident and optimistic and that Mr Cameron had said that they had done very well on Mary Street and Mrs Schipp had said that she was very happy with the result and asked whether she would definitely receive her one-third share of the profit as well as the interest on the money she had loaned. According to Mr French, Mr Cameron replied: "Del, George and I said you would receive one-third of the profits and you will". 336 Mr French had not been able to fix the precise date of this meeting in his first affidavit; referring to it as "early December 1988". However, some three years later, he made a second affidavit in which he fixed the date of the meeting by reference to Mr Cameron and Mr Harrison's diary entries then shown to him. 337 Mr Murphy of AGC deposed that he first met Mrs Schipp in early January 1989. I find that Mr French was incorrect in his recollection and that he has confused his dates. The meeting with Mr Murphy took place in early January 1989. 338 I find that no meeting with Mrs Schipp present took place on 8 December 1988. Mrs Schipp had not, as I find, spoken to Mr Harrison or Mr Cameron since being told by Mr Cameron in late November that the Mary Street sale was due to be settled within the following week. I have already dealt with her telephone call to Mr Cameron of 9 December. 339 Mr Zander, a pharmacist who, through his company, came to invest in Kembla Street, in his first affidavit, deposed that in mid-December he was present at a conversation with Mr Cameron, Mr Harrison and Mrs Schipp at which Mr Cameron or Mr Harrison said: "Didn't we do well out of Mary Street - wasn't that lucky"; that Mrs Schipp replied: "Good. I'd like to do it again" and that Mr Harrison said "Thank God we got out of it at that price. The poor chap who bought it has no profit left in it". 340 Some three years later, Mr Zander in his second affidavit deposed that, aided by reference to Mr Cameron's diary entry of 10 December 1988, he now believed the meeting to have taken place on 10 December 1988. 341 I find that no such meeting took place. Mr Zander is likely to have confused the dates with one of the meetings of late December 1988 or early January 1989. In fact on 10 December Mrs Schipp, as I have already found, had been trying without success to contact Mr Harrison; she finally managed to speak with him on 13 December. Mr Zander was confused on a number of aspects although, as I find, he gave his evidence believing the same to be truthful. An example of Mr Zander's erroneous recollection is his evidence that the contract for sale was executed on 30 January 1989 and not on 7 January 1989 [paragraph 50 - First Affidavit]. The passage of time has meant that Mr Zander's evidence is not always reliable. His evidence was frequently dependent upon the correctness of diary entries which were not his own. 342 Mr Cameron had also deposed in his affidavit that a meeting took place on 10 December 1988 at which there were present himself, Mr Harrison, Mrs Schipp and Mr Zander. He then gave evidence that on 10 December, Mr Zander at the meeting said that he was prepared to invest $100,000, that Mrs Schipp was contemplating investing $100,000 and that he and Mr Harrison were each contemplating investing $50,000.00. 343 I reject so much of Mr Cameron's and Mr Harrison's evidence as alleged that meetings with Mrs Schipp took place on 8 December and 10 December 1988. 344 Mr Zander also deposed in his first affidavit to a meeting with Mr Harrison, Mr Cameron, Mrs Schipp and Mr French of late December 1988 in the course of which the following was, inter alia, said : Mrs Schipp - "Will I definitely be receiving my one-third share of the profits as well as the interest on the money I have loaned to you?" Mr Cameron - "Del, George and I have always said we would give you a gratuitous payment even though you pulled out of the venture." Mr Zander - "I have organised a loan of $100,000 from the ANZ Bank and I am happy to invest this in the project." Mrs Schipp - "Bob, I am also happy to invest $100,000. I have spoken to others about the project and I feel it would be a good superannuation for me." 345 Three years later, aided by Mr Cameron and Mr Harrison's diary notes, Mr Zander placed this meeting as having occurred on 20 December 1988. 346 I reject Mr Zander's evidence - here again he is likely to have become confused, possibly through discussions over the years with Mr Cameron and Mr Harrison as to what had occurred. I do not find that he intentionally gave false evidence. It was at all times plain to me, that he was endeavouring to do his best to recall events which were extremely hazy in his mind. 347 Mr Cameron deposed that, on 20 December 1988, a meeting took place between himself, Mrs Schipp, Mr Harrison, Mr Zander and Mr Skelcher. According to Mr Cameron, Mrs Schipp said nothing about the proceeds of sale of Mary Street during this meeting or as to where they were. 348 Mr Cameron asserts that on this occasion a valuer named Mr Bell was put through to the meeting on a loud speaker telephone and that Mr Bell advised that Kembla Street was, in his opinion properly valued at $600,000. 349 Mrs Schipp denied having been present in Mr Cameron's office on this occasion when a Mr Bell was spoken to on the loud speaker phone, and denied ever having been present in Mr Cameron's office when Mr Cameron was speaking to Mr Bell on the loud speaker phone. Whilst I accept that Mrs Schipp has no present recollection of hearing Mr Bell on a speaker phone indicate that Kembla Street was, in his opinion valued reasonably at $600,000, the combined evidence of Mr Cameron and Mr suggests, and I accept, that at some stage such a discussion did take place. This is likely to have been in late December or early January. 350 Mr French had also deposed that he attended a meeting on 20 December 1988 at which there were present Mr Cameron, Mr Harrison, Mrs Schipp and Mr Zander. He said that at this meeting Mr Harrison, Mr Cameron and Mrs Schipp again expressed complete satisfaction at the conclusion of the Mary Street development and that all had seemed relaxed in their relationship with each other. He said that the purpose of the meeting as he recalled it was to discuss the proposed development at Kembla and Market Streets. I reject this evidence - Mr French is likely to have been confused. The meeting may have taken place in very late December or early January. 351 I reject also so much of Mr Cameron's and Mr Harrison's evidence as suggested that a meeting took place on 20 December 1988 with Mrs Schipp. Mr Cameron had deposed that on 20 December 1988 Mr Skelcher was present as well as Mrs Schipp, Mr Harrison, Mr Zander and himself. Mr Skelcher, however, gave no evidence of attending such a meeting. 352 In fact, as I find, Mrs Schipp having just returned from Queensland, conferred with Mr Baird on 21 December 1988. She had not seen Mr Cameron or Mr Harrison since weeks earlier.

[104]

Mrs Schipp sees Mr Baird on 21 December 1988 359 Mrs Schipp having returned from Queensland, conferred with Mr Baird on 21 December 1988. Mr Baird who gave evidence, said that Mrs Schipp seemed to him to be distressed when he saw her. 360 In the course of this meeting, as Mr Baird deposed and as I find, Mrs Schipp showed him the Agreement of Sale of the Mary Street property by Solano to her and also the First Joint Venture Agreement. 361 Mrs Schipp said to Mr Baird that she did not want to sell the property so quickly and had wanted to go through with the development considering it a long-term thing. She said that she felt that after she had bought the property the rules had changed so that she really did not know what was happening at that time. She said: "I want to get away from Don Cameron and George Harrison and get my money and profit out. I put in $154,696.83 and I paid all the extra expenses". 362 Mrs Schipp also produced to Mr Baird on this occasion records of the payments she had made in relation to Mary Street. While she was present, Mr Baird dictated a letter to Mr Cameron and to the Commonwealth Trading Bank which were typed on 22 December 1988. These are referred to below. 363 Mrs Schipp gave evidence that she gathered from Mr Baird that she had done the wrong thing in relation to the Joint Venture Agreement which she had signed. She said that she had had her thoughts on what the joint venture was all about but 'When the nitty gritty was all sorted out, what was in the joint venture was quite different to what I thought it was'. 364 Mrs Schipp gave evidence that from 21 December to 24 December she was speaking to Mr Baird and did not rely upon Mr Harrison. 365 I find that Mrs Schipp did not show Mr Baird a copy of the Second Joint Venture Agreement when she saw him in late December 1988. Mr Baird could not recall seeing the document on 21 December 1988. His best recollection was that he may have first seen the Second Joint Venture Agreement in or around June 1991. He gave evidence that he was as sure as he could be that he had not seen this joint venture agreement on 21 December 1988 or in about December 1988. I accept this evidence.

[141]

Mrs Schipp's description of Mr Cameron bellowing at her was : "It was like thunder, absolute thunder, to the extent that I almost passed out." 391 Mrs Schipp said in evidence that "the bellowing would have gone on for some minutes - I honestly think that I passed out for a few minutes". 392 In cross-examination, Mrs Schipp added that Mr Cameron had said to her "I have this letter from the Commonwealth Bank and they have frozen my funds. I have never been treated in this way before. In all the time that I have been in business I have never been in this situation". 393 Mrs Schipp was so afraid and shocked by the verbal attack upon her by Mr Cameron and Mr Harrison and by their obvious anger directed at her and by what I find was a threatening and harsh tone/manner in which these matters were put to her that she either passed out or came close to passing out and had to be helped into a chair. Mr Cameron and Mr Harrison lowered their voices once she had been helped into the chair and Mr Cameron said that she had been wrong to doubt them and said that he and Mr Harrison had been very good to Mrs Schipp and were there to help her. 394 Mrs Schipp said, and I accept, that the effect of Mr Cameron and Mr Harrison's way of speaking with her made her quite terrified of them at the time and upset her whole balance. 395 Mrs Schipp swore that she didn't think that anybody should be subjected to other people's roaring and then accepted that it was not roaring but it was very, very harsh. 396 Mrs Schipp when closely tested on the content of the conversation said that both Mr Cameron and Mr Harrison had said the same things to her which was that they did not like her getting Mr Baird to freeze the account. She said that she had been sat in a chair and started to then quieten down because she was distressed. Her evidence was that Mr Cameron and Mr Harrison were "trying to quiet me down because they could see that they had really distressed me". 397 Mrs Schipp said that she felt intimidated and harassed by Mr Cameron and Mr Harrison in this meeting. She said that she felt intimidated in the fact that they had tried to smooth her over so that she felt as though she was the problem. She said "They made me feel as though I had done something very, very wrong, that I had done something against them". She said "All I can say is, that was absolutely horrific, what they did to me". 398 Mrs Schipp also said that there were a lot of other things said during the course of this meeting which she really cannot remember. She said "It was very distressing. I know that there were other things said on that day and I just can't pull them together". All in all she said that she was there for about half an hour. 399 Mrs Schipp's evidence was that Mr Cameron and Mr Harrison made her out to be the problem. She said that she was outclassed and manipulated in that Mr Cameron and Mr Harrison "made me out to be the problem to the extent that I said to them 'Look, I'm really sorry that I have done this. I didn't mean to do this to you'".

[147]

Meeting with Mr French and Others 417 On or about early January, Mrs Schipp had a further meeting with Mr Cameron and Mr Harrison and Mr Zander. This was a meeting at which Mr French was present. Mr French took Mrs Schipp to the side and said that he thought that Mrs Schipp could not go wrong by going into any venture with Mr Cameron. He said to her that the Kembla Street project sounded like a good project and that he had heard all about the project from Don Cameron. He said that he had quite a few years of working alongside Mr Cameron and that he thought he was a great bloke. 418 Mrs Schipp was influenced at this meeting by the fact that a new participant, Mr Zander, was to be involved and by the fact that Mr Baird had, as I have earlier indicated, said to Mrs Schipp back in late December, that if he had a few dollars to spare, he wouldn't mind putting his money into the Kembla Street project. She had received some confidence in the Kembla Street project from what Mr Baird had had to say to her and from what Mr French had had to say to her about his having worked alongside Mr Cameron. 419 In the course of this meeting, Mr Cameron said words to the effect: "Well Del, you'll put in $100,000; Bob Zander is going to put in $100,000 and George and I are going to put in $50,000 each. The profit share will be 1/3, 1/3 and 1/6 each according to our contributions. The balance of moneys owing to George for the land of $300,000 will be taken out as a loan. I'll ask around about interest rates and find a good loan package. As we have discussed before, we will sell off the plan to finance the project. The building will be built within the next 12 months or so, so we'll have to get finance for the loan for that period. We've got Rob Skelcher on the project and we think it should cost about $1.2 million to build. The $1.2 million will be funded by the sales off the plan. You, Del, and Bob can take your choice of offices on the first floor as will George and I." 420 During these meetings of early January, Mr Cameron would write figures on a sheet and talk extremely quickly regarding the proposals. Mrs Schipp was not provided with any figures in relation to the viability of the Kembla Street development and did not ask to see a copy of the valuation of Kembla Street. She relied upon Mr Cameron's view that $600,000 was a reasonable price to pay for the Kembla Street property. She was never informed by Mr Cameron or by Mr Harrison that Kembla Street had been purchased by Mr Harrison for approximately $85,000 in 1975, nor the fact that Mr Harrison had a $300,000 mortgage over the property. 421 I accept Mrs Schipp's evidence that Mr Cameron and Mr Harrison were extremely positive and 'up beat' in their discussions about Kembla Street and that Mr Cameron and Mr Harrison said to Mrs Schipp that the project could be financed and developed within 12 months. Mr Cameron and Mr Harrison were well aware that it had not been possible in 1988, despite their efforts, to obtain pre-leasing commitments in the absence of some form of development activity being under way. They were well aware of the Commonwealth Bank's requirement that pre-leasing commitments be procured as a condition before finance could be provided. They were well aware that no such pre-leasing commitments had been obtained by the time Pyogrove agreed to purchase Kembla Street. 422 I find that the question of whether the parties would be capable of providing sufficient security was not explored or discussed at any time before Mrs Schipp invested in Kembla Street. Nor had the importance of obtaining detailed plans, specifications and tender prices been discussed with Mrs Schipp. No such plans, specifications or tender prices had been obtained or become available at the time of the discussions leading to the decision to invest in Kembla Street. 423 Mr Cameron and Mr Harrison were, as I find, aware at the time of the early January 1989 discussions with Mrs Schipp, that the project had not progressed to a stage where a proper assessment of building costs could be made. Mr Cameron said to Mrs Schipp that Mr Skelcher was involved with the project and that he thought that the project should cost about $1.2m to build. Yet, as I find, the fact was that at the time this representation was made, Mr Cameron and Mr Harrison were aware that the project had not progressed to a stage where a proper assessment of building costs could be made. Only the development application had been prepared prior to 7 January 1989. I accept that without the building application available or any further detailed building specifications, it was simply not possible for a reliable estimate of construction costs to be made. Yet Mrs Schipp remained ignorant not only of all these matters, but also of the fact that Mr Harrison's financial predicament required that Kembla Street be sold for $600,000 and that the sale be completed by the rollover date of 31 January 1989. 424 Importantly Mrs Schipp was not informed that she was to become personally liable as a guarantor for borrowings to fund the purchase. 425 After these discussions with Mr Cameron and Mr Harrison and Mrs French, Mrs Schipp decided that the project must be a worthwhile investment.

[180]

Second Joint Venture Agreement - Executed on or about 28 March 1989 431 The Second Joint Venture Agreement was executed after completion of the Mary Street sale. The compelling inferences which support this finding are drawn from a number of matters including importantly the differences between the two joint venture agreements. In particular : (a) The omission in the Second Joint Venture Agreement of any reference to construction finance. [Compare clause 9(b) of each Agreement]. Once the property had been sold there was no need to provide for construction finance. (b) The omission from the Second Joint Venture Agreement of any provision for Mr Harrison and Mr Cameron to act as project managers. Project management was no longer required after a sale. (c) The addition in the Second Joint Venture Agreement of a provision that Mrs Schipp lend to the trust not only the purchase price and stamp duty, but also any other amounts payable in respect of the project. Mrs Schipp had paid all of the accounts associated with settlement. 432 The contradictory evidence in relation to the Second Joint Venture Agreement takes one back in time to the events which, on Mr Cameron and Mr Harrison's evidence, are said to have taken place in March 1988. This has already been briefly referred to; see paragraphs 227 and following. 433 Both Mr Cameron and Mr Harrison were closely tested in cross examination on their evidence that the Second Joint Venture Agreement had been executed on 25 March 1988. 434 I formed the clear view that Mr Cameron and Mr Harrison were lying on this matter and that Mrs Schipp's evidence was truthful and should be accepted. 435 This is a matter which par excellence involves the assessment of these witnesses' credit through extended cross examinations. It is impossible to summarise precisely which sections of the cross-examination persuaded me that the versions of Mr Cameron and Mr Harrison should be rejected and that of Mrs Schipp accepted. My judgment in this respect is gleaned from their demeanour and their being tested on many occasions in relation to this matter and in relation to a number of other matters. 436 Amongst the many matters upon which I have relied in forming this view is the confusing nature of the evidence which Mr Cameron and Mr Harrison appeared to give. Mr Cameron for example said several times that he and Mr Harrison had stated to Mrs Schipp that if a profit was made on Mary Street, they would "revert back to the first agreement" and Mrs Schipp would receive one-third of the profits. In short, so he said, the first Deed would come "back into play". 437 Mr Cameron was asked in cross-examination and answered as follows: 'Q. You know, don't you, that the second agreement does not say that if a profit is made, that the first agreement will operate, does it? A. It doesn't say that, but we told Mrs Schipp, when we had the meeting that that would occur. Q. If that was the clear understanding, why wasn't it put into the second agreement? A. Into what agreement?

[181]

Q. Why wasn't it put into the second agreement, that if a profit was made that the second agreement would be replaced by the first agreement? A. Well all I can say is that the legalities were left to Mr Harrison.' [Transcript 21 October} 438 As opposed to the evidence that upon a profit being made, Mrs Schipp was entitled to be placed in the position where her rights to a profit share were as provided for in the First Joint Venture Agreement, both Mr Cameron and Mr Harrison swore that in fact any payment which might be made after a profit was made, would be a gratuitous payment to Mrs Schipp. Indeed Mr Cameron conceded that such a payment would be in his and Mr Harrison's discretion. 439 Other differences emerged between the versions which Mr Cameron and Mr Harrison gave on this matter in their different affidavits and then in chief. Mr Cameron for example had in his first affidavit of 10 February 1993, deposed to a version of the conversation which was that he and Mr Harrison would give Mrs Schipp a gratuitous payment out of the profits if a profit was made. In that version of the conversation in this affidavit, Mr Cameron had not made any specific reference to having said to Mrs Schipp that she would receive a one-third share of any profits. In Mr Cameron's later versions of the conversation, it was always put that Mrs Schipp was told that she would in fact receive a one-third share of the profits. 440 Other parameters of importance on this area involved the, so it seemed to me, very curious situation that if the Second Joint Venture Agreement was to regulate the parties' legal relationship, both agreements, on the Defendants' evidence, were given to Mrs Schipp. 441 I accept Mrs Schipp's evidence that she was given the only agreement which she had signed in March 1988, namely the First Joint Venture Agreement. 442 Also curious, it seemed to me in the extreme, was Mr Cameron's evidence that it did not cross his mind to ask for the division between himself and Mr Harrison to be one-half each as opposed to a one-third/two-thirds share division on the so-called Second Joint Venture Agreement, said to have been signed in March 1988. Indeed his evidence was that there was no real negotiation about the division. 443 The whole of the cross examination of Mr Cameron and Mr Harrison on this issue persuaded me that their version of the events was fabricated. This finding is supported by the complete absence of any evidence that the Second Joint Venture Agreement was shown to any third party in 1988. One would have expected it to be sent to the Commonwealth Bank in late 1988 rather than the First Joint Venture Agreement which was in fact sent. One would have expected Mrs Schipp to have shown both documents to Mr Baird in December 1988 if she had ever received both. She showed him only the First Joint Venture Agreement. 444 Mrs Schipp's handwritten notes Exhibit 'P1', and the date when they were prepared, confirm in my judgment both her evidence as to the time of execution, that is that the issue of the Second Agreement postdated the roaring meeting and the tax problem discussions, and also the fact that Mrs Schipp was not given a copy of the Second Joint Venture Agreement. 445 Mr Harrison's evidence in relation to alleged discussions with Mrs Schipp of 6 or 7 January 1989 was confused. His evidence on many matters was confused. He seemed to me to prevaricate and be content to be argumentative whenever this suited him. I was not prepared to accept him on many areas and in particular in relation to the evidence which he gave of the Second Joint Venture Agreement being executed in March 1988. 446 Mr Harrison in his first affidavit, had deposed to an approach by Mrs Schipp to him in February 1989 when she is alleged to have said "I am happy with the gratuitous payment that Don and yourself had paid to me. I do not need this money at this stage and I would like you and Don to use the money in the Kembla Street development and repay it back to me in two years time. I do not need any interest payment on this amount as that would only complicate my tax problem". [Paragraph 146] 447 In cross examination, Mr Harrison departed from his affidavit evidence that this discussion took place in February 1989 and gave evidence that the conversation must have been on 6 or 7 January 1989. Some of this evidence is consistent with the view that Mr Harrison was now saying that the conversation took place in the presence of Mr Bourke on 6 January 1989. 448 The following excerpt of cross examination of Mr Harrison records what he had to say about this matter and also some of the cross examination on Mr Harrison's allegation that Mrs Schipp did not want to have documentation on the interest free loan. The transcript reads: SLATTERY: 'Q. Because she had a tax problem? A. I disagree, I have never discussed the question of a tax problem with her. This so-called tax problem is a figment of her imagination.

[214]

Either during this meeting or shortly after the meeting, Mr Harrison said : "We'll have to redo the earlier agreement to reflect this arrangement" or words to that effect. 453 At about the same time, a conversation took place in relation to Mrs Schipp's then belief from what she had been told by Mr Cameron and Mr Harrison and Mr Baird that she was probably only entitled to $40,000 from the sale of Mary Street. I accept Mrs Schipp's evidence that in this conversation: Mrs Schipp said "We should have something in writing to show that you have my $40,000. When can it be repaid?" Mr Cameron said "What about three years?" Mrs Schipp said "I would rather two years, would that do?" 454 I reject the submission of the Seventh Defendant that there is a rational explanation for the interest free loan in that Mrs Schipp received her profits as a gratuity and being grateful for the money showed her appreciation by the interest free loan. 455 Mrs Schipp's evidence, which I accept, was that on or about 28 March 1989, she signed the Second Joint Venture Agreement, although it was backdated to 25 March 1988. She recalled that it had to be backdated a few days plus a year. On her evidence, Mr Harrison read the Second Joint Venture Agreement out and simply said: "Its much the same as the earlier agreement" or words to that effect. At the time of signing the Second Joint Venture Agreement Mrs Schipp did not, as I find, appreciate what the differences were between this document and the First Joint Venture Agreement. She understood that the Second Agreement 'would apportion the distribution of [her] profit share on Mary Street to [Mr Cameron and Mr Harrison]'. 456 Mrs Schipp, as I find, did not seek any independent legal advice in relation to the Second Joint Venture Agreement. Neither Mr Cameron nor Mr Harrison as I find, nor anyone else, suggested to Mrs Schipp that she should or needed to seek independent legal advice on this matter. Mrs Schipp was not herself as I find, supplied with a copy of the Second Joint Venture Agreement until September 1991. Mr Bourke had received a copy of the Agreement from Mr Cameron under cover of a letter dated 19 July 1989.

[216]

Evidence of Mr Bourke 459 This finding also involves a rejection of evidence given by Mr Bourke. I turn to examine that evidence. 460 Mr Bourke was unsure as to whether Mr French had been at a meeting of 6 January 1989. Mr French gave evidence that he had been present at least during a portion of the meeting. 461 Mr Bourke's evidence was that he arrived at Don Cameron's office in Wollongong just after lunch. He was introduced to Don Cameron, George Harrison, Mr Zander and Mrs Schipp. 462 There was quite a considerable amount of happy discussion regarding the successful completion of a venture which Mr Cameron, Mr Harrison and Mrs Schipp had undertaken in relation to Mary Street. According to Mr Bourke, they were happy that they had made a profit and were discussing it amongst themselves. Mr Bourke's evidence was that, consequential to this discussion, there were further discussions about the taxation consequences for each of the three persons involved in respect of the profit which they made on that particular joint venture. He said that they had asked him for his opinion and that he gave it. In his affidavit, he deposed that Mr Cameron had asked him what was his, that is Mr Bourke's, opinion of the taxation consequences of the profits made on Mary Street. Mrs Schipp, according to Mr Bourke, had said that she would also like to know. Mr Bourke deposed that he had said that they would have to explain to him who owned the joint venture and in what proportions. His evidence was that Mr Harrison said that there were two joint venture agreements at which point in time he handed Mr Bourke two documents for his perusal. Mr Bourke said that he looked at these documents briefly. 463 In the witness box, Mr Bourke was shown two joint venture agreements and he gave evidence that these were the two documents that he had been handed and had perused briefly. 464 According to Mr Bourke, he said: "If there are two agreements about the same thing, there may be some confusion as to which one is the legal agreement". According to Mr Bourke, Mr Harrison replied : "The last dated agreement is the one the parties agreed reflected their agreement. The first agreement was between Don Cameron Real Estate Pty Limited, Emibarb Pty Limited and Del as equal partners. The original intention was that all partners would contribute and share the profits equally. But Del was fearful of losing her money and didn't want to take the risk, so we prepared another agreement which said that Del would provide the finance and Emibarb and Don Cameron Real Estate would take the risk and they would bear any losses. Del was to get interest on her loan." 465 Mr Bourke's evidence was that Mr Cameron then said "Don't forget to tell him about the gratuitous payment to Del" and that Mr Harrison said "Don and I have agreed to give Del $40,000 as a gratuitous payment as well as interest on the loan. That way we each get $40,000 which is what we each would have got if we'd stayed with the first agreement". 466 Mr Bourke's evidence was that Mrs Schipp then said: "Yes that's right. I hope I don't have to pay tax on this. I can't afford to pay any tax in my position. I don't earn much and I need to keep all of this money and not pay any of it out in tax". 467 Mr Bourke said that he had then said to Mr Cameron : "In your situation, if the profit is $40,000 then Don Cameron Real Estate won't have to pay tax because you can offset it against the substantial losses from previous years." 468 Mr Harrison, according to Mr Bourke, then said "Emibarb won't have to pay tax either because it also has considerable losses from previous years". Mr Bourke then recalls having said that he was not their accountant and his evidence was that he asked how much these losses were, to be informed by Mr Harrison "about $500,000". 469 Mr Bourke's version of the conversation as deposed to in his affidavit continues as follows : Mrs Schipp said to him: "What will my situation be with tax in this project?"

[218]

Mr Bourke said: "In general terms, gifts are not taxable provided they are genuinely gratuitous. If it is not a genuine gift then tax will be payable at your marginal rate and in this situation the tax would be about $20,000 including provisional tax". Mr Cameron and Mr Harrison said: "It's definitely gratuitous". Mr Harrison said: "We have no obligation to pay Del whatsoever. This is a gift to her and we'll include all the profits in our own companies' income tax returns for 1989". 470 Mr Bourke deposed that at no stage did Mrs Schipp say anything to suggest that she disagreed with what Messrs Cameron and Harrison had said during this conversation. Mr Bourke recalled Mrs Schipp saying that she was very happy with the previous venture and that she was happy to proceed and be involved in the new one. 471 Mr Bourke further deposed that at this stage of the meeting Mrs Schipp said to him that she was happy with the way things had turned out with Mary Street. That she was very worried about losing money on the project because the only assets she had were her unit in Smith Street and the money she got as part of the settlement when she divorced her husband. 472 Mr Bourke then gave detailed evidence which he had deposed to in his affidavit in relation to the discussion which took place as to their new proposed joint venture. According to Mr Bourke, Mr Harrison said that some days before, he had acquired a shelf company called Pyogrove to act as trustee for the joint venture and that they needed to decide who the directors and secretary of the company were going to be. It was then stated that it was agreed that Mr Cameron, Mr Harrison, Mr Zander and Mrs Schipp would be directors. Mrs Schipp said that she would be prepared to be the secretary of Pyogrove. Mr Bourke's evidence was that Mrs Schipp said, in relation to whether or not she would like to be the secretary, words to the following effect : "It wouldn't be a problem for me. I've done things like this before when I was married. My husband and I had companies and I am quite familiar with what is required." 473 According to Mr Bourke, after some discussion in relation to the shareholdings and family companies which might be shareholders, he said to Mr Harrison: "If Del decides to have a trust, will you be preparing the Trust Deed?" Mr Harrison replied "No, Brian Baird will do that. He's her solicitor." 474 According to Mr Bourke, at this stage of the meeting, Mr Harrison said to Mrs Schipp words to the effect : "Del, if you're not completely happy with going into the Kembla Street project with Don, Bob Zander and myself we'd be quite happy for you to say that you don't want to proceed. That would be all right with us." According to Mr Bourke, Mr Cameron said to Mrs Schipp words to the effect: "Yes Del, we don't want to have any problems like we did over Mary Street. I would be quite happy if you didn't come into this." 475 According to Mr Bourke, Mrs Schipp replied: "No, I want to go ahead with the project. I would like to make more money like we did on Mary Street. I want to build up more assets for my future". 476 Mr Bourke gave evidence that he then had a private conversation with Mrs Schipp who informed him that she had decided to change her accountant, David Daly, because she thought he had been passing information to her former husband. Mr Bourke said that he needed personal information if he was to be her tax adviser and obtained some such information. 477 Mr Bourke said that he told Mrs Schipp that she could minimise her income tax by creating a family trust and distributing the income from its investments between her daughters and herself and that she agreed that this was a good idea. 478 Mr Bourke was closely examined in cross-examination on precisely what occurred during this meeting. His evidence given in cross-examination was not materially different to that which he had deposed to in his affidavit. In particular in cross-examination, Mr Bourke said that when the question of the joint venture at the corner of Kembla and Market Streets came up, he can recall that one of the reasons why he remembers this was because he thought it was quite an unusual thing; that Mr Harrison and Mr Cameron both suggested to Mrs Schipp that perhaps she might not wish to proceed with going into the new joint venture because it was a very large one in terms of dollars and could be a bit risky with an office development and that just because she was involved in the other one, did not necessarily mean that she had to go into the Kembla Street project. Mr Bourke's evidence given in cross-examination was that Mr Cameron and Mr Harrison said to Mrs Schipp that they would be quite happy for her not to be involved and if she did not want to she could say so then. 479 In cross-examination, Mr Bourke was asked to expand upon what he recalls having been said in relation to Mary Street. In cross-examination, he again said that at the beginning there was a lot of happy discussion about the fact that Mary Street was finalised with a profit. He said that the parties talked about making $40,000 profit each. He said that the question of the deeds that he looked at was discussed because there were taxation implications in respect of the two deeds. He said that when one took the two deeds and looked at the way the ownership and so on was noted in those deeds there were different taxation consequences for some of the parties in the one deed as opposed to the other deed so that there was discussion which he recalled about the taxation consequences of both of the deeds and he said that he was involved in those discussions. 480 When asked as to what he said and as to what Mr Cameron, Mr Harrison or Mrs Schipp said about this subject, his evidence was as follows : "There were two deeds . . . and I was surprised to see two deeds. I thought that was unusual so I - before I gave my advice at the time, I thought I should ask Mr Harrison, who is a legal practitioner, which deed is the legal deed because I couldn't imagine that you would have two deeds about precisely the same thing saying different things, so I thought you should only have one. So anyway, he said to me that the deed that applies is the one that is dated last. In that particular deed it said that Don Cameron Real Estate and Emibarb were the equitable owners of the - or had the equitable interests in the project and that Mrs Schipp was the financier of it. And I said that - and I explained to all of them at the time that on that basis, that the profits would be taxed in the hands of Emibarb and Don Cameron Real Estate and that the interest received by Mrs Schipp would be taxed in her hands. Then Don Cameron and/or George Harrison said to me that they had decided that because of Mrs Schipp's involvement from the beginning and the fact that it was originally intended that she would be a one-third equitable owner, which was evidenced in the preceding dated deed, that they had decided that it was only fair that she should receive one-third of the profits in addition to the interest on the loan and they said that they had decided that they would like her to have that money as a gift, 'what did I think of that, what was the taxation consequence of that?' And my answer to that, I can remember saying to them that generally speaking gifts are not taxable under the Income Tax Assessment Act provided that they are a genuine gift and they, George Harrison and Don Cameron, both assured me that it was and that they had made that decision to give her that money because they wanted to. So that is what was said in the context of the taxation advice that I was giving them." 481 Mr Bourke also gave evidence in cross-examination that he did ask why there were two deeds because that seemed to be a sensible to ask, it seemed strange to him that there were two deeds. Mr Bourke said that either Mr Harrison or Mr Cameron explained to him that Mrs Schipp was not a wealthy person and that she was not - that she was afraid of losing her money that was invested in the venture and that they thought that it was fair on her that if she didn't have to take a risk from the loss side of things. 482 When asked as to what Mr Bourke had understood Mr Cameron and Mr Harrison had meant when they had said that Mrs Schipp wouldn't have to take a risk from the loss side of things as opposed to some other side of things, Mr Bourke said : "Well, normally that commercial type venturing, the parties that have the equitable interest would share the profits in accordance with the terms of the deed and conversely, if the venture is not a success, then they would also - they would then share those losses in those same proportions, so what I was meaning there was that in that first deed that I was - had a look at there today, Mrs Schipp had a one-third equitable interest and if you read provisions of the deed, it said a one-third equitable interest in the profits and the losses, so it was explained to me that they wanted to protect her from the losses aspect of it and that's the reason why they revised the provisions of the deed. 483 Mr Bourke also said that he had said to Mr Cameron and Mr Harrison that it was important that it was a genuine gift from a taxation point of view because if it was just a sort of roundabout way of giving Mrs Schipp profits really, "then . . . really what should happen is that she should declare it as a profit on the joint venture and pay the tax on it and they assured me that they had; that because of her original fears; that they had wanted to protect her from the losses; and so they had decided that they would change the nature of the ownership of the joint venture completely. However, what wasn't said was whether the decision to make her a gift of $40,000 was taken at the time the deed was redrawn or whether that was a decision which was taken at a later date . . . ". 484 When asked what it was about the conversation which Mr Bourke saw as unusual, his evidence was : "Well it was unusual because there was a lot of happiness and talk about making a profit on a venture which is normally a private matter between the parties concerned and there were other people in the room who were not party to that transaction. I thought it was also very unusual that Mr Harrison and Mr Cameron were really trying to persuade in their own way Mrs Schipp not to proceed into the new venture. I thought that was rather strange in view of the fact that she had been involved in the previous successful one and those things stuck in my mind. I just thought they were unusual things to say and unusual things to do in meetings." 485 Mr Bourke was then asked in cross-examination whether he heard Mr Cameron or Mr Harrison say to Mrs Schipp or to Mr Zander that the project would be a good investment. His answer was : "Not in - not in those exact - I did not hear them say 'Mrs Schipp this is a good investment. Mr Zander, this will be a good investment'. The answer to the question is no." 486 Mr Bourke was then asked whether he had heard Mr Cameron or Mr Harrison say anything like that of a positive nature to Mrs Schipp or Mr Zander in his presence. His answer was; "Not in the context as you are putting it to me". 487 Mr Bourke was asked the question: "Did they say it in any context that you can presently recall?" The answer was: "In the context of the discussion about the joint venture as a whole, everybody was involved in the discussion and I mean everybody, that's Mrs Schipp, Mr Zander, George Harrison and Mr Cameron and in the context of the discussion as a whole, everybody expressed confidence in its viability and in that context I am prepared to say that people thought it was a good investment based on the discussions that were taking place between them. Bearing in mind at this stage I am the listener in all of this, I'm listening to these people talking about this because they were talking about the physical aspects of the joint venture which was really outside of my area, I wasn't there to talk about that, so, yes, they were very confident about the viability of it". 488 Mr Bourke was asked whether he denied that Mr Harrison or Mr Cameron made a particular statement on this occasion; that is to say, words to the effect "a good investment". 489 Mr Bourke's answer was "I deny that I heard Mr Cameron or Mr Harrison say specifically to Mrs Schipp 'Mrs Schipp, this is going to be a good investment'. I deny that." 490 It seemed to me that Mr Bourke was very careful in his denial and hedged on several occasions when asked these questions as to whether or not Mr Harrison or Mr Cameron had said that the investment was a good investment. I formed a view that he was favouring the cases of Mr Cameron and Mr Harrison in no uncertain terms by being so careful on this matter. 491 This aspect of Mr Bourke's evidence puzzled me and continues to puzzle me. I am further surprised that Mr Bourke would have such an excellent recollection of a conversation where he took no file notes and which had taken place some 8½ years before he gave evidence. 492 Another most curious aspect of Mr Bourke's evidence relates to Exhibit P20 and Exhibit P20A. Mr Bourke accepted that in 1995 he received this facsimile from Mr Harrison enclosing Mr Harrison's file notes. In this facsimile, Mr Harrison had asked Mr Bourke to tell Mr Harrison what his recollection was. 493 One of the file notes sent to Mr Bourke with this facsimile was headed 4 March 1992 and Mr Bourke's name was at the top of the page. Mr Bourke had absolutely no recollection whatsoever of discussing with Mr Harrison either by telephone or face to face, on 4 March 1992, the deed of 25 March 1988 or any other matter at all. He accepted that he had received the facsimile. 494 Mr Bourke's evidence was extremely detailed on events which had taken place over eight years earlier. His only affidavit was made some seven years after the 6 January 1989 meeting. 495 The only notes which Mr Bourke took of the meeting were set out as Annexure 'A' to his Affidavit. At so much of the meeting as took place with all present, the notes read:

