WFM Motors Pty Limited v Bar M Pty Limited

Supreme Court of NSW|2021-12-14|Before: Kunc J

Summary

For nearly three decades Ristorante Macchiavelli was an iconic Sydney restaurant. Equally iconic was its proprietor, the late Giovanna Toppi (the Second Defendant (Giovanna)). Her daughter, Paola (the Third Defendant), followed her mother into the restaurant business. Without intending any disrespect, in this judgment the parties will be referred to by their given names.
These proceedings concern Giovanna's liability to the Plaintiff, WFM Motors Pty Ltd (WFM), which sues Giovanna under a third party guarantee and mortgage provided by her as security for a loan of $1,100,000 advanced to a company, Bar M Pty Ltd (the First Defendant) (Bar M), of which Paola is the director. The mortgage was over an investment property owned by Giovanna in Macleay Street, Potts Point (the Property). Bar M and Paola have admitted their liability to WFM in respect of the loan. WFM was the landlord of premises at Rushcutters Bay where Paola operated her restaurant called Bar M (the restaurant).
By a cross-claim, Giovanna applied for relief from enforcement of the mortgage and guarantee under the Contracts Review Act 1980 (NSW) (CR Act), the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) and, or in the alternative, the general law of unconscionable conduct.
Two very different pictures of Giovanna were sought to be drawn by the parties. Giovanna's case was that she was an elderly, vulnerable, poorly educated mother with limited English, who was a victim of the unconscientious conduct of her daughter and WFM. WFM submitted that what Giovanna may have lacked in formal education was more than made up for by a business acumen amply demonstrated by her successful career as a Sydney restaurateur over many years. Giovanna, according to WFM's case, had volunteered to assist her daughter and her daughter's business and well understood, and had received independent legal advice about, the legal obligations which she assumed towards WFM.

Facts

What follows are the facts which the Court finds to be uncontested or not seriously contestable, including by reason of admissions or concessions. The essential disputed matters as asserted by the parties are also noted at the relevant point in the chronology of events for context, with the reasons for specific findings cross-referenced to elsewhere in these reasons.
From 2015 to 2018, Bar Machiavelli Pty Ltd (Bar Machiavelli), whose sole director was Paola, leased premises in Neild Avenue, Rushcutters Bay (the Premises) from WFM to run an Italian restaurant (the 2015 Lease). The term of the 2015 Lease was for 6 years commencing on 1 December 2015 with a starting annual rent of $235,000 per annum. Bar Machiavelli was a trustee for a unit trust in which the unit holders were G & P Toppi Pty Ltd (G & P Toppi) and companies associated with Mr Bicher and Mr Pellarini (the Bicher entities).
G & P Toppi (now known as Cara Nonna Pty Ltd) was incorporated on 4 February 2016 with Giovanna and Paola as directors and Giovanna as a shareholder. So much is evidenced by a historical company extract in evidence. In her brief oral evidence, Giovanna asserted that she knew nothing about the company, but conceded she could have been a director if Paola had made her sign something.
On 21 March 2018, the Bicher entities commenced proceedings in this Court against Bar Machiavelli, G & P Toppi and Paola for breach of trust and for debts said to be owed by Bar Machiavelli of approximately $830,000 plus interest (the Bicher trust proceedings). Paola was represented in those proceedings by a solicitor, Mr Philip Beazley.
In April 2018, Giovanna was being represented in relation to another matter by a solicitor, Ms Vivian Evans of Uther Webster & Evans. In relation to that same matter, Mr Beazley was acting for Paola.
On 25 May 2018, the solicitors for the Bicher entities wrote to WFM informing it of the Bicher trust proceedings. The letter, which was copied to Mr Beazley as Paola's solicitor, asked that WFM give them notice of any proposed transfer of the 2015 Lease.
On 5 June 2018, Ms Evans wrote to Dr Sharon Reutens, a consultant psychiatrist with experience in old age psychiatry: "We act on behalf of Mrs Giovanna Toppi who has requested that we prepare a Power of Attorney, Revocation of Power of Attorney, Appointment of Enduring Guardian and a new Will on her behalf. Some issues have been raised by her children in relation to her capacity to provide us with instructions generally in relation to her financial matters and in particular, in relation to the most recent instructions regarding the documents referred to above. In those circumstances, Giovanna has asked us to arrange an assessment and we in turn spoke to her doctor at St Vincent's, Dr Timothy Furlong who provided us with your details. You are at liberty to discuss her general health and treatment with Dr Furlong. We understand that Giovanna is scheduled to attend your Rooms at 9am on Wednesday, 6 June 2018 for the purposes of obtaining a medical report on her current cognitive state and whether or not she has capacity to manage her financial affairs and provide instructions in relation to those matters, a Will, Power of Attorney and Appointment of Enduring Guardian. We look forward to receiving the Report at your earliest convenience."
Dr Reutens saw Giovanna on 6 June 2018 for two hours.
Sometime in June 2018, Paola became sole director and shareholder of Scuie Scuie Pty Limited.
On 12 June 2018, Paola (as sole director of Bar Machiavelli) appointed a voluntary administrator to the company on the basis of likely or actual insolvency.
Dr Reutens' report to Ms Evans about Giovanna is dated 25 June 2018 (the Report). Because of its proximity to the events in question in these proceedings, it is necessary to set out some parts of the Report at length: "EXECUTIVE SUMMARY Ms Toppi is an eighty one year old woman who lives with her son, Walter. She has a provisional diagnosis of Mild Neurocognitive Disorder and a possible Gambling Disorder. Further investigations are required to confirm the Mild Neurocognitive Disorder. There are inconsistencies between Ms Toppi's and her son's account of her gambling, and objective evidence is required to determine if she has a diagnosis of a Gambling Disorder. Ms Toppi's [sic] mainly speaks Italian. Although she appeared to understand my questions in the interview and the cognitive screening questions, her results might have been affected by language factors. Based on the interview, collateral history and results of cognitive screening my opinion is: 1. Ms Toppi has capacity to appoint an Enduring Guardian; 2. Ms Toppi requires further discussion with her lawyer and re-testing to decide if she can confer an Enduring Power of Attorney. 3. Ms Toppi requires assistance with financial decision making. 4. Ms Toppi did not demonstrate full Testamentary Capacity. It is recommended that Ms Toppi undergo investigation for the cognitive impairment, including brain MRI to determine if there is a reversible cause of the deficits. She is recommended to undergo neuropsychological testing using the services of an Italian speaking interpreter. Further discussion about her Will should utilise the services of an Italian speaking interpreter and it is recommended that Ms Toppi be seen after a period of one to three months to determine if there is consistency in her decision making with respect to her Will. … DEMOGRAPHICS Ms Toppi is an eighty one year old woman who lives with her forty six year old son, Walter. She stated that Walter's partner sometimes stayed over. Ms Toppi is a self-funded retiree. She has three children: Paola, Caterina, Walter. Ms Toppi told me that she previously owned a business, Machiavelli Restaurant, for over thirty years, and currently had an interest in a business, Bar Machiavelli, run by her daughter, Paola[.] HISTORY 1. Enduring Power Of Attorney Ms Toppi stated that she wished to revoke a Power of Attorney she made in 2017 Appointing Walter. Ms Toppi told me she had first appointed Paola as her attorney, several years ago, she could not recall when. She stated that Paola "appointed herself. She said 'sign' and I signed". Ms Toppi claimed that no one explained the range of powers an attorney might have when she signed that Power of Attorney. Ms Toppi said that because Paola was the oldest she had always trusted her and anything Paola asked her to sign she had signed. Ms Toppi stated that about six or seven months ago Walter told her that Paola had suggested they "put me in a home". Ms Toppi was very upset at this. She said that a friend advised her that because she had signed a Power of Attorney and Guardianship, that Paola could do whatever she wanted with Ms Toppi's money and she could place her in a home. Ms Toppi said as a result of this information she revoked the Power of Attorney and made a new one three months ago, appointing Walter as her attorney. However, she had recently decided to change it again, "now I want Walter out too". Ms Toppi initially stated that she wanted the Public Trustee to be appointed, but midway in the interview stated that she wanted to dispense with appointing an attorney altogether "I don't want someone to tell me what to do. I want to decide for myself". She stated that an attorney "can decide for me what to do. I don't want them to do it". … 2. Enduring Guardianship Ms Toppi could recall signing an Enduring Guardianship appointing Paola several years ago, at about the time she signed the Enduring Power of Attorney document. She said that at the time when she signed the Power of Attorney and the Enduring Guardianship appointing Paola, her rationale was that Paola was the eldest and she trusted her. However Paola had "disappointed me" by suggesting that she move into a home. Ms Toppi had not raised the issue with Paola as "I don't want to have a bad relationship with her". … 4. Testamentary Capacity Ms Toppi's understanding of the nature and effect of a Will. Ms Toppi understood a Will to be a document that contained her wishes for distributing her money and property after she died. Ms Toppi's understanding of her estate Ms Toppi stated that her estate included shares in Bar Machiavelli. She had a 30% interest, Paola had a 30% interest and there were two partners of Paola's who had 40% between them. She said that her main asset was [the Property] that she estimated to be worth 14-15 million dollars. Ms Toppi stated that she had one bank held at NAB which she estimated to have about one million and twenty five thousand dollars. She did not own s. She did not own significant jewellery, art works or other valuables. She owned a car. …. Pattern of Previous Wills … I enquired about the relationship with her children. Ms Toppi stated that she had not spoken to Caterina in the last two years. They had not argued. Ms Toppi said that Caterina was in charge of the family restaurant Machiavelli, which Ms Toppi had put in Paola's name. She said that Paola had transferred the restaurant to Caterina. She was not quite sure of the circumstances of the transfer, but said that the two sisters stopped talking after this and she no longer spoke to Caterina. She stated that she did not feel that she needed to bequeath any money to Caterina because Caterina now owned the premises of Machiavelli restaurant in her name and received about $6000 a week in rent. Ms Toppi stated that she did not think she needed to bequeath any of her estate to Paola because she had helped Paola a lot financially over the years. She said that Paola went broke in her own business and Ms Toppi "put her up" in a restaurant business known as Bar Machiavelli in Rushcutters Bay. She stated that Paola was "never happy". Ms Toppi stated that because Paola was given 30% of the Bar Machiavelli business she did not feel the need to bequeath any money to her. Ms Toppi stated that she had never given any money to Walter and wanted to leave him her estate. She said that he had been a dutiful son and had never asked for any money whereas Paola had. I showed Ms Toppi the 2017 Will. She could not recall having made a Will in December 2017 and appeared upset when I showed it to her, stating that she had never seen it and wanted to know who had made the Will. She stated that she had not wanted Marco Cunningham to be an alternate executor if Walter was unwilling or unable. She only wanted Walter to be the executor. When it was pointed out that she had signed the Will and that it had been witnessed by two people, she said that she still could not recall having signed it. We read the Will together. Ms Toppi had earlier stated that she did not want Paola or Caterina to have any of her estate, however when going through the 2017 Will she had said that she did not mind if Paola received the shares in G&P Toppi Pty Ltd. Ms Toppi told me that the company Sciue Sciue closed down two months ago because Paola could not manage two restaurants. She stated that she did not mind if Paola received the share in Tridevco Limited. Tridevco Limited was Paola's company. She said she did not know she owned a share in it, stating "she must have given me a share". Ms Toppi said that Paola and her husband "used to put me as a director" for a number of their companies and "she can have that share". … 5. Assessment of Financial Capacity Ms Toppi informed me she was renting a three bedroom apartment at X New South Head Road, Double Bay and had been renting for approximately five years … Ms Toppi planned to sell the building she owned at X Macleay Street, Potts Point, and buy a nice apartment for herself. She estimated the building was worth about 14 or 15 million dollars. From the proceeds of the sale she would buy a three bedroom apartment that she estimated would cost approximately two million dollars. She would give some money to Walter, approximately five million dollars. When asked what she would do with the rest of the proceeds of the sale of the Macleay Street building she said it was time for her to enjoy herself. If there was money left over when she died it would be left to Walter. … Financial judgement Toppi was asked about the steps she would take if she were to sell her property. She told me she would call a real estate agent to ask for an estimate of the building's worth and "I'd call more than one agent to find out how much its worth". She would ask the real estate agency to sell the property. CURRENT SYMPTOMS … Ms Toppi described having gambled all her life. She said that her husband was a bookmaker. She had between $500 and $2000 each week on gambling. She said that she had never been in debt and she did not borrow money. She stated that she usually went to the casino on a weekly basis and was transported there by her son. However some weeks she would not go, for instance if she had to go to a wedding. Ms Toppi stated that she had made friends at the casino but said that she never gave or loaned them money. She stated that she had never spent more than she could afford and had never been in debt. She said that she used to got to gambling houses with her husband and now went to the VIP room at the casino and stated that there would good people there who would never ask her for money. CURRENT FUNCTIONING Ms Toppi said she lived in a rental apartment with her son Walter. She woke at about 7am and might do some light cleaning. The cleaner came about twice a week to vacuum, mop and clean the kitchen and bathrooms. She had known her for fifty years. Ms Toppi showered in the morning and groomed herself independently. She stated she did not require any prompting or assistance. She told me that util about one year ago she had gone into work at Bar Machiavelli every day and would supervise, cook or greet long standing customers. She said it was very different now she had retired. She was at a bit of a loose end. She went to Bar Machiavelli about three or four times a week where she would mingle with customers and talk to the staff. She was no longer cooking. Ms Toppi said that she maintained a good relationship with Paola. She attended renal dialysis at St Vincent's hospital three days a week. Her son sometimes took her out for coffee or lunch in Double Bay. Friends came to see her. She went to the casino once a week to play poker. She said she played cards and had never played poker machines. Ms Toppi said if she was at home she would watch TV or she might read an Italian novel. In the evening she might go out with Walter. She occasionally went to church. She did not undertake and formal exercise. Ms Toppi said she had not driven her car for three months and her licence had expired. … PERSONAL HISTORY … Her elder daughter, Paola, was born in 1964, her second child Caterina was born in 1969 and Walter was born in 1971. Ms Toppi stated that Caterina took over the running of Machiavelli Restaurant. She said that owing to the unhappiness about the transfer of the restaurant into Caterina's name she and Caterina were not speaking. About two or three years ago Paola and Ms Toppi opened Bar Machiavelli in Rushcutters Bay. They rented the premises and it was run by Paola. Ms Toppi stated that Paola and her husband had gone bankrupt in another business and she wanted to help Paola so Ms Toppi set her up in the business. Ms Toppi said that she retired last year when she had to commence renal dialysis. Until then she was cooking twelve hours a day and teaching apprentices. She was also front of house. … MENTAL STATE EXAMINATION Ms Toppi presented early for the appointment and said Walter had driven her. She was a neatly groomed woman with neatly cut hair who spoke in accented English. Ms Toppi told me that her first language was Italian and Italian was the language she spoke at home. Questions sometimes had to be repeated because she did not appear to understand them. Speech was rushed at times, reflecting her distress, for instance when she was discussing the issues surrounding the Power of Attorney and the writing of her Will. Her affect was generally reactive within the normal range and she smiled spontaneously. She denied depressed mood. There was no evidence of psychotic phenomena. Ms Toppi did not describe thoughts of harm to herself or others. COGNITIVE TESTING Ms Toppi's cognition was screened using the Roland University Dementia Assessment Scale, which is specifically for use in people of culturally and linguistically diverse backgrounds (CALD). She scored twenty-two out of thirty where a score of twenty-two or less is suggestive of cognitive impairment. On the Clock Drawing Test she was able to draw a circle adequately. She did not place all the numbers on the clock face and was unable to show the time. The cognitive screening is suggestive of executive impairment. There were errors of judgment, planning, of set shifting. Memory impairment was identified memory. Ms Toppi could recall only two of a list of four items. It is noted that English is not Ms Toppi's first language, and neuropsychological testing in [sic] using an Italian interpreter may be required. COLLATERAL HISTORY FROM SON WALTER … Mr Toppi stated that Ms Toppi had a limit of $10,000 a month at the casino but he estimated she had spent hundreds of thousands of dollars over the years. He said that he [sic] borrowed money from people in the casino and said that she was also vulnerable to other people "who frequent casinos" asking her for money. He stated that she owed people money. Mr Toppi said that Ms Toppi received $40,000 a month in rent from the Potts Point building, but she owed people money. With respect to her current relationships with the family, Mr Toppi said that he believed his mother was currently upset because there was an issue with the partnership at Bar Machiavelli … Mr Toppi said he was concerned about his mother's financial capacity. He said "she just signs things put in front of her". PSYCHIATRIC DIAGNOSES

