Turner v Windever & Anor

Court of Appeal (NSW)|2004-10-20|Before: Giles JA, Santow J, Bryson JA, Austin J, Santow JA

CITATION: Turner v Windever & Anor [2005] NSWCA 73

JUDGMENT OF: Giles JA at 1; Santow J at 90; Bryson JA at 103

CATCHWORDS: Relief against unconscionable dealings - elderly widow mortgages home to one son-in-law to secure a loan - arrangement for simple interest and no payment until sale or death - mortgage erroneously provides for compound interest and payment on demand - widow finds out and becomes distressed and concerned about "foreclosure" - son-in-law does not allay her concerns - adverse stance in correspondence - widow wished to be rid of the mortgage - transferred home to another daughter and son-in-law who paid out the mortgage - transaction improvident - widow died before trial - whether judge erred in not accepting her affidavit evidence where disputed unless corroborated - whether widow under special disadvantage because unaware that mortgage could be rectified - whether transferees took advantage of opportunity presented by the disadvantage - no error as to affidavit - on facts, not shown that under special disadvantage or that advantage taken. D

Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419; Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51; Blomley v Ryan (1956) 99 CLR 362; Bridgewater v Leahy (1998) 194 CLR 457; CASES CITED: Clyne v Law Society of New South Wales (CA, 4 September 1987, unreported); Commercial Bank of Australia v Amadio (1983) 151 CLR 337; Fox v Percy (2003) 214 CLR 118; Louth v Diprose (1992) 175 CLR 61; Wilton v Farnworth (1948) 76 CLR 646.

Suzanne Mary Turner - Appellant PARTIES: Carol Ann Windever - First Respondent Daniel William Windever - Second Respondent

D Grieve QC & S Reuben - Appellant COUNSEL: M B Lee & A Crossland - Respondents

Astley Thompson Cox - Appellant SOLICITORS: Marsdens Law Group - Respondents

LOWER COURT JURISDICTION: Supreme Court - Equity Division

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41244/03 ED 4537/01

GILES JA SANTOW JA BRYSON JA

Tuesday 22 March 2005 TURNER v WINDEVER & ANOR Judgment 1 GILES JA: The proceedings were commenced by summons. An order was not made for formal or informal pleadings to define the issues, as at least with the benefit of hindsight would have been desirable. The trial before Austin J was conducted as a claim to relief in the exercise of equity's jurisdiction to relieve against unconscionable dealings. His Honour declined to grant relief. 2 Both parties accepted his Honour's statement of the elements of a case of unconscionable dealing, formulated with reference to Wilton v Farnworth (1948) 76 CLR 646, Blomley v Ryan (1956) 99 CLR 362, Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 337, Louth v Diprose (1992) 175 CLR 61 and Bridgewater v Leahy (1998) 194 CLR 457. The statement was - "105 … a case of unconscionable dealing involves the following: (a) the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the stronger party;

(b) the special disadvantage must seriously affect the weaker party's capacity to judge or protect his or her own interests;

(c) the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person);

(d) that party must take advantage of the opportunity presented by the disadvantage; and

(e) the taking of advantage must have been unconscientious. 106 I would only add that, as cases such as Blomley v Ryan show, once ingredients (a), (b) and (c) are established, and the improvidence of the transaction is shown, the plaintiff's task is made easier by an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage."

The judge's decision 3 His Honour referred to cases in the area of discourse being "fact-specific". It will be necessary to go to the facts in a little detail, including some of their many disputed areas. An initial outline of the circumstances in which the relief was claimed, and of the judge's reasons for declining to grant relief, is appropriate. 4 Mrs Betty Lett, a widow then in her seventies, owned and lived in a property at Kianga. The property was mortgaged to one of her sons-in-law, Mr Jeffery Blackburn, the husband of a daughter Mrs Christine Blackburn. The arrangement between Mrs Lett and Mr Blackburn was that simple interest of 10 per cent would run on the mortgage advance, but that principal and interest would not be payable unless Mrs Lett sold the property and would be paid out of her estate upon her death. 5 The mortgage Mrs Lett signed, however, provided for interest at 10 per cent compounding daily and for repayment of the principal on demand. Mrs Lett became aware that the mortgage provided for compound interest. She became distressed about the compounding of interest, and that Mr Blackburn would "foreclose" under the mortgage. 6 Mrs Lett then transferred the property to a daughter and another son-in-law, Mrs Carol Windever and Mr Daniel Windever. Mr Trevor Wain, solicitor, acted for both parties on the transfer. Under her arrangement with the Windevers, they paid out the mortgage and entered into an agreement with Mrs Lett intended to permit her to live in the property for as long as she wished. 7 Mrs Lett, and upon her death her executrix, Mrs Suzanne Turner, claimed to have the transfer of the property set aside in the exercise of the equitable jurisdiction. His Honour held that it had not been established that in the transfer of the property Mrs Lett was under a special disadvantage affecting her ability to make a judgment as to her best interests. 8 His Honour accepted that the transfer of the property was an improvident transaction. He nonetheless said, and it was not in dispute in the appeal, that improvidence of itself did not make an unconscionable dealing, and emphasised that it was necessary to establish a special disadvantage, being a "disability, condition or circumstance … which seriously affects the ability of the innocent party to make a judgment as to his own best interests" (Commercial Bank of Australia Ltd v Amadio at 461). 9 His Honour did not accept the Windevers' submission that Mrs Lett was robust, in context meaning physically robust, and found that at the time of the transfer she was frail and had physical problems which would eventually contribute to her death. But his Honour continued - "117 On the other hand there is clear evidence that she was a strongly independent person who had no difficulty understanding such matters as the application of compound interest and, later, a transaction by which she transferred her property to the defendants in exchange for release from her loan obligation and a right of residence for life. As Mason J emphasised in the Amadio case, in the passage quoted above, the issue is not whether there is a disadvantage or disability, rather whether that condition seriously affects the ability of the weaker party to make a judgment as to her own best interests. In my opinion the evidence overwhelmingly establishes that in November 1998 Mrs Lett's disabilities and disadvantages did not have that effect. 118 Even the leading cases in this area tend to be fact-specific. Nevertheless a useful comparison can be made between the facts of this case, essentially a case of a frail and capable woman striking a bargain with her daughter and son-in-law to secure for herself residence for life and freedom from the threat of compound interest and foreclosure, and the facts of such cases as, respectively, Wilton v Farnworth , Blomley v Ryan , Louth v Diprose and even Bridgewater v Leahy . There is not, here, an uneducated and dull-witted person giving away his share of his wife's estate without understanding its value, or an aged alcoholic negotiating a transaction at an undervalue while being plied with rum, or an infatuated middle-aged man whose feelings were manipulated for gain, or a very old and frail man whose intention to transfer his property at an undervalue was procured by his nephew and business partner, on whom he depended. That Mrs Lett did not have any such dependence on Mr and Mrs Windever is demonstrated by what subsequently happened when their relationship fell apart." 10 His Honour then referred to a number of other matters on which Mrs Turner relied. Some of them arose in the appeal in different guises, and I will return to them as necessary. The first was that Mrs Lett knew that under the mortgage arrangement only simple interest was to be charged and that Mrs Windever "misrepresented the situation to her mother, and raised a false concern that compound interest would be charged". For reasons he gave, the judge "disagree[d] with this contention on the facts". The second was that the Windevers concealed their intention to obtain a transfer of the property from Mrs Lett. The judge did not accept that they kept the information from other family members "where they had, or arguably had, a duty to disclose their intention". The third was that the Windevers misrepresented to Mrs Lett the effect of the residence arrangement accompanying the transfer of the property. The judge considered that the representations were consistent with the rights Mrs Lett probably obtained, and that "to the extent that those rights may have been based on equitable estoppel, their conduct contributed to the creation of the rights". 11 The judge continued - "125 While I disagree with the submissions of counsel for the plaintiff concerning misrepresentations with respect to compound interest and the residence arrangement, and the allegation of concealment, in my opinion the establishment of these contentions would not have given rise to a case of unconscionable dealing, in the absence of the ingredient of special disability. No case of fraudulent or innocent misrepresentation was pleaded. Even if, because of these matters, it could be said that Mrs Lett and Mr and Mrs Windever were in the position of unequal bargaining power, Australian law does not recognise inequality of bargaining power as a ground, as such, for intervention in contractual arrangements: Commercial Bank of Australia v Amadio , at 461 per Mason J. 126 In my opinion Mrs Lett did not have the benefit of independent advice, because Mr Wain was acting for Mr and Mrs Windever, who stood to benefit from the transaction, as well as for Mrs Lett. The advice he gave her, while helpful in some respects, did not seek to ensure that she was freed from the effects of such disabilities as she had. It would certainly not have removed the presumption of unconscientious advantage that would have arisen had the ingredients of the doctrine been established. But lack of independent advice is not itself a ground for equitable intervention, as the cases to which I have referred make clear. 127 My conclusion is that none of the matters to which the plaintiff has referred overcomes the fundamental deficiency in the plaintiff's case, namely that the first and essential ingredient for the application of the equitable doctrine, the existence on the part of Mrs Lett of a special disadvantage, has not been established, and consequently the other ingredients for the application of the doctrine cannot be made."

