Darmanin v Cowan

[2010] NSWSC 1118

CITATION:	Darmanin v Cowan [2010] NSWSC 1118
HEARING DATE(S):	28 and 29 June 2010
JUDGMENT DATE :	1 October 2010
JURISDICTION:	Equity
JUDGMENT OF:	Ward J
DECISION:	Plaintiff's claim dismissed
CATCHWORDS:	EQUITY - unconscionability - undue influence - cottage built on defendants’ property at plaintiff’s expense - relationship between plaintiff and defendants broke down - plaintiff required to leave defendants’ property - whether unconscionable for defendants not to reimburse plaintiff for costs of construction of cottage - whether agreement or arrangement between defendants and plaintiff procured by way of unconscientious conduct or undue influence - HELD - no benefit unconscionably retained by defendants in circumstances - defendants did not act unconscionably or exercise undue influence in their dealings with plaintiff - CONTRACTS - whether intention to create legal relations in a domestic or social context - whether relief under Contracts Review Act - HELD - no intention to create legal relations - plaintiff’s claim dismissed
LEGISLATION CITED:	Contracts Review Act 1980 (NSW) Evidence Act 1995 (NSW)
CASES CITED:	Agricultural and Rural Finance Pty Ltd & Anor v John Edward Atkinson & Ors [2010] NSWSC 635 Allcard v Skinner (1887) 36 Ch D 145; [1886-90] All ER Rep 90 Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1; (1983) 44 ALR 607 Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557 Australasian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 Australian Competition and Consumer Commission v Oceana Commercial Pty Ltd [2004] FCAFC 174 Balfour v Balfour [1919] 2 KB 571 Ball-Guymer v Livantes (1990) 102 FLR 327 Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 23 Barnes v Addy [1874] 9 Ch App. 244 Barrier Wharfs Limited v W Scott Fell & Co Limited (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Limited v G R Securities Pty Limited (1986) 40 NSWLR 622 Baumgartner v Baumgartner (1987) 164 CLR 137 Bennett v Horgan (unreported, NSWSC, 3 June 1994) Blomley v Ryan (1956) 99 CLR 362 Bovaird v Frost [2009] NSWSC 337 Brandi v Mingot (1976) 12 ALR 551 Bridgewater v Leahy [1998] HCA 66; 194 CLR 457; 158 ALR 66; 72 ALJR 1525 Browne v Dunn (1893) 6 R 67 (HL) Brusewitz v Brown [1923] NZLR 1106 Buckpitt v Oates [1968] 1 All ER 1145 Bulstrode v Trimble [1970] VR 840 Chalmers v Pardoe [1963] 1 WLR 677 Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523; 2004 ATC 4579; (2004) 56 ATR 19; [2004] VSCA 82 Commonwealth of Australia v McLean (1996) 41 NSWLR 389; (unreported, NSWCA, 31 December 1996) Coward v Motor Insurer’s Bureau [1963] 1 QB 259 Crosthwaite v Elizabeth City Corporation (1989) 51 SASR 105 Crowe v Commonwealth Bank of Australia [2005] NSWCA 41 Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841 Ermogenous v Greek Orthodox Community [2002] HCA 8; (2002) 209 CLR 95 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251 Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186; (2009) 75 NSWLR 42 Frances Madge Johnson by her tutor Karen Elisabeth Smith v Andrew Robert Stuart Johnson [2009] NSWSC 503 Frederick John Jones v Jennifer May Moss [2007] NSWSC 969 Georgeski v Owners Corporation SP49833 [2004] NSWSC 1096; (2004) 62 NSWLR 534 Giumelli v Giumelli [1999] HCA 10; 196 CLR 101; 73 ALJR 547 Goldsworthy v Brickell [1987] Ch 378 Graham Evans Pty Ltd v Stencraft Pty Ltd [1999] FCA 290 Hartigan v International Society for Krishna Consciousness Incorporated [2002] NSWSC 810 Heaton v Luczka (unreported, NSWCCA, 3 March 1998) Henderson v Miles (No 2) [2005] NSWSC 867 Hill v Hill [2005] NSWSC 863 HML v R [2008] HCA 16; (2008) 235 CLR 334; (2008) 245 ALR 204 Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 Holland v Hodgson (1872) LR 7 CP 328 Huguenin v Baseley (1807) 14 Vesey Jnr 273; 33 ER 526 Janson v Janson [2007] NSWSC 1344 Jiwira v PIBA [2000] NSWSC 1094 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Jones v Padavatton [1968] EWCA Civ 4; [1969] 2 All ER 616 Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181 Knox v Knox (16 December 1994, unreported, Young J) Kowalczuk v Accom Finance Pty Ltd (2008) 252 ALR 55 Kriezis v Kriezis [2004] NSWSC 167 Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No 2) [2006] FCA 748 Leigh v Taylor [1902] AC 157 Lopwell Pty Ltd v Clarke and Ors [2009] NSWCA 165 Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2007] NSWSC 12 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; 52 NSWLR 705 Malsbury v Malsbury (1979) 1 BPR 9550 May v Ceedive Pty Limited [2006] NSWCA 369 Maynard v Moseley (1676) 3 Swan 651 McKay v McKay [2008] NSWSC 177 Mighell and Anor v Gargoura and Ors [2009] NSWSC 248 Mizzi v Reliance Financial Services Pty Ltd and Ors [2007] NSWSC 37 Morris v Morris (1982) 1 NSWLR 61 Muschinski v Dodds (1985) 160 CLR 583 N H Dunn Pty Limited v L M Ericsson Pty Limited (1979) 2 BPR 9241 National Dairies WA Limited v Commissioner of State Revenue (WA) [1999] WASCA 152 Nattrass v Nattrass [1999] WASC 77 O'Rorke v Bolingbroke (1877) 2 App Cas 814, Owen and Gutch v Homan (1853) 4 HLC Palinkas v Palinkas [2009] NSWSC 92 Palumberi v Palumberi (1986) NSW ConvR 55-287 Parker v Clark [1960] 1 All ER 93 Pasternacki and Solka-Pasternacki (as Executors of the Estate of the Late Mary Nagy) v Correy [2000] NSWCA 333 Pennie v Pennie [2010] NSWSC 565 Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41 Perpetual Trustees Vic Ltd v Bodiroza [2009] NSWSC 861 Precision Plastics Pty Ltd v Demir (1975) 132 CLR 362 Quek v Beggs (1990) 5 BPR 11,761 (NSW SC) R T & Y E Falls Investments Pty Limited v The State of New South Wales & ors [2001] NSWSC 1027 Raffaele v Raffaele [1962] WAR 29 Re Gonin (deceased) [1979] Ch 16 Reid v Smith (1905) 3 CLR 656 Riz v Perpetual Trustee Australia Ltd (2008) NSW ConvR 56-198; [2007] NSWSC 1153 Royal Bank of Scotland v Etridge (AP) [2001] UKHL 44 Schaefer v Schumann [1972] AC 572 Scheps v Cobb [2005] NSWSC 455 Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 Shearer v Manly-Warringah District Rugby League Football Club (unreported, NSWSC, 7 November 1989) Sirtes v Pryor [2005] NSWSC 1082 Spina v Permanent Custodians Ltd (2009) 14 BPR 26,923 Talevski and Anor v Talevski and Anor [2007] NSWSC 945 Tanner v Tanner [1975] 1 WLR 1346 Taylor v Streicher [2007] NSWSC 1006 Teen Ranch Pty Ltd v Brown (1995) 87 IR 308 Thomas v Hollier (1984) 53 ALR 39 Todd v Nicol [1957] SASR 72 Tory v Tory [2007] NSWSC 1078 Unsted v Unsted (1947) 47 SR (NSW) 495; (1947) 64 WN 183 Wakeling v Ripley (1951) 51 SR (NSW) 183 Watkins v Combes (1922) 30 CLR 180 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431; Whereat v Duff (1973) 1 ALR 363; (1973) 47 ALJR 540
TEXTS CITED:	ALRC 102, 2005, Uniform Evidence Law ALRC 38, 1987, Evidence Anderson J., Williams J. and Clegg L., The New Law of Evidence; Annotation and Commentary, 2nd ed, Butterworths, 2009 Carter J., Peden E and Tolhurst G., Contract Law in Australia, 5th end, Butterworths, 2007 Greig, D. and Davis J, The Law of Contract, The Law Book Company Limited, 1987 Justice J D Heydon, Cross on Evidence, Butterworths, online edition Mason, K, Carter, J & Tolhurst, G, Mason & Carter’s Restitution Law in Australia Butterworths, Sydney, 2008 Mason A, 'The Impact of Equitable Doctrine on the Law of Contract' (1998) 27 Anglo-American Law Review 1 Meagher R., Heydon D., and Leeming M., Meagher Gummow and Lehane’s Equity: Doctrines and Remedies, 4th edn, Butterworths, 2002 Young P., Croft C. and Smith M., On Equity, Lawbook Co, 2009
PARTIES:	Tracey-Lee Darmanin (Plaintiff) Simone Cowan (First Defendant) Robert Raymond Cowan (Second Defendant)
FILE NUMBER(S):	SC 09/288822
COUNSEL:	A Crossland (Plaintiff) W Ward (Defendants)
SOLICITORS:	Craig Milne & Company (Plaintiff) Rowan's Lawyers (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WARD J

FRIDAY 1 OCTOBER 2010

09/288822 TRACY-LEE DARMANIN V SIMONE COWAN & ROBERT COWAN

JUDGMENT

1 HER HONOUR: In these proceedings Ms Darmanin seeks the recovery of moneys expended by her in relation to the construction and fitting out of what has variously been described as a cottage and as a relocatable or portable home. The dwelling (to which I will neutrally refer for convenience as the cottage) was built in late 2007 on steel piers or railings on part of a 30 acre property owned by the second defendant, Mr Cowan, in Glenorie. Mr Cowan and his wife, the first defendant, live in the main residence on the Glenorie property with their children.

2 Ms Darmanin lived with her daughter in the cottage for about 6 months from January 2008 to June 2008, having lived temporarily with the Cowans in their own home during the construction of the cottage. She vacated the cottage, some months after the Cowans’ demand that she do so, following the breakdown of the relationship between the parties. The cottage is now the subject of a demolition order from the local Council, the operation of which order (I am told) has been suspended pending the determination of these proceedings. The cottage has been unoccupied since it was vacated in mid 2008.

3 This is clearly an unfortunate situation for all parties. What is in issue between them, in essence, is who should bear the cost of what transpired to be an unsuccessful attempt by the Cowans to assist Ms Darmanin with a place for her and her daughter’s accommodation at a time when it was recognised by them that she was unwell. From the Cowans’ perspective, having offered their assistance to Ms Darmanin, they are now being asked to pay for the costs of the cottage built when she accepted that offer of assistance (without account being taken of costs expended by them in that exercise). From Ms Darmanin’s perspective, had she not acted upon the offer of assistance by the Cowans’ she would not now face the loss of what her Counsel (Mr Crossland) describes as her life savings, having expended them in the construction of a building that now seems to be of little or no benefit to any party. (The residual value of the cottage depends primarily on its relocatability. If not relocatable, its value depends on whether the Council enforces the demolition notice issued in respect of the cottage - since there might otherwise be some scope to derive rental income from the cottage if it remains on the land).

4 Counsel for the Cowans, Mr Ward, says that this is a case of nothing other than Christian charity. He metaphorically likens his clients’ position to that of frogs placed in tepid water slowly brought to the boil. His clients gave evidence that, as their friendship with Ms Darmanin broke down, they were intimidated by her behaviour. By that stage, my impression is that they found themselves unable to avert the situation in which they are now placed. Mr Crossland’s response is that the presence of the best of intentions is no defence to the claim of unconscionability.

5 Ms Darmanin’s claim for relief is put in two ways. Her principal claim (broadly described as a claim of unconscionability) is that it would be unconscionable for Mr and Mrs Cowan to have the benefit of the “value” of the cottage (for which Ms Darmanin paid) or, in the alternative, that it would be unconscionable for them not to compensate Ms Darmanin for her expense in building the cottage. Reliance was placed for this claim almost exclusively on the judgment of McLelland J (as his Honour then was) in Morris v Morris (1982) 1 NSWLR 61. There, his Honour applied a principle analogous to that which had been applied by the Privy Council in Chalmers v Pardoe [1963] 1 WLR 677 and found it to be unconscionable and inequitable for the defendants to retain the benefit of expenditure by the plaintiff of money on their property free of any obligation of recoupment to him. In Morris v Morris, his Honour held that the property was impressed with an equitable charge for the amount of the plaintiff’s expenditure and interest.

6 The second way in which Ms Darmanin’s claim is put is predicated on an agreement which she alleges was entered into by her with the Cowans in relation to the cottage in about mid 2007, under which agreement she says she was entitled to occupy the cottage for a specified period of time (pleaded as 8 years but said in submissions to be 6 years). That agreement is said to be one which is unjust, for the purposes of s 7 of the Contracts Review Act 1980 (NSW), and one which arose out of the unconscientious conduct and undue influence on the part of the Cowans. Ms Damanin contends that it should be set aside and that she should be reimbursed for her expenditure, and recover interest and costs.

7 Although reliance is placed, in both of the ways in which her claim is put, on Ms Darmanin’s mental health at the relevant time(s) (she having had a history of depressive illness and having been diagnosed in about April/May 2007 with bipolar disorder), it is submitted for Ms Darmanin that a finding in relation to her mental health is not necessary for the purposes of her principal claim. That claim, as articulated by Mr Crossland, turns on the making of a promise that Ms Darmanin could stay in the cottage for a period of some 6 or 8 years, a promise of which it is said there could not have been any reasonable certainty of fulfilment at the time it was made, and which was relied upon by Ms Darmanin in making the said expenditure).

8 Ms Darmanin has quantified the moneys spent by her on construction of the cottage, including appliances and fittings (though some of those have already been removed by her), variously at $78,000 and at $82,000 (though in her affidavit deposing that the costs were more than that), plus interest from 15 November 2007 and costs.

9 The agreement on which Ms Darmanin bases her alternative claim (which is denied by the Cowans) is that pleaded in paragraph 30 of the Amended Statement of Claim by reference to the terms of the ‘proposal’ described in paragraph 18 of the pleading. (Although paragraph 30 actually refers to paragraph 17 that reference was acknowledged by Mr Crossland to be a typographical error.)

10 The proposal forming the basis of the alleged agreement, in summary, was that if Ms Darmanin sold a property then owned by her at Gymea she could use the net proceeds of sale to pay for the construction of a residence on the Glenorie property and she could live there for 8 [or 6] years rent-free; that during construction she could live at the Cowans’ residence without paying rent; that the Cowans would provide care and support for Ms Darmanin and her daughter and would arrange payment of all aspects of the construction and completion to habitability of the new residence.

11 There is also said to be an implied term of that agreement, namely that, in exchange for permitting Ms Darmanin to build the residence and remain living in it for 8 [or 6] years, the Cowans would have the sole benefit and ownership of the residence after that period. No basis for the implication of such a term was identified in the pleading or in the submissions. I can only assume that the implication is said to follow from the “rent-free” basis of Ms Darmanin’s occupation (ie that an agreement for occupation of the cottage to be rent-free assumes that otherwise rent would be payable to the owner) and/or the fact that there was no provision in the alleged agreement for what was ultimately to happen with the cottage. However, it does not seem to me that this necessarily follows. The payment of “rent” for the use of the land on which the cottage sits would not of itself require an assumption that the cottage was to be or become the property of the Cowans (for example, the arrangement might have been described as “rent-free” simply because no fee was to be paid for having the cottage temporarily placed on the land, similarly to the pitching of a tent or location of a caravan in someone’s backyard).

12 The actual period during which Ms Darmanin claims she was (contractually) entitled to reside rent-free in the cottage on the Cowans’ land (and before she says the sole benefit and ownership was to revert to the Cowans), though pleaded in precise terms as 8 years, is one about which (as already noted) there was some imprecision. Mr Crossland submitted at the outset of the hearing that “on one view of things” the time period might have been a 6 year period but submitted that this made no great difference to the nature of the agreement between the parties. (While this may well be the case when looking at the nature of the agreement, it seems to me that if there is uncertainty as to an essential term of an agreement, such as the duration of the arrangement, this is something that may be of great relevance to the question whether any such agreement was made or whether any such agreement was intended to have legal effect.)

13 As I understand it, the length of the claimed rent-free occupation period is the product of the calculation of the period at the culmination of which, at a notional rental of $250 per week, the notional rent would exceed the total expenditure on the cottage (though for this purpose the total expenditure seemingly includes items of fitout which Ms Darmanin apparently considered it was open to her to remove when she ultimately vacated the cottage). Where the figure of $250 per week came from, however, is a matter of dispute between the parties.

14 The Cowans deny that there was any legally binding agreement and say that the arrangement pursuant to which Ms Darmanin was permitted to build the cottage on the Glenorie property was a domestic or social arrangement under which Ms Darmanin would be permitted to live in a caravan or relocatable home on the property for a ‘few years’ rent-free (subject to payment of electricity charges). The Cowans say that their only desire was to assist Ms Darmanin in a cost responsible way to preserve her very limited resources at a time of emotional or psychological distress. They deny that they have received any benefit from the construction of the cottage and deny that it was ever intended or agreed that the cottage should become their property. The Cowans say that the cottage was to belong to Ms Darmanin, who was to be free to move the cottage whenever she chose.

15 The Cowans have requested that Ms Darmanin remove the cottage from the property. She has not done so. Ms Darmanin accepts that she did try to sell the cottage and it appears that she made some enquiries as to the removal of the cottage, in that she has referred to a cost of over $30,000 to move the cottage (T22.13). In the witness box, Ms Darmanin’s explanation for the fact that the cottage had not been removed was that she has no money to do so and she has nowhere for it to go (not that it does not belong to her). She says that the cost involved in its removal is because “it wasn’t really built as a moveable cottage”. In February 2008, Ms Darmanin suggested that the Cowans borrow funds to pay her back for the cost of construction of the cottage on the basis that they could derive rental from the cottage (Again, inconsistent with the notion that the Cowans already had an entitlement to do so on the basis that the cottage was theirs). The Cowans did not agree to do so but were at that stage prepared to allow the cottage to remain on their land so Ms Darmanin could herself receive rental from the cottage (at least until she had recouped her expenditure on the cottage). Due to the Council’s intervention that course does not seem open to the parties.

Issues

16 There are a number of factual disputes between the parties as to the circumstances in which the arrangements between them came into existence and as to the substance of those arrangements, as well as to the relocatability of the cottage. I will consider those when reviewing the factual background to the dispute. The claims before me, broadly, are as follows:

(i) Ms Darmanin’s principal claim for reimbursement of some or all of the expenditure on the cottage based on a general principle of unconscionability (said to be akin to unjust enrichment) (“the unconscionability claim”); and

(ii) Ms Darmanin’s alternative claim that there was a binding agreement in the terms alleged by Ms Darmanin and that this agreement should be set aside as unjust under the Contracts Review Act or otherwise for unconscientious conduct or because it was procured by undue influence (“the contractual claim”).

17 In particular, Mr Crossland relies on the admission in paragraph 32 of the Cowans’ Amended Defence that they knew, at the time of the arrangements in question, that Ms Darmanin was suffering emotional or psychological distress; the alleged implied admission (said to be contained in the same paragraph) that although there was an agreement between them the Cowans had no intention to be legally bound thereby; and an admission said to be contained in a letter dated 20 February 2008 to Ms Darmanin confirming the alleged agreement as set out in that letter (this last being said to be the critical evidence in Ms Darmanin’s case).

Summary

18 In summary, for the reasons set out below, I am of the view that Ms Darmanin’s claim fails in each of the ways in which it is put.

19 As to the unconscionability claim, I find that the promise made to Ms Darmanin (in reliance on which I accept she expended funds in the construction of the cottage) was one which contemplated no more than the temporary placement of a relocatable home on the Glenorie property and that there was no benefit to the Cowans in the arrangement entered into with Ms Darmanin, nor is there any benefit now retained by them (unconscionably or otherwise) as a result of Ms Darmanin’s expenditure. I find that there is no unconscionability or inequity in Ms Darmanin not now being reimbursed by the Cowans for the expenditure she incurred in the construction of the cottage.

20 As to the contractual claim, I find that the arrangement between the parties was one which fell short of a binding legal agreement. Had I found otherwise, I would nevertheless not have found that the agreement was unjust for the purposes of s 7 of the Contracts Review Act. I further find that there was no undue influence by the Cowans or Amadio unconscionability (Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447) in relation to the arrangements entered into with Ms Darmanin (whether or not those arrangements constituted a binding agreement).

21 I therefore propose to dismiss Ms Darmanin’s claim. However, I consider it would be appropriate to allow Ms Darmanin a final opportunity to remove or sell the cottage (and so obtain whatever benefit remains of her investment in the dwelling). As there is a question as to when the Council’s demolition order may become operative once final orders are made in these proceedings, I consider the best course would be to dismiss the proceedings but to stay the order dismissing these proceedings for a period of, say, 6 weeks in order to allow Ms Darmanin a final opportunity of that kind (following which the cottage, if not removed, could in my view be treated as having been abandoned by Ms Darmanin). I will hear any submissions both as to this aspect of the final orders and as to costs, at a time convenient to Counsel.

Friendship between Ms Darmanin and Mrs Cowan

22 Ms Darmanin and Mrs Cowan first met when they were at primary school together. It seems that they lost touch for some time after Ms Darmanin left school (during which period Ms Darmanin worked as a dental nurse, moved to Queensland for a couple of years, and then returned in New South Wales to work again as a dental nurse).