[224]

The letter enclosed a copy of the Second Joint Venture Agreement. 502 Mr Bourke's mind was a total blank about the subject of discussing the 25 March Deed with Mr Harrison in March 1992. [Transcript page 1954] 503 Under cross-examination, Mr Harrison agreed that on 4 March 1992 he had been talking to Mr Bourke about the subject of the Second Joint Venture Agreement which had been sent to Mr Bourke by Mr Cameron on 19 July 1989. 504 Under cross-examination, Mr Harrison agreed that he had said on 4 March 1992 to Mr Bourke that the Joint Venture Agreement had been dated 25 March 1988 and that it divided the proceeds of Mary Street into portions, that is to say two-thirds to Mr Harrison and one-third to Mr Cameron, as far as the split of profits was concerned. 505 Under cross-examination, it was suggested to Mr Harrison that he had said to Mr Bourke on this occasion that in fact the document was made in 1989, but Mr Harrison denied this suggestion. 506 Mr Harrison, in cross-examination, was asked to look at the number '89' which appears in his own text of the note and to acknowledge, as he did, that this was in his handwriting. He agreed that it was and that it was written by him in the course of his conversation with Mr Bourke. 507 It was then put to Mr Harrison in cross-examination that he wrote this number on his file note to record something which he had said to Mr Bourke, 'The document though dated 25 March 1988 was in fact was made in 1989'. Mr Harrison denied that he wrote '89' on the file note to record that the document though dated 25 March 1988 was in fact made in 1989. 508 Mr Harrison was then asked the question: 'Why did you put the '89' there?' He answered that the substance of the conversation related to Mr Murray Schipp's allegation of blackmailing he and Mr Cameron to give the Plaintiff her money back. In effect, Mr Harrison's answers were that the conversation occurred in the course of discussion about aspects of settlement negotiations involving Mr Bourke. These negotiations had, however, taken place well before 1992; the proceedings commenced in 1991. [See generally the evidence of Mr Murray Schipp]. 509 Mr Harrison's evidence was that Mr Murray Schipp had threatened to blackmail Mr Harrison and had said that his mother, Mrs Schipp, was going to report Mr Harrison to the Law Society if her claims were not met. Mr Harrison's evidence was that Mr Schipp had claimed that the Second Joint Venture Agreement had been backdated by about a year - this being one of the serious allegations, as I understood the evidence, in relation to which Mrs Schipp was proposing to report Mr Harrison to the Law Society. Mr Harrison's explanation of how he came to be informing Mr Bourke in March 1992 of matters identifying the Second Joint Venture Agreement with the date '1989' was that he had, in March 1992, been reporting Mr Murray Schipp's blackmailing tactics to Mr Bourke. None of this was put to Mr Murray Schipp in cross-examination. I reject Mr Harrison's evidence that any such blackmailing threat occurred. I reject the whole of Mr Harrison's evidence as to the conversation with Mr Bourke, save that I accept that it was on this occasion that Mr Harrison informed Mr Bourke of the existence of the Second Joint Venture Agreement. 510 I was not persuaded by Mr Harrison's responses in relation to this matter that he was telling the truth. It seems to me that the proximity of the '89' in square brackets to the words 'dated 25 March 88' suggests that and I find that, in this conversation reference was made to the Deed as having in fact been signed in 1989. That Mr Bourke could not recall any aspect of this conversation throws considerable doubt on his evidence as to an event which had taken place some 3 years earlier. 511 Although Mr Bourke gave his evidence in a fashion which suggested that he was quite confident of what had occurred in the early January 1989 meeting, the reliability of his evidence requires to be tested against a number of parameters including: · Mr Bourke's inability to recall anything at all about the conversation which he had on 4 March 1992 with Mr Harrison. · Mr Bourke's failure to take notes on the relevant matter in the early January 1989 meeting. · Mr Bourke's inability to recall whether or not Mr French was at the meeting. · Mrs Schipp's sworn testimony and my view that she was a witness of truth who did recall what had happened in respect of how and when the Second Joint Venture Agreement had been signed and in respect of the fact that she had never had any conversations about being protected from losses, about gratuitous payments or about revising the First Joint Venture Agreement. · Mrs Schipp's April 1991 handwritten notes, Exhibit P1, written within a relatively short period after the events in question and in which, after referring to the 'roaring meeting', she stated: "Don and George both have such influence of persuasion that in no time there was talk of how they could help my tax problem by taking it into their companies, George taking the $40,000 and then channelling $20,000 back to Don. To do this - they redid the original contract (my solicitor read and has the original before the new one was done). The new contract is very similar to the original but has been predated by a few days and part of it is changed saying something like, that the property of Mary Street, Thirroul was bought in my name. But I had funded $150,000 to the project for Don C and George H and they had paid me interest on the money - I know this exists somewhere as they got me to sign my name on it together with theirs." · The fact that had the Second Joint Venture Agreement been in existence in early October 1988, Mr Harrison would have forwarded it to the Commonwealth Bank rather than, as he in fact did, forwarding a copy of the First Joint Venture Agreement. At this point in time, that is to say in early October 1988, it was in Mr Harrison's clear interests if the Second Joint Venture Agreement had existed recording him as, as a matter of law entitled to two-thirds of the profits of the Mary Street sale, to forward this document to the Bank rather than a document which recorded him as a one-third interested joint venture partner. · The fact that there is no reference whatever in the letter dated 28 December 1988, which I have found was not then written, to a gratuitous payment - the letter simply records Mrs Schipp, Emibarb and Don Cameron Real Estate as each entitled to 'one-third share of profits'. · The inconsistency between on the one hand, Mr Harrison's evidence at Transcript page 1800.20 that the reason he had sent to the Bank in late September 1988 the First and not the Second Joint Venture Agreement, was that he knew by mid-to-late 1988 that the Venture was going to make a profit and was informing the Bank as to how the arrangement was to work out in practice and on the other hand, the fact that on 19 July 1989, a profit already having been made on Mary Street, Mr Harrison elected to send the Second Joint Venture Agreement to Mr Bourke. Mr Harrison had sworn that he had sent the First Joint Venture Agreement to the Bank rather than the Second because, the project having achieved a profit, he was effectively reverting to the First Joint Venture Agreement as a matter of fact. 512 It is to be recalled also that Mr Bourke was first approached to prepare his affidavit in about January or early February 1996 by Minter Ellison, this being a number of years after the events in question. 513 Although I have found this question of Mr Bourke's credit one of some difficulty, in the result I am persuaded that his evidence was unreliable and should not be accepted. The whole of the evidence before me has to be assessed in determining the reliability of Mr Bourke as a witness and I have taken into account all of the relevant evidence in reaching my findings as to the events of 6 January 1989. 514 Mr Slattery submitted that it was open to me to find that Mr Bourke gave false evidence, knowing the evidence to be false. I would not accept this submission. Rather it seems to me, that Mr Bourke had become persuaded at some time in the past that events which did not in fact occur, had occurred. It is not necessary that I identify precisely when this occurred save that it is obvious that Mr Bourke spoke to Mr Harrison at least in March 1992 about the March 1988 Deed.

[232]

Something was said in reply but I do not recall what or by whom. At some stage during this meeting Mr Harrison said to Mr Cameron, Mrs Schipp and myself words to the following effect: "I want all of you to know that I am not holding myself out as your solicitor and advisor. It is important that you consult your own advisor, solicitors and accountants in order to advise you as to the viability of the project. In addition, if there are any queries regarding the legal aspects of the transaction, I also want you to check with your own solicitors."' 518 Mr Zander was unable to recall the contract for the purchase of Kembla Street being dated on 7 January 1989, one day after the Bourke meeting. He could not, early in his cross-examination, recall whether or not he was present at the time the contract was made. [Transcript page 1889] 519 Later in the cross-examination he gave evidence that he recalled the contract being signed on 30 January 1989 [Transcript page 1890-1891]. He then said that the contract was not signed before Mr Cameron went on holidays [Transcript page 1891] and that the contract would have been signed while Mr Cameron was there. Mr Cameron in fact returned from his holidays in late January. 520 It became clear in Mr Zander's cross-examination that his recollection could simply not be trusted on matters involving detail. His first affidavit had stated that 'on 30 January 1989 we all got together for the purpose of executing . . . contract for the purchase of the land'. 521 I formed the view that Mr Zander's evidence was unreliable. His recollections were vague. He had not in his first affidavit given any detail of all of the 6 January 1989 meeting at which Mr Bourke was present. Yet in his affidavit made in March 1996 some 7 years after the event, he was able to complete three pages of detail. 522 I reject so much of Mr Zander and Mr Bourke's evidence as is inconsistent with Mrs Schipp's evidence s to the 6 January 1989 meeting. In particular, I find that no reference whatever was made at the 6 January 1989 meeting to the existence of or terms of a Second Joint Venture Agreement to Mrs Schipp's share of the Mary Street profits as a gratuitous gift, to Mrs Schipp having been fearful of losing her money and not wanting to take risks, to Emibarb and Don Cameron Real Estate agreeing to take the risk and to bear losses or to gratuitous gifts not being taxable, or to the First Joint Venture Agreement having been redrawn.

[233]

Evidence of Mr French 523 Mr French had deposed that he had been present during the 6 January 1989 meeting and that not long after the meeting commenced, Mr Harrison pulled two documents out of a file and said that they were the two deeds relating to the Mary Street joint venture. Mr French recalled Mr Harrison having said, "The later agreement applies". 524 Mr French deposed that in the course of this conversation Mr Bourke and Mrs Schipp had had the following exchange : Mr Bourke: "The profits on the Mary Street venture are going to be split between Don and George because that's what the agreement says." Mrs Schipp: "What about the money that I got?" Mr Bourke: "Del, you received two things. Interest on your investment - that you must declare on your income tax. The other money you received is a gift from Don and George and you don't have to declare that". Mrs Schipp: "That's wonderful, but why do I have to declare the interest?" Mr Bourke: "Well, interest is income." 525 Mr French's evidence was that the two single sheets of paper were taken out of Mr Harrison's file were passed to Mr Bourke who very briefly passed them to, or holding them in his hand, showed them to, Mr French. This is inconsistent with the documents, being the two Joint Venture Agreements, which together comprise a number of pages. I reject Mr French's evidence of the above discussion. Over the years he is likely to have become persuaded that such a conversation occurred. My finding is that no such conversation took place. 526 Mr French also gave evidence that, at some stage during the meeting, Mr Harrison said words to the effect : "If we're all going to be part of this venture we all have to be happy with the way its commenced. If anyone doesn't want to be in it or doesn't want to do it this way you should say so now." 527 My findings as to the 6 January 1989 meeting are that the meeting involved discussion as to the new project, that Mr Harrison said that he had acquired a shelf company called Pyogrove to act as trustee in the joint venture and that they needed to decide who the directors and secretary of the company were going to be; that it was then agreed that Mr Cameron, Mr Harrison, Mr Zander and Mrs Schipp would be directors; that Mrs Schipp said that she would be prepared to be the secretary of Pyogrove; that some discussion took place in relation to the shareholdings and family companies which might be shareholders; that Mr Harrison said to Mrs Schipp words to the effect : "Del, if you're not completely happy with going into the Kembla Street project with Don, Bob Zander and myself we'd be quite happy for you to say that you don't want to proceed. That would be all right with us." Mr Cameron said to Mrs Schipp words to the effect : "Yes Del, we don't want to have any problems like we did over Mary Street. I would be quite happy if you didn't come into this"; that Mrs Schipp replied: "No, I want to go ahead with the project. I would like to make more money like we did on Mary Street. I want to build up more assets for my future";

[240]

9 January 1989 539 Between 9 January 1989 and 29 January 1989 Mr Cameron was in Queensland on vacation. 540 According to Mr Watson's diary notes of 9 January 1989, Harrison had stated that funds to meet interest and Australian withholding tax would be available on the due date from sale of assets but that he would not be able to meet the settlement obligation. Based on this, Mr Watson had placed Mr Harrison on notice that dealing rights with the bank would be withdrawn and if, for any reason, he could not meet the interest and withholding tax component, the loan would be placed in default and brought onshore under the provisions of the stop/loss agreement. 541 By 9 January 1989, the bank had been provided with a copy of the agreement for sale of Kembla Street at $600,000 to Pyogrove Pty Limited. An internal bank memorandum makes it clear that by 9 January the bank had been informed, I infer by Mr Harrison, that contracts had been exchanged, that the deposit had not yet been paid and that settlement was to be effected "on or prior to 31 January 1989 from finance obtained from external source". 542 On 9 January 1989, the Bank estimated Mr Harrison's settlement obligation which would crystallise in late January as approximately $152,000. This estimation was assessed by calculation of the original draw-down and from that the calculation of Mr Harrison's exposure in United States dollars was carried out which was then converted to Australian dollars. Mr Harrison would himself, at all material times, have been able to calculate the settlement obligation which would crystallise in late January 1989. This was a calculation of what Mr Harrison's foreign currency exposure was on the exchange rate on any given day and a deduction from that of the rollover amount at the last rollover. It was a straightforward calculation of the original borrowing, the current exposure and the difference between the two. The bank also forwarded market notes to borrowers on regular occasions to keep them appraised of how things were moving on the market and borrowers, such as Mr Harrison, had the right to ring the bank's dealers at any time during day or night to determine where the market rates had moved and Mr Harrison, as I find and as Mr Watson testified, availed himself of this service.

[241]

10 January 1989 - conversation between Watson and Harrison 543 On about 10 January 1989, Mr Watson ascertained from the Wollongong Branch that funds which Mr Harrison had set aside to meet interest and Australian withholding tax on 31 January 1989 had become earmarked for another transaction. Mr Watson telephoned Mr Harrison to clarify the situation. 544 Mr Harrison confirmed that in order to sell the Kembla Street property he had to enter into a partnership deal and his portion of the savings investment account funds were to cover his contribution in the partnership. Mr Watson explained to Mr Harrison that in accordance with recent discussions held with Mr Harrison, if funds were not available on the due date to meet the interest bill, the loan would be placed in default and brought onshore under the terms of the stop/loss agreement. 545 What followed was a plea by Mr Harrison that the Bank had to help him whilst he was putting together the various plans to sell off assets. Mr Watson conceded to Mr Harrison that Mr Harrison may well be working hard, however, to date very little had actually occurred and pointed out that Mr Harrison had known for 6 months that his interest bill was upcoming. 546 Mr Watson also told Mr Harrison that he was to contact Mr Watson by 13 January updating developments and advising as to how he proposed to meet the interest bill. 547 In adding to his evidence in chief, Mr Watson referred to the SIA, or savings investment account, as being a sinking fund that had been specifically established to put aside funds to meet interest and Australian withholding tax at each rollover that the Bank retained a charge over. Mr Watson said that he had told Mr Harrison on this occasion that he had become aware that the funds that were being held in that account to meet interest and withholding tax were now being requested to be used for another purpose. He informed Mr Harrison that if Mr Harrison did not meet the interest and withholding tax from his own resources by the due date of 31 January 1989 or have the funds available by the due date, the Bank would be required to withdraw Mr Harrison's dealing rights, default the foreign currency loan, bring it onshore where it would be then subject to domestic interest rates or 21.25% p.a. and that Mr Harrison would not be allowed to go back offshore again until he was in a position to be able to meet the interest and withholding tax component. In response, Mr Harrison said that he was doing everything that he could to satisfy the Bank's requirements with regard to both meeting the obligation and to reducing debts but he needed assistance from the Bank to be able to complete those requirements and sought Mr Watson's authorisation to use those funds and not to have to meet the interest component. Mr Watson refused to give that authorisation. 548 Prior to this occasion Mr Watson was unaware that there was any association between Mr Harrison and the purchaser syndicate of the Kembla Street property.

[275]

FURTHER OR COMPLEMENTARY FINDINGS OF FACT Matters litigated; dishonesty, fraud, issues as to subjective intent 595 The seventh defendants pleadings raise the dishonesty exclusion clause. Thus notwithstanding the disclaimer by Mrs Schipp's counsel referred to in paragraph 112, it is necessary for the Court to examine all of the evidence and to reach findings of fact material to the states of mind and intents of Mr Cameron and Mr Harrison. The case had progressed a considerable distance before the forensic decision by Mrs Schipp to disclaim allegations of intentional misconduct making it in any event impossible for the Court to disregard evidence adduced and the relevant cross examination up to the point when the disclaimer was made. 596 Mr Harrison saw Mrs Schipp as a soft target without material family support or connections to whom she could turn. She had funds. He needed access to funds and was primarily dominated by his own precarious financial position and that of his companies from the time he was first introduced to Mrs Schipp. 597 Mr Harrison was well aware that Mrs Schipp looked up to him by reason of his status as a solicitor. He was well aware that Mrs Schipp relied upon his integrity as a solicitor in all his dealings involving both the Mary Street and Kembla Street joint ventures. He was well aware that Mrs Schipp was extremely susceptible to influence by him, as well as by Mr Cameron. 598 Mr Slattery QC, appearing for Mrs Schipp, put to Mr Harrison that, at the time of the making of the First Joint Venture Agreement in respect of Mary Street, Mr Harrison was simply interested in becoming involved in a project in which he would probably derive a profit without having regard to Mrs Schipp's separate interests and without suggesting to her that she obtain independent advice. Notwithstanding Mr Harrison's denial of these propositions, I find that they correctly represent the position which obtained. Mr Harrison, in fact, intended to procure for himself a share of such profits as might be obtained from the Mary Street property at the earliest practicable opportunity. I find, as was put to Mr Harrison by Mr Slattery before the forensic decision to disclaim allegations of fraud and dishonesty, that :

[277]

(b) "at the time of the discussions in about the middle of September 1988 . . . [Mr Harrison was] solely thinking about [his] own financial problems and not [Mrs Schipp's] separate interests". [Transcript page 1847] 599 At the time when Mr Harrison and Mr Cameron sought to persuade Mrs Schipp of the non-viability of the Mary Street development, they were acting in Mr Harrison's interests to procure a profit on a rising market and intended to persuade Mrs Schipp to reinvest all of her Mary Street funds in a Kembla Street redevelopment. This purpose was intentionally withheld from Mrs Schipp. 600 Mr Harrison and Mr Cameron saw Mrs Schipp as a person who was relevantly so gullible and naive as to be putty in their hands in relation to their desires and proposals on any development. They believed from their assessments of her that she had virtually no experience of developments or contracts and would sit quietly by as effectively a sleeping partner, who from time to time might require to be 'handled', but whose views and desires ought not relevantly be any obstacle to their wishes. In name she might be a partner, but, in reality, she represented a cash box able to be utilised. 601 The version put by Mr Cameron and Mr Harrison as to the events leading to the Second Joint Venture Agreement for Mary Street, although rejected by me, speaks volumes in relation to their attitude to Mrs Schipp. Their version was that although the Second Agreement included no provision obliging the Cameron Harrison Interests to give Mrs Schipp a third of any profits made on Mary Street, this fact was not communicated to Mrs Schipp [Transcript page 1612], who was simply informed that she would receive a third of any profits and/or that if a profit was made the parties would revert to the first agreement and/or that Mrs Schipp's receipt of profits would be, in reality, a gratuitous payment to be made or withheld in the discretion of Mr Cameron and Mr Harrison. Accepting, but only for the purposes of analysis, the version of these events put by Mr Cameron and Mr Harrison, it becomes clear that Mrs Schipp would, at a minimum, have placed herself entirely in Mr Cameron's and Mr Harrison's hands had a profit been made. The inherent contradictions in the supposed arrangements and the uncertainty of those supposed arrangements, indeed the very facts which the Court was asked to accept as the context in which the Second Joint Venture Agreement was made, bespeak of the contemptuous way in which Mr Cameron and Mr Harrison would assert that they dealt with Mrs Schipp's interests and rights. 602 I interpolate that had I found as a fact that the so-called Second Joint Venture Agreement had been signed in March 1988, the versions given by Mr Cameron and Mr Harrison as to the discussions leading to the execution of that agreement would, had the Plaintiff sought appropriate relief, likely have led to an order either setting aside the Second Agreement, or rectifying it, or declaring that the Cameron Harrison Interests were estopped from relying upon the agreement. On Mr Cameron and Mr Harrison's version of the conversations, the Second Joint Venture Agreement omitted a term which would lead, or may lead at their discretion, to the First Joint Venture Agreement becoming enlivened. Alternatively, the appropriate declaration may have been to find a collateral contract. 603 The exercise of endeavouring to draw up the missing term, or the collateral agreement, points up the uncertainty in the so-called Second Joint Venture Agreement arrangements. Candidates might be:

[278]

Missing Term of Second Joint Venture Agreement * In the event that the project achieves a profit, the parties agree that the joint venture is to be regulated by the original Joint Venture Agreement; or * This Joint Venture Agreement is to govern the parties' legal rights if a loss is incurred on the project. Should a profit be achieved, the original Joint Venture Agreement is to govern the parties' legal rights; or * In the event that a profit is achieved upon completion of the project, Don Cameron Real Estate and Emibarb may, in their absolute discretion, agree to make a gratuitous payment of a share of such profits to Delcie Joan Schipp in such amount as they may determine and/or in an amount not to exceed that amount which would have been payable to Delcie Joan Schipp had the First Joint Venture Agreement not been rescinded. Terms of Collateral Agreement * In consideration of the Second Joint Venture Agreement being entered into, the parties agree: (a) that the Second Joint Venture Agreement shall only operate if the project achieves a loss; (b) that in the event that the project achieves a profit, the First Joint Venture Agreement is to regulate the parties' legal rights in relation to the project and to the division of profits; or * The parties agree that the Second Joint Venture Agreement is to operate to regulate the legal rights of the parties in relation to the project. The parties further agree that in the event that a profit is achieved on the project, Don Cameron Real Estate and Emibarb may in their absolute discretion determine to make a gratuitous payment to Delcie Joan Schipp of such amount as they may see fit. 604 Mr Cameron was aware of Mr Harrison's pressing financial position and was content to allow Mr Harrison to dominate the decision-making processes regardless of the fact that, in doing so, Mr Harrison was likely to be motivated by his own financially pressed agenda. 605 As early as 12 September 1988, Mr Cameron had stated to Mrs Schipp that Mr Harrison really needed the money for the bank. Mr Cameron denied in evidence that he had knowledge of Mr Harrison's financial difficulties of 1988 and 1989, but conceded that he had been aware that Mr Harrison had an offshore loan. I do not accept that Mr Cameron was not aware of Mr Harrison's financial difficulties. Mr Harrison had asked for Mr Cameron's help in selling assets to obtain funds to pay to the bank. Mr Cameron had written the letter of 9 September 1988 to the Commonwealth Bank by way of a request for financial assistance for the development of Kembla Street. In this letter, Mr Cameron had asserted that the proceeds of the sale of Mary Street would be used to reduce the borrowings on Kembla Street. The letter stated that, upon approval of the loan sought, the funds could be used "to repay Mr Harrison's loan". The letter stated that once the building was fully let, the bank should revalue the building with a view to re-leasing the collateral securities. 606 The evidence satisfies me that Mr Cameron and Mr Harrison had an extensive involvement and close working relationship with one another during 1988 and 1989 and that Mr Harrison, to Mr Cameron's knowledge, was under sustained pressure from the Commonwealth Bank to realise assets to meet his and his group's debts. Mr Cameron was used by Mr Harrison as the Real Estate Agent in respect of his programme of asset sales in 1988 and 1989. 607 The agreement reached between the parties for the Mary Street Joint Venture was never documented correctly. The parties had not agreed to Mr Cameron or Mr Harrison having any interest in the land in the absence of a completed development. Mrs Schipp had been told in express terms, that only when the units were developed and sold would Mr Harrison and Mr Cameron share in the profits with her. This was the basis upon which she had proceeded. This was what she and Messrs Cameron and Harrison had agreed to. No discussions had taken place as to the possibility that the project might not proceed after development approval. The parties had not agreed to any outside funding to complete the project, or to the land being used as security for such borrowing. Mrs Schipp did not have explained to her, in any real sense, the terms of the First Joint Venture Agreement. 608 The Mary Street agreement reached had contained the following express and/or implied terms: - Mrs Schipp was to purchase the property; - The title to the property was to be in Mrs Schipp's name and pending completion and sale of the development, she was to be the legal and beneficial owner of the property; - Mrs Schipp was to advance all funds necessary by way of purchase price and stamp duty and expenses incidental to the purchase but not the development of the property; - An implied term was that all rent collected and paid to Mrs Schipp would be offset against interest payable to Mrs Schipp - Upon, and only upon, completion and sale of the development, and in consideration for their efforts in managing up to completion the development of the project, Mr Cameron and Mr Harrison would each be entitled to one-third of the profits on sales of the three units; - Mr Cameron and Mr Harrison were to be the project managers for the development and sale of three townhouses on the property; - Mr Cameron and Mr Harrison were to undertake all reasonable efforts as project managers, to arrange for the development of the property by the construction of three townhouses on the property; - Mrs Schipp was to be paid interest by the Cameron Harrison Interests at the rate of 14% per annum on the purchase price of the property and on stamp duty and expenses outlaid by her incidental to the purchase; - Mr Harrison was to draft a written agreement to document the terms of the Mary Street Agreement and was to act upon all conveyancing aspects relating to the purchase of the property or to the sales of the townhouses. - Mr Harrison was also to draft all agreements of, or ancillary to, the purchase of Mary Street or the proposed development and sale of the townhouses. - The development would be financed by off-plan sales of the units; - Mr Cameron and Mr Harrison were to be wholly responsible for procuring the off-plan unit sales to fund the development. 609 It is perhaps convenient to here interpolate alternative analyses of the legal relationships qua Mary Street. 610 As I have indicated, in my view, the parties had entered into a binding agreement in their conversations held prior to the First Joint Venture Agreement being produced or signed. In short, this is a finding that the case is one falling into the first Masters v Cameron class. The parties had reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms but, at the same time, proposed to have the terms restated in a form which would be fuller or more precise but not different in effect: Masters v Cameron (1954) 91 CLR 353 at 360 611 Of relevance in categorising the agreement in this way is the fact that it was not until after the deposit had been paid and the details of the development were quite advanced that Mr Cameron told Mrs Schipp that Mr Harrison had drawn up a contract. The parties' relationship had commenced on a commercial footing before a document proposed to record the agreed terms of the relationship was either mentioned or came into existence. Although payment of the initial deposit predated Mr Harrison's arrival by a week or thereabouts, he was quite content to be treated alongside and in the same manner as was Mr Cameron. Payment of the initial deposit inured in the interests of all three persons. The further deposit was paid on 16 February 1988 when, after Mr Harrison had agreed to participate, the purchase price had been increased. 612 It is clearly arguable that, contrary to the view which I have expressed, the case falls into the second Masters v Cameron class, namely the parties having completely agreed upon all the terms of their bargain and intending no departure from or addition to that which their terms express or imply, had nevertheless made performance of the terms conditional upon the execution of a formal agreement. 613 Regardless of which of the first two Masters v Cameron classes the case falls into, a binding contract came into existence. In the first case, the contract would bind the parties at once to perform the agreed terms, whether the contemplated final document comes into existence or not, and to join in settling and executing the final document. In the second case, the contract would bind the parties to join in bringing the formal contract into existence and then to carry it into execution. 614 The case was not, in my view, one falling into the third Masters v Cameron class, namely one into which the parties' intention was not to make a concluded bargain at all, unless and until they executed a formal contract. Had this been the relevant class, the terms of agreement would not have been intended to have, and therefore would not in fact have, any binding affect on their own: Governor etc of the Poor Kingston upon Hull v Petch (1854) 10 Exch 610 "... when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that these particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made": Rossiter v Miller (1878) 3 App Cas 1124 at 1149 per Lord O'Hagan 615 It should be recalled that Mr Cameron, Mr Harrison and Mrs Schipp had been having discussions and negotiating and working through terms for approximately 3 and a half months prior to February 1988. The suggestion that a contract had been drawn up by Mr Harrison came very late in the peace and after Mrs Schipp had outlaid the deposit and worked through the terms of the arrangement in detail. No relevant parameter of the discussions had included a statement that a Joint Venture Agreement document would be prepared. From Mrs Schipp's point of view any documentation would be relatively simple, there being no question of Mr Cameron and Mr Harrison obtaining an immediate interest in the land. 616 The consideration to be provided by Mrs Schipp was obvious, She agreed to provide the whole of the funds required to purchase Mary Street, as well as expenses necessarily incidental to the purchase. 617 The consideration to move from Mr Cameron and Mr Harrison was their undertaking to act as project managers, that is to say to arrange for the building and sale of the townhouses and all of the matters incidental to the development and, but incidentally to the former undertaking, to pay to Mrs Schipp 14 % return on her outlay of funds. Although not actually stated, I see it as appropriate to treat this latter promise as entitling rent received to be treated as an off-set against interest to be paid. 618 I have found as a fact that Mrs Schipp was informed by Mr Cameron and Mr Harrison that only once the units were developed and sold would they share in the profits. This, in my view, was a term of their oral agreement. I construe the representation in context as not permitting of ambiguity. However, even if ambiguous, the matter may be looked at in a number of ways. 619 One approach is to view the facts in terms of consideration which , as a matter of substance, may fail.

