Freeman v Brown

[2001] NSWSC 1028

CITATION:	Freeman v Brown [2001] NSWSC 1028
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 1595/01
HEARING DATE(S):	28/06/01, 29/10/01, 30/10/01, 31/10/01
JUDGMENT DATE:	5 December 2001
PARTIES :	Keith Edward Freeman by his tutor the Protective Commissioner of NSW - Plaintiff Peter Brown - Defendant
JUDGMENT OF:	Barrett J

COUNSEL :	Mr C.G. Grant - Plaintiff Mr V. Stefano - Defendant
SOLICITORS:	Connery & Partners - Plaintiff Stormers Solicitors - Defendant
CATCHWORDS:	EQUITY - Undue influence - unconscionable dealing - intervention by equity even though consideration adequate and affected party gave consent - party affected by significant intellectual impairment, social dysfunction and alcoholism - other party's knowledge thereof - features of transaction and circumstances from which disability must have been realised - EQUITY - remedies - restitution - gain realised by perpetrator of equitable wrong must be restored to victim - certain counter-balancing benefits and detriments may lie where they fall - CONTRACTS - harsh and unconscionable contracts and statutory remedies - contract measured against each relevant statutory criterion and against combination
LEGISLATION CITED:	Contracts Review Act 1980
CASES CITED:	Alati v Kruger (1955) 94 CLR 216 Amcor Ltd v Watson (2000) Aust Contract R 90-110 Baburin v Baburin [1990] 2 Qd R 101 Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 Blomley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Ferrari Investments (Townsville) Pty Ltd v Ferrari [2000] 2 Qd R 359 Louth v Diprose (1992) 175 CLR 621 Maguire v Makaronis (1997) 188 CLR 449 Quek v Beggs (1990) 5 BPR 11,761 Spencer v The Commonwealth (1907) 5 CLR 418 United States Surgical Corporation v Hospital Products Ltd [1983] 2 NSWLR 157
DECISION:	Refer paragraphs 87 and 88

31

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

WEDNESDAY, 5 DECEMBER 2001

1595/01 – FREEMAN v BROWN



JUDGMENT

HIS HONOUR :

1 The plaintiff, Keith Edward Freeman (whom I shall call “Mr Freeman”), seeks relief in consequence of the transfer by him to the defendant of a house property at 16 Kingsley Grove, Kingswood. The defendant’s name is Gabor Simon Raitsits. He says that he is generally known as Peter Brown. I shall refer to him as “Mr Brown”.

2 It is common ground that the property was sold by Mr Freeman to Mr Brown pursuant to a contract dated 3 May 1999 and that a conveyance of the property was effected by an instrument of transfer of the same date. Each shows a consideration of $85,000. It is also common ground that Mr Freeman signed the contract and the transfer.

The plaintiff’s claims

3 Mr Freeman, suing by his tutor, the Protective Commissioner of New South Wales, asserts that he was, to the knowledge of Mr Brown, incapable of understanding the nature of the sale transaction; also that the transaction was made by Mr Freeman as a result of the exercise of undue influence by Mr Brown. Mr Freeman also says that he was at a special disadvantage in dealing with Mr Brown because of impaired mental faculties, illness, consumption of alcohol, inexperience in business and lack of legal assistance or explanation as to the transaction and its consequences and effect upon him, so that he was unable to protect his own interests and Mr Brown unconscionably took advantage of his position.

The sale transaction

4 The facts concerning sale of the property are largely undisputed. Where there is conflict in the evidence, it is either not of great importance or may be resolved with a substantial degree of confidence.

5 Mr Brown became aware on about 26 April 1999 that the property might be for sale at a price of $85,000. He learned this from Lisa Smith, a customer of his in his pawnbroking business with whom he also had a social relationship. Upon inspection, he found the house to be in a severely damaged condition. More will be said of this later. Mr Freeman was not living there at that time, having moved to a caravan park. His sister and one or two other persons were in occupation. Mr Brown formed the view that had the house been in reasonable repair, the property might have had a value of between $110,000 and $120,000. He also estimated that it would probably cost $25,000 to make the necessary repairs. The day after his inspection, Mr Brown was introduced by Ms Smith to Mr Freeman as the owner of the house. They were introduced at Mr Brown’s pawnbroker’s shop in Penrith. Mr Brown deposes that the following conversation took place between them:

“Me: ‘Why are you selling the house?’
Keith: ‘I don’t want it anymore. I’m having too much trouble with my half sister, I just want to sell it and go bush’.”

6 Mr Brown then instructed Mr Gibson, a Penrith solicitor, to prepare a contract for the sale of the property. Mr Gibson was given the telephone number of Ms Smith who, in turn, gave him Mr Freeman’s name and address and later delivered to him a copy of the certificate of title for the property. At about 6 pm on 28 April 1999, following a conversation at Mr Brown’s shop, Mr Brown and Mr Freeman, together with Ms Smith, went to Mr Gibson’s office. Mr Gibson had already prepared a contract and transfer. In the contract, Mr Gibson was shown as the solicitor for the purchaser (Mr Brown), while Mr Freeman was shown as acting for himself. Both the contract and the transfer were signed at that time by Mr Freeman and Mr Brown, with Mr Gibson witnessing Mr Brown’s signature and Ms Smith witnessing Mr Freeman’s. In the course of that meeting, Mr Gibson ascertained from Mr Freeman that the certificate of title for the property was held for him by Messrs Lamrocks, solicitors of Penrith. Mr Gibson said that he would need this. Mr Freeman, accompanied by Mr Brown and Ms Smith, then went to Lamrocks’ office, arriving at about 6.30 pm. The office was locked but they rang the night bell and someone came to the door. When Mr Freeman asked this person for the certificate of title, he was told that everything was locked away and that a solicitor should make contact the next morning.

7 The next day, 29 April 1999, Mr Gibson prepared a form of authority for Mr Freeman to sign authorising Lamrocks to release the certificate of title to Mr Gibson. Mr Freeman signed the authority and it was delivered to Lamrocks who, later in the day, delivered the certificate of title to Mr Gibson. At or about that time, Mr Grassi, a solicitor with Lamrocks, telephoned Mr Gibson who, on the basis of what Mr Grassi told him, telephoned Mr Brown saying that he was not prepared to continue acting for Mr Brown on the purchase transaction. He confirmed this in a conversation with Mr Brown on 3 May 1999 and in a letter of that date which he sent to Mr Brown by post. I shall come back to these conversations and the letter in due course.

8 At some point after Mr Gibson had informed Mr Brown that he was not prepared to continue acting, Mr Brown arrived at Mr Gibson’s office without notice. Mr Brown demanded “the papers”. Mr Gibson says that he gave Mr Brown the contract and the transfer but, at first, retained the certificate of title. However, he felt threatened by Mr Brown whom he described as “angry and confrontational”. Eventually, on Mr Gibson’s version of events, he gave Mr Brown the certificate of title as well, thinking that, because of something Mr Brown had said on an earlier occasion, he was going to take all the papers to another Penrith solicitor, Mr Stormer. Mr Gibson says that this visit from Mr Brown occurred on 3 May 1999.

9 Mr Brown’s version of the visit differs in some respects from Mr Gibson’s. Mr Brown places the visit as having occurred on the day on which he received the telephone call from Mr Gibson in which Mr Gibson said that, because of what he had been told by Mr Grassi, he was not prepared to continue acting. That was 29 April 1999. According to Mr Brown, Mr Gibson gave him all three documents – contract, transfer and certificate of title – when asked. He denied having been “angry and confrontational” and that the certificate of title had been handed over only after he applied pressure to Mr Gibson.

10 As far as the date of Mr Brown’s visit to Mr Gibson’s office is concerned, I think it more likely that the visit took place on 29 April 1999 as Mr Brown says. It is likely that Mr Brown went there to resolve matters very soon after Mr Gibson phoned, rather than waiting until the following Monday, 3 May. This, in turn, makes more likely Mr Gibson’s account of the handing over of the documents, in that Mr Brown, having gone straight to Mr Gibson’s office after receiving the presumably unwelcome message that Mr Gibson was not prepared to act, was likely to have been at least annoyed and perhaps angry. Mr Brown says in his affidavit that he was “upset with John” (Mr Gibson) for declining to act further. Had he gone to Mr Gibson’s office several days after receiving the message, annoyance or anger arising from frustration may have subsided. Mr Brown is a large man who, in the course of cross-examination, more than once adopted a forceful and challenging attitude. There is a distinct probability that he was, as Mr Gibson deposed, “angry and confrontational” when he went to Mr Gibson’s office. Furthermore, I do not think that Mr Gibson, a solicitor of 40 years standing, would lightly hand over a document as important as a certificate of title to someone he knew not to be the party to whose account he held it.

11 Mr Brown deposes to having met with Mr Freeman and Ms Smith on two occasions on 3 May 1999 with the certificate of title, transfer and contract in his possession. The three of them lunched together. He says that Mr Freeman confirmed his desire to sell the house. He then gave Mr Freeman $500 cash as a deposit for which he obtained a receipt. Mr Brown afterwards went to the office of State Revenue at Parramatta where he paid stamp duty on the contract and transfer. He then continued on to the Land Titles Office in the city where he lodged the transfer for registration, accompanied by the certificate of title. He waited while registration was effected and received the certificate of title showing him as registered proprietor. All this happened in the course of a single day, 3 May 1999. Mr Silburn, a friend or acquaintance of Mr Brown’s and a clerk at Mr Stormer’s office, had told Mr Brown how to go about obtaining stamping and registration. Armed with that information, Mr Brown had decided that he did not need Mr Stormer to act in place of Mr Gibson.

The subsequent transactions

12 When Mr Brown thus became the registered proprietor of the property on 3 May 1999, he had paid only the $500 cash deposit given by him to Mr Freeman earlier on that day. There had been no settlement or completion, in the usual way, pursuant to the contract. Mr Freeman had not engaged in the usual process of exchanging the muniments of title and a conveyance for the price.

13 On the evening of 3 May, Mr Freeman and Ms Smith went to Mr Brown’s home by invitation. Also present was Mr Wheatley, a friend of Mr Brown’s, who had been asked by Mr Brown to come as there was a need for someone to witness a signature. This meeting had apparently been arranged by Mr Brown and Ms Smith before Mr Brown visited the Office of State Revenue and the Land Titles Office. Ms Smith had told Mr Brown that Mr Freeman wanted to invest $50,000 with him (being part of the price for the property), whereupon Mr Brown had discontinued attempts he had begun to obtain a loan of $70,000 from St George Bank.

14 When the four persons were present at Mr Brown’s home, Ms Smith produced a typewritten document headed “24 Month Investment Agreement”. This was set out in the form one might expect a solicitor to use. It contained terminology such as “in the State aforesaid”, with amounts of money stated in words followed by figures in brackets. It had an air of formality to it. The parties were Mr Freeman (whose address was given as the Lakeside Caravan Park, Windsor), Mr Brown and Ms Smith. The agreement commenced:

“This Agreement is for the investment and rollover of Fifty Thousand Dollars ($50,000.00) for a twenty four (24) month term, conditions as follows:-“

15 The tone is immediately set by clause 1:

“Lisa Smith is acting as an advisor to Keith Freeman and all matters relating to this agreement must be directed to Lisa Smith.”

16 Clauses 2 and 3 record a loan of $50,000 by Mr Freeman to Mr Brown for a term of 24 months at an interest rate of 6% per year, with the whole of the interest payable at the end of the term or, if Mr Freeman so requests, by one payment at the end of the first year and another at the end of the second. Clause 7 confers on “either party” (referring, clearly enough, to Mr Freeman and Mr Brown) a right to terminate the agreement by 60 days’ notice. In clauses 4, 5 and 6, certain arrangements with respect to interest in case of early termination are recorded: basically, that Mr Freeman would receive no interest at all if he terminated within the first year, that he would receive $3,000 plus $250 per additional month if he terminated in the second year, and that he would receive the full two years’ interest if Mr Brown terminated at any time. