ZHOU v MINDARIE DRIVE PTY LTD

1. Mr Aguirre is the appellants' son in law.[3] He and his business partner, Mr Daniel Sanbrook, were the directors and shareholders of Mindarie Drive Pty Ltd.[4] In 2017 Mindarie Drive was involved in a property development (the Jade development) involving the construction of a mix of residential and commercial units.[5] The development was financed by a commercial lender but by late 2017 further finance was required.[6]

1. The respondent, a retired investor, was born in China. She had carried on a business lending money in China. The respondent cannot speak English and left all dealings in relation to Mindarie Drive to Ms Wang, who acted as her agent.[7] The trial judge approached the issue of what was known by the respondent on the basis that what was known by Mr Lee and Ms Wang was her knowledge.[8] Mr Lee prepared the loan deed containing the appellants' guarantee. The loan deed was executed by the appellants at a meeting held at Mr Lee's office on 5 December 2017.

1. On 5 December 2017 Mr Booth was 71 years old and Mrs Booth was 66 years old.[9] They were both retired. Mr Booth retired at the age of 67 having worked as an underground miner for approximately 16 years and thereafter as a saw operator in a granite and marble business.[10] Mrs Booth retired at the age of 60 having worked as a hairdresser and subsequently as a teacher's aide for disabled children for 17 years.[11] She retired due to ill-health.[12] Mr Booth also suffered from ill-health. He had a severe stroke in 2017 and suffered from heart conditions.[13] The appellants' health conditions did not render them incapable or less capable of being able to understand advice given to them by Mr Lee at the meeting held on 5 December 2017.[14] The appellants each completed the equivalent of three years of secondary education.[15] Although the appellants had no experience in running businesses they both understood the effects of a mortgage and a guarantee.[16]

Discussions between Ms Wang and Mr Aguirre - 14 November to 1 December 2017

1. Ms Wang met Mr Aguirre for the first time on 14 November 2017. Mr Aguirre was introduced to her as a property developer and the two of them discussed the Jade development.[17] Mr Aguirre told Ms Wang he needed further finance and would be able to 'get it anywhere' but he 'urgently needed the money'.[18] The following day Ms Wang met Mr Sanbrook.
2. Mr Lee and Ms Wang undertook due diligence.[19] Ms Wang obtained feasibility studies, pre-sales contracts, various ASIC searches and other information relating to Mr Sanbrook, Mr Aguirre and Mindarie Drive. She provided some of the information to Mr Lee.[20] On 20 November 2017 Ms Wang told Mr Aguirre the respondent would consider lending between $350,000 to $500,000 for one year with security over the Jade development.[21]
3. On 30 November 2017 Mr Lee emailed Ms Wang with a costs agreement, an authorisation to act and a draft loan deed which provided for guarantees to be given by Mr Aguirre and Mr Sanbrook.[22] Ms Wang forwarded the documents she had received from Mr Lee to Mr Aguirre.[23] That afternoon Mr Lee spoke with Ms Wang and advised her that he had concerns about the security for the loan because it was likely the directors had provided other guarantees and he recommended further security be obtained.[24]
4. On (Friday) 1 December 2017 Mr Aguirre told Ms Wang it would not be possible to place a caveat over the Jade development because it could create difficulties with the current financier and contractors.[25] Ms Wang told him they were not willing to do business on that basis and so the 'deal was off'.[26] Later Mr Aguirre rang Ms Wang and offered both his and Mr Sanbrook's properties as security for the loan. Ms Wang again advised they were not willing to proceed because it was necessary for the loan to be secured by unencumbered property.[27] Mr Aguirre then offered the appellants' home in the Perth suburb of Butler as security for the loan. He told Ms Wang the property was unencumbered and explained that it would 'ultimately be his in the future'. Mr Aguirre did not consult the appellants before offering their home as security.[28]
5. Subsequently Mr Aguirre informed Ms Wang that the appellants' property was subject to a reverse mortgage, and she responded that they were not interested in taking a second mortgage.[29] Mr Aguirre then suggested the loan be increased to enable the reverse mortgage, which was only between $70,000 to $80,000, to be paid off. He said his in-laws were happy to offer their property as security and could be guarantors.[30] The respondent was content with this arrangement. She wanted Mr Lee to discharge the reverse mortgage and place a caveat over the appellants' home as soon as the loan was made.[31]
6. Ms Wang's evidence was that she understood Mr Aguirre and the appellants had a close relationship. This was based on two things. First, Mr Aguirre had told her he had paid for the appellants to go on a cruise some 12 months earlier and, secondly, as Ms Wang put it in her evidence, 'they like very Chinese culture, because our culture is families altogether, funding together, whatever. You know this from my impression probably. I come from China, yes this was my impression from Thomas'.[32]
7. Ms Wang did not know anything about the appellants' assets other than they owned the property to be provided as security.[33]

1. On 4 December 2017 Mr Lee provided Ms Wang with a second draft of the loan deed. She forwarded this to Mr Aguirre at 8.06 am on 5 December 2017.[34]
2. Following receipt of Ms Wang's email, Mr Aguirre telephoned her and asked her to arrange a meeting so they could execute the loan deed later that day. She was surprised he was moving so quickly and felt it was 'quite desperate'.[35] Ms Wang described Mr Aguirre as 'very nice but pushy'.[36]
3. Mr Aguirre and Mrs Aguirre spoke separately to the appellants about the proposed loan. The findings in respect of these communications are set out at [36] below.

1. Later in the morning of 5 December 2017 Mr Aguirre collected the appellants from their home and drove them to Mr Lee's office. Along with Mr Sanbrook, they arrived at about 12 noon. When they arrived, Mr Lee was making amendments to the loan deed. He showed them into the boardroom.[37] Ms Wang arrived a short time later.[38] This was the first time the appellants had met Ms Wang and Mr Lee.[39]
2. After Ms Wang arrived Mr Lee placed three copies of the draft deed on the desk in the boardroom. He told the parties to discuss the changes that had been made and he left the room.[40]
3. At 12:30 pm Mr Lee checked on the parties. He said that generally Mr Aguirre did most of the talking. An amendment to the spelling of Mr Booth's Christian name was required. Mr Lee made that amendment. At about 1.00 pm Mr Lee told those present that further amendments were required and he needed more time. He sent everyone away for lunch and said they should come back at about 2.00 pm. Ms Wang and Mr Aguirre stayed behind and spoke for about five minutes.[41]
4. Mr and Mrs Booth, Mr Sanbrook and Mr Aguirre went for lunch at a tavern across the road from Mr Lee's office where they sat together.[42] At about 2:20 pm everyone went back to Mr Lee's office and into the boardroom.
5. Mr Lee printed out three copies of the deed in its final form and took the parties through the changes. Mr Lee said he spoke to everyone, not specifically referring to any individual person. Mr Aguirre had suggested at least one of the changes. The interest rate was amended from 30% to 18%.[43] The spelling of Mr Booth's Christian name was amended in one place previously overlooked. There was no change to the clause that provided for a guarantee to be given by the appellants.[44]
6. Mr Lee went through the changes 'bit by bit' but could not recall the exact words used.[45] He said he spoke to all four guarantors using their first names and said you are guarantors, that is, your assets will be used as security.[46] He said he talked through the caveat over the properties. He did not read the clause verbatim but said there would be a caveat over their property and referred to the property's address. Mr Lee said he explained the caveat was a charge over the property.[47]
7. The trial judge accepted Mr Lee's evidence that 'Mr Aguirre was putting a bit of pressure on to get it done saying in the presence of all that he wanted to go to the bank before it closed'.[48] Mr Aguirre was the only guarantor who 'meaningfully discussed' the terms of the deed.[49]
8. Mr Lee left the room for about 30 to 35 minutes for the parties to consider the changes. He was later told they were ready to sign and re‑entered the boardroom.[50]
9. The deed comprised 32 pages (including the pages with the attestation clauses).[51] It recorded the loan sum was $500,000. This included an establishment fee of $25,000 and interest of $90,000 (calculated at an annual rate of 18%). $90,000 was to be withheld by the respondent and held in a holding account with payments of accrued interest being made out of the account to the respondent on a monthly basis.
10. Clause 12 of the deed provided for the guarantee to be given by the appellants. It was in the following terms:
    1. GUARANTEE

In consideration of the Lender agreeing to lend the Loan Sum to the Borrower at the request of the Guarantors, the Guarantors enter into this guarantee that operates to the benefit of the Lenders on the terms and conditions of this clause.

The Guarantors jointly and severally agree to Guarantee to the Lender:

(a) full and punctual payment of the interest and other monies due under this Deed;

(b) the performance and observance of all the Borrower's obligations and covenants pursuant to the provisions of this Deed;

(c) all claims by the Lender against the Borrower for:

1. any default on the terms of this Deed;

2. the Lender's loss or damage in the event of the Borrower defaults on this Deed;

3. for the Lender's costs incidental to and in connection with the Lender's seeking enforcement of those obligations against the Borrower and the Guarantors, including but not limited to legal costs on an indemnity basis; and

4. all other loss or damage suffered by the Lenders arising in connection with or incidental to this Deed.

(d) that in the event the Borrower defaults in the payment of the Interest or any other monies due under this Deed, the Guarantors will immediately pay to the Lender such monies outstanding upon request by the Lender in writing; and

(e) that in the event the Borrower defaults in the performance, compliance or observance of the provisions of this Deed, the Guarantors will pay to the Lender on demand:

1. all losses, damages, expenses and costs including legal costs on an indemnity basis; and
2. indemnify the Lenders for all such losses, damages, expenses and costs which the Lenders may be entitled to recover regardless of whether or not any demand has been made or legal proceedings have been commences against the Borrower.

...

12.5 Duration of Guarantee

(a) the entire Loan Term; and

(b) continues to operate and remains in force until all interest or other monies have been paid and all obligations of the Borrowers are satisfied in full.

...

12.8 Security provided by Guarantors'

(a) The Guarantors hereby warrant and undertake to allow the Lender to caveat on the properties owned by the Guarantors as security for the guarantee and indemnity provided for the Borrower to the Lender.

(b) The Guarantors, BARRY MILES BOOTH and JENNIFER ROSE BOOTH must provide a Clean Title for the Lender to be used as a security and the lodgement of a caveat on the property located at 30 Cape Meares Crescent, Butler in the State of Western Australia ('Butler Property')

(c) The Guarantors, BARRY MILES BOOTH and JENNIFER ROSE BOOTH undertake and must appoint Vanguard Legal Pty Ltd (ABN: 57 619 610 721) of 1/799 Beaufort Street, Mount Lawley in the state of Western Australia to discharge the mortgage over the Butler Property upon the execution of this Deed.

(d) The Guarantors confirm and agree to release and forfeit their right under the law to challenge or withdraw the Caveat lodged by the Lender over the properties owned by the Guarantors until the Loan Sum and all monies owing under this Deed is fully repaid in full.

1. Clause 17 of the deed provided:
   1. INDEPENDENT LEGAL ADVICE

The parties agree and confirm that they are entitled to obtain independent legal advice over the terms of this Deed and are advised to obtain same prior to the execution of this Deed.

1. Schedule 2 of the deed contained the following provision:

YOUR ASSETS/ PREMISES TO BE USED AS SECURITY FOR THE LOAN SUM

The securities listed below secure all the Loan Sum in this Deed.

In the future, the Parties may agree in writing to further securities being provided.

1. Caveat over property situated at 31 Green Road, Hillarys in the State of Western Australia more particularly described in Certificate of Title Lot 244 On Plan 9881 Volume 1331 Folio 778.
2. Caveat over property situated at 30 Cape Meares Crescent, Butler in the State of Western Australia more particularly described in Certificate of Title Lot 650 on Deposited Plan 62273 Volume 2713 Folio 299.

Guarantee and Indemnity for the Loan Sum, Interest and all monies due payable by the Borrower to the Lender given by TOMAS BRIONES AGUIRRE, DANIEL BRYAN SANBROOK, BARRY MILES BOOTH and JENNIFER ROSE BOOTH.

1. Before the signing of the deed, Mr Lee said to the appellants words to the effect:[52]

Mr and Mrs Booth, I trust that you have read through and reviewed the document, as per the document you have the right to seek independent legal advice prior to signing the document, you have a choice to sign it or not to sign it today, can you confirm if you would like to seek legal advice.

1. Mr Lee pointed to cl 12 of the deed and said this is a guarantee, these are the terms. He pointed also to schedule 2 and said, 'please have a look at this, please have a look at this page, your assets or your property will be used as a security for the loan and what you have provided is a guarantee and indemnity'. Mr Lee's evidence was that he usually said, 'that means everything and anything that is under your personal name can and will be used to satisfy the debt in the event of the default' and he believed he used similar words on that day. Neither of the appellants said anything.[53]
2. Mr Lee then asked everyone once again if they were happy to sign the document 'today' and they nodded. Mr Lee spoke to Mr Aguirre and Mr Sanbrook and asked them if they wanted independent legal advice by pointing out and reading schedule 3 of the deed on page 28 (schedule 3 contained clauses referring to the entitlement to obtain legal advice - the clauses relating to the appellants are reproduced below), they both said 'no we are fine, we have chosen not to obtain independent legal advice', they signed and Mr Lee crossed out the word 'have' underneath Mr Sanbrook and Mr Aguirre's names.[54]
3. When Mr Lee came to the appellants he pointed them to, and read aloud, the clause on page 29 (also part of schedule 3), he pointed out that they had the right to independent legal advice, and when he asked them if they wished to obtain independent legal advice they both individually said 'no'.[55] The word 'have' was crossed out and the appellants both signed on the line above their names. The relevant part of schedule 3 of the deed as completed by the appellants is reproduced below.

1. The appellants were the last to sign the deed. They had gone through the document 'literally page by page'.[56] At about 4.30 pm Mr Lee copied the partially signed deed (the respondent had yet to sign) and gave one copy to the appellants, and one copy to either Mr Aguirre or Mr Sanbrook.
2. At trial there was a dispute about the advice provided by Mr Lee during the meeting. The trial judge was satisfied Mr Lee advised the appellants of the following four matters: they were providing a guarantee, the effect of the guarantee, they had a right to obtain independent legal advice and they did not have to sign the deed that day.[57] The trial judge referred to the advice comprising these four elements as 'the disputed advice'.

Trial judge's findings about Mr and Mrs Aguirre's conduct towards the appellants

1. The trial judge made a series of findings in which he set out relevant aspects of Mr and Mrs Aguirre's engagement with the appellants both prior to and at the meeting. These were the findings on which his Honour based his conclusion that undue influence had been established. The findings were as follows:

(a) Mrs Aguirre told Mrs Booth that Mr Aguirre could get a lower interest rate from the respondent if a caveat was placed over their home. Mrs Booth's response was that if it was going to help then it would be okay.[58]

(b) Mr Aguirre was 'the driving force of the transaction'.[59]

(c) After Mrs Aguirre had spoken to them, Mr Aguirre spoke to the appellants about the use of their property as security. He told them a caveat would be placed over their property and they would not be able to sell or deal with their property for a period of time.[60] Although before the meeting on 5 December 2017 Mr Aguirre knew the appellants would be guarantors of the loan,[61] the trial judge was not prepared to infer that he had told them they would be guarantors.[62]

(d) Mr Aguirre told the appellants the reverse mortgage would need to be paid out because the lender required clean title to their property and the amount required to do this would be part of the loan. Once the reverse mortgage was discharged a caveat would be placed on the property. The only reason the reverse mortgage was discharged was because this was necessary to enable the loan to proceed.[63]

(e) All the information about the loan and proposed deed conveyed to the appellants prior to the meeting was conveyed by Mr Aguirre. Mr Aguirre carried out all the negotiations in relation to the deed and knew that the appellants would be a party to the deed and would be guarantors.[64]

(f) All the arrangements for the appellants to attend Mr Lee's office to sign the deed were made by Mr Aguirre, he drove them to the meeting and was always present with them during the meeting. Except possibly for discussions around the amendment to the spelling of Mr Booth's name, Mr Aguirre was the only guarantor who meaningfully discussed the terms of the deed.[65]

(g) Mrs Booth considered Mr Aguirre to be a businessman who knew about 'financial things', she trusted him and accepted what he said without asking any meaningful or in-depth questions.[66] Mrs Booth was happy to assist Mr Aguirre to obtain finance for the development and effectively to do what was necessary to achieve that aim because it would help Mr and Mrs Aguirre. Mrs Booth was happy to assist her daughter in circumstances whereby neither she nor anyone else had concerns about the financial viability of the project.[67]

(h) Mr Booth was reliant on the advice he received from Mrs Booth and complied with her wishes in respect to the transaction.[68]

1. The reverse mortgage on the appellants' property was discharged on 8 December 2017 and on 17 January 2018 a caveat was placed over their property.

Trial judge's reasons for rejecting the undue influence defence

1. The trial judge referred to the authorities in which the principles constituting the doctrine of undue influence are explained. There was no criticism of his Honour's exposition of the applicable principles.
2. The trial judge referred to the nine matters relied on by the appellants to establish that the relationship between them and Mr Aguirre was such as to give rise to a presumption of undue influence. Those matters were: the closeness of the relationship, the appellants' modest means, their ages, their compliant personalities, their limited education, their lack of business experience, their poor health, the lack of independent advice and Mr Aguirre's role as their adviser in the transaction.[69] The trial judge analysed each of the matters and found that there was nothing in the any of the factors other than the last one (Mr Aguirre's role as their adviser) that either alone or in combination established any dominion or ascendancy by Mr and Mrs Aguirre generally over the will of either of the appellants or 'any dependency and subjection' on the part of the appellants.[70] Parenthetically, the trial judge had made an earlier finding about the relationship between Mr Aguirre and the appellants generally (upon which the respondent placed some reliance):[71]

I find the [respondent] had no knowledge actual or constructive that there was any emotional or general reliance by Mr and Mrs Booth on Mr Aguirre, or that they were susceptible to his influence. There is no evidence which supports a contrary conclusion or an inference to that effect.

1. Earlier the trial judge had found that there was no evidence of any general or emotional reliance of the part of the appellants towards Mr Aguirre.[72] Putting aside the particular transaction the appellants were not susceptible to the influence of Mr Aguirre in other aspects of their lives.[73]
2. However, the trial judge found Mr Aguirre's role as the appellants' adviser in relation to the specific transaction the subject of the dispute supported the existence of a relationship of influence. Drawing on what had occurred both prior to and at the 5 December meeting,[74] the trial judge was satisfied:[75]

[T]here was a special relationship of influence with Mr Aguirre and Mrs Aguirre in relation to this transaction and Mr Aguirre occupied a position of ascendancy or influence and Mr and Mrs Booth a position of dependency and trust and the presumption of undue influence has been established.

1. As noted earlier, the findings on which his Honour's conclusion that the presumption of influence was established are those set out at [36] of these reasons.
2. The trial judge was satisfied the presumed influence was undue because Mr Aguirre 'did not fully and frankly reveal the true nature of the transaction'.[76]
3. The trial judge then considered the position of the respondent in relation to Mr Aguirre's undue influence. His Honour noted that undue influence operated against not only the party who exercised the influence but against third parties who claimed under the party exercising the undue influence with constructive knowledge or notice of that influence. The trial judge referred to the possibility that the presumption of undue influence may be discharged. The relevant paragraphs of the primary reasons are reproduced in the section of these reasons dealing with the first ground of appeal.
4. The trial judge set out and analysed the circumstances relied on by the appellants to establish the respondent had constructive notice of Mr Aguirre's undue influence.[77] In the course of this analysis the trial judge referred to the fact that the appellants had not received independent legal advice and to the submission made by their trial counsel that the lack of independent legal advice was of great significance. His Honour considered the decision in Bester v Perpetual Trustee Co Ltd,[78] to which further reference will be made later in these reasons. The trial judge referred also to a submission made by the appellants' counsel to the effect that the transaction was an improvident one from their perspective. His Honour was not prepared to characterise the transaction as improvident but did accept that the guarantee provided no benefit to the appellants.[79] This reflects the conclusion (reached by his Honour in his consideration of the Yerkey v Jones defence) that the appellants were volunteers and derived no material benefit from the transaction.[80]
5. In concluding the analysis of the circumstances relied on by the appellants to establish constructive notice the trial judge set out his findings as to what was known by the respondent and, in the light of what was known, whether the respondent should be held to have constructive knowledge or constructive notice. His Honour concluded the respondent had neither constructive knowledge nor constructive notice and nor was she 'wilfully blind'. The relevant paragraphs of the primary reasons are reproduced in the section of these reasons dealing with the first ground of appeal.
6. In case he was wrong in concluding the respondent did not have knowledge or notice of Mr Aguirre's undue influence, the trial judge considered whether the appellants had signed the loan deed in the exercise of their own independent will. The relevant paragraphs of the primary reasons are reproduced in the section of these reasons dealing with the second ground of appeal. Essentially, there were four factors that contributed to his Honour's ultimate conclusion on this issue. First, after receipt of the disputed advice, the appellants knew the transaction involved the provision by them of a guarantee and the lodging of a caveat against title to their home. Secondly, the appellants had declared themselves happy to proceed without legal advice. Thirdly, Mrs Booth trusted Mr Aguirre's business sense and had every confidence in his business skill. Fourthly, Mrs Booth wished to support her daughter and her husband in their business venture and Mr Booth was happy to proceed if his wife was prepared to proceed.

1. The seminal exposition of the principles constituting the doctrine of undue influence is that of Dixon J in Johnson v Buttress:[81]

The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor's will or freedom of judgment in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the deliberate contrivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act. But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected. When they stand in such a relation, the party in the position of influence cannot maintain his beneficial title to property of substantial value made over to him by the other as a gift, unless he satisfies the court that he took no advantage of the donor, but that the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee. This burden is imposed upon one of the parties to certain well-known relations as soon as it appears that the relation existed and that he has obtained a substantial benefit from the other. A solicitor must thus justify the receipt of such a benefit from his client, a physician from his patient, a parent from his child, a guardian from his ward, and a man from the woman he has engaged to marry. The facts which must be proved in order to satisfy the court that the donor was freed from influence are, perhaps, not always the same in these different relationships, for the influence which grows out of them varies in kind and degree. But while in these and perhaps one or two other relationships their very nature imports influence, the doctrine which throws upon the recipient the burden of justifying the transaction is confined to no fixed category. It rests upon a principle. It applies whenever one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his part.

1. In Thorne v Kennedy,[82] the plurality explained:[83]

The question whether a person's act is 'free' requires consideration of the extent to which the person was constrained in assessing alternatives and deciding between them. Pressure can deprive a person of free choice in this sense where it causes the person substantially to subordinate his or her will to that of the other party. It is not necessary for a conclusion that a person's free will has been substantially subordinated to find that the party seeking relief was reduced entirely to an automaton or that the person became a 'mere channel through which the will of the defendant operated'. Questions of degree are involved. But, at the very least, the judgmental capacity of the party seeking relief must be 'markedly sub-standard' as a result of the effect upon the person's mind of the will of another. (footnotes omitted)

1. Later, the plurality cited the following statement from the Restatement of the Law Third, Restitution and Unjust Enrichment:[84]

Circumstances universally relevant to the proof of undue influence include the relation of the parties; the nature and terms of the transfer in question; the susceptibility of the transferor to the influence of the other; the opportunity of the other to exert undue influence; and the extent to which the transferor acted on the basis of independent advice.

1. As this court explained in Shephard v Tuanie Paul Galea as executor and trustee of the estate of the Late Joseph Galea:[85]

In circumstances of an antecedent relationship of ascendancy or influence on the part of the donee and corresponding dependency or trust on the part of the donor, the question is not whether the donee knew what she was doing, but how the intention to make the gift was produced. In Huguenin v Baseley, the donor, a widow who had recently arrived in England with no friends or relatives there and no knowledge of business affairs, entrusted the management of certain estates that she had inherited to a clergyman. She subsequently settled upon the clergyman a voluntary settlement of property, which was drawn by the clergyman's solicitor. In proceedings to set aside the settlement, Lord Eldon accepted the defendant's argument that the widow had intended to gift him the property. However, his Lordship said, in effect, that given the existence and nature of the antecedent relationship, the question remained whether the donor widow had 'all that care and providence ... placed [a]round her' before making the gift which the donee would be bound, in the circumstances of their relationship, to exert on her behalf. (footnotes omitted)

1. Johnson v Buttress[86] provides a further illustration of the principle that undue influence may vitiate a transaction even if the donor understands the nature of the transaction. Mr Buttress was 67 years of age, illiterate and without any experience in business affairs. He transferred his only substantial asset to a relative of his deceased wife. The defendant was unable to displace the presumption of undue influence notwithstanding the transaction was explained to Mr Buttress and he understood the nature of it. Latham CJ provided the following description of the circumstances in which Mr Buttress executed the transfer:[87]

The transfer was prepared by the managing clerk of the defendant's solicitor. The defendant accompanied the deceased to the solicitor's office, and was present at the interview with the managing clerk. The learned judge accepted the evidence of the managing clerk, which showed that the deceased understood at the time that he was dealing with his property and that he was parting with his property. But nothing was said to direct his attention to the fact that he was in effect denuding himself of the whole of his property without obtaining any equivalent, and of course it was not suggested that the advice he received in the office of the defendant's solicitor was independent advice.

1. The trial judge held that when established, undue influence operates not only 'against the person who is able to exercise the influence' but 'against every volunteer who claimed under him, and also against every person who claimed under him with notice of the equity thereby created, or with notice of the circumstances from which the court infers the equity.[88] His Honour cited Bainbrigge v Brown and Bank of New South Wales v Rogers as authorities for this principle.[89]
2. On appeal there was no challenge to this statement of principle. That is not surprising because as Brooking J said in Budget Nominees Pty Ltd v Registrar of Titles:[90]

There is ample authority for the view that undue influence will affect a third person who has notice of the existence of the relation of influence, or of the circumstances giving rise to it, the authorities not suggesting the presence of an additional requirement related in some way to agency: Moloney v Kernan (1842) 2 Drury & Warren 31; Archer v Hudson [1844] EngR 759; (1844) 7 Beav. 551; 49 ER 1180; Maitland v Irving [1846] EngR 1095; (1846) 15 Sim. 437; 60 ER 688; Thornber v Sheard [1850] EngR 564; (1850) 12 Beav 589 at pp 602 - 603; [1850] EngR 564; 50 E.R. 1186; Kempson v Ashbee [1874] UKLawRpCh 107; (1874) 10 Ch App. 15; Bainbrigge v Browne [1881] UKLawRpCh 148; (1881) 18 ChD 188; De Witte v Addison (1899) 80 LT 207; M'Mackin v Hibernian Bank (1905) 1 IR 296; Union Bank of Australia Ltd v Whitelaw [1906] VicLawRp 77; (1906) VLR 711 at 721-722; London & Westminster Loan and Discount Co v Bilton (1911) 27 TLR. 642 at p 656; Lancashire Loans Ltd v Black (1934) 1 KB 380; Yerkey v Jones (1940) 65 CLR 648 at p. 677; Bank of New South Wales v Rogers [1941] HCA 9; (1941) 65 CLR 42; Berk v Permanent Trustee Co. of New South Wales Ltd [1947] NSWStRp 44; (1947) 47 SR (NSW) 495 at p 463.

1. The sufficiency of constructive notice for the purposes of undue influence may be contrasted with the position in relation to unconscionable conduct as stated by the High Court in Kakavas v Crown Melbourne Ltd.[91] In Kakavas the High Court said constructive notice has no role to play in determining claims for relief against unconscionable conduct in equity and a person seeking relief against unconscionable conduct is required to prove that the alleged wrongdoer had actual knowledge (or wilful blindness) of the weakness of the other party to the impugned transaction.[92] This requirement is imposed because equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind.[93]
2. Undue influence and unconscionable conduct are both species of equitable fraud. In Kakavas the High Court referred with approval to observations of Lindley LJ in Manchester Trust v Furness,[94] to the effect that, the concept of constructive notice should not be used to establish that a commercial transaction was impeachable for equitable fraud (reference was made to observations to a similar effect in other cases).[95] Notwithstanding the apparent breadth of these observations, they are not to be understood as effecting a change to the principles that operate where the equity of a person on whom undue influence has been exercised is in competition with the interests of a third party who has acquired an interest in the property. Kakavas was a decision concerned with unconscionable conduct and not undue influence. Further no reference was made to Bank of New South Wales v Rogers, long regarded as authority for the proposition that constructive notice on the part of a third party is, in certain circumstances, sufficient to vitiate a transaction on the ground of undue influence, or to any of the other undue influence decisions, in which constructive notice has been deployed to that effect. That said, brief reference to the authorities and the commentary in the leading equity texts is helpful to demonstrate how the concept of notice (including constructive notice) as distinct from knowledge has been used in undue influence cases, especially those involving third party financiers.
3. In Bainbrigge v Brown,[96] a father procured the assignment by his wife and adult children (the children were found not to be 'entirely emancipated from the father's control') of their interests in property to his creditors. The father was found to have procured the assignment by the exercise of undue influence. Fry J described the operation of undue influence on the creditors as follows:[97]

[The inference of undue influence] operates against the person who is able to exercise the influence . . . and, in my judgment, it would operate against every volunteer who claimed under him, and also against every person who claimed under him with notice of the equity thereby created, or notice of the circumstances from which the court infers the equity.

1. The observation of Fry J in Bainbrigge v Brown quoted above was cited with approval by each of the judges in Bank of New South Wales v Rogers.[98]
2. In Rogers the plaintiff was 64 years of age. She had lived with her uncle for 40 years and relied solely on his business advice. She charged to the bank virtually the whole of her property as security for the uncle's overdraft. The relationship between the plaintiff and her uncle was held to give rise to a presumption of undue influence that was not rebutted by the defendant. The defendant had sufficient notice of the relationship between the plaintiff and her uncle such that the onus was cast on it to prove that the giving of the security was the free, voluntary, and well‑understood act of the plaintiff. The defendant was unable to discharge the onus and the security was set aside.
3. McTiernan J explained that courts do not intervene in undue influence cases to discourage generosity or folly but for reasons of public policy and utility to protect persons, including sureties, from being deprived of their property by force or fraud of any kind.[99] His Honour referred to earlier English Court of Appeal decisions that contained salutary warnings to creditors who take securities from family members of the debtor. Those warnings are as relevant today as they were when given. The extracts from the cited cases bear repetition:[100]

In Sercombe v Sanders the Master of the Rolls (Sir John Romilly) said: 'It is important that creditors should understand that they cannot improve their security, taken from persons to whom they have given credit, by inducing them, at the last moment, to compel near relations or persons under their influence, and not in a situation to resist their importunity, to pay their debts.' Nor can a creditor take advantage of security if he has notice that it has been obtained by such means. In Berdoe v Dawson the principle is well illustrated. A father, who was pressed for payment of a debt, with the knowledge of the creditor induced his two sons, then of the respective ages of twenty-five and twenty-three, to join in securing his debt. The father and sons executed an indenture whereby they assigned all their interests under a will to secure the debt and interest. The sons were resident with and maintained by their father until his death. He died insolvent. The creditor was well acquainted with the family. The Master of the Rolls said: 'When a person executes a deed by which his father or any other person nearly related and connected with him, or who, from any other cause, has necessarily a considerable influence over him is benefited, then the person who claims the benefit of that deed is bound to establish two things:-he is bound to establish, in the first place, that the person who executed the deed knew what he was about when he executed it; and in the next place, he is bound to show that it was made of his own free will, and unbiassed by and without being subject to that influence which he could not easily resist'. (footnotes omitted)

1. McTiernan J analysed what was known to the bank officer dealing with the uncle and concluded:[101]

The respondent's dealing with her property does not look as if it proceeded from rational consideration on her part and from her own pure volition. If the bank had made reasonable inquiries, it would have ascertained the facts about the situation in which the respondent stood to [the uncle] and that she was necessarily exposed to influence founded upon her relations of confidence and dependence with him. 'When it is said that a person is put on inquiry, the result in point of law is that he is deemed to know the facts which he would have ascertained if he had made inquiry' (London Joint Stock Bank v Simmons, per Lord Herschell). There were strong grounds for suspecting that there was some special or peculiar relation between [the uncle] and the respondent which enabled him to dominate her will, and also that she had no independent advice. No draft of the mortgage or of any letter was sent to her beforehand or to any person acting on her behalf. The respondent was, it is true, of mature age. But the dominion resulting from the long-standing quasi-parental relationship undoubtedly remained in [the uncle] even if the relationship had become modified in course of time. The bank is deemed to have known of this relation of influence.

1. Williams J referred in some detail to the steps taken by the bank officer to explain the transaction and the security documentation to the plaintiff but in his Honour's view this was not sufficient to discharge the onus on the bank.[102] His Honour developed his reasoning as follows:[103]

The onus was on the appellant to establish that she acted spontaneously in the sense already mentioned and it has not discharged the same. She was never free from [the uncle's] influence. He acted for her throughout. He was present on every occasion. A gift can be valid although the donor did not have independent legal advice, if the donee, or the person claiming under the donee with notice, can prove the gift was the result of the free exercise of the donor's independent will. Where the donor is making a gift of property it may be sufficient if he or she understands the terms of the instrument of gift, because this can be knowledge of all relevant circumstances, but where the transaction is complicated it would usually be impossible for a donee or the third party to establish such knowledge in the absence of independent legal advice. The giving of a guarantee is usually a complicated matter. The instrument itself is often involved. The guarantor has rights against the debtor in the event of the creditor calling upon him to pay the debt. A knowledge of the debtor's financial position is therefore material. In the circumstances of the present case it was essential that the respondent should have had the protection of some independent legal advisor who would have fully explained the whole position to her. To adapt the words of Sir John Romilly in Sercombe v Sanders, would not a separate solicitor have said to her: 'You must understand that you are losing your shares for ever. Are you quite sure you are relieving [your uncle] from his difficulties or are you only putting off the evil day? For if he became bankrupt you had better give him these shares afterwards, unless your object is to benefit the bankers.' In most of the cases the person entitled to the benefit of the inference has been a son or daughter or other younger relative who has shortly before attained the age of twenty-one years; but there are cases in which the transaction has been set aside against third parties where the donor was a mature age (Harvey v Mount; Sharp v Leach). (footnotes omitted)

1. In Bank of Credit and Commerce International SA v Aboody,[104] the Court of Appeal of England and Wales observed:

If a creditor has actual or constructive notice, at the time of the execution of the charge or guarantee in question, that the guarantee or charge on which it relies has been procured by the exercise of undue influence, it cannot enforce the transaction; an equity is raised against the creditor irrespective of any question of agency. (emphasis added)

1. The Court of Appeal of England and Wales also considered what was required to establish constructive notice in Wright v Cherrytree Finance Ltd, finding that constructive notice was established where:[105]

There was enough there to make any prudent lender see the need for inquiry. There should have been a strong suspicion at least that [the person providing security for a loan] did not understand what transaction she was entering into; or, if she did understand it (and it is said by the finance company that she did), that she was subject to pressure she could no longer resist. (emphasis added)

1. In Garcia v National Australia Bank Ltd,[106] Gaudron, McHugh, Gummow and Hayne JJ, in the course of emphasising that the decision in Commercial Bank of Australia Ltd v Amadio[107] was concerned with unconscionable conduct, made the point that 'there was no allegation of undue influence with notice on the part of the bank (a situation corresponding to that in Bank of New South Wales v Rogers)' (emphasis added) thereby implicitly approving of the significance of notice in Rogers. In Mavaddat v HSBC Bank Australia Ltd [No 2],[108] Mitchell J, with whom Newnes JA agreed, cited Rogers and the passage in Garcia to which reference has just been made as authority for the proposition that, equitable fraud founded in presumed undue influence cannot be sheeted home to third parties where there is no evidence that the third party knew of circumstances from which the court would infer undue influence.[109]
2. In Micarone v Perpetual Trustees,[110] Olsson J (though dissenting in the result on the undue influence ground of appeal) set out the circumstances in which undue influence will vitiate a transaction and then observed:[111]

Where undue influence is found to have been established, a third party financier taking the relevant security cannot maintain that security, if it had actual or constructive notice of the requisite relationship, by reason of information which ought to have put it on enquiry.

1. In Permanent Mortgages Pty Ltd v Vandenbergh,[112] Murphy J noted that:[113]

The receipt and retention of a benefit by a third party bank arising from the customer's undue influence has generally been held to be unconscientious on three principal bases. The first is where it has participated with notice, the second is agency, and the third involves special principles historically developed and applied to married women.

As to the first of those, the third party is affected in equity where it participates in the transaction with actual or constructive notice of the circumstances giving rise to the impropriety, ie of the actual undue influence exercised, or of the circumstances from which the presumption of undue influence arises: Yerkey v Jones (677); Bank of New South Wales v Rogers [1941] HCA 9; (1941) 65 CLR 42, 55, 70 - 72, 85 - 86; Commercial Bank of Australia v Amadio (464); Garcia v National Australia Bank (408); Budget Nominees Pty Ltd v Registrar of Titles (1988) V ConvR 54-311, 63-988.

1. In Credit Lyonnais Bank Nederland NV v Burch,[114] the Court of Appeal in England and Wales set aside a guarantee given by a junior employee on a modest wage in favour of her employer's bank. The securities were given to secure an increase in the employer's overdraft from £250,000 to £270,000 though the guarantee was unlimited both in time and amount. The guarantee was secured by a mortgage over the employee's flat valued at £100,000 in which the employee had equity of £70,000. Millett LJ said:[115]

In the present case, the bank did not obtain the guarantee directly from Miss Burch. It was provided to the bank by Mr Pelosi, who obtained it from Miss Burch by the exercise of undue influence. In such a context, the two equitable jurisdictions to set aside harsh and unconscionable bargains and to set aside transactions obtained by undue influence have many similarities. In either case it is necessary to show that the conscience of the party who seeks to uphold the transaction was affected by notice, actual or constructive, of the impropriety by which it was obtained by the intermediary, and in either case the court may in a proper case infer the presence of the impropriety from the terms of the transaction itself.[116]

1. In On Equity the learned authors offer the following summary:[117]

The most common situation in which a transfer to a third party without notice is found to occur is when the transferor provides security to a third party creditor for the debts of the person who has exercised undue influence. The third party will not be permitted to enforce the security if the creditor had actual or constructive notice of the circumstances giving rise to the exercise of undue influence. Where presumed undue influence has been shown, the knowledge constituting constructive notice will be knowledge of the facts or circumstances which would lead a court to find a presumption of undue influence. Where actual undue influence has been established, the relevant notice will be of the circumstances alleged to constitute the actual undue influence. Where a transaction is so 'extravagantly improvident' that it is difficult to explain in the absence of some impropriety, then a third party may be put on inquiry by this factor alone: Credit Lyonnais Bank Nederland NV v Burch.

If the third party knows enough of the circumstances to put it on inquiry, but fails to make reasonable inquiries or to take other reasonable steps to ascertain whether the surety has an equity to have the transaction set aside, it will be held to have constructive notice: Bank of New South Wales v Rogers. (footnotes omitted).

1. Observations to a similar effect are to be found in Equity: Doctrines and Remedies:[118]

There has been much litigation concerning the position of financiers who take a guarantee or other security from a third party in support of indebtedness to them of a debtor who exercises undue influence over the third party. If the financier had actual knowledge of what was happening between the debtor and the surety (in a case of 'actual' undue influence) or of the circumstances from which a presumption is said to arise, or ought to have been put upon inquiry that impropriety might occur, then the creditor is subject to the equitable rights of the surety.

1. In Barclays Bank Plc v O'Brien,[119] Lord Browne-Wilkinson (with whom Lord Templeman, Lord Slynn of Hadley and Lord Woolf agreed) described the doctrine of notice as follows:[120]

The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it.

1. Lord Brown-Wilkinson went on to state the relevant principle of notice in these terms:[121]

[I]f the known facts are such as to indicate the possibility of an adverse claim that is sufficient to put a third party on enquiry. (emphasis added)

1. In Kakavas v Crown Melbourne Ltd,[122] the High Court adopted the substance of the slightly more detailed explanation of the concept of constructive notice contained in Equity: Doctrines and Remedies:[123]

A person is deemed to have constructive notice of all matters: (a) of which the person would have received notice if the person had made the investigations usually made in similar transactions; and (b) of which the person would have received notice had the person investigated a relevant fact which had come to that person's notice and into which a reasonable person ought to have inquired.

1. Cases in which it is sought to set aside guarantees and securities granted in favour of a financier by a relative or other person with a close relationship to the debtor commonly involve allegations that the financier had constructive notice of the second kind described in Equity: Doctrines and Remedies. Constructive notice of this kind involves a subjective element, actual knowledge of relevant circumstances, and an objective element, whether a reasonable person ought to have enquired into those circumstances. Put shortly, do the known circumstances create a suspicion that puts a party on inquiry?[124]

1. As the court observed in Shephard,[125] the provision of independent advice is an important consideration when determining the question of whether a presumption of undue influence has been rebutted. The advice must be independent and effective for the purposes of enlivening the client's appreciation of the transaction, its legal effects and the alternatives (if any) which are open to the client.
2. In Bester v Perpetual Trustee Co Ltd,[126] the plaintiff succeeded in having a settlement she had made as a 21-year-old set aside. By the settlement she had vested her share of her father's estate in her uncle and the Public Trustee Co Ltd. From her perspective the settlement was objectively improvident. The terms of the settlement were read to her by a solicitor. It was held that the existence or absence of independent advice was a factor to which reference may legitimately be made in determining whether the plaintiff thoroughly comprehended and entered the settlement deliberately and of her own free will. In that regard, Street J said of the role of the solicitor:[127]

[He] was, I accept, most careful to read the document through, and to invite questions of the plaintiff. But it was not textual advice upon the engrossment which was of prime importance in this regard: rather, it was advice upon the more general topic of whether a settlement should be entered into at all, and, if so, the general nature of the settlement.

1. As amended at the hearing the grounds of appeal contended the trial judge:[128]
   1. erred in law by finding that the respondent did not have constructive notice of Mr Tomas Aguirre's undue influence over the appellants, an inference which was not open to the trial judge based on the findings of fact and the authorities at paragraphs 390 to 392 of the decision. Such error being found at paragraphs 401 to 405 of the trial judge's decision; and
   2. erred in law by drawing the wrong inference of fact from the primary facts at paragraph 413 of the decision, by finding that the appellants exercised their own free will, independent of any undue influence of Mr Tomas Aguirre, in signing the deed of guarantee after having been given the Disputed Advice by the respondent's solicitor.

1. In Shephard,[129] the court summarised the approach to appellate intervention as follows:

In Lee v Lee, Bell, Gageler, Nettle and Edelman JJ said:

A court of appeal is bound to conduct a 'real review' of the evidence given at first instance and of the judge's reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge's findings unless they are 'glaringly improbable' or 'contrary to compelling inferences' is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, 'in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge'.

The reference to 'secondary facts' in the third sentence of that passage was footnoted in Lee to Kakavas v Crown Melbourne Ltd and Thorne.

In Thorne, the plurality observed that an assessment of the willpower of a person is not an exercise of mathematical precision. Their Honours also said:

In any case where a transaction is sought to be impugned by the operation of vitiating factors such as duress, undue influence, or unconscionable conduct, it is necessary for a trial judge to conduct a 'close consideration of the facts ... in order to determine whether a claim to relief has been established'. On appeal, it is also essential for the appellate court to scrutinise the trial judge's findings and assess any challenge to the trial judge's conclusions in light of the advantages enjoyed by that judge.

In Kakavas v Crown Melbourne Ltd, quoting with approval from the judgment of Dawson, Gaudron and McHugh JJ in Louth v Diprose, this Court described how the 'proof of the interplay of a dominant and subordinate position in a personal relationship depends, "in large part, on inferences drawn from other facts and on an assessment of the character of each of the parties"'. As Rich J said, in the context of a claim to set aside a transaction, the advantage of the trial judge 'of seeing the parties and estimating their characters and capacities is immeasurable'. These matters led Toohey J, in Louth v Diprose, to say that the 'formidable obstacles' involved in an attack on findings of fact by a trial judge 'may be enhanced where issues of undue influence and unconscionability are involved'.

Related to the fact finding advantage of the trial judge is the evaluative nature of the judgment involved in determining whether the vitiating factors have been established. For example, in undue influence there will be questions of evaluative judgment involved in assessing whether the extent to which a person's will has been subordinated to another's is sufficient to characterise the person as lacking free will. (emphasis added)

Appellate caution, where it is required, has particular significance where 'the interests of individuals are divergent and conflicting, where personal feeling is acute ... [and] [w]here so much depends upon the character, personal motives and interests of individual persons ...'.

(footnotes omitted)

1. The trial judge explained the operation of undue influence against third parties with constructive notice as follows:
   1. However, the inference of undue influence operates against the person who is able to exercise that influence, in this case Mr Aguirre, and against every volunteer who claimed under him and also against every person who claimed under him with notice of the equity thereby created or with notice of the circumstances from which the court infers the equity: Bainbrigge v Browne [1881] UKLawRpCh 148; (1881) 18 Ch D 188; Bank of New South Wales v Rogers [1941] HCA 9; (1941) 65 CLR 42, 51, 85 (Williams J). The latter case cites numerous cases where securities in the hands of third parties who have given value have been set aside when the conditions referred to in Bainbrigge v Browne have been established.
   2. Mr Maher says the [respondent] had notice of the equity thereby created (Mr Aguirre's undue influence) or had notice of the circumstances from which the court infers the equity.
   3. Where presumptive undue influence has been established knowledge sufficient to constitute the constructive knowledge of the [respondent] will be knowledge of the facts or circumstances which would lead the court to find a presumption of undue influence. In addition if the [respondent] knows enough of the circumstances to put it on inquiry but fails to make reasonable enquiries or take other reasonable steps to ascertain whether Mr Aguirre's undue influence was operating on Mr and Mrs Booth at the time they signed the Deed it would be held to have constructive notice.
   4. Even though the presumption of undue influence operates against a person who had notice of the equity or notice of the circumstances from which the court infers the equity that presumption can be discharged if in this case the [respondent] establishes that the Deed resulted from free exercise of Mr and Mrs Booth's independent will.
2. The trial judge set out his findings about the respondent's knowledge and his conclusions on the issues of constructive knowledge and constructive notice in the following paragraphs:
   1. I find that the [respondent] knew Mr and Mrs Booth's property was being used as security for the loan, and they were guaranteeing the loan to Mindarie Drive a company which they knew Mr Aguirre was a director and shareholder of and Mr and Mrs Booth had no interest in. The [respondent] knew the Deed provided benefits to Mindarie Drive and therefore Mr Aguirre and Mr Sanbrook and knew that Mr and Mrs Booth as guarantors obtained no real benefit from the Deed and only a potential liability of $500,000. The [respondent] believed that Mr and Mrs Booth's property was of sufficient value to cover that potential liability.
   2. The [respondent] knew of the family relationship between Mr and Mrs Booth and Mr and Mrs Aguirre and believed that they had a close relationship and supported each and knew the latter had paid for a cruise for Mr and Mrs Booth 12 months previously. The [respondent] believed that the families 'were together' and their 'funding was together'. It would have been obvious at the meeting that Mr and Mrs Booth were aged 60-70. The [respondent] knew that Mr Aguirre needed the money urgently and was aware that Mr and Mrs Booth had not received independent legal advice but in circumstances where the [respondent] knew they had been given the disputed advice in the presence of Mr Aguirre. Further the [respondent] was aware that Mr and Mrs Booth had advised that they did not want to obtain legal advice and were happy to sign the Deed and asked no questions about any issue.
   3. The crucial factor in finding that the antecedent relationship of Mr and Mrs Aguirre with Mr and Mrs Booth which created the presumption of undue influence was that Mr Aguirre controlled the transaction and at the position most favourable to the Booths did not advise them that they were providing a guarantee. There is no dispute that the [respondent] had no knowledge of that fact.
   4. I reject the submission by Mr Maher that based on what the [respondent] did know she had sufficient knowledge of the facts which lead the court to find the presumption of undue influence to place her on inquiry. There is no dispute that she did not know (taking it at its highest for Mr and Mrs Booth) that Mr and Mrs Booth were not advised by Mr Aguirre that they were providing a guarantee. Mrs Booth does not dispute that she knew before the meeting that a caveat was to be lodged over their property. The [respondent] believed that the families had a close relationship and supported each other and were 'all together' and their 'funding was together'. The conduct of Mr and Mrs Booth arriving at the meeting with Mr Aguirre and conveying in the meeting that they did not want independent legal advice and were happy to sign the Deed after the disputed advice was given and asking no questions could only reinforce that the family with the close relationship was supporting each other. Taking it at its highest for Mr and Mrs Booth that they were not advised by Mr Aguirre that they were providing a guarantee there was nothing to put the [respondent] on notice of that fact or put her on notice of any untoward conduct by Mr Aguirre, or to put her on inquiry that the relationship between Mr and Mrs Booth and Mr and Mrs Aguirre was anything but a close relationship where they supported each other and acted together.

1. The appellants argued that when determining the issue of whether the undue influence found to exist operated against the respondent, the trial judge did not apply the test of constructive notice (even though he had correctly identified that constructive notice was sufficient) but rather considered whether the respondent had actual notice. The appellants argued the trial judge's findings about what was known to the respondent was sufficient to put her on inquiry and his Honour should have found that the respondent had constructive notice of Mr Aguirre's undue influence. The appellants argued there were clear parallels between the facts of this case and the facts in Bank of New South Wales v Rogers.[130]
2. The respondent argued the trial judge's primary findings were credibility-based findings with which this court should not interfere and from which it was open to his Honour to find the respondent did not have constructive notice. In essence, the respondent argued the appellants had not shown any error on the part of the trial judge.

1. The gravamen of ground 1 is that the trial judge erred in finding the respondent did not have constructive notice of the exercise by Mr Aguirre of undue influence over the appellants. The ground does not challenge any of the trial judge's primary factual findings. Rather it challenges his Honour's evaluative conclusion reached following the application of the principles upon which the doctrine of constructive notice is based to the facts as found by his Honour. Nevertheless the trial judge's conclusions were based on his Honour's assessment of the whole of the evidence and may have turned on nuances not apparent on a reading of the primary reasons. This reinforces the need for appellate caution.[131]
2. The trial judge's reasons (paragraph [404]) for rejecting the appellants' submission that the respondent had constructive notice of Mr Aguirre's undue influence had a narrow focus. His Honour's analysis revolved around three matters: (i) the respondent did not know that Mr Aguirre had not told the appellants before the 5 December 2017 meeting they would be providing a guarantee, (ii) the respondent knew that the appellants had arrived at the meeting with Mr Aguirre and that they had said they did not want independent legal advice after the 'disputed advice' was given to them, and (iii) the respondent believed that the families had a close relationship and supported each other and their 'funding was together'. The third matter, Ms Wang's subjective belief about the closeness of the relationship, appears to have weighed significantly in the trial judge's analysis. Implicitly, his Honour appears to have relied on the closeness of the relationship as providing an explanation for the willingness of the elderly appellants to assume (in circumstances of some evident urgency), a contingent liability of $500,000 secured over their home with no benefit to themselves. Focusing on Ms Wang's subjective belief distracts from the question of whether knowledge of the circumstances would put a reasonable person on inquiry.
3. The narrow focus adopted by the trial judge was productive of possible error. Having regard to the authorities referred to above the analysis instead required a consideration of all the matters of which the respondent was aware and a consideration of what a reasonable person ought to have made of those matters. In summary, the trial judge found the respondent was aware of the following:

(a) The appellants were Mr Aguirre's parents-in-law. The respondent knew they had a close relationship 'where they supported each other and acted together'.

(b) The appellants were aged between 60 and 70.

(c) Mr Aguirre and Mr Sanbrook were the only persons from the borrowers' side of the transaction whom Ms Wang had met and had any communication before the 5 December 2017 meeting.

(d) The appellants arrived at the meeting with Mr Aguirre.

(e) The appellants did not engage in any meaningful discussion at the meeting of 5 December 2017 and Mr Aguirre did most of the talking.

(f) Mr Aguirre needed the money urgently and was 'quite desperate'.

(g) The loan was required to provide additional funding for a property development.

(h) The appellants had no interest in Mindarie Drive or in the Jade development.

(i) The transaction provided no real benefit to the appellants and created a potential liability for them of $500,000.

(j) The appellants had not received independent legal advice though they had been advised of their right to obtain such advice.

1. When the matters summarised above are considered from an objective perspective (from the perspective of a reasonable person in the respondent's position) they point powerfully to the possibility of the exercise of undue influence by Mr Aguirre over the appellants, a matter into which a reasonable person in the respondent's position ought to have inquired.
2. In addition, although the trial judge was reluctant to characterise the transaction as such, on an objective assessment of the matters of which the respondent was aware, it was a most improvident transaction from the appellants' perspective. The transaction was fraught with risk for the appellants and (as the trial judge found) it provided no benefit to them. Expressed in the language used by McTiernan J in Bank of New South Wales v Rogers,[132] the transaction does not look as if the appellants proceeded from a rational consideration of their interests and from their pure volition. The reverse was the case: objectively it was quite irrational for the appellants, at their age, to risk losing their home by participating in the financing of a property development undertaken by a company evidently in financial difficulties and 'quite desperate' for further funding.
3. The facts of which the respondent was aware were sufficient to put her on inquiry as to the possible exercise of undue influence by Mr Aguirre over the appellants. No inquiry was made by the respondent and, in those circumstances, the respondent was deemed to know of the circumstances giving rise to a presumption of Mr Aguirre's undue influence.
4. Ground 1 is established.

1. The trial judge explained why he was satisfied that the appellants signed the loan deed in the exercise of their free will in the following paragraphs:
   1. I find that Mr and Mrs Booth were given the disputed advice by Mr Lee. They were also in the room when that advice was given to Mr Aguirre and Mr Sanbrook. Neither Mr or Mrs Booth who are of full age and mental competency said anything or did anything to indicate that they were not aware previously that they were guarantors. They both knew the effect of a guarantee as a result of their life experiences and as a result of what Mr Lee told them at the meeting and knew that a caveat was being put over their property and that caveat would have legal consequences. They said nothing at the meeting to indicate that they were surprised by the guarantee or were hearing about it for the first time, and they did not ask to speak to Mr Aguirre in private or query him. They said they were happy to proceed and did not want legal advice. I am satisfied that they exercised their own free will in signing the Deed.
   2. I find that after having been given the disputed advice they proceeded to sign the Deed because, I find, at the time Mrs Booth trusted Mr Aguirre's business sense and had every confidence in Mr Aguirre's business skill.
   3. Simply put, Mrs Booth was happy to assist because on her own evidence it helped Mr Aguirre and I infer she thought she was assisting her daughter and her husband in their business venture in circumstances where Mr Aguirre, Mr Sanbrook and Mrs Aguirre were confident that the Jade Development would be successful and there is no evidence showing that anyone had any concerns about the viability of the development at that stage. That was a decision Mrs Booth made of her own free will because she wished to support her daughter and her husband in his business venture, something unconnected with any relationship of influence.
   4. Mr Booth executed the Deed as he was happy to proceed if his wife was prepared to proceed. That was a decision he made of his own free will something unconnected with any relationship of influence.
   5. I find that any presumption of special influence from the relationship of Mr and Mrs Aguirre [had] been rebutted by the time Mr and Mrs Booth signed the Deed in the exercise of their own independent will.
   6. I am satisfied that the judgmental capacity of Mr and Mrs Booth was not substandard such that it constrained them in assessing alternates and deciding between them. They did understand the alternates. That is that they did not have to sign the Deed. The [respondent] has satisfied me on the balance of probabilities that Mr and Mrs Booth signed the Deed in the exercise of their own independent will and not as a result of any actual or presumed undue influence.

1. The appellants' contentions were twofold. First, they contended, in effect, that by focusing on whether the appellants understood they were giving a guarantee and that there would be a caveat on their home the trial judge misdirected himself. The appellants contended the question was not whether the appellants knew what the transaction involved but how the intention to enter the transaction was formed. Secondly, and relatedly, the appellants contended that the advice provided by Mr Lee was textual advice whereas the advice the appellants required was independent 'contextual' advice of the nature described by Williams J in Bank of New South Wales v Rogers when his Honour adapted the words of Sir John Romilly in Sercombe v Sanders.[133]
2. The respondent repeated the contention made in respect of ground 1 to the effect that his Honour's findings were based on credibility-based findings unchallenged in this appeal and the appellants have not demonstrated any error warranting appellate intervention.

1. It is helpful to keep in mind that the trial judge was satisfied that the presumption of undue influence was established because Mr Aguirre acted as the appellants' adviser in relation to the transaction.[134] His Honour's finding that the appellants were freed from the undue influence after they received the disputed advice was based on the proposition that the disputed advice ensured that the appellants understood they were giving a guarantee secured by a caveat over their home and, aided by this understanding, they were happy to sign the loan deed without the benefit of independent legal advice.
2. These points may be made.
3. First, the trial judge focused on whether the appellants understood the nature of the transaction but, as the authorities referred to earlier establish, having such an understanding is not of itself sufficient to rebut the presumption of undue influence. The authorities make it clear that the focus should be on what caused the party who was subject to undue influence to enter the transaction.
4. Secondly, considered in isolation, the provision of the guarantee secured by the caveat involved legal obligations that may have been capable of being readily explained to, and understood by, the appellants. Viewed in the wider commercial context, however, the provision of a guarantee of Mindarie Drive's debt to the respondent was a more complicated transaction. A proper understanding of the transaction and its inherent risks required an understanding of Mindarie Drive's financial position and an assessment of the current state of the Jade development. A competent lawyer providing independent advice to the appellants would have drawn their attention to the need to consider Mindarie Drive's financial position, in particular whether the net amount of the financing provided by the respondent (that is, the amount available after deduction of the amount required to discharge the reverse mortgage and the amount set aside for interest) would be sufficient to ensure the development could be completed. No doubt an independent legal adviser would have posed a question similar to that identified by Williams J in Rogers:[135] were the appellants quite sure that the availability of the finance being provided by the respondent would relieve Mindarie Drive of its difficulties or were they merely putting off the evil day?
5. Thirdly, from the appellants' perspective the transaction was so improvident that the presumption of undue influence would not be lightly rebutted.
6. Fourthly, in his capacity as the appellants' adviser, prior to the meeting on 5 December 2017, Mr Aguirre had obtained a commitment from the appellants agreeing (at least) to a caveat over their home. Also, at very short notice, he had secured their attendance at a meeting with the respondent's lawyer. Mr Aguirre's ability to achieve these outcomes reflected a significant degree of influence over the appellants.
7. Moreover, the appellants had spent most of the day of 5 December 2017, before they signed the deed, in the company of Mr Aguirre in whom they reposed trust and, at least in Mrs Booth's case, reposed confidence in his business sense and skill. The appellants had no time to themselves and no time for private reflection on the merits of the transaction. Indeed, Mr Aguirre was pressing to get the deed signed without delay so he could get to the bank before it closed. All of that contributed to an ongoing and strengthening situational ascendancy on the part of Mr Aguirre and a dependency on the part of the appellants so far as the transaction was concerned. In the circumstances it is inherently improbable that the provision of the disputed advice by the lender's lawyer, whom the appellants had only just met, would be sufficient to free the appellants from Mr Aguirre's influence, especially when Mr Aguirre had been present with them throughout the day.
8. Fifthly, in circumstances where the presumption of undue influence has been established because of Mr Aguirre's role as the appellants' adviser, there is a degree of tension between the trial judge's finding that the appellants signed the deed of their own free will and his finding that at the time Mrs Booth signed the deed, she trusted Mr Aguirre's business sense and skill. Mrs Booth's trust in Mr Aguirre's business sense and skill at the time she signed the deed is indicative of a continuation of Mr Aguirre's influence.
9. Sixthly, the finding Mrs Booth entered the transaction because she wanted to help Mr Aguirre and her daughter does not of itself support the conclusion that she was free from Mr Aguirre's influence. At best, it was a neutral factor. More telling, however, the trial judge inferred Mrs Booth was happy to assist 'in circumstances where Mr Aguirre, Mr Sanbrook and Mrs Aguirre were confident that the Jade development would be successful and there [was] no evidence showing that anyone had any concerns about the viability of the development at that stage'. This finding undermines the conclusion the presumption of undue influence had been rebutted. Had the appellants received independent legal advice they would have been advised not to rely on the confidence held by Mr and Mrs Aguirre and Mr Sanbrook in the success of the development but to consider the possibility the development might fail. They would have been advised to seek objective confirmation of the viability of the project.
10. In summary, the trial judge erred in the following respects: his Honour erred in focusing on whether the appellants understood the nature of the guarantee and caveat rather than on the critical question of whether the respondent had demonstrated that they were free of Mr Aguirre's influence; his Honour did not factor into his analysis the nature and extent of the independent legal advice required to alert the appellants to the risks inherent in entering such an improvident transaction; and, accepting all the advantages enjoyed by his Honour as the trial judge, he erred in drawing the inference the appellants signed the deed in the exercise of their own free will.
11. Ground 2 is established.

1. The appellants were given leave to file and serve a minute of amendments to the 'orders wanted' as set out in the white appeal book along with supplementary submissions. The respondent was given leave to file and serve responsive submissions.
2. Before turning to the amended orders sought and the parties' submissions it is necessary to refer to the steps taken by the respondent to enforce the judgment. Judgment was entered for the respondent in the sum of $562,086 (the amount outstanding at trial was $311,975 plus interest).[136] On 30 July 2023 a Property (Seizure and Sale) Order was registered against the appellants' property at the request of the respondent and subsequently the property was sold. The Sheriff received $563,000 and after deduction of the Sheriff's fees and disbursements the sum of $546,593 (rounded up) was paid to the respondent's lawyers on 9 February 2024.[137]
3. On 12 April 2024 the appellants filed a minute of amended orders sought by them:
   1. The appeal be and is hereby allowed.
   2. The judgment and orders of the District Court of Western Australia dated and entered 16th of June 2023 in action CIV /94 7 /2020 is set aside. In substitution thereof the following orders are made:

2.2 The fourth and fifth defendants' counterclaim is allowed and the Court declares that:

'the Deed dated 5 December 2017 signed by the plaintiff as Lender and the fourth and fifth defendants as Guarantors has been rescinded to the extent that it relates to the fourth and fifth defendants on the basis that the fourth and fifth defendants' agreement to the deed was procured by the undue influence of Mr Aguirre over the fourth and fifth defendants of which the Plaintiff had constructive notice.'

2.3 The plaintiff pay the fourth and fifth defendants' costs of the action and counterclaim, including any reserved costs, to be taxed if not agreed.

1. The Respondent pay the Appellants the amount of $563,000.00, together with interest from 7 December 2023 (at the rate provided for by s 32 of the Supreme Court Act 1935 (WA), by way of restitution.
2. The Respondent pay the Appellant's costs of the appeal to be taxed.
3. The respondent contended the appropriate orders were as follows:
   1. the appeal be and is hereby allowed;
   2. the Judgment of the District Court dated and entered 16 June 2023 in action CIV 947/2020 be and is hereby set aside;
   3. there be no order as to costs of either the Trial or the Appeal.
4. The respondent contended orders 2.1 and 2.2 in the appellants' minute were unnecessary.
5. As to order 3, the respondent accepted the appellants were entitled to restitution but disputed the amount sought by them. The respondent contended restitution should be limited to the sum recovered by her and paid into and held in her lawyers' trust account ($546,593). Because the funds were held in the trust account no interest has accrued and thus, so the respondent contended, none should be payable to the appellants. The respondent also contended in working out the amount in which restitution should be made an allowance should be made for the amount paid to discharge the reverse mortgage on the appellants' property. The respondent contended the evidence at trial was to the effect that 'approximately $85,000' of the loan was used to discharge the reverse mortgage.
6. The respondent contended there should be no order as to costs because the appellants' lawyers acted on a pro bono basis in relation to both the action at first instance and on appeal. Alternatively, the respondent contended the costs of the District Court proceedings should be limited to one third of the costs recoverable on assessment because the appellants succeeded on only one of the defences relied on by them.
7. The respondent's contention that the making of a declaration is unnecessary is not accepted. Making a declaration leaves no room for further disputation between the parties in circumstances in which (as the appellants pointed out) cl 12.5 of the deed imposes a continuing obligation on the appellants. Rescission involves restoring the parties to their pre-contractual positions. Thus, a consequence of rescinding and setting aside the deed is that the appellants must account for the benefit of having the reverse mortgage discharged.[138] Given that the judgment has been enforced by the sale of the appellants' property, restitution of this benefit can only be achieved by adjusting the amount of restitution to be effected following the reversal of the judgment, a matter dealt with in [115] below.
8. The respondent's contention that there should be no order as to costs is not accepted. The contention rests on the assertion that the appellants' lawyers acted on a pro bono basis. The relevant general principles were recently summarised by this court in Frigger v Computer Accounting & Tax Pty Ltd:[139]

Under the indemnity principle, costs are awarded by way of indemnification so that a party who does not have a liability to their solicitors for costs cannot recover costs against an unsuccessful party to the litigation. In the absence of proof of an agreement to the contrary, a solicitor who acts on instructions for a party on the record is taken to be entitled to look to that party for costs. To avoid a costs order on the basis of the indemnity principle, an unsuccessful party must show that there is an agreement between the successful party and their solicitors that under no circumstances will the successful party be liable for costs. The indemnity principle will permit recovery of costs by a successful party who is under a legal liability to pay their solicitors even though the likelihood of their being called upon to do so is remote. The principle will allow costs recovery even though the liability may be or has been discharged by a third party. (footnotes omitted)

1. In the present case, no evidence has been adduced before this court about the terms of the appellants' lawyers' retainer. The respondent has not shown that there is an agreement between the appellants and their lawyers that under no circumstances will the appellants be liable for costs. The appropriate order is that the respondent pay the appellants' costs of the appeal.
2. As to the respondent's alternative contention on the question of costs, this is not a case in which there should be an issue-based apportionment of costs. Both the claim and the defences arose out of a common factual substratum. That the defences necessitated separate legal argument is not sufficient to warrant an issues-based apportionment of costs.
3. Turning now to the issue of restitution consequential upon the reversal of the judgment.