The case on appeal 12 Mrs Turner's argument on appeal was more narrowly focussed than at the trial, where the special disadvantage on which she relied appears to have been rather Protean. For her contention that his Honour was in error in failing to find that Mrs Lett was under a special disadvantage, she relied solely on the special disadvantage that Mrs Lett was unaware that the mortgage was not binding in its terms as to compound interest and repayment. She said that despite the terms of the mortgage Mrs Lett was entitled to live in the property until sale or her death without obligation to make payment of principal and interest (although that rather overlooked that compound interest would mean less money for Mrs Lett on sale or her beneficiaries). 13 If the special disadvantage were accepted, other matters would arise. In aid of her principal contention, Mrs Turner also contended that his Honour erred in the approach he took to the evidence by affidavit of Mrs Lett, who had died prior to the trial, in his findings as to the genesis of the transfer of the property, and in the view he took of the residence arrangement.

The facts in more detail. 14 The evidence was extensive and replete with inconsistencies and conflict. In what follows I take up the focus on the special disadvantage for which Mrs Turner now contends, and in that respect I sometimes supplement the judge's findings by other references to the evidence. I will come to Mrs Turner's subsidiary contentions as to the facts later in these reasons. 15 In 1996 Mrs Lett, then aged 71, owned and lived in a home unit at Narooma. In March 1977 she sold the home unit and bought the property 13 View Hill Road, Kianga for $145,000. She did not have enough money for the purchase, and was lent $48,000 by the Blackburns. Mr Blackburn became the mortgagee. 16 Mr Edmund Fredericks, solicitor, acted for Mrs Lett and Mr Blackburn. Mrs Lett declined to obtain independent legal advice. Mr Fredericks had died prior to the trial, and why he prepared the mortgage to provide for compounding interest and payment prior to sale or death was not revealed. 17 In April 1997 Mr Fredericks sent the draft mortgage to Mr Blackburn for approval. Mr Blackburn did not reply. In October 1997, after the transfer of the property to Mrs Lett, Mr Fredericks wrote again to Mr Blackburn asking for instructions about the mortgage and its registration. The judge said that Mr Blackburn "gave evidence relevant to these matters but it was confused and unconvincing". This description was well merited. 18 The judge said - "34 What appears to have happened is that Mr Blackburn arranged for signature of the draft mortgage without referring back to Fredericks & Co. The mortgage, in the form drafted by Fredericks & Co, was executed by Mrs Lett and Mr Blackburn, as sole mortgagee, and dated 26 April 1997. Mrs Lett's signature was witnessed by Mrs Turner, and Mr Blackburn's signature was witnessed by JA Turner (evidently Mrs Turner's husband)." 19 Mrs Turner is another daughter. Although the judge did not specifically refer to it, in her affidavit Mrs Lett said that Mr Turner asked whether she understood everything in the mortgage and had it been explained to her, to which she replied yes, and that Mr Turner then asked Mr Blackburn if he had explained the mortgage to Mrs Lett and he replied yes. Mr Blackburn's evidence included that he explained the mortgage but "overlooked" the compounding interest - "I mean, if I knew it was there and what it meant I would have deleted it". Implicit in the judge's finding was that at the time she signed the mortgage Mrs Lett did not know that it provided for compounding interest and payment on demand. 20 At a time which was contentious, but which his Honour found was about February 1998, Mrs Lett was made aware that the mortgage provided for compounding interest. Mrs Turner told Mrs Windever of the mortgage. Whether Mrs Turner also told Mrs Windever of the compounding interest and of her concern that the Blackburns would be owed more than the property was worth when Mrs Lett died, and asked Mrs Windever to "break the news" to Mrs Lett, was disputed between them. Whatever passed between Mrs Turner and Mrs Windever, it led to Mrs Windever telling Mrs Lett about the compounding interest. The judge appears to have accepted Mrs Lett's affidavit evidence so far as Mrs Lett said that she was told by Mrs Windever that the Blackburns were "using her", were charging compound interest, and "In a couple of years Chris and Jeff will own the property and you'll be out. You'll have nothing." 21 The judge appears also to have accepted Mrs Windever's evidence that Mrs Lett became very distressed. He did not fully accept some evidence of one of Mrs Lett's sons, Mr Peter Lett, but accepted that Mrs Lett probably told him after this occasion that the mortgage papers she signed should have been explained to her, that Mr Blackburn was charging 10 per cent compound interest, and that she was very worried. That Mrs Lett was concerned was amply shown and was not really in dispute. 22 The worry extended to what the family referred to as foreclosure, clearly enough not the legal concept but meaning that Mrs Lett could be turned out of the property. The judge said - "49 … Mrs Windever said that her mother told her of a telephone conversation in which Mrs Blackburn said that if her mother continued to dispute the debt, Mr Blackburn would foreclose the mortgage. Mr Windever gave similar evidence. That is denied by Mr Blackburn, although he conceded he may have mentioned to his wife or someone else in the family the idea of foreclosing on the mortgage, which he recollected someone was "bandying about". It is unnecessary for me to find that Mr Blackburn made such a threat, and it would be difficult to do so on the evidence for me, but I do find that, for whatever reason, Mrs Lett was very concerned that foreclosure would occur." 23 Mr Blackburn gave evidence which included that he became aware that charging compound interest was causing "major problems" in the family and that he took steps to have Mr Fredericks change the mortgage so that it no longer provided for compounding interest. A number of aspects of his evidence presented difficulties. The judge did not find it necessary to resolve them. He said that it was sufficient that any steps taken by Mr Blackburn towards replacing compound interest with simple interest in the mortgage were ineffectual, and that as far as the evidence went nothing was sent to Mrs Lett for signature. He appears to have accepted that Mr Blackburn became aware of Mrs Lett's worries, as indeed emerges from the resort to solicitors which ensued. What is plain is that the simple course was not adopted of Mr Blackburn telling Mrs Lett that he stood by the original arrangement despite the terms of the mortgage and that she had no cause for concern. Evidence of Mrs Blackburn to the effect that she told Mrs Lett in one or more conversations that Mrs Lett did not have to pay interest and the mortgage would be changed, and that she told Mrs Windever the same, was evidently not accepted by the judge. 24 Mrs Lett consulted Mr Wain in March 1998. Mr Wain had previously acted for the Windevers. Mrs Windever made the appointments and drove Mrs Lett to see him. On some of the occasions Mrs Windever was with Mrs Lett and Mr Wain when they talked, on others Mrs Lett saw Mr Wain alone. Mr Wain gave evidence, but was asked remarkably little about what passed between him and Mrs Lett and him and Mr Fredericks. He did not have a good recollection of what took place in and in connection with acting for Mrs Lett. 25 Mr Wain wrote to Mr Fredericks on 5 March 1998 asking for a copy of the mortgage. There was no evidence of whatever consultation with Mrs Lett caused him to do so. Mr Fredericks sent Mr Wain a copy of the mortgage on 9 March 1998. The document in the bundle bore the imprint of payment of stamp duty and a dealing number, and had apparently been lodged for registration. This may not have been the correct document. In unknown circumstances, the mortgage came to be registered on 29 July 1998. It was common ground, however, that the mortgage Mr Fredericks sent provided for compounding interest and payment on demand. 