[279]

The promised consideration, as a matter of substance was the activities of Mr Cameron and Mr Harrison to act as project managers in procuring the development and sale of the proposed units. 620 Mason and Carter generally deal with this topic at paragraph 928. In particular, they deal with situation where there is , in point of fact, no "agreed return": "Under contractual principles, where a builder promises to build a house in return for a promise to make a lump sum payment on completion, the request of the customer is for the building of a house. Clearly, however, the builder must clear the land, dig the foundations, construct the frame, and do all the other things necessary to complete the work in accordance with the contract. If the builder partially performs, for example by clearing the land and digging the foundations, but the customer validly discharges the contract for breach, there is no failure of the agreed return because there is no agreed return for the work done. In cases where it is the failure of the plaintiff to perform the contract (rather than the basis upon which the contract is found to be ineffective) that prevents the enforcement of the defendant's contractual obligation, the effect of applying failure of consideration would be to rewrite the contract." [Mason and Carter Restitution Law in Australia (Butterworths, Sydney, 1995) at 298-299] 621 In Baltic Shipping Company v Dillon (1992) 176 CLR 344 at 378, Deane and Dawson JJ give an example of a failure of a promised consideration viewed as a matter of substance: "There can be circumstances in which there is, for relevant purposes, a complete failure of consideration under a contract of transportation notwithstanding the carrier has provided sustenance, entertainment and carriage of the passenger during part of the stipulated journey . For example, the consideration for which the fare is paid under a contract for the transportation of a passenger by air from Sydney to London would, at least prima facie, wholly fail if, after dinner and the inflight film, the aircraft was forced to turn back due to negligent maintenance on the part of the carrier and if the passenger were disembarked at the starting point in Sydney and informed that no alternative transportation could be provided. Thus in Heywood v Wellers, Lord Denning MR regarded it as self-evident that, in some circumstances where part of a journey had been completed money paid to the carrier or 'driver' was recoverable 'as of right' for the reason that it was 'money paid on a consideration that had wholly failed'." 622 Here the fact that Mrs Schipp, prior to the sale of Mary Street, received some rental payments or may possibility be said to have obtained some potential benefit from the work Mr Cameron and Mr Harrison in fact procured through Mr Skelcher and applications for consent and the like, is not relevantly dissimilar to receipt by the passenger in the above example of sustenance, entertainment and carriage during part of the stipulated journey. 623 Hence Mr Cameron and Mr Harrison were not entitled to an agreed return (their share of the profits) because there was no agreed return for the work done. 624 If my finding as to the existence of a binding Masters v Cameron Class 1 agreement be incorrect and if the correct view is that the parties' intention was not to make a concluded bargain at all, unless and until they executed a formal contract, at least two other approaches are thrown up for consideration. 625 The first directs attention to the Brian v UDC principle as attracted. [see paras 725 to 728 below]. The parties were negotiating to enter a joint venture agreement. Mr Cameron and Mr Harrison were under a fiduciary obligation to disclose material facts to Mrs Schipp . A material fact was that the proposed Joint Venture Agreement was to give an immediate interest in the property to Mr Cameron and Mr Harrison. A material fact was that their interest was not made conditional upon the completion of the development and sale of the units. These facts were not disclosed in circumstances where the previous discussions made their disclosure necessary. It became unconscionable for Mr Cameron and Mr Harrison to be permitted to rely on the Agreement as a binding document. 626 The second approach would be to focus on the parties' assumptions. Mr Harrison gave evidence that it had been assumed in the discussions that Mr Cameron and he would be developing the property and that all of the parties made that assumption prior to their entry into the First Joint Venture document. [Transcript 1689 and 1691]. Thus the appropriate examination would be as to whether the parties may be seen to have had a common understanding, namely:

[281]

(b) that Mr Cameron and Mr Harrison would not be entitled to share in the profits of a sale of Mary Street if Mr Cameron and Mr Harrison determined, for unacceptable reasons, not to be disclosed to Mrs Schipp, to abort the proposed development completely. 627 I have already found that it was expressly put to Mrs Schipp that "once the units were developed and sold Mr Cameron and Mr Harrison would share in the profits one third each" [Para 166]. This is not in terms a finding of fact as to whether or not the matter referred to in (a) was in the common contemplation of the parties. That further finding is implicit in the first finding. To make the matter quite clear my finding is that the matter referred to in (a) was in the common contemplation of the parties. 628 If I be wrong in my further finding that the parties contractually agreed upon a term of the Mary Street agreement which was that upon and only upon completion and sale of the development, and in consideration for their efforts in managing up to completion the development of the project, Mr Cameron and Mr Harrison would each be entitled to one-third of the profits on sales of the three units, then a case might be put that the matter referred to in (a) was "in the common contemplation of the parties yet not a contractual provision actually agreed upon for the simple reason that it was a matter of common assumption." cf Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 354 per Mason J. (Emphasis added) 629 This might permit the extrinsic evidence of the conversations to be admitted to assist in interpreting the contract by reference to the parties' actual intentions as expressed before entry into the contract. On that approach, it could be argued, although Mrs Schipp's case was not put in this way, that the proper construction of the word "profit" in Clause 6 of the First Joint Venture Agreement is that the word means only such financial gain as was the result of the sale of the developed units. 630 Possibly the matter referred to in (b) could be treated as also in the common contemplation of the parties. More probably that matter raises different considerations because matters in common contemplation would not usually include considerations of the effect of deliberate default. 631 The parole evidence rule was not an insuperable obstacle to Mrs Schipp's case. This is because her case was that presentation to her of the First Joint Venture document for execution took place in circumstances where the antecedent oral agreement was not documented correctly and where she did not have explained to her in any real sense the terms of the document. Equity will allow a party "to allege that a written agreement does not, for some reason, contain the real agreement between the parties ... in exceptional circumstances to impugn the correctness of their own record of their agreement. Fraud must be proved, or there must be evidence of mistake, or it must be shown that one party is taking an inequitable advantage of some term of the written contract": Rowe v Oades (1906) 3 CLR 73 at 81 per O'Connor J. [Emphasis added] 632 Mr Slattery QC took Mr Cameron closely through the events relating to the period from the commencement of 1988 to the 12 September 1988 occasion when the Mary Street Auction Authority was signed by Mrs Schipp [See Transcript pages 1238-1272]. 633 The matters covered included the reasons why Mr Cameron had not sought to procure the rescission of the contract on 25 March when, on Mr Cameron's version, Mrs Schipp allegedly sought to withdraw from the Joint Venture Agreement; the failure to put the property to market until mid-1988; the delay, in seeking construction finance until a preliminary approach was made on 24 August 1988; the delay until 7 September 1988, in giving Mr Skelcher instructions to undertake a building application and the fact that these instructions were given only 5 days before Mrs Schipp was persuaded to give the Authority to Auction. 634 The cross-examination culminated in it being put to Mr Cameron that he was never serious about developing Mary Street. It seems to me that, notwithstanding Mr Cameron's vigorous denial with this proposition, the tardy approach of the Cameron Harrison Interests over the first half of 1988 to attending to the steps necessary to the development of Mary Street, support a finding that at least from early 1988 Mr Cameron and Mr Harrison did not seriously intend to develop Mary Street. 635 Had Mr Cameron and Mr Harrison seriously intended to develop Mary Street through this period, they would have sought finance for the project considerably earlier than when they first approached a financial institution in this regard. Their explanations as to the requirement to sell Mary Street, that is because of the Council constraints on size, were untrue. They both had a development of Kembla Street in mind at least from early 1988. Mr Skelcher had been drawing up plans for development of both properties at the same time. The content of the letter to the Commonwealth Bank dated 9 September 1988 and the proximity in timing of that letter to the occasion when Mrs Schipp had been persuaded, by the representations of Mr Cameron and Mr Harrison, to agree to sell Mary Street make plain, as I find, that Mr Cameron and Mr Harrison from relatively early in the piece, had in mind somehow or other procuring Mrs Schipp to invest in Kembla Street. And, as put by Mr Slattery to Mr Cameron at Transcript page 1248, the reason that he, with, I infer, the acquiescence of Mr Harrison, suggested to Mrs Schipp on 12 September 1988 that there should be an auction of Mary Street, was "because [Mr Cameron], [and I infer Mr Harrison], wanted to use the proceeds of the sale of Mary Street to go into the Kembla Street development". 636 The tax problem discussion was lit upon by Mr Harrison and Mr Cameron, and seen, and used as a convenient vehicle to unsettle Mrs Schipp and to persuade Mrs Schipp to reinvest in Kembla Street. 637 The depositing of Mrs Schipp's share in the proceeds of sale of Mary Street into the Commonwealth Bank without her involvement, rather than the payment to her of her due entitlement, is a significant indicator that Mr Cameron and Mr Harrison intended Mrs Schipp to have to deal with them in order to receive her funds. This was a device to further the probability that Mrs Schipp's moneys would be invested in Kembla Street. Early December was close enough to the end of January maturity of Mr Harrison's FX loan to mean that all stops had to be pulled out in the effort to be as sure as possible that approaches to Mrs Schipp to invest in Kembla Street had the maximum leverage and likelihood of success. 638 The evidence that Mr Harrison was unconcerned as to his financial predicament was false. A bold and brazen approach to the obvious connection between the two dates was falsely to deny point blank that relationship. That Mr Harrison timed completion of the Kembla Street sale to take place on the FX Rollover Date in order to meet his commitments on the rollover is plain. That he knew that this would have to be the timing and intended this is made clear by the bank manager's diary note of 29 November 1988 set out above, which includes "the prospective purchaser has been advised that settlement must be effected by the end of January"; see also the diary note of 13 December 1988. 639 I reject Mr Cameron's evidence that the settlement date was fixed and that Mr Harrison did not tell him that he needed an early settlement, but that Mr Cameron just 'fell in line' to make it happen. [Transcript page 1399-1400] 640 The haste to exchange on Kembla Street was obvious. No proper explanation was given to Mrs Schipp of the perceived risks and timing and of the obvious fact that construction finance would have to be required. 641 Mrs Schipp was made to feel guilty at her having sought independent legal advice. She was left in no uncertain terms with the belief that to again approach an outside lawyer would be seen as an act of disloyalty. She was not advised to seek outside legal advice. 642 Notwithstanding these manipulations of and designs played upon Mrs Schipp, it is clear that having, as she understood, made a large profit on Mary Street, Mrs Schipp was anxious to participate in another development. It is clear that Mrs Schipp placed some reliance, in determining to participate in Kembla Street, upon reassurances by Mr Baird, upon Mr French's statements as to Mr Cameron, upon Mr Bourke's involvement as an adviser and importantly upon Mr Zander's involvement. Mr Zander's inclusion in the joint venture meant that Mrs Schipp would not be alone in having to deal with Mr Cameron and Mr Harrison. Mrs Schipp drew a real measure of comfort from the fact that Mr Zander was alongside her in joining the Kembla Street Joint Venture. This project was obviously to be a large project of real significance and Mrs Schipp believed that it was likely to be very profitable. She was swept up in the euphoria created by Mr Cameron and Mr Harrison over the new project, having absolutely no idea that Mr Harrison's financial difficulties had reached a crescendo, having no idea that the project dovetailed perfectly with Mr Harrison's need to make a large payment on 31 January on the FX rollover and very importantly having no knowledge whatever as to Mr Harrison's and Mr Cameron's past endeavours and lack of success in seeking to procure finance for the project or in seeking to obtain pre-leasing or pre-purchase commitments or expressions of interest. 643 By late December 1988, Mrs Schipp had continued to regard Mr Harrison as a partner who was also a solicitor. She had watched him prepare documents relating to the Mary Street Joint Venture and was well aware that he had handled the 'legals', which meant the Mary Street purchase and sale conveyancing transactions. She had been advised by him of the tax problems she would encounter on her capital gains from Mary Street, absent new arrangements. She believed that he was obliged to act in the interests of all the parties who were to participate in Kembla Street. She understood that he was to act for Pyogrove and for the Kembla Street participants in all matters relating to the purchase and procuring of finance and in all dealings requiring legal training and relating to the procuring of Council consents and similar. She relied upon him to act in the interests of Pyogrove and of all the participants in the Kembla Street Joint Venture and never turned her mind to his position of conflict of interest in acting in a matter in which his personal interests and those of the participants would or might be in conflict. In particular, Mrs Schipp relied upon Mr Harrison to inform her of the meaning and content of legal documents she was being asked to sign. She was not told by Mr Harrison that she could, or should, or that it was advisable for her to, obtain independent legal advice before signing documents. Both Mr Harrison and Mr Cameron were well aware that Mrs Schipp had once been well and truly dressed down for approaching Mr Baird and were well aware that Mrs Schipp believed, as I find she did, that to approach Mr Baird again would be regarded by Mr Cameron and by Mr Harrison as an act of disloyalty and as an indication that she could no longer be trusted as committed to the Kembla Street joint venture but might at any second determine not to participate in that joint venture. Mrs Schipp was in this way caught in the web of the Kembla Street joint venture without a real option to seek outside advice if she wished to remain in it. She had become entangled in this web by a number of operative factors including : * having been manipulated to trust Messrs Harrison and Cameron; * having a measure of confidence that Mr Zander's participation meant that she was not to be alone with Messrs Cameron and Harrison in the project and added a measure of respectability to the project; * the reassurance which came from observing Mr Bourke give advice; * the reassurance from Mr French as to Mr Cameron; * the reassurance from Mr Baird that the Kembla Street project might very well be an excellent one; * her own greed in terms of not wanting to be left out of a significant new project, where she had already had a smack of real profit over Mary Street which had seemed to be achieved so very easily. Perhaps as she thought, she had been wrong to doubt Messrs Cameron and Harrison. 644 The close contest over the myriad of facts which took place during the extended hearing should not divert attention from the relatively simple underlying picture which emerged. Mrs Schipp wished to make an investment. She sought the advice of an experienced real estate agent. He had a close friend and business partner who was a solicitor facing, as the real estate agent well knew, extreme financial difficulties due to a number of matters including a foreign currency loan. Mrs Schipp was never told of these financial problems. These problems, in the main, dictated the events which unfolded. 645 The events included : 1. Mr Cameron and Mr Harrison representing that if Mrs Schipp would agree to invest in the Mary Street property: (a) their role would be to act as project managers (b) Mr Harrison would document the agreement and carry out all legal work relating to matters relating to the Joint Venture or the Development so that Mrs Schipp would not need to worry about this. Mrs Schipp's first information about this was received very late in the peace close to the signing of the document. As soon as she was told that Mr Harrison had drawn up a contract and became aware that she was to sign it, she became entitled to regard Mr Harrison as having prepared it for the three joint venturers as part of the "legals"

[295]

15 Mr Cameron and Mr Harrison failing to advise Mrs Schipp of material facts known to them, and required to be known by her, in order that she might be in a position to assess properly the advantages and disadvantages of participating in the Kembla Street venture. These included: * Mr Cameron and Mr Harrison failing to inform Mrs Schipp of the fact that despite strenuous efforts to procure pre-leasing commitments, none had been procured. * Mr Cameron and Mr Harrison failing to inform Mrs Schipp of the fact that the Commonwealth Bank had stipulated as a requirement prior to finance being provided that pre-leasing commitments be procured. * Mr Cameron and Mr Harrison failing to: (a) inform Mrs Schipp that a question for consideration was whether the parties would be able to provide sufficient security to support loans which would be necessary by way of development finance needs for the construction; (b) discuss this question with Mrs Schipp. * Mr Cameron and Mr Harrison failing to discuss with Mrs Schipp the importance of obtaining detailed plans, specifications and tender prices, or the fact that no such specifications [Transcript page1342.40] or firm tender prices [Transcript page 1727.27] had been obtained. * Mr Cameron and Mr Harrison failing to inform Mrs Schipp that the project had not progressed to a stage where a proper assessment of building costs could be made. * Mr Cameron and Mr Harrison failing to disclose to Mrs Schipp the fact that Mr Harrison's financial predicament required that Kembla Street be sold for $600,000 and that the sale be completed by rollover date 31 January 1989. * Mr Cameron and Mr Harrison representing to Mrs Schipp that the project could be financed and developed within 12 months and failing to disclose to Mrs Schipp the belief which they had during the whole of January 1989 which was that it was totally unrealistic to anticipate that the development could be completed within a twelve month period. * As pleaded, the commercial setting, purpose and effect of the contract for investment of the funds in Pyogrove, was such that the Cameron Harrison Interests were aware that Pyogrove had no practical means at the time of the investment of developing the property in the manner described to Mrs Schipp.

[304]

The Events in Question - An Overview Examination 646 It is appropriate to stand back from the close analysis of each of the discrete facts found and to examine the events in question on a macro or overview basis. Approaching the case in that way points up, as I find, that Mr Cameron and Mr Harrison engaged in a number of acts which, seen together, are properly described as unconscionable conduct. These acts ranged over the full course of their dealings with Mrs Schipp. The combined effect of the acts, assessed against the relationships of superiority on the Cameron/Harrison side and of inferiority on Mrs Schipp's side, require the intervention of a Court of Equity to relieve against the unconscionable dealing. The case is one of exploitation by Mr Cameron and Mr Harrison of Mrs Schipp's several positions of serious disadvantage over the course of their dealings in such a manner that Mr Cameron and Mr Harrison cannot, in good conscience, retain the benefit of such bargains as they may have made. 647 It is well established that those who enter into commercial dealings are bound by their contracts and that a strong case must be made out to establish equitable fraud arising from unconscionable conduct. 'The law in general leaves every man at liberty to make such bargains as he pleases, and to dispose of his own property as he chooses. However improvident, unreasonable, or unjust such bargains or dispositions may be, they are binding on every party to them unless he can prove affirmatively the existence of one of the recognised invalidating circumstances such as fraud or undue influence.' Salmond J in Brusewitz v Brown (1887) 36 CLD at 182-183. 648 In this case, I formed the clear view that Mrs Schipp was in fact a person with a special weakness, readily apparent to Mr Cameron and Mr Harrison which sprang from her quiet, reserved and timid character, from her lack of commercial experience and, at the time, from the fact that she had no close family support. It has been said that the relationships in which one party stands in a position of special disadvantage vis-a-vis the other, are infinitely various: Blomley v Ryan (1956) 99 CLR 362 at 405; Commercial Bank of Australia Ltd v Armadio (1983) 151 CLR 447 at 462, Louth v Diprose (1992) 175 CLR 621 at 628.] 649 Mrs Schipp's evidence, which I accept, was that in the main she did not speak during most of the many meetings with Mr Cameron and Mr Harrison over aspects of the development of Mary Street. In my judgment, Mr Cameron and Mr Harrison came early to view Mrs Schipp as a very weak and naive and vulnerable person who could simply be taken for granted and who was obviously way out of her depth in the commercial dealing which was involved. This was a case in which it was necessary to see Mrs Schipp in the witness box and to see Mr Cameron and Mr Harrison in the witness box to examine properly their relationship inter se and to form a judgment on whether their dealings from early days placed Mrs Schipp in a position where her weakness became more and more apparent to Mr Cameron and Mr Harrison. In my judgment, this did occur and Mr Cameron and Mr Harrison moved in to take unfair and unconscionable advantage of this weakness. Probably the weakness stemmed from Mrs Schipp's inherent character, she being a small person who was quiet and timid, and also from her lack of education. Thus, as time went by, Mrs Schipp's capacity to make decisions as to her own best interests became peculiarly susceptible to control and influence by Mr Cameron and Mr Harrison. She came to be extremely disadvantaged in her bargaining power as compared to that of Mr Cameron and Mr Harrison. She fell in with whatever Mr Harrison and Mr Cameron suggested. She was well out of her depth and they knew it. The relationship of respect which she had for their business experience was such that she, to their observation, became extremely susceptible to their influence as they knew. Their acts of manipulation were acts to which she was, as they believed, utterly vulnerable by reason of the personal domination which they had come to achieve over Mrs Schipp. 650 The case presents as one in which Mr Cameron and Mr Harrison acquired such a special relation of domination, influence and superiority over Mrs Schipp as to render reasonable a presumption that the Kembla Street transaction was procured by Mr Cameron and Mr Harrison through the unconscientious use of their power over her. 651 The relation of domination, influence and superiority arose from relatively early in their dealings when Mr Cameron's position as an experienced real estate agent and Mr Harrison's position as a solicitor, were used by them to dominate Mrs Schipp. They were aware of Mrs Schipp's vulnerability and of the effect which their positions had on Mrs Schipp and that she placed trust and confidence in their attending in the interests of all, to the furthering of first the Mary Street Joint Venture, and later the Kembla Street Joint Venture. 652 As time passed, Mr Cameron and Mr Harrison manipulated Mrs Schipp in a series of ways using a number of methods. She was not up to protecting herself and in the result became the victim of the unconscionable conduct of Mr Cameron and Mr Harrison. 653 There are cases in which it becomes difficult and sometimes impossible to separate out the strands constituting undue influence, economic duress, breaches of fiduciary duty, misrepresentation and unconscionable conduct. These remedies are often not mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of each other. As Mason J said in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461, "In one sense fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct all constitute species of unconscionable conduct". The same point has been made in relation to the doctrines of unconscionable conduct and undue influence: "There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest." [ Amadio (1983) 151 CLR at 461] 654 Naturally, the facts in each case must be closely examined in order to determine which one or more of these remedies may be applicable or inapplicable in any given situation. This is to assess properly the elements which the development of the law has attached to the discrete remedies. 655 The present is, thus, one of the easier cases in which to deal with these matters, for the simple reason that, as it seems to me, in the main, the remedies relied upon by Mrs Schipp are available and able to be availed of. On an overview basis, the case presents as one in which Mr Cameron and Mr Harrison cannot be permitted to take advantage of Mrs Schipp's special vulnerability or disadvantage in the circumstances in which they effectively, on several material matters, tricked her into parting with her moneys.

[305]

Interrelated bases for granting relief 656 The findings of fact set out above, require them to be looked at from the point of view of the relevant principles of law. It would be surprising indeed if Mrs Schipp, in the light of these findings, was not entitled to relief against the Cameron Harrison Interests. Examining what that entitlement may be, exposes a number of different bases available for granting relief to Mrs Schipp, depending upon which particular face of the dealings between herself and the Cameron Harrison Interests is placed in focus. Indeed, a number of the bases grounding Mrs Schipp's entitlement to relief rest upon principles which, in truth, overlap. 657 As I have said, far from this being a case in which there is a question as to whether any relief should be granted to Mrs Schipp, it presents more as a case in which the difficulty arises from having to select between the different types of relief which may be available to her. 658 It has been said time and time again that the particular facts in each case must be scrupulously examined both when assessing which relevant principles of law to apply to those facts and when identifying which forms of relief are appropriate to be awarded. 659 The facts do present a picture which may be examined from a number of faces. As one looks at the situation from one face, a particular focus appears attractive as suggesting the principle which is applicable, resulting in one form of relief. When one turns to look at the situation from another face, then a somewhat different focus becomes more attractive and apparently applicable, throwing up possibly an entitlement to a different form of relief, or sometimes an entitlement to an overlapping form of relief. 660 Between the time when Mrs Schipp first commenced discussions with Mr Cameron in relation to Mary Street and the time when Kembla Street was sold, a number of events occurred in her commercial dealings with the Cameron Harrison Interests. Possibly the simplest way to look at those events is to focus on Mrs Schipp having entered into two joint venture agreements or arrangements. If, as it seems to me, those joint venture arrangements or agreements throw up clear fiduciary obligations owed between the joint venturers inter se, then to a large extent Mrs Schipp's entitlement to relief arises simply from breaches of the fiduciary obligations owed by the Cameron Harrison Joint Venture Interests to Mrs Schipp by reason of the fact that the Joint Venture Agreements had been entered into. 661 This is not a case, however, in which it is simply the fact that joint venture agreements came to be in place, which gives rise to relevant fiduciary obligations owed to Mrs Schipp. It is also, importantly, a case in which the inducement to Mrs Schipp to enter into these joint venture agreements requires to be examined from a point of view of the obligations of promoters of joint venture agreements to those to whom the ventures are being promoted. In that situation, principles possibly most clearly expressed in recent years in the High Court of Australia decision in United Dominion Corporation Ltd v Brian (1985) 157 CLR 1 come to the fore. That is to say, even before a joint venture agreement is entered into, those negotiating to enter into the joint venture agreement may have imposed upon them obligations of the type spelled out in Brian v UDC towards one another. Possibly, this concept may be described as 'a joint venture to enter into a joint venture'. In this case, the obligations springing up from the duties of promoters are of far more significance when examining the promotion of the Kembla Street joint venture, than in examining the promotion of the Mary Street joint venture. However, the duties of those promoting or negotiating to enter into both joint ventures were, as it seems to me, breached in certain ways to which I will later refer. 662 Thus far, I have isolated for mention the two joint venture agreements or arrangements and the promotion of each in terms of looking to the place where relevant principles of law are to be found. But another way of looking at Mrs Schipp's transactions entered into with the Cameron Harrison Interests is to focus on the special disadvantages which, from beginning to end, Mrs Schipp faced in dealing with Mr Cameron and Mr Harrison. The disadvantages arose by reason of the difference in their respective positions, she being at the one end of the continuum, relevantly naive and inexperienced in relation to joint ventures and developments [see for example her lack of awareness even during the hearing, of the meaning of the word "conveyancing" - Transcript page 794.26], Mr Cameron and Mr Harrison being at the other end of the continuum, extremely experienced in such matters as well as in matters of documenting legal agreements. It is here, it seems to me, that Mrs Schipp's naivety and ability to be manipulated come to the fore. I do not suggest that naivety or gullibility by any party to a commercial transaction per se gives that party rights to relief or an entitlement to tear up the transaction. But when, as it seems to me, the party who is naive and gullible, comes to place trust and confidence in those with whom she is dealing, and when they, being aware of that naivety and gullibility and being aware of the trust and confidence placed in them, take advantage of their position to overreach themselves, to mislead the other party and to misrepresent facts and matters to that party, the principles here prayed in aid by the Plaintiff are enlivened and the court, in utilising a range of equitable relief doctrines, may grant appropriate relief. 663 Thus, superimposed upon the face presented by the transaction as the joint venture face, one finds the other face of the special disadvantage of a party who came to place trust and confidence in the other parties who proceeded to take unfair advantage of their position by acting in this way. These are matters which enliven the relevant principles dealing with unconscionable conduct at common law, also enlivening the principles which ground a range of fiduciary obligations. 664 There is, of course, yet another very important underlying parameter which obtained in this case. It falls to be weighed in balance in addressing what were the obligations of the joint venturers inter se, whether Mrs Schipp laboured under any, and if so what, special disadvantages in her dealings with Messrs Cameron and Harrison, and whether she placed any and if so what type of trust and confidence in Mr Cameron and/or in Mr Harrison. I refer here to the simple fact that Mr Harrison was a solicitor who from time to time, in the course of the relevant dealings, undertook the task of carrying out work which can only be regarded as appropriate for a solicitor or lawyer to carry out. I leave to the side for the moment questions such as whether the work was carried out on express or implied retainer, or pursuant to an understanding, and questions such as whether a non-client was entitled to assume that the work would be carried out professionally or for her benefit. 665 Let me immediately put to the side one proposition. I would not accept that the mere fact that a person who enters into a joint venture happens to be a solicitor, by itself imposes upon him any of the obligations which may be attracted had he been retained to use his professional ability or training for some purpose related to the joint venture. The point is well made in the following passage taken from Sheinkopf v Stone 927 F 2d 1259 (1st Cir. 1991), a case in which a law firm was held not liable for the acts of a lawyer who solicited a 'non-client's investment in an outside business venture': "Human beings routinely wear a multitude of hats. The fact that a person is a lawyer, or a physician, or a plumber, or a lion-tamer, does not mean that every relationship he undertakes is, or can reasonably be perceived as being, in his professional capacity. Lawyers/physicians/plumbers/lion-tamers sometimes act as husbands, or wives, or fathers, or daughters, or sports fans, or investors, or businessmen. The list is nearly infinite. To imply an attorney-client relationship, therefore, the law requires more than an individual's subjective, unspoken belief that the person with whom he is dealing, who happens to be a lawyer, has become his lawyer. If any such belief is to form a foundation for the implication of a relationship of trust and confidence, it must be objectively reasonable under the totality of the circumstances." [per Solya J.... at 1265]

[306]