(a) In Commonwealth of Australia v McCormack,[140] the applicable principle was stated as follows:[141]

'Restitutio in integrum is the right of every successful appellant': per Lord Field in Cox v Hakes. An appellant who has satisfied a judgment for the payment of money is entitled, on the reversal of the judgment, to repayment of the money paid by him with interest: Rodger v The Comptoir D'Escompte de Paris; Merchant Banking Co. v Maud. (footnotes omitted)

(b) Although this is a consequence of rescinding the deed rather than giving effect to restitution following the reversal of the judgment, for the reason stated in [111] above, in calculating the amount of the restitutionary payment account must be taken of payment made to discharge the reverse mortgage. If this was not brought into account, the appellants would receive a windfall gain. It does not appear that the precise amount paid to discharge the reverse mortgage was established by the evidence at trial. Mrs Booth thought the amount was ab[142] $83,000.142 The respondent's submissions suggest the amount was 'approximately $85,000'. Given the difference between the parties appears to be in the order of $2000, they should confer and agree (or, in the absence of agreement, provide evidence of) the precise amount.

(c) When considering the appellants' claim for payment to them of the full amount received by the Sheriff from the sale of their property ($563,000) it must be remembered that the principle stated in Commonwealth of Australia v McCormack is concerned with restitution of the benefits received by the unsuccessful respondent rather than a loss suffered by the successful appellant. A successful appellant is not entitled to compensation for losses suffered as a consequence of the judgment given at first instance.[143] The respondent cannot be held liable in restitution for an amount she did not in fact receive. The respondent did not receive $563,000. The appellants' restitutionary remedy must be based on the amount actually received by the respondent: $546,593. No other basis upon which the appellants might recover the costs of enforcing the judgment was advanced. There is scant authority on the question of which party should bear the costs of enforcing a judgment that is reversed on appeal. The only authority that we have been able to find is the Canadian decision of Robertson v Miller.[144] This concerned an application for an order for restitution by a successful appellant whose property had been sold by the sheriff. Consistent with the restitutionary principles to which reference has been made, the appellant was unable to recover the costs of execution from the unsuccessful respondent.

(d) The appellants are entitled to interest on the sum to be restored to them. They are not disentitled by the fact the funds paid to the respondent were held in her lawyers' trust account and not transferred into an interest-bearing account. The prescribed rate of interest on judgment debts is 6 per cent per annum.[145] That rate is commonly applied when awarding pre-judgment interest and is an appropriate rate of interest in the circumstances of this case. The appellants seek interest from 7 December 2023, it is inferred that this was the date on which their property was sold. The respondent has not challenged this date.

1. Accordingly, although we will hear from the parties as to the final form of the orders and the amount paid to discharge the reverse mortgage, the appropriate orders are as follows:

(1) The appeal is allowed.

(2) The judgment of the District Court of Western Australia entered on 16 June 2023 in action CIV 947 of 2020 is set aside and the following orders are substituted:

(a) The respondent's claim against the appellants is dismissed.

(b) The court declares the deed dated 5 December 2017 executed by the appellants and the respondent and others be rescinded and set aside as between the appellants and the respondent as having been procured by the undue influence of Mr Tomas Aguirre over the appellants of which the respondent had constructive notice.

(c) The respondent pay the appellants' costs of the action and counterclaim, including any reserved costs, to be assessed if not agreed.

(3) The respondent pay the appellants the amount of [$546, 593 less the amount paid by the respondent to discharge the mortgage on the appellants' property] together with simple interest thereon at the rate of 6% per annum from 7 December 2023 until payment.

(4) The respondent pay the appellants' costs of the appeal to be assessed if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Yerkey v Jones [1939] HCA 3; (1940) 63 CLR 649.

[2] Zhou v Mindarie Drive Pty Ltd [2023] WADC 63 (Primary reasons) [413].

[7] Primary reasons [17], [19] and [55].

[22] Primary reasons [62] and GAB 38.

[34] Primary reasons [68] and GAB 189.

[69] Primary reasons [380] - [381].

[74] Primary reasons [250] - [259].

[77] Primary reasons [395] - [400].

[78] Bester v Perpetual Trustee Co Ltd [1970] 3 NSWLR 30.

[81] Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 134 - 135.

[82] Thorne v Kennedy [2017] HCA 49; (2017) 263 CLR 85.

[84] American Law Institute, Restatement of the Law Third, Restitution and Unjust Enrichment (2011), s15, comment c.

[85] Shephard v Tuanie Paul Galea as executor and trustee of the estate of the Late Joseph Galea [2020] WASCA 152 [108].

[89] Bainbrigge v Brown [1881] UKLawRpCh 148; (1881) 18 Ch D 188, 196 - 197; Bank of New South Wales v Rogers [1941] HCA 9; (1941) 65 CLR 42, 51.

[90] Budget Nominees Pty Ltd v Registrar of Titles (1988) V Conv R 54-311, 63-988; see also Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [180] (Murphy J).

[91] Kakavas v Crown Melbourne Ltd [2013] HCA 25; [2013] 250 CLR 392.

[92] Kakavas v Crown Melbourne Ltd [152] - [154]; Mavaddat v HSBC Bank Australia Ltd [No 2] [2016] WASCA 94 [79]; Serventy v Commonwealth Bank of Australia [No 2] [2016] WASCA 223 [18]; Dewar v Ollier [2020] WASCA 25 [178]; Gunn v Meiners [2022] WASCA 95 [159] - [175].

[93] Kakavas v Crown Melbourne Ltd [161].

[94] Manchester Trust v Furness [1895] UKLawRpKQB 140; [1895] 2 QB 539, 545.

[95] Kakavas v Crown Melbourne Ltd [152].

[96] Bainbrigge v Brown (1881) Ch D 188.

[98] Bank of New South Wales v Rogers, Starke J (51 - 52), McTiernan J (61) and (71), and Williams J (85).

[99] Bank of New South Wales v Rogers (61).

[100] Bank of New South Wales v Rogers (61 - 62).

[101] Bank of New South Wales v Rogers (71).

[102] Bank of New South Wales v Rogers (86 - 87).

[103] Bank of New South Wales v Rogers (87).

[104] Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923 at 973.

[105] Wright v Cherrytree Finance Ltd [2001] EWCA Civ 449 [31].

[106] Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395; 408 .

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

[108] Mavaddat v HSBC Bank Australia Ltd [No 2] [2016] WASCA 94.

[109] Mavaddat v HSBC Bank Australia Ltd [No 2] [75].

[110] Micarone v Perpetual Trustees Ltd [1999] SASC 265.

[111] Micarone v Perpetual Trustees Ltd [278].

[112] Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353.

[113] Permanent Mortgages Pty Ltd v Vandenbergh [179] - [180].

[114] Credit Lyonnais Bank Nederland NV v Burch [1996] EWCA Civ 1292; [1997] 1 All ER 144.

[115] Credit Lyonnais Bank Nederland NV v Burch (153).

[116] As noted earlier, the decision of the High Court in Kakavas makes it clear that in Australia actual knowledge is required before a transaction will be set aside on the ground of unconscionable conduct.

[117] Young PW, Croft C and Smith ML, On Equity (2009) [5.470].

[118] Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015) [15.150].

[119] Barclays Bank Plc v O'Brien [1993] UKHL 6; [1994] 1 AC 180.

[120] Barclays Bank Plc v O'Brien (195 - 196).

[121] Barclays Bank Plc v O'Brien (197).

[122] Kakavas v Crown Melbourne Ltd [152]; see also London Joint Stock Bank v Simmons [1892] UKLawRpAC 17; (1892) AC 201 per Lord Herchell at 220; Bank of New South Wales v Rogers per McTiernan J, 71.

[123] Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015) [8 - 270]; Kakavas v Crown Melbourne Ltd [152].

[124] Hermann v Pitt (1890) 11 NSWLR (Eq) 294, 300.

[125] Shephard v Tuanie Paul Galea as executor and trustee of the estate of the Late Joseph Galea [106].

[126] Bester v Perpetual Trustee Co Ltd [1970] 3 NSWLR 30.

[127] Bester v Perpetual Trustee Co Ltd (35).

[129] Shephard v Tuanie Paul Galea as executor and trustee of the estate of the Late Joseph Galea [124] ‑ [127].

[130] Bank of New South Wales v Rogers [1941] HCA 9; (1941) 65 CLR 42.

[131] Craig-Bridges v NSW Trustee and Guardian [2017] NSWCA 197 [116] - [118]; Smart v Power [2019] WASCA 106 [106].

[132] Bank of New South Wales v Rogers (71).

[133] Bank of New South Wales v Rogers (87).

[135] Bank of New South Wales v Rogers (87).

[137] The facts relating to the sale are established by the affidavit of Mr Claudio Armeli-Cartillazzone sworn on 29 February 2024 and read in support of the respondent's application for security for costs.

[138] Mason & Carter's Restitution Law in Australia (4th Edn 2021) [1318] and the authorities there cited.

[139] Frigger v Computer Accounting & Tax Pty Ltd [2023] WASCA 152 [38].

[140] Commonwealth of Australia v McCormack [1984] HCA 57; (1984) 155 CLR 273.

[141] Commonwealth of Australia v McCormack (276).

[143] NAB v Bond Brewing Holdings Ltd [1991] VicRp 31; (1991) 1 VR 386, 592 (Brooking J); see also Effect Of Reversal Of Judgment On Acts Done Between Pronouncement and Reversal - D.M Gordon QC Law Quarterly Review Vol 74 517, 521 - 522.

[144] Robertson v Miller (1904) 3 NB Eq 78.

[145] Civil Judgments Enforcement Regulations 2005 (WA) reg 4(1).