Mild Neurocognitive Disorder (provisional)
Possible Gambling Disorder OPINION ON DIAGNOSES Ms Toppi demonstrated cognitive impairments on screening in memory and executive function. Executive functions include planning, judgement, attention and problem solving. Executive functions are required for making decisions and planning. Ms Toppi also demonstrated memory impairment on screening. She was unable to recall making the 2017 Will, but could recall making the Enduring Power of Attorney and Enduring Guardianship at that time. Ms Toppi's functioning did not appear to be significantly changed as a result of her cognitive impairments. She had always had a cleaner. Her bills were usually paid by her son or the accountant. She was still able to cook, and my impression was that if not for her physical impairments she would be able to dress herself independently … The cognitive impairment, and particularly the executive dysfunction, raise concerns about Ms Toppi's ability to manage her finances and her capacity to make an Enduring Power of Attorney, Enduring Power of Guardianship and her Testamentary Capacity. There was a history of gambling that, based on Mr [Walter] Toppi's history, would fulfil DSM-5 criteria for a Gambling Disorder. Ms Toppi was described as relying on others to provide money to gamble, gambled more since she retired and had to commence dialysis, and had lost a significant amount of money. It is noted that Ms Toppi gave a different history of her pattern of gambling, and given the discrepancy, objective evidence would be required to substantiate the diagnosis. If the diagnosis is substantiated, it is possible that the cognitive impairment is contributing to the disorder. OPINION ON FINANCIAL CAPACITY Ms Toppi was able to adequately name currency, demonstrate the relationship between currency and to understand terms related to financial management. She was able to describe how she wrote a cheque and how she would sell a house. Her ability to manage transactions such as shopping and bill paying appear to be intact. The executive impairments are concerning, and if she has a Gambling Disorder the combination of the Gambling Disorder and cognitive impairment in the executive domain suggests that she requires assistance to manage her finances, particularly in the realm of financial decision making. … OPINION ON CAPACITY TO APPOINT AN ENDURING GUARDIAN Ms Toppi initially conflated the powers of an enduring guardian with that of an enduring power of attorney. She was able to recall my explanation after a delay. She was able to understand the enduring nature of the appointment after she lost capacity. She was able to understand that the appointment would not start until it was deemed that she had lost capacity to make decisions regarding her healthcare, accommodation or decisions about her person. Based on this assessment, I am of the opinion that Ms Toppi has capacity to independently appoint an enduring guardian. OPINION ON TESTAMENTARY CAPACITY. Ms Toppi was able to name the extent of her estate. She was unaware of a share in Tridevco but was aware that her main asset was the building in Potts Point and was able to identify the shares in the other companies. Ms Toppi was able to list potential beneficiaries. She provided a rationale for the distribution of the estate between the three children. She provided a rationale for not bequeathing any of her estate to the grandchildren. Ms Toppi did not appear to be hampered by a mood disorder or delusional beliefs about any of her potential beneficiaries. It is concerning that she was unable to recall making the December 2017 Will. Ms Toppi has changed her mind about the appointment of Marco as executor in the event that Walter was unable or unwilling to be executor. She no longer wanted the grandchildren to benefit from the estate in the event that Walter died. Ms Toppi has a moderately complex decision to make with respect to her Will. There is family conflict and money has previously been distributed to Paola and Caterina. In these circumstances, the cognitive demand is greater than in a more straightforward Will. Ms Toppi has to recall past financial decisions that have benefited her children, compare the financial gifts and assess the relative needs and merits of her potential beneficiaries. This inability to make a consistent decision and the inability to recall the December 2017 Will in the context of a moderately complex Will, cognitive impairment and executive dysfunction indicates on the balance of probabilities, that Ms Toppi does not have Testamentary Capacity at the present time. RECOMMENDATIONS 1. The Mild Neurocognitive Disorder requires further investigation with MRI and neuropsychological investigation utilising an Italian speaking interpreter. 2. Ms Toppi usually speaks Italian. It is recommended that she attend legal appointments with an Italian speaking interpreter in order to minimise any effects of language."

On 13 August 2018, the Bicher entities commenced proceedings in this Court against WFM, the administrator of Bar Machiavelli and Paola for orders that WFM consent to the assignment of the 2015 Lease from Bar Machiavelli (in administration) to the Bicher entities (the WFM lease proceedings). WFM actively opposed the relief sought and was represented in the proceedings by HWL Ebsworth (HWLE). Paola was represented by Mr Beazley.
Orders were made by Brereton J on 10 September 2018 in the WFM lease proceedings requiring WFM to consent to an assignment of the 2015 Lease and requiring WFM to pay the costs of the Bicher entities.
By reason of the Court's acceptance of the evidence of Mr Colacicco (see [92] below) and the finding that Giovanna had a fundamental disposition to assist Paola (especially in relation to Bar M) (see [139] below), the Court finds the following occurred during September 2018 in accordance with his affidavit evidence: "22. I took the phone call from Giovanna. I recall that Giovanna was upset and distressed throughout the telephone conversation. She was upset due to legal proceedings involving business partners. I do not recall the entirety of that discussed during our telephone conversation. However, I do recall that she words to me to the following effect: "Please Mr Frank, please help us. Speak to Mr Nick [Politis, owner of WFM] if he can help us with a loan… Please help us with money. Ask Mr Nick to help… I have got my property. I can give him security, but we need to do a deal with the partners… My property is worth a lot of money… Please speak to Mr Nick. We're going to be left on the street if we do not find this money they want." 23. I understood the reference to "my property" to mean the property located at XX Macleay Street, Potts Point NSW (Potts Point Property). I understood that because Mia and I had attempted to lease the Potts Point Property for Giovanna. The Potts Point Property was raised in our telephone conversation because I said to Giovanna words to the effect "Okay Mumma, don't get upset. I'll speak to Nick. As long as there's equity in the property and there's security, it should be fine. He's a good person. He'll help. Let me ask."
Furthermore, the Court finds that the conversation referred to in the preceding paragraph must have occurred after 10 September 2018 (because Mr Beazley's offer of that date set out in [23] below makes no express reference to a mortgage) and before the email of 27 September 2018 set out in [28] below.
On 10 September 2018, Mr Beazley wrote to WFM: "We act for Paola Toppi and Scuie Scuie Pty Ltd. Our clients wish to make an application for an assignment of the lease from Bar Machiavelli Pty Ltd (In Liquidation) to our client, Sciue Sciue Pty Ltd [sic]. The lease will be guaranteed by our client Paola Toppi, Scuie Scuie Pty Ltd and Giovanna Toppi. We are instructed Giovanna Toppi is the Registered Proprietor of XX MacLeay Street, Potts Point which has an equity of over $3million. We draw your attention to the affidavit of Paola Toppi sworn 19 August 2018 as to the abilities of Paola and Giovanna Toppi."

The disputed facts

Before turning to the essential facts in dispute between the parties, I will set out the relevant legal principles in relation to fact finding, and then consider the evidence of the various witnesses, together with submissions made in relation to potential witnesses who were not called.

Legal principles as to fact finding and credit

I summarised the legal principles as to fact finding and credit in Maria Saravinovksa v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964. The relevant sections are extracted below: "[462] The Court was given helpful summaries of the legal principles in relation to fact finding and credit by each of the parties. Those submissions were one of the few areas of the case where there was no disagreement as to the way in which the Court should go about fact finding in a case such as the present where most of the critical evidence depended upon uncorroborated oral testimony and where, to quote Maria and George's written submissions, "There are vast factual differences between the parties". [463] In approaching the task of fact finding, particularly where credit is a significant issue, the Court has applied ten principles. [464] First, at the forefront of the Court's approach has been the oft cited statement of McClelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 (Watson) at 318-319: Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction (1995) 49 NSWLR 315 at 319 rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not … attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712. [465] Second, the concept of actual persuasion was elucidated by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers appointed) (In liquidation) (No 2) [2011] FCA 1123; (2011) 297 ALR 56: 48. Under s 140(2) of the Evidence Act 1995 (Cth) (the Evidence Act), the Court must, in deciding whether it is satisfied that a case has been proved to the requisite standard, take into account: ● the nature of the cause of action or defence; ● the nature of the subject matter of the proceeding; and ● the gravity of the matters alleged. When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-2). [466] Third, there is the statutory successor of the rule in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 in s 140 of the EA: 140 Civil proceedings: standard of proof (1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities. (2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account: (a) the nature of the cause of action or defence, and (b) the nature of the subject-matter of the proceeding, and (c) the gravity of the matters alleged. [467] Fourth, evidence is to be preferred which is inherently probable in the circumstances or is given by a witness against their interest. [468] Fifth, evidence of independent witnesses, i.e. persons who have no reason to be partisan, may be decisive in resolving the conflicting evidence of interested parties. [469] Sixth, where a witness has been found to be lying about one thing that does not automatically mean that they are to be disbelieved about everything else. The Court is not bound to accept or reject a witness' evidence in its entirety. This approach was expressed by O'Loughlin J in Cubillo v Commonwealth of Australia (No 2) [2000] FCA 1084; (2000) 103 FCR 1: 118 Before commencing a detailed analysis of the evidence in this case, I desire, in the first instance, to make clear the approach that I have taken to the evidence of a witness where I have found some, but not all, aspects of the evidence of that witness to be unreliable. Simply because I find against a party or a witness on one issue and reject some part of the evidence of that person, it does not mean that what remains is tainted, or otherwise lacks probative force, with the consequence that I should dismiss all the evidence of that person. The principles enunciated in the cases indicate that the trial judge is entitled to believe part of the evidence given by a witness and to reject the rest. After making an assessment of the evidence, after utilising the advantage of having seen and heard all the witnesses, and after forming an impression of each, the confidence that the judge reposes in a particular witness is assessed accordingly. Where evidence has a logical probative value, a judge will rely on it; where it contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force, the judge will, in all probability reject it or, at least, not rely on it. I mention some authorities that support those propositions. … 121 A trial judge is not restricted in his or her assessment of a witness. By this I mean that if, on peripheral issues, the trial judge reaches conclusions adverse to the credibility of a party, it does not necessarily follow, consistently with such conclusions, that these must be findings adverse to that party on the issues that are central to the determination of the matter. There is no rule of law or practice that states that an adverse finding on any aspect in the evidence of a witness means that the whole of that witness' evidence must be rejected. [470] Seventh, and closely related to the preceding point, in Sangha v Baxter [2009] NSWCA 78 Basten JA (with whom Handley AJA agreed) cautioned against global credibility findings: 155 There are risks in making global findings about credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases. 156 Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, King v Collins [2007] NSWCA 122 at [44]. [471] Eighth, disbelieving a witness that "X" was the case does not mean that "not X" has been proven. The Court respectfully adopts what fell from Gibbs J (as his Honour then was) in Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694 (citations omitted): The fact that a witness is disbelieved does not prove the opposite of what he asserted: Scott Fell v. Lloyd [1911] HCA 34, (1911) 13 CLR 230, at p 241 ; Hobbs v. Tinling (C.T.) & Co. Ltd. (1929) 2 KB 1, at p 21 . It has sometimes been said that where the story of a witness is disbelieved, the result is simply that there is no evidence on the subject (Jack v. Smail [1905] HCA 25, (1906) 2 CLR 684, at p 698 ; Malzy v. Eichholz (1916) 2 KB 308, at p 321 ; Ex parte Bear; Re Jones [1945] NSWStRp 50, (1945) 46 SR (NSW) 126, at p 128 ), but although this is no doubt true in many cases it is not correct as a universal proposition. There may be circumstances in which an inference can be drawn from the fact that the witness has told a false story, for example, that the truth would be harmful to him; and it is no doubt for this reason that false statements by an accused person may sometimes be regarded as corroboration of other evidence given in a criminal case: Eade v. The King [1924] HCA 9, (1924) 34 CLR 153, at p 158; Tripodi v. The Queen [1961] CHA 22, (1961) 104 CLR 1. Moreover, if the truth must lie between two alternative states of fact, disbelief in evidence that one of the state of facts exists may support the existence of the alternative state of facts: Lee v. Russell (1961) WAR 103, at p 109 . [472] Ninth, for reasons set out in Saravinovski (No 5) at [76] and following, the Court gave leave for certain of Chris' affidavits to be relied upon, notwithstanding that his loss of mental capacity meant that he could not be cross-examined. The way such evidence should be treated was considered by Hallen J in Fulton v Fulton [2014] NSWSC 619 [Fulton]: 111. However, affidavit evidence, however good, which, for whatever reason, is not subject to cross-examination when cross-examination is required, will always be discounted, as appropriate, if the affidavit is used with leave without cross-examination. The degree to which it will be discounted may depend on various factors, including the circumstances that lead to cross-examination being dispensed with, the nature of the evidence and its centrality and degree of significance to the case. The degree of discount appropriate will be judged according to all the circumstances of the case: Re O'Neil, Deceased [1972] VicRp 35, [1972] VR 327, per Anderson J, at 333 - 334; Citibank Ltd v Liu; ABN Amro Bank Ltd v Liu [2002] NSWSC 86, per Hamilton J, at [5]. [473] Tenth, the Court can only do the best it can on the evidence which it has. Some issues may need not be resolved or should not be resolved. It may be that they cannot be resolved given the nature of the evidence which the parties have adduced. This case has many similarities to the family dispute considered by Robb J in Aytul Ak-Tankiz v Ferat Ak & Ramazan Ak [2014] NSWSC 1044. Of the evidence in that case, his Honour said: 187. The principal evidence relating to these issues consisted of the uncorroborated evidence of the witnesses, or alternatively the only corroboration available was the testimony of other witnesses. The evidence distilled into the word of one witness against the word of one or more other witnesses. Most of the events relevant to the issues occurred many years ago. The evidence relevant to the issues generally consisted of a series of assertions, and counter-assertions by various witnesses. Evidence of the objective context was generally not available, so it has not been feasible to test the versions of events that were in contest by reference to the objective probabilities, based upon uncontroversial contemporary circumstances. Though the issues are not entirely irrelevant, their significance is limited, and their resolution has not been necessary for the purpose of determining the real issues in the case. Any attempt to resolve the issues by making judgments about the relative credibility of the individual witnesses on an issue-by-issue basis was likely to be based on illusory foundations."

Legal principles as to the evidence of a witness who has died

Beazley, Giles and Santow JJA set out the principles relevant to the weight to be given to a witness' evidence when they have died before they were cross- examined in Amalgamated Television Services Pty Limited v Marsden [2002] NSWCA 419 (Amalgamated): "[188] 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.""
Levine J set out a rationale for affording any weight to evidence untested by cross-examination in Marsden v Amalgamated Television Services Pty Limited [2001] NSWSC 510 (citations omitted): "[1021] A reason advanced for affording the evidence any weight in those cases where death or incapacity intervenes, is that the witness did not know when examined in chief, that death would prevent him being cross-examined. Fear of cross-examination therefore operated as "some guarantee of a willingness to tell the truth""

Jones v Dunkel inferences

Ward CJ in Eq (as her Honour then was) set out what a Jones v Dunkel inference is in Galati v Deans [2021] NSWSC 1094: [496] "In circumstances where the evidence adduced calls for an explanation by a party and that party fails to call a witness or tender evidence, a Jones v Dunkel inference may be drawn that the uncalled witness or missing evidence would not have assisted that party's case. The rule allows for the more ready acceptance of evidence which might have been contradicted, but which was not (see as explained in Greenaway v Auzhair 1 Pty Ltd (2010) 80 ACSR 538; [2010] NSWSC 1339 (Auzhair Supplies) at [114]). However, the rule does not permit the court to choose between guesses simply because one guess seems more likely than the other or to fill the gaps in evidence (Jones v Dunkel at 305 per Dixon CJ). Thus, a Jones v Dunkel inference is only available where there is, on the evidence, a reasonable basis on which the inference may be drawn (Auzhair Supplies at [115]-[117]). Moreover, in Payne v Parker, Glass JA made clear that the rule only applies when three conditions are met, namely: (i) the missing witness would expect to be called by one party rather than the other; (ii) their evidence would clarify a particular issue; and (iii) their absence is unexplained."