[See generally the discussion of this topic in Solicitors' Liability Committee v Gray and Winter (1997) 147 ALR 154 at 184-195 per Beaumont and Burchett JJ. 666 On and after Mr Harrison was first introduced to Mrs Schipp as a solicitor and spoke with her and Mr Cameron in relation to Mary Street, and through the whole of his dealings with Mrs Schipp and Mr Cameron, it would have been possible for him to leave his hat as solicitor in the cupboard. For present purposes, his professional discipline would then have been no more relevant than it would have been had he been a physician or lion tamer. But here, Mr Harrison allowed the fact that he was a solicitor to intrude into his dealings with Mrs Schipp from time to time in a fashion which engages and brings into play various obligations and duties which would not otherwise have attached to him. He offered to "do the legals" and drew up contracts which were to be entered into between himself and Mrs Schipp and others. He gave Mrs Schipp legal advice on some topics. He invited and encouraged her to deal with him and his wife in relation to Kembla Street. The fact that Mrs Schipp did not ask him to advise her about her personal position and, in that sense, did not regard him as she would a family solicitor [Transcript page 794.45] does not detract from the fact that, in giving legal advice, he exposed himself to an obligation to use care in so acting, and importantly gave Mrs Schipp reason for treating him, as she did, as acting as a solicitor in that matter. As a solicitor, he acted for her at the same time as acting for himself and other joint venture partners. As a solicitor, he completed the Mary Street conveyance, and then as a solicitor, he deposited the moneys owing to the vendors of Mary Street into a bank account. During the whole of the period that he was acting as a solicitor in relation to the sale of Mary Street, up to and including all periods when the settlement moneys were in his hands, or, at his direction, paid into the solicitor's settlement deposit bank account and not yet accounted to the persons entitled to the proceeds as vendors of Mary Street, he retained his hat as solicitor squarely on his head. It was not then appropriate for him to use the fact that he held these funds as a bargaining chip in his efforts to induce Mrs Schipp to enter into the Kembla Street Joint Venture Agreement. Thus, in one place, one has the combination of a solicitor's obligations to his clients who here include Mrs Schipp; a promoter's obligations on Brian v UDC principles (Cf Catt v Marac Australia Ltd (1987) 9 NSWLR 639), and a situation in which trust and confidence has been placed by Mrs Schipp in the solicitor, both as a Mary Street joint venture partner of hers engaged in the winding up of the joint venture [Chan v Zacharia (1984) 154 CLR 184], and as the solicitor handling the conveyancing aspects of the sale of Mary Street, and finally a situation in which Mrs Schipp is under a specially disadvantageous situation in the position she occupied in very late 1988, by which time Mr Cameron and Mr Harrison had so manipulated her that she was, in a real sense, a pawn in their hands. 667 Of course, Mr Harrison's role as a solicitor continued through into the conveyance of the Kembla Street property where he effectively acted as solicitor for the purchaser as well as solicitor for the vendor. It was he who drew up the Contract for Sale of Kembla Street and it was he who inserted the period of time for completion. I reject any suggestion that he was at arm's length from Mrs Schipp in the matter of the setting up of the contract for the sale of Kembla Street or the conveyancing transaction. I reject any suggestion that Mrs Schipp was given an opportunity to, or advised to, obtain her own legal advice, or to go to another solicitor to act for her in relation to her interests as one of the purchasers of Kembla Street. Mr Harrison simply 'did it all', as he had in relation to Mary Street. He was in so much of a hurry to have the contract for Kembla Street signed and then the conveyance completed, that the last thing in his mind was to permit Mrs Schipp an opportunity to have another solicitor effectively act for her to protect her interests, as through Pyogrove, one of the Joint Venture Partners. 668 Not to be overlooked is the fact that Mr Harrison gave commercial advice. And gave that advice at the same time as wearing his solicitors hat and / or as giving legal advice. The case thus involves conflicts of the entrepreneurial interests of Mr Harrison with his professional duties. 669 In Leary v Federal Commissioner of Taxation (1980) 32 ALR 221, Brennan J , as His Honour then was, did not have to consider whether it was possible for the role of professional adviser and the role of an entrepreneur properly to coincide or overlap. Here that matter is squarely thrown up. Brennan J said in Leary (at 240). 'It has not been material to consider whether it is possible for the role of a professional adviser and the role of an entrepreneur properly to coincide or overlap, but the appearance of solicitors performing these respective roles in the present case leads me to invite attention to significant differences between the two functions. These differences do not arise out of any judicial view as to the lawfulness or morality of tax avoidance … They arise because the field of professional activity is co-extensive with a lawyer's professional duty. That duty is to give advice as to the meaning and operation of the law and to render proper professional assistance in furtherance of a client's interests within the terms of the client's retainer. It is a duty which is cast upon a lawyer, as a member of an independent profession, whether his services are sought with respect to the operation of taxing statutes, the provisions of a contract, charges under the criminal law or any other of the varied fields of professional concern. It is a duty which arises out of the relationship of lawyer and client. But activities of an entrepreneur in the promotion of a scheme in which taxpayers will be encouraged to participate [fall] outside the field of professional activity; those activities are not pursued in discharge of some antecedent professional duty. Entrepreneurial activity does not attract the same privilege nor the same protection as professional activity; and the promotion of a scheme in which particular clients may be advised to participate is pregnant with the possibility of conflict of entrepreneurial interest with professional duty." 670 Here, Mr Harrison had been either retained to act or had held himself out as acting in relation to a number of matters later dealt with in this judgment. These embraced doing "all the legals" in relation to Mary Street, giving advice as to the meaning and effect of the First Joint Venture Agreement, continuing to act as solicitor for the vendor of Mary Street until the net proceeds of sale were disbursed in late January 1989, giving advice to Mrs Schipp on capital gains tax issues relating to Mary Street. Yet, at the same time, Mr Harrison was acting as a promoter of the Mary Street Joint Venture. They embraced his acting upon the Pyogrove borrowing transaction, giving advice as to the AGC documents to be signed in relation to Kembla Street, and giving commercial advice that the project could be financed within 12 months, was a great investment and would be a great form of superannuation. Yet, at the same time, Mr Harrison was acting as a promoter of the Kembla Street Joint Venture. The clearest of conflicts of entrepreneurial interest and professional duty were thrown up. And Mr Harrison at times clearly blurred his roles as a solicitor and entrepreneur/promoter. 671 Thus, this is a case in which Mr Harrison's role as solicitor comes to the fore from time to time. And whenever that role does come to the fore, Mr Harrison must accept, as a consequence of wearing his solicitor's hat, that the principles of law which apply to solicitors dealing with their clients, or advising their clients, or carrying out work for their clients, are enlivened. 672 Another mode of examining Mrs Schipp's transactions with the Cameron Harrison Interests would be to focus on the temporal situation. A close examination of the time line points up several important facts. Mr Cameron occupied a position of conflict of interest in relation to his interest in the purchase - at a point in time when the vendor had retained Don Cameron Real Estate as selling agent. Then, on 25 February 1988, when Mr Cameron and Mr Harrison first produced the first Mary Street Joint Venture Agreement for Mrs Schipp's execution, questions of wrongdoing by both Mr Cameron and Mr Harrison arise. By this date a binding agreement already existed and all that remained was to have the terms restated in a form which would be fuller or more precise but not different in effect. Up to that moment, aside from Mr Cameron's conflict of interest to which I have already referred, I do not see that any duty which either Mr Cameron or Mr Harrison may have had as persons negotiating to enter the Mary Street Joint Venture had been breached. Up to that moment, I do not see that there was any unconscionable conduct or breach of fiduciary obligation or misleading or deceptive conduct or other act of wrongdoing by either Mr Cameron or Mr Harrison. But at the time the document was presented to Mrs Schipp for execution, it departed in material respects from the representations made to her and from the oral agreement which she had entered into. As Mrs Schipp was not informed of the departure of the document from those representations and that agreement, the first acts of wrongdoing occurred and the position changed. If one was to view the agreement which the document would propose to create, as a new Joint Venture differing from the oral agreement already reached [Masters v Cameron class 1 or 2], it would be appropriate to regard Mr Cameron as well as Mr Harrison as promoters of such new Joint Venture Agreement. In that circumstance Mr Cameron and Mr Harrison would owe fiduciary obligations of disclosure of the terms of the proposed new Joint Venture Agreement to Mrs Schipp. Alternatively, if one was to view the negotiations as a Masters v Cameron Class 3 situation, Mr Cameron and Mr Harrison were obliged to disclose the material terms of the document which would bind the parties to Mrs Schipp. On each of these approaches Mrs Schipp became entitled in any event to set aside the written agreement by reason of the unconscionable conduct of Mr Cameron and Mr Harrison. She had occupied a disadvantageous position of which Mr Cameron and Mr Harrison unconscientiously took advantage. Her special disability, even at this early stage, arose by reason of her being induced to rely upon Mr Harrison to draw up a document which would correctly record the oral agreement, and to properly explain the document to her. His position as a solicitor had been put forward as the justification for his preparation of the document. Mr Harrison acted for Mrs Schipp as well as for himself in drawing up the document. Approaching the matter from the viewpoint of Mr Harrison's fiduciary obligation as a solicitor owed to Mrs Schipp, he has to prove that the transaction was 'open and fair, and free from all objection', not merely 'fair'. Maguire and Makaronis (1997) 188 CLR 449 at 465. He comes under 'a heavy duty to show the righteousness of the transaction'. Maguire at 465. But the transaction was open to objection, and on this basis also, the written agreement was one which Mrs Schipp was entitled to set aside. 673 Moving further along the time line, acts of wrongdoing occur when Mr Cameron and Mr Harrison, relatively early in 1988, formed the decision that Mary Street should be sold, and formed that decision, not because of any particular concern as to the viability of Mary Street but primarily because of Mr Harrison's pressing financial agenda. From the moment that Mr Cameron and Mr Harrison determined upon this course, their failure to inform Mrs Schipp of that determination constitutes an act of wrongdoing. Probably this act of wrongdoing, which continued, is best described as a breach of the duty by those who are joint venturers to make proper disclosure to one another of matters material to be known to one another in relation to the joint venture. Obviously, non-disclosure and misrepresentation constitute breaches of this duty which is owed by joint venturers to one another. 674 The time line then leads to the many acts of manipulation of Mrs Schipp from the Children's Meeting onwards. Now, one has a combination of breaches of the duties owed by the Mary Street joint venturers to one another; of breaches of the duties owed by those promoting the Kembla Street joint venture to those to whom the joint venture was being promoted; and of Mrs Schipp quite simply being tricked in a number of ways. I do not see that the fact that Mrs Schipp's actions were partly influenced by the taste of profit received from the Mary Street transaction, or by the confidence expressed by Mr Baird in the Kembla Street transaction, or by the confidence in Mr Cameron expressed by Mr French, or by Mr Zander's appearance on the scene, alter the underlying fact which was that Mrs Schipp's position through the last months of 1988 and January 1989 was an intolerable one. That she cannot now, and probably could not then, give a clear explanation of the extent to which her motivation in entering into Kembla Street stemmed from her belief that this was probably the only way in which she would be likely to retrieve her moneys from Mary Street, or alternatively, stemmed from that matter in part, and in part from her desire to make a profit out of a seemingly attractive new joint venture, does not appear to me to lead to her losing her rights to relief from the Cameron Harrison Interests in relation to her losses sustained qua the Kembla Street transaction. Not to be overlooked is the importance of Mrs Schipp in the face of positive representations in relation to Kembla Street, having no knowledge whatever as to Mr Harrison's and Mr Cameron's past endeavours, and lack of success, to procure finance for the project, or in seeking to obtain pre-leasing or pre-purchase commitments or expressions of interest. Likewise, I do not see that Mrs Schipp accepting the Second Joint Venture Agreement, albeit not understanding it, as a method, as she had been told, of avoiding her obligation to pay capital gains tax on her profits, results in her losing her rights to relief in respect of the Kembla Street transaction. This was only one of the tricks being played upon her. It was not possible to retrospectively remove her legal entitlement to profits on the Mary Street Development. 675 Where A holds property of B being a gullible and naive person, and holds B to ransom by refusing to return B's property unless B will invest all or most of that property in a new commercial agreement with A, A cannot erase the picture by calling over a neighbour or friend to inform B of A's credibility or trustworthiness. In that situation, nothing short of independent advice and probably a break in time or cooling off period would be necessary in order for B to have regained his/her composure so as to be in a position to give a real consent to the proposed transaction. 676 Equity is no stranger to catching or tricky bargains, trust and confidence placed in another then being abused, special disadvantages in relationships, fraud, unconscionable conduct and undue influence. These situations are often to be recognised by a simple examination of the motivation of those with whom the innocent person dealt and, very importantly, by an examination of the manner in which those with whom the innocent person dealt profited. Here, Mr Harrison's motivation was always his financial position which provided the dominant reason explaining why he and Mr Cameron acted in the ways in which they did. Mr Cameron seems to have simply played along as Mr Harrison's adjutant. Here, the gains which Mr Cameron and Mr Harrison made include profiting from the Mary Street Joint Venture where they had no right to those profits at all, and include obtaining interest free loans from Mrs Schipp. Mr Harrison further gained a significant advantage in that Mrs Schipp became a person who invested in the Kembla Street transaction when, at the point in time when it was made, such an investment was neither viable nor prudent, nor made by a person appreciative of the legal or commercial risks attached to the transaction.

[310]

Commonwealth v Verwayen (1990) 170 CLR 394 at 440-441 per Deane J. 680 "It has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that special disability was sufficiently evident to the other party to make it prima facie unfair or 'unconscionable' that that other party procure, accept or retain the benefit of, the disadvantaged party's assent to the impugned transaction in the circumstances in which he or she procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: 'the burthen of showing the fairness of the transaction is thrown on the person who seeks to obtain' or retain the benefit of it: See O'Rorke v Bolingbroke (1877), 2 App Cas 814, at p 823, per Lord Hatherley; Fry v Lane, Re Fry; Whittet v Bush (1888), 40 Ch D 312, at p 322; Blomley v Ryan (1956), 99 CLR 362, at pp 428-429; Commercial Bank of Australia Ltd v Amadio (1983), 151 CLR 447, at p 474 . . . 681 The adverse circumstances which may constitute a special disability for the purposes of the principle relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible of being comprehensively catalogued ibid, at p 474. In Blomley v Ryan (1956) 99 CLR, at p 405, Fullagar J listed some examples of such special disability: 'poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary.' As Fullagar J remarked, the common characteristic of such adverse circumstances 'seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other'."

[311]

Louth v Diprose (1992) 175 CLR 621 at 637 per Deane J. 682 'Certainly the equitable jurisdiction is not based upon mere inadequacy of consideration or other inequality in bargaining power or improvidence in the transaction. This has been clear since the time of Lord Nottingham's dictum that Chancery mends no man's bargain: Maynard v Moseley (1676) 3 Swanst 651 at 655; 36 ER 1009 at 1011. It is supported in the nineteenth century cases: Borrell v Dann (1843) 2 Hare 440; 67 ER 181; Middleton v Brown (1878) 47 LJ Ch 411; Allcard v Skinner (1887) 36 Ch D 145 at 157-8 (Kekewich J); affd CA. Sir John Salmond put the position thus in Brusewitz v Brown [1923] NZLR 1106 at 1109-10: The mere fact that a transaction is based on an inadequate consideration or is otherwise improvident, unreasonable, or unjust is not in itself any ground on which this Court can set it aside as invalid. Nor is such a circumstance in itself even a sufficient ground for a presumption that the transaction was the result of fraud, misrepresentation, mistake, or undue influence, so as to place the burden of supporting the transaction upon the person who profits by it. The law in general leaves every man at liberty to make such bargains as he pleases, and to dispose of his own property as he chooses. However improvident, unreasonable, or unjust such bargains or dispositions may be, they are binding on every party to them unless he can prove affirmatively the existence of one of the recognised invalidating circumstances, such as fraud or undue influence. This general principle, however, is subject to an important exception. Where there is not merely an absence or inadequacy of consideration for the transfer of property, but there also exists between the grantor and the grantee some special relation of confidence, control, domination, influence, or other form of superiority, such as to render reasonable a presumption that the transaction was procured by the grantee through some unconscientious use of his power over the grantor , the law will make that presumption, and will place on the grantee the burden of supporting the transaction by which he so benefits, and of rebutting the presumption of its invalidity. In such cases it is necessary for the grantee to prove that the suspected transaction has not its source in any improper influence over the mind or will of the grantee, or in any fraud, misrepresentation, mistake, or concealment of material facts which ought to have been disclosed by the grantee to the grantor in view of the relation between them. Unless the grantee can prove this the transaction will be set aside at the suit of the grantor or his representatives. The commonest and most important instances of this presumption are those cases in which the relation between the parties is some recognised legal relationship of confidence, such as that existing between solicitor and client and between trustee and beneficiary. The rule, however, is not limited to any exclusive and defined list of recognised legal relations. It is quite general in its application. The question in every case is: Did the parties contract at arm's length and on terms of equality, or, on the contrary, did there exist between them such a relation of superiority on the one side and inferiority on the other (whatever the source or nature of that superiority or inferiority may be), and therefore such an opportunity and temptation for the unconscientious abuse of the power and influence so possessed by the superior party, as to justify the legal presumption that such an abuse actually took place and that the transaction was procured thereby? '

[314]

It is, however, to the passages excerpted in paras 679-684 that I turn for the appropriate explanation of the principles to be here applied. 687 Mrs Schipp's special vulnerability arising from her lack of experience in real estate development and reliance upon Mr Harrison's status as a solicitor to act in the interests of herself and the Cameron Harrison Interests in documenting the agreement for Mary Street has been referred to. The facts throw up a clear course of tricky conduct; and the whole of the events from Mrs Schipp's initial introduction to Mr Cameron up to the sale of Kembla Street in October 1991 have to be weighed. That conduct was in its factual setting unfair to Mrs Schipp in a situation where fairness and good faith was properly to be expected of Mr Cameron and Mr Harrison. They ought not in conscience as between themselves and Mrs Schipp to have acted as they did. Definition is indeed a poor instrument when used to determine whether or not a transaction, here a series of transactions, was unconscionable. In my view, the conduct engaged in by the Cameron Harrison Interests is properly described as 'unconscionable conduct'. The exploitation by Mr Cameron and Mr Harrison of Mrs Schipp's positions of vulnerability and disadvantage in her dealings with respect to both Mary Street and Kembla Street was such that the Cameron Harrison Interests cannot in good conscience retain the benefits of the transactions which must be set aside. Difficult though it may be to define with particular precision how there came to exist between the Cameron Harrison Interests and Mrs Schipp such a relationship of superiority on the one side and inferiority on the other, that relationship did in my view come to exist, leading to such an opportunity and temptation for the unconscientious abuse of the power and influence possessed by the Cameron Harrison Interests, as to justify both my finding that such abuse actually took place and that the transactions were procured thereby and also as to justify the legal presumption that such an abuse took place and that the transactions were procured thereby.

[315]

ECONOMIC DURESS 688 Mrs Schipp disclaims any reliance upon economic duress as a cause of action. The Seventh Defendant, however, submits that "because dishonesty can involve an element of objectiveness as well as subjective intent, . . . the notions which underlie concepts of economic duress may well found a finding that what was done was dishonest, . . . the sorts of themes underlying . . . cases [on economic duress] may well show that what occurred in this case was dishonest within the meaning of the policy". [7 April 1988 Transcript page 50] 689 McHugh JA has recently dealt with the doctrine of economic duress in the following terms: "The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock. As his Lordship pointed out, the consequence is that the "consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind" (at 384). In the same case Lord Scarman declared (at 400) that the authorities show that there are two elements in the realm of duress: (a) pressure amounting to compulsion of the will of the victim and (b) the illegitimacy of the pressure exerted. "There must be pressure", said Lord Scarman "the practical effect of which is compulsion or the absence of choice". The reference in Universe Tankships Inc of Monrovia v International Transport Workers Federation and other cases to compulsion "of the will" of the victim is unfortunate. They appear to have overlooked that in Director of Public Prosecutions for Northern Ireland v Lynch [1975] AC 653, a case concerned with duress as a defence to a criminal proceeding, the House of Lords rejected the notion that duress is concerned with overbearing the will of the accused. The Law Lords were unanimous in coming to the conclusion, perhaps best expressed (at 695) in the speech of Lord Simon of Glaisdale "that duress is not inconsistent with act and will, the will being deflected, not destroyed". Indeed, if the true basis of duress is that the will is overborne, a contract entered into under duress should be void. Yet the accepted doctrine is that the contract is merely voidable. In my opinion the overbearing of the will theory of duress should be rejected. A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct . But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress. In their dissenting advice in Barton v Armstrong [1973] 2 NSWLR 598; [1976] AC 104, Lord Wilberforce and Lord Simon of Glaisdale pointed out (at 634; 121): " . . . in life, including the life of commerce and finance, many acts are done under pressure, sometimes overwhelming pressure, so that one can say that the actor had no choice but to act. Absence of choice in this sense does not negate consent in law: for this the pressure must be one of a kind which the law does not regard as illegitimate. Thus, out of the various means by which consent may be obtained - advice, persuasion, influence, inducement, representation, commercial pressure - the law has come to select some which it will not accept as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress or coercion." In Pao On v Lau Yiu Long [1980] AC 614, the Judicial Committee accepted (at 635) that the observations of Lord Wilberforce and Lord Simon in Barton v Armstrong were consistent with the majority judgment in that case and represented the law relating to duress. It is unnecessary, however, for the victim to prove that the illegitimate pressure was the sole reason for him entering into the contract. It is sufficient that the illegitimate pressure was one of the reasons for the person entering into the agreement . Once the evidence establishes that the pressure exerted on the victim was illegitimate, the onus lies on the person applying the pressure to show that it made no contribution to the victim entering into the agreement: Barton v Armstrong (at 633; 120) per Lord Cross." [Emphasis added]

[318]

Commercial Bank of Australia v Amadio (1983) 151 CLR 447 at 474 per Deane J. 692 "Historically, courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of 'unconscionable conduct' is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, e.g., a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter, the will of the innocent party is not independent and voluntary because it is overborne. In the former, the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. [Amadio (1983) 151 CLR 447 at 461 per Mason J]. 693 Although Mrs Schipp's case was ultimately confined to one of 'presumptive undue influence', the issues raised by the seventh defendant oblige the court to approach the matter from a wider perspective. 694 The focus where undue influence is alleged is on the quality of the consent or assent of Mrs Schipp. Mrs Schipp's will was not independent and voluntary because it was overborne by the conduct of Mr Cameron and Mr Harrison. This was clearly the case during the 'roaring meeting'. It was clearly the case during the general manipulation of Mrs Schipp by the Cameron Harrison Interests. Mrs Schipp was manoeuvred by the 'Tax Problem Discussion', by the tactics of placing her in a high state of anxiety as to the whereabouts of the settlement funds from the Mary Street sale, and by coming to believe that the only way she would ever receive her entitlement to the Mary Street proceeds was by dealing in relation to Kembla Street, into a position where her will was neither independent, nor voluntary because in truth it was overborne.

[324]

That being so, the proposed participants in each joint venture were under fiduciary obligations to one another in relation to the proposed project at the time when the first of the mortgages was given and accepted. In particular, each participant was under a fiduciary duty to refrain from pursuing, obtaining or retaining for itself or himself any collateral advantage in relation to the proposed project without the knowledge and informed assent of the other participants. 'The subject matter over which the fiduciary obligations' extended must be 'determined by the character of the venture or undertaking for which' the relationship between the prospective joint venturers existed: per Dixon J., Birtchnell 24 (1929) 42 C.L.R., at p 408 in a partnership context but equally applicable here": United Dominions Corp. v Brian (1985) 157 CLR 1 per Mason, Brennan and Deane JJ [emphasis added]. 703 "The decision of Lord Lyndhurst L.C. in Fawcett v Whitehouse (1829) 1 Russ. & M. 132 [39 E.R. 51] is clear authority for the proposition that a person who is negotiating for himself and his future partners as an agent for the intended partnership, and who clandestinely receives an advantage for himself, must account for that advantage to the partnership when it is formed. Hichens v Congreve (1829) 1 Russ. & M. 150 [39 E.R. 58] is a similar case. Other authorities, cited by Lindley, concerned promoters of companies, but there is an analogy between the position of company promoters and that of persons who invite others to join in a partnership. The principle was stated generally in Directors, etc. of Central Railway Co. of Venezuela v Kisch (1867) L.R. 2 H.L. 99 at p 113 "It cannot be too frequently or too strongly impressed upon those who, having projected any undertaking, are desirous of obtaining the co-operation of persons who have no other information on the subject than that which they choose to convey, that the utmost candour and honesty ought to characterise their published statements." 704 There is a passage in Bell v Lever Bros. Ltd [1932] AC 161 which, although not cited by Lindley, appears to support his proposition; Lord Atkin said [1932] AC at 227: "Ordinarily the failure to disclose a material fact which might influence the mind of a prudent contractor does not give the right to avoid the contract. The principle of caveat emptor applies outside contracts of sale. There are certain contracts expressed by the law to be contracts of the utmost good faith, where material facts must be disclosed; if not, the contract is voidable. Apart from special fiduciary relationships, contracts for partnership and contracts of insurance are the leading instances. In such cases the duty does not arise out of contract; the duty of a person proposing an insurance arises before a contract is made, so of an intending partner." (Emphasis supplied.) 705 I do not understand this passage to mean that the only remedy for a failure by an intending partner to disclose a material fact is rescission. The passage does suggest that an intending partner, like a partner, owes a duty of the utmost good faith." UDC v Brian (1985) 157 CLR 1 at 5-6 per Gibbs CJ

[325]

Fiduciary Obligations of a Joint-Venturer 706 One question which arises is whether or not Mr Harrison and Mr Cameron owed fiduciary duties to Mrs Schipp because they stood in a relationship of joint-venturers with her. The question throws up the need to examine under what circumstances, if any, a joint venture agreement will give rise to fiduciary obligations between the parties. 707 The principle appears to be that a court will find that a fiduciary relationship existed between the parties to a joint venture when it is analogous to a partnership. The High Court in United Dominion Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 held that although it was not fully documented, a joint venture arrangement for the development of certain land was analogous to a partnership so that the relationship between the venturers was fiduciary in character. Justices Mason, Brennan and Deane held that : ". . . whether or not the relationship can be said to be fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties have undertaken. If the joint venture takes the form a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers from being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship." [157 CLR 1 at 11] 708 When, then, will a joint venture be regarded as a partnership such that the participants in the arrangement owe fiduciary obligations to one another, and even if a particular joint venture is not regarded by the law as a partnership, or analogous to one, in what circumstances, if any, will the participants in the joint venture owe any, and if so what, fiduciary obligations to one another ? 709 The High Court has stated that a joint venture, at least as a matter of ordinary language, will often be a partnership. "The term 'joint venture' is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or under Scots' law 'adventure') will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a 'joint venture' and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other. One would need a more confined and precise notion of what constitutes a 'joint venture' than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint venturers is necessarily a fiduciary one: but cf. Per Cardozo C.J., Reinhard v Salmon 20 (1928) 249 N.Y. 458, at p 462; 164 N.E. 545, at p 546.

[329]

It does not seem to me that in determining the existence and scope of fiduciary duties in the case of a joint venture arrangement, it is necessary to attempt to fit the particular relationship into the legal category of 'partnership' as set out in the Partnership Act. In my view, the better approach is to consider whether or not the joint venture possesses characteristics which the courts have recognised as being inherent in the partnership relationship. The difference between this approach and the previous one is that while the elements of a partnership relationship are identical, the statutory definition entails a more limited enquiry and requires each part of the definition of a 'partnership' to be made out. In contrast, the second approach allows a court to find that a partnership existed on the basis of one, or a number, of dominant aspects of the relationship. This permits the fiduciary duties to be moulded to the character of the particular relationship. 713 In Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 at 407-408, Dixon J identified two distinctive features of a partnership relationship: "The relation is based, in some degree, upon mutual confidence that the partners will engage in some particular kind of activity or transaction for the joint advantage only. In some degree, it arises from the very fact that they are associated for such a common end and are agents for one another in its accomplishment." 714 The House of Lords in Cocks v Hickman (1860) 11 HL Cas 267 at 304 stated that the real basis of liability in partnership was 'in truth, the liability of a principal for the acts of his agent'. However, when determining whether or not a joint venture will attract fiduciary obligations akin to those owed by members of a partnership to one another, whether or not the relationship between the participants in a joint venture is characterised by an element of mutual trust and confidence is the overriding consideration. Dawson J in United Dominions Corporation v Brian concluded that: "Of course, in a partnership the parties are agents for each other and this may constitute a separate reason for the fiduciary character of the partnership. There may be no such agency between participants in a joint venture but, as Dixon J pointed out in Birtchnell v Equity Trustees, Executors & Agency Co. Ltd (1929) 42 CLR 384 at 407-408, even in a partnership it is really the mutual confidence between partners which imposes fiduciary duties upon them and the same confidence may, in appropriate circumstances, be found to exist between participants in a joint venture." [See also Justice McPherson, "Joint Ventures" in P.D. Finn, ed., Equity and Commercial Relationships (Law Book Company, Sydney 1987) at 30] 715 This view of partnerships was recently invoked by the Queensland Court of Appeal in Whywait Pty Ltd v Davidson [1997] 1 Qd R 225. The question for the Court was whether a relationship of principal and agent had existed between Mr and Mrs Davidson and a third party such that the Davidsons were bound by any contracts for building work entered into by that the third party. The Davidsons and the third party had signed an joint venture agreement in relation to property development. The court held that there was an agency relationship because the Davidsons and the third party had a 'relation of mutual confidence' and were therefore, in a partnership relationship.

[330]

Fiduciary Obligations when the Joint Venture is not analogous to a Partnership 716 It is plain that even if a joint venture is not a partnership at law, an agreement between the participants may give rise to fiduciary obligations. 717 Recognition of the existence of fiduciary relationship in joint ventures which were not considered to be partnerships has occurred in a limited number of cases in Australia as well as New Zealand: Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1; Keith Murphy Pty Ltd v Custom Credit Corporation Ltd (1992) 6 WAR 332; Mount Isa Mines Ltd v Seltrust Corporation Pty Ltd (unreported, Supreme Court of Western Australia, 27 September 1985, per Rowland J); Auag Resources Ltd v Waihi Mines Ltd [1994] 3 NZLR 571. An extensive consideration of the issue was given by Ryan J in Pacific Coal Pty Ltd v Indemitsu (Qld) Pty Ltd (unreported, Supreme Court of Queensland, 21 February 1992). Justice Ryan held that it was unnecessary to decide whether or not an Investigation Agreement relating to the mining of coal deposits could be categorised as a partnership agreement. Based on the form of the joint venture agreement and the obligations which had been assumed by the parties, His Honour held that, regardless of such a finding, a fiduciary relationship existed between the parties: " ... I consider that the participants undertook to act so as to further their joint interest in the venture and not to act so as to prejudice that joint interest. They placed mutual confidence in one another, and each was vulnerable to abuses of power by the others." [at 17] 718 The particular terms of the joint venture agreement which Ryan J identified as relevant to the finding that a fiduciary relationship existed, included the parties' covenants to be just and equitable in all activities and dealings with co-venturers and to act bona fide in the interests of the joint venture's objectives; the imposition of an obligation of confidentiality; the provision that all liabilities, costs and expenses of the joint venture would be shared and that the assets of the venture were to be dedicated to the joint venture exclusively. [at 16] 719 I find that the joint participation of Mr Cameron, Mr Harrison and Mrs Schipp in the Mary Street Joint Venture gave rise to fiduciary obligations. It is unnecessary for me to determine whether a fiduciary relationship existed between them by categorising their relationship as a partnership, it is enough that each of the parties had placed, as I find that they had, mutual confidence in each other in the pursuit of the objectives of the joint venture agreement. 720 I have found that the parties had entered into a binding agreement before the written document purporting to be the Mary Street Joint Venture was created. The finding that the relationship between Mr Cameron, Mr Harrison and Mrs Schipp was characterised by mutual trust and confidence is, then, based upon the express and implied terms of that oral agreement. [See paragraph 603] 721 Mr Cameron, Mr Harrison and Mrs Schipp agreed to associate themselves for the purpose of the purchase and development of the Mary Street property. They put themselves in a position where they placed reliance upon the undertakings of the others to achieve the objectives of the Mary Street Joint Venture. The capital which Mrs Schipp advanced was intended to be used solely in relation to the objectives of the joint venture, in particular for the purchase of Mary Street and any expenses incidental to the purchase of the property. The management of the project was dependent upon the efforts of Mr Harrison and Mr Cameron and it was their responsibility to procure finance for the development by pre-selling the units. The parties were to share equally in the profits of the venture, once Mary Street had been developed. 722 It is to be noted that there are factors which might be said to suggest that the mutual confidence that existed between Mr Cameron, Mr Harrison and Mrs Schipp was not sufficient to give rise to fiduciary obligations. On the basis of the oral agreement, Mr Cameron and Mr Harrison had no interest in the property. Mrs Schipp was to receive all rent collected prior to the development of the property. Nonetheless, the intention when Mary Street was purchased was that three townhouses would be built on the land. Mr Cameron, Mr Harrison and Mrs Schipp placed reliance upon the undertakings of the others to further the objectives of the Joint Venture. They placed mutual confidence in one another and were vulnerable to abuse by the others of their fiduciary position. I conclude, therefore, that fiduciary obligations arose from the Mary Street Joint Venture Agreement. 723 If I had found that the terms of the relationship between Mrs Schipp and Mr Cameron and Mr Harrison were embodied in the written document relating to the Mary Street Joint Venture, my finding that the relationship gave rise to fiduciary obligations would remain. Indeed, the relationship between the parties established by the written agreement is strongly characterised by mutual trust and confidence. 724 Recital A described the relationship between the parties as "a joint venture for the purpose of acquiring property at 16 Mary Street Thirroul". It was a venture with a particular purpose. As set out above, neither the limited purpose nor the description of the relationship as a joint venture prevents fiduciary obligations arising. The parties agreed to share equally in the profits and losses on the project; each party was entitled to 1/3 of the profit and liable for 1/3 of the loss [Clause 6]. The parties also agreed to indemnify each other for any liability in excess of their correct share [Clause 6(i)]. Mr Cameron, Mr Harrison and Mrs Schipp each had a beneficial interest in the land [Clause 4(1)] The parties covenanted with each other to "use their best endeavours to procure the purposes of the project." [Clause 4(4)] The moneys received by Mrs Schipp as trustee on behalf of the project or participants were to be paid into a bank account dedicated to the joint venture and out of which account all expenses incurred in relation to the project were to be paid.

[332]

Partnership-like Joint Ventures 725 Where a joint venture agreement does constitute a partnership at law, the participants in the joint venture are, of course, subject to all of the fiduciary obligations which flow from a partnership relationship. 726 Each member of a partnership owes fiduciary obligations to act in the joint interests of the partners in relation to the conduct of the business of the partnership and in respect of its assets: Helmore v Smith (1886) 35 Ch D 436. In Birtchnell v Equity Trustees Executors & Agency Co Ltd, Dixon J considered the scope of those fiduciary obligations. His Honour held that : 'As a general rule however, the relationship between partners is a fiduciary one. 'Indeed, it has been said that a stronger case of fiduciary relationship cannot be conceived than that which exists between partners. . . . The relation is based, in some degree, upon a mutual confidence that the partners will engage in some particular kind of activity or transaction for the joint advantage only. In some degree it arises from the very fact that they are associated for such a common end and are agents for one another in its accomplishment.' …… '[t]he subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm.' [(1929) 42 CLR 384 at 408] 727 Partners owe to one another duties of the utmost good faith. This includes a duty to render true account and full information of all things affecting the partnership; a duty of honesty in dealings with third parties, whether or not the particular transaction is of a partnership nature; a duty to account to other partners for any benefit or gain obtained in circumstances where there was a conflict of personal interest and fiduciary duty or a significant possibility of such a conflict; and, a duty to account for any benefit or gain obtained or received by reason of, or by use of, their fiduciary position or of any opportunity or knowledge resulting from it. 728 As has already been mentioned the fiduciary relationship between putative partners may commence during the stage of negotiations for the partnership agreement: United Dominions Corporation v Brian. It is present, in every case, during the course of the partnership and continues during the period when the partnership is being wound up: Chan v Zacharia (1984) 154 CLR 184.