26 Mr Wain prepared a new will for Mrs Lett, which she signed on 11 March 1998. Mrs Lett gave the whole of her estate to Mrs Windever. A letter annexed to the will set out reasons why she did not leave any of her estate to her other children. In the case of Mrs Blackburn, the reason given was that Mrs Blackburn knew Mr Blackburn had placed a 10 per cent compound interest rate on the mortgage loan and did nothing about it. In the case of Mrs Turner, it was said that Mrs Turner knew Mr Blackburn had placed a 10 per cent compound interest rate per annum on the mortgage loan and did not tell Mrs Lett of it or explain it until well after the mortgage had been put in place. 27 Mr Wain sent a copy of the mortgage to Mrs Lett on 12 March 1998, his letter saying "Please let us have your further instructions". According to Mrs Windever, she was with Mrs Lett on 12 March 1998 when he "explained the interest component to her", at which time he expressed surprise that the mortgage had been presented to her for signature. The judge made no finding as to a consultation on 12 March 1998, and the correspondence seems against one on that date. 28 On 18 March 1998 Mr Fredericks wrote to Mr Wain; there was no evidenced of intermediate contact between them. The letter was headed "Without prejudice", and read - "We refer to the above matter and to our letter dated 9th March, 1998 as enclosing copy of Mortgage Document. You will note that Annexure A to the document sets out the terms and conditions of the Mortgage loan and noting that there is a requirement for the Mortgagor to pay interest upon the principal sum at the rate of 10% per annum and as calculated on a daily basis. We note the date of the Mortgage being the 26th April, 1997 and our client would therefore require repayment of the principal amount and in addition interest calculated at the set rate from that date. We advise that the interest due and payable in addition to the principal amount is $4,287.12." 29 The interest amount was simple interest at 10 per cent. The letter seemed to contemplate immediate repayment of the mortgage advance and to affirm an entitlement to compound interest, but it claimed only simple interest. 30 Mr Wain replied to Mr Fredericks on 24 March 1998. The evidence did not show whether he had by this time received further instructions from Mrs Lett. The letter read - "We refer to your letter of the 18th March, 1998 and note the contents. You will be aware that the mortgage was signed by our client without the benefit of any legal advice with regard to the same. In such circumstances it seems to us that there was a clear conflict of interest from your firm as acting on the part of the mortgagee. Our client is 72 years of age and is in poor health. Preliminary discussions with our client indicate that she had no knowledge whatsoever that she was paying interest on the loan funds at 10% per annum on a compounding basis. We will be seeking further instructions and will be in touch in due course." 31 Mr Fredericks wrote to Mr Wain on 31 March 1998. There was no evidence of the telephone conversation to which his letter referred. The letter was again headed "Without Prejudice", and read - "We refer to the above matter and to previous correspondence herein and to our recent telephone conversation. We note that you are obtaining further instructions. Our client would like to resolve the matter by way of payment out including some form of interest. We would be grateful if you could obtain your client's immediate instructions so that we may resolve the matter to the satisfaction of all parties." 32 Mr Fredericks wrote again to Mr Wain on 3 April 1998. Once more the letter was headed "Without Prejudice". It read - "We refer to the above matter and to previous correspondence herein. We note that Mrs Blackburn, the wife of Mortgagee in these proceedings has had a discussion with your client who is in fact her mother. We understand that your client now concedes that the debt is outstanding and she is aware of the debt and that there is an interest component. At this stage we do not know whether the property is to be sold and the mortgage debt is to be discharged or whether refinance is to be organised. Also we are not sure whether in fact your client is prepared to sign an acknowledgement or some form of acknowledgement that the debt is outstanding and that the debt will then be a debt due and payable by her estate upon her decease. We would appreciate you obtaining further instructions." 33 Although Mrs Blackburn gave evidence, including of the conversations with Mrs Lett to which I earlier referred, there was no evidence identifying the discussion to which the letter referred. None of the conversations of which Mrs Blackburn gave evidence fits with what the letter says of the discussion. 34 On 8 April 1998 Mr Wain wrote to Mr Fredericks saying that he was obtaining instructions. He wrote to Mrs Lett enclosing a copy of the letter of 3 April 1998 and asking for instructions. 35 Mr Fredericks wrote to Mr Wain again on 8 April 1998. Again the letter was headed "Without Prejudice". It read - "We refer to the above matter and to previous correspondence herein and in particular to our letter dated 3rd April, 1998. Our client is most anxious to have a resolution to this matter one way or another. Please advise, as a matter of urgency, whether you have any instructions and whether your client proposes to sell the property and pay out our client the amount due under the Mortgage or whether or not she will be arranging for alternate finance. We would appreciate an early reply and we thank you in anticipation." 36 On 16 April 1998 Mr Wain wrote to Mrs Lett enclosing a copy of this letter and asking for instructions. 37 Mr Wain had a file note of a conference with Mrs Lett on 22 April 1998. It read - "1. Renegotiate to an interest rate regulated by reference to a bank int.

Acknowledgement by M'ee that the principal and int. to be payable on the death or voluntary sale of the house.

Distressing to have the possibility of foreclosure at any time." 38 Mr Wain wrote to Mr Fredericks on 23 April 1998 - "We refer to your letter of the 8th April and note the contents. We have had the further opportunity of discussions with our client who again impresses upon us that she was completely unaware that there was an interest component as part of the mortgage. Given the circumstances it would seem to us that the proper course would be to, with your client's consent, renegotiate the terms of the mortgage to a mutually agreeable format. In that regard it is suggested that perhaps the mortgage was regulated by reference to a bank interest rate. In addition, our client is most concerned that the mortgagee has the ability under the current terms of the mortgage to call up the principle [sic] and interest at any time. Given the circumstances and our client's distressed condition it would be suggested that perhaps the documentation could be redrawn to reflect that the principle and interest accruing was to be paid on the death of our client or alternatively on the voluntary sale of the property. We look forward to your early advice." 39 Until communications in November 1998 arranging for discharge of the mortgage, so far as the evidence went there the solicitors' dealings ended. The suggestion of re-drawing the documentation plainly found no favour. The mortgage was registered on 29 July 1998 in unchanged form. 40 I have said that Mr Wain did not have a good recollection. A reading of his evidence gives little confidence in anything but a broad remembrance. While the judge did not do so, I think it can be summarised as -

(a) belief that the mortgage provided for compounding interest and was repayable on demand, and that "there was a possibility of foreclosure of the mortgage at any time";

(b) instructions that compounding interest and repayment on demand was not the arrangement as Mrs Lett had understood it; and

(c) instructions that Mrs Lett wanted to be rid of the mortgage to Mr Blackburn. 41 That Mrs Lett wanted to be rid of the mortgage stood out in Mr Wain's evidence. He said that Mrs Lett was well aware of the "value of the transaction", meaning the transfer of the property which at that point in his evidence was placed in March 1998, and that "she was adamant for me to conduct the transfer"; that she was "concerned about the mortgage"; that she "insisted and was passionate about transferring the property"; and that the effect of the words expressing her passionate desire was that "she was to specify the mortgage that was on her property [sic] and she wanted to transfer the property and get rid of the mortgage". He said that Mrs Lett's concern was having a mortgage on the property, that she was distressed that she had a mortgage on the property and wanted it removed, that she thought she was at risk because the mortgage was in place, and that she "was adamant that she have this mortgage removed and they were my strict instructions". I will return to this when considering the special disadvantage for which Mrs Turner contended. 42 In the result, the transfer of the property got rid of the mortgage. There was particular conflict in the evidence of the genesis of the transfer of the property to the Windevers. 43 The judge accepted, from Mrs Lett's affidavit, that she contacted a son, Mr David Lett, and a grand-daughter for financial assistance of some kind, although not with a specific transaction in mind. He did not accept that, on a similar approach to the Windevers, they were the ones who suggested that Mrs Lett "sign the property over" to them in return for payment of the money and interest owed to the Blackburns and exclusive lifetime occupancy of the property. He said - "71 Mrs Windever put the matter differently, saying that her mother repeatedly asked her and her husband to buy the Kianga property from her for the amount owing to Mr Blackburn. Mrs Windever denied ever having made an offer, and maintained that all times the offers were made by her mother. This is one of the occasions where Mrs Lett's affidavit evidence is contradicted and it would be unsafe to rely on it. I therefore accept Mrs Windever's account. 72 Mrs Windever gave evidence that in around October 1998, Mrs Lett said to her: 'If you can get rid of the debt to Jeffrey Blackburn, you can have the house in consideration of all that you have done for me over the years in looking after me, as long as you promise not to put me in an old persons' home.' She gave similar evidence in her supplementary affidavit made on 7 March 2003. Mr Windever gave similar evidence. Insofar as this evidence seeks to attribute to Mrs Lett a motive of rewarding Mr and Mrs Windever for all of their care and attention over the years, it is not supported by other evidence of Mrs Lett's motive and, being self-serving, I have decided it would be unsafe to accept it." 44 Apart from the motivation of reward, his Honour appears to have accepted that in about October 1998 Mrs Lett's suggestions to the Windevers came to a head in the manner described by Mrs Windever. In her supplementary affidavit Mrs Windever's evidence of the conversation was that it followed her taking Mrs Lett to see Mr Wain, the consultation being between Mr Wain and Mrs Lett without her being present, with Mrs Lett afterwards saying that Mr Wain was a really nice man and "I am finally going to get Jeff off my back". The judge referred to evidence in Mrs Lett's affidavit of seeing Mr Wain about transferring the property to the Windevers, which he placed at "evidently in late October 1998" it seems because in the affidavit it was shortly before the transaction took place. He referred to evidence from Mr and Mrs Windever about being asked to go to Mr Wain's office where Mr Wain put a proposal that the property be transferred to them in return for them paying out the mortgage and giving Mrs Lett a right to live in the property. The timing was linked with Mr Windever then, on 5 November 1998, making a loan application to the Commonwealth Bank for $60,000 to obtain money for the transaction. 45 That his Honour found in this manner is confirmed by his rejection of the submission of counsel for Mrs Turner that he should find that the Windevers "conceived and planned the November 1998 transaction many months earlier, no later than December 1997". His Honour said - "75 ... He relied on documents produced by Delves & Wain, which indicate that a file was opened in the name of Mr and Mrs Windever for the purchase of the Kianga property on 5 December 1997.

76 The file includes some handwritten notes prepared by Mr Windever and headed "Contract for Sale", recording that the proposal was for a sale price of $1 plus assumption of the Blackburn mortgage. Counsel asks the Court to infer from the fact that this document, though undated, appears as the first document in a file that appears to be chronologically arranged, that it was prepared in about December 1997 rather than in, say, November 1998.

77 I am not prepared to make that inference. The other evidence to which I have referred points to the conclusion that the November 1998 transaction developed after Mrs Lett became aware that the mortgage provided for compound interest, in late February or early March 1998. The fact that the handwritten note contains a reference to the loans manager of the Commonwealth Bank, to which Mr Windever made an application only on 5 November 1998, tends to suggest that the notes were created at that time rather than in December 1997. All one can say on the evidence in the Delves & Wain file is that the firm opened a file, presumably on instructions from Mr and Mrs Windever, with respect to a proposed "purchase" of the Kianga property in December 1997, and that that file was closed on 29 April 1998. There is no basis for inferring that the purchase transaction was on the terms that became the November 1998 transaction." 46 On 10 November 1998 Mr Wain wrote to Mr Fredericks with a view to discharge of the mortgage. Mr Fredericks' reply of 11 November 1998 included, "For your information, and subject to our clients [sic] confirming instructions we enclose herewith on a without prejudice basis the calculation of interest as at 11 November 1998." On 12 November 1998 Mr Fredericks sent the same calculation of interest, not expressed to be on a without prejudice basis. The calculation was of simple interest at 10 per cent. Mr Fredericks wrote again on 13 November 1998, saying he held a signed discharge of the mortgage and that his client "confirms that the calculation of interest forwarded to you under cover of our letter of 12th November 1998 is correct". 47 On 17 November 1998 Mr Wain sent to Mrs Lett a copy of the calculation of mortgage repayment. 48 On 24 November 1998 Mrs Lett attended upon Mr Wain and signed a contract for sale and a transfer of the property to the Windevers for a stated consideration of $1. Mr Wain witnessed her signature. On that day he wrote to Mrs Lett - "We are pleased to confirm Contracts for the Sale of the above property was exchanged on the 24th November, 1998. As soon as we have the Transfer to hand we will make arrangements for you to sign it. It is necessary for you to keep all insurances in respect of the property in force until settlement takes place. We note that the consideration for the transfer of the property is $1.00 and that the mortgage currently over the property will be paid out by Mr and Mrs Windever. Part of the arrangement is that Mr and Mrs Windever will enter into the Deed of Agreement, a copy of which is attached which provides you with a life tenancy arrangement over the property. Should there be any additional matters that might be relevant to the tenancy arrangement then you might discuss them with the writer at your convenience." 49 On the same day Mr Wain wrote to the Windevers - "We advise that contracts were exchanged on the 24th November, 1998. We note that the consider [sic] for the transfer of the property is $1.00. We confirm that we are attending to payment of stamp duty on the Contract and Transfer. Part of the arrangement is that you will enter into a Deed of Arrangement, a copy of which is attached which provides Mrs Lett with a life tenancy arrangement over the property. Should you have any matters you wish to discuss with the writer please contact the writer at your convenience." 50 The transfer is dated 24 November 1998, and despite the second sentence of the letter to Mrs Lett appears to have been signed on that day. Mr Wain witnessed Mrs Lett's signature as transferor, and signed the transfer as solicitor for the transferees. 51 On 29 November 1998 Mrs Lett and the Windevers signed the Deed of Agreement. The parties were Mrs Lett as Grantee and the Windevers as Grantor. All under the heading "RECITALS", the Deed of Agreement provided - "1. The Grantee has agreed to sell and the Grantor has agreed to purchase the property 13 Viewhill Road, Kianga in the State of New South Wales.

The Grantee agrees to sell and the Grantor agrees to purchase the property for the sum of $1.00.

In consideration of the transfer of the property 13 Viewhill Road, Kianga to the Grantor the Grantor shall give to the Grantee full free and exclusive licence to use the 'residence'.

The Grantor agrees that the Grantee does not have to pay or contribute towards rates or the upkeep of the property.

No relationship of landlord and tenant is deemed to be created by this Deed of Agreement.

The Grantor is not liable for any injury, accident or damage caused to the person or property of the Grantee or any invitee of the Grantee." 52 The transaction was completed on 17 December 1998. Using the money borrowed from the Commonwealth Bank, $55,890.39 was paid in discharge of the mortgage. The interest paid was simple interest at 10 per cent.

Mrs Lett's affidavit 53 The proceedings were commenced by a summons filed on 11 September 2001. Mrs Lett swore an affidavit dated 16 October 2001. She died on 25 December 2001. Mrs Turner submitted that the judge was in error in deciding that the evidence in the affidavit should not be accepted, where disputed, unless there was corroboration. 54 The judge said - "7 Notwithstanding an objection on behalf of Mr and Mrs Windever on the ground that the evidence could no longer be tested by cross-examination, I allowed Mrs Turner to tender in evidence the affidavit of Mrs Lett made on 16 October 2001. Although admissible, Mrs Lett's evidence has to be treated with great care, in my opinion. It is clear from reading the affidavit that the deponent was very hostile to Mr and Mrs Windever at that time. Most of the assertions in the affidavit are challenged by Mr and Mrs Windever. This is precisely the sort of case where the Court is most likely to be assisted, in determining the credibility of a witness, by observing the witness giving oral evidence and responding to cross-examination.

8 I have decided that, in these circumstances, the correct approach is not to accept Mrs Lett's evidence where it is challenged by the defendants' evidence, unless there is some external corroboration." 55 For some time from November 1998 Mrs Lett lived alone in the property. By late 1999 the relationship between Mrs Lett and the Windevers had become strained, and it worsened after the Windevers moved into the property with Mrs Lett. Mrs Lett moved out of the property at the end of 2000. In January 2001 she revoked her power of attorney in favour of Mrs Windever. In a will she made on 2 March 2001 she excluded Mrs Windever. Whoever was in the right, there is no doubt that Mrs Lett was hostile to the Windevers as at October 2001, and the hostility is evident in the affidavit. 56 Mrs Lett's affidavit could be used notwithstanding that she could not be cross-examined, see Pt 38 r 9(3) of the Rules. Its weight was another matter, to which this hostility was important. As well, the affidavit was plainly incorrect in important respects - for example, the account of dealings with Mr Wain is incomplete and wrong when measured against the correspondence and other documents earlier mentioned. 57 An illustration of his Honour taking the approach he announced can be seen in his [71] set out above. However, there was not a blanket rejection of the evidence in Mrs Lett's affidavit. It was an approach, not an inflexible rule. The judge did not always decline to accept Mrs Lett's evidence because it had been by her affidavit: for example, although he preferred the early 1998 placement of the conversation when Mrs Lett was told of compounding interest over Mrs Lett's placement of some months after April 1997, he did so not because of conflict with the evidence of Mrs Turner and Mr Windever, but because of when Mrs Lett first saw Mr Wain. Nor did he always decline to accept Mrs Lett's evidence where it was disputed, even if uncorroborated. For example, he considered it probable that Mrs Lett asked Mr David Lett and her grand-daughter for assistance of some kind, but less likely that she would have approached them with a specific transaction in mind; this involved rejection of the Windevers' evidence that she told them of a specific transaction proposed to Mr David Lett. 58 The judge's approach is in accordance with authority. In Clyne v Law Society of New South Wales (CA, 4 September 1987, unreported) Mahoney JA observed that "experience has shown that it is proper to treat with considerable reserve evidence, or the inference from evidence, which has not been subjected to cross-examination", and in Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419, where a witness had been discharged prior to cross-examination, the Court said at [188] - [191] - "188 There appears to be no direct authority as to how a court should deal with the evidence of a witness discharged in such circumstances. There is, however, some authority as to how to deal with evidence upon which there has been no opportunity to cross-examine, because, for example, a witness had died. It has been held that such evidence is admissible but that the "'court [would] not attach so much weight to it as it would have been done if there had been an opportunity of cross-examination', Daniell's Chancery Practice, 6th Ed, p 786" : Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd (1967) 116 CLR 254 at 263. In that case, a witness who had died by the time the trial came on for hearing swore two contradictory affidavits. Windeyer J said at 263: 'The latter I think makes the former of no weight; and it can itself be of little or no weight in the circumstances, except to the extent that it is supported by documents which accord with other evidence to which I shall come later.' 189 Abadom v Abadom (1857) 24 Beav 243 is to the same effect. There it was held that whilst an affidavit of a witness who had died could be read, the court would ' pay much less attention to it than the other evidence' . 190 The case of R v Stretton (1988) 86 Cr App Rep 7, is perhaps closer to this. The complainant in a sexual assault trial took a series of epileptic fits during the course of her cross-examination. She was discharged from giving further evidence. The trial judge allowed the trial to proceed but gave the jury a warning in terms that if they were of the view that the defendant was deprived of the opportunity of properly testing and probing the complainant's evidence, he 'advised' they should acquit the defendant. If, however, as a matter of ' commonsense and fairness' they considered they had had ' a fair and complete opportunity of judging her credibility' they should assess the case accordingly. The English Court of Appeal held that it was a matter for the trial judge's discretion as to whether to permit the trial to continue and no error had been shown in the manner in which he had exercised that discretion. 191 Likewise, in Meyer v Hall (1972) 26 DLR (3d) 309, it was held that it was a matter for the discretion of the trial judge as to the weight to be given to the evidence of a witness who could not be cross-examined, including if the trial judge thought appropriate, ignoring the evidence." 59 In my opinion, in the circumstances his Honour was correct in treating Mrs Lett's evidence with great care, and did not err in the approach he announced.

The genesis of the transfer of the property 60 Mrs Turner submitted that the judge was in error in finding the genesis of the transfer of the property in Mrs Lett's requests to the Windevers to buy the property from her for the amount owing to Mr Blackburn. She submitted that his Honour should have found, in accordance with Mrs Lett's affidavit, that when first telling Mrs Lett of the compounding interest Mrs Windever suggested, "If you sign the property over to us you can stay here for the rest of your life", and that thereafter when Mr David Lett had been unable to provide assistance the Windevers said, "If you sign the property over to us now we will give you an exclusive lifetime occupancy of the house and we will pay all moneys owing and interest to the Blackburns". According to the submission, the Windevers were intent on acquiring the property from as early as December 1997, and that they were so intent was supported by Mr Wain's file opened on 5 December 1997 and the other matters in the judge's [75]-[77] above. 61 It was not clear how this was said to bear upon whether Mrs Lett was under the special disadvantage for which Mrs Turner contended, as distinct from whether the Windevers took advantage of any special disadvantage. In any event, I am not persuaded that the judge's finding has been shown to be incorrect. 62 Mr Wain had a file, file 11972W, endorsed as a purchase of the property by the Windevers from Mrs Lett. The file cover was also endorsed as opened on 5 December 1997 and closed on 29 April 1998. It contained the handwritten notes to which the judge referred, but for the reason his Honour gave, plus the fact that they included settlement figures for 11 November 1998, the notes can not have dated from December 1997. Although not referred to by the judge, the file also contained a copy letter from Mr Wain to Mrs Lett dated 12 March 1998 and a memorandum of fees in terms appropriate for preparation of a contract for an arms length sale through an agent, although with file identification 11971W, and in the case of the letter specifically referring to sending the contract to an agent for sale. The file also contained a copy letter to Mrs Lett dated 26 May 1998 (also 11971W) enclosing "copy Contract we prepared on the proposed sale of your property", on a natural understanding meaning the same contract as was referred to in the letter of 12 March 1998. 63 Mr Wain seemed to accept that he was instructed on a sale to the Windevers as at December 1997 and March 1998, but could not explain or add to what might have occurred. His evidence really did not go beyond the documents, and the documents were in a particularly unsatisfactory state which was matched in that respect by Mr Wain's recollection. Although Mr Wain said he only prepared one contract for the sale of the property, that does not fit with the letter of 12 March 1998. Whatever may have occurred in late 1997 had apparently resulted in the contract of March 1998, and had run its course by the end of April 1998. 64 In my view, that is what his Honour meant when he said that there was no basis for inferring that the December 1997 purchase transaction was on the terms that became the November 1998 transaction. The Windevers denied any earlier transaction, and it was necessary for his Honour to take into account the objective indications of a December 1997 transaction. But in the unsatisfactory state of the evidence I do not think the file provided the incontrovertible facts or incontestable testimony of which Gleeson CJ and Gummow and Kirby JJ spoke in Fox v Percy (2003) 214 CLR 118 at [28] whereby his Honour's finding is impugned.

The residence arrangement 65 The Deed of Agreement was a badly drawn document. Mrs Turner submitted that, contrary to Mr Wain's letters of 24 November 1998, it did not give Mrs Lett a life tenancy, and that it did not properly protect an entitlement to live in the property for as long as she wished. Again it was not clear how this was said to bear upon whether Mrs Lett was under the special disadvantage for which Mrs Turner contended. 66 The judge said of the Deed of Agreement - "87 Although this poorly drafted instrument speaks in terms of a "licence", Mr Windever gave evidence that Mr Wain told him and his wife that the document would allow Mrs Lett to live in the Kianga property as long as she wanted to. Mr and Mrs Windever accepted the offer on that basis. It seems to me probable, though it is not necessary to decide the point, that Mrs Lett acquired out of these arrangements a right to remain in the Kianga property for life, either by way of an oral partly performed contract to confer a life interest, or an irrevocable contractual licence, or a licence coupled with an equity arising out of estoppel." 67 As I have said, one of the matters on which Mrs Turner relied before the judge was misrepresentation of the effect of the residence arrangement, but the judge did not agree that there had been misrepresentation. At the time, according to the evidence his Honour accepted, Mrs Lett and the Windevers all intended that Mrs Lett should have an entitlement to live in the property for as long as she wished. That Mr Wain may have failed properly to embody that intention in the Deed of Agreement does not contribute to Mrs Lett being under the special disadvantage of unawareness that the mortgage was not binding in its terms as to compound interest and repayment. I see no reason to disagree with the judge's tentative view of the residence arrangement, but Mrs Turner's submission does not assist her case of a special disadvantage.

Consideration of the special disadvantage 68 The special disadvantage for which Mrs Turner contended on appeal was not one of illness, infirmity, lack of education, illiteracy or some such matter. Mrs Lett had the capacity, in respects of that kind, to make a judgment as to her best interests. In a manner not prominent at the trial, the special disadvantage was said on appeal to be that Mrs Lett did not know of something material to her making a judgment as to her best interests, that the mortgage was not binding in its terms as to compound interest and repayment. Mrs Turner submitted that Mrs Lett in truth had no reason to be worried or distressed, because the mortgage would readily have been rectified, and that she did not know of the ready rectification because Mr Wain failed to advise her of it. It was squarely put that Mr Wain disregarded his duty to Mrs Lett and "It is for that reason and that reason alone that she remained under a disadvantage, a special disadvantage". 69 Mrs Turner's submissions did not elaborate on special disadvantage constituted by unawareness of something material to a judgment as to one's best interests. The Windevers submitted that the postulated unawareness in this case was not a special disadvantage, but that in any event it had not been established that Mrs Lett suffered from it. 70 In Blomley v Ryan Fullagar J said at 405 - "The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary . The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other." (emphasis added) 71 Kitto J at 415 did not refer to lack of assistance or explanation where assistance or explanation was necessary. His Honour spoke of "illness, ignorance, inexperience, impaired faculties, financial need or other circumstances", without elucidation of ignorance. As was made plain in Commercial Bank of Australia Pty Ltd v Amadio at 461-3, the circumstances stated in Blomley v Ryan were not exhaustive. Mason J said that they were "no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another … ", with the ensuing reference to a "disabling condition or circumstance … which seriously affects the ability of the innocent party to make a judgment as to his own best interests". 72 Mere unawareness of a matter material to the interests of a party to a transaction is not a special disadvantage. That is a commonplace of commercial and other negotiations, and good conscience does not require the other party to guard against the party inadequately informing himself any more than it requires the forfeiture of a superior bargaining position (see Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [10], [15]-[17], [56], [185]). 73 If the unawareness is due to a condition or circumstance of the kind to which Fullagar and Kitto JJ referred, equitable principles of unconscionability arise. If the unawareness is not for that reason, but is due to misrepresentation or statutory misleading or deceptive conduct or amounts to vitiating mistake under contractual principles, relief may be available, but these distinct principles are not swallowed up by an amorphous concept of unconscionability. As Gleeson CJ remarked in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd at [7] - "In everyday speech, "unconscionable" may be merely an emphatic method of expressing disapproval of someone's behaviour, but its legal meaning is considerably more precise." 74 This remains the case if the unawareness is because the party has been badly advised. Notwithstanding the bad advice, the party may have the capacity to make a judgment as to his best interests. It may be a flawed judgment because the capacity is exercised upon incomplete knowledge or bad advice, but there is an important difference between a person under a condition or circumstance disabling him from making a sound judgment and a person who is able to make a judgment but fails to make a sound one. 75 The key words in Fullagar J's reference to lack of assistance or explanation are the rider, "where assistance or explanation is necessary". Assistance or explanation may be necessary because the party is of reduced cognitive capacity, or because the matter is entirely beyond the party's experience and unassisted comprehension. There can thereby be a condition or circumstance falling within the general principle founded on seriously weakened ability to make a judgment as to one's own best interests. But there must be a need for assistance or explanation, and even then where assistance and explanation have been provided the courts should be slow to spread the consequences of bad advice from the adviser to the other party to the transaction, if the assistance and explanation are thought wanting, on the basis that the party was under a special disadvantage. 76 In the present case, I do not think it necessary to take this question further. Assuming that there could be the postulated special disadvantage, constituted by unawareness that the mortgage was not binding in its terms as to compound interest and repayment, for the reasons which follow I do not think it was established that Mrs Lett suffered from that disadvantage in deciding upon the transfer of the property. 77 Mrs Lett knew that the arrangement with Mr Blackburn was for simple interest, and for principal and interest to be payable upon sale of the property or out of her estate upon her death. The occasion for her worry and distress, confirmed when a copy of the mortgage was provided through Mr Wain in March 1998, was that the mortgage provided for compounding interest and repayment of the principal on demand. She knew that the mortgage was wrong, and believed that she had signed under a mistake, indeed in circumstances of deception: the letter annexed to the will of 11 March 1998 can convey nothing less. 78 Mr Wain must have been made aware of all these matters. His letter of 23 April 1998, in stating that Mrs Lett was unaware of "an interest component as part of the mortgage" and suggesting a bank interest rate, is odd, although the letter also reflects instructions that there was to be repayment only on sale or after death. The whole letter is difficult to reconcile with Mr Wain's firm remembrance that Mrs Lett wanted to be rid of the mortgage, in that it proposed renegotiation of the mortgage. The probable explanation, in my view, is that Mrs Lett's wish to be rid of the mortgage was qualified in the conference of 22 April 1998 by the possibility of renegotiation, leading to a proposal in a badly framed letter which so far as the evidence went received no response. When there was no response, being rid of the mortgage was reinstated. 79 The occasion for Mrs Lett's worry and distress went beyond mere disconformity between the original arrangement with Mr Blackburn and the terms of the mortgage. As I have said, the simple course was not adopted of Mr Blackburn telling Mrs Lett that he stood by the original arrangement despite the terms of the mortgage and that she had no cause for concern. The letters from Mr Fredericks, to Mrs Lett's eyes transmitting Mr Blackburn's position, were to the contrary. This must have had a significant effect on Mrs Lett's decision upon her course of action. 80 In dealing with the submission that Mrs Windever "misrepresented the situation to her mother, and raised a false concern that compound interest would be charged", the judge said - "120 I disagree with this contention on the facts. In my opinion, while the evidence shows that Mrs Lett understood the basic agreement she had made with Mr Blackburn, under which he would be entitled to charge interest of 10% per annum, with principal and interest payable in the event of her death or voluntary sale of the property, there seems to have been a difference between them as to whether interest was to be charged on a compounding basis. 121 I agree with the evidence of Mr Wain that the Blackburn mortgage entitled Mr Blackburn to charge interest at a compound rate calculated daily. It was open to Mr Blackburn formally to alter the arrangements, and his evidence indicates that he knew how to go about doing so, but he did not see to it that the mortgage was varied to remove the right to charge compound interest. It is true that during their correspondence with Delves & Wain in 1998, Fredericks & Co gave indications that their client would not charge interest on the compound basis. That could be inferred by a close reading of the letter of Fredericks & Co dated 18 April [sic: March] 1998, although the position could certainly have been made clearer by the drafter of the letter. Then it appeared, by the letter of Fredericks & Co dated 31 March 1998, that Mr Blackburn was prepared to negotiate for "some form of interest". Only by their letter of 11 November 1998 did Fredericks & Co spell out the way in which simple interest would be calculated. But these letters were written "without prejudice", implying that Mr Blackburn sought to preserve his strict legal right to charge compound interest. 122 For Mrs Windever to say, as a lay person in February 1998, "they are charging you compound interest", was not a misrepresentation. It emerged, but only subsequently, that Mr Blackburn would charge only simple interest, but he sought to preserve his rights and did not implement a variation to the mortgage, and instead the mortgage was registered in its unvaried form. I do not accept the proposition that Mr Wain had any obligation to explain to Mrs Lett, in her distressed state, that Mr Blackburn proposed to charge only simple interest, in circumstances where the proposal was without prejudice, nothing had been done to vary the mortgage, and then the mortgage was registered in its unvaried form." 81 In my opinion, this was a rather kindly view of Mr Blackburn's position as conveyed by Mr Frederick's letters. I speculate that behind the letters lay a correct belief, as at March-April 1998, that Mrs Lett intended to put the property on the market, correct because of Mr Wain's letter of 12 March 1998 and memorandum of fees apparently directed to preparation and provision to an agent of a contract for sale. Neither party so suggested, by the course of evidence or in submissions, and I do not think I can do more than speculate. Even if it be so, and it would operate favourably to Mrs Turner in the view taken of Mr Frederick's letters, Mr Blackburn's position would have appeared to Mrs Lett as one of adversity. The letters are important for what they did not say as well as for what they did say. 82 Mr Frederick's letter of 18 March 1998 was equivocal. It referred to an entitlement to compounding interest but contemplated acceptance of simple interest. Mr Wain's letter of 24 March 1998 explicitly took issue with compound interest. Mr Frederick's reply of 31 March 1998 did not say that there was no question of compound interest. It could easily have been seen as holding over Mrs Lett's head the entitlement to payment of compound interest, as a threat calculated to cause her to pay the mortgage out. That threat was visible in Mr Frederick's letter of 3 April 1998, referring to sale or refinancing. The letter also referred to Mrs Lett acknowledging a debt payable on her death, when what should have been said was that Mr Blackburn acknowledged that under the arrangement at the time the $48,000 was lent it was repayable out of Mrs Lett's estate unless the property was sold prior to her death. The letter of 8 April 1998 was still more direct, asking for a "resolution" by advice of sale or refinancing. There should have been nothing to resolve. There was more than a "difference" over charging compound interest. 83 A proposal for resolution, by Mr Wain's letter of 23 April 1998, was apparently ignored. It is entirely understandable, in the circumstances, that Mrs Lett should have wanted to be rid of the mortgage. It was not enough for her to have it established that she only had to pay simple interest and did not have to pay anything until sale or death. She must have wanted to be entirely free of the trouble Mr Blackburn was causing, trouble which in her eyes stemmed from deception at the time she signed the mortgage. Mrs Lett conveyed this by what she said to Mrs Windever, it seems accepted by the judge, "I am finally going to get Jeff off my back". That the mortgage could readily have been rectified, if correct, would not have been what mattered to Mrs Lett. She did not want a rectified mortgage to Mr Blackburn. She wanted severance from Mr Blackburn. 84 It was submitted on behalf of Mrs Turner that the mortgage would have been rectified, in the sense of corrected, if Mrs Lett had asked. The submission relied on Mr Blackburn's stance in these proceedings. That was not his stance in 1998, and the submission should not be accepted. If it came to rectification by legal proceedings seeking the relief of that name, Mr Blackburn's stance at the time did not suggest that the mortgage could readily have been rectified. Had Mr Wain advised Mrs Lett as to rectification, his advice could not have been that she would obtain the relief easily, without expense and stress and with certainty of success. 85 That comes to the heart of the special disadvantage for which Mrs Turner contended, failure by Mr Wain to advise Mrs Lett that the mortgage could readily be rectified. Mr Wain gave no direct evidence, and was not directly asked, about advice or lack of advice upon rectification of the mortgage. The closest the evidence came was one question in cross-examination - "Q. So that when you said that it was distressing in respect of the possibility of foreclosure, did you have any discussion with Betty Lett that might have disabused her of the matters leading to her distress? A. I don't have any recollection of that, no." 86 It may be a proper inference that Mr Wain did not advise Mrs Lett that the mortgage could readily be rectified. As I have indicated, I do not think he could properly have so advised her, and if he had done so his advice would probably have resulted in his taking a firmer stance in the correspondence with Mr Fredericks. But I do not think it should be inferred that in what passed between Mr Wain and Mrs Lett there was no regard to rectification of the mortgage. The evidence was unsatisfactory, perhaps in part because there was not the focus at the trial on the special disadvantage now under consideration but also because of Mr Wain's poor recollection and the lack of confidence inspired upon reading his testimony. It is quite possible that, when Mrs Lett's resolve was to get Mr Blackburn off her back, advice as to court proceedings seeking relief by way of rectification of the mortgage was given but not found attractive. The evidence did not exclude that, nor was it an unlikely situation. 87 What occurred at a number of stages of this unfortunate family dispute has not become known fully or clearly in the course of these proceedings. We must work with the evidence as it is. I am not satisfied that, assuming that Mrs Lett could have been under a special disadvantage constituted by unawareness that the mortgage was not binding in its terms as to compound interest and repayments, she was disadvantaged in that respect so as to be unable to decide upon transfer of the property as the course in her best interests. It was a rational decision to be rid of the mortgage, in the manner I have explained in order to get Mr Blackburn off her back. The decision did not turn on inability to bring legal proceedings to have the mortgage rectified, and rationality can and often should include avoiding legal proceedings. Although rectification may well not have been to the fore in whatever advice Mr Wain gave to Mrs Lett, it was not established that he failed to advert to it as a matter for consideration in Mrs Lett deciding upon the transfer of the property as the way of getting rid of the mortgage. Nor do I accept, as was suggested on behalf of Mrs Turner, that Mrs Lett erroneously believed to the end that Mr Blackburn was insisting on compound interest, since she was sent the calculation of mortgage repayment, on simple interest, on 17 November 1998.

