Wittman v Wittman

EQUITY - GENERAL PRINCIPLES - UNCONSCIONABLE CONDUCT - GENERAL PRINCIPLES - where the testator died in 2003 - where the plaintiff is his first son and executor under his father's last will made on 23 February 2001 - where the defendant is the testator's second son - where the defendant issued a bankruptcy notice to his father in January 1999 and a petition was filed in April 1999, returnable in May 1999 - where in May 1999 the testator through a Deed of Agreement and a Bill of Mortgage transacted to pay $273,993.35 to the defendant from his estate and secured by a mortgage over the home unit in which he lived at Surfers Paradise - where the testator was at a special disadvantage at the time of entering the transaction because of his medical condition and impaired judgment - where the plaintiff as executor of his father's estate, applied to set aside the Deed of Agreement and the Bill of Mortgage by which this transaction was effected - whether the Deed of Agreement and the Bill of Mortgage should be set aside on the ground of unconscionable conduct by the defendant

EQUITY - GENERAL PRINCIPLES - UNDUE INFLUENCE AND DURESS - GENERAL PRINCIPLES - where the defendant threatened his father with bankruptcy and issued a bankruptcy notice to him in January 1999 - where in May 1999 the testator through a Deed of Agreement and a Bill of Mortgage transacted to pay $273,993.35 to the defendant from his estate and secured by a mortgage over the home unit in which he lived at Surfers Paradise - where that transaction included a component for wages and interest - whether a relationship of influence existed between the testator and the defendant - whether the will of the testator was not independent and was overborne - whether the Deed of Agreement and the Bill of Mortgage should be set aside on the ground of undue influence

EQUITY - GENERAL PRINCIPLES - UNDUE INFLUENCE - OTHER PRESUMPTIONS OF UNDUE INFLUENCE - ABSENCE OF INDEPENDENT ADVICE - where the testator had no legal advice specifically on the terms of the Deed of Agreement - where it is not clear if the defendant was aware that no legal advice was sought by the testator - whether the Deed of Agreement and the Bill of Mortgage should be set aside on the ground of undue influence

Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, cited

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447, discussed

Fry v Lane (1888) 40 Ch D 312, cited

Guimelli v Guimelli, (1999) 196 CLR 101, discussed

Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710, cited

Motor Terms Co Pty Ltd v Liberty Insurance Ltd (in liq) [1967] HCA 9; (1967) 116 CLR 177, cited

O'Rorke v Bolingbroke (1877) 2 App Cas 814, cited

The Commonwealth v Mewett (1997) 191 CLR 471, cited

Union Bank of Australia Ltd v Whitelaw [1906] VicLawRp 119; [1906] VLR 711, cited

Verwayen v The Commonwealth, (1990) 170 CLR 394, cited

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, discussed

Watkins v Combes [1922] HCA 3; (1922) 30 CLR 180, cited

[1] McMURDO J: The late Mr George Wittman was born in Hungary in 1918 and died at the Gold Coast in 2003. The plaintiff, Mr Peter Wittman, is his first son and the executor under his father's last will made on 23 February 2001. From 1963 until about 1996, George Wittman lived in a de facto relationship with Angela Dooley. Mr Richard Wittman, who is the defendant, was born early in this relationship in 1963. Another son, Jossi Wittman, was born in 1976.

[2] This case concerns a transaction between the late Mr Wittman and the defendant in May 1999. George Wittman then agreed that he owed a total of $273,993.35 to the defendant, and that it should be paid to the defendant from his estate and secured by a mortgage over the home unit in which he lived at Surfers Paradise. The plaintiff, as executor of George Wittman's estate, applies to set aside the Deed of Agreement and the Bill of Mortgage by which this transaction was effected. He does so on the alternative grounds of undue influence and unconscionability.

[3] George Wittman was taken prisoner by the German forces in World War II. He was of the Jewish faith and was one of a few survivors in the camp in which he was held. He came to Australia from Hungary in 1949, with his first wife and their young son (the plaintiff). He divorced in 1953, and after a de facto relationship with another woman, he began his relationship with Angela Dooley. He and Ms Dooley, together with the defendant and later Jossi Wittman, lived mostly in Melbourne until about 1979 when the family moved to the Gold Coast. Mr Wittman had worked as a dentist in Hungary but in Australia he built a business career as a property developer. In particular he purchased and developed retirement homes and nursing homes, including one which is relevant to this case, the Galilee Lodge in Melbourne.