23 Ms Darmanin has no formal qualifications other than her Year 10 School Certificate. Since 2003, Ms Darmanin has worked off and on as a dental nurse for Dr William Zafiropoulos, variously in his own dental practice or in a dental practice in which he worked. Her role in that period has included the promotion of (as I understand it, quite costly) cosmetic procedures to patients. It was suggested by Mr Ward that this was a quite responsible role on Ms Darmanin’s part, which may or may not be the case. In early 2007, just prior to the events that have given rise to these proceedings, Ms Darmanin was working with Dr Zafiropoulos in a practice in Menai. In around 1999/2000, Ms Darmanin and Mrs Cowan renewed their acquaintance.

Ms Darmanin’s financial position

24 In about 2002/3, Ms Darmanin purchased a unit in Gymea. She financed the $460,000 purchase price through the combination of a $360,000 home loan and the proceeds of sale of another property in Punchbowl (her equity in the Gymea property at that stage thus being in the order of $100,000).

25 In early 2007, Ms Darmanin borrowed about $70,000 from the Bank of Queensland on the security of her Gymea property. She says that she had intended to purchase a dental surgery (though there was no evidence that she had made any enquiries in relation to any particular surgery or that she had considered the feasibility of such a purchase from a business point of view) but instead spent the money on mortgage repayments, jewellery and expensive clothes (para 13 of her affidavit of 13 August 2009). (There is no suggestion that Ms Darmanin no longer retains value in the personal property acquired with those funds. Therefore the suggestion that she has lost her “life savings” may be somewhat overstated.)

26 In October 2007, in the circumstances considered later in this chronology, Ms Darmanin sold her Gymea property and paid for the construction of the cottage the subject of these proceedings. She now lives in rented accommodation.

Ms Darmanin’s mental health

27 Ms Darmanin’s affidavit of 13 August 2009 outlines a history of depressive illness from the age of 20 (thus for about the past 18 years) though this was seemingly not the subject of any formal diagnosis until around mid 2007. Ms Darmanin describes the period from about December 2006 as one in which she suffered from her third major episode of depression. She was hospitalised suffering from depression in around April or May 2007 at which time Ms Darmanin says she was formally diagnosed with type 2 bi-polar disorder. Broadly, that account is confirmed by the clinical psychologist called to give evidence for Ms Darmanin (whose account was apparently drawn by her from information provided to her by Ms Darmanin’s referring general practitioner).

28 Although the diagnosis of her condition in mid 2007 is described in her pleading (para 10) as a diagnosis of manic depressive disorder, the expert evidence adduced by the Cowans in these proceedings (from Dr Roberts) was to the effect that this and the term bipolar disorder are interchangeable.)

29 There is no dispute that at around mid 2007 Ms Darmanin was very unwell. According to Mrs Cowan, Mr Bruce Blackmore (a friend of Ms Darmanin to whom Ms Darmanin habitually refers as “uncle” but who is not related to her) contacted her and told her he was worried about Ms Darmann and that Ms Darmanin had a ‘bad depression’. Mrs Cowan was either asked or offered assistance. Mrs Cowan says that she was not aware of Ms Darmanin’s hospitalisation at the time (which suggests that the friendship between the two may not have then been as close as it became from mid 2007 onwards).

30 According to Ms Darmanin, during a telephone conversation with Mrs Cowan around this time, the latter suggested that if Ms Darmanin was ‘that bad’ she should come over (to Glenorie) so that Mrs Cowan could look after her. Mrs Cowan says that Mr Blackmore drove Ms Darmanin to the Glenorie property, (Ms Darmanin says that she drove herself there but that Mr Blackmore followed in his car) and that Ms Darmanin spent 4 or 5 days there (Ms Darmanin says 2-3), while Ms Darmanin’s daughter was minded by others.

31 Mrs Cowan described Ms Darmanin as being in a “dazed and stupefied” state at that time (24 May 2010 affidavit). This is consistent with Ms Darmanin’s recollection that she was like a ‘zombie’. It is not disputed that Mrs Cowan made an appointment for Ms Darmanin to see a doctor at that stage. According to Mrs Cowan, Ms Darmanin’s state improved with the medication at least to the extent that Ms Darmanin was able at the end of that time to drive herself to her parents and then home and to cook for herself and her daughter.

32 Apart from the minor discrepancies noted above, the recollections of Mrs Cowan and Ms Darmanin to this point are broadly consistent.

33 Around this time and after Ms Darmanin’s short stay with the Cowans in mid 2007, it seems that there was regular contact between Mrs Cowan and Ms Darmanin (with a number of telephone calls a week between the two and visits by Ms Darmanin on occasion to the Glenorie property). Mrs Cowan referred in the witness box to her concern as to Ms Darmanin’s state of mind and referred to Ms Darmanin being ‘heartsick’ at the fact that her daughter had to attend before and after school care while Ms Darmanin worked, that being suggested as being a cause of Ms Darmanin’s bouts depression. (Although Mr Crossland suggested that this was something of a recent invention by Mrs Cowan, it not having been referred to in her affidavit, it is consistent with the fact that the arrangement between the parties, on whichever version is accepted, was one that involved Mrs Cowan agreeing to assist in the care of Ms Darmanin’s daughter.)

The Cowans’ knowledge of Ms Darmanin’s illness

34 There is a dispute as to what was known by the Cowans of Ms Darmanin’s illness at this time. In her pleading, Ms Darmanin alleges that in about mid 2007 the Cowans became aware that she was having psychological difficulties of a serious depressive nature (paragraph 11) or alternatively that she had been diagnosed with a depressive illness (paragraph 13). Ms Darmanin further alleges (paragraph 12) that at about that time the Cowans became aware that she had been “formally diagnosed with a manic depressive illness”.

35 In her affidavit of August 2009, Ms Darmanin deposes to having told Mrs Cowan of the bipolar diagnosis (paragraph 15). Mrs Cowan emphatically denies that she was told that Ms Darmanin had bipolar disorder (though she accepts that she was aware that Ms Darmanin had suffered or claimed to have suffered bouts of depression). In paragraph 50 of her affidavit, Mrs Cowan says that what Ms Darmanin referred to was ‘my depression’ or ‘my serious depression’.

36 Ultimately, other than any issue as to Mrs Cowan’s credit or the reliability of Ms Darmanin’s recollection as a witness, it does not seem to me to matter whether Mrs Cowan was told by Ms Darmanin in April/May 2007 (or at any other relevant time) that she had, or had been diagnosed with, bipolar disorder or that she had a manic depressive illness (formally diagnosed or otherwise) or was simply aware that Ms Damanin had suffered from bouts of depression.

37 That is because it is by no means clear that Mrs Cowan, as a lay person, (or her husband for that matter) had any understanding of the ramifications of a depressive illness or manic depressive illness such as bipolar disorder beyond those which they were able to observe from Ms Darmanin’s outward behaviour. (Mrs Cowan’s description of Ms Darmanin’s state at the time focussed on her inability to cook, clean or care for herself or her daughter, indicating that it was in relation to those matters that she perceived Ms Darmanin as unwell.)

38 That is not surprising. Dr Samson Roberts, a consultant forensic psychiatrist called to give evidence by the Cowans, (to whose evidence Mr Crossland raised a Makita objection, referring to Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; 52 NSWLR 705 on the basis that Dr Roberts had not had any face to face consultation with Ms Darmanin in order to assess her mental state – an objection which I deal with below) gave evidence (in summary) as to the nature of bipolar disorder and its symptoms.

39 Dr Roberts’ evidence was that bipolar disorder is a disorder of mood characterised by one or more manic or mixed episodes, usually accompanied by major depressive episodes (hence the description ‘bipolar’). It is a relapsing and remitting condition. Each episode, he said, is of insidious onset, variable severity and variable duration. There are episodes of illness generally interspersed with periods of “wellness”. Dr Roberts observed that many patients continue to function at normal or near normal level with limited overt manifestations of impairment aside from periods of very severe mood disturbance. Dr Roberts confirmed the difference between hypomania and mania and indicated that the presence of grandiose delusions and disorder of thought form would attract a diagnosis of Mania or Manic Episodes in accordance with DSM IV criteria. While Dr Roberts noted that there would be cognitive impairment in areas relevant to attention, problem solving and memory as a feature of bipolar disorder he emphasised that to identify with certainty the nature and severity of problem solving deficits would require sophisticated neuropsychological testing.

40 Dr Roberts explained that it is not common for lay people to recognise the emerging symptoms of the manic or hypomanic phases of bipolar disorder; that during the quiescent phases of the disorder a person may appear to be behaving normally even though there was scientific evidence that there would be ongoing subtle cognitive defects at that time; and that a lay person with no special understanding of the disorder would not be expected to appreciate the subtle effects of the disorder on a person’s cognitive thought processes at a time when the person might otherwise appear to be behaving normally. As a general observation Dr Roberts said that he would not expect a lay person to be cognisant of the intricacies of psychological assessment in bipolar disorder; nor would subtle deficits in problem solving (as might potentially impact on financial transactions) have been objectively noticeable. Memory and concentration difficulties per se would not, in his experience, alert a lay person to the cognitive defects associated with the disorder.

41 As to the question of credit, Mrs Cowan was adamant that she had not been told of the bipolar diagnosis. Ms Darmanin was equally adamant that she had. According to Ms Darmanin’s evidence in the witness box, the basis on which Ms Darmanin was so sure that she had told Mrs Cowan of the diagnosis was because she said that Mrs Cowan had told her that her brother suffered from it. Not only was any familial experience of the disorder denied by Mrs Cowan in the witness box -T 40 - (who cannot have had forewarning of the assertion since it did not appear in Ms Darmanin’s affidavit and who, to my observation, seemed genuinely bemused by the suggestion that anyone in her family suffered from the disorder) there was no evidence that anyone did. That assertion, made so dogmatically by Ms Darmanin in the witness box, almost with the air of playing a trump card, in the absence of anything to suggest that it accords with the facts, casts doubt in my view on the reliability in general of Ms Darmanin’s recollection of events.

42 In particular, it suggests a tendency on the part of Ms Darmanin to embellish her evidence in somewhat similar fashion to other evidence, such as the overstatement made by her in her affidavit that everything was left in the cottage intact when she vacated it – para 47 (though she conceded in the witness box that some items had been removed) and the embellishment she seems to have employed when assessed by her the clinical psychologist she consulted in November 2007, Ms Vicki Easson.