Giovanna Toppi

As I have already noted, Giovanna's affidavit evidence was that without explanation from anyone, and not understanding what she was signing, Giovanni acquiesced in Paola's request "Mum, I need you to sign here" or "Sign here, Mum". However, an important preliminary question is what approach the Court should apply to her evidence when most of it was not able to be tested by cross-examination.
As was required to be the case at the time, the entire hearing was conducted remotely. Giovanna was sworn through an interpreter at 10.33 am (T85:1) on the third day of the hearing (Monday, 20 September 2021), which had commenced at 9.30am. With that commencement time my practice is to take a morning tea adjournment at about 11am.
Giovanna was cross-examined by Mr Jammy for about half an hour. It was done through an Italian interpreter, although Giovanna appeared to understand some questions before they were interpreted and answered in English. The cross-examination, such as it was, takes up ten pages of transcript. After some questions about Giovanna's history as a restaurateur, the topic had turned to preliminary questions about the Settlement Deed and the alleged debt of $100,000 owed to the Bicher entities when morning tea was taken.
Before the Court rose, I said this to the parties (T96:1-8): "I have some reservations about how well this is working, but it's really a matter for counsel. It is theoretically possible if people take the view that this will be better done in person that I may be able to get us a court separate from this building, but I'm in the parties' hands if that application is to be made. At the moment I'm just signalling that I'm slightly concerned that we're getting a proper understanding and a proper impression of the witness through this process, but I'm in counsel's hands."
I indicated to the parties that over morning tea I could make inquiries if a court room could be made available outside the main Queen's Square complex for the hearing to continue in person. I then had this exchange with Mr Kidd SC (T96:45-97:13): "KIDD: For what it's worth, as I understand it, my side proposed an application for an in person hearing. My learned friend's side didn't agree and the application wasn't made. For what it's worth, if your Honour is willing to make that enquiry over morning tea that would be relevant to know whether it's possible, obviously. HIS HONOUR: Yes. KIDD: I suppose a question there is at what point in time that could be convened, particularly where, as I understand it there's a dialysis procedure tomorrow. I don't know how feasible it is to hastily convene an in person hearing for this afternoon, for instance - HIS HONOUR: I'll make that enquiry, Mr Kidd, otherwise it will have to be on another day, which I know is very unsatisfactory, if people think that it's serious. But I have to say, having now been doing this for more than a year this is the first time I'm genuinely having some reservation about the fairness and effectiveness of what's going on. But it's not at the point where I feel the Court should intrude. I think at this moment I really just need to rely on the parties to tell me if anyone feels they're being disadvantaged and make the offer. Perhaps on that basis, Mr Kidd, in light of what you've said I should at least go and make an enquiry over morning tea? KIDD: For our part, we'd be grateful if your Honour is willing to do that and take some instructions about it in the meantime. HIS HONOUR: Yes, all right."
The solution I had in mind was not achievable. After the short adjournment I informed the parties that the only possibilities were to press on with taking Giovanna's evidence remotely or adjourn her evidence. I also said (T97:50 - T98:1-8): "HIS HONOUR: To be perfectly frank, the problem I'm having, quite apart from the problems that you may be having, are that it is very difficult for me to tell how much is what is the flat effect of being on a screen, an older witness through an interpreter, giving her answers off into space, to what extent is her lack of understanding, simply the completely strange circumstances in which she finds herself, as opposed to something more to do with her mental condition, her capacity to understand and the like, so I do have a concern about that, but you may say to me, "Look, that's fine, we'll just press on."
The exchange continued in the (electronic) absence of Giovanna and Mr Jammy said (T99:36-100:4): "JAMMY: Your Honour my instructions accord with my recommendation, which is that we will be seeking an adjournment until such time as Ms Toppi is able to give evidence in person. The reasons for that really are because the nature of the dispute is a matter is one where both her under understanding and ability to understand and communicate are central to the issues in dispute, as are questions of her credibility. A credit finding is going to need to be made in respect of her evidence given the conflict between her and the evidence of the other witnesses. We believe, in those circumstances, it's important that your Honour is able to properly assess her demeanour and understand her answers and form a view. That would be the first reason. The second reason is the one that we discussed before we adjourned, which is that I simply cannot hear her answers, which makes it very difficult for me to let the cross-examination flow if I don't know what her answer to a previous question is. I don't want to stop her answering spontaneously, I think that's very important that she be allowed to do that. I wouldn't ask your Honour to direct her to answer through the interpreter. If she feels comfortable answering a question she must do so, but there is that difficulty that I'm struggling with the audio."
Mr Kidd SC neither consented to nor opposed the application provided that the length of any adjournment to take Giovanna's evidence would not be too long. Ultimately, Giovanna's evidence and the time for final submissions was adjourned to 6 and 10 December 2021 respectively, on the basis that all the other witnesses would give their evidence on the days originally fixed for the entire hearing. That is what occurred. Unfortunately, and unexpectedly, Giovanna died on 3 November 2021.
WFM submits the Court should limit the use made of Giovanna's affidavits, as it may unfairly prejudice WFM (s 136 Evidence Act 1995 (NSW)) and that it should only be accepted to the extent it is not contradicted by other evidence. In support of the application for a limiting order, Mr Jammy's closing submissions identified numerous areas upon which Giovanna was not able to be cross-examined which he submitted were central to the dispute, including (and I here reproduce Mr Jammy's written submissions): "a. the Settlement Deed to which Giovanna was a party, and specifically her knowledge of: i. the "Giovanna Loan" as defined in the Settlement Deed; ii. the mortgage given by Giovanna in respect of the Property, to secure the required payment by G&P Toppi under the Settlement Deed; iii. the consequences of the failure of G & P Toppi to satisfy its payment obligations under the Settlement Deed, including the possibility of Giovanna losing the Property if the mortgage given by her was to be enforced; b. the fact that Giovanna knew Nick Politis (Mr Politis), Francesco Colacicco (Mr Colacicco) and Mia Fredrix; c. Giovanna's request to Mr Colacicco that he ask Mr Politis, on her behalf, to lend her and Paola the money to satisfy the payment of obligations under the Settlement Deed; d. the circumstances in which Giovanna signed the Giovanna Guarantee and the Mortgage on or about 12 October 2018, including that Mr Beazley was present at the time of signing, he witnessed her signatures on those documents and he explained to her the contents, nature and effect of those documents on her and the Property; e. Mr Beazley being Giovanna's solicitor at the time of signing the loan security documents, as confirmed in the letter dated 27 September 2018 to that effect signed by her; f. Paola asking Mr Beazley to arrange and Mr Beazley arranging a further meeting on or about 26 October 2018 with Giovanna for Giovanna to sign a further set of loan security documents; g. Giovanna's meeting with Mr Beazley on or about 26 October 2018 where Giovanna signed a further set of loan security documents, including that Mr Beazley was present at the time of signing, he witnessed her signatures on those documents and he explained to her the contents, nature and effect of those documents on her and the Property; h. Giovanna signing a new will on or about 26 October 2018 which had been prepared by Mr Beazley on Giovanna's instruction, in his capacity as her solicitor; i. Giovanna's history of providing security for her and her daughters' business-related monetary obligations and using the properties owned by her for that purpose, including: i. the mortgage given by Giovanna over a property at 41 Warren Road, Bellevue Hill (Bellevue Hill Property) for her daughter, Caterina Tarchi (Caterina) in or around 2006; ii. the mortgage given by Giovanna over the Bellevue Hill Property in or around 2006 as security for a loan in favour of Machiavelli Holdings Pty Ltd (Machiavelli Holdings) (of which Caterina was the sole director) from National Australia Bank for $1 million obtained in connection with the operation of Machiavelli Restaurant; iii. the mortgage given by Giovanna over the Property in or around 2010 as security for a further loan in favour of Caterina's company, Machiavelli Holdings, from the National Australia Bank for approximately $1 million, which is referred to in Giovanna's 26 October 2018 will and which created tension with Caterina when Caterina kept the proceeds of the sale of Machiavelli Restaurant; iv. the mortgage given by Giovanna over the Property in 2013 as security for a loan in favour of Giovanna from Neolite Neon Co Pty Ltd (Neolite) for $150,000 (Neolite Loan); v. The Deed of Release negotiated with, among others, Caterina in 2018. j. whether Giovanna's statement that Mr Beazley was not and had never been her solicitor was true in light of: i. Mr Beazley's correspondence on behalf of Giovanna with Neolite's solicitor regarding the Neolite Loan; ii. a will signed by Giovanna and dated 10 October 2013 which was prepared and witnessed by Mr Beazley; iii. the Enduring Guardianship and Power of Attorney signed by Giovanna and dated 30 December 2013 which was prepared and witnessed by Mr Beazley; iv. Giovanna's withdrawal of Mr Beazley's mandate in December 2017; v. Giovanna's will dated 26 October 2018, which was prepared and witnessed by Mr Beazley; vi. Vivian Evans' statement on 4 February 2019 that Mr Beazley had acted for Giovanna; k. the accuracy of the information in Dr Sharon Reutens' report dated 25 June 2018 about Giovanna's relationship with Paola, including Giovanna's sense of betrayal by Paola in June 2018; l. the unlikelihood of her simply signing the Giovanna Guarantee and the Mortgage at Paola's request, having asserted that Paola had take advantage of her and abused her trust in similar circumstances; m. that Giovanna was a wealthy woman with assets of between $4 to $6 million depending on these Proceedings; n. that Giovanna gambles regularly and spends considerable amounts of money at casinos despite her poor health (at least in 2018); o. the webpage article from 2018 about Giovanna's second lease of life after her health scare; and p. her ability to understand English."
On the contrary, Mr Kidd SC submitted that Giovanna's evidence should not be so limited in circumstances where the cross-examination was adjourned through no fault of her own.
I will first consider what is to be made of affidavit evidence which was the subject of what little cross-examination did occur. I propose to treat it and the cross-examination evidence (such as it was) in the same way I will approach Giovanna's affidavit evidence that had not been the subject of cross-examination. This is because the technical and other issues identified in the transcript exchanges set out above demonstrate that, through no one's fault, it was not able to be conducted in a way that was fair to anyone, including Giovanna. In any event, the cross-examination had barely begun to touch any central issue before it was adjourned.
Insofar as Giovanna's affidavit evidence generally is concerned, I do not accept either that the evidence should be limited as Mr Jammy submits or Mr Kidd SC's appeal to the proposition that what occurred was no fault of Giovanna's. Inevitably from time to time witnesses, in some cases central witnesses, die before they are able to be cross-examined. I propose to follow what was said in Amalgamated and Fulton (see [62] and [63] above).
In approaching Giovanna's evidence, I have borne in mind that it goes to the critical issues in the case, so the possibility of the Court being more prepared to accept untested evidence on peripheral issues does not apply. Furthermore, while the language of "weight" and "discount" is familiar in this field of discourse, it is metaphor which, in my respectful opinion, is helpful only up to the point that it begins to disguise or distract from how a judge as trier of fact actually approaches her or his task. My own preference is to analyse the issue in terms of persuasiveness.
As is noted in [62] above, the judge must be actually persuaded of the existence of a fact, which is not the same thing as a pseudo-scientific determination of 51% probability. The judicial process of being persuaded is ultimately the application of common sense and human experience (concepts which overlap but are not co-extensive) to reach a state of satisfaction that something happened. The degree of certainty that accompanies that state of satisfaction is reflected in the law's different requirements in relation to standard of proof, including by application of the statutory expression of the Briginshaw standard in civil matters, or proof beyond reasonable doubt in criminal matters. Matters of common sense and human experience include propositions such as that an account of an event prepared shortly after the relevant event is likely to more accurately reflect what occurred than an account written five years later, or that the evidence of a witness with no interest in the outcome is likely to be more accurate than a partisan witness. Another example are the matters identified by McClelland J in the well-known passage from Watson quoted at [62] above.
In assessing the evidence of a person, the common law has long taken the view that the giving of evidence is a human rather than mechanical or administrative process. This means that a critical element in determining the persuasiveness of a witness's evidence, especially when it has been given on the written page, is to require the witness to be made available so that the judge can bring to bear her or his own human experience in assessing the likely reliability of another human being by seeing them in person, and by observing how they respond to the testing of their evidence both in terms of what they say and how they say it. While by no means infallible, this latter element - demeanour - can be useful as one factor in the complex, interactive and intuitive process of fact finding.
In the case of Giovanna's evidence, it has a degree of persuasiveness for the reason identified by Levine J in Amalgamated at first instance (see [64] above). It may be more persuasive in relation to any matters deposed to if they accord with what human experience suggests is inherently likely, is contrary to her interest or is corroborated by other evidence which the Court accepts. However, the persuasiveness of her evidence that is not contrary to her interest will be reduced on critical matters for at least two reasons.
First, it is the evidence of a party and must be considered in the light of the issues identified in Watson quoted at [62] above.
Second, unlike the evidence of other witnesses, the Court will not have the advantage of seeing Giovanna in person and observing how she responded to the testing of her evidence both in terms of what she would have said and how she would have said it. Depending on the nature and importance of the fact in question, these matters may mean that her evidence cannot be as persuasive as the evidence of a witness who has been cross-examined, and whose evidence has not been relevantly undermined by that cross-examination.

Sharon Reutens

Dr Reutens was called to prove the Report (extracted in [18] above). It was not a report prepared for these proceedings or which even coincidentally deals with the specific issues in these proceedings. That is not a criticism.
Dr Reutens presented as a considered and professional practitioner whose evidence the Court has no hesitation in accepting. The most pertinent aspect of her relatively brief cross-examination (taking up only five pages of transcript) was (T76:12-44): "Q. She was able to remember and relate to you the history of the various restaurants that she had owned? A. Yes. Q. In some detail, she remembered the years that she had opened and closed various restaurants, what they were called, where they were located, is that correct? A. Yes. Q. You didn't discuss at any stage with Ms Toppi, did you, whether she knew what a mortgage was? A. No, no. Q. Or a guarantee? A. No. Q. You weren't asked to do that, were you? A. No. Q. At no stage have you discussed with her, either in that meeting or subsequently in documents that this litigation is concerned with? A. No, I haven't. Q. Is it correct that ultimately your finding in respect of Ms Toppi's cognitive impairment was a provisional finding? A. It was - yes, yes. I was conservative, I suspected it, but I didn't want to make it more than provisional without further testing, yes. Q. And in fact you recommended there should be further investigation. A. Yes. Q. Without that further investigation you couldn't make a definitive diagnosis? A. Yes."
Notwithstanding the provisional nature of her diagnosis, I propose to take her conclusions into account as relevant but far from determinative. This is because it was a conservative, provisional diagnosis of a "mild" condition requiring further investigation in circumstances where Giovanna was on the borderline of the relevant diagnostic indicator, scoring twenty-two out of thirty on the Roland University Dementia Assessment Scale where a score of twenty-two or less is suggestive of cognitive impairment.
As will become apparent in these reasons, the Report is of far greater significance in these proceedings not so much for its conclusions but because it records in a way which I accept as accurate both what Giovanna told Dr Reutens at the time and how Giovanna appeared in circumstances unaffected by the present dispute.

Francesco Colacicco

Mr Francesco Colacicco (Mr Colacicco) is a real estate agent who assists WFM.
Mr Colacicco's evidence (set out at [21] above) is that he took a phone call from Giovanna. Giovanna was upset and distressed due to the legal proceedings instituted by the Bicher entities. Giovanna pleaded with Mr Colacicco to speak to Mr Nick Politis (Mr Politis), the owner of WFM, to see if he could help Paola and her with a loan and offered the Property as security.
Mr Kidd SC submitted that Mr Colacicco's evidence is unreliable because it is based on his memory alone, unsupported by any contemporaneous record such as a file note. Furthermore, the request for Mr Colacicco to make an affidavit had come from Mr Politis, who was an important business connection for Mr Colacicco.
On the contrary, WFM submitted that any connection between Mr Politis and Mr Colacicco does not bear on the truthfulness of his evidence. Furthermore, although Mr Colacicco could not remember every conversation during this period, he was sure he could remember significant conversations.
I do not accept that Mr Colacicco's business connection to WFM is a sufficient or proper basis to doubt Mr Colacicco's evidence. It was not put to him that his evidence was false, rather that it was not reliable given the passage of time and the frailty of human memory. Mr Colacicco presented as an independent and reliable witness whose only interest was to assist the Court by telling it what he could recall. He adhered to his evidence under cross-examination. The Court accepts his evidence.
In reaching this conclusion there are three other matters I should record in relation to Mr Colacicco's evidence about the conversation he said occurred at the restaurant on the evening of 28 October 2018 (see [51] above).
First, my acceptance of Mr Colacicco as a reliable witness has been made taking into account that Giovanna denied the relevant parts of his evidence. However, in accordance with the approach I have set out in paragraphs [81] and [82] above, I find Mr Colacicco's evidence to be more persuasive than Giovanna's untested denial.
Second, at [115] below I have concluded that no Jones v Dunkel inference should be drawn in relation to WFM's failure to call Mr Politis. If I had drawn such an inference, it would then have made it easier for the Court to infer based on Giovanna's denial that no such conversation had taken place. However, the inference would still not have assisted Giovanna's case because I would nevertheless have concluded that Mr Colacicco was a reliable witness whose evidence I should accept.
Third, Mr Kidd SC cast doubt on the reliability of Mr Colacicco's evidence of the conversation because he gave this evidence in cross-examination (T152.6 - T152.46): "Q. When you gave the evidence a moment ago about the content of the conversation that you say you had with Giovanna, you were remembering what was written in your affidavit, correct? A. I was remembering what, what I'd sworn in my affidavit, that's correct. Q. You have included in your affidavit evidence of a discussion between Mr Politis and Giovanna on the date of the loan advance that you say that you observed, do you remember that? A. When, the day that they had their settlement with the loan, with their partners? Q. Yes. A. Yes, we attended the restaurant that evening for dinner with our partners. Q. Without partners, you mean without husbands and wives? A. With, with our partners. Q. You were at the restaurant for dinner, correct? A. Correct. Q. You had been drinking I assume? A. I don't drink, and we'd just arrived when that conversation took place. Q. It was a noisy restaurant, correct? A. No it wasn't because it was an early dinner and we had just arrived. It was about 6.30 of an evening, 6 to 6.30, and we had an early dinner there, as we did many other times, maybe two, three times a week. Q. On this occasion who was there, you, Mr Politis? A. Myself, Mr Politis, my wife and Mr Politis' partner. We had a table that we would have dinner at every time. It was a designated table for us. Our partners walked in and went to the table, got ushered to the table, and Giovanna got up from her table where she spent most of the time, that was a table designated for her, and came over to thank us, thank Mr Politis, kissed us hello and thanked him and thanked myself as well. Q. That's your best memory of that incident, correct? A. Yes it is. Q. Being honest, would you agree that that memory is a vague memory? A. No it's not a vague memory, I can remember it."
Mr Kidd SC drew to attention as an example of the fallibility of human memory that Mr Colacicco's account did not refer to the additional words he had recorded in his affidavit "…You saved us. Don't worry we'll pay back the money in 1 year. I will sell the property".
I am satisfied of the reliability of Mr Colacicco's affidavit evidence notwithstanding the evidence recorded in [51] above for two reasons. First, I accept Mr Jammy's submission that at that point of his evidence set out in [96] above, Mr Colacicco had not been asked to recount what had been said, but had been giving a more general response to the proposition that he could not remember what had occurred. Second, when Mr Colacicco's evidence in the witness box is understood in both its immediate context ("a discussion between Mr Politis and Giovanna on the date of the loan advance": see [96] above) and earlier questions (see T150:37 - T151:11) about his recollection of what Mr Politis had said to him (Mr Colacicco) about the terms on which he would make the loan, the evidence Mr Colacicco gave - "Giovanna…came over to Mr Politis, kissed us hello and thanked him and thanked myself as well" - can only be understood as being to the effect that Giovanna was thanking Mr Politis (and Mr Colacicco) for the financial assistance WFM had given.

Daniel Ryan

Daniel Ryan (Mr Ryan) is a director of WFM. He gave his evidence in a straightforward fashion with clear answers. He presented as a businessman giving evidence about a business transaction in a truthful way and he did not give any sense that his evidence was coloured by a perceived need to defend WFM's conduct in entering into the arrangements which it did with Paola and Giovanna. The Court accepts his evidence.

Philip Beazley

In explaining the view to which I have come as to the treatment of Mr Beazley's evidence, it is convenient to set out my conclusions before dealing with the parties' submissions: 1. Mr Beazley's evidence is not reliable to the extent it relies on either or both of his memory or his purported practice alone. This is because I have serious doubt about the reliability of his memory and other evidence demonstrates, at the very least, poor professional practice on his part. 2. I am nevertheless satisfied both that Mr Beazley was doing his best to recall what occurred as well as his memory allowed and that he was not seeking to mislead the Court deliberately. 3. I will only accept Mr Beazley's evidence where it is against his interest, inherently probable or is corroborated by contemporaneous documentary or other independent evidence.
Mr Beazley swore two affidavits in these proceedings in WFM's case, the first on 28 May 2021. This referred to a meeting with Giovanna on or about 12 October 2018 (see [36] above).
Mr Beazley's second affidavit was sworn on 15 September 2021, the day before the hearing commenced. Because of its importance, it is necessary to set out some parts of the affidavit at length: "4. During the course of preparing for appearing in these proceedings to give evidence, it became apparent to me that the date on which I met with Giovanna Toppi has become an issue. Whilst reviewing my records, it became apparent that the mortgage documents were not executed just once, but twice. 5. At the time of swearing the May 2021 Affidavit, I had vivid memories of the execution of the first set of documents with Giovanna, because it happened at a venue where I do not usually execute mortgage documents. I had a briefcase of documents and my stamps with me sitting at a large round table at the rear of the restaurant with just myself and Giovanna, 6. Because at the time I swore the May 2021 Affidavit I was unaware of which set of documents were being relied upon by the plaintiff and I had not reviewed the entirety of my records in relation to the mortgage documents, it completely slipped my mind that the documents executed on 12 October 2018 were not the final documents. [This sentence not reproduced as confined to witness' understanding.] … 8. It has been my practice since 2013 when I started to use this system, that all hard copy documents are scanned electronically, named with the date of the document, the matter number of the file and a brief description of the document. That document is then stored in the storage drive of my computer system in a file called "Entered into Leap". That document is then uploaded in the matter. A copy of the list of documents in my LEAP System is at page 266 of Exhibit PB1. In that list, the left hand column is a description of the document. The right-hand column is a record by the LEAP System when it was uploaded and by whom. "SW" is my office clerk. "PB" is me. 9. In the May 2021 Affidavit, I deposed at paragraphs 12 to 20 that I met with Giovanna at Bar M on 12 October 2018 to sign the facility documents for the Bar M Loan. That is true. On Monday 15 October 2018 between 10.43am and 12.56pm each document was scanned. I prepared a letter at 12.50pm to HWLE enclosing the documents and my office clerk delivered them by hand. A copy of that letter, recording its receipt by HWLE, is at page 640 of the Court Book. 10. What has become apparent is that on 26 October 2018 between 12.32pm and 2.26pm, a new set of signed documents was scanned into the LEAP System. I typed a further letter to HWLE at 3.10pm and the second set of original documents were hand delivered to them. 11. What I cannot presently explain is why I hand wrote the date 25 October 2018 on the documents. It is only possible they were executed on 26 October 2018 between 11am and 2.26pm. I know this for the following reasons: … (c) On 25 October 2018 at 5.11pm, I received another email from Ms Townsend enclosing a further version of the lease to be signed. A copy of the email is at page 645 of the Court Book. A copy of the lease attached to the email is at page 270 of Exhibit PB1. … (e) I have reviewed my computer and the "downloads" record for 25 and 26 October 2018. This is where any documents downloaded from an email will be recorded and the time it was downloaded. I downloaded the unsigned execution documents onto my computer for printing at 11.03 am on 26 October 2018. A screenshot of the "downloads" record is at page 330 of Exhibit PB1. … 13. [First sentence rejected.] I have no independent recollection of this meeting [referring to meeting Giovanna between 11.03am and 2.30pm], which does not surprise me because there was nothing unusual or special about it. 14. Because the certificate signed by a guarantor requires that the documents be explained to the guarantor prior to executing the documents, it is my [word rejected] practice to explain to each guarantor what the document means and what their risks are before they sign any of the documents. I have never witnessed financial documents such as these for someone who was not present at the time they signed the documents."
Mr Beazley was cross-examined in relation to a dispute involving the Law Society in 2014, including proceedings brought against him in NCAT by the Law Society successfully alleging professional misconduct and the truthfulness of his explanations in that dispute. These related to when Mr Beazley realised he ought to give a Notice of a Show Cause Event in relation to two creditor's petitions that had been presented against him. It was submitted for Giovanna that Mr Beazley had been dishonest in his evidence before NCAT, a proposition Mr Beazley firmly denied in the witness box. Furthermore, as WFM submitted, no express finding of dishonesty was made by NCAT.
I do not regard the evidence that emerged concerning the matters referred to in the preceding paragraph as sufficiently close in time or subject matter to these proceedings to be of reliable assistance in assessing Mr Beazley's credit. In any event, the views to which I have come are derived from his own proven conduct and evidence in relation to the issues in these proceedings. Recourse to collateral evidence as to credit is unnecessary.
Insofar as Mr Beazley's memory is concerned, I accept the gravamen of Mr Kidd SC's first submission that any confidence the Court might have in its reliability is decisively shaken by the circumstances of his first and second affidavits. His first affidavit was sworn on 28 May 2021, less than three years after the events in question. However, Mr Beazley candidly said that he only recalls the first meeting with Giovanna on 12 October 2018 and not their second meeting on 26 October 2018. I do not accept his rationalisation in his second affidavit as to his failure to recall the second meeting "because there was nothing unusual or special about it". It seems to me that, accepting his account of events for the sake of the argument, having to arrange for an elderly client to attend his offices at short notice, print out and explain the contents of a suite of legal documents and then have them executed and returned to HWLE all in the space of about three hours might be thought to be unusual.
The Court's conclusion is that even allowing for the fact that Mr Beazley is a busy solicitor, his complete failure to recall the later events gives the Court no real confidence in the reliability of his memory. This casts critical doubt over the reliability of the recollection that he has proffered as to the substance of the advice he says he gave Giovanna, quite apart from the question of the adequacy of that advice, assuming it was given (as to which see [167] below).
Second, Mr Kidd SC emphasised that Mr Beazley did not make a file note or record and retain on his file the advice given by him to Giovanna in accordance with rule 11 of the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015 (NSW). This meant both that Mr Beazley had only his memory to rely on and demonstrated non-compliance with professional standards. Mr Beazley sought to explain his failure on the basis that the requirements change every year. I accept Mr Kidd SC's submission that explanation is wrong. Assuming in Mr Beazley's favour that it was seriously advanced, it again reflects adversely on the standard of his professional practice.
WFM submitted that, whether the failure to record his advice is a professional shortcoming of Mr Beazley or not, it did not support a finding that he did not give Giovanna such advice. I do not agree. The failure to record the advice as was required casts doubt both on whether the advice was given and its competence on the assumption that it was given.
Third, Mr Kidd SC pointed to the fact that Mr Beazley had certified that Giovanna signed Giovanna's signed transaction documents on 25 October 2018 in his presence. As Mr Beazley himself accepted, that could not have occurred until 26 October 2018 and Mr Beazley had no satisfactory explanation why he had certified that she had done so on 25 October 2018.
Mr Jammy submitted that the probable explanation was simple error. Given the admitted rush in which things were apparently done, I accept that is the probable explanation. However, that only again reflects poorly on the care and competence with which Mr Beazley approached his task. Of even greater concern to the Court on that score is that Mr Beazley permitted Giovanna to declare, and he witnessed that declaration (set out in [46] above), that she had received independent legal advice (being the advice he said he had given her). Independent advice in the context of a third party mortgage and guarantee transaction means independent of both the lender and the borrower. Mr Beazley could not give such independent advice because he was acting for Paola and Bar M. That he either failed to see or ignored his clear conflict of interest casts further doubt on the standard of his professional practice and, therefore, the quality of any advice he may have given to Giovanna.
Fourth, attention was drawn to the evidence relating to the execution of the Settlement Deed. This was to the effect that someone - "presumably Mr Beazley" according to the submissions for Giovanna - removed execution pages signed by the Toppi parties and attached them to another version of the Settlement Deed signed by the other parties. Not least because no original documents were in evidence, such alleged conduct if it occurred was not sufficiently demonstrated as being attributable to Mr Beazley to be taken into account in assessing his evidence on the critical matters in this case. In any event, the Court has come to its views about the lack of reliability of Mr Beazley's evidence without recourse to this matter.
Fifth, Mr Beazley swore in his affidavit of September 2021 that, at the time of his May 2021 affidavit, he was not sure which documents were being sued upon. In cross-examination, however, Mr Beazley conceded he had been provided with the relevant documents before he swore his May 2021 affidavit. He did not accept that what he had said in his September 2021 affidavit was false. Mr Kidd SC submitted that it was false. I am not satisfied it was false in the sense of a knowingly wrong statement. I am well satisfied that it is yet another example of professional carelessness and lack of attention to detail on the part of Mr Beazley.
Finally, it was submitted that Mr Beazley and Paola had a close relationship that was more than the ordinary solicitor client relationship. They had celebrated two birthdays together at the restaurant. Further, Paola sent Mr Beazley an email on 18 June 2021, saying: "Well, if [Giovanna] drops dead then we can frustrate the probate and settlement… here's hoping." I accept Mr Kidd SC's submission that Mr Beazley's evidence must be understood as being coloured by friendship with Paola rather than an arm's length professional relationship between a solicitor and his client. However, in and of itself, I do not regard such a friendship as sufficient to be a decisive matter in not accepting his evidence, although it will certainly lend support to such a conclusion where it is available by reference to other matters.

Nick Politis

It was submitted for Giovanna that a Jones v Dunkel inference in relation to Mr Politis should be drawn because he had not been called to give evidence notwithstanding that he was obviously in WFM's camp and had knowledge of relevant events either directly or through others. However, WFM submits there is no scope for such an inference as Mr Politis' evidence would have been hearsay and Mr Colacicco had already given a first-hand account of what had occurred at the restaurant on 28 October 2018 (see [51] above).
The Court concludes that no Jones v Dunkel inference can be drawn in relation to Mr Politis because his evidence would only have been cumulative of Mr Colacicco's evidence: Manly Council v Byrne [2004] NSWCA 123 at [60]-[67]. No objection was pressed to the relevant parts of Mr Colacicco's evidence, including hearsay material of what Mr Politis said to Mr Colacicco about why and on what terms the former was prepared to make a loan. WFM called as witnesses the two people who were actually involved in making the Transaction happen: Mr Ryan and, to a lesser extent, Mr Colacicco. Furthermore, any evidence from Mr Politis about what Giovanna said to him and Mr Colacicco on 28 October 2018 (see [51] above) would clearly only have been cumulative of Mr Colacicco's account and could not have affected the complexion of Mr Colacicco's evidence of the incident: Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 at [85] per Nettle JA. In my respectful opinion, it falls within the hornbook example of cumulative evidence: if there were five people at a meeting, it will be sufficient to call one person who was at the meeting to give evidence of what that person heard being said.

Paola Toppi

It was submitted for Giovanna that a Jones v Dunkel inference in relation to Paola should be drawn against WFM because she had not been called to give evidence. Paola and Bar M have filed an acknowledgment of their liability for the whole of the amount claimed by WFM and Paola consented to her solicitor, Mr Beazley, giving evidence for WFM. WFM has not yet taken any enforcement action again Paola or Bar M. In those circumstances, Mr Kidd SC submitted that Paola was "in the camp" of WFM, had evidence relevant to the proceedings and there was no explanation for her absence.
WFM submitted there is no scope for such an inference because Paola was a non-party witness and not in WFM's "camp".
The Court accepts WFM's submission. Paola was a non-party witness, that is to say she was not under the control of WFM or Giovanna. The fact that she may have admitted her liability to WFM does not put her under the control of or "in the camp" of WFM. That analysis may have been different if there was evidence that WFM had released Paola from liability to it and agreed to indemnify her from suit by Bar M and Giovanna. But that is not this case.
Quite apart from not being under the control or influence of WFM, nor would WFM be reasonably expected to have called Paola. If Paola had been called by WFM and denied that she had improperly influenced her mother, that evidence would have been of little assistance to WFM because Giovanna would have argued that any such denial was driven by self-interest in deflecting any liability from herself (Paola) to Giovanna.