[4] It appears that at some stage Mr Wittman was more wealthy than he was at the time of the subject transaction with the defendant in 1999, when his assets consisted of the apartment in which he lived in "The Condor" building in Surfers Paradise and a share of a nursing home in Melbourne called Kincora Court. Not long after the transaction with the defendant, he sold that share for about $500,000, which he invested in the purchase of a second unit in The Condor and the balance of about $300,000 in managed funds with AMP. Until then he had been living off a combination of drawings from the Kincora Court business and some payments from Centrelink.

[5] Plainly he believed that his financial position had much deteriorated over the years. Indeed, by the late 1990s he was convinced that his fortune had been stolen from him and he was in the habit of accusing very many people of doing so, such as his own family including the defendant and Jossi Wittman. No witness suggests that there was any basis in truth for these accusations. From about 1993, he had been writing letters to prominent persons around the world complaining that he had been defrauded of his fortune, involving alleged amounts of up to $20 million. He would write these letters to, amongst others, Her Majesty the Queen, the Prime Minister of Australia, the Premier of Queensland, the President of the United States, the President of the International Olympic Committee and various police forces in Australia and overseas. Dr Klug, consultant psychiatrist, has examined copies of these letters and documents relating to the late Mr Wittman's medical history and concludes that Mr Wittman suffered from a mental illness of a delusional disorder, paranoid type, which "affected his reality testing and emotional control and may have impaired his judgment with respect to instructions he gave to accountants or solicitors and with respect to the formulation of the Deed of Agreement". Another consulting psychiatrist, Dr Morris, has examined this material and concludes that Mr Wittman had psychotic depression and was delusional such that "his reality testing was profoundly disturbed" and that "he was not able to clearly identify what was going on around him in terms of particularly his financial affairs ... he was very unwell and his grasp on reality was quite disturbed". It is Mr Wittman's mental condition, according to either psychiatrist's view, which is the basis for the plaintiff's claim that Mr Wittman had a special disadvantage which the defendant unconscionably exploited in the relevant transaction.

[6] The defendant finished his secondary schooling at the Gold Coast in 1979. I accept his evidence that he intended to then undertake full time University studies in Queensland but that instead, at George Wittman's request, he went to work at the Galilee Lodge nursing home. As is not disputed, he worked there full time for about four years from the beginning of 1980 and for no wage, except drawings from the business for his living expenses. He had few expenses because he lived either in the family home Mr Wittman had kept in Melbourne, or in the nursing home itself, and in each case his meals and the use of a car were provided. I accept that despite his youth, he had substantial administrative duties in the day to day operation of the nursing home (which was also managed by a nursing matron) and that he had an important role in co-ordinating a program of rebuilding and extension of the nursing home. That also is undisputed and it is supported by evidence of Mr Guglielmino, who was called in the plaintiff's case. What is in dispute is whether the defendant ever became entitled to some payment, or some further payment, for this four years of work and whether that entitlement was enforceable against George Wittman when he agreed, in the subject transaction in 1999, to pay the defendant for it the equivalent of $15,600 a year (for four years $62,400) and interest on that at an annual rate of 7 per cent ($138,924.85). This totalled $201,324.85, and so comprised most of the $273,993.95 which Mr Wittman agreed to pay in the subject transaction.

[7] Galilee Lodge was sold around the end of 1983 and the defendant took up paid employment away from Mr Wittman's businesses. He presently operates his own marketing business. There is not much evidence of the relationship between George Wittman and the defendant after that but clearly it was acrimonious for some years prior to 1999. It was suggested to the defendant that this could be traced to the defendant's reaction to Mr Wittman's termination of the relationship with his mother in about 1995, but it seems to have predated that.

[8] The defendant sued Mr Wittman at least three times. According to the defendant, he sued in the Magistrates Court in Victoria, claiming an entitlement to be reimbursed for a tax debt which he had paid on behalf of the company which had operated Galilee Lodge. He says that the claim was compromised by a promise that he would be paid, which George Wittman breached and gave rise to further proceedings. Secondly, as the plaintiff pleads and the defendant admits (a deemed admission by the defence not pleading to the relevant allegations in the statement of claim), he brought proceedings against Mr Wittman in 1992 in the District Court at Southport, in which he obtained a default judgment in 1993 for $48,066.10. And thirdly and as he expressly admits, he sued Mr Wittman, Ms Angela Wittman (his mother) and their company G Wittman Pty Ltd, again in the District Court at Southport, in December 1995. The pleadings in that case are in evidence here. They show that he was claiming a total of $40,102.80, made up of an amount of $34,872 alleged to be owing by the defendants by a written agreement of May 1994, and interest on that at an agreed rate. As he there alleged, the $34,872 was made up of amounts to which he was entitled from as early as 1985 (one of which appears to be that tax payment he made for the company). That third proceeding progressed through the usual interlocutory steps towards the appointed date for trial in November 1998. Until shortly before then the defendants were legally represented. But they did not appear at the trial and a judgment was entered against them for the amount of the claim together with interest to that date, in total $56,478, and costs. In these proceedings, there is no challenge to the validity of that judgment, nor is there an allegation that the present defendant was not owed by George Wittman and others the amount for which he was given judgment. It is this judgment sum together with some further interest and legal costs in relation to those proceedings which account for $72,668.50 of the $273,993.35 which George Wittman agreed to pay in the subject transaction.

[9] In the lead up to the November 1998 trial, there was some correspondence and at least one meeting in which there were attempts to settle matters between George and Richard Wittman. George Wittman had assistance from Mr Knight, an accountant who was giving him tax advice but who also wrote on his behalf to Richard Wittman's solicitors. On 5 October 1998, Mr Knight wrote to them saying that Mr George Wittman was "not in good health and is in quite a serious financial position", and offering to settle the District Court claim on terms that $40,000 would be paid to Richard Wittman upon George Wittman's death, an obligation which could be secured by a second mortgage over the apartment in which he lived. The offer was expressed to be "made as a consequence of Mr Wittman's inability to borrow funds to pay the alleged debt". As I will discuss, in truth George Wittman was able to borrow such an amount.

[10] On 13 October 1998, Richard Wittman's solicitors replied to Mr Knight, putting a counter proposal whereby Richard Wittman would be paid $44,642 (as claimed on the Plaint) upon George Wittman's death, together with interest of 10 per cent from the issue of the Plaint and the costs of those proceedings, all to be secured by a second mortgage upon the apartment. That was not accepted by George Wittman. On 15 October 1998, Richard Wittman's solicitors again wrote to Mr Knight withdrawing their offer.

[11] There was at least one meeting in November 1998 between George and Richard Wittman at which there were discussions with a view to settlement. That meeting was organised by Jossi Wittman, who was anxious to achieve a personal reconciliation between them. Ms Angela Wittman was there but she was not called as a witness. Mr Terry Westwood was there and he was called. He was a friend of George Wittman and had previously been an accountant. There is some question as to when that meeting took place but most probably it occurred before 2 November. There is a diary note of that date made by Mr Abbott, a solicitor who had been acting for George Wittman, in which he notes a phone call from Richard Wittman's solicitor advising that "client has spoken to father". According to the witnesses who were at this November 1998 meeting, Richard Wittman put a case for payment of wages for his time at Galilee Lodge, which George Wittman firmly rejected. There is then a letter dated 4 November 1998 from the solicitors for Richard Wittman, addressed to George Wittman and enclosing a draft Deed of Agreement. The letter pointed out that the draft contained "provision for the payment of outstanding wages owed". I infer that this is the document ultimately signed by George Wittman on or about 17 May 1999, because as originally typed it was dated in 1998.

[12] It is unnecessary to resolve precisely when this meeting occurred and whether the draft Deed of Agreement was then on the table. More importantly, it is clear that Richard Wittman put his wages case at that meeting and that George Wittman firmly rejected it. And it is also clear that George Wittman had the draft Deed of Agreement in November 1998, so that it was between 13 October and the beginning of November 1998 that Richard Wittman had decided to require, as a condition of a settlement of the District Court proceedings, that George Wittman agree to pay not only the amount there claimed but also a much larger sum for his work at Galilee Lodge more than fifteen years earlier.

[13] George Wittman does not appear to have had legal advice upon the merit of this wages claim. Mr Abbott was not retained to advise on that question or at all after November 1998. George Wittman did see another solicitor in early 1999, in the course of which there was some discussion of this claim. But that was in a different context, in which advice was being given to him, no doubt on the suggestion of others, in the context of George Wittman's proposed marriage to a woman who was 60 years his junior. He did marry her later in 1999 but they separated not long afterwards, in circumstances in which a domestic violence order issued against him and in which he was accusing his new wife of infidelities which in her brief evidence at this trial she strongly denied.

[14] Richard Wittman took steps to have George Wittman bankrupted upon the basis of his judgment. A bankruptcy notice issued in January 1999 and a petition was filed in April, returnable on 19 May 1999. That hearing did not occur because the Deed of Agreement was signed by George Wittman on 13 May 1999. The plaintiff says that it was signed it under threat of bankruptcy. Richard Wittman disputes that, saying that there was no threat and pointing out that there was no meeting or discussion between the two men after late 1998. I infer that George Wittman signed the Deed of Agreement when he did because of the imminent bankruptcy hearing. I accept also the evidence of many witnesses that George Wittman would have had a particular apprehension of bankruptcy because of the importance he placed upon what he saw as his own high standing. At least some years prior to 1999, he had been prominent in Gold Coast social and charitable circles and was a respected member of the local Jewish community.

[15] This is recorded by the Deed of Agreement dated 13 May 1999 and the Bill of Mortgage dated 3 June 1999. The mortgage simply secures the obligations under the Deed of Agreement. The Deed recites that the parties had agreed to settle the claim in the proceedings commenced in 1995 and also "to settle the outstanding wages owed to Richard Wittman". He agreed to "discontinue the proceedings" on the terms of the Agreement and on registration of the mortgage. As I have already mentioned, the Deed was in terms drafted before Richard Wittman had obtained his judgment.

[16] The amount which was expressed to be in settlement of the claim in the proceedings was a total of $72,668.50 comprising an amount of $13,250 for costs, and a balance for claim and interest of $59,418.50 (that was more than the $56,478 for which judgment was given, but the difference is not said to be significant for present purposes). As already mentioned, the balance was made up of four years of wages at $15,600 per year and interest on that calculated from February 1980 to 6 November 1998 of $138,924.85, so that the total agreed as owing was $273,993.35.

[17] By clause 5 it was provided that "the parties agree that the debt be paid no later than three (3) months after the date of death of George Wittman". Clause 6 provided for the grant of the mortgage to secure this debt, which was to carry interest at the rate of 10 per cent from 6 November 1998 "to the date of death of George Wittman and three (3) months". Clause 7 provided that if the money owed under the mortgage was not completely satisfied from the proceeds of sale of the mortgaged property, the balance was to be paid from his estate.

[18] George Wittman had no legal advice specifically on terms of this Deed and in particular on whether he should sign it in his circumstances as at May 1999. I am not prepared to conclude that Richard Wittman knew that there had been no such advice, although probably his own solicitors told him that by May 1999 they were then communicating directly with George Wittman.

[19] There is no basis for impugning the transaction insofar as it involved the payment of the judgment debt, interest upon it and costs. The plaintiff's case, upon either his argument of undue influence or that of unconscionability, is that the transaction was unfair because of the component for wages and interest thereon. This requires an assessment of the genuineness and reasonableness of Richard Wittman's demands in that respect. At the commencement of the trial, the plaintiff's counsel appeared to concede that as at 1999, the defendant was owed wages by George Wittman but say that interest on those wages was a different matter. Counsel also then argued, and continued to argue, that the wages claim was statute barred by 1999, which he submitted was a factor which of itself made this agreement unreasonable. But as the trial progressed, the plaintiff did dispute that there was ever any entitlement to wages. I did not understand the defendant to complain, and nor could he have complained, about this apparent change in position. And it was not until the second day of the trial that the defendant pleaded his case as to how he was entitled to these wages.

[20] The defendant does not claim that when he worked at Galilee Lodge he was promised wages. His case is put upon the basis of an equitable estoppel. He says that George Wittman led him to expect a benefit of another kind, in consequence of which he did not work elsewhere and in particular did not work for wages during those four years. He says that George Wittman was thereby obliged to pay him the wages he would have made by working elsewhere, as a means of avoiding the detriment through his reliance upon what he was told.

[21] What was his expectation? His evidence (in chief) in answer to that question was as follows:

"The expectation, according to what I was told by my father, is that the business was for me and my mother and - well, the business and everything was for us.

You mentioned that you were told something by your father. When was this? -- This would have been when I - well, I was told right along from childhood that the business and the reason he was working was for - was for our benefit and later on my younger brother. When I went down to Melbourne and started working it was resaid as well.

What was the normal practice amongst the family for the taking of wages up until that time? Did you know it? -- No, my - no-one took wages. My father never took any wages or my mother, when she worked very hard in the business all the years and never took any wages, and neither myself."

In cross examination, he said this:

"Your mother didn't take any money out of the family business wages or ----?-- I said no wages.

So none of your family did. So there was never an expectation from any family member to have got wages out of the business? - As wages as such there was an expectation that we would be getting proceeds of the business, or company, or however you would like to say it.

So there was no wages as such to ever be got by any family member out of the business and you understood that, didn't you? - I didn't particularly understand that. I wouldn't put it that way. I was saying that we expected some form of return.

But that return wasn't going to be in the form of a weekly wage for ex-years or anything else like that, was it? It was never expected to be that? - At the time, not in the form of a wage.

So you never had an agreement with your father that you would be paid wages some time down the track for your time working in the nursing home? -- Had an agreement that the business and everything that's been built up was for me and my mother.

But you had no promise or agreement from your father that you would get wages either then or at any time in the future, did you? - I will say it again. We had a promise that everything was for me and my mother.

Will you answer the question specifically. You had no promise that you were going to get any wages either then or at any time in the future from that business, did you? - The wording "wages" didn't come up, "return" did as in the form of the business or house et cetera.

I accept the evidence in that passage from the defendant's evidence in chief and with some qualification, what he said in that passage from his cross examination. His reference in cross examination to "an agreement" seems to have been prompted by the use of that term by the cross examiner. I do not accept that George Wittman spoke in terms of an agreement. Nor am I satisfied that the word "return" was used. Each term seemed to be used as a defensive response to the cross examiner, rather than as an accurate recollection of the precise words spoken, if that is possible after about twenty five years.

[22] As I view this evidence, Richard Wittman should not have assumed or expected that a particular legal relationship then existed or would exist between them. He may well have believed that his efforts would be to his ultimate benefit, as well as to the benefit of others in the family and in particular his mother and his brother. But a reasonable expectation would have been no more than that the wealth being accumulated through the entities controlled by George Wittman would ultimately benefit the family because Mr Wittman would want that to happen, not because he would be legally obliged to Richard Wittman to make it happen. It is significant that George Wittman said these things to the defendant from the time of his childhood, and well before he worked at Galilee Lodge. In his specification of the elements of an equitable estoppel in Waltons Stores (Interstate) Ltd v Maher,[1] Brennan J defined the first matter to be proved as being "that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship".

[23] And to the extent that Richard Wittman did have an assumption or expectation from what he was told, it could not have been in any sense specific. He was not told that he would have a certain share of the Galilee Lodge business or of any other property but only that the "business and everything was for us". As appears from those passages from his evidence, the defendant was unable to say what the benefit was which he expected. Of course in the field of estoppel, the language used by the party to be estopped need not always have the precision required within a conveyance of property. But the generality of what George Wittman said is inconsistent with the notion that it was intended to induce an assumption or expectation of a legal relationship because it permitted no definition of that relationship. In Guimelli v Guimelli,[2] Gleeson CJ, McHugh, Gummow and Callinan JJ apparently accepted the view of Deane J in Verwayen v The Commonwealth,[3] that prima facie, an estoppel should operate to preclude departure from the assumed state of affairs.[4] Again, because the usual remedy is to hold the defendant to the legal relationship which the plaintiff had assumed, and as the defendant knew or intended him to assume,[5] there is a need for some definition of that relationship from what was said between the parties.

[24] On behalf of the plaintiff, it was strongly argued that Richard Wittman could not demonstrate a detrimental reliance upon what he had been told, because of the benefits he did receive whilst he worked at Galilee Lodge. He had free board either at the house or at the Lodge, the use of a car and some spending money. He began this work when he was only 17 and when he had no particular skill or qualification. So it was argued that for him to receive $300 per week when he had received these other benefits would over compensate him for his efforts. Broadly speaking, I accept that argument. It is not possible to quantify with any precision the amount which would have been a reasonable salary for his work. There is some evidence of the work which he did but with the expiration of time it is difficult to now say what would have been a reasonable salary in his case. Nor is it possible at this point in time to quantify the extent of his drawings upon the business for living expenses. I do not have the impression that he was living extravagantly but overall he seems to have managed quite well on what he was drawing. An allowance of a further $300 per week over his other benefits, in the context of the early 1980s for an unskilled man in his late teens would probably be excessive. Put another way, had he worked and lived elsewhere during these years, I do not think that he would have been better off and in particular by as much as $300 per week.

[25] This is not the trial of a claim to enforce an equitable estoppel. The outcome of this proceeding is not determined by whether Richard Wittman can prove that he had a cause of action which in 1999 was worth at least $200,000. A compromise of a claim might be shown to be fair, just and reasonable without proof that the claim would have succeeded. But the apparent strength or otherwise of this wages claim is relevant to the question of whether Richard Wittman acted unconscionably in securing this agreement in 1999.

[26] In assessing the relative strength of that claim, I do not see the potential operation of a limitation period as very significant. If, as the plaintiff argues, the claim was statute barred by 1999, the remedy would be barred but not the right itself.[6] A statute barred debt or liability is not provable in a bankruptcy.[7] But again, the question is not simply whether Richard Wittman had an enforceable cause of action but whether his procuring an agreement for wages and interest was unconscionable. In this context, it is necessary to keep in mind the nature of the cause of action which his says he had. He argues that his cause of action came from an equitable estoppel, so that it would have been unconscionable for George Wittman to reject his claim. That is relevant to whether it was unconscionable for him to procure an agreement to compromise that cause of action. A defendant who was conscience bound to pay him for his work would find it difficult to say that his agreement to pay was itself unconscionably procured.

[27] The more substantial difficulty for the defendant is in demonstrating that he had a genuine and arguable claim for these wages. I am not persuaded that he has ever held a genuine belief of any legal right arising out of his work at Galilee Lodge, and in particular a right worth $200,000. Notably, he had sued George Wittman at least three times but not on this basis. And for the reasons already given, in my view he did not have a reasonably arguable claim for wages and interest and, in particular, a claim of the order of $200,000.

[28] The plaintiff argues that George Wittman was at a special disadvantage and that this was unconscionably exploited by the defendant. That special disadvantage is said to have existed from his mental condition. Alternatively he says that the defendant enjoyed a position of substantial influence over him, which he unduly exploited by this agreement. That relationship of influence is said to have existed from a threat of bankruptcy.

[29] As Mason J explained in Commercial Bank of Australia Ltd v Amadio,[8] although the remedies of relief on the ground of unconscionable conduct and relief for undue influence need not be "mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other", there is a difference between the remedies as follows:[9]

"But relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, e.g., a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.

...

Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest."

[30] In the present case there is no presumption of undue influence: the plaintiff accepts that he must prove a relationship of influence from the particular circumstances. And recognising that these two men had had little to do with each other for some years prior to this transaction, apart from being adversaries in litigation, the plaintiff looks to the circumstance of a threat of bankruptcy as a means of arguing a relationship of influence. The defendant's argument that there was no threat of bankruptcy reflects a sensitivity to any suggestion that there was some impropriety in the defendant's steps towards bankrupting George Wittman. But the defendant was well entitled to enforce his judgment by pursuing a bankruptcy. The threat of bankruptcy as the plaintiff relies upon it involves simply the evinced intention of the defendant to procure a sequestration order in the event that George Wittman did not come to terms.

[31] Undoubtedly that threat of bankruptcy was influential. The late Mr Wittman would not have agreed as he did without that threat. The timing of this transaction and the scheduled date of the bankruptcy hearing is more than merely coincidental. The present question is whether this gave Richard Wittman that position of "ascendency, power or domination over (George Wittman) and that on his part (George Wittman) had taken a position of dependence or subjection".[10] There must be an influence by which, as Mason J said in the above passage from Amadio, "the will of the innocent party is not independent and voluntary because it is overborne". As I will further discuss, George Wittman had an impaired capacity to judge what was in his best interests. But he was not without a capacity to understand the effect of this transaction. And the impression I have from many witnesses, including both the plaintiff and the defendant as well as those witnesses who were his friends or professional advisers, was that he was still a determined individual, who was prepared to and did act upon his own judgment, whether sound or otherwise, and to ignore the advice of others, in relation to financial decisions and to his then proposed remarriage. In my conclusion there was not a relationship of influence as the plaintiff must prove to succeed upon this ground.

[32] As the defendant's submissions accepted, the necessary elements of the plaintiff's alternative case of unconscionability are summarised in this passage from the judgment of Deane J in Amadio:[11]

"The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or "unconscientious" that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: "the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract" (see per Lord Hatherley, O'Rorke v Bolingbroke (1877) 2 App Cas 814 at 823; Fry v Lane (1888) 40 Ch D 312 at 322; Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362 at 428-429).

The equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence are closely related. The two doctrines are, however, distinct. Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party (see Union Bank of Australia Ltd v Whitelaw [1906] VicLawRp 119; [1906] VLR 711 at 720; Watkins v Combes [1922] HCA 3; at 193-4; at 713). Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In (supra, at 405). Fullagar J listed some examples of such disability: "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary". As Fullagar J remarked, the common characteristic of such adverse circumstances "seems to be that they have the effect of placing one party at a serious disadvantage the other".

[33] It is necessary then for the plaintiff to first prove that George Wittman was at a special disadvantage and then to prove that the disadvantage was evident. Neither of those elements is conceded but nor is it seriously contested. There is abundant evidence, including that of Dr Klug who was called by the defendant, which establishes that George Wittman was then suffering from one or more mental disorders which are likely to have impaired his judgment. In his report of June 2005, Dr Klug summarises his opinion as to George Wittman's health in mid 1999 as follows:

(b) He probably suffered from depression;

(c) He may have suffered some memory impairment, however, it is unlikely that his memory was impaired to such an extent as to render him incompetent to sign the documents;

(d) He suffered from cerebrovascular disease as part of his general vascular disease, including coronary artery disease and peripheral vascular disease.

His diabetes was a likely contributing factor. The medical records made available to me indicate that he suffered a stroke causing a left fronto-parietal infarct in 1989 ...

It is likely that George Wittman's judgment was impaired from at least 1994 onwards. My opinion is based on the delusions expressed in his letters to numerous persons which he wrote between the years 1994 to 2002. Those letters suggest that the late George Wittman suffered from a mental illness, delusional disorder, paranoid type, which affected his reality testing and emotional control and may have impaired his judgment with respect to instructions he gave to accountants or solicitors and with respect to the formulation of the Deed of Agreement. However, it is unlikely that his capacity to understand the documents he was executing was impaired as a result of his Delusional Disorder."

Dr Klug also expressly agreed with the report of Dr Morris, who was called by the plaintiff, that "George Wittman's judgment was already impaired as early as 1994, at least.".

[34] Dr Klug's opinion was premised upon the letters to which he referred as having been authored by George Wittman himself. He was taken to a particular example which was in terms suggesting that it was written by someone with some legal or other professional background, and not Mr Wittman, as the witness Mr Westwood said when asked to comment upon whether it was in a language which George Wittman used. So Dr Klug's opinion may have understated Mr Wittman's impairment. Be that as it may, even accepting simply the psychiatric evidence called by the defendant, I am satisfied that the late Mr Wittman was at a special disadvantage in this transaction, because his judgment as to whether this was a transaction which he should undertake was significantly impaired. He was unable to make a worthwhile judgment as to what was his best interests. His letters to various people in relation to the alleged theft of his fortune need not be set out here, but they would cause a lay person to readily agree with Dr Morris' opinion that "he was very unwell and his grasp on reality was quite disturbed". Dr Klug's opinion was also based on the delusions apparent from this correspondence. The defendant was well aware of this correspondence and I am satisfied that he was aware of Mr Wittman's delusional disorder although, of course, he was probably unable to give it its medical description. He was also aware of Mr Wittman's proposed marriage.

[35] In my view Mr Wittman's disability in making worthwhile judgements in the ordering of his affairs must have been sufficiently evident to the defendant to have made it prima facie unfair or unconscientious that he procure Mr Wittman's agreement to this transaction. An onus is thereby cast upon him to show that the transaction was "fair, just and reasonable", which is to be assessed from the view point of the party under the disability.[12]

[36] The transaction must be considered as a whole. A very substantial benefit to George Wittman was that the obligation to pay the judgment debt was postponed and he thereby avoided bankruptcy. He also compromised any claim which Richard Wittman might have brought for his work at Galilee Lodge. So he was able to avoid these demands without then having to pay a dollar. But he did compromise his ability to deal with his assets not only through his will but during his lifetime. That is because he mortgaged the apartment in which he lived to secure this debt.

[37] On one interpretation, the Deed of Agreement would have prevented him from paying this debt during his lifetime and thereby obtaining a discharge of that mortgage (absent Richard Wittman's agreement). However under the better interpretation of the Deed of Agreement, and in particular its clause 5, he was entitled to pay the debt and accrued interest at any point. Clause 5 provides that "the parties agree that the debt be paid no later than three (3) months after the date of death of George Wittman". By specifying the date by which the debt was to be paid, the parties effectively provided that the debt could be paid at any time before then. Clause 5 is not in terms, for example, that the debt was to be paid "on a date three (3) months after the date of death ...".