43 For example, in Ms Easson’s report she recorded information that presumably could only have been conveyed to her by Ms Darmanin to the effect that Ms Darmanin’s ‘naturopath landlord’ (who she indicated was Mr Cowan) was trying to persuade her to come off her medication, when there is no suggestion that either of the Cowans was a naturopath or was attempting to persuade Ms Darmanin to come off her medication. Since it seems that it was Mrs Cowan who had taken steps to facilitate the prescription of medication or a change of medication in mid 2007 rather than the contrary (both she and Ms Darmanin gave evidence of her taking Ms Darmanin to see a doctor), and Mr Blackmore deposed to Mrs Cowan expressing a concern to him at one stage that Ms Darmanin might not be taking her medication, and since there is no evidence that either Mrs Cowan or her husband is a naturopath (and there is no suggestion that anyone else was in the position of landlord at that time to whom this could be a reference), this casts some doubt on the reliance which can be placed on Ms Darmanin’s account of events in general.

44 I note, however, that Ms Darmanin’s version of the ‘bipolar’ conversation was supported by Mr Blackmore, who recalled that he had been present during a conversation between the two women in which the word ‘bipolar’ had been mentioned by Mrs Cowan. Mr Blackmore says that he is sure that he heard the word ‘bipolar’ because he had not known what bipolar meant until it was mentioned – T 26.23 - (though there is nothing in his account of the conversation that records any description of what it meant – simply the usage of the word). He did not agree that the person mentioning the word was Ms Darmanin (though there seems no reason why she would not have used the word, especially since her own evidence is that she had used it in her conversation with Mrs Cowan in relation to the diagnosis). Mr Blackmore’s evidence in this regard went no further than the one conversation, at a time that was not made clear.

45 Without any disrespect to Mr Blackmore, I think it equally likely that his recollection that the word was used in a conversation of this kind by Mrs Cowan was influenced by the fact that, with hindsight, it is known that Ms Darmanin had suffered from bipolar disorder. I cannot be satisfied that any reference by Mrs Cowan in the conversation to which he refers was not more than a general reference to Ms Darmanin’s depression or depressive illness.

46 Ms Darmanin herself said that 2007 was a ‘blur’ to her and that she did not recall much of 2007 (para 14 of her affidavit). I consider in general that Mrs Cowan’s account of the events of 2007 (and that of her husband) is more likely to be reliable than that of Ms Darmanin (whose tendency to grandiosity was noted by her psychologist, Ms Easson).

47 Therefore, I do not consider that Mrs Cowan’s denial that she had been told of a diagnosis of bipolar disorder reflects adversely on her credit. That said, for the reasons outlined above, I do not consider that anything turns on the disputed evidence on this issue (other than as an indication that care must be taken before accepting Ms Darmanin’s account of events). Even if Mrs Cowan (and her husband) had known the depressive illness was categorised as a bipolar disorder I am not convinced that this would have led to any particular realisation as to the defective impact that could have had on Ms Darmanin’s thought processes at those times when she appeared well or (as seemed to be the case towards the end of 2007) when she ceased taking medication and may have started to display symptoms towards the more manic end of the bipolar spectrum.

48 Thus, I find that, as at April/May 2007, what the Cowans were aware of was that Ms Darmanin was suffering some form of depressive illness and was sufficiently unwell to be unable, for a period of time, to care for the physical wellbeing of herself or her daughter. What I do not accept is that they were aware that this illness was something that was present, and could continue adversely to affect Ms Darmanin’s judgment or cognitive thought processes, even after she had appeared to recover or behave more normally (ie once she had moved out of the ‘dazed and stupified’ state she seemed to have been in during the 4 or 5 day period in which she stayed with the Cowans in mid 2007).

Ms Darmanin’s ability to manage her affairs as at mid 2007 and alleged reliance on the Cowans

49 Insofar as it is alleged that, by mid 2007, Ms Darmanin’s ability to manage her affairs (and make decisions as to financial matters) was significantly impaired, I accept Dr Roberts’ evidence that the latest scientific research would suggest that there is a continuing impairment to some subtle degree even during quiescent stages of a bipolar disorder. Thus, over the period from mid 2007 onwards, it seems reasonable to assume that Ms Darmanin suffered some cognitive impairment although the degree of that impairment may have fluctuated. (I note that Ms Easson did not see Ms Darmanin until November 2007 and so (like Dr Roberts) cannot express a view based on direct observation at that stage but said that it was likely that Ms Darmanin was entering a hypomanic phase in the three months leading up to her first consultation.)

50 Insofar as it is alleged that the Cowans knew by the middle of 2007 that Ms Darmanin’s ability to manage her own affairs was so impaired, I accept that the Cowans were on notice that Ms Darmanin was suffering from a depressive illness and unable to manage at least her personal affairs at the time she stayed with them in mid 2007 (and this surely would have extended to her financial affairs). As noted above, what I am not satisfied about is that the Cowans were cognisant of a significant degree of impairment in this regard after Ms Darmanin responded to the medication and started to resume a more active life.

51 It is alleged by Ms Darmanin that by mid 2007 she was “heavily reliant” on Mrs Cowan for emotional and practical support and that she was “heavily reliant” on both the Cowans for practical support. At least in relation to the question of emotional support it seems to me not unlikely that Ms Darmanin was to a degree reliant on Mrs Cowan’s friendship and assistance. However, there is nothing to suggest that Ms Darmanin was not also reliant (at least once she left the Glenorie property) on others, such as Mr Blackmore and her employer Dr Zafiropoulos, for emotional and practical support at this time. Nor is there anything to suggest (as seems to be asserted) that Mrs Cowan encouraged Ms Darmanin to rely on her and her husband (to the exclusion of others or otherwise) for such support, as opposed to simply offering assistance where she could.

52 To the extent that Ms Darmanin’s affidavit asserts that there was no one other than the Cowans who were giving her advice during the relevant period, this again seems to me to be an exaggeration. Not only does Mr Blackmore seem to have offered at least some support during this period, (contacting Mrs Cowan for assistance and accompanying Ms Darmanin to the Cowans in mid 2007 and visiting her on the property) but there is also evidence that, at least at the time Ms Darmanin entered into the legal arrangements for sale of her Gymea property, she had discussed the sale price with her employer.

53 The statement by Ms Easson that Ms Darmanin had limited social support seems to be solely based on what Ms Darmanin told her. I would be inclined to count Ms Darmanin’s evidence on this point as self-serving (particularly when Ms Darmanin also said that ‘lots’ of people had spoken against the idea of the cottage or, to use her words, had said “this is crazy” and she should not be doing this T 21 – suggesting at the very least that she had discussed this proposal with more than simply the Cowans).

54 At some point in 2007, Ms Darmanin went back to work for Dr Zafiropoulos and did so through to about October 2007. It seems (having regard to the evidence of the real estate agent, Mr Bill Anastasiadis, who acted on the sale of the Gymea property, that on at least one occasion Ms Darmanin had referred to discussions with her employer as to the final sale price offered by the purchaser) that Ms Darmanin also placed reliance during this period on his advice. I am thus of the view that the alleged reliance placed on the Cowans has been overemphasised by Ms Darmanin.

Suggestion that Gymea property be sold

55 Ms Darmanin says that it was when she was staying at the Glenorie property in April/May 2007 that the suggestion of the sale of the Gymea property was first raised (and this does not seem to be disputed). However, she says (at paragraph 18 of her affidavit) that Mrs Cowan suggested that she sell her house. Mrs Cowan, on the other hand, says that Ms Darmanin told her that she was not able to continue working, was suffering depression and, as she would have no income, she would have to sell her townhouse (para 6, 24 May 2010 affidavit). Mrs Cowan denies suggesting that the premises be sold (para 8).

56 It seems to me not implausible that, at a time when Ms Darmanin was in a zombie-like state and unable to look after her daughter, she expressed concerns to Mrs Cowan about her ability to continue working and to meet her mortgage repayments. (Although Ms Darmanin gave evidence that she had not missed any repayments, the likelihood of so doing must surely have occurred to her if she were unable to continue working. She had apparently already used additional borrowings to meet her repayment obligations in early 2007.) The knowledge Mrs Cowan had of Ms Darmanin’s financial position can only have come from Ms Darmanin herself. Had Ms Darmanin not expressed concerns about her ability to continue to work and meet mortgage repayments, there would be no logical reason for a sale of the property to come up at all (in other words, if all Ms Darmanin had needed was a place to stay for a while then there would have been no logic to a suggestion that the house be sold).

57 There is nothing to suggest that Mrs Cowan had any knowledge of, or interest in, Ms Darmanin’s financial affairs prior to that point such as might lead me to conclude that the suggestion of a sale of the property emanated originally from Mrs Cowan. Similarly, despite the submission by Mr Crossland that the Cowans were ‘shepherding’ Ms Darmanin out of her Gymea property (and wanted to have a cottage erected on their land), there is nothing to suggest that there was any motivation for personal gain on the part of the Cowans in what occurred and, insofar as I am asked to infer this, I am not satisfied on the evidence before me that I should do so.

58 I do not accept Ms Darmanin’s evidence on this issue.

Initial offer

59 Mrs Cowan acknowledges that she said to Ms Darmanin that she could purchase a “moveable home” and place it on their property but was clear that it was always to be Ms Darmanin’s property. Mrs Cowan says that she said to Ms Darmanin “after you feel better you could sell the portable home” – para 10 of her affidavit. (In the witness box, though not in her affidavit, Mrs Cowan explained that her thought process was to assist Ms Darmanin to find out why she was having bouts of depression.)

60 The original offer or suggestion, which Mrs Cowan acknowledges she made, is broadly consistent with Ms Darmanin’s recollection of the conversation (as it appears at paragraph 23(f) of Ms Darmanin’s affidavit) and is consistent with the evidence as to a caravan having previously been located on the Glenorie property (as a temporary measure to accommodate some workers).

61 The portability of any dwelling to be placed on the Glenorie property was accepted by all parties to have been a feature of the initial discussion. It was suggested by Mr Crossland, in his cross-examination of the Cowans, that the use of the adjective “relocatable” was something which had been adopted for the purpose of creating an impression as to the nature of the accommodation which had been contemplated by the parties and that this terminology had not been used in discussions between the parties. In effect, as I understood it, Mr Crossland was suggesting that the Cowans were seeking to put a label on the dwelling that would assist in their argument whereas that had not been the term used in the discussions between the parties. Mrs Cowan conceded that in what I would call everyday parlance (conversations with her children and the like) the cottage was referred to as “Tracy’s home” or “Tracy’s cottage” but insisted that in discussions as to the arrangements between the parties the reference was to a relocatable (or moveable) home. I note that Ms Darmanin herself refers to a conversation where the home was referred to in similar terms (para 23(f) of her affidavit). I do not think that the Cowans can be criticised for referring to the cottage as a relocatable home when the initial offer was in those terms and I accept that they have at all times considered that what was to be placed on the land should be relocatable. (I do not see this as a case of deliberately appending a label to something and then using that label as an aid to construction.)

62 Where the respective accounts seem to diverge at this point is as to whether there was any consensus reached at that stage in relation to the proposal and as to whether by then it was contemplated that there should be a more permanent cottage (as opposed to a mobile home) on the land.

63 Mrs Cowan contends that after the offer was made the subject was not raised again until some time later (around September 2007) (and she says this was after Ms Darmanin had considered the possibility of renting elsewhere). Mrs Cowan recalls a conversation in which Ms Darmanin asked her if the offer was still open (something which Ms Darmanin denies).

64 Ms Darmanin contends instead that there was a discussion (which she seems to put as around mid 2007) with Mr Cowan in which he said that he did not like the thought of a portable home on the land and that he suggested that there be a cottage. Mr Cowan, however, was fairly blunt in the witness box as to his views about the arrangement and I have difficulty accepting that he made any proposal at all about a cottage on the property (the thrust of Mr Cowan’s evidence, which I considered was said with genuine feeling, was that his wife had prevailed upon him to accept that Ms Darmanin should be permitted to stay on the property and to accept the view expressed by Ms Darmanin, with which his wife agreed, that a caravan would be too small for Ms Darmanin and her daughter; and that he had only reluctantly agreed).

65 As to the timing of the discussion about a cottage, as opposed to a caravan or ‘portable home’ (assuming for present purposes that there is a difference between the latter and a cottage, which seems to me to be moot), had it occurred in April/May 2007 then it would seem to me to be surprising that nothing seems to have been done at that stage to consider what kind of cottage would be suitable. The evidence is that steps to identify a suitable home to place or build on the land did not take place until about September 2007 (after Mrs Cowan says that Ms Darmanin raised the offer with her again).

66 There was also a dispute as to whether anything was said at that stage (mid 2007) as to who was to own the cottage (or portable home). Mrs Cowan, as noted above, said that she had said to Ms Darmanin that when she felt better she would be able to sell the ‘portable home’. That seems to me to be consistent with the arrangement being one to assist Ms Darmanin with temporary accommodation, in circumstances where Mrs Cowan had made clear that there was insufficient room in her own house to do so (and makes sense of the motivation being to achieve a cost responsible solution – since it contemplates that there will be a residual value in the structure so that Ms Darmanin would have the benefit both of a period of rent-free accommodation and then of the sale of the structure). Ms Darmanin’s version on this seems to be limited to what is said in paragraph 23 (p) of her affidavit (which I consider in due course).

67 Ms Darmanin’s evidence was that she would not have sold the property had she not had the offer from the Cowans (as she would have had nowhere to live). Ms Darmanin denied having asked in September if it was still all right for her to stay on the Glenorie property for some time, but did not deny having looked at rental properties, which seems consistent with her having made a final decision to move to Glenorie only some time later in 2007 after she had seen what was available on the rental market (in which case the conversation attributed to her by Mrs Cowan makes sense as a matter of logic).

68 Although there is some doubt as to when (accepting that it was asked) the question was raised by Ms Darmanin as to whether it was still all right if she still stayed on the property for some time, (and in particular, some emphasis was placed by Mr Crossland on the fact that Mrs Cowan conceded in the witness box that the Cowans’ ‘offer’ could have been made before the Gymea property was sold suggesting that this meant that the sale of the property was in reliance on the offer made by Mrs Cowan), it does not seem to me that much turns on this for present purposes, since even after the Gymea property was sold Ms Darmanin was not in my view committed to proceeding with the construction of the cottage. It would have been open to Ms Darmanin at that point to take some different decision in relation to her future accommodation (and to have used the net proceeds of sale in a different fashion).

69 What seems more relevant to me is that if the question was raised by Ms Darmanin (and I accept Mrs Cowan’s evidence that it was), it indicates to me that Ms Darmanin well understood the temporary nature of the arrangement and it explains the underlying logic of the arrangement as one in which Ms Darmanin would spend what would otherwise have been rent on an asset in which she could live for a while and then either sell in due course or relocate once she was able to resume working and caring for her daughter.

70 Whether or not the Cowans’ offer was accepted by Ms Darmanin before the decision by Ms Darmanin to sell the Gymea property, it certainly seems to be accepted by the Cowans that the possibility of temporary accommodation on their land was discussed before the Gymea property was put on the market and, a fortiori, before the sale was completed. Significantly, in light of the agreement on which Ms Darmanin now relies, Ms Darmanin acknowledges that the initial proposal or offer was that she would be able to reside in a caravan or portable home – an offer which both underscores the temporary nature of the accommodation being made available and is inconsistent with the suggestion that it was intended that the Cowans were to obtain any rights to the temporary residence in question.

Involvement of Ms Darmanin in sale process

71 There was also a dispute as to the level of involvement Ms Darmanin had in the sale process in respect of the Gymea property. In around July 2007, thus about two months or so after the initial suggestion in relation to the caravan/portable home, Mrs Cowan made enquiries (she says at Ms Darmanin’s request) as to suitable real estate agents to market the Gymea property. It is not disputed that Mrs Cowan made the initial arrangements for the agents to make appraisals of the property and that she was present when the various prospective agents were interviewed.

72 Mrs Cowan accepts that it was she who recommended that Mr Anastasiadis be appointed as real estate agent. It is not suggested that there was any personal motivation in her so doing or that there was any previous business or social relationship between the Cowans and Mr Anastasiadis. He is the principal of the Ray White Real Estate agency at Gymea and has been a real estate agent for approximately 20 years.

73 In Mr Anastasiadis’ affidavit of 26 May 2010 he recounts his recollection of the marketing/sale process insofar as it relates to each of Ms Darmanin and Mrs Cowan. He refers to an initial meeting with the two, following an enquiry in April 2007 in relation to a marketing appraisal. Some weight was placed by Mr Crossland on the seeming inconsistencies between the events as described in Mr Anastasiadis’ affidavit and his account of those events when cross-examined in the witness box – in particular, what was the initial ‘meeting’ (the witness referring to that as a telephone call and suggesting that telephone discussions constituted ‘meetings’) and as to how much of a role Mrs Cowan had (he saying that she had ‘more’ of a role in the initial ‘meeting’ when the initial contact was solely with Mrs Cowan). I formed the impression that Mr Anastasiadis had simply been imprecise in his language on those aspects and that the respective accounts were broadly consistent.

74 Another example of imprecision in Mr Anastasiadis’ evidence was in his answer to questioning about the statement he had attributed to Mrs Cowan, which was that “Tracy’s had a hard time and is not well”. Mr Anastasiadis suggested in the witness box that she may have had a cold at the time but when pressed it became clear that he was using this as an example and that he was not suggesting that he recalled that she had actually had a cold at the time. From that, I infer that he did not recall having seen or heard anything to suggest that there was a major problem with her health at the time. In general, I found Mr Anastasiadis to be an honest witness, perhaps inclined to speculate at times such as in relation to this issue.

75 I would accept Mr Anastasiadis’ evidence that he did not notice anything about Ms Darmanin to cause him concern as to her capacity to give instructions as vendor in relation to the sale, since I think it likely that a real estate agent who was concerned as to the mental capacity of a vendor to commit to a sale of the property would be concerned to protect his or her own position before proceeding to take instructions for the sale of the property. However, again, I place little reliance on such evidence because there is nothing to tell me that as a lay person he would have been in a position to realise the impact of bipolar disorder on Ms Darmanin’s thought processes even if he had understood her to be suffering a manic depressive illness and (other than the conclusion expressed by Ms Easson as to the emerging hypomania in the 3 months prior to her seeing Ms Darmanin) it is not suggested that Ms Darmanin was exhibiting symptoms of mania or hypomania in the period July-August when the property seems to have been marketed and sold (it having a 3 month settlement date according to Ms Damanin and the completion date being October 2007).

76 More relevantly, however, what Mr Crossland’s cross-examination of Mr Anastasiadis did cast doubt on was his evidence that Ms Darmanin had been ‘actively involved’ in negotiating the commission in relation to the sale (something Ms Darmanin denied). With respect to Mr Anastasiadis, it seems as if there was hardly any “negotiation” of the commission at all, at least if negotiation is used in the sense of parties making offers and counter offers. When pressed on this issue, it became apparent that the low rate of commission (favourable to the vendor), which was the very feature of the sale which enabled Mr Anastasiadis to recall the transaction out of the many in which he was involved over and since that period, was one which Mr Anastasiadis was happy to offer in order to increase the agency’s listings in the area and the only negotiation as such seems to be that he put forward a lower figure by way of commission than he ordinarily would have done and this was accepted. Even treating ‘negotiation’ as an imprecise use of language (and assuming that what he may more likely have meant was ‘discussion’), Mr Anastasiadis could not point to any real discussion of the commission with Ms Darmanin. Therefore I place no weight on his evidence that Ms Darmanin had ‘actively’ negotiated the commission (though I do not think that Mr Anastasiadis’ evidence on this issue casts doubt on the balance of his evidence – it seemingly being a product of being focussed on his own perceptive of events in this regard).

77 Mr Anastasiadis also recalled that Ms Darmanin had been firm in the price she wanted for the property. However, I place little weight on that factor since it is by no means clear whether, even if she had demonstrated a firmness in this regard, this was something impressed upon her by others such as the Cowans or Dr Zafiropoulos or was indicative of her mental capacity.

78 I accept Mr Anastasiadis’ evidence that Ms Darmanin had told him on one occasion (when he was seeking instructions as to an amount offered for the property) that she wanted to speak to her employer (someone whose name he did not recall though he remembered it was a Greek sounding name). Mr Anastasiadis’ recollection is that after the initial telephone call and meeting at which Mrs Cowan was present he did not meet or deal with her at all. That evidence seems to me to be consistent with the faith Ms Darmanin placed in Dr Zafiropoulos (‘he knows everything about my life’ – para 14 affidavit) and some discussion was broadly conceded by Ms Darmanin in the witness box. The relevance of this is that it indicates that, at least in relation to the sale, Ms Darmanin was not wholly reliant on Mrs Cowan or her husband (nor can she have been “heavily reliant” on them if she was seeking final approval or advice from Dr Zafiropoulos).

79 Finally, although it was suggested that Mr Anastasiadis would be expected to have difficulty remembering this out of all the transactions in which he had been involved over the relevant time, I accept that the lower commission rate is something that might well have caused Mr Anastasiadis to remember this transaction. I note that he also recalled Ms Darmanin saying that she needed to sell the property because of debts, which strikes me as information of a kind a real estate agent might be more likely to remember (since it might have had an impact on the sale he or she might need to achieve and/or on the attitude the vendor might have to prospective offers). Mr Anastasiadis was not challenged on that aspect of his evidence.

80 Ms Darmanin’s evidence was that she was undecided as to whether to sell the Gymea property up until the time that she signed the contract (and that this was why the real estate agent had brought the papers to her work place to sign). (If so, this seems inconsistent with there being any binding arrangement or agreement in place in relation to the cottage at this stage other, perhaps, than one which gave Ms Darmanin the option whether or not to proceed.) Had Ms Darmanin been as heavily reliant as she claims on the Cowans for emotional and/or practical support at this stage, one would have expected Ms Darmanin to have told Mr Anastasiadis that she needed to confer with the Cowans (not her employer) in relation to the final sale price.

Jones v Dunkel inference

81 I note that Mr Ward submitted that I should draw an adverse inference from the failure of Ms Darmanin to adduce evidence from Dr Zafiropoulos (Ms Darmanin’s response to questions as to his availability being that he was in Sydney but that he had enough problems of his own and that he was in and out of court – a rather cryptic explanation). In response, Mr Crossland submits that no Jones v Dunkel inference should be drawn since there were numerous lay witnesses to speak to the outward appearance of Ms Darmanin’s mental state.

82 A Jones v Dunkel inference ([1959] HCA 8; (1959) 101 CLR 298, at 312, 320–321) is open to be drawn in relation to an unexplained failure to call evidence in relation to a particular issue (such as Ms Darmanin’s mental state) only if the evidence otherwise before the court is sufficient to give rise to an inference as to a matter which calls for explanation by her. The rule in such a case would permit evidence in relation to that matter to be given greater weight, and an inference or inferences more readily to be drawn, when the party who might have called evidence to the contrary has chosen not to do so (see Davies AJA in Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572; HML v R [2008] HCA 16; (2008) 235 CLR 334; (2008) 245 ALR 204, at [302]; [303]; Brandi v Mingot (1976) 12 ALR 551, at 559-60; Jones v Dunkel;Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181, at 197). Thus in Commonwealth of Australia v McLean (1996) 41 NSWLR 389 (although see the unreported version of this judgment as it was not reported entirely, NSWCA, 31 December 1996), Handley and Beazley JJA noted that the rule typically applies to strengthen or weaken an inference otherwise available on the evidence, for the benefit of the party not in default.

83 I such an inference arises it permits the court to infer that the uncalled evidence or missing material would not have assisted the party in question, not that the uncalled evidence was in fact damaging to his or her case. Thus it allows for the more ready acceptance of evidence which might have been contradicted (but which was not).

84 Here, I accept that there is evidence from a number of lay witnesses as to their observation of Ms Darmanin’s mental condition, as well as evidence from Ms Easson, and that whatever Dr Zafiropoulos might have said as to his observation of Ms Darmanin’s mental health it is not likely to have taken the matter much further than the other lay witnesses’ evidence.

85 However, what Dr Zafiropoulos would have been well placed to answer is the evidence of Mr Anastasiadis to the effect that Ms Darmanin had said she needed to consult with him in relation to the sale price. That is evidence which, if disputed by Ms Darmanin, one might have expected her to adduce from her employer (who she says was so familiar with her life and her financial commitments). There was evidence as to an unsuccessful attempt by the solicitors acting for the Cowans to speak with the dentist. Ms Darmanin’s account of why he was not there to give evidence was rather cryptic (“He has got his own issues at the moment” T12.50; “He is in and out of court as well at the moment” – T13.32).

86 In the circumstances, it seems to me that there is nothing to contradict Mr Anastasiadis’ evidence as to the conversation with Ms Darmanin in which she mentioned her employer as someone with whom she would have to speak in relation to the final sale price and that it would have been open to Ms Darmanin to call Dr Zafiropoulos to refute the suggestion that she had turned to him for some form of advice or recommendation had that been incorrect. (Ms Darmanin herself appeared to concede that she had discussed the final sale price with her employer – saying “The reason why I discussed it with my boss is I was so unwell that the real estate agent actually came to my work to ask me to sign it… that’s why I spoke to my boss because they were actually at my work to sign the paperwork” – T 15.50.)

87 I would thus draw a Jones v Dunkel inference to the effect that Dr Zafiropoulos could not have assisted Ms Darmanin’s case and therefore that Ms Darmanin did at least discuss with her employer the final offer made for the purchase of her Gymea property (and thus I am not satisfied that Ms Darmanin has established heavy reliance, let alone that she was wholly reliant, on the Cowans for advice or support in that regard). What I cannot draw from the absence of any evidence from Dr Zafiropoulos is an inference as to what advice he may or may not have given during that discussion or as to how often Ms Darmanin may have discussed the proposed sale with him. Nevertheless, the limited inference that I think can and should be drawn casts real doubt on the assertion of Ms Darmanin that she was under pressure from the Cowans to sell the Gymea property (in the witness box she said “I am sure if I wasn’t put under pressure it wouldn’t have ever been sold” – T16.8). This seems to me again to bear the hallmark of exaggeration on Ms Darmanin’s part.

88 I should also note that although there was evidence from Dr Roberts as to what conclusion one might draw as to Ms Darmanin’s state of mental health (or that of someone suffering from bipolar disorder) by reason of the fact that she was employed by Dr Zafiropoulos over the period through to October 2007, ultimately I do not draw any inference from the fact of Ms Darmanin’s employment over this period (other than to infer that she cannot have been in as zombie-like a state at that time since at the very least she was capable of attending the dental surgery during her work hours).

Conclusion as to circumstances of Gymea sale

89 While I am not satisfied that the decision to sell the Gymea property was one made solely in reliance on the offer made by Mrs Cowan and nor do I accept that it was one made at Mrs Cowan’s initial suggestion or behest, I accept that the decision to sell the Gymea property was made by Ms Darmanin in the knowledge that there was an option of residing on the Glenorie property in a caravan or portable home if Ms Darmanin chose to take up that option down the track.

90 I am not satisfied that Ms Darmanin was put under any pressure by the Cowans to sell the Gymea property; nor am I satisfied that this was their idea. I think the far more likely explanation is that Ms Darmanin realised that she would have difficulty meeting her mortgage payments if she continued to be too unwell to work and that she sought assistance from the Cowans to arrange the sale.

91 Nor am I satisfied that Ms Darmanin had no one advising her other than the Cowans in relation to the sale (as she has asserted). Further, I note that although Ms Darmanin emphasised in the witness box that but for the pressure she would not have sold her home, it is not the sale of the Gymea property with which Ms Darmanin now takes issue – rather, it is the fact that the net proceeds were used to build a cottage the benefit of which is not now available to Ms Darmanin as a practical matter unless she is able to relocate the cottage to another block of land.

Completion of Gymea sale

92 The property was sold with completion taking place in October 2007. The net proceeds of sale received on completion by Ms Darmanin were in the order of $78,000. It seems to me that it is not until around this time that the final decision by Ms Darmanin to proceed with the cottage can logically be said to have been made – in the sense that there does not seem to have been anything to commit Ms Darmanin to the construction of the cottage until after the proceeds of sale had been received, by which time Ms Darmanin had been well enough to have worked for Dr Zafiropoulos for some time since her depressive episode in April/May 2007 (albeit on a part time basis and noting that Ms Darmanin said her work had not been satisfactory – T 13) and at which stage Ms Darmanin would have had at least one alternative accommodation option (namely renting a property for some time). (I note that she had formerly shared accommodation with Mr Blackmore and that such an option might have been available as well.)

93 I consider it likely, having regard to Dr Roberts’ evidence, that Ms Darmanin would not have been perceived by lay persons, such as the Cowans, in October 2007 as being as unwell as she was in April/May 2007 when she was, in Mrs Cowan’s words, in a dazed and stupefied state.

Terms of the arrangement re cottage

94 The critical issue in this case (on both of the ways in which Ms Darmanin pleads her claims) is what were the terms of the arrangement pursuant to which Ms Darmanin then took up residence with the Cowans. Leaving aside whose suggestion it was that Ms Darmanin should sell the Gymea property in the first place (though my conclusion is that it was more likely to have been Ms Darmanin’s), and accepting that both sides agree that the initial offer was that Ms Darmanin could reside on the Glenorie property in a caravan or portable home, how is it said that the more complicated tenancy agreement asserted by Ms Darmanin originated?

95 Ms Darmanin’s account seems to be that, at or about the time of the initial suggestion, Mr Cowan said that he did not like the thought of a portable home or caravan and suggested a cottage (para 23(g) of her affidavit). I have indicated above the difficulty I have accepting that Mr Cowan made any such suggestion. However, the agreement as pleaded (one which it is alleged was made in mid 2007) goes further than this and includes an arrangement by which the period of occupation is determined by reference to a notional rent calculation. There is nothing at around this time at around this time to suggest that anyone had raised the question of a notional rental for a structure the design of which had not yet been considered in any detail and which had not then been built. Ms Darmanin deposes in para 23(p) of her affidavit of 13 August 2009 to a conversation to the following effect:

I had a conversation with Simone in which she said words to the effect: 'You will spend $X on the house so let us say you can live in for 8 years rent-free. You can think of the money spent on the house as rent in advance' . (my emphasis)

96 This statement of Mrs Cowan, said to have been accepted or relied upon by Ms Darmanin, gives rise to the alleged agreement on which Ms Darmanin bases her contractual and that Mr Crossland submits is unconscionable (T 144).

97 At the outset, even if such a statement was made it is by no means apparent to me that a person to whom that statement was made would have understood it to be a promise to permit that person to live on the property until a notional rent equalled the amount expended on the cottage. On its face, a statement of this kind seems to be indicating that if Ms Darmanin stayed on the Glenorie property, and was not paying the rent which she would otherwise have had to do had she rented elsewhere, then after a period of occupation she would be in no worse position than if she had paid rent elsewhere (an advantage to Ms Darmanin assuming she then retained the asset to sell or relocate) and thus she could ‘think’ of the money spent building the cottage as equivalent to the rent she would otherwise have had to spend if she had lived elsewhere; in effect a notional amortisation of the cost of the cottage.

98 Significantly, even on Ms Darmanin’s version of the conversation, there was no particular value placed on the amount to be expended on the cottage (it being referred to as $X) or as to the likely rental amount to be assumed for the purposes of the calculation (or how either of those figures were to be determined) even though they were to form an essential part of the calculation of how long she could remain on the property. Nor was there any discussion apparently as to a cap on the expenditure to be factored into the equation. Therefore, on Ms Darmanin’s version of the agreement there would be no way of knowing in advance of completion of the cottage just how long Ms Darmanin was to be permitted to reside there rent-free or when the Cowans were to have sole use and entitlements to the cottage.

Browne v Dunn

99 Mr Crossland submits that on an issue as important as this conversation, if Ms Darmanin’s account were not to be accepted, Mr Ward should have put to Ms Darmanin that this was evidence which should not be accepted and thus given her an opportunity to explain her affidavit evidence. Mr Crossland submits that, as Ms Darmanin was not cross-examined on this issue, her account of the conversation as set out in paragraph 23(p) of her affidavit account should stand (T 143.35; T 144.4).

100 True it is, from my review of the transcript and my recollection of the cross-examination, that Ms Darmanin was not expressly taken to this sub-paragraph in cross-examination and it was not expressly put to her that this account was mistaken or untrue. However, the terms on which Ms Darmanin occupied the cottage (and whether it was pursuant to a binding agreement) were clearly in issue. As noted earlier, the evidence as to conversations regarding the possibility of Ms Darmanin living (whether in a cottage, relocatable home or caravan) on the Glenorie property is that they largely (if not solely) occurred before completion of the sale of the Gymea property. The conversations are variously described as occurring in mid 2007 and as late as September 2007 (and, according to Mrs Cowan, after the sale of the plaintiff’s house in Gymea there was another conversation regarding Ms Darmanin coming to stay on the Cowan’s property).