Contracts Review Act - Legal Principles

There was no real dispute between the parties as to the principles to be applied. Because of the view to which the Court has come on the facts, the most salient legal principles can be stated relatively briefly.
The relief and matters to be considered by the Court under the Contracts Review Act 1980 (NSW) are set out below. "7 Principal relief (1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following - (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, … 9 Matters to be considered by Court (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of - (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following - (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not - (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of - (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act - (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made."
Campbell JA set out the elements that must be satisfied to found a claim under the Contracts Review Act 1980 (NSW), in Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343: "[85] Comparatively early in the life of the Contracts Review Act, McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 recognised, at 621, that the Act "… is revolutionary legislation whose evident purpose is to overcome the common law's failure to provide a comprehensive doctrinal framework to deal with "unjust" contracts." [86] McHugh JA recognised, at 620, that a contract can be unjust "because of the way it operates in relation to the claimant or because of the way in which it was made or both." He recognised that a contract could be unjust because it contained "substantive injustice" - which arises "because its terms, consequences or effects are unjust", or because of "procedural injustice" - which arises "because of the unfairness of the methods used to make it" - or both. He recognised, at 621, that a contract can be "unjust" even if it is not unconscionable, harsh or oppressive. Notwithstanding the traditional view that equity took about circumstances in which it would hold that enforcement of a contract was unconscionable, a contract may be unjust even though the circumstances that give rise to that injustice are not known to the other party: Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 at 277; Nguyen v Taylor (1992) 27 NSWLR 48 at 71 per Sheller JA; Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [94]-[96]. [87] In applying the Contracts Review Act, two distinct steps are involved. As stated by Brereton J in Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 at [51]: "… The first is whether the contract was unjust in the circumstances in which it was made, having regard to the factors referred to in s 9. This is a conclusion of fact, albeit one of ultimate fact involving a broadly based value judgment [ Antonovic v Volker (1986) 7 NSWLR 151, 154-155 (Samuels JA, Kirby P agreeing); Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256, 270E (Samuels JA); Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41, [34]-[40] (Spigelman CJ), [106]-[111] (Basten JA)]. The second, which arises only if the first is resolved in the affirmative, is whether any and if so what relief should be granted; this involves the exercise of a judicial discretion [Khoshaba, [34]-[36] (Spigelman CJ), [109] (Basten JA)]." [88] Thus, if the contract is found unjust by reason of circumstances not known to one of the contracting parties, it does not automatically follow that relief will be given to remedy that injustice."
Allsop P (as his Honour then was) said, in Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36: "[7] The broad evaluation of unjustness under the Contracts Review Act 1980 (NSW) ss 4, 7 and 9 involves the normative evaluation of the totality of relevant circumstances. Inevitably minds may differ as to conclusions about such questions. Also, it is often not fruitful to compare other cases with the particular circumstances at hand, lest one be deflected from an appropriate overall assessment by focus on particular aspects relevant to any such comparison. Central to the normative evaluation is the recognition that there is a need for the protection of some people in some circumstances, who are not able fully to protect their own interests against factors that may cause injustice. That vulnerability may come from one or more of many circumstances, such as lack of education or of intelligence, from gullibility, from the predation of fraud and greed, and also sometimes from loyalty and love. The characterisation of a contract as unjust and the sheeting home to the other contracting party of the consequences of its unjustness may be a difficult evaluative exercise. At its heart, however, is the recognition of the inadequacy of one party to protect her or his interests in the circumstances. Here, there was no predation. There was no behaviour in which Provident sought to take advantage of Mrs Papa. Her son may have sought to do so, but his exchanges with his mother can be seen as blandishments born of his own optimism. Mrs Papa had a solicitor whose advice was inadequate. It would, in my view, be unjust to visit the blandishments of the son and the inadequacy of fulfilment of retainer by the solicitor on the lender. That conclusion involves a consideration of all the matters referred to by Macfarlan JA, including the fact that Mrs Papa was a capable and intelligent woman, who was in no way misled by the lender in entering into the transaction."
WFM drew to attention this conclusion by Pembroke J in Williams v Commonwealth Bank of Australia [2013] NSWSC 335: "[34] My findings of fact lead to the conclusion that the plaintiff has not established any case based on unconscionability or pursuant to the Contracts Review Act. It is not enough that he was simply elderly at the time he gave his guarantee and mortgage. Nor is it enough that he obtained no personal benefit from the transaction other than the moral satisfaction to be derived from the gift of paternal benevolence to his youngest son."
This last case, it was submitted for WFM, demonstrates that something more must be proved than that Giovanna was merely elderly at the time she signed the Giovanna Guarantee and Mortgage. Further, it is not enough that she obtained no personal benefit from the transaction.
Mr Kidd SC contended that this was a case of asset lending, of which Basten JA (as his Honour then was) said in Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 (Khoshaba): "[128] To engage in pure asset lending, namely to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default, is to engage in a potentially fruitless enterprise, simply because there is no risk of loss. At least where the security is the sole residence of the borrower, there is a public interest in treating such contracts as unjust, at least in circumstances where the borrowers can be said to have demonstrated an inability reasonably to protect their own interests, for the purposes of, for example, s 9(2)(e) or (f). That does not mean that the Act will permit intervention merely where the borrower has been foolish, gullible or greedy. Something more is required: see Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482 at 491 (Handley JA) cited with approval in Elkofairi (supra) at [77] by Beazley JA."
Brereton J (as his Honour then was) said in Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153 (Riz) (reversed on appeal on other grounds): "[70] The substantive unfairness is said to be found in the "asset lending" element. Although asset lending is not necessarily unjust, such contracts have the potential for injustice. The perceived injustice in "asset lending" is sourced in what is described in Khoshaba by Basten JA (at [128]) as the futility of the exercise: if the loan is not serviceable, then it is not in substance a loan but an asset sale, in which the lender risks nothing but the borrower risks the asset. Such a transaction involves no risk to the lender, but considerable risk to the borrower, given the likely inability of the borrower to perform and the probability if not certainty of resort to the security, with the lender being in a better position to protect itself against loss. The substantive unfairness lies in the imbalance of risk. Where that is voluntarily accepted, such a transaction may not be unjust. But where in the circumstances in which the transaction is made - particularly where the family home is involved - the borrower has a less than full appreciation of the risks or consequences, or is under some misapprehension or pressure, so as to provide an element of procedural unfairness, such a loan may be unjust. And even apparent comprehension of the transaction and its legal and practical effect and voluntariness is not entirely prophylactic: the purposes of the Contracts Review Act include protection of those who are not able to protect themselves, and while the Act is not a panacea for the greedy, it may come to the aid of the gullible."
WFM's submissions accepted that Khoshaba and Riz demonstrate that asset lending may be unjust. However, it was put that there is no one-size-fits-all formula for when a contract is unjust - each case must be assessed on its own merits, although the fact that the asset is the family home may make it more likely that the contract is unjust. In this case the asset was the Property, which was an investment property and not Giovanna's family home.

Critical factual findings

The parties' respective cases were presented as ultimately depending on several contested factual areas, which may be summarised as: 1. Giovanna and her circumstances, including her understanding (if any) of the Transaction. 2. Did the Transaction benefit Giovanna? 3. Did Giovanna have independent and competent legal advice? 4. The knowledge and behaviour of WFM.

The Court's findings about Giovanna

WFM characterises Giovanna as a savvy businesswoman who received adequate independent legal advice and whose health and age did not affect her ability to understand legal documents in English.
It was submitted that evidence of Giovanna's English ability comes from a variety of sources. Mr Colacicco gave affidavit evidence that Giovanna conversed in English and her English was good. Mr Ryan gave evidence in cross-examination that Paola and Giovanna were talking to each other in English. Mr Beazley gave affidavit evidence that he spoke to Giovanna in English, explained documents to her and that she had understood. Giovanna's English was good enough for her to conduct a two-hour psychiatric assessment in that language with Dr Reutens. Not only was Giovanna able to tell Dr Reutens about her background and life, but she was able to understand explanations about the effect of legal documents. Although Giovanna gave oral evidence in Italian, even in the short time she was in the witness box she often gave answers to questions in English before they were interpreted.
In 2018, Giovanna considered herself to be healthy, saying she feels younger than ever in an article on the restaurant website (see [24] above). WFM submits Giovanna was healthy enough to visit casinos regularly.
On the other hand, Mr Kidd SC submitted that Giovanna characterised herself as an 82-year-old widow who finished school in Year 5 in Italy. It was Giovanna's position that her English was limited and she could not understand legal documents in English; she had signed Giovanna's signed transaction documents because she was asked to do so by Paola and she trusted her daughter. Furthermore, her health was suffering. Giovanna needed dialysis three times a week and she had a possible cognitive impairment as of 25 June 2018.
In my respectful view, the best evidence the Court has about Giovanna in September and October 2018 is the Report, which carefully sets out Dr Reutens' observations of Giovanna on 5 June 2018. There is no evidence to suggest that those observations would not be equally applicable to Giovanna three or four months later. I will set out my findings about Giovanna and some related issues by reference to the Report (extensively extracted at [18] above). The quotations in [135] to [140] below are from the Report.
For the reasons advanced by WFM set out in [131] above, especially the Report, I find that, while English was not her native language, Giovanna could understand and speak conversational English well. That is unsurprising given the length of time she had been a successful restaurateur who had a significant "front of house" presence. So much is demonstrated by the fact that Dr Reutens was able to obtain over a period of two hours Giovanna's history and to ask her questions for the purpose of examining her.
I reach that conclusion bearing in mind Dr Reutens' observation that "questions sometimes had to be repeated because [Giovanna] did not appear to understand them". However, the important point for present purposes is that I infer that with repetition Giovanna was able to understand them. Furthermore, as the discussion recorded by Dr Reutens with Giovanna about an enduring power of attorney demonstrates, Giovanna was able to understand and retain a clear explanation about legal documents.
I also accept and find in accordance with Dr Reutens' observation that "it is probable that [Giovanna's] understanding would be enhanced with the use of an Italian speaking interpreter". Where precision and clarity of communication, and a higher degree of comfort about Giovanna's understanding was required, the assistance of an interpreter was desirable. This is supported by the recommendation that "she attend legal appointments with an Italian speaking interpreter in order to minimise any effects of language". However, Dr Reutens' use of "minimise" informs my conclusion that while the use of an interpreter on such occasions was desirable, it was not essential. Putting it another way, Giovanna was not a person who would be unable to attend effectively on an English speaking professional without an interpreter. The two hour interview with Dr Reutens without an interpreter demonstrates that to be the case, even allowing for Dr Reutens' cautious observation "although she appeared to understand my questions in the interview and the cognitive screening questions, her results might have been affected by language factors".
On at least three occasions (not extracted in [18] above) Giovanna referred to having to take legal advice or discuss a course of action with her solicitor. The Court is satisfied that she understood she could seek legal advice on matters of importance from her solicitor.
I find that Giovanna's general disposition was to trust and assist Paola, notwithstanding she had been "very upset" and "disappointed" that Paola had allegedly said (recalling it was Walter who had reported this to Giovanna) that Giovanna should be moved to a retirement home. It was against that background of trust that she would sign what Paola put in front of her: "Mrs Toppi said that because Paola was the oldest she had always trusted her and anything Paola asked her to sign she had signed".
Elsewhere in the interview Giovanna had said "I don't want to have a bad relationship with [Paola]". Dr Reutens also recorded "Ms Toppi said that she maintained a good relationship with Paola" and that "Ms Toppi stated that Paola and her husband had gone bankrupt in another business and she wanted to help Paola so Ms Toppi set her up in the business [Bar M]".
I do not regard this conclusion about Giovanna's desire to help Paola as being inconsistent with Giovanna saying she did not want to leave Paola a legacy. The reason Giovanna gives for that is precisely her generosity in life to Paola. However, I am not persuaded that negatives the probability that Giovanna would have wanted to help Paola keep the restaurant (an eventuality that arose after the interview with Dr Reutens). As Giovanna is recorded as saying on the Bar M website (see [24] above) "As long as I live I will be here to support my daughter".
In reaching this conclusion I have also taken some support from the fact that Giovanna made these statements in circumstances where it was Walter who had taken Giovanna to see Dr Reutens, so there is no possibility of any proximate influence over Giovanna by Paola (as, for example, might be said to have occurred where it is the major beneficiary who has taken an elderly testator to the solicitor who prepares the testator's will).
This conclusion also corroborates, and fortifies my acceptance of, Mr Colacicco's evidence that it was Giovanna who asked for Mr Politis' help, volunteered the Property and later thanked Messrs Politis and Colacicco for their help in advancing the funds to pay the Settlement Sum.
On a related topic, I find, as Dr Reutens recorded, that Giovanna intended to sell the Property and understood the process of selling. This again corroborates, and fortifies my acceptance of, Mr Colacicco's evidence that Giovanna said to Mr Politis "I will sell the [Property]". In reaching this conclusion I have not overlooked Mr Kidd SC's submission that what Giovanna told Dr Reutens about wanting to sell the Property did not contemplate providing further financial support to Paola. However, as I have already observed, the need for such support did not crystallise until after the interview with Dr Reutens. The Report provides clear evidence of the importance Giovanna placed on having assisted Paola into the restaurant. That, in turn, I consider makes more likely the prospect that Giovanna would not have wanted that assistance to come to nothing by Paola being evicted from the restaurant, and therefore would have wanted to help Paola again when the dispute with the Bicher entities erupted as it did.
This brings me to a central issue between the parties: did Giovanna understand the nature and risks she assumed in entering into the Transaction? Her untested affidavit evidence was that she did not and that she would not have entered into the Transaction if it had been explained to her and she had understood.
Giovanna bore the onus in these proceedings of proving those matters. Having carefully considered all of the evidence, I am not actually persuaded on the balance of probabilities that she did not understand or that she would not have entered into the Transaction if she had understood. I reach that conclusion without taking into account Mr Beazley's evidence because, as I set out in [167] above, I am not satisfied what advice he may have given to her or its adequacy.
The best evidence in support of Giovanna's case on this point was Giovanna's evidence - which I have considered in the way I have set out in [81] to [83] above - and some aspects of the Report. I accept Dr Reutens' provisional diagnosis that Giovanna had Mild Neurocognitive Disorder. However, in addition to being provisional, it was not directed to her capacity to understand the transactions at issue in these proceedings. Nor does the Court have any expert evidence to make any conclusion on that point based on inferences from Dr Reutens' findings.
I have also taken into account Dr Reutens' finding that at the time of the Report Giovanna did not have testamentary capacity. There are two reasons why I think this is of little assistance to the present task. First, and again, the Court does not have any expert evidence to make any conclusion based on inferences from Dr Reutens' findings. In other words, how (if at all) can her conclusion on testamentary capacity be "translated" to Giovanna's capacity to understand what she was undertaking by the Transaction? Second, and closely related to the first point, Dr Reutens' conclusion is based on her characterisation of Giovanna's testamentary task as "moderately complex" and she goes on to explain the complexity.
To the extent that, in the absence of expert evidence, I am able to express this conclusion, I have real doubt that the same degree of "complexity" attended the Transaction and her decision to enter into it. I am therefore not satisfied that Dr Reutens' conclusion on testamentary capacity can be called in aid in the present case to support Giovanna's untested affidavit evidence. In entering into the Transaction, Giovanna's decision essentially involved taking a view about Paola's ability and the likely success of the restaurant, matters about which Giovanna had the unique experience of a lifetime in the restaurant business, and her regular "front of house" attendances at the restaurant, to inform her decision making.
After the matters referred to in the preceding paragraphs, I have also taken into account that when the Report and its various conclusions are considered in their entirety, they support the conclusion that Giovanna could understand legal documents and concepts and that, while an interpreter was desirable, she could even do so when such things were explained to her in English. Therefore, I am of the view that Dr Reutens' report casts real doubt on the persuasiveness of Giovanna's untested affidavit evidence on these matters, even if some weight (see [86] above) is given to Dr Reutens' diagnoses, including the provisional diagnosis of a Mild Neurocognitive Disorder.
To this must be added the Court's acceptance of Mr Colacicco's evidence set out in [21] and [51] above. Mr Colacicco's evidence contradicts Giovanna's evidence. As WFM submitted, it demonstrates that she requested Mr Politis to advance funds, she offered up the Property as security for the loan, she understood it was repayable in 12 months and that its repayment might require the sale of the Property, which she was prepared to do.
I have also taken into consideration that Giovanna, as a self-made success in the restaurant business, must have developed some business acumen. In addition, there was evidence, not explored in any detail because Giovanna was not able to be cross-examined, about previous transactions that: 1. she had given a guarantee and mortgage in 2005 over the Property in respect of a nearly $1,000,000 facility to National Australia Bank concerning Ristorante Macchiavelli; 2. she had guaranteed loans for her daughter Catarina and Catarina's husband, and provided a personal guarantee for an indebtedness of Catarina's company of $1,300,000 (these were referred to in Giovanna's will made on 26 October 2018 that was in evidence, apparently drawn for her by Mr Beazley); and 3. in 2013 she had given a personal guarantee and a mortgage over the Property to secure a personal loan to her of $150,000 from Neolite Neon Co Pty Ltd.
Taking all of the matters commencing at [134] above into account, I am not actually persuaded on the balance of probabilities that she did not understand or that she would not have entered into the Transaction if she had understood.
It does not automatically follow from the previous paragraph that the Court should find that she did understand or that she would have entered the Transaction if she did have the benefit of proper and independent legal advice. However, in this case the evidence warrants that conclusion. First, whatever she may or may not have understood, the Court finds based on Mr Colacicco's evidence that, having requested Mr Politis to advance funds and offered up the Property as security for the loan, she understood the most critical aspects: it was repayable in 12 months and that its repayment might require the sale of the Property, which she was prepared to do. When to these findings is added the Court's conclusion (see [139] above) that Giovanna was disposed to help Paola and would not have wanted her previous assistance to Paola in opening the restaurant to come to nothing, the Court finds that Giovanna would have proceeded with the Transaction even if she had received proper and independent advice about its nature and effect, including that it extended to securing Bar M's performance under the 2018 Lease (noting that is not an obligation upon which WFM sues in these proceedings).

Benefit to Giovanna

WFM submitted Giovanna personally owed Bicher & Son Pty Ltd $100,000 (the Giovanna Loan), and this amount was used from the Transaction to repay the debt. In this way, Giovanna derived a benefit from the Transaction.
On the other hand, Giovanna's affidavit evidence was that this debt did not exist. It was submitted for her that, without repayment of the Giovanna Loan, Giovanna did not derive a benefit from the Transaction. Furthermore, even if she did owe the debt, any relief under the CR Act could be fashioned so as not to deprive WFM of its right to repayment of so much as went to payment of the debt.
There are three reasons why the Court finds the Giovanna Loan did exist, even when Giovanna's untested denial of the existence of the debt is taken into account.
First, the Settlement Deed was the product of an arms-length negotiation in the context of contested litigation. It would make no sense for the Bicher entities to acquiesce in the inclusion of a fictitious item as part of the Settlement Deed. However, it does make sense that the Bicher entities would use the commercially advantageous position in which they found themselves as a result of the litigation, especially the WFM Lease Proceedings, to extract repayment of a debt owed by Giovanna.
Second, Mr Ryan gave evidence in cross-examination that he had been made aware in the time leading up to WFM's advance of funds that $100,000 was "going to Giovanna" (T53.6), although he accepted that he did not know what it was for.
Third, the Report makes clear that Giovanna gambled and that she owed people money. As it records: "Mr Toppi said that Ms Toppi received $40,000 a month in rent from the Potts Point building, but she owed people money". This makes more probable that she owed the Bicher entities money, even an amount as large as $100,000 given the reported size of her gambling habit.
These three matters are more persuasive of the existence of the Giovanna Loan than Giovanna's untested denial. However, while not dispositive, in considering her denial I have also taken into account that her denial may be the product of poor memory or a reaction to an inconvenient or embarrassing truth. Either possibility finds some support in Giovanna's reaction recorded in the Report to being presented with her 2017 Will, which it appears from the Report she had undoubtedly executed.
Finally, while absence of financial benefit may not make a contract unjust, non-financial benefit is also relevant in this case. There were two related non-financial benefits for Giovanna to enter into the Transaction and thereby ensure Paola did not lose the restaurant, both apparent from the Report and other uncontroversial evidence: 1. She avoided all of her previous assistance to Paola in relation to the restaurant coming to nothing; and 2. She clearly enjoyed coming to the restaurant and being in "front of house" with customers as a diversion in her retirement.

Independent and competent legal advice

I have dealt with Mr Beazley's evidence at some length (see [100] to [113] above), so can state my factual conclusions concisely. These conclusions are all made taking into account Giovanna's untested evidence.
Despite the difficulties which I have identified with his evidence, having seen him give his evidence and taking into account his communications with HWLE, I am satisfied that he acted for Giovanna in relation to the Transaction. I regard Paola's text message (see [41] above) as the essential piece of contemporaneous corroboration. I have also taken into account to a limited extent the letter at [26] above, which I accept was signed by Giovanna: limited because in its terms it only relates to the matters giving rise to the Settlement Deed.
For reasons I have already given (see [110] above), Mr Beazley was not a solicitor independent of both the lender and the borrower. He had a conflict of interest in acting for both Paola and Giovanna.
To find that Mr Beazley did not meet with Giovanna on 26 October 2018 and that he did not witness her signatures in his presence would be very serious findings including that an officer of the Court had lied to the Court. Such findings would require satisfaction on the Briginshaw standard. I am not so satisfied, having seen him give his evidence and taking into account Paola's text message as independent, contemporaneous corroboration. I would also be slow to make such findings in the absence of Giovanna having been tested on her evidence. In reaching this conclusion I have taken into account the dating of Giovanna's signed transaction documents, but have accepted that this is likely to have been the product of mistake in the obvious haste of what occurred on 26 October 2018.
Having seen him give his evidence and taking into account Paola's text message, which I find more persuasive than Giovanna's untested evidence, I am satisfied that Mr Beazley met with Giovanna on 26 October 2018 and witnessed her sign Giovanna's signed transaction documents. I also accept, not least because it was inherently likely given my finding that he acted for her and because of the declaration (see [46] above), that he gave her some advice about entering into the Transaction. However, in the absence of any written record of that advice, given the views to which I have come about both the reliability of his evidence and his apparent lack of adherence to professional standards, I am unable to make any finding about the nature of that advice or its adequacy.
WFM submitted that whatever had happened on 26 October 2018, the Court could take account of whatever advice Mr Beazley gave Giovanna on or about 12 October 2018. Hospital records show Giovanna had dialysis on 11 and 13 October 2018. There are two reasons why I do not accept that submission.
First, and again, in the absence of any written record of that advice, given the views to which I have come about both the reliability of Mr Beazley's evidence and his apparent lack of adherence to professional standards, I am unable to make any finding about the nature of that advice or its adequacy.
Second, I accept Mr Kidd SC's submission that Giovanna's signed transaction documents differed in a significant respect from those executed on 12 October 2018, a point about which Mr Beazley seemed to be unaware until it was pointed out to him in the witness box. That was that the scope of Giovanna's liability was expanded under the Transaction to include guaranteeing Bar M's performance under the 2018 Lease.

WFM's conduct and knowledge

Both Mr Colacicco in his affidavit and Mr Ryan in his cross-examination described their various observations and interactions with Giovanna, including seeing her regularly at the restaurant. Other than acknowledging her age, none of what they described would have put them on notice of any obvious vulnerability or impairment on the part of Giovanna. They had both conversed with her in English (Mr Colacicco also in Italian as their common native language). The Court infers from their descriptions that WFM had no notice of any obvious vulnerability or impairment on the part of Giovanna other than her age (which in and of itself is not a vulnerability or impairment).
Next, there was an issue between the parties directed at least in part towards the concept of asset lending. It was submitted for Giovanna that Mr Ryan's evidence supported a finding that WFM did not care whether the Toppi interests could repay WFM without having to sell the Property. In cross-examination, Mr Ryan was asked whether WFM had undertaken any assessment of the capacity of Bar M to be able to repay the loan. Mr Ryan replied that WFM had not undertaken any such assessment. Mr Ryan was also asked whether he had seen any financial statements or cashflow forecasts of the restaurant business. Mr Ryan replied that he had not seen such documents.
WFM submitted that Mr Ryan's evidence does not support such a finding. In cross-examination, Mr Ryan was asked whether he had any idea whether Bar M would be able to afford to repay the loan. Mr Ryan replied that he did have some idea of whether Bar M would be able to afford to repay the loan. WFM occupied the building next to the restaurant and Mr Ryan could see the restaurant had enough customers to make it work.
Consistently with the Court's view of Mr Ryan as a reliable witness (see [99] above), the Court accepts his evidence that: 1. It was not WFM's expectation that it was most likely the loan would be repaid by the sale of the Property; 2. While WFM took comfort in having security over the Property, it had confidence in Paola and Giovanna by reason of having observed them operate the restaurant and having regard to Giovanna's reputation; and 3. WFM hoped it would not have to draw on the Property.
WFM's view of Paola and Giovanna appears from Mr Ryan's answer as to why WFM would not consent to an assignment of the 2015 Lease to the Bicher entities (T44:2-12): "… The comparison was Paola Toppi and her - when, when we dealt with Paola Toppi we also, we also knew that Giovanna, her mother, brought a lot of, a lot of customers and, you know, referrals to the Bar Machiavelli business. She, she was very important as in Paola was running the business without a doubt but Giovanna was very active in the business bringing custom to the business. She knew everyone from Machiavelli's in the city and, you know, we - the - so I was comparing Paola, a seasoned operator for many years in Machiavelli, one of the best-known restaurants in Sydney, and her mother behind her and then I was comparing that to someone who had worked for, I think, 18 months to maybe 2 years in the, in the Machiavelli business and previously had run day spas, I think."
Mr Ryan's evidence, which I accept was (T58:41-T61:8): "Q. Is this right; to your understanding WFM had not undertaken any assessment of the capacity of Bar M Pty Ltd to be able to service the loan and repay the $1.1 million principal within 12 months? A. No, you're right. Sorry, yes, yes. Q. You agree with what I-- A. I agree, yeah. Q. You were certainly aware when you entered into this document that Bar M would be liable not only to pay the interest payable under the loan agreement but also to pay the increased rent under the new lease that was entered into at the same time, correct? A. Yes. Q. You, as at late October 2018, had no idea whether Bar M would be able to afford to make the interest payments as well as the increased rent payments, correct? A. Well when you say no idea, we, we occupied the building right next to there. We know the volume of traffic that they were generating through the, through the restaurant. They had changed their strategy to larger functions rather than, rather than solely night of restaurants. They were getting big numbers. Now whether big numbers mean they make a lot of money is, is never the same thing. But they certainly had increased the volume there and we thought, you know, there's every chance that they'll be successful with their, with the way they were moving the, moving the restaurant. Q. You hadn't seen any financial statements or-- A. No. Q. --or cashflow forecasts-- A. No. Q. --of the business? A. No. Q. Correct? A. That's correct. Q. So far as repayment of the $1.1 million principal within 12 months, do you agree that you had no basis for believing that Bar M would be able to repay that amount, do you agree with that? A. Not specifically, no. Q. What did you say, you agree with what I say? Is that what you said? A. We had no specific information. We had no budgeted cashflows or anything like that, no. Q. You also had no basis for believing that Bar M would be able to repay $1.1 million in 12 months' time, correct? A. Not necessarily, no. Q. Sorry, I'm just trying to understand whether you're agreeing with me or disagreeing? A. No, no, I'm not agreeing with you on that point entirely. We see what was a thriving restaurant business. They used to, when they went into administration there was a whole range of issues, finance and accounting issues, and cash issues between them and the previous partners. We think if they were run properly, from an administrative point of view, they certainly had the volume of people, and, and traffic to be able to make, make the restaurant work. HIS HONOUR Q. Is this a fair summary, you didn't have any financial information but you were relying on the performance of the restaurant as you had seen it before the problems arose? A. That's correct, yeah, that's correct. KIDD Q. What I'm trying to ask you is based upon your observations of the performance of the restaurant, you surely must agree with you that you had no basis for supposing that in 12 months' time there would be $1.1 million available to repay the loan? A. Well I just said to you I didn't see a formal, formal budgets to prove otherwise, yeah. Q. Is this right, that your expectation as at October 2018 was that the $1.1 million loan would be repaid in the 12 months, by the 12 monthly payment date by the Potts Point property being sold? A. Not entirely, no, no. We didn't necessarily guarantee that we would have to draw on that property. We, we were hoping we wouldn't have to. Q. Your expectation was that the most likely source of funds to repay the $1.1 million loan in 12 months' time would be the sale of the restaurant business? A. No, not necessarily. We felt comfort in the fact that we had the property to fall back on, though it wasn't our intention to automatically rely on selling the property … Q. To your understanding, you and the other director of WFM were content to advance the $1.1 million loan because you were comfortable that there was ample equity in the Potts Point property owned by Giovanna to repay the loan? A. Correct. Q. It was your expectation that the sale of the Potts Point property would be the likely source of funds to repay the $1.1 million loan, correct? A. We were prepared to take the risk that it was, yeah. Q. You agree that that was your expectation, that the $1.1 million would be repaid in all likelihood by the sale of the Potts Point property? A. No, I think what you asked me before, that I'd be comfortable that there was a sufficient equity to pay the loan if needed. Q. You were content to advance the loan? A. Correct. Q. Because of being comfortable of the ample equity in the Potts Point property, correct? A. I thought I'd answered this, but yes."
The final issue is WFM's knowledge concerning Giovanna's legal representation. As to this the Court finds that WFM must be treated as being fixed with their solicitors' knowledge that Mr Beazley was acting for Giovanna and Paola and that, as their solicitors ought to have known had they turned their mind to it, Giovanna did not have the benefit of independent legal representation.

Giovanna's CR Act Claim - Consideration

It is convenient to summarise the Court's essential factual findings relating to the period June to October 2018: 1. Giovanna could speak and understand conversational English well. 2. Giovanna could understand and retain a clear explanation about legal documents, although her understanding would have been enhanced with the use of an Italian interpreter. 3. Giovanna understood that she could take legal advice on matters of importance from her solicitor. 4. Giovanna's general disposition was to trust and assist Paola. 5. It was Giovanna who asked for Mr Politis' help, volunteered the Property and later thanked him and Mr Colacicco for advancing the Settlement Sum. 6. Giovanna intended to sell the Property in any event and understood the process of selling. 7. The Property was not Giovanna's family home and her equity exceeded what would be required to repay WFM's loan including interest. 8. Even accepting that Dr Reutens had provisionally diagnosed Giovanna with Mild Neurocognitive Disorder, Giovanna has not discharged the onus of satisfying the Court that she did not understand the nature and effect of the Transaction or that she would not have entered into the Transaction if she had. 9. Giovanna understood that the loan from WFM was repayable in 12 months and that its repayment might require the sale of the Property, which she was prepared to do. 10. Giovanna had general business experience as a successful restaurateur and had given mortgages and guarantees. 11. Giovanna owed $100,000 to Bicher & Son Pty Ltd and the Transaction gave her the direct benefit of enabling her to discharge that debt. 12. The Transaction also gave Giovanna the indirect benefits of ensuring her previous assistance to Paola in relation to the restaurant did not come to nothing and enabling Giovanna to continue her "front of house" role which she clearly enjoyed. 13. Mr Beazley acted for Giovanna in relation to the Transaction, witnessed her signing Giovanna's signed transaction documents and gave her some advice. 14. However, Mr Beazley was not an independent solicitor in the requisite sense. 15. The Court is unable to make a finding as to the nature or adequacy of any advice Mr Beazley gave Giovanna. Insofar as she bore the onus to show she received no, or inadequate advice, Giovanna has not discharged that onus. However, to the extent Giovanna's untested affidavit evidence cast an evidentiary burden on WFM, it has not satisfied the Court that she was adequately advised. 16. It was not WFM's expectation that it was most likely the loan would be repaid by the sale of the Property. 17. While WFM took comfort in having security over the Property, it had confidence in Paola and Giovanna by reason of having observed them operate the restaurant and having regard to Giovanna's reputation. 18. WFM hoped it would not have to draw on the Property. 19. WFM, by its solicitors, ought to have known that Giovanna was not receiving independent advice in relation to the Transaction.
It will be clear from the foregoing that Giovanna's case fails on the facts. Nearly all of the facts urged upon the Court on her behalf as justifying relief under the CR Act have not been made out. Most of the facts which have been established point against such relief being granted.
The first step under the CR Act is to consider whether the Transaction was unjust in the circumstances it was made. Taking account of all the matters referred to in [178] above, the Court does not conclude that it was in that sense. The proven feature of this case which could support such a conclusion is that Giovanna did not have independent legal advice and that WFM ought to have known that through its solicitors. I do not think that is sufficient in the context of all the other matters to conclude that the Transaction was unjust in the circumstances in which it was made.
However, even if that conclusion is wrong and the Transaction was unjust in the circumstances in which it was made, the Court would not, in the exercise of its discretion, grant any relief. The reasons for this are all of the matters (other than the absence of an independent solicitor and WFM's imputed knowledge of that) identified in [178] above. To the extent that Mr Beazley failed Giovanna by not recognising his conflict and ensuring she received independent advice, it would be unjust in all the other circumstances I have identified to visit the consequences of that failure on WFM.
There is another matter of context which has informed the conclusion which the Court has reached. This was not a transaction involving a bank or other professional lender. The Transaction took place in the context of a pre-existing commercial relationship of landlord and tenant where both sides (WFM on the one part, and Paola and Giovanna on the other) wanted their relationship to continue. Each had their own distinct interests for that to occur. It would be artificial to view the Transaction as a third party mortgage and guarantee simpliciter and ignore that broader commercial context. In my respectful view, looking at what occurred in that way points against both injustice in the circumstances and, if that be wrong, against the Court granting any relief and depriving WFM of the commercial benefit for which it had bargained.
There are two other matters which I should note.
First, I am not satisfied that what occurred was, in all the circumstances, asset lending of the kind criticised in Khoshaba and Riz, not least because the Property was not Giovanna's home (that is not to say that a transaction concerning an investment property can never be asset lending). There was no accounting or other evidence that at the time of the Transaction it should have been clear to WFM (and the other parties) that the loan from WFM would not be able to be serviced. The fact that 12 months later it was not repaid is not of itself sufficient to found such an inference.
Furthermore, Mr Ryan's evidence demonstrates that WFM had a rational basis to make the commercial judgment to enter into the 2018 Lease. Unlike a commercial lender, WFM was not lending money in the expectation of a return through the interest charged. It would make no sense for WFM to enter into the 2018 Lease and fund the Settlement Sum if it thought there was no real prospect of Paola, with Giovanna's matriarchal "front of house" presence, making a success of the restaurant and complying with the 2018 Lease. I do not accept that WFM was indifferent to the serviceability of its loan to Bar M or that it was engaging, or thought itself to be engaging, in a "potentially fruitless enterprise" of the kind referred to by Basten JA in Khoshaba.
Second, I have taken into account that by entering into the 2018 Lease and the Transaction, WFM obtained significant, additional commercial benefits compared to the 2015 Lease, including a higher rent to recover its costs of the WFM Lease Proceedings and the benefit of a secured guarantee from Giovanna for not only repayment of the Settlement Amount but also for Bar M's performance under the 2018 Lease. The latter is not sought to be enforced by WFM in these proceedings. In any event, I do not consider any of those matters to be more than a reflection of the parties' respective commercial bargaining positions and not, of themselves, indicia of unjust or unconscientious conduct by WFM.
I will next briefly consider Giovanna's other claims.

Giovanna's ASIC Act Claim

Giovanna relies on these provisions of the ASIC Act: "12CA Unconscionable conduct within the meaning of the unwritten law of the States and Territories (1) A person must not, in trade or commerce, engage in conduct in relation to financial services if the conduct is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. (2) This section does not apply to conduct that is prohibited by section 12CB. 12CB Unconscionable conduct in connection with financial services (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person; or (b) the acquisition or possible acquisition of financial services from a person; engage in conduct that is, in all the circumstances, unconscionable. (2) This section does not apply to conduct that is engaged in only because the person engaging in the conduct: (a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or (b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition. (3) For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. … 12GM Other Orders … (2) Without limiting the generality of section 12GD or 12GNB, the Court may, on the application of: (a) a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in in contravention of a provision of this Division; or (b) ASIC in accordance with subsection (3) on behalf of such a person or persons; make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (7)) if the Court considers that the order or orders concerned will: (c) compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage; or (d) prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person or persons."
Allsop P (as his Honour then was) set out principles applicable to ASIC Act claims in Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389, (Bathurst CJ and JC Campbell JA agreeing) which I respectfully adopt: "[291] Aspects of the content of the word "unconscionable" include the following: the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably: Attorney General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 at 583 [121]; the conduct must be irreconcilable with what is right or reasonable: Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 at 140 [30]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCA 62; 117 FCR 301 at 316-317 [44]; Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262; factors similar to those that are relevant to the CRA are relevant: Spina v Permanent Custodians Ltd [2009] NSWCA 206 at [124]; the concept of unconscionable in this context is wider than the general law and the provisions are intended to build on and not be constrained by cases at general law and equity: National Exchange at 140 [30]; the statutory provisions focus on the conduct of the person said to have acted unconscionably: National Exchange at 143 [44]. It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances."
It will be apparent from the Court's findings in [178] above that there is no basis for finding - and the Court does not find - the kind of "high level of moral obloquy" on the part of WFM of the kind his Honour identifies. This claim also fails.

Giovanna's unconscionability claim under the general law

Keifel CJ, Bell, Gageler, Keane and Edelman JJ in Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49 set out the principles applicable to an unconscionability claim as follows: "[38] A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage "which seriously affects the ability of the innocent party to make a judgment as to [the innocent party's] own best interests". The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring "victimisation", "unconscientious conduct", or "exploitation". Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage."
Again, it will be apparent from the Court's findings in [178] above that Giovanna has failed to demonstrate a "special disadvantage" or any "unconscientious taking advantage". This claim also fails.

Conclusion

WFM is entitled to judgment on its claim against Giovanna's estate. Giovanna's cross-claim will be dismissed. Giovanna's estate is to pay WFM's costs of the proceedings.
The parties will be given an opportunity to bring in short minutes to give effect to these reasons, including quantifying WFM's claim up to date. If these are agreed, the orders will be made in chambers. Otherwise, on a date to be fixed the Court will hear any special costs applications or resolve any other matter in relation to the final orders on which the parties are unable to agree. 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. Decision last updated: 04 November 2022

Australian Securities and Investment Commission Act 2001(Cth)

(CR Act), the Australian Securities and Investment Commission Act 2001(Cth)

Trade Practices Act 1974(Cth)

At a glance

Court

Decision date

Before

Catchwords

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Catchwords

Judgment (23 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (49)

Cited By (2)