Conclusion 88 In the manner the appeal was conducted, if the special disadvantage for which Mrs Turner contended is not accepted there is left the judge's finding of "a strongly independent person who had no difficulty in understanding … a transaction by which she transferred her property to the defendants in exchange for release from her loan obligation and a right of residence for life". It may be added, however, that unless the judge's finding as to the genesis of the transfer of the property be overturned it would be difficult to find that the Windevers took advantage of the opportunity presented by Mrs Lett's disadvantage. They were not shown to have known anything about availability of relief by way of rectification of the mortgage, or of advice given or not given to Mrs Lett on that subject. Again, the focus at the trial was otherwise. 89 In my opinion, the appeal should be dismissed with costs. 90 SANTOW JA: This is a case not about principle but its application. I would adopt the statement of the trial judge at [105] of his careful judgment, concerning unconscionable dealing: "105 … a case of unconscionable dealing involves the following: (a) the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the stronger party;

(b) the special disadvantage must seriously affect the weaker party's capacity to judge or protect his or her own interests;

(c) the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person);

(d) that party must take advantage of the opportunity presented by the disadvantage; and

(e) the taking of advantage must have been unconscientious." 91 As becomes clear, I agree respectfully in the result reached by Giles JA, but consider that it depends solely on the absence of (c) above and what then follows for (d) and (e) above. 92 I would, however, gratefully adopt Giles JA's comprehensive elucidation of the factual circumstances surrounding this unfortunate case. 93 Where I respectfully differ from the trial judge and from Giles JA is that I do consider that the late Mrs Lett was at a special disadvantage. That special disadvantage lay in Mrs Lett's unawareness that the mortgage was not binding in its terms as to compound interest and her incomplete awareness concerning the fact that simple interest and principal was only to be paid on her death or on earlier voluntary sale of the property. Her lack of awareness meant that she did not appreciate the strength of her legal position, whatever may have been her appetite to defend it. I agree that mere unawareness of a matter material to the interests of a party to a transaction, as this was, may not per se be a special disadvantage. However, this was a case of "lack of assistance or explanation where assistance or explanation was necessary", where it is well established that special disadvantage may reside. In order that she, being elderly and obviously highly anxious and distressed about the mortgage, should be in a position to make an informed decision in her best interests, as to whether to press her undoubtedly strong case for rectification, she needed to be properly informed about her position. It is wrong in principle to speculate that she might still, had she known the true position, have chosen not to press her strong legal position for rectification in order to be rid of the mortgage problem as she perceived it; that is, by instead gifting the property to the Windevers in return for a life estate. We simply do not know what she would have done, properly advised. 94 Lacking that advice, Mrs Lett, a widow in her 70s in poor health, was desperately anxious about "foreclosure" of her home by her son-in-law Mr Blackburn. She was clearly the weaker party in her dealings with her other son-in-law and daughter, Mr and Mrs Windever, in resorting to them for a solution. At a disadvantage by reason of her ignorance of the strength of her true position vis-à-vis Mr Blackburn, she entered into an arrangement for them to: (a) relieve her of what she perceived as an escalating liability at compound interest (which they replaced with a viable mortgage, then standing at under $60,000 well below the value of the property), and (b) provide her with what was intended to be a proper life tenancy, but turned out to be an impaired, inadequately drafted "exclusive licence"; and importantly not one whereby she could insist on exclusive possession, leaving her entirely vulnerable when relations broke down with the Windevers. 95 For that, she transferred her property, worth around $185,000, to the Windevers for a nominal amount. They were then able to repay the Blackburn loan at simple not compound interest by Mr Blackburn replacing the loan. That of itself indicated that his obduracy about altering the mortgage was not necessarily matched by legal confidence that he could have resisted a properly advised Mrs Lett in rectification proceedings, had she been aware that she could have brought them. 96 The trial judge, while accepting her physical frailty and acute anxiety, understandable given her ignorance of her legal rights, was in no doubt as to her being "a strongly independent person who had no difficulty understanding such matters as compound interest" (at [117]). It is true that she understood that she was exchanging her property "for release from her loan obligation and a right of residence for life" (at [117]). But this is with the crucial qualification that she was ignorant of her legal rights. She was advised by a solicitor (Mr Wain) acting also for the Windevers. Mr Wain appears never to have told her that she could threaten rectification proceedings, against Mr Blackburn, and that she could be confident that if pursued she had a legal entitlement to obtain rectification. 97 In that state, she was in the situation described by Mason J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. Her unadvised ignorance of her rights, in dealing with the Windevers when using their solicitor, meant that she lacked the ability, as the weaker party "to make a judgment as to her own best interests". 98 Nor is it to the point to speculate that she might still have done what she did vis-à-vis the Windevers, even properly advised, in the absence of clear evidence to that effect. There is no suggestion in the solicitor's letters on her behalf of any asserted right to rectify as distinct from mere assertion or request. That leads to the inference that this was no part of his advice to Mrs Lett. 99 The trial judge pointed out that cases such as Blomley v Ryan (1956) 99 CLR 362 establish that once the first three ingredients of unconscionable dealing quoted above are made out there is an equitable presumption that the stronger party has taken advantage of the opportunity presented by the weaker party's disadvantage and that stronger party's taking of advantage must have been unconscientious. Here the Windevers evidently had no problem getting Mr Blackburn to charge only simple interest on discharge of the mortgage, and they knew too that Mrs Lett was receiving advice from Mr Wain, their solicitor too. But that of itself does not satisfy the third requirement, namely knowledge on the Windever's part, of the special disadvantage, or of facts which would raise that possibility in the mind of a reasonable person. The Windevers have not been shown to have been responsible for Mrs Lett choosing Mr Wain to advise though no doubt their prior connection with Mr Wain was seen as a convenient reason for using him, despite the potential conflict. Nor have they been shown to have been responsible for any shortcomings on the part of Mr Wain in the drafting of Mrs Lett's intended life interest or otherwise. None of this suffices to demonstrate unconscientious taking advantage by them of Mrs Lett's disadvantage. That disadvantage, as put again on this appeal, was simply her unawareness that the mortgage was not binding in its terms, as to compound interest and repayment, with the consequence that it was amenable to rectification. 100 That conclusion is not contradicted by the fact that the defective life interest added to the improvidence of the transaction. This is because it is not established that the Windevers, as reasonable laypersons, would have, or should have, appreciated its legal shortcomings. It meant, however, that when relations later broke down with the Windevers, Mrs Lett gave up her co-residence with the Windevers and left them in full possession, having given away her interest in the remainder for $1 and lacking a clear right to exclusive life-time possession. 101 As I have earlier concluded, there remains a fundamental impediment in the way of Mrs Turner to succeed. As Giles JA observes, the Windevers "were not shown to have known anything about availability of relief by way of rectification of the mortgage, or of advice given or not given to Mrs Lett on that subject". The stronger party "must know of the special disadvantage (or know of facts which would raise the possibility in the mind of any reasonable person)". Absent that knowledge, it is not possible to show that the Windevers unconscientiously took advantage of the opportunity presented by Mrs Lett's disadvantage. The appellant failed to establish that essential matter. Thus though she was at a special disadvantage, that cannot be considered in a vacuum. This is more especially when that disadvantage relates to absence of knowledge and the consequences flowing from that, in her dealings with the stronger party. It is when these elements are considered together that the appellant's case fails. 102 I thus agree the appeal should be dismissed with costs. 103 BRYSON JA: During the hearing I strongly felt the need to be assured that the parties had considered fully the possibility of agreement to settle their dispute, and the Court adjourned for a short time so that this could be considered. The hearing on appeal is late in the day for compromise, but I felt, as did Giles and Santow JJA, that I should be sure that this had been considered. We have witnessed a family tragedy. 104 These proceedings have several unfortunate characteristics which I have recurringly seen in Equity suits. One is that closely related persons litigate at length over family property and incur costs which are not well proportioned to the value of the property in dispute, so that there can be little for the winner to enjoy and disaster for the loser: the parties cannot afford their conflict and the prize is not worth the expense, or the injury to family relationships. A second is that claims to be in adverse circumstances warranting equitable relief are made on a less than compelling basis. A third is that legal advice and assistance obtained when the transactions were put together does not in retrospect appear to have been very adept, although it was probably good enough to carry those involved through their affairs in the manner first intended if their relationship had not become hostile. A fourth is that after a full hearing and careful judgment, conflict is continued on appeal. A Judge in Equity recurringly sees families destroy their economic positions and well-being in similar ways, and it is not in the Court's power to stop it. 105 I agree with Giles JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

At a glance

Court

Decision date

Before

Source

Judgment (41 paragraphs)

Parties

Cases Cited (10)