101 Insofar as any weight can be placed on the order in which the events are set out in paragraph 23 of Ms Darmanin’s 13 August 2009 affidavit, reference is made to representations made in mid October 2007, i.e. before the settlement of the Gymea property (specifically in subparagraphs (f), (g)), then there is a reference to the sale of the Gymea property in October 2007 (at subparagraph (n)), before Ms Darmanin then (in subparagraph (p)) refers to the alleged conversation regarding the 8 years rent-free and thinking of the expenditure of money as rent in advance.

102 Representations to the effect of Ms Darmanin’s ability to live on the property rent-free for 8 years are particularised at subparagraph (b) and (c) of paragraph 18 of Ms Darmanin’s Amended Statement of Claim. However, there is no pleading of any representation to the effect that the expenditure on the home could be considered as “rent in advance”. (I note that paragraph 20(c) of the Amended Statement of Claim does contain an allegation as to the Cowans having directed how the proceeds of sale of the Gymea property should be spent but there is no mention that such expenditure was in lieu of or referable to rent. There is a reference in the particulars at paragraph 25 to the fact that the Cowans encouraged Ms Darmanin to believe that at the time that she agreed to expend such sums on the house, she would be able to live on the property – but again no mention of a belief that such expenditure was referable to a rent-free period.) Further, there is no express mention in the Amended Statement of Claim of any representations made after the completion of the Gymea property sale in or after October 2007.

103 In the Amended Defence, relevantly, paragraphs 18(b) and (c) are denied, as is paragraph 30. In Mrs Cowan’s affidavit of 24 May 2010, Mrs Cowan refers (at paragraph 16) to a conversation on or about September 2007 regarding Ms Darmanin coming to live on the property which occurred after the sale of the Gymea property (see also her affidavit dated 1 September 2009, placing this conversation in September/October after the sale of the Gymea property – paragraph 8; and affidavit dated 29 September 2009, at paragraph 8). Likewise, Mr Cowan refers to conversations on the same topic occurring in October 2007 (at paragraph 7 of his affidavit of 29 September 2009 and paragraph 6 of his affidavit of 20 May 2010).

104 In her affidavit of 1 September 2009, Mrs Cowan deposes that paragraph 23 of Ms Darmanin’s affidavit of 13 August 2009 is “simply not correct” and that the words attributed to her and her husband are not correct (paragraph 54) (see also paragraph 38 of her affidavit of 29 September 2009 to the same effect).

105 In her affidavit of 24 May 2010, Mrs Cowan (at paragraph 53) addresses sub-paragraph 23(p) of Ms Darmanin’s 13 August affidavit and states ”I specifically deny the assertions at paragraph 23(p) that it was asserted that large amounts of monies were to be taken from the residue of the plaintiff’s sale of her town house”.

106 In a short written submission served prior to the hearing (“Statement of Real Issues”), Mr Ward foreshadowed the Cowans’ submission that there are “multiple conflicting affidavits” and questioned whether Ms Darmanin could be believed on any significant point on her evidence. In another document provided prior to hearing, titled “Outline of Defendant’s submissions”, Mr Ward submits that the affidavits of Ms Darmanin and the facts alleged within them have been “significantly contradicted” by the evidence of the Cowans’ and other independent parties.

… [P]roprietary rights fall to be governed by principles of law and not by some mix of judicial discretion … , subjective views about which party ‘ought to win’ … and ‘the formless void of individual moral opinion’ … Long before Lord Seldon’s anachronism identifying the Chancellor’s foot as the measure of Chancery relief, undefined notions of ‘justice’ and what was ‘fair’ had given way in the law of equity to the rule of ordered principle which is of the essence of any coherent system of rational law. The mere fact that it would be unjust or unfair in a situation of discord for an owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other …

315 Finally, the lack of any benefit (as I have found) to the Cowans as a result of the transaction makes it difficult to see any unconscientious advantage taken of Ms Darmanin’s special disadvantage for the purposes of the Amadio doctrine.

316 Mr Crossland, in closing submissions, referred to the decision of Forster J in Frances Madge Johnson by her tutor Karen Elisabeth Smith v Andrew Robert Stuart Johnson [2009] NSWSC 503, as authority for the proposition that a finding of unconscionability or undue influence could still be made irrespective of the good intentions on the part of the defendants (T 159.42). In Johnson, Forster J had made a finding that the defendant had acted unconscionably and that there was presumed undue influence. The fact that the defendant acted according to what he thought subjectively to be in the best interests of the plaintiff, did not detract from such a finding (at [97]; [99]). However, there is a distinction between having good intentions and deriving a benefit from the transaction. The lack of unconscientious conduct in this case can be seen from the lack of any benefit to the Cowans, irrespective of the bona fides of their intentions. In Johnson, Forster J also found that the defendant had acted in his own interest when procuring the plaintiff to sign the cheques that resulted in the transfer to them of the $540,000 (at [99]).

317 I find that there has been no unconscionability on the part of the Cowans in this case.

Undue Influence

318 The doctrine of undue influence, though similar to that of unconscionability in the Amadio sense, is a distinct doctrine and must be separately considered. In Amadio (at 461) Mason J distinguished unconscionable conduct from undue influence in these terms:

In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.

319 Deane J in Amadio, (at p 474) identified the difference in the nature of the two jurisdictions:

Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party ... Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so.

320 In Louth v Diprose, Brennan J (after citing from the decisions of Deane J and Mason J above in Amadio) went on to state:

Although the two jurisdictions are distinct, they both depend upon the effect of influence (presumed or actual) improperly brought to bear by one party to a relationship on the mind of the other whereby the other disposes of his property. Gifts obtained by unconscionable conduct and gifts obtained by undue influence are set aside by equity on substantially the same basis. In White and Tudor's Leading Cases in Equity ((7) 9th ed. (1928), vol.1, pp 203ff), the notes to Huguenin v. Baseley ((8) [1807] EngR 397; (1807) 14 Ves Jun 273 (33 ER 526).) treat the principle applied in cases of unconscionable conduct as an extension of the principle applied in cases of undue influence ((9) White and Tudor, op cit, p 227; founded on Dent v. Bennett (1839) 4 My. and Cr.269, at p 277 [1839] EngR 434; (41 ER 105, at p 108); Smith v. Kay [1859] EngR 38; (1859) 7 HLC 750, at p 779 [1859] EngR 38; (11 ER 299, at pp 310-311).):

"The principle upon which equity will give relief as against the persons standing in (the categories of confidential) relations to the donor, will be extended and applied to all the variety of relations in which dominion may be exercised by one person over another."

The ground for setting aside a gift obtained by unconscientious exploitation of a donor's special disadvantage, as explained in Amadio, can be compared with the ground for setting aside a gift obtained by undue influence, as explained by Dixon J. in Johnson v. Buttress ( (10) [1936] HCA 41; (1936) 56 CLR 113, at p 134.):

"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." (Emphasis added.)

The similarity between the two jurisdictions gives to cases arising in the exercise of one jurisdiction an analogous character in considering cases involving the same points in the other jurisdiction.

321 Undue influence cases fall into two classes - those where undue influence will be presumed from a relationship, thus throwing the burden of rebutting the presumption upon the party benefiting from the transaction, and those where undue influence must be affirmatively proved. Other than those relationships where a presumption of undue influence will arise simply by reason of the nature of the relationship itself (such as solicitor/client or parent/child) a presumption of undue influence will arise where it is proved that the party benefiting from the transaction occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependency or trust on the latter’s part (Johnson v Buttress (1936) 56 CLR 113, at 119, 134, per Dixon J).

322 In Johnson v Buttress, Latham CJ at 119 said:

The jurisdiction of a court of equity to set aside gifts inter vivos which have been procured by undue influence is exercised where undue influence is proved as a fact, or where, undue influence being presumed from the relations existing between the parties, the presumption has not been rebutted. Where certain special relations exist undue influence is presumed in the case of such gifts. These relations include those of parent and child, guardian and ward, trustee and cestui que trust, solicitor and client, physician and patient and cases of religious influence. The relations mentioned, however, do not constitute an exhaustive list of the cases in which undue influence will be presumed from personal relations. Wherever the relation between donor and donee is such that the latter is in a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter, the presumption of undue influence is raised (Dent v. Bennet (1839) 4 My & Cr 269; 41 ER 105 ; see also Smith v. Kay (1859) 7 HLC 750; 11 ER 299 ).
Where such a relation of what may be called, from one point of view, dominion, and from another point of view, dependence, exists, the age and condition of the donor are irrelevant so far as raising the presumption of undue influence is concerned. It must be affirmatively shown by the donee that the gift was (to use the words of Eldon L.C. in the leading case of Huguenin v. Baseley (1807) 14 Ves Jun Supp 372; 34 ER 1138) "the pure, voluntary, well-understood act of the mind" of the donor. (my emphasis).

323 The relationship of dependency was described by Sir Anthony Mason (writing about the doctrines of undue influence and unconscionable dealing in Mason A, 'The Impact of Equitable Doctrine on the Law of Contract' (1998) 27 Anglo-American Law Review 1) as a class 2B relationship (using the terminology adopted by the English Court of Appeal in Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 23):

My understanding of undue influence, not altogether fashionable in the light of modern English decisions, is that it denotes an ascendancy by the stronger party over the weaker party such that the relevant transaction is not the free, voluntary and independent act of the weaker party ( Commercial Bank of Australia Ltd v. Amadio (1983) 151 CLR 447 at 461,474). In other words, it is the actual or presumed impairment of the judgment of the weaker party that is the critical element in the grant of relief on the ground of undue influence (See Peter Birks and Chin Nyuk Yin, On the Nature of Undue Influence, Ed. J. Beatson and D. Friedmann, "Good Faith and Fault in Contract Law" 57 et seq.). … In these relationships, called class 2A relationships in Barclays Bank plc v. O'Brien ([1994] 1 AC 180 at 189), the weaker party, dependent on the stronger party, is not likely to bring to bear a free, voluntary and independent judgment to a transaction involving the parties to the relationship, whether it is a contract or a gift. Class 2A relationships are to be distinguished from class 2B cases where a de facto relationship of trust and confidence will raise a presumption of undue influence. (my emphasis).

324 Here the pleading asserts that the agreement was procured by undue influence but, having regard to the pleaded relationship of dependency on the Cowans, it seems that what is invoked in the present case is the class of presumed undue influence.