[38] If he was not entitled to pay the debt during his lifetime, his financial position was affected because he was unable to sell the apartment free of the mortgage. If he was able to pay the debt in his lifetime, then he was able to sell the apartment but at a significant cost, because Richard Wittman could have insisted upon payment for a discharge of his mortgage. He would not have been bound to accept some substitute security. The value of the apartment cannot be assessed from the evidence, save that the defendant caused some inquiry made to ensure that it was an adequate security. There was a first mortgage to a bank but the amount secured by that is unknown. It would appear that the second unit which he bought in the same building, from some of the proceeds of the sale of his share in Kincora Court, cost George Wittman less than $300,000 (having regard to what it appears he received from that sale less the amount, in excess of $300,000, he invested with AMP). The unit mortgaged to Richard Wittman may have been more valuable than the second one. But more likely than not, had he sold the mortgaged apartment, or someone had sold it on his behalf, it would not have yielded sufficient money after payment of the defendant's mortgage to buy an alternative residence. He was then aged 81 and it was not inevitable that he would remain in this apartment until he died rather than, for example, that he would move to a nursing home. Such a move would have cost him at least $300,000 because of the defendant's mortgage, unless of course the defendant agreed to some substituted security. But that would have been his decision and given the history of litigation between them, George Wittman should not have been optimistic in that respect.

[39] What else could he have done as at May 1999? Mr Hugh Price worked as an agent for AMP and in that role he arranged for George Wittman to invest over $300,000 in managed funds. In the course of that, he had to become aware of George Wittman's financial position because he was acting as a financial advisor to him. According to his evidence, George Wittman could have raised what was necessary to pay the judgment debt by a bank loan secured upon his apartment or by a loan through Kincora Court. That evidence was not challenged and I see no reason to reject it. So there was an alternative for him, which was to become bound to pay a bank about $70,000 rather than being bound to pay Richard Wittman about $270,000. In each case the security would have been the same and it is unlikely that the bank's interest rate would have been greater than the 10 per cent to which he agreed in the Deed. The difference would have been that most probably the bank would have required repayment earlier than what as agreed with Richard Wittman. But once the prospect of a sale and perhaps a necessary sale of his apartment is considered, it can be seen that he would have been better off owing a bank $70,000 than he was under this Deed. The difference between the respective debts, about $200,000, was a large amount in comparison with his overall accumulated capital. Had he paid the judgment debt and costs from a bank loan, his net worth would have been $200,000 more and he would have had more scope in dealing with his residence. He would not have had the protection from a claim for wages. But for reasons I have given that was not as significant benefit.

[40] It follows that this was a transaction to which George Wittman should not have agreed. Had he been able to make a worthwhile judgment as to what he should do, he would have borrowed what was necessary to pay the judgment debt. From his viewpoint, this transaction was not fair, just and reasonable. The defendant has failed to discharge the onus upon it in that respect, and the transaction should be set aside as unconscionably procured.

[41] The defendant's position will then be that which he would enjoy had the Deed of Agreement and Bill of Mortgage not been signed. He will have his rights as a judgment creditor for $56,478 and interest on that overdue judgment sum at the prescribed rate of 10 per cent.[13] There seemed to be some argument as to whether in these circumstances the defendant would be entitled to interest on his judgment. My view is that the setting aside of this transaction would have the result that he is to be treated as having been an unpaid judgment creditor at all times. But if that view is not correct, effectively the same result should follow because in order to obtain his equitable relief, the plaintiff should do equity by compensating the defendant for being out of his money. That includes the sum of $13,250 for the costs of the District Court case which the plaintiff appears to accept as a reasonable estimate.

[42] It will be ordered that upon payment to the defendant by the plaintiff as executor of the estate of George Wittman of $69,728 together with interest on that sum at 10 per cent per annum from 23 November 1998, the Deed of Agreement and Bill of Mortgage executed by George Wittman in favour of the defendant will be set aside and the defendant will be ordered to do all things reasonably necessary to effect the registration of a discharge of that mortgage.

[1] (1988) 164 CLR 387 at 428-429

[2] (1999) 196 CLR 101

[4] (1999) 196 CLR 101 at 123

[5] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 429

[6] The Commonwealth v Mewett (1997) 191 CLR 471

[7] Motor Terms Co Pty Ltd v Liberty Insurance Ltd (in liq) [1967] HCA 9; (1967) 116 CLR 177

[8] [1983] HCA 14; (1983) 151 CLR 447 at 461

[9] [1983] HCA 14; (1983) 151 CLR 447 at 461

[10] Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (4th ed) at [15-105] citing Whereat v Duff [1972] 2 NSWLR 147

[11] Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 at 474-5

[12] The Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447 at 475

[13] s 48 of the Supreme Court Act 1995 (Qld) and s 4 of Supreme Court Regulation 1998 (Qld)