[333]

Non-partnership Joint Ventures 729 In the absence of a finding that a joint venture constituted a partnership in the eyes of the law, any fiduciary relationship which may arise out of the joint venture agreement is limited to a certain extent. It will not circumscribe a fiduciary in a joint venture relationship in all areas of commercial activity in which that participant might be involved: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97, 102 and 123; Pacific Coal Pty Ltd v Idemitsu (Qld) Pty Ltd . In general, participants in a joint venture are free to pursue their own interests and to compete in areas outside the scope of the venture. 730 The scope and content of the fiduciary duties arising out of a non-partnership joint venture are to be determined by the terms of the agreement and/or the nature of the relationship between the parties. Clauses in the joint venture agreement are the principal source of any fiduciary obligations which may exist between the participants in the joint venture. Contractual and fiduciary relationships between the same parties may co-exist, provided that there is no inconsistency between the two sets of obligations. Mason J in Hospital Products Pty Ltd v United States Surgical Corporation held that : " . . . that contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situation it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship if it is to exist at all, must accommodate itself to the terms of the contract so that it is consist with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction." [156 CLR 41 at 97] 731 The court may also ground its findings that fiduciary obligations exist upon general equitable principles. These duties operate in addition to those obligations which, by their agreement, the parties impose upon themselves and must not be inconsistent with any obligations arising out of the contract. In Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 17, Bryson J held that, if additional fiduciary duties are found to have existed, they should be limited to those activities in relation to which the participants to the joint venture have mutual trust and confidence in each other. 732 My findings as to the content of the fiduciary duties owed by Mr Harrison and Mr Cameron to Mrs Schipp arising from their joint participation in the Mary Street and Kembla Street Joint Venture appear below.

[352]

RELIEF IN RELATION TO MARY STREET TRANSACTION 743 Mrs Schipp is entitled to relief by way of equitable compensation. The Harrison Cameron Interests are by this relief to be stripped of the profits they made in relation to the Mary Street transaction. The relief is grounded upon the defendants breaches of fiduciary obligation and unconscionable conduct in procuring a share of the profits in reliance upon a document to which Mrs Schipp had not assented as regulating their joint venture agreement. The relief is further grounded upon the failure to inform Mrs Schipp of the respects in which the First Joint Venture document presented to Mrs Schipp, departed from the oral agreement she had entered into. Had the Joint Venture Agreement still been inchoate at this stage, this would have constituted a breach of the duty of the promoters of the Mary Street Joint Venture agreement to make full and fair disclosure of matters which to their knowledge were material to be known to Mrs Schipp. In that situation Mr Cameron and Mr Harrison would have been obliged to draw to Mrs Schipp's attention the fact that an express representation to her that they would share in profits once the units were developed and sold was not to be included as a term of the written Joint Venture Agreement which included no provision fettering their rights as immediately entitled to interests in the joint venture. On the basis that the parties had already reached a binding oral agreement, the conduct was a breach of the duties of good faith and disclosure owed by each joint venturer to the other. Mrs Schipp was entitled to be informed of the differences between the document presented to her for signature and the terms previously agreed. She was also entitled to a full and clear explanation of the whole of the document. 744 At a more simplistic level, the Cameron Harrison Interests are required to disgorge monies to which they were never entitled pursuant to the agreement entered into and to be stripped of profits they made on the transaction. 745 Relief in relation to entry into Kembla Street transaction 746 I have already set out in detail my findings in relation to the conduct of the defendants as a result of which Mrs Schipp invested her moneys and, through Jabele, entered into the Kembla Street transaction. The breaches of fiduciary obligation which led to Mrs Schipp's investment in Kembla Street began at the time she was persuaded that Mary Street should be sold and continued through acts of manipulation and non-disclosure. In short, to repeat matters already dealt with above, the case proved involved the following conduct of the Cameron Harrison Interests:

[360]

There is no doubt but that this conduct was material to Mrs Schipp's decisions to invest in Kembla Street. The holding is that Mrs Schipp was tricked into so investing by the conduct which was unconscionable. 753 The Third and Fourth Defendants submitted that if Mrs Schipp succeeded in proving that the Third Defendant breached fiduciary duties that were owed to her, she had nonetheless failed to prove that the losses were caused by those breaches. In Brickenden v London Loan and Savings Co [1934] DLR 465 at 469, Lord Thankerton said: "When a party holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituents action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant". 754 Kirby J pointed out in Maguire (at 492-493) that the Brickenden rule "contains within its formulation words which adequately meet the need for there to be some connection to the breach so as to exclude events which are not too remote. Thus it must be shown that any facts not disclosed by the fiduciary were material". 755 This is not a case in which the breaches of fiduciary obligation had no or no real consequences. The facts proved before me go well beyond, but include in many instances, failures to disclose. Mrs Schipp was tricked into so investing by the conduct which was unconscionable. Insofar as the conduct included non-disclosure, the non-disclosed facts were highly material to Mrs Schipp's course of conduct. 756 Hence, the Plaintiff's case seeking equitable compensation is made out in relation to the Kembla Street investment. An entitlement to that relief is made out both by reason of the breaches of fiduciary obligation proved, and by reason of the Defendants unconscionable conduct proven.

[363]

(c) Acting upon the Mary Street sale conveyancing transaction. This was conceded by Mr Harrison at Transcript page 1622 . It was conceded by his Counsel in submissions Volume 1A p22 that Mr Harrison acted on the conveyancing transaction for all the venturers. (d) Acting upon the Kembla Street purchase conveyancing transaction and acting upon the Pyogrove borrowing transaction This was effectively conceded by Mr Harrison at Transcript page 1593. In reality, Mr Harrison acted as solicitor for both the vendors and the purchaser and for the shareholders in the purchaser. 760 I note that at Transcript page 1593, Mr Harrison gave evidence that he dealt with AGC on behalf of Pyogrove. Mr Harrison corresponded with AGC using the letterhead 'G A Harrison, Solicitor of 73 Church Street, Wollongong' [Transcript page 1827]. As I have already pointed out, in evidence Mr Harrison conceded that so far as his dealings with AGC on behalf of Pyogrove were concerned, he knew full well that he was acting as a solicitor on behalf of Pyogrove; that he corresponded with Pyogrove on his solicitor's letterhead and that he never informed AGC that he was not Pyogrove's solicitor, also that he appreciated that there was a very plain conflict of interest between his position as vendor to the joint venture and his position as solicitor acting for Pyogrove. 761 I reject Mr Harrison's evidence that he informed the participants in the Kembla Street Joint Venture that they should instruct a solicitor to act on Pyogrove's behalf. 762 Incidental to these retainers Mr Harrison took it upon himself to give advice to Mrs Schipp as to her liability to pay capital gains tax on profits earned on the sale of Mary Street and also on the meaning and effect of the AGC documents to be signed by Mrs Schipp. 763 If I be wrong in my above findings as to actual retainer, my view is that Mr Harrison held himself out as acting in the above matters. In particular, and on the question of Mr Harrison acting upon the Kembla Street purchase conveyancing transaction and acting upon the Pyogrove borrowing transaction, to the extent that Mr Harrison gave evidence that he merely carried out the conveyancing work for Pyogrove, my finding is that he accepted the same responsibilities as would have devolved upon him had he been formally retained in writing. As I have already said, in reality, Mr Harrison acted as solicitor for both the vendors and the purchaser and for the shareholders in the purchaser. I have rejected Mr Harrison's evidence that he informed the participants in the Kembla Street Joint Venture that they should instruct a solicitor to act on Pyogrove's behalf. Even had this occurred, Mr Harrison, by his actions in proceeding to act for Pyogrove on the conveyance, accepted the same responsibilities as would have devolved upon him had he been formally retained. 764 In the result, my finding is that Mr Harrison was either retained to act or held himself out as acting at least in respect of the following matters: (1) The drafting of the First Joint Venture Agreement recording the terms upon which the parties had agreed to participate in the Mary Street Venture. (2) Giving advice to Mrs Schipp as to the meaning and effect of the First Joint Venture Agreement. (3) Acting upon the Mary Street purchase conveyancing transaction.

[370]

PROXIMITY IN A RELATIONSHIP OF SOLICITOR-CLIENT 768 In Hawkins v Clayton, Deane J. said : "The content of the duty of care in a particular case is governed by the relationship of proximity from which it springs. It may, in some special categories of case, extend to require the taking of positive steps to avoid physical damage or economic loss being sustained by the person or persons to whom the duty is owed. Apart from cases involving the exercise of statutory powers or where the person under the duty has created the risk, the categories of case in which a relationship of proximity gives rise to a duty of care which may, according to circumstances, so extend are, like those in which there is a duty of care to avoid pure economic loss, commonly those involving the related elements of an assumption of responsibility and reliance. The relationship of solicitor and client is, as has been seen, a relationship of proximity which ordinarily involves the combination of those elements with respect to foreseeable loss which may be caused to the client by the performance of professional work. It is a relationship of proximity of a kind which may well give rise to a duty of care on the part of the solicitor which requires the taking of positive steps, beyond the specifically agreed professional task or function, to avoid a real and foreseeable risk of economic loss being sustained by the client. Whether the solicitor-client relationship does give rise to a duty of care requiring the taking of such positive steps will depend upon the nature of the particular professional task or function which is involved and the circumstances of the case ." [Emphasis added; (1988) 164 CLR 539 at 579] 769 Until the recent decision of the High Court in Van Erp, the High Court had consistently emphasised the central place that proximity holds in determining whether a duty of care exists. In Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 52, Deane J said that: "the notion of proximity can be discerned as a unifying theme explaining why a duty to take reasonable care to avoid a reasonably foreseeable risk of injury has been recognised as arising in particular categories of case". 770 Notwithstanding the scepticism expressed by McHugh J on the question of "whether the concept of proximity gives any real guidance in determining the existence of a duty of care in difficult and novel cases", His Honour noted: "the current emphasis in Australia on proximity as the central determinant of a duty of care". Hill v Van Erp (1997) 188 CLR 159 at 210. 771 The best known definition of proximity is that of Deane J in Jaensch v Coffey (1984) 155 CLR 549 at 584-585, where His Honour said : "It involves the notion of nearness or closeness and embraces physical proximity (in the sense of space and time) between the person or property of the plaintiff and the person or property of the defendant, circumstantial proximity such as an overriding relationship of employer and employee or of a professional man and his client and causal proximity in the sense of the closeness or directness of the relationship between the particular act or cause of action and the injury sustained . . . The identity and relative importance of the considerations relevant to an issue of proximity will obviously vary in different classes of case and the question whether the relationship is 'so' close 'that' the common law should recognise a duty of care in a new area or class of case is . . . likely to be 'difficult' of resolution in that it may involve value judgments on matters of policy and degree. 772 In Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 497-498, Deane J said of proximity that : ". . . [it] is directed to the relationship between the parties insofar as it is relevant to the allegedly negligent act or omission of the defendant and the loss or injury sustained by the plaintiff. It involves the notion of nearness or closeness and embraces physical proximity (in the sense of space and time) between the person or property of the plaintiff and the person or property of the defendant, circumstantial proximity such as an overriding relationship of employer and employee or of a professional man and his client and what may (perhaps loosely) be referred to as causal proximity in the sense of the closeness or directness of the causal connection or relationship between the particular act or course of conduct and the loss or injury sustained. It may reflect an assumption by one party of a responsibility to take care to avoid or prevent injury, loss or damage to the person or property of another or reliance by one party upon such care being taken by the other in circumstances where the other party knew or ought to have known of that reliance." 773 And similarly, Mason CJ, Deane, Gaudron and McHugh JJ in Gala v Preston (1991) 172 CLR 243 at 253 said : "The requirement of proximity constitutes the general determinant of the categories of case in which the common law of negligence recognises the existence of a duty to take reasonable care to avoid a reasonably foreseeable and real risk of injury."

[372]

PROXIMITY, RELIANCE, ASSUMPTION OF RESPONSIBILITY 774 In Bryan v Maloney (1995) 182 CLR 609 at 617-619, Mason CJ, Deane and Gaudron JJ said : 'The cases in this Court establish that a duty of care arises under the common law of negligence of this country only where there exists a relationship of proximity between the parties with respect to both the relevant class of act or omission and the relevant kind of damage. In more settled areas of the law of negligence concerned with ordinary physical injury to the person or property of a plaintiff caused by some act of the defendant, reasonable foreseeability of such injury will commonly suffice to establish that the facts fall into a category which has already been recognised as involving a relationship of proximity between the parties with respect to such an act and such damage and as 'attracting a duty of care, the scope of which is settled' [citations omitted]. In contrast, the field of liability for mere economic loss is a comparatively new and developing area of the law of negligence. In that area, the question whether the requisite relationship of proximity exists in a particular category of case is more likely to be unresolved by previous binding authority with the consequence that the 'notion of proximity . . . is of vital importance'; [citations omitted] it is the 'articulation', in the different categories of case, 'of circumstances which denote sufficient proximity' with respect to mere economic loss, including 'policy considerations', which will gradually provide 'a body of precedent productive of the necessary certainty'. Inevitably, the policy considerations which are legitimately taken into account in determining whether sufficient proximity exists in a novel category will be influenced by the courts' assessment of community standards and demands [citations omitted]. One policy consideration which may militate against recognition of a relationship of proximity in a category of case involving mere economic loss is the law's concern to avoid the imposition of liability 'in an indeterminate amount for an indeterminate time to an indeterminate class' [citations omitted]. Another consideration is the perception that, in a competitive world where one person's economic gain is commonly another's loss, a duty to take reasonable care to avoid causing mere economic loss to another, as distinct from physical injury to another's person or property, may be inconsistent with community standards in relation to what is ordinarily legitimate in the pursuit of personal advantage [citation omitted]. The combined effect of those two distinct policy considerations is that the categories of case in which the requisite relationship of proximity with respect to mere economic loss is to be found are properly to be seen as special. Commonly, but not necessarily, they will involve an identified element of known reliance (or dependence) or the assumption of responsibility or a combination of the two [citations omitted ]." [Emphasis added].

[373]

CONTROL 775 Mrs Schipp's Counsel, while accepting that the concept of assumption of responsibility and/or reliance has been the main vehicle by which proximity has been established in cases involving pure economic loss, placed reliance on the judgment of Gaudron J in Hill v Van Erp (1997) 188 CLR 159 at 198-199, in focussing upon the importance of control as a factor in proximity and as a factor in governing the context of the duty of care : "The importance of control as a factor in proximity and also as a factor governing the content of the duty of care is apparent in Burnie Port Authority v General Jones Pty Ltd. And although Deane J rested his judgment in Hawkins v Clayton on assumption of responsibility and reliance, it seems to me that that case is more easily explained in terms of control. Thus, there was a duty on the part of the solicitor in that case to take reasonable steps to make the contents of a will known to the named executor because, as Brennan J pointed out, "the executor need[ed] to know of the will and its contents before he [could] accept the office and undertake administration of the estate in accordance with the will". Or as I put it in that case, "a person in that position of control ought to have [the executor] in contemplation as one affected by his failure to disclose [the contents of the will]". Moreover, control is in some respects a more stringent test than assumption of responsibility. Certainly neither law nor logic excludes it from consideration as a determinant of proximity in cases of pure economic loss." 776 The application of a duty of care to a third party has occurred then by use of the notions of assumption of responsibility, reliance and control. 777 The concept of assumption of responsibility to third parties has been extended to situations where the solicitor knows that the third party is in substance totally dependent upon a solicitor. Dawson J observed this possibility in Van Erp, at 186, when his Honour noted : "The notion of general reliance or dependence described by Mason J [in Sutherland Shire Council v Heyman] is apt also to describe the situation in which, while there will usually be no specific reliance by an intended beneficiary upon a solicitor retained to attend to the will, the intended beneficiary's interests are totally and unavoidably dependent upon the proper performance of a function within the sole province of a solicitor, and it might be added, in that situation the solicitor knows of the beneficiary's dependence and in that respect may be regarded as having assumed responsibility towards the intended beneficiary." 778 I have already examined the circumstances which throw light on the relationships between the parties and in particular the relationship between Mrs Schipp and Mr Harrison. 779 Views may differ as to whether, and if so in what precise matter, Mrs Schipp may be said to have retained Mr Harrison to act as her solicitor. Plainly that retainer did exist in a number of matters. In some of these, Mr Harrison may be said to be acting also for himself and/or also for other joint venturers. The point which is made by my findings of fact is that, even where Mrs Schipp may not have expressly retained Mr Harrison to carry out a very specifically defined task, he well knew that Mrs Schipp was, in substance, totally dependent upon him to carry out his functions as a solicitor. Her interests were totally and unavoidably dependent upon the proper performance by Mr Harrison of his functions as a solicitor, he knew of this dependence and may in law be regarded as having assumed relevant responsibility towards Mrs Schipp.

[375]

as to the meaning and legal effect of the First Joint Venture Agreement; * as to her entitlements under the First Joint Venture Agreement. * as to whether the written form of the First Joint Venture Agreement reflected the terms of the Joint Venture Agreement which the parties had previously discussed and agreed to. (2) A duty to take reasonable care in drafting the First Joint Venture Agreement to reflect the parties antecedent agreement which I have found or, if I be wrong as to the Masters v Cameron class which obtained, to reflect the arrangement which had been proposed to Mrs Schipp. (3) A duty to account forthwith to Mrs Schipp for her due entitlement upon the completion of the Mary Street sale and to pay to her the monies to which she as entitled. (4) A duty to take reasonable care to ensure that Mrs Schipp received accurate advice as to whether Mrs Schipp was liable to pay capital gains tax on profit earned on the Mary Street sale. (5) A duty to take reasonable care to ensure that Mrs Schipp received accurate advice as to the terms of: * the contract for the Pyogrove purchase of Kembla Street; * the nature and implications of the AGC loan documentation and guarantee. (6) A duty to take reasonable care in supervising Mrs Schipp's execution of the AGC loan documentation and guarantee. (7) A duty to take reasonable care in the making of positive representations to ensure that such representations were accurate and not misleading (8) A duty to take reasonable care to give Mrs Schipp full legal advice, with the commercial knowledge of the transaction available to him, about the legal implications of the Kembla Street transaction she was entering and the guarantee she was giving. (9) A duty to take reasonable care to ensure that Mrs Schipp received accurate advice: * as to the need for the First Mary Street Joint Venture Agreement to be redrawn in 1989; * as to the meaning and legal effect of the Second Joint Venture Agreement document; * as to her entitlements under the Second Joint Venture Agreement document. 781 In each of these tasks:

[379]

(6) Mr Harrison failed to take reasonable care in supervising Mrs Schipp's execution of the AGC loan documentation and guarantee. (7) The Plaintiff proved the making of the following representations by Mr Harrison: (i) that the Cameron Harrison Interests had development plans for the Kembla Street property which were reasonable and viable; (ii) that an investment of $100,000 in the property would be a wise investment by Mrs Schipp and a suitable form of superannuation; (iii) that the Kembla Street property would cost approximately $1.2 million to build. The breaches of the duty to take reasonable care in the making of the representations to ensure that they were accurate and not misleading, were constituted by Mr Harrison's failure, against the making of the positive representations, to disclose that there were a number of hurdles to the project proceeding namely: (i) The experience of the Cameron Harrison Interests which had been that it was not possible in 1988 to obtain pre-leasing commitments in the absence of some form of development activity being under way. The Commonwealth Bank had also required pre-leasing commitments as a condition to the provision of finance. No such pre-leasing commitments were obtained by the time Pyogrove agreed to purchase Kembla Street. (ii) The need for the provision of adequate security by the parties to support the obtaining of finance needed to develop the property. The question of whether the parties would be capable of providing sufficient security was not explored or discussed at any time before she invested in Kembla Street. (iii) Detailed plans, specifications and full tender prices were needed. No such specifications [Transcript page 1342 .40] or firm tender prices[Transcript page 1727.27] had been obtained at the time of the discussions leading to the decision to invest in Kembla Street. Nor had the importance of obtaining such plans, specifications and tender prices been discussed with Mrs Schipp. (iv) That there was no construction contract in existence for development of the Kembla Street property at $1.2 million or any other figure and there were no firm plans for execution of such a contract at a price which was likely to make the investment a profitable one for Mrs Schipp; (v) That applications for finance for development of the Kembla Street property had previously been rejected and there was no reasonable grounds for believing that such an application would succeed in the short term; (vi) That the project had not developed to a stage where a proper assessment of building costs could be made. (8) Mr Harrison failed to take reasonable care to give Mrs Schipp full legal advice, with the commercial knowledge of the transaction available to him, about the legal implications of the Kembla Street transaction she was entering and the guarantee she was giving. (9) Mr Harrison failed to take reasonable care to ensure that Mrs Schipp received accurate advice: * as to the need for the First Mary Street Joint Venture Agreement to be redrawn in 1989; * as to the meaning and legal effect of the Second Joint Venture Agreement document; * as to her entitlements under the Second Joint Venture Agreement document.

[382]

Kembla Street 786 The defendants submissions were that the real cause of Mrs Schipp investing in Kembla Street was that having had the taste of profit on Mary Street, Mrs Schipp placed reliance in determining to participate: * upon reassurances by Mr Baird, * upon Mr French's statements as to Mr Cameron, * upon Mr Bourke's involvement as an adviser * upon Mr Zander's involvement * upon the fact that the project was obviously to be a large project of real significance which Mrs Schipp believed was likely to be very profitable. 787 The whole of the circumstances proved must be taken into account on the issue. There is no need to repeat the factual findings set out above. In my view applying common sense to the facts here proved, it is clear that the conduct of Mr Harrison constituted by breaches of duties of care owed by him to Mrs Schipp in relation to Kembla Street relevantly caused Mrs Schipp to invest in Kembla Street. Of course that conduct in many instances was the same conduct as that which constituted breaches of fiduciary obligation by Mr Harrison and by Mr Cameron. 788 It must be recalled that Mrs Schipp had been the subject of a course of conduct including acts of manipulation and non disclosure over an extended period. That she was swept up in the euphoria created by Mr Cameron and Mr Harrison over the new project having absolutely no idea that Mr Harrison's financial difficulties had reached a crescendo, having no idea that the project dovetailed perfectly with Mr Harrison's need to make a large payment on 31 January on the FX rollover and having no knowledge whatever as to Mr Harrison's and Mr Cameron's past endeavours and lack of success in seeking to procure finance for the project or in seeking to obtain pre-leasing or pre-purchase commitments or expressions of interest does not as a matter of common sense derogate from the fact that the offensive conduct was the real cause of Mrs Schipp's investment. 789 If and to the extent that the "but for" test may play a part in the decision, that test poses the question whether the plaintiff's loss would not have been suffered but for the defendants' default. The question is again "to be answered by applying that test in a practical commonsense way: Nader v Urban Transit Authority of New South Wales (1985) 2 NSWLR 501 at 530-531 and cases there cited." Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 315 per Glass JA 790 In my view and applying the "but for' test, Mrs Schipp's loss would not have been suffered but for the offensive conduct. Mrs Schipp would not have participated in the Kembla Street transaction had Mr Harrison discharged his fiduciary obligations and his duties of care and had Mrs Schipp received the advice which Mr Harrison was obliged to furnish to her.

[385]

Mary Street 793 (1) Representation as to Project Management being a Condition of Profit Share The Cameron Harrison Interests represented that Mr Cameron and Mr Harrison would be project managers for the development of three units and that only once the project was developed and sold would each be entitled to one third of the profits on the sale of the units so developed. Misleading and Deceptive Conduct All parties proceeded upon the assumption that Messrs Cameron and Harrison would project manage the building of the town houses or units upon the property. In the circumstances of the antecedent agreement which I have found [see para 607 and 608], the conduct of drafting and presenting to Mrs Schipp an open-ended joint venture deed which did not make clear that the profit was conditional upon the project management role, was misleading and deceptive. Mr Cameron and Mr Harrison's later reliance upon the Deed as regulating their legal entitlement to share in the proceeds of Mary Street was also misleading and deceptive. (2) Representation as to Ownership of Land The Cameron Harrison Interests represented that Mrs Schipp would be the legal and beneficial owner of the Mary Street property. Misleading and Deceptive Conduct The First Joint Venture Deed purported to create a trust. The document was not fully or adequately explained to Mrs Schipp. Mrs Schipp was unaware of the fact that the document did not identify her as the legal and beneficial owner of the property. (3) Representation as to the Funding of the Mary Street Development The Cameron Harrison Interests represented that they would be wholly responsible for the funding of the development of Mary Street. Misleading and Deceptive Conduct The inclusion of paragraph 9(b) of the First Joint Venture Deed which provides that the land would be used as security for any further development finance, constituted misleading and deceptive conduct. However, as the Plaintiff conceded, on its own, the representation probably did not occasion any loss to Mrs Schipp because the Mary Street development was sold before development occurred.

[386]

Kembla Street (4) Representation that Development Plans for Kembla Street were Reasonable and Viable The Cameron Harrison Interests represented that they had development plans for the Kembla Street property which were reasonable and viable. Misleading and Deceptive Conduct There were a number of hurdles to the project proceeding which were not communicated to Mrs Schipp. When seen in the context of the positive representations about the Kembla Street development made to Mrs Schipp, the omission to mention these hurdles was likely to mislead her into believing that the development was viable. The Cameron Harrison Interests failed to alert Mrs Schipp to the true situation which, in reality, was that the joint venturers were doing little more than buying an opportunity to explore the merits of developing Kembla Street. The following were undisclosed hurdles to the development proceeding: (i) The experience of the Cameron Harrison Interests which had been that it was not possible in 1988 to obtain pre-leasing commitments in the absence of some form of development activity being under way. The Commonwealth Bank had also required pre-leasing commitments as a condition to the provision of finance. No such pre-leasing commitments were obtained by the time Pyogrove agreed to purchase Kembla Street. (ii) The need for the provision of adequate security by the parties to support the obtaining of finance needed to develop the property. The question of whether the parties would be capable of providing sufficient security was not explored or discussed at any time before she invested in Kembla Street. (iii) Detailed plans, specifications and full tender prices were needed. No such specifications [Transcript page 1342 .40] or firm tender prices[Transcript page 1727.27] had been obtained at the time of the discussions leading to the decision to invest in Kembla Street. Nor had the importance of obtaining such plans, specifications and tender prices been discussed with Mrs Schipp.

[391]

Facts relating to the claim against the Seventh Defendants 801 The Seventh Defendants are underwriters who by agreement with the Law Society of New South Wales on behalf of all Solicitors agreed to provide insurance of the type required by the Solicitors (Professional Indemnity) Regulations. The relevant agreement between the Insurers and the Law Society is embodied in Master Policy No.91NSW8. The terms upon which the Insurers have agreed to provide insurance are contained in the Master Policy and the Certificate of Insurance attached to that policy. [Exhibit D3X pages 744A-744H and 744R-744U] 802 Clause 2 of the Master Policy provides the period for which a particular solicitor is insured and the amount for which he or she is insured. It reads as follows: "2. This Policy commences on the 1st day of July, 1991 providing a sum insured of $1,100,000 each claim and expires at midnight on 30th June 1992. This policy can be extended subsequently for successive periods of one year on each 1st day of July subject to the rates of premium and sum insured for each renewal being agreed by the Insurers and The Law Society of New South Wales at least six months before such renewal . In the event of any failure to agree upon such rates of renewal premium and sum insured, all cover under this policy shall cease at midnight on 30th June 1992." 803 The underwriters appointed representative in New South Wales is Law Cover which is to receive all claims and notices required to be given by an insured person under the terms of the Certificate of Insurance. [Clause 4 Master Policy] 804 It is convenient at this stage to refer to the Certificate of Insurance, issued under the Master Policy to Mr Harrison. The main provisions of the Certificate of Insurance are: " This is to certify that in accordance with the authorisation granted to the undersigned under the Master Policy referred to in the Schedule by the Insurers subscribing such Master Policy (hereinafter called 'The Insurers') insurance is granted by the Insurers in accordance with the terms and conditions following and in consideration of the payment of the premium stated in the Master Policy.

[407]

(e) This insurance shall not indemnify the Assured in respect of any liability:- (v) brought about by the dishonest or fraudulent act or omission of the Assured including any Partner or former Partner of the Assured. Save that this exclusion shall not apply to liability arising out of any claim brought about by dishonest or fraudulent act or omission of any person employed in connection with the practice (including any articled clerk and any solicitor who is a Consultant or Associate with the Firm). ¼ 805 By letter dated 7 May 1991, Mrs Schipp's solicitors, Denley Gargett & Baird, informed Mr Harrison and Mr Cameron of their instructions to recover the balance of moneys owing to Mrs Schipp by each of them, being $20,000. They informed Mr Harrison and Mr Cameron that unless the payment was made within seven days a Summons would issue in the District Court. [Exhibit D3X pages 673 and 674A] 806 Harrison & Associates replied on behalf of Mr Harrison on 8 May 1991. The relevant paragraph of that letter reads as follows: "3. We note Mrs Schipp's allegation of a debt owed to her in the sum of $20,000.00 by Mr Harrison and Mr Cameron. If Mrs Schipp considers that there is a debt owing to her then we would suggest that she does commence proceedings in the District Court." [Exhibit D3X page 682] 807 On June 13, Denley, Gargett & Baird reiterated their request to Harrison & Associates that the balance of moneys owing to Mrs Schipp be paid by Mr Harrison and Mr Cameron within seven days. [Exhibit D3X page 723] 808 Mrs Schipp initiated proceedings in the District Court against George Harrison, as first Defendant, and Donald Cameron, as Second Defendant, by a Statement of Liquidated Claim filed on 1 August 1991. The claim was for $40,000 plus interest. The Plaintiff claimed $20,000 from each of Mr Harrison and Mr Cameron as well as interest on those amounts. The amount claimed by Mrs Schipp was particularised as "the plaintiff's share of the moneys held in the Commonwealth Bank of Australia account number 683997 in the name of the first defendant as trustee for the plaintiff, the second defendant and the first defendant." [Exhibit D3X pages 757-759] 809 Mrs Schipp commenced proceedings in the Supreme Court of New South Wales by Summons filed on 24 December 1991. In addition to Mr Harrison and Mr Cameron, Mrs Schipp joined as defendants to those proceedings the companies associated, Pyogrove Pty Ltd and AGC (Advances) Ltd. 810 By letter dated 26 May 1992, Barker Gosling, solicitors for Mrs Schipp, notified Law Cover that Mrs Schipp had commenced proceedings against Mr Harrison. The letter was the earliest report to Law Cover of the matters which were the subject of the Mrs Schipp's claim. [Affidavit of Edith Brigitte Pers dated 15 December 1994, paragraph 9] The relevant parts of that letter are as follows:

[415]

Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any cases where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken. 814 Pursuant to section 6(4) of the Act, leave was sought by the Plaintiff to commence proceedings against the Insurers. Leave to join the Insurers as a party to the proceedings was granted by Young J on 4 May 1995: Schipp v Cameron (unreported, Supreme Court of NSW, 4 May 1995). 815 816 The policy of insurance in these proceedings is a 'claims-made policy'. It is a policy in which the obligation of the insurer to indemnify the insured against any liability which they may have incurred does not arise until the insured has made a claim under the policy by notice in writing to the insurer: Clauses 2 and 4(b) of the Certificate of Insurance (set out above). The type of cover provided by claims-made policies was described by the Canadian Supreme Court in Reid Crowther & Partners Ltd v Simcoe & Erie General Ins Co (1993) 99 DLR (4th) 741 at 749 in the following terms: "Claims-made policies ... cover the insured against all claims that are made during the policy period, regardless of when the activity giving rise to the claim occurred." 817 A claim can then be made during the currency of the policy, and the insurer may have an obligation to indemnify the insured, in respect of a liability of the insured caused by conduct which occurred at a time when he or she was not covered by a policy of insurance. This is the situation in the proceedings now before the Court. 818 Mrs Schipp's case against the Insurers requires the determination, as a threshold question, of whether or not, on its proper construction, Section 6 is applicable in the circumstances of the present proceedings. The question arises because this is a case in which the events which are said to ground the causes of action raised by Mrs Schipp occurred some years before the period of cover provided for under the policy of insurance. The question, then, is whether or not section 6 applies to "claims made" policies where the event or events giving rise to the claim for damages or compensation occurred before the commencement of the relevant policy period.

[416]

Continuing Default of a Fiduciary who Acted in Breach of Duty 819 It is necessary first to address the Plaintiff's submission that the threshold question as to whether or not section 6 of the Act applies to claims made policies where the relevant event occurred prior to the period of cover provided by the policy did not arise in these proceedings. The Plaintiff submitted that equitable compensation was sought from Mr Harrison for breach of the fiduciary duties he owed to Mrs Schipp in his capacity as a solicitor and that until restitution was made, there was a continuing default. Mr Harrison, in failing to give restitution to the Plaintiff was said to be in continuing default up to and during the currency of the insurance policy. On this submission, a finding that Mr Harrison was liable to account to the Plaintiff meant that there was an occurrence of liability to which the policy may respond. [Plaintiff's Submissions Volume 2 paragraph 5.6] 820 The Insurers' initially submitted that the Plaintiff was barred from making the submission because the Statement of Claim did not seek equitable compensation as a form of relief, nor did it plead the continuous default of Mr Harrison as a fact giving rise to liability. [Seventh Defendants' Submissions paragraph 2.1.33 - 2.1.38]. On 6 April 1998, leave was granted to the Plaintiff to amend the Statement of Claim to include a claim for equitable compensation. Pursuant to that leave, on 7 April 1998, the Plaintiff filed in Court a Third Further Amended Statement of Claim which added to paragraphs 22(iv), 46(ii) and 70(v) a claim for equitable compensation. In the light of the amendment, the Insurers' submission in relation to pleading falls away. 821 The Plaintiff relied on Re Dawson (dec.); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211; Bartlett v Barclays Trust Co (No 2) [1980] 1 Ch 539 and Maguire v Makaronis (1997) 188 CLR 449 to support the submission. Target Holding Ltd v Redferns [1996] 1 AC 421 should also be included in this line of authority. 822 I do not accept that these cases are authority for a principle of general application in relation to the obligation of a defaulting fiduciary to provide restitution for breach of duty. They merely establish that there is an obligation on the part of a defaulting trustee who has deprived the trust of trust property to provide restitution in specie, or equitable compensation in lieu thereof. 823 The continuing obligation of a defaulting trustee to make good the loss caused by his or her breach of trust is, in a sense, peculiar and arises from the particular rights of beneficiaries under a trust. In Maguire v Makaronis, the majority stated (at 473) that: "Whilst the trustee is the archetype of the fiduciary, the trust has distinctive characteristics. In particular, where the trust is created by will or settlement in traditional form, the trustee holds title to the property on behalf of beneficiaries or for charitable purposes. If the trust be still subsisting, the objective of an action to recover loss upon breach of trust is the restoration of the trust fund. The right of the beneficiaries is to have the trust fund reconstituted and duly administered, rather than to recover a specific sum for the sole use and benefit of any beneficiary. Indeed, no one beneficiary may have sustained a present and individual loss. This may be so if the trust is a discretionary trust or no interest vests, either in interest or possession, before the termination of a prior interest." 824 Furthermore, the reference to the continuing nature of a defaulting trustee's obligation has generally arisen in the context of fixing the relevant date for quantification of monetary compensation to be paid, in circumstances where the restitution of actual trust property is impossible. Street J in Re Dawson stated that a defaulting trustee's obligation was "continuing" in the sense that the relevant date for assessment of the value of the trust property is the date of restoration, not the date of deprivation: Re Dawson [1966] 2 NSWR 211 at 216; see also Target Holdings [1996] 1 AC 421 at 437. 825 The Plaintiff referred to two passages, in particular, to support the submission that the propositions established in the authorities on which they relied were intended to be of more general application. The first was taken from Re Dawson (at 216): "... the obligation to make restitution which courts of equity have from very early times imposed upon defaulting trustees and other fiduciaries is of a more absolute nature than the common law obligation to pay damages for tort or breach of contract."[Emphasis added in Plaintiff Submissions in Reply paragraph 58.2] 826 The second passage referred to appeared in the judgment of the majority in Maguire v Makaronis (at 474): "Yet the policy of the law to hold the trustee up to the obligation to perform the trust is strongly manifested in cases where the loss is occasioned upon breach arising from conflict between duty and interest. What one might call that heightened concern is manifested also, as we have sought to indicate earlier in these reasons, in the treatment of disloyalty by non-trustee fiduciaries." 827 When placed in the context in which they appear, these passages do not purport to extend the continuing obligation of a defaulting trustee to defaulting fiduciaries generally. 828 An issue was also raised as to the meaning of '"event" in section 6(1). Counsel for the Plaintiff, Mr Slattery QC, submitted that the word encompassed the situation in which, even if a cause of action had accrued, there was a continuing liability. [Transcript of 6 April 1998 at page 16] Mr Hutley SC, counsel for the Insurers submitted, that it referred only to the accrual of a cause of action. Mr Hutley submitted that the terms used in the section, namely "an event giving rise to a claim for damages or compensation", logically referred to a complete cause of action. [Seventh Defendants' Submissions paragraph 2.1.31] The obligation to provide restitution, that is the accrual of the cause of action, arises on the date that the relevant defendant acted in breach of his or her fiduciary duty. 829 As I do not accept that Mr Harrison had a continuing liability to provide restitution in respect of the breaches of fiduciary duties owed to Mrs Schipp in his capacity as solicitor, it is not now necessary for me to decide the meaning of the word "event" in section 6(1). I note, however, that the following statement of Cole J in Capita Financial Group Ltd v Triden Properties (unreported, Supreme Court of NSW, 6 September 1993) at 84 would suggest that the meaning contended for by the Seventh Defendants' is to be preferred: "No liability ... arises until the cause of action of the third party is complete. A negligent act [in this case, the defective design of a building] without loss creates no liability in the insured nor can it give rise to 'the claim for damages' in the third party. The 'happening of the event' which gives rise to 'the claim for damages' by the third party on the insured must thus relate to that event which completes the cause of action and permits the making or the 'giving rise to' the claim for damages upon the insured. The 'claim for damages' referred to in the section 6(1) must, in my view, relate to a maintainable claim for damages in the sense that there is complete cause of action."

[417]

Proper Construction of Section 6 830 I turn then to the proper construction of Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). 831 The proper construction of section 6 is not clear on the current state of the authorities. The view that the section does not to apply to claims made policies where the event giving rise to the claim for damages or compensation occurs prior to the commencement of the period of the relevant policy has been supported in Manettas v Underwriters at Lloyds (1993) 7 ANZ Insurance Cases 61-180 per Cole J, Capita Financial Group Ltd v Triden Properties (unreported, Supreme Court of NSW, 6 September 1993, Cole J) and Carnie v Richmond (unreported, Supreme Court of NSW, 9 September 1997, Dowd J). 832 The view that the section does not apply to claims made policies construes the section to operate as follows. If a person is insured against indemnity to a third party and an event occurs for which there is cover, a charge is fixed at that time on the insurance moneys. The charge attaches even if the precise liability is not known until a later time. If there is no insurance cover at the time of the event, no charge can attach and section 6 can have no application. 833 The decision of Cole J in Manettas v Underwriters at Lloyds adopts this construction. Cole J said (at 78,032): "Thus section 6(1) can have no application to a 'claims made and notified' policy, unless the event giving rise to the claim for damages or compensation occurs within the period of insurance covered by that policy so that there are, at that time, insurance moneys that are or may become payable in respect of that liability." There is no doubt that the time at which the notional charge attaches is the time of the 'the happening of the event giving rise to the claim for damages'. The words 'on the happening of the event' deny any alternative interpretation. The Court of Appeal has held that 'it is at that time and no other, that the charge attaches. The subject matter of the charge must then be determined, again at that time.' .... Further Samuels JA said in Oswald ... : 'Furthermore, it cannot be doubted, in my opinion, that since sec.6 establishes a charge upon "insurance moneys", the effectiveness indeed the reality of the charge must depend on whether that subject matter exists.' [(1987) 11 NSWLR 715 at 723]

[418]

If at the relevant time there is no insurance policy, there cannot be any 'insurance moneys'. The words of section 6(1) in my opinion, inevitably lead to the conclusion that section 6(1) does not apply to 'claims made and notified' policies where the event giving rise to the claim for damages occurs prior to the commencement period of the policy.' 834 Section 6 has, however, been found to apply to claims made policies not in existence at the time of the event giving rise to the claim for damages by Lindgren J in FAI General Insurance Co Ltd v McSweeney (unreported, Federal Court of Australia, 12 March 1997) and by the New Zealand Court of Appeal in FAI (NZ) General Insurance Co Ltd v Blundell and Brown Ltd [1994] 1 NZLR 11. Support for this approach is also to be found in decisions in relation to applications for leave to join an insurer as a defendant pursuant to section 6(4): National Mutual Property Services v Citibank Savings Ltd (1997) 9 ANZ Insurance Cases 61-335 per Lindgren J and Schipp v Cameron (unreported, Supreme Court of NSW, 4 May 1995) per Young J. Davies J in Jones v Mortgage Nominees (unreported, Federal Court of Australia, 10 November 1995) indicated (at 112) that such an approach was preferred by him but he was not required to decide the matter on a final basis in those proceedings. 835 This line of authority recognises a charge as arising from the happening of the event which gives rise to the claim for damages or compensation, whether or not there is a policy of insurance in existence at that time. The existence, or not, of a policy of insurance is said only to effect the nature of the charge which arises. The charge will be 'floating' if the event occurs before a policy has been entered into. It is said to become fixed if and when insurance moneys become payable under a policy entered into at some date after the event. 836 In FAI v McSweeney, Lindgren J described the alternative constructions of section 6 in the following terms (at 64): " First Construction Sub-section 6(1) speaks as at the moment after the contract of insurance is entered into, and, for that matter, at subsequent moments throughout the period of the contract of insurance down to time of the happening of the Event. At that moment, and at those moments, the insured is indemnified' against liability to pay any damages or compensation. The happening of the Event is, at that moment, and at those moments, a future event, as is indicated by the words 'shall on the happening [Event] Y be a charge'. The alternatives posed by the expression 'all insurance moneys that become payable in respect of that liability' encompass the possibility that the insurance moneys will become payable upon the happening of the event and the possibility that they will become payable subsequently, in either case, pursuant to the contract of insurance by which the insured is already indemnified. In the latter case, the charge may be conveniently described as a 'floating' charge.

[419]

Second Construction Sub-section 6(1) speaks at the time of adjudication. As at that time, the insured entered into a contract of insurance by which the insured 'is indemnified [at the time of adjudication] against any liability to pay damages or compensation.' The expression, 'shall be a charge' does not convey a future tense but is prescriptive of the legal result to which the courts must give effect. The charge which the section creates exists on and from the Event. The charge is a fixed charge in the case where insurance moneys are payable at the time of the Event and a floating charge in respect of insurance moneys that may become payable, and do in fact become payable, at a later date. In relation to the latter, it is immaterial that the insurance moneys become payable pursuant to an insurance contract entered into after the Event: once insurance moneys have in fact become payable in respect of the liability, the charge fixes upon them.' 837 In that case, Lindgren J rejected the approach of Cole J in Manettas and preferred the second of the alternative constructions supported by the differing authorities. His Honour stated (at 64-65) that, in his view, the following considerations supported that construction: "1. … I do not think that the expression 'is indemnified' speaks at the time of the Event, and therefore requires a contract of insurance be in existence at that time. The construction that that expression speaks at the time of adjudication by the Court is at least equally open and, in my view, it is the construction suggested by the natural and unforced reading of sub-s 6(1). 2. The charge is expressed to be on, relevantly, "insurance moneys that may become payable" in respect of the insured's liability to pay damages or compensation. … the expression … "moneys that may become payable" is apt to also accommodate moneys that may become payable after the subsequent entry by the wrongdoer into a claims made and notified contract of insurance. 3. The terms of sub-s 6(1) do not expressly restrict the charge to, relevantly, moneys that may become payable under a contract of insurance in existence at the time of the Event. Nor should such a limitation be held to be implied unless this is plainly required. It should not be readily implied because it is inconsistent with the policy objective which underlies the provision, namely, that of achieving the result that the moneys which in fact become payable under a liability indemnity policy are made available to a claimant. It would have been a simple matter for Parliament to add such words as "under the contract of insurance in existence at the time of the event giving rise to the insured's liability" at the end of sub-s 6(1) if the provision had been intended to have the restricted operation suggested. 4. No reason of policy has been suggested, and I can think of none, why the provision should not apply to a claims made and notified policy which comes into existence after the Event. According to either of the two constructions described earlier, the charge is a 'windfall' for the claimant. It is no part of the policy which underlies the provision, that the claimant should have been aware of the existence of the contract of insurance, bargained for its existence, or dealt with the insured in reliance on its existence. The legislative policy of ensuring that the claimant will have the benefit of the moneys payable under a contract of liability indemnity insurance is better served by the second construction than by the first. The two constructions referred to earlier are both arguable, and the second should be preferred as better conforming to the purpose of the provision. 5. Sub-section 6(7) presents no difficulty for either construction: according to the first, "the contract of insurance" to which that sub-section refers is that which was in existence at the time of the Event; according to the second, it is that which existed during the period in which the relevant claim was made and notified. 6. Once it is accepted that the expression "moneys may become payable" encompasses the situation where moneys become payable pursuant to a claims made and notified policy entered into after the Event, it is clear that the language of sub-s 6(1) is always satisfied at the time of the Event, since it is always the case that the wrongdoer may, after the Event, enter into a claims made and notified policy under which the relevant moneys will become payable. 7. It seems to me, with respect, that the reasoning in Manettas gives an undue significance to the words 'on the happening of the [Event]'Indeed, it is reasonable to think that in most cases, including non 'claims made and notified cases', it is insurance moneys that 'may become payable' after the Event rather than those that 'are payable' at the time of the Event, on which the statutory charge can be expected to operate. This is because in most cases (as sub-ss 6(2) and (3) contemplate) the amount of the insured's and the insurer's liability will not be known on the happening of the event, and because the making of a claim by the insured upon the insurer for indemnity will be a condition precedent to the arising of the insurer's liability to indemnify. If sub-s 6(1) had made explicit that which is implicit, by saying '… on and from the happening of the Event …' rather than simply '… on the happening of the event …', the capacity of the provision to encompass claims made and notified policies subsequently entered into would, perhaps, have been clear." 838 The principal issue to be determined by the Court in relation to the proper construction of section 6, and the point which distinguishes the two lines of authority on this issue, was identified by Lindgren J in National Mutual in the following terms: "… the issue which divides the authorities on the question whether s 6(1) applies to a claims made policy issued after the event is the question whether the word 'charge' in the subsection refers to something the nature of which necessitates that the contract of insurance already exist at the time of the event." [at 76,712] 839 The authorities are in agreement that the charge descends, if at all, on the happening of the event giving rise to the claim for damages or compensation. In Bailey v NSW Medical Defence Union, McHugh and Gummow JJ stated (at 446): "By its own force, the statute, in circumstances where it applies, creates, on the happening of the event giving rise to the claim for damages or compensation, a charge on all insurance moneys which are then payable in respect of the liability against which the insured is indemnified and on all such insurance moneys that may become payable in respect of that liability." [Emphasis added] 840 In an examination of section 6 by the Court of Appeal in Oswald v Bailey, Kirby P also said that: "Section 6(1) speaks of a 'charge' at a specified time, namely 'the happening of the event giving rise to the claim for damages or compensation. It is at that time, and none other, that the charge attaches. The subject matter of the charge must then be determined, again at that time. Otherwise there would be no point in providing in terms of a 'charge'. In some cases the precise amount of insurance moneys will be clearly established by the terms of the contract of insurance. In others, such as the present, they will need to be established by litigation. They are thus, for the purposes of the charge, moneys payable which 'may become payable in respect of that liability." 841 Lindgren J also recognised, as a background against which the question of the proper construction of section 6 was to be determined, that "the charge for which sub-s 6(1) provides arises on the happening of the Event [giving rise to the claim for damages or compensation]": FAI v Sweeney at 64; see also National Mutual v Citibank Savings at 76,712. 842 The starting point in an inquiry as to the proper construction of section 6 is the decision of the High Court in Bailey v NSW Medical Defence Union (1995) 185 CLR 399. The case involved an occurrence policy, not a claims made policy, which existed at the time that the event occurred. The Court was required to decide whether or not the section applied in circumstances where the insurer purported to deny indemnity on the basis of a retrospective amendment to the terms of the policy. The joint judgment of McHugh and Gummow JJ, in the minority, addressed the issue of the construction and application of section 6. Brennan CJ and Deane and Dawson JJ endorsed the interpretation of the provision offered by McHugh and Gummow JJ . 843 Their Honours stated (at 449-450) "The phrase in s 6(1), 'insurance moneys that ... may become payable', is apt to deal with the situation where, whilst the charge has descended, there is as yet no sum which could be identified as presently payable by the insurer to the insured. In such a case, the statutory charge operates, by loose analogy to an agreement for a charge on after-acquired property, upon such moneys as and when they do become payable. However, there will be nothing in respect of which the charge may be enforced if the moneys never become payable by reason of the exercise by the insurer of rights to avoid the contract or of a vitiating factor in its formation. So also in the case of a breach which pursuant to the terms of the contract or the general law, entitles the insurer to disclaim liability and this state of affairs exists when action is brought by the claimant under s 6(4) or, as necessary, leave is sought to commence that action. In all these cases, there were no insurance moneys which were payable when the charge arose and none have become payable. However, once the charge has descended on the happening of the event giving rise to the claim for damages or compensation , no mutual or unilateral action of insurer or insured which is taken otherwise than under or pursuant to the contract of insurance or general law as it operates upon the contract may vary, discharge or otherwise qualify or abrogate the contract of insurance so as to deny to the claimant what otherwise would be the fruits of enforcement of the charge by action taken under s 6(4) against the insurer. The contract of insurance is that as it stood when the charge descended ." [Emphasis added] 844 The High Court was not required to consider the issue which is currently before the Court, that is whether or not a section 6 charge is applicable in circumstances where no contract of insurance was in existence on the happening of the event giving rise to the claim for damages. In the course of construction of section 6, however, the statement by Justices McHugh and Gummow that "the contract of insurance is that as it stood when the charge descended" assumes that a contract of insurance was required to be in existence at the relevant time. It seems to me, than, that the effect of their Honours' decision is that no charge can be created in favour of a third party if the event occurred prior to the existence of a relevant contract of insurance and, therefore, that the section has no operation in the present proceeding. 845 Lindgren J in National Mutual Property Services v Citibank Savings Ltd confined McHugh and Gummow JJ statements on the interpretation and application of section 6 to the particular facts before the High Court. Lindgren J said (at 76,712) that "What McHugh and Gummow JJ said in Bailey must be understood against the background that in that case the relevant contract was already on foot when the late Dr Bailey supposedly incurred liability to Mr Crawford...' Justice Lindgren stated further that: "It is therefore readily understandable that their Honours might say, as they did, in the context of the facts and issue in Bailey , without foreclosing the possibility that in a different case the provision might operate although the contract of insurance was entered in to subsequently." 846 In Carnie v Richmond, Dowd J did not, however, regard the judgment of McHugh and Gummow JJ in Bailey as distinguishable in proceedings which concerned the application of section 6 to claims made policies. Further, his Honour considered that the judgment "underlined and supported" a construction of the section which held that it was inapplicable to claims made policies entered into after event giving rise to a claim for damages or compensation had occurred: Carnie v Richmond at 18 847 In my view, the construction of section 6 propounded by McHugh and Gummow JJ ought not to be confined to the facts of that particular case. While the circumstances which gave rise to the relevant liability in that case and the provisions of the policy of insurance under consideration by the High Court were materially different, in my view, their Honours' statements as to the operation of section 6 are of general application. I would not readily prefer to adopt an approach which would encourage alternative meanings of the words used in the statute dependent upon the context in which the proper construction of the statute arises for consideration. 848 Mr Slattery submitted that, contrary to the interpretation which I preferred above, support for the proposition that section 6 did not require, for its application, the existence of a policy of insurance at the time of the relevant event, may be found in the judgment of McHugh and Gummow JJ in Bailey. Mr Slattery relied on the following sentence from the extracted passage of their Honours' judgment: "... there will be nothing in respect of which the charge may be enforced if the moneys never become payable by reason of the exercise by the insurer of rights to avoid the contract or of a vitiating factor in its formation." 849 Mr Slattery submitted that their Honours were there contemplating the operation of the section in situations in which there was no contract of insurance. He submitted that the consequences of a contract being avoided by an insurer or in relation to which vitiating factors occurred, such as lack of capacity of a contracting party or an insufficient correspondence between offer and acceptance, were materially similar to those in which no contract of insurance had yet been entered into as contemplated by Lindgren J in FAI General Insurance v McSweeney. [Transcript of 6 April 1998 at page 15 and of 7 April 1998 at page 77] 850 Mr Hutley submitted that the sentence from McHugh and Gummow JJ's judgment does not support such an interpretation. He submitted that McHugh and Gummow JJ were referring to the capacity at common law to avoid any policy of insurance ab initio in a case of either material misrepresentation or material non-disclosure. On Mr Hutley's submission, the passage did not support the proposition that section 6 applies even if no contract of insurance has been entered into for the reason that, where there has been avoidance ab initio, the law continues to recognise the contract of insurance for certain purposes. 851 Mr Hutley referred the Court to the decision of Rogers CJ Comm D in FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1996) 41 NSWLR 559 in which his Honour was required to consider whether or not a contract of insurance which had been avoided for material non-disclosure, remained on foot so far as it contained an exclusive jurisdiction clause relevant to the question of whether or not the Court should exercise jurisdiction. In relation to the subsistence of the contract, Rogers CJ stated (at 563-564): "Sometimes words are used to the effect that a contract avoided ab initio is never taken to have existed. ... The words are sufficient for most purposes, but they should not be taken literally. Neither rescission by a party nor a judge's say so can turn the clock back to have that literal effect, and a contract avoided ab initio is not in Newspeak an uncontract. There was a contract, and there cannot be avoidance ab initio unless the avoiding party is in a position to restore the party to the pre-contractual position, at law with some exactitude but in equity by substantial restoration with allowances: see Alati v Kruger (1955) 94 CLR 216 at 223-224. Avoidance ab initio means that the parties are to be restored substantially to the positions they would have been in had there not been a contract, but it remains that there was a contract." [Cf Mackender v Feldia AG [1967] 2 QB 591 per Diplock LJ; Clarke in The Law of Insurance Contracts , 2nd ed., (Lloyd's of London Press, London, 1994) at 609-610] 852 I do not accept the Plaintiff's interpretation of the sentence in McHugh and Gummow JJ's judgment, nor do I accept the proposition which that sentence is said to support. Reference is made by their Honours only to the consequences for the operation of the section of a contract being avoided ab initio, namely that there will be no insurance moneys to which the charge can attach. I accept that the principles applicable to determine whether or not a contract of insurance which has been avoided by the insurers will still be recognised for some purposes are as stated by Mr Hutley. It seems to me, on that line of authority, it cannot be assumed that McHugh and Gummow JJ were referring to the operation of section 6 in circumstances in which a contract of insurance was not yet in existence. 853 I was also referred to the decision of the New Zealand Court of Appeal in FAI v Blundell and Brown [1994] 1 NZLR 11 in support of the proposition that section 6 is applicable to claims made policies where the event giving rise to the claim for damages or compensation occurs prior to the existence of a policy of insurance which would respond to the relevant event. That issue was not directly raised by those proceedings which concerned an appeal against the granting of leave pursuant to section 9 of Law Reform Act 1936 (NZ), which is relevantly identical to section 6 of the NSW Act, in circumstances in which the insurer was notified of a claim in 1991 in relation to an event which occurred in 1984 and 1985. One issue in the proceedings was whether leave to proceed against the insurers ought to have been refused because the proceedings against the insured for an account of profits were said to be statute barred. In the course of dismissing the appeal, the members of the Court referred to the proper construction of section 9. 854 Richardson J said (at 16): "Two elements must be present before a charge arises: the first is a contract of insurance by which the insured is indemnified against the liability to pay any damages or compensation; the second is an event giving rise to a claim for such damages or compensation. In providing that the charge arises 'on the happening of the event giving rise to the claim for damages or compensation' the subsection does not advert to those situations where the contract to indemnify was entered into subsequent to the event giving rise to the plaintiff's claim. … It is implicit in the subsection, and in accord with reality that the charge cannot arise unless and until there is insurance money available out of which it can be met. In short the charge only arises when there is in existence both a relevant contract of insurance indemnifying the insured and an event giving rise to the claim." [Emphasis added] 855 Robertson J stated (at 25) that the section would apply to a claims made policy where the Event preceded the existence of the policy: "the respondent's claim against [the insured] is in equity and no limitation period applies. The relationship between [the insured] and his insurers is in contract. The trigger point in respect of a potential liability for the appellant is the emergence of a claim against [the insured]during the period of insurance. It would make the insurance cover of no utility if one were to interpret the provisions so that a claim notified in respect of an incident more than six years earlier (but itself not statute-barred) could not create a liability. The notification of the claim was made in this case more than six years after the event giving rise to the liability. I am not attracted by an interpretation which indicates that the remedial benefit contained in s 9 of the Law Reform Act is to have no potential for application." [Emphasis added] 856 Robertson and Richardson JJ stated that section 9 of the New Zealand Act would apply to claims made policies where the relevant event had occurred before the commencement of the policy. Their Honours reasoning cannot, however, be adopted by me because it is inconsistent with the judgment of McHugh and Gummow JJ in Bailey. Richardson J was able to conclude that section 9 of the New Zealand Law Reform Act applied, even when an event occurs before the applicable claims made policy had come into existence, by accepting that the charge only arises when the insurance policy comes into existence, which may be after the event has occurred; Roberston J, implicitly, also accepted the rationale [see underlined sections in above extracts from the judgments]. In the light of the High Court decision in Bailey, which held that the charge was created on the happening of the event giving rise to the claim for damages or compensation, it is not open to this Court to accept that line of reasoning in these proceedings, and for that reason, I do not find the decision persuasive. 857 The way in which section 6 ought to be construed in order to give effect to the legislature's intention, as raised in the judgment of Robertson J, will be further addressed below.

[421]

In similar terms in National Mutual Property Services v Citibank Savings (1997) 9 ANZ Insurance Cases 61-335 at 76,712, his Honour commented that the charge "can be seen as analogous to a charge over future property, namely, the chose in action to come into being once an insurer becomes liable to indemnify." 859 n National Mutual Properties v Citibank Savings, Lindgren J further said (at 76,713) "It is possible to hypothesise circumstances relevantly similar to those of the present case in which, without a strained use of language, an equitable 'charge' over a future right of indemnity could be said to have arisen consensually at the time of the Event. Assume that for valuable consideration moving from [the third party] to [the insured], [the insured] had expressed themselves at the time of the Event as 'charging' in favour of [the third party]any right of indemnity which they might in the future have against the insurer in respect of any liability which they might, in the meanwhile, have incurred to [the third party]. For lack of a right of indemnity already existing at the time of the Event, there would not be a presently effective charge. Nonetheless, the word 'charge' might appropriately be used to refer to the proprietary effect of the contract which I have described, namely a floating charge which would fasten upon a particular right of indemnity satisfying the contract description upon its coming into existence … It suffices to say that it is arguable the word 'charge' is used in sub-s 6(1) to encompass, by analogy with a presently effective charge, such a situation which, of course, the statute substitutes for agreement and consideration." 860 The Seventh Defendant submitted that the reasoning of Justice Lindgren in FAI v McSweeney should not be accepted because it was based upon a misapprehension of the nature of a charge over future property and as to the circumstances in which such a charge may exist. The Seventh Defendant also contended that Lindgren J's analogy of a charge under section 6(1) to a floating charge is incorrect. The Insurers submitted that the law does not recognise a charge over future property in terms enumerated by Lindgren J. The Insurers further submitted that the person in favour of whom a charge is created can have no proprietary interest, and therefore there is nothing over which the charge can operate, until there is property. [Seventh Defendants' Submissions paragraphs 2.1.13-2.1.14] 861 A charge, whether fixed or floating or of an equitable nature, is a security right over property. In Sykes and Walker on The Law of Securities (5th ed., LBC, Sydney, 1993), the authors commented (at 19) that: "It is thought that a 'charge' at least involves the notion of the burdening of some subject property with an obligation in the sense that failure to perform the obligation involves a resort to that property to secure the satisfaction of the obligation." 862 Similarly, Gough on Company Charges (2nd ed. Butterworths, Sydney, 1996) said the following in relation to the concept of security interests (at 4): "The primary meaning [of the word security] requires the creation of vesting of some proprietary interest in the property of the debtor in favour of the creditor by means of a contract between the parties or by operation of law." 863 The existence of the property is a necessary incident of the existence of a charge. While it is possible to have a charge over property that will only come into existence after the charge has been created, the immediate consequences of such an agreement are entirely different from those in which a charge is created over present property. An agreement for value to assign future property binds the conscience of the assignor and, if the property comes into existence, it will at that time vest in the assignee according equitable principles: Holroyd v Marshall (1862) 19 HLC 191 and Tailby v Official Receiver (1888) 13 App Cas 523; Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477 at 484 per Latham CJ; at 493 per Williams and Kitto JJ. An agreement to charge future property operates in the same way: see Metcalfe v Archbishop of York (1836) 1 My & Cr 547 at 556 [40 ER 485 at 489] 864 The precise nature of the right of the person in favour of whom a charge is created before the property to be charged comes into existence is not clear. Meagher, Gummow and Lehane suggest that "authority establishes that it is more than a right of contract but it cannot at that stage be an interest in property because there is no property in existence, or in the hands of the assignor, to which it can attach": Equity: Doctrines and Remedies (3rd ed., Butterworths, Sydney 1992) at 160. Similarly, Gough in Company Charges states (at 40) that "until the assignor acquires the property, the assignee has merely a personal contractual right against the assignor but in equity the moment the property comes into existence by virtue of acquisition of the assignor or otherwise the agreement [to charge particular property] operates upon it." It is not now necessary for me to determine the nature of the right of the person in favour of whom property not yet in existence is charged; it is simply relevant to note that that right is not a proprietary right but a personal right of the assignee. 865 A floating charge is a charge that affixes to assets held by a person from time to time. If a charge is granted over property, and further property is acquired at a later time, the charge also affixes to after acquired property from the moment of acquisition, but it does not attach prior to this: see statements of Lord MacNaughten in Government Stocks and Other Securities Investment Co Ltd v Manila Rly Co Ltd [1897] AC 81 at 86 and Illingworth v Houldsworth [1904] AC 355 at 358. 866 In my view, it is misleading to draw analogies between on the one hand, charges created by virtue of section 6 and on the other hand, floating charges and equitable charges. The creation of charges at law and in equity is dependent upon an existing relationship between the parties, albeit it a relationship in which the rights of the parties may change as and when property is acquired, and an agreement between the parties which in equity may be seized upon as a basis of relief. In the case of a charge created by operation of statute, however, there is no such relationship between the parties nor, in the case of a section 6 charge, is there any agreement between the third party and the insurer which might provide the basis of relief. The entitlement of the third party is only created when a cause of action arises and the relevant defendant is indemnified against the liability alleged. In my view, a construction of the section which relies, by analogy, upon consensus or agreement between the parties is not instructive and, as it seems to me, only serves to highlight the difficulties of adopting such an approach in order to determine the operation of the charge arising pursuant to section 6 of the Law Reform (Miscellaneous Provisions) Act. 867 In the alternative to the submission that the Court ought to accept the construction of section 6 preferred by Lindgren J, the Plaintiff submitted that section 6 created a sui generis remedy, namely a charge the description and characteristics of which were to be found only in the terms of the section. Mr Slattery put to the Court in Submissions in Reply, that it was incorrect for the Court to attempt to draw analogies between the remedial charge created by section 6 and charges at common law or in equity. [Transcript of April 7 1998 at page 77] 868 Mr Slattery referred the Court to Cobar Corporation Ltd v Attorney-General (NSW) (1909) 9 CLR 378 in which the High Court was required to consider whether a statute created a right to bring an action for recovery of a stamp duty debt. Griffiths CJ stated (at 387) that: "There is a general rule that when a new right is created by a Statute and a special sanction is also given by the same Statute regard must be had to that sanction, and the obligation can only be enforced in the prescribed manner." 869 Isaacs J (at 396 and 400) stated, in similar terms: "The principle relied on ... may be taken to be that stated by Lord Tenterden CJ in Doe d. Murray v Bridges 1 B & Ad 847 at p. 859 in these words: - 'Where an Act creates an obligation, and enforces the performance in a specified manner, we take it to be a general rule that performance cannot be enforced in any other manner. This was affirmed by the House of Lords in Pasmore v Oswaldtwistle Urban Council (1989) AC 387 at p. 394. ...And finding specific modes of enforcement expressly provided by the Statute in respect to the newly created statutory obligation, there comes into play the rule laid down by Lord Tenterden already quoted, and consequently I am not at liberty to apply the common law rule ubi jus ibi remedium as a necessary instrument to give some effect to an obligation, and so call into operation the ordinary common law remedy as if there were a gap left by the legislature, and assumed to be met by the common law. There is no gap, and a Court is not justified in creating one, and then filling it with a remedy which might or might not be convenient." 870 The nature of the charge created by section 6 was considered by McHugh and Gummow JJ in Bailey v New South Wales Medical Defence Union (at 445-446). Their Honours stated that as to the word 'charge' in the section: "That which is created by Section 6(1) is given the name 'charge'. This invokes an institution of the general law and suggests the creation by force of statute of a security for the payment of a debt or the performance of some other obligation. In such cases, the obligation secured may be that of the party giving the charge or a third party. The assignment of a presently existing chose in action by way of charge rather than an absolute assignment by way of legal mortgage is well recognised. However, in New South Wales, this cannot be effected under s 12 of the Conveyancing Act 1919 (NSW). Accordingly the assignment by way of charge of a presently existing chose in action is effective only in equity. Likewise, an assignment of part of a presently existing chose in action. Where the subject matter of the assignment is the future 'fruit' rather than the whole or part of the presently existing 'tree', value is necessary to render the 'future assignment' effective in equity. The distinction is illustrated in a number of decisions of this Court, most strikingly in Shepherd v Federal Commissioner of Taxation . 871 Section 6 is to be read against these distinctions in property law. However, what section 6 achieves is the creation of a new right and an associated remedy to enforce it. The section does so by sweeping up distinctions in general law between legal and equitable assignments of whole or part of presently existing or future choses in action and between cases where value is required or inessential. By its own force, the statute, in circumstances where it applies, creates, on the happening of the event giving rise to the claim for damages or compensation, a charge on all insurance moneys which are then payable in respect of the liability against which the insured is indemnified and on all such insurance moneys that may become payable in respect of that liability." 872 It seems to me that McHugh and Gummow JJ have adopted the interpretive approach on which the Plaintiff relied. Their Honours held that section 6 had created a right that did not exist at common law or in equity. The statutory right provided for in section 6 is required because the law of privity of contract precludes a third party suing on the contract of insurance at common law or in equity. McHugh and Gummow JJ held that the section also created a novel remedy in respect of that right, in the sense that the conditions at law and in equity as to when a charge may arise in respect of present and future property do not apply to the statutory charge created by section 6. In reaching this conclusion their Honours relied on the terms of section 6 itself. The section 6 charge arises by force of statute and the person for whom the charge is created has a statutory right of action to enforce the charge against the insurers. McHugh and Gummow JJ did not regard the creation of the charge or its enforcement as being dependent upon principles of common law or equity, rather they inferred from the terms of the section. 873 I do not, however, understand their Honours to be saying that, in addition to removing the distinctions between the various conditions which must be met in order for a charge to attach according to existing legal principles and the time at which that will occur, the distinguishing feature of a charge, namely that it is a security interest in property had also been eradicated by statute. 874 In Oswald v Bailey, Samuels JA stated (at 732) that there must be property to which the charge can attach at the time that the relevant event occurs: "… it cannot be doubted, in my opinion, that since s 6 establishes a charge upon 'insurance moneys', the effectiveness, indeed the reality of the charge must depend upon whether that subject matter exists." 875 Nor, as it seems to me, are there any inferences which may be drawn from the words used in section 6 which suggest that the charge arises and remains inchoate until a contract of insurance comes into existence. 876 Kirby P in Oswald v Bailey, stated that the words 'may become payable' referred to situations in which the amount of insurance moneys payable was uncertain. It is to be noted, however, that a situation in which the amount was purely speculative because no contract of insurance had yet been entered into did not, arise for consideration in that case, nor did Kirby P contemplate such a situation in his judgment. His Honour said (at 723): "In some cases the precise amount of insurance moneys will be clearly established by the terms of the contract of insurance. In others, such as the present, they will need to be established by litigation. They are thus, for the purposes of the charge, moneys payable which 'may become payable in respect of that liability." 877 Similarly, Dowd J in Carnie v Richmond stated (at 14): "The legislative provision nominates a time at which the 'charge' attaches. As Kirby P indicated in Oswald at page 724, 'it is at this time that the decision must be made whether there are 'insurance moneys' and whether at that date they 'may become payable in respect of ... liability'. It is apparent that the words 'may become payable' were used with reference to insurance moneys being determined by litigation and in terms of quantum only rather than to necessarily import a flexibility as to when the charge arises." 878 In Capital Financial Group v Triden Properties, Cole said (at 81) that the words "that are or may become payable": "… indicate that there may either be an existing liability under the insurance policy upon the insurer to give indemnity in respect of the event which occurred creating a liability in the insured to a third party, or there may be a liability which would arise in the future upon the insurer to pay moneys upon the happening of a subsequent event such as, for example, the making of a claim under a claims made policy." 879 Lindgren J in FAI v McSweeney considered that the words "may be payable" in section 6(1) were equally open to an alternative interpretation. His Honour stated (at 65) that the expression "is apt to accommodate moneys that may become payable after the subsequent entry by the wrongdoer into a claims made and notified contract of insurance." 880 In my view, the construction which is to be preferred is that of Kirby P. 881 It is also supported by other provisions in section 6. The Insurers further submitted and I accept that the proposition that the charge may descend before a contract of insurance has come into existence and so before there is any insurer, is inconsistent with section 6(4) which provides that 'every such charge as aforesaid shall be enforceable by way of an action against the insurer ...'. The Insurers submitted and I accept that the proper construction of this subsection required that there was, at all material times, an insurer against whom an action may be brought to enforce the charge.

[422]

Section 6 should be Construed Beneficially 882 The Plaintiff submitted that, given the obvious ambiguity of section 6, the Court should construe the section beneficially. On the Plaintiff's submission, the court should infer that the section was intended by Parliament to apply to claims made policies even if it is not expressly stated to do so. The mischief which the section was intended to remedy was described by the Attorney General Major Martin in the Second Reading Speech on 20 March 1946 at Hansard page 2809: "The plaintiff, in law, is a stranger to the defendant's insurance company, the extent of its liability in the matter being to indemnify the defendant against any claim proved against him. In the result it could happen, and it has happened in some very tragic cases, that when a plaintiff has obtained a verdict the defendant's insurer pays to the defendant the amount of that verdict, but the defendant disappears with the money, spends it at the races, or makes away with it in some other manner. ... The result of such cases is that the plaintiff does not recover the fruits of the judgment that the law has given him. This is remedied by clause 6 which has the effect, where a person is insured, of making the amount of his liability to a plaintiff, on the happening of an event giving rise to a claim for damages or compensation, a charge on the moneys payable under the insurance policy." 883 The section, then, is a remedial provision. Its purpose is to overcome obstacles that the principles of privity of contract might otherwise pose to a plaintiff who, having obtained judgment against an impecunious insured, sought to access the moneys payable to that insured by an insurer pursuant to a contract of indemnity. The Act is also intended to ensure that successful claimants have 'direct access … to the reliable funds of an insurer': Oswald v Bailey (1987) 11 NSWLR 715 at 727; see also National Mutual Fire Insurance Company Ltd v Commonwealth (1981) 1 NSWLR 400 at 401-403 per Moffit P. 884 Kirby P in Oswald v Bailey indicated that the Court should construe section 6 beneficially. His Honour said (at 723-724): "The section is, as I have already mentioned, a novel reforming provision. As such, it should be construed beneficially to protect claimants such as the appellants. It gives a direct statutory right of action against the insurer which normally the law would not allow. Once the premises are established the appellants' rights no longer depend upon the contract of insurance. They are derived from the Act itself." 885 Kirby P further expressed (at 727) a preference for a construction of the section which recognised : "the language which the legislature chose in order to effect its apparent purpose and the preference which should be given, … to that construction of the section which promotes its remedial purpose rather than one which would diminish the achievement of that purpose." 886 The meaning of beneficial construction of a remedial provision in an act was explained by Isaacs J in Bull v Attorney General (NSW) (1913) 17 CLR 370 at 384. The case concerned a section of the Crown Lands Act 1895 validating certain transactions. Isaacs J, in the minority, held that the section was intended to validate all transactions concerning Crown lands. He stated: "… this is a remedial Act, and therefore, if any ambiguity existed, like all such Acts should be construed beneficially. … This means, of course, not that the true signification of the provision should be restrained or exceeded, but that it should be construed so as to give the fullest relief which the fair meaning of its language will allow.' 887 Beneficial interpretation of the legislation may not, however, distort the meaning of the words used in the legislation. In Khoury v Government Insurance Office of New South Wales (1984) 58 ALJR 502 at 508, Mason, Brennan, Deane and Dawson JJ stated that "… the rule that remedial provisions are to be beneficially construed so as to provide the most complete remedy of the situation with which they are intended to deal must, as has been said, be restrained within the confines of 'the actual language employed' and what is 'fairly open' on the words used." 888 In Carnie v Richmond (unreported, Supreme Court of NSW, 9 September 1997) Dowd J said the following in relation to adopting a beneficial approach to the interpretation of section 6 (at 18-19): "No matter how beneficial legislation may be in intent, it is for the legislature to bring that intent to cover a new set a circumstances and not for the courts to do so, no matter how unjust the consequences of the legislative enactment may be. The fact that there has been a significant change in insurance practice would, in my view, oblige a review of s 6 of the Act to bring it into alignment with the clear need to apply that legislative intent to the claims made and notified' policies. The simple fact however is that the words used and the structure of s 6(1) do not in the actual words used cover a 'claims made and notified' policy and no amount of beneficial intent or appeals to justice should cause a court to stretch the meaning of the language used.'" [contra Schipp v Cameron at 12 per Young J] 889 In my view, it is reasonable to infer, as the Seventh Defendants submitted, that the operation of the section in relation to claims made policies was simply not addressed when the legislation was drafted. Similarly, Robertson J in FAI (NZ) General Insurance Co Ltd v Blundell & Brown Ltd [1994] 1 NZLR 11 at 25 said the following in relation to the circumstances in which an equivalent section was passed in New Zealand (although it is to be noted that his Honour was of the view that the section could be beneficially construed such that it was applicable to claims made policies entered into after the relevant event):

[424]

Meaning of the word "loss" 895 The Insurers submitted that if Mr Harrison is liable to Mrs Schipp, the Insurers are only obliged to indemnify Mr Harrison in respect of that liability if it may be properly characterised as a "loss" for the purposes of the contract of insurance. 896 In the Third Further Amended Statement of Claim, Mrs Schipp sought damages for breach of the Mary Street joint venture agreement, equitable compensation, restitution and an account of profits in relation to Mrs Schipp's entry into the Mary Street transaction, the sale of the property and Mr Cameron and Mr Harrison's retention of the proceeds of that sale. [Paragraphs 22 and 46] Paragraph 46(iv) also sought interest in relation to the sale of the Mary Street property and retention of the moneys. In relation to the purchase of the Kembla Street property, Mrs Schipp sought an account of profits, damages, equitable compensation and restitution as well as any interest that may have accrued on any amount for which Mr Harrison is liable to Mrs Schipp. [Paragraph 70] 897 The Insurers submitted that not all of the remedies sought by the Plaintiff would, if granted by the Court, give rise to a "loss" in the relevant sense. In particular, the submission was that if the remedy sought, and granted by the Court, involved Mr Harrison relinquishing some benefit which was wrongfully obtained by him, such a liability on the part of Mr Harrison could not be characterised as a 'loss' which the Insurers had agreed to indemnify. The Insurers submitted that an order to provide restitution or an account of profits would not cause a 'loss' to Mr Harrison to which the policy would respond. [Seventh Defendant's Submissions paragraphs 2.2.2-2.2.5] 898 The Insurers further submitted, that if Mrs Schipp has alternative remedies available of, for example, an account of profits (or restitution) and damages, the Policy would not respond because Mrs Schipp had elected to pursue damages only. Irrespective of the way in which the relief was framed, the Insurers submitted that the Court, if it granted relief to Mrs Schipp, would still be required to determine the amount of the benefit which was wrongfully obtained by Mr Harrison. According to this submission, the only 'loss' suffered by Mr Harrison to which the policy would respond was, the amount, if any, which he is ordered by the Court to pay in excess of the amount of the wrongful benefit he obtained. [Seventh Defendant's Submissions paragraph 2.2.6] 899 In reply, the Plaintiff submitted that first, it would be within the ordinary contemplation of the parties that loss arising from the finding of a civil liability would include the granting to a third party of the ordinary range of remedies, including an account of profits or restitution. Secondly, the Plaintiff submitted that the policy did not contain any provision which qualified cover by reference to the types of remedies which might be awarded to a third party. Nor was the cover qualified by the provisions of the Insurance Contracts Act 1984 (Cth) or the relevant case law. [Plaintiff's Submission in Reply paragraphs 50.1-50.8] 900 I accept the Plaintiff's submissions in relation to the characterisation of a 'loss' under the policy. Clause 2 provides, inter alia, that an indemnity exists "against all loss to the Assured … whensoever occurring arising from any claim or claims first made against the Assured … in respect of any description of civil liability whatsoever incurred in connection with the Practice." The indemnity is broadly framed, using words such as 'all' and 'any', which do not readily suggest a limitation on the cover provided by a policy of the type submitted by the Insurers. 901 This approach accords with the definition of a 'contract of liability insurance' in section 11(7) of the Insurance Contracts Act 1984 (Cth), referred to by the Plaintiff in their submissions in reply. The Act defines a contract of liability insurance as "a contract of general insurance that provides cover in respect of the insured's liability for loss or damage caused to a person who is not the insured." The Act defines the nature of the cover provided by liability insurance policies by reference to the fact of liability to a third party not the nature of that liability or the type of relief available. 902 The Seventh Defendants cited a number of authorities as to the meaning of the word 'loss': Wilson v Jones (1867) LR 2 Ex 137 at 150 and Estate Realties Ltd v Wignall [1992] 2 NZLR 615 at 633. In each case, the characterisation of what would amount to a loss was undertaken in a context quite removed from the circumstances in the proceedings before me. The meaning of words in a policy of insurance is primarily a question of the construction of the policy and previous decisions, which may be instructive to a greater or lesser extent, do not provide a conclusive answer as to what 'loss' means in the policy the subject of these proceedings. 903 I do not accept the construction of the word 'loss' in the policy put forward by the Insurers. I accept the construction put forward by the Plaintiff and conclude, therefore, that the Insurers may not have avoided the obligation to indemnify Mr Harrison on the grounds that the loss suffered as a result of the Court finding him liable to Mrs Schipp was not an event to which the policy would respond.

[425]

Liability incurred in connection with practice as a solicitor 904 The terms upon which the Insurers are liable to indemnify Mr Harrison are provided in Clause 2 of the Certificate of Insurance (set out above). The insuring clause provides cover only "… in respect of any description of civil liability whatsoever incurred in connection with the Practice." "The Practice" is defined in Clause 1(b) to mean "the business of practising as a solicitor undertaken by the Assured or the Assured's predecessors in business alone or with others." 905 In order for the Insurers to be liable to indemnify Mr Harrison in respect of his liability to Mrs Schipp, the liability must have been caused by acts or omissions made by Mr Harrison in connection with his business of practising as a solicitor. It seems to me that Mr Harrison's liability has been so incurred. I have found that Mr Harrison breached fiduciary obligations owed to the Plaintiff as a consequence of the solicitor/client relationship that existed between them. I have also found that Mr Harrison breached duties of care owed to Mrs Schipp as a result of him acting in the capacity as either her solicitor or a solicitor who owed duties of care to Mrs Schipp as a third party whose rights may be affected by Mr Harrison's performance of obligations owed to his relevant client in the circumstances. Mr Harrison breached fiduciary obligations and duties of care that could arise from his conduct in relation to the Mary Street transactions and the Kembla Street joint venture in the capacity of a solicitor. 906 The Insurers submitted that the definition of "the practice" in clause 1 of the Certificate of Insurance requires not only that a liability be incurred by the insured as a result of activities which may be said to be connected with the professional practice of a solicitor but also that the insured is practising as a solicitor as a "business". The Insurers submitted that, in order to have a business of practising as a solicitor, "a person must habitually set about earning income, or some other reward, in return for acting as a solicitor for clients ... unless he or she is engaged on some continuing basis in the activities of a solicitor for reward, he or she does not have a business or practising as a solicitor." [Seventh Defendants' Submissions paragraph 2.3.44] 907 In my view, the use of the word "business" in the definition of "practice" refers to the type of work and the purpose for which it is done, rather than whether that work was continuous or not; or, paid or not. It seems to me that, in this context, business is synonymous with the word profession. The words, "business of the practice as a solicitor" are intended , in my view, to exclude from the scope of indemnity under the policy any entrepreneurial activity undertaken by a solicitor which may involve the exercise of legal knowledge and expertise but which cannot readily be described as generally part of a solicitor's professional practice: cf Solicitors' Liability Committee v Gray (1997) 147 ALR 154 at 195-195 per Beaumont and Burchett JJ; at 164-165 per Lockhart J. [see Judgment paragraphs 665-671]

[430]

In Drayton v Martin (1996) 67 FCR 1 at 32, Sackville J was required to consider a professional indemnity insurance policy in which the phrase "any description of civil liability whatsoever in connection with the practice" appeared. Sackville J said as follows: "… the meaning of the phrase 'in connection with' whether used in a statute or in a contract, must depend on the context: Burswood Management Ltd v Attorney-General (Cth) (1990) 23 FCR 144 (FCA/FC), at 146. Nonetheless the width of the ordinary meaning of the phrase is indicated by a passage from the judgment of Wilcox J in Our Town PM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465, at 479-480 'The words "in connection with" have a wide connotation, requiring merely a relationship between one thing and another. They do not necessarily require a causal relationship between two things: see Commissioner for Superannuation v Miller (1985) 8 FCR 153 , at 154, 160, 163. They may be used to describe a relationship with a contemplated future event: see Koppen v Commissioner for Community Relations (1986) 11 FCR 360, at 364; Johnson v Johnson [1952] P 47 at 50-51. In the latter case, the United Kingdom Court of Appeal applied a decision of the British Columbia Court of Appeal, Re Nanaimo Community Hitel Ltd [1954] 3 LDR 225, in which the question was whether a particular court, which was given 'jurisdiction to hear and determine all questions that may arise in connection with any assessment made under this Act' had jurisdiction to deal with a matter which preceded the issue of an assessment. The trial judge held that it did, that the phrase 'in connection with' covered matters leading up to, or which lead up to, an assessment. He said, [1944] 4 DLR 639: "One of the very generally accepted meanings of 'connection' is 'relation between things one of which is bound up with or involved in another'; or, again 'having to do with'. The words include matters occurring prior to as well as subsequent to or consequent upon so long as they are related to the principal thing. The phrase 'having to do with' perhaps gives as good a suggestion of the meaning as could be had." This statement was upheld on appeal.'" [See also Hunter J in McCann v Switzerland General Insurance Australia Ltd (unreported, Supreme Court of NSW, 26 June 1998) at 279-285] 908 In my view, the requirement that the liability to which the insurance policy in the proceedings will respond be "in connection with the Practice" is a broad requirement that there be a relationship between the conduct which amounts to liability and the general conduct of a solicitor in the course of his or her practice. It is not a requirement that the relevant conduct be the sole cause of an insured's total liability to the Plaintiff: contrast principles applicable to the test for the application of an exclusion clause [see Judgment paragraphs 934-942]. In my view, however, it is the case that the indemnity provided by the policy would only extend to loss which could be said to result from conduct in the capacity as a solicitor and not to additional loss, if any, brought about by any other conduct. In short, I would not accept that the Insurers are not liable to indemnify Mr Harrison because additional liability can be found to exist on bases separate from that incurred in connection with the business of Mr Harrison's practice as a solicitor. 909 In my view, it is sufficient to invoke the indemnity provided by the policy that Mr Harrison's liability to Mrs Schipp was incurred in relation to conduct which may be said to be part of the professional practice of a solicitor. It being the case that the breaches of duties which can be sheeted home to Mr Harrison's position as a solicitor were material, the fact that other causes of action were also made out does not detract from the policy of insurance responding to embrace the whole of the relevant liability.

[431]

Exclusion Clause 910 The Seventh Defendant is not liable to indemnify the Third Defendant in respect of any liability he may incur if one of the categories in Clause 5 of the policy entitled 'General Exclusions' applies. The policy does not indemnify the Third Defendant "in respect of any liability ... brought about by the dishonest or fraudulent act or omission of the Assured ...": Clause 5(e)(v). The Seventh Defendant submitted that there was dishonesty on the part of Mr Harrison such that the exclusion clause applied. 911 The Seventh Defendant's Defence to the Further Amended Statement of Claim pleaded that Mr Harrison, and not the Seventh Defendants, was liable to Mrs Schipp "to the extent that the liability of Harrison was brought about by the dishonest or fraudulent acts or omissions of Harrison" because the general exclusion in clause 5(e)(v) applies. [Paragraph 6(c)] As already noted above, the Plaintiff later disclaimed that part of the Statement of Claim which sought a finding of fraud or dishonesty on the part of Mr Harrison. [See Transcript pages 1842-1843] Despite the decision of the Plaintiff not to press a finding of actual dishonesty, as the parties accepted, an issue for determination remains whether or not Mr Harrison's conduct was dishonest or fraudulent because the issue is raised by the Seventh Defendants' pleadings. 912 The Policy does not define the word "dishonest". The meaning of the word is primarily a question of the proper construction of the policy, but in the absence of any indication within the document as to the meaning of the words, the words should be given their ordinary meaning. In Underwriters at Lloyds v Ellis (unreported, Court of Appeal, 25 February 1998, per Meagher, Handley and Powell JJA) Powell JA stated that the following approach should be taken in interpreting an exclusion clause of the type sought to be relied on by the Seventh Defendant: ".. it is now accepted that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentum in case of ambiguity (see, for example, Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500)." [at 29] 913 "Dishonesty" is defined in the Shorter Oxford Dictionary as constituting conduct that is: "Discreditable as being at variance with straightforward or honorable dealing; underhand, now, fraudulent, thievish, knavish." 914 That definition has been accepted by many of the authorities in which the question as to whether or not an exclusion clause which allows an Insurer to refuse to indemnify the Assured on the grounds that their conduct was dishonest or fraudulent has been raised: McMillan v Joseph (1987) 4 ANZ Insurance Cases 60-822; Crowe v Wheeler & Reynolds [1988] 1 Qd R 40; Comino v Manettas (1993) 7 ANZ Insurance Cases 61-162; East End Real Estate Pty Ltd t/a City Living v CE Heath Casualty & General Insurance Ltd (1993) 7 ANZ Insurance Cases 61-151; Chittick v Maxwell (1993) 118 ALR 728; H G & R Nominees Pty Ltd v Fava [1997] 2 VR 368; Underwriters at Lloyds v Ellis (unreported, Court of Appeal, 24 February 1998, per Meagher, Handley and Powell JJA). Those authorities offer some guidance as to the application of clause 5(e)(v) in these proceedings. 915 The ambit of the conduct which will be "dishonest" is not entirely clear from the authorities. In particular, there is some question as to whether or not an intention to deceive is required. The Full Court in Queensland has held that dishonesty requires "an act involving some intent to deceive or cheat": Crowe v Wheeler & Reynolds [1988] 1 Q R 40 at 43. Most recently, J D Phillips J in H G & R Nominees v Fava [at 421] in relation to an exclusion clause in a solicitor's professional indemnity policy in similar terms to clause 5(e)(v) held that "what is relevant to the operation of the exclusion clause is ... some conscious and deliberate conduct on the part of the insured." The Plaintiff submitted that those authorities which asserted that dishonesty required an intention to deceive or cheat, or the existence of knowledge that conduct was "not straight forward but underhand", should be followed. 916 There is, however, also authority for the proposition that the nature of conduct that may be characterised as "dishonest" is not limited to conduct which is actuated by an intent to deceive: McMillan v Joseph (1987) 4 ANZ Insurance Cases 61-162 at 75,056. In that case in the New Zealand Court of Appeal, Casey J gave some consideration to the meaning of the word "dishonest" in a policy similar to the one before the Court. His Honour stated: "I accept the appellant's submissions that "dishonest" is used in the sense of deliberate conduct carrying out its ordinary meanings (amongst others) of 'not straightforward' and 'underhand'. Like fraud, the term is of wide application in the almost infinite variety of human activity and while the general concepts it embodies are well understood, attempts to analyse or define them narrowly is fruitless. In any given case a decision on whether conduct is dishonest is best left to the common sense and experience of the judge or jury after consideration of all the relevant circumstances. The test is an objective one and in the context of this policy the insured's conduct is to be judged by that standard of honesty generally accepted as appropriate for members of the legal profession in their dealings with their clients. Because of the trust reposed in them it may well be higher than the standards expected in some other areas of business and commercial life. " [Emphasis added] 917 The Seventh Defendant submitted that this case was authority for the proposition that "there can be dishonesty without an intent to deceive" [Seventh Defendant's Submissions paragraph 2.4.5] and that it is this line of authority which should be followed by the Court in these proceedings. I would not accept the Seventh Defendant's submission without qualification. It seems to me that, Casey J did not hold that intention to deceive was irrelevant to a finding that conduct was dishonest, merely that the relevant intention was not to be determined by the actual state of mind of the individual whose conduct was in question. Rather, deliberate conduct or intention was to be inferred by the Court assessing the conduct against an objective standard of honesty accepted as appropriate in the circumstances. It is on the basis of this objective test that Casey J included as a relevant consideration standards and codes of conduct of the profession of the particular individual whose conduct is impugned. 918 Australian courts appear to have accepted that professional standards may be relevant to a court's inquiry into whether particular conduct was dishonest. In H G & R Nominees v Fava (supra), Phillips J regarded the authorities which concerned the meaning of dishonesty in the context of professional indemnity policies as falling into two categories. First, cases in which the insured professional makes a deliberately false representation. In such circumstances, the operation of the exclusion clause is relatively clear and the question as to whether or not an intention to deceive is required is not thrown up by the facts. I interpolate that in the authorities examined by Phillips J, false representations concerned situations such as those in which a solicitor had given a false certification of independent advice or purported to witness a legal document without seeing the party who executed it or should have executed it: see Comino v Manettas and the facts of H G & R Nominees itself. The second category of cases considered by His Honour were those in which the question for the Court was "at what point a failure to dishonour professional standards becomes dishonesty" [at 418]. The cases which Phillips J considered fell within the second category were McMillan v Joseph, Chittick v Maxwell and East End Real Estate. 919 The Seventh Defendants also relied on East End Real Estate Pty Ltd vt/a City Living v C E Heath Casualty & General Insurance Ltd (1993) 7 ANZ Insurance Cases 61-151. In that case, Rolfe J considered the meaning of the word "dishonest" in the context of an exclusion clause in a professional indemnity policy. His Honour said at 77-798: "'Dishonest', in my opinion, generally connotes a degree of moral turpitude or delinquency, which transcends such a breach of duty ... It does not require very much more than the breach of duty to bring about dishonesty ... In the authorities to which I have referred reference is made, in particular, to the conduct not being 'straightforward' or being 'underhand'. To that, for present purposes, I would add that the conduct may be dishonest if it is discreditable as being at variance with honorable dealing. That places it in a professional or quasi-professional context." 920 In East End Real Estate, Rolfe J relied on the rules and regulations which control the conduct of real estate agents to establish what would constitute honourable dealing. Those rules and regulations required that an offer be conveyed to the principal as soon as practical after it was received and therefore, his Honour held that the failure of an agent to convey an offer, and / or that agent being in a position of conflict regarding the fiduciary duty owed to his / her principal was sufficient to constitute dishonest conduct. 921 There was an issue between the Plaintiff and the Seventh Defendant as to the nature of the duty referred to by Rolfe J. The Plaintiff asserted that his Honour was referring to a statutory duty. The Plaintiff submitted that "His Honour considered matters of law in conjunction with a positive obligation placed on the real estate agent by paragraph 5 of Schedule 2 to the Auctioneers & Agents Regulations made under the Auctioneers & Agents Act 1941". The Plaintiff sought to distinguish East End from the present proceedings on those grounds. 922 The Seventh Defendant, however, submitted that the duty referred to by Rolfe J was not imposed by statute but was either a contractual duty, duty of care or fiduciary duty. I accept the Seventh Defendants' submission as to the nature of the duty referred to by Rolfe J. His Honour noted that it was common ground between the parties in the proceedings before him that the conduct of the real estate agent which gave rise to the proceedings, namely the failure of the agent to communicate to the vendor all offers received in respect of a certain piece of property, "may amount to either a breach of contract, negligence or a breach of a fiduciary duty." [at 77,793] 923 The Plaintiff also sought to distinguish the decision in East End and the concept of dishonesty propounded by Rolfe J on the basis that the dishonesty exclusion in the policy there under consideration included the additional words "criminal" and "malicious". In my view, little turns on the difference in considering the approach adopted by Rolfe J: cf McCann v Switzerland Insurance Australia at 244 per Hunter J 924 Notwithstanding that the facts in East End differ from the present proceedings in that Mr Harrison was not under any statutory obligation of the kind in that case, it seems to me that the approach of Rolfe J may well be applicable here. I would read his Honour's decision as meaning that not every breach of standards established for a particular profession, whether by statutory instrument or by some other means, will result in the conduct in question being regarded as dishonest. In each case, the nature and content of the standard would plainly be relevant on the issue. 925 In East End, Rolfe J observed that "there may well be instances of conduct imposed by the regulations, breach of which could not be stated to be discreditable, not straightforward or underhand": [at 77,798]. Young J in Chittick v Maxwell (1993) 118 ALR 728 at 749 also observed that a failure to adhere to professional standards, whether informally imposed by the profession itself or created by law, would not in itself be grounds for the operation of an exclusion clause which allowed an insurer to refuse indemnity on the basis that the conduct of the insured was dishonest. His Honour stated: "I must confess that, were it not for the decided cases on the word 'dishonest', I would not have thought that it was valid to say that 'dishonest' had anything to do with the way in which other solicitors of good repute may regard the conduct of the solicitor in question. There may be various practices within a solicitor's profession which solicitors regard with suspicion, but about which there is nothing morally or legally wrong. For instance, solicitors may regard it as improper to deal with a matter without opening a file for each matter and making sure all the correspondence in connection with the matter is kept on the file. However, even if a solicitor failed to comply with this rule and so brought down upon himself the odium of the profession, I could not see how that failure had anything to do with his being honest or dishonest. Perhaps an example that is likely to bring about loss is the situation where a solicitor acts for both vendor and purchaser or both mortgagor and mortgagee. That is bad practice, but I would shy away from saying it is dishonest and I would not wish it to be thought that the exclusion in the fidelity insurance policy could apply merely because a solicitor acted for both parties. [Emphasis added] 926 It seems to me that a failure to adhere to professional standards will amount to dishonesty if the relevant standard, or standards, involve an express obligation to attest to the truthfulness of a matter, to disclose a particular fact or otherwise act honestly in some regard. In my view, it will not be sufficient for conduct to be dishonest that there is a breach of a standard which merely protects against careless practices. The salient consideration is not, however, whether the standard is imposed by the legislation or by the general law. 927 A similar view of the authorities was adopted by Hunter J in the recent decision in McCann v Switzerland Insurance Australia (supra). His Honour said (at 244): "What I think is clear from East End , and the other authorities to which I have referred, is that mere breach of duty, without more, is insufficient to constitute dishonesty, consistently with the view that where the purpose of a particular duty founded in regulation is to be found in ensuring primacy of honesty in the duty relationship, little more is needed than proof of the breach to establish actual dishonesty." 928 Hunter J ultimately adopted a concept of dishonesty in materially different terms to those which I have considered above. His Honour expressed the view that the concept of dishonesty should be understood in terms of a "context of injury to an entitlement or putting at risk of injury to the entitlement of another, as distinct from attempting an examination of a concept of dishonesty in vacuo by definitions of standards and the like": at 240. As to the meaning of the word dishonest, Hunter J held (at 245) that: "For the purpose of the dishonesty exclusion, I think the concept of dishonesty involves an intentional act, or omission where there is a duty to act, which deprives another of money or valuable property or puts at risk or prejudicially affects that other in relation to some lawful economic right, interest, opportunity or advantage, knowing that the actor has no right to deprive that other of the money or property or to put it at risk or to so prejudice the interests of that other. Knowledge that there is no right so to act may be derived from the existence of a duty or from representations made to the object of the dishonesty. The duty may arise out of statute or out of the legal relationship between the parties. While recklessness itself is not tantamount to dishonesty it, clearly, may evidence the existence of dishonesty." 929 In reaching this conclusion, his Honour had regard to the concept of dishonesty which has developed in the context of the criminal offence of fraud. I note in passing that, in requiring "an intentional act or omission", I understand Hunter J to require that there be deliberate acts or omissions as opposed to reckless or thoughtless conduct. I do not understand Hunter J to include as a fundamental element of the concept of dishonesty, an intent to deceive, although clearly, like recklessness, such evidence would presumably be relevant to the existence of dishonesty as the concept was formulated by Hunter J. 930 Without expressing any view as to the concept of dishonesty ultimately formulated by Hunter J, it seems to me that that concept embraces a greater variety of conduct and situations than it is necessary to be adopted by me in the context of the proceedings now before me. In McCann v Switzerland Insurance Australia, there was an issue as to whether the misappropriation of moneys in certain trust funds held by Allen Allen & Hemsley as trustee could be said to have been brought about by the dishonest or fraudulent conduct of a partner of that firm. Hunter J held that the misappropriation was not actuated by an intention to defraud the trust and the question which his Honour was then required to determine was whether the conduct of the partner could be said to have been dishonest or fraudulent on the basis that the conduct of the partner was imprudent or reckless. 931 The Plaintiff submitted to the Court that Mr Harrison's conduct in breach of both fiduciary duties and duties of care owed to Mrs Schipp in his capacity as her or a solicitor was not actuated by fraud or dishonesty, but was rather the product of Mr Harrison's preoccupation with his own financial difficulties. This submission might have raised questions as to whether or not recklessness was sufficient to ground a finding that Mr Harrison's conduct was dishonest in the relevant sense. In the light of the findings of fact which I have made, the issue did not, however, arise. As stated above in consideration of the fiduciary duties and duties of care owed to Mrs Schipp by Mr Harrison and breached by him, I do not accept that Mr Harrison's conduct in relation to Mrs Schipp was as result of his being pre-occupied. Rather I have found that, together with Mr Cameron, Mr Harrison deliberately managed and manipulated Mrs Schipp into a position advantageous to him. 932 The fiduciary duties and duties of care which a solicitor owes to a client constitute, it seems to me, duties the failure to adhere to which may well, depending on the precise circumstances, allow the relevant conduct to be characterised as dishonest. 933 I have held that Mr Harrison acted as Mrs Schipp's solicitor, or a solicitor, in respect of a number of matters earlier spelled out. I have further held that by virtue of Mr Harrison's position as a solicitor, he owed to Mrs Schipp fiduciary obligations and duties of care which he breached, and breached flagrantly, in the furtherance of his own interests. In the light of these findings and notwithstanding the fact that Mr Harrison also breached fiduciary obligations springing from relationships independent of fiduciary duties springing from his position as a solicitor, it seems to me that Mr Harrison's relevant conduct was dishonest and that the exclusion in clause 5(e)(v) of the policy was activated.

[432]

Test for Application of an Exclusion Clause 934 Clause 5(e)(v) excludes the obligation of the Seventh Defendant to indemnify Mr Harrison if the liability in respect of which he is making a claim was 'brought about by' his dishonest acts or omissions. 935 The Plaintiff submitted that even if Mr Harrison's conduct was dishonest, there was no causal connection between any actions or omissions of his which may be construed as dishonest and the bases upon which, so the Plaintiff alleges, Mr Harrison is liable to Mrs Schipp. 936 The principles applicable in determining whether or not purported dishonest conduct attracted the operation of an exclusion clause were considered by Mahoney JA in Comino v Manettas at 77,870: "The phrase looks to what actually brought about the liability, in negligence, tort, or otherwise to [the client]. The ingredients of that liability involved only the failure of [the solicitor] to clarify his instructions. Once that failure occurred and the transaction was carried to completion on the basis of his mistake as to his instructions, the liability to [the client] arose. The defaults relied on by Law Cover, viz., the attestation default and the certification default, played a part in the arising of that liability. In that sense, the liability was not 'brought about by' those defaults." 937 In that case, a solicitor negligently failed to clarify his instructions. He did so mistakenly and there was no suggestion that his failure involved dishonesty of any kind. The solicitor was required to pay damages for negligence. The solicitor had also dishonestly attested and certified certain documentation. Had he not done this, the transaction giving rise to the damage might not have proceeded. Mahoney JA held that the liability in these circumstances was not "brought about by" the dishonest acts of the solicitor and thus the exclusion clause did not apply. 938 The passage from Comino was considered with approval by Phillips J in H & G Nominees v Fava [1997] 2 VR 368 at 421. His Honour stated that: "I mention [ Comino ] because it lends support to the need to find, not just that the impugned conduct was 'dishonest' but also the relevant causal link between that dishonesty and the liability in respect of which indemnity is being sought - and, for the reasons I have already given, that causal link is missing here even if the arguments of the third party be otherwise accepted."

[433]

[See also Chittick v Maxwell (1993) 118 ALR 728 at 748; Underwriters at Lloyds v Ellis per Powell JA at 34] 939 The question as to the causal link between dishonest conduct and the liability of an insured required to attract the operation of an exclusion clause in terms of Clause 5(e)(v) was addressed recently by Hunter J in McCann v Switzerland General Insurance (supra). His Honour stated (at 260): "... in the operation of the dishonesty exclusion it is necessary for the excess insurers' to prove that the proximate cause of [a firm of solicitor's] liability to [a trust] was [a particular partner's] dishonest conduct. this by reason of the necessity to satisfy the requirement that the liability be 'brought about' by [the partner's] dishonest conduct. It may have been otherwise had the insurers chosen to use a wider expression, such as, 'arising out of' or 'arising from' such dishonest conduct or 'directly or indirectly brought about by' such conduct. As it stands, the expression 'brought about' is synonymous with 'caused' and, insurance law, that calls for the identification of the proximate cause." 940 His Honour further stated (at 259) that: "'the proximate cause of a loss is the cause which is most proximate in efficiency, the "real", "effective" or "dominant" cause (which) supposes a causal connection closer than a mere unbroken chain of causation between cause and effect (that) although the proximate cause need not be the sole cause of the loss, its causal contribution must be predominant among the operative causes - its effect must be much greater than merely "not negligible". It must be what might colloquially be called the "most causative" of the operative causes'." [Citations omitted] 941 In requiring that the dishonest conduct of the insured be the proximate cause of the relevant liability in order for the dishonesty exclusion to be invoked, I do not understand Hunter J to have adopted an approach to causation which is materially different from that established in Comino and the subsequent cases. 942 What is required then, in order that the exclusion in clause 5(e)(v) be enlivened, is a finding not only that certain conduct of Mr Harrison was dishonest, but also that it was that dishonest conduct, and not some other acts or omissions of Mr Harrison or Mr Cameron, which brought about the liability to Mrs Schipp. 943 It is not, however, necessary to attract the exclusion clause that the cause of action be framed in fraud or dishonesty. The question is whether the liability of the insured which is claimed was based upon an act or omission which can be characterised as dishonest. That this is the case is evident from the approach of Powell JA at Underwriters of Lloyds v Ellis in which his Honour distinguished between the claims made in those proceedings against the insured which were based upon the issuing of a false certificate and in relation to which the insured was not entitled to any indemnity of his costs incurred in defending such claims (if they were in fact made out), and those claims which were not based upon the issuing of a false certificate, and in relation to which the insured was entitled to an indemnity in respect of his costs in defending that claim. 944 The Plaintiff had initially sought findings that certain of Mr Harrison's conduct should be characterised as dishonest or fraudulent. The Second Further Amended Statement of Claim pleaded that the First to Fourth Defendants: 1 "... failed to disclose to the plaintiff that they had no intention of developing or alternatively that they had strong suspicions they were unlikely ever to develop the Mary Street property past the point of obtaining development application and building application plans" [Paragraph 12 (ii)]; 2 "... failed to disclose to the plaintiff that one of their purposes in inducing the plaintiff to auction the Mary Street property was ultimately to cause her to invest the proceeds of sale thereof in a property then owned by or on behalf of the third defendant at the corner of Market and Kembla Streets, Wollongong ("the Kembla Street property") [Paragraph 35(ii)]; 3 "... failed to disclose to the plaintiff that part of the purpose of the first, second, third and fourth defendants in making the representations described in paragraph 38 hereof was a scheme to cause the plaintiff to invest the proceeds of sale of the Mary Street property into the Kembla Street property" [Paragraph 44(iii)]. 945 The paragraphs in which those findings were sought were disclaimed after the commencement of the hearing [see Judgment paragraph 112]. As I have said, the Plaintiff's decision not to pursue a finding of actual dishonesty as a ground of relief does not remove the issue still raised by the Seventh Defendant which goes to whether Mr Harrison's liability to Mrs Schipp was based upon his dishonest acts or omissions attracting the operation of the exclusion clause. In my view, that liability was based upon Mr Harrison's dishonest acts and omissions such that the exclusion clause is enlivened, and I so find.

[435]

(i) a claim in respect of the Mary Street venture; (ii) a claim in respect of the purchase of the Kembla Street property; and (iii) a claim for repayment of the loan made by the Plaintiff to Mr Harrison. 951 The Insurers' submission requires the Court to determine the meaning of the word 'claim' in the insurance policy and to determine whether Mr Harrison's loss resulting from my finding that Mr Harrison is liable to Mrs Schipp arises from one or more claims. 952 In Corporate Pension Planning Pty Ltd v NRG Victory Australia Ltd (unreported, Supreme Court of NSW, 8 April 1998), Young J considered the meaning of the word "claims" in the context of a contract between underwriters of life insurance policies and a company which organised groups to take out bulk term life insurance in respect of which policy that company then acted as trustee. His Honour examined a number of authorities as to the meaning of the word "claims". He stated (at 13-14) that: "Counsel referred me to a series of cases and dictionaries in which the word 'claim' was used in insurance law. In Transport Industries Insurance Co Ltd v NSW Medical Defence Union Ltd (1986) 4 ANZ Insurance Cases 60-736, the Court of Appeal examined the word 'claims', said it was ambiguous and that it was of limited utility to examine the meaning ascribed to the word 'claims' in other insurance policies for other and different purposes (per Kirby P at 74,411). In ANZ Bank Ltd v Colonial & Eagle Wharves Ltd [1960] 2 Lloyds Report 241 at 245 [sic], McNair J said that the word 'claims' in the policy there under consideration could mean either the right to make a claim or the assertion of that right. This was said by the NSW Court of Appeal to be an instructive approach. The prime dictionary meaning of the word 'claim' is to demand or assert a right to something. Usually, the mere occurrence of something which gave rise to an action is not in itself a claim, the claim is the demand which again is not the same thing as a cause of action: West Wake Price & Co v Ching [1957] 1 WLR 45, 55. A claim usually means an assertion of a cause of action: Schordich-Churchwood v Cordle [1959] 1 WLR 351, 353. However, often the word 'claim' will mean contingent claims so that when one is dealing with executors who are to distribute without notice of claims, the executor has to allow liabilities of which he or she knows where a person has the right to make a claim as well as those actually sent in: Markwell's case (1872) 21 WR 135. Another illustration is given by Keates v Lewis Merthyr Consolidated Colleries Ltd [1911] AC 641, where a court had power to adjust claims between employer and employee and was held able to include in the adjustment claims which the employee could have made but had not in fact put forward. No analysis of previous cases is likely to provide any conclusive answer as to what the word 'claims' means in the instant document." 953 In West Wake Price & Co v Ching [1957] 1 WLR 45 at 55, Devlin J said the following as to the meaning of the word 'claim' in the context of an professional indemnity policy taken out by a firm of accountants: "I think the primary meaning of the word 'claim' - whether used in a popular sense or in a strictly legal sense - is such as to attach it to the object that is claimed; and is not the same thing as the cause of action by which the claim may be supported or as the grounds on which it may be based." 954 His Honour further stated, at 57: "If the word ['claim'] is to be used with any precision, it must be defined in relation to the object claimed. The grounds of the claim or the causes of action which support it can give it colour and character, but cannot give it its entity. ¼ if you identify a claim as something to be paid (and that is how it is referred to in the Q.C. clause), it must be something capable of separate payment: you cannot pay a cause of action. It follows, I think, that if there is only one object claimed by one person, then there is only one claim, however many may be the grounds or the causes of action which can be raised in support of it: likewise, where several claims are each dependent on the same cause of action (as, for example, where one cause of action leads to alternative claims for an injunction, damages or an account or other different forms of relief), there remains only one cause of action, however many claims give rise to it." 955 In Haydon v Lo & Lo [1997] 1 WLR 198, Lord Lloyd of Berwick, delivering judgment for their Lordships, said the following in relation to the meaning of the word "claim" in a professional indemnity policy held by a firm of solicitors (at 204-206): "Their Lordships agree with Mr Kentridge that it is the underlying facts which are determinative, and that the formulation of the claim by the third party cannot be decisive of the insurers liability, whether for the purpose of calculating the deductible, or for any other purpose.... But it does not follow that there was a separate claim whenever a separate cause of action arose, nor that there were, as a consequence 43 claims. Although the nature of the demand cannot be decisive, it at least provides a useful starting point in a claims made policy, such as this was. There is nothing here to displace that first impression ... that there was only one claim made by the Tang estate against Lo & Lo - namely a claim for restitution of loss caused by a dishonest employee of the firm." 956 957 The Insurers submitted that the decision of the Privy Council in Haydon v Lo & Lo could be distinguished from the present proceedings. In that case, the Privy Council held that 43 acts of theft by an employee from one client could be said to give rise to a single claim for restitution against the employer. I would not accept this submission. In Haydon v Lo & Lo, the four different methods which the employee used to steal from the client did not prevent the Privy Council from finding as it did. It does not seem to me that the facts in the present proceedings are sufficiently different from those in Haydon. 958 The meaning of the word "claim" is ultimately a question of the construction of the policy. Previous decisions as to the meaning of the word claims in the context of different policies provide only limited assistance, as Young J acknowledged in Corporate Pensions Planning v NRG Victory Australia. However, the decision in Haydon v Lo & Lo is particularly persuasive because in that case the Privy Council was required to construe a solicitor's professional indemnity policy which contained an 'insuring clause' in terms almost identical to that in the policy under consideration in these proceedings. 959 I now turn to consider the meaning of the word "claim" in the policy and in particular in clause 5(b) of the Certificate of Insurance. 960 The word "claim" in the Certificate is used in two senses. In some cases, it is used to mean a claim by the insured, Mr Harrison, against his insurers. It is used in this sense in clause 4(f). For the most part, however, the word 'claim' is used in the sense of a claim against the insured by a third party. It is clear that this is the sense in which the word is used in clause 2 which refers to "any claim or claims first made against the Assured". The Schedule to the policy specifies that the sum insured is $1,100,000 for each claim. In my view, it may be inferred that the word "claim" is used there in the same context as in clause 2. The word "claim" is similarly used in clause 4(a)(i) which prohibits the insured from admitting "liability for, or settl[ing], any claim falling within the Insuring Clauses hereof" and in Clause 4(b) which requires notice to be given in writing "of any claim the subject of the Insuring Clauses hereof made during the Period of Insurance against the Assured". 961 The question then is which of the two meanings the word "claim" has in Clause 5(b). It seems to me that it refers to a claim against the insured, rather than a claim by the insured against his insurers. This interpretation is supported by the context in which the word appears in Clause 5(b). Each reference to the amount of the deductible in particular circumstances enumerated in clause 5(b) is stated to include "claimants costs": see definition of "deductible" in Clause 1(h). "Claimants costs" are not defined in the Certificate of Insurance but it is clear that they are the costs incurred by a third party who makes a claim against the insured. They are not the costs incurred by the insured in defending or settling that claim because such costs are covered by the term "Related Costs" and defined in Clause 1(f). 962 The Insurers submitted that the structure of the Statement of Claim indicated that the proceedings brought by the Plaintiff constituted relevantly three separate claims against Mr Harrison. The Insurers submitted that the Statement of Claim was divided into discrete categories and dealt separately with entry into the joint venture agreement in respect of Mary Street, the sale of the Mary Street property and the retention of the proceeds of sale, the repayment of the loan by Mrs Schipp to Mr Harrison and the purchase of the Kembla Street property. For the purposes of determining the number of claims, Mr Harrison's liability in respect of the discrete transactions involving acquisition and sale should be regarded as one claim. If it were otherwise, the assessment of the number of claims would regard the Plaintiff as recovering twice in respect of the same loss. The Insurers further submitted that the Amended Statement of Claim asserted that discrete issues were raised and discrete relief sought in respect of the various acts or omissions of Mr Harrison which the Plaintiff alleged were wrongful. The Insurers also sought to rely upon descriptions of the Plaintiff's case by her solicitors and counsel to support the submission that Mrs Harrison's loss arises out of three separate claims made against him by the Plaintiff. [Seventh Defendants' Submissions paragraphs 2.5.14-2.5.19] 963 It is clear from the authorities that the way in which a claim is framed by one or other of the parties will not determine the extent of the insurer's liability. Equally, the fact that the Plaintiff's case is based upon a upon number of causes of action will not be conclusive of the fact that more than one claim has been made under the policy. The distinction between a claim for insurance purposes and a cause of action was drawn by Stocker LJ in Thorman v New Hampshire Insurance Co (UK) Ltd [1988] 1 Lloyd's Rep 7 at 16. His Lordship said: "Plainly a claim can only be enforced by legal proceedings where the appropriate cause of action is pleaded and proved, but the cause of action is not, itself, a claim but the necessary vehicle for its legal enforcement …" 964 The number of claims made under the policy is dependent upon the underlying facts which give rise to the claim or claims. In Haydon v Lo & Lo, Lord Lloyd of Berwick stated (at 204); " … it is the underlying facts which are determinative of how many claims have been made under a policy, and that the formulation of the claim by the third party cannot be decisive of an insurer's liability, whether for the purpose of calculating the deductible, or for any other purpose." [ cf Thorman v New Hampshire Insurance Co (UK) Ltd [1988] 1 Lloyd's Rep 7 at 16; Australia & New Zealand Bank Ltd v Colonial & Eagle Wharves Ltd [1960] 2 Lloyd's Rep 241 at 255 per McNair J.] 965 I would, therefore, reject the Insurers submission that the way in which the case was framed and pleaded in the Statement of Claim by the Plaintiff requires a holding that Mr Harrison's loss arose from three separate claims. 966 It was also submitted by the Plaintiff that an alternative approach to the assessment of the number of claims within the policy was by reference to the ability to isolate damages in respect of each claim. This was the approach to the issue said to have been adopted by Sir John Donaldson MR in Thorman (supra). In that case, on the Plaintiff's submission, the Master of the Rolls considered that, in circumstances where more than one claim exists, delineation of the number of claims made under the policy may be achieved by determining when each "new and unrelated assertion of damages" occurs: Thorman at 11. The Master of the Rolls sought to demonstrate such analysis by way of the following example (at 11-12): "An architect has separate contracts with separate building owners. The architect makes the same negligent mistake in relation to each. The claims have a factor in common, namely the same negligent mistake, and to this extent are related, but clearly they are separate claims. Bringing the claims a little closer together, let us suppose that the architect has a single contract in relation to two separate houses to be built on quite separate sites in different parts of the country. If one claim is in respect of a failure to specify windows of the requisite quality and the other is in respect of failure to supervise the laying of foundations, I think once again the claims would be separate. But it would be otherwise if the complaint was the same in relation to both houses. Then take the present example of a single contract for professional services in relation to a number of houses in a single development. A single complaint that they suffered from a wide range of unrelated defects and a demand for compensation would, I think, be regarded as a single claim. But if the defects manifested themselves seriatim and each gave rise to a separate complaint, what then ? They might be regarded as separate claims. Alternatively later complaints could be regarded as enlargements of the original complaint that the architect had been professionally negligent in his execution of his contract. It would, I think, very much depend on the facts ." [Emphasis added] 967 It seems to me that the approach proposed by Sir John Donaldson MR is not, in substance, different from the approach followed by Stocker LJ in that case and by the Privy Council in Haydon which looked to the underlying facts of the case as determinative of the number of claims made under a particular policy. 968 The question, then, is whether the underlying facts of the case can be said to give rise to three claims against Mr Harrison, as the Insurers submitted, or just one, as the Plaintiff submitted. The Plaintiff submitted that Mr Harrison embarked upon "a course of conduct" in his capacity as a solicitor which caused Mrs Schipp to become involved in the Mary Street joint venture and continued through the sale of Mary Street, the loan made to Mr Harrison and the purchase of Kembla Street. [Plaintiff's Submission Volume 2 paragraph 2.4(c)] As a result of this conduct, Mrs Schipp was persistently deprived of the money she initially invested in the Mary Street property. Mr Harrison's conduct has resulted in Mrs Schipp making a single demand for relief which although a number of different causes of action are alleged should be characterised as one claim under the policy. I accept the Plaintiff's submission. 969 In my view, had the Insurers been liable to indemnify Mr Harrison, they would only have been liable to provide cover for loss to which the policy would respond incurred by Mr Harrison in respect of the claim made by Mrs Schipp insofar as that loss exceeded $3000 and was less than $1,100,000.

Parties

Applicant/Plaintiff:

Schipp

Respondent/Defendant:

Cameron, Harrison & ors

Legislation Cited (6)

Fair Trading Act 1987(NSW)

Law Reform (Miscellaneous Provisions) Act 1946(NSW)

Insurance Contracts Act 1984(Cth)

Partnership Act 1892(NSW)

Conveyancing Act 1919(NSW)

Trade Practices Act 1974(Cth)

Cases Cited (58)

New South Wales Supreme Court CITATION : Schipp v Cameron, Harrison & ors [1999] NSWSC 997 CURRENT JURISDICTION : Supreme Court, Equity Division FILE NUMBER(S) : 6425/91 HEARING DATE(S) : 5&6.2.98, 6&7.4.98, 22-26.9.98, 29 & 30.9.98, 1,3,7-10,13,17,20-24 & 30.10.98, 3-7, 20&21.11.98, 1& 12.12.98 JUDGMENT DATE : 9 July 1998

M.J. Slattery QC and JM Hennessey (Plaintiff) COUNSEL : Donald Cameron (First Defendant self litigant) S.J. Archer and M.G. Stubbs (Third & Fourth Defendants) N.C. Hutley SC and PJ Brereton (Seventh Defendants) Barker Gosling (Plaintiff) SOLICITORS : Hegarty & Elmgreen (Third & Fourth Defendants) Minter Ellison (Seventh Defendants) CATCHWORDS : Catchwords:; EQUITY - Joint Venture Agreement - Loan agreement - Ability to set aside - Unconscionable conduct - Position of special disadvantage or vulnerability arising from lack of experience and reliance - Exploitation of disadvantage - Economic duress - Whether illegitimate pressure exerted by defendants - Undue influence - Presumption of - Whether will of the plaintiff independent and voluntary.; EQUITY - Fiduciary duty - Breach - Joint venture agreement for property development - Duties of intending co-venturers - Whether fiduciary duties owed by joint venturers when agreement reached - Content of fiduciary obligations of participants in a joint venture - Circumstances in which a joint venture will bear sufficient similarity to a partnership to attract fiduciary obligations - Solicitor and client - Whether acting in capacity as a solicitor or entrepreneurial activity - Failure of solicitor to disclose interest - Propriety of acting in transaction for more than one party - Relationships of trust and confidence - Whether fiduciary who acts in breach of duty under a continuing liability to make restitution - Remedies of plaintiff - Equitable compensation for breach of fiduciary duty.; NEGLIGENCE - Duty of care - Breach - Solicitors - Whether retained to act for joint venturers in respect of property transactions - Whether retained to give advice in respect of tax liability and a loan agreement - Whether duty of care owed to third party - Whether any assumption of responsibility arising from knowledge of total dependence - Causation.; TRADE PRACTICES - Misleading and deceptive conduct - Trade Practices Act 1974 (Cth) section 52; Fair Trading Act 1987 (NSW) section 42.; INSURANCE - Professional indemnity insurance - Claims made policy - Proceeding against insurer direct - Whether statutory charge attaches to insurance moneys - Construction of statute - Remedial provision - Beneficial construction of statute - Principles applicable - Law Reform (Miscellaneous Provisions) Act 1946 (NSW), section 6; CONTRACT - Construction - Oral agreement - Agreement later reduced to written document containing different provisions - Implied Terms - Collateral contract - Failure of consideration.; INSURANCE - Professional indemnity insurance - Scope of indemnity - Whether insurer entitled to disclaim liability under policy - Whether loss under the policy includes liability to provide restitution or an account of profits - Whether conduct in connection with the business of a solicitor's practice - Exclusion for loss brought about by dishonest conduct - Meaning of "dishonest" under the policy - Whether breach of solicitor's fiduciary duties and duties of care owed to a client amounts to dishonest conduct - Requirement of causal link between dishonest conduct and liability incurred in order to invoke exclusion clause - Whether one or more claims made under policy - Meaning of "claim" - Value of deductible under policy. Fair Trading Act 1987 (NSW) section 42 Insurance Contracts Act 1984 (Cth) section 11 ACTS CITED : Law Reform (Miscellaneous Provisions) Act 1946 (NSW) section 6 Law Reform Act 1936 (NZ) section 9 Partnership Act 1892 (NSW) section 1 Trade Practices Act 1974 (Cth) section 52 Atanovic v Volker (1986) 7 NSWLR 151 Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 Auag Resources Ltd v Waihi Mines Ltd [1994] 3 NZLR 571 Australia & New Zealand Bank Ltd v Colonial & Eagle Wharves Ltd [1960] 2 Lloyd's Rep 241 Bailey v NSW Medical Defence Union Ltd (1995) 184 CLR 399 Baltic Shipping Company v Dillon (1992) 176 CLR 344 Bartlett v Barclays Trust Co (No 2) [1980] 1 Ch 539 Bell v Lever Brothers [1932] AC 161 Birtchell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384 Blomley v Ryan (1956) 99 CLR 362 Brickenden v London Loan & Savings Co [1934] DLR 465 Brusewitz v Brown (1887) 36 CLD Bryan v Maloney (1995) 182 CLR 609 Bull v Attorney General (NSW) (1913) 17 CLR 370 Canny Gabriel Castle Jackson Advertising Co Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Capita Financial Group Ltd v Triden Properties (unreported, Supreme Court of NSW, 6 September 1993, Cole J) Carnie v Richmond (unreported, Supreme Court of NSW, 9 September 1997, Dowd J) Catt v Marac Australia Ltd (1987) 9 NSWLR 639 Chan v Zacharia (1984) 154 CLR 184 Chittick v Maxwell (1993) 118 ALR 728Cobar Corporation Ltd v Attorney General (NSW) (1909) 9 CLR 378 Cocks v Hickman (1860) 11 HL Cas 267 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Comino v Manettas (1993) 7 ANZ Insurance Cases 61-162 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Commonwealth v Verwayen (1990) 170 CLR 394 Corporate Pension Planning Pty Ltd v NRG Victory Australia Ltd (unreported, Supreme Court of NSW, 8 April 1998) Crescendo Management Pty ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 Crowe v Wheeler & Reynolds [1988] 1 Qd R 40 Drayton v Martin (1996) 67 FCR 1 East End Real Estate Pty Ltd t/a City Living v CE Health Casualty & General Insurance Ltd (1993) 7 ANZ Insurance Cases 61-151 English v Dedham Vale Properties Ltd [1978] 1 WLR 93 Estate Realties Ltd v Wignall [1992] 2 NZLR 615 FAI General Insurance Co Ltd v McSweeney (unreported, Federal Court of Australia, 12 March 1997, Lindgren J) FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1996) 41 NSWLR 559 FAI (NZ) General Insurance Co Ltd v Blundell and Brown Ltd [1994] 1 NZLR 11 Gala v Preston (1991) 172 CLR 243 Governor etc of the Poor Kingston Upon Hull v Petch (1854) 10 Exch 610 Government Stocks and Securities Co Ltd v Manila Rly Co Ltd [1897] AC 81 HG & R Nominees Pty Ltd v Fava [1997] 2 VR 368 Hawkins v Clayton (1988) 164 CLR 539 Haydon v Lo & Lo [1997] 1 WLR 198 Helmore v Smith (1886) 35 Ch D 436 Hill v Van Erp (1997) 188 CLR 159 Holroyd v Marshall (1862) 10 HLC 191; 11 ER 999 Hospital Products Pty Ltd v United States Surgical Corporation (1984) 156 CLR 41 Illingworth v Illingworth [1904] AC 355 Jaensch v Coffey (1984) 155 CLR 549 Jones v Mortgage Nominees (unreported, Federal Court of Australia, 10 November 1995, Davies J) Keith Murphy Pty Ltd v Custom Credit Corporation Ltd (1992) 6 WAR 332 Khoury v Government Insurance Office of New south Wales (1984) 58 ALJR 502 CASES CITED : Leary v Federal Commissioner of Taxation (1980) 32 ALR 221 Lewis v Hillman (1852) 10 ER 239 Lord Goff-White v Jones [1995] 2 AC 207 Louth v Diprose (1992) 175 CLR 621 MacKender v Feldia [1967] 2 QB 591 McCann v Switzerland Insurance Australia Ltd (unreported, Supreme Court of NSW, 26 June 1998, Hunter J) McMillan v Joseph (1987) 4 ANZ Insurance Cases 60-822 Maguire v Makaronis (1997) 188 CLR 449 Manettas v Underwriters at Lloyds (1993) 7 ANZ Insurance Cases 61-180 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Mar-con Corporation Pty Ltd v Campbell Capital Ltd (1989) 6 IPR 153 Markwell Bros Pty Ltd v CPN Diesels Queensland Pty Ltd [1983] 2 Qd R 508 Masters v Cameron (1954) 91 CLR 353 Metcalfe v Archbishop of York (1836) 1 My & Cr 547; 40 ER 485 Mount Isa Mines v Seltrust Corporation Pty Ltd (unreported, Supreme Court of Western Australia, 27 September 1985, Rowland J) Nader v Urban Transit Authority of New South Wales (1985) 2 NSWLR 501 National Mutual Fire Insurance Company Ltd v Commonwealth (1981) 1 NSWLR 400 National Mutual Property Services v Citibank Savings Ltd (1997) 9 ANZ Insurance Cases 61-335 Nichols v Jessup [1986] 1 NZLR 266 Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 Oswald v Bailey (1987) 11 NSWLR 715 Pacific Coal Pty Ltd v Indemitsu (Qld) Pty Ltd (unreported, Supreme Court of Queensland, 21 February 1992, Ryan J) Re Dawson; Union Fidelty Trustee Co Ltd v Perpetual Trustee Co Ltd (1966) 84 WN(Pt1)(NSW) 399; [1966] 2 NSWR 211 Reid Crowther & Partners Ltd v Simcoe & Erie General Ins Co (1993) 99 DLR (4th) 741 Rossiter v Miller (1878) 3 App Cas 1124 Rowe v Oades (1906) 3 CLR 73 Schipp v Cameron (unreported, Supreme Court of NSW, 4 May 1995) Young J) Sheinkopf v Stone 927 F 2d 1259 (1st Cir 1991) Smith v Anderson (1880) 15 Ch D 247 Solicitor's Liability Committee v Gray (1997) 147 ALR 154 Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 Sutherland Shire Council v Heyman (1985) 157 CLR 424 Tailby v Official Receiver (1888) 13 App Cas 523 Talbot v General Television Corporation Pty Ltd [1980] VR 224 Tagret Holdings Ltd v Redferns [1996] AC 421 Taylors Fahsions Ltd v Liverpool Trustees Co [1982] 1 QB 133 Tenture Pty Ltd v Costala Pty Ltd (unreported, Supreme Court of Victoria, 15 July 1997, McDonald J) Thorman v New Hampshire Insurance Co (UK) Ltd [1988] 1 Lloyd's Rep 7 Transport Industries Insurance Co Ltd & Ors v NSW Medical Defence Union Ltd (1986) 4 ANZ Insurance Cases 60-736 Trollope & Colls Ltd v Haydon [1977]1 loyd's Rep 244 Tufton v Sperni [1952] 2 TLR 516 Underwrites at Lloyds v Ellis (unreported, Court of Appeal, 25 February 1998, Meagher, Handley and Powell JJA) United Dominion Corporation Ltd v Brian (1985) 157 CLR 1 United States Surgical Corporation v Hospital Products Pty Ltd [1982] 2 NSWLR 766 Voli v Inglewood Shire Council (1963) 110 CLR 74 Warman International Ltd v Dwyer (1987) 182 CLR 544 West Wake Price & Co v Ching [1957] 1 WLR 45 White v Jones [1995] 2 AC 207 Whywait Pty Ltd v Davidson [1997] 1 Qd R 225 Wik Peoples v Queensland (1996) 187 CLR 1 Wilson v Jones (1867) LR 2 Ex 137 DECISION : Further submissions to be brought in.

(1986) 7 NSWLR 151

(1987) 9 NSWLR 310

(1995) 184 CLR 399

(1992) 176 CLR 344

(1929) 42 CLR 384

(1956) 99 CLR 362

(1995) 182 CLR 609

(1913) 17 CLR 370

(1974) 131 CLR 321

(1987) 9 NSWLR 639

(1984) 154 CLR 184

(1993) 118 ALR 728

(1909) 9 CLR 378

(1982) 149 CLR 337

(1983) 151 CLR 447

(1990) 170 CLR 394

(1988) 19 NSWLR 40

(1996) 67 FCR 1

(1996) 41 NSWLR 559

(1991) 172 CLR 243

(1988) 164 CLR 539

(1997) 188 CLR 159

(1984) 156 CLR 41

(1984) 155 CLR 549

(1992) 6 WAR 332

(1984) 58 ALJR 502

(1980) 32 ALR 221

(1992) 175 CLR 621

(1997) 188 CLR 449

(1991) 171 CLR 506

(1989) 6 IPR 153

(1954) 91 CLR 353

(1985) 2 NSWLR 501

(1981) 1 NSWLR 400

(1988) 14 NSWLR 1

(1987) 11 NSWLR 715

(1906) 3 CLR 73

(1997) 147 ALR 154

(1986) 160 CLR 16

(1985) 157 CLR 424

(1985) 157 CLR 1

(1963) 110 CLR 74

(1987) 182 CLR 544

(1996) 187 CLR 1

(1982) 151 CLR 422

(1996) 186 CLR 71

(1984) 154 CLR 178

(1995) 182 CLR 544

(1995) 185 CLR 399

(1955) 94 CLR 216

(1951) 82 CLR 477

(1990) 23 FCR 144

(1987) 16 FCR 465

(1985) 8 FCR 153

(1986) 11 FCR 360

(1986) 161 CLR 500

Cited By (6)

Bailey v New South Wales Medical Defence Union Ltd

Brooker v Friend & Brooker & Anor

Khan as Trustee for The Khan Family Trust v Hadid; Hadid v Khan as Trustee for The Khan Family Trust

Perpetual Trustees Victoria Ltd v Malouf

The Owners - Strata Plan 50530 v Walter Construction & Ors