325 In On Equity, the learned authors (at [5.390]) express the view that, for a presumption of undue influence to arise, not only must there be a relationship of ascendancy or trust, reliance or confidence but the value of the property transferred or the transaction entered into must, having regard to the transferor’s circumstances, be so substantial or the transaction so improvident that it cannot be explained on the grounds of friendship, relationship, charity or other ordinary motives on which ordinary persons act (there citing Whereat v Duff; Quek v Beggs (1990) 5 BPR 11,761 (NSW SC); Allcard v Skinner, at 185; Goldsworthy v Brickell [1987] Ch 378, at 400-401). The authors state that if the transaction is not one as so described it will be necessary to for actual undue influence to be established (Nattrass v Nattrass [1999] WASC 77, at [109]).

326 In Allcard v Skinner, Lindley LJ indicated that a presumption will arise only where the transaction is ‘so large as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary men act’.

327 It is by no means clear that this is a case in which the relationship between Ms Darmanin and the Cowans was one of sufficient dependency as to give rise to a presumption of undue influence. While I accept that Ms Darmanin was suffering from a mental disorder, and indeed the disability this occasioned her seems to have been the impetus for the suggestion that she stay with the Cowans in the first place, I am not satisfied that (with the exception of the initial short period when Ms Darmanin was in a dazed and stupefied state), Ms Darmanin was in a position where she relied and depended upon the Cowans in such a way that it can be presumed that she was not likely to bring to bear a free, voluntary and independent judgment to a transaction involving the parties to the relationship. (Indeed during the course of construction of the cottage there were periods of conflict in which Ms Darmanin showed herself to be more than capable of bringing an independent mind to bear and to make decisions independently of, and contrary to the wishes of, the Cowans.)

328 As to the size and improvidence (if any) of the impugned transaction (to the extent that this is a factor indicating that a relationship of undue influence existed, I note that although the arrangement ultimately consumed all the net proceeds of sale of Ms Darmanin’s Gymea property that would not necessarily have been the case had Ms Darmanin not increased the size and fittings of the cottage. However, even accepting that the arrangement was of a substantial amount having regard to Ms Darmanin’s assets, I am not satisfied that it was so improvident as to point to the existence of a relationship where a presumption of undue influence would arise.

329 (In saying this I note that the improvidence of the transaction is neither a necessary nor a sufficient requirement for either of the doctrines of unconscionability or undue influence to operate, and the absence of improvidence will not be a defence to a claim based on unconscionability or undue influence.)

330 In Amadio, Deane J stated (at 475):

In most cases where equity courts have granted relief against unconscionable dealing, there has been an inadequacy of consideration moving from the stronger party. It is not, however, essential that that should be so (see Blomley v. Ryan (1956) 99 CLR, at p 405 ; Harrison v. National Bank of Australasia Ltd. (1928) 23 Tas LR 1 ; but cf. Lloyds Bank v. Bundy (1975) 1 QB 326, at p 337 and Cresswell v. Potter (1978) 1 WLR 255, at p 257 ). Notwithstanding that adequate consideration may have moved from the stronger party, a transaction may be unfair, unreasonable and unjust from the view point of the party under the disability. An obvious instance of circumstances in which that may be so is the case where the benefit of the consideration does not move to the party under the disability but moves to some third party involved in the transaction.

331 In relation to an allegation of undue influence, it would seem that the improvidence or otherwise of the transaction is relevant not only to the question whether a presumption of undue influence arises in the first place but also to whether any such presumption has been rebutted. Of course, as observed by the authors of Meagher, Gummow and Lehane’s Equity Doctrines and Remedies, 4th edn, Butterworths, 2002 (at [15-020]), the jurisdiction to intervene on the basis of undue influence is not based upon mere inadequacy of consideration, the improvidence of the transaction or the inequality of bargaining power, “as equity mends no man’s bargain” (there citing Maynard v Moseley (1676) 3 Swan 651, at 655; Allcard v Skinner, at 157-158; Brusewitz v Brown [1923] NZLR 1106, at 1109-10).

332 Where the transaction is otherwise one that has been made for full or fair value, it seems unlikely that the facts will give rise to the existence of a presumed case of undue influence and instead the party seeking to set the transaction aside will have to prove there was in fact undue influence exercised. In Watkins v Combes (1922) 30 CLR 180, at 193-194, Isaacs J stated:

But, ... more than mere influence must be proved so as to render influence, in the language of the law, `undue.' It must be established that the person in a position of domination has used that position to obtain unfair advantage for himself, and so to cause injury to the person relying upon his authority or aid. (my emphasis)

333 Conversely, the degree of improvidence of the transaction may indicate the existence of undue influence.

334 In the present case, it does not seem to me that the nature of the arrangement was inherently improvident. This was not a situation of the kind considered in Hartigan v International Society for Krishna Consciousness Incorporated where the gift (being the transfer of proceeds of sale of the plaintiff’s only asset) could not be explained by ordinary human motivations of generosity, charity or religious feeling, and was so extraordinarily improvident as itself to call for consideration of the circumstances and state of mind which had led the plaintiff to make it (at [37]). Nor was it an arrangement from which the Cowans obtained any benefit.

335 In Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2007] NSWSC 12, Barrett J (after considering the passage from Isaacs J in Watkins v Combes) went on to say (at [136])

Central here is a concept of “unfair advantage” to the person exerting influence and “injury” to the person upon whom the influence is brought to bear.

336 In that regard, the lack of any benefit to the Cowans seems to me to point against the presumption of any undue influence on their part.

337 In passing I note that the question whether it is necessary that the improvidence of the transaction be established before the presumption will apply, as opposed to being relevant only to rebutting the presumption once established, was considered in England, in Royal Bank of Scotland v Etridge (AP) [2001] UKHL 44 where Nicholls LJ said (at [21]):

As already noted, there are two prerequisites to the evidential shift in the burden of proof from the complainant to the other party. First, that the complainant reposed trust and confidence in the other party, or the other party acquired ascendancy over the complainant. Second, that the transaction is not readily explicable by the relationship of the parties.

…The need for this second prerequisite has recently been questioned: see Nourse LJ in Barclays Bank Plc v Coleman [2001] QB, 20, 30-32, one of the cases under appeal before your Lordships' House. Mr Sher QC invited your Lordships to depart from the decision of the House on this point in National Westminster Bank Plc v Morgan [1985] AC 686.

My Lords, this is not an invitation I would accept. The second prerequisite, as expressed by Lindley LJ, is good sense. It is a necessary limitation upon the width of the first prerequisite. It would be absurd for the law to presume that every gift by a child to a parent, or every transaction between a client and his solicitor or between a patient and his doctor, was brought about by undue influence unless the contrary is affirmatively proved. Such a presumption would be too far-reaching. The law would out of touch with everyday life if the presumption were to apply to every Christmas or birthday gift by a child to a parent, or to an agreement whereby a client or patient agrees to be responsible for the reasonable fees of his legal or medical adviser. The law would be rightly open to ridicule, for transactions such as these are unexceptionable. They do not suggest that something may be amiss. So something more is needed before the law reverses the burden of proof, something which calls for an explanation. When that something more is present, the greater the disadvantage to the vulnerable person, the more cogent must be the explanation before the presumption will be regarded as rebutted . (my emphasis)

338 The relevant decision to enter into the arrangement in relation to the cottage is one which I find was not made during the period in which Ms Darmanin was in a zombie-like state but at a time after that, when Ms Darmanin had outwardly recovered somewhat from her depressive illness and had returned to work (and was able to have regard to advice other than that emanating solely from the Cowans). I find that there was not a sufficient relationship of dependency at the relevant time (nor was this a sufficiently improvident transaction or indeed one which benefited the Cowans) such as to give rise to the presumption of undue influence. Nor do I find that there has been any actual undue influence exerted by the Cowans.

339 If there had been found to be a sufficient relationship of dependence such as to give rise to the presumption of undue influence, the law would require that persons in the position of influence (ie on this hypothesis) the Cowans) positively justify the retention of any benefit conferred on them, namely to show that the gifts conferred on them were the independent and well understood acts of a man in a position to exercise a free judgment based on information as full as the donee.

340 It is not necessary for there to have been an actual use of influence for the purpose of obtaining the benefit; ie that undue influence be proved as a fact. Rather, as Asprey JA in Whereat v Duff (1973) 1 ALR 363; (1973) 47 ALJR 540, says (at 167):

… where the relations between the donor and the donee have at, or shortly before, the making of the gift been such as to raise a rebuttable presumption that the donee had an undue influence over the donor. … the court sets aside the gift unless the donee rebuts the presumption. The court does not act on the ground that any wrongful act has been committed by the donee, but on the ground of public policy and to prevent the relations which existed between the parties and the influence arising therefrom being abused: Allcard v. Skinner (1887) 36 Ch D 145 at 171 (my emphasis)

341 Thus in Allcard v Skinner (1887) 36 Ch D 145; [1886-90] All ER Rep 90 it was said that once the facts are established from which the court will infer that a situation exists where undue influence may have been exerted, then the presumption arises and the onus then falls upon the donee to rebut the presumption by proving that “in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gift was the result of a free exercise of the donor's will”.

342 In On Equity, (Young, Croft and Smith, Lawbook Co, 2009) it is said that, to rebut a presumption of undue influence, it is necessary to show that the transfer was the independent, well understood act of a person exercising free judgment (citing Johnson v Buttress, at 134) and that, in transferring the property (or conferring the benefit for that matter) the transferor was acting independently of the influence of the relevant person (citing Watkins v Combes (1922) 30 CLR 180). Even if the reasonableness of the transaction does not prevent the presumption from arising, it will be relevant to rebutting the presumption, as explained by Isaacs J in Watkins v Combes.

343 As Deane J noted in Amadio (at 423) when undue influence is raised, one looks to the quality of the consent or assent by the weaker party. The question at the heart of the doctrine is not whether the intention in fact existed but how that intention was produced (Huguenin v Baseley (1807) 14 Vesey Jnr 273 at 300, 33 ER 526, at 536; Hartigan v International Society for Krishna Consciousness Incorporated [2002] NSWSC 810, at [27]; [29]), that is whether the intention was one formed by the weaker party’s own free and independent exercise of will.

344 Given the finding I have made that no presumption of undue influence arose it is not necessary to make any further finding. Had it been necessary I would have found that any such presumption was rebutted in circumstances where I find that the decision to accept the Cowans’ offer was made at a time when there was no dominance by the Cowans of her will but that where Ms Darmanin had exercised her own judgment (whether that be ill advised or otherwise) and where there was no benefit as such to the Cowans and hence nothing ‘undue’ in the sense considered above.

Conclusion

345 For the reasons set out above, I am of the view that there was no binding legal agreement as alleged between the parties (and hence the Contracts Review Act claim fails); that there was no Amadio unconscionability or undue influence exerted by the Cowans and hence the remaining bases of the contractual claim fail; and that the Cowans have obtained no benefit from the arrangement (let alone any benefit which it would be unconscionable for them now to retain). The claims by Ms Darmanin thus fail and the appropriate order is to dismiss the proceedings with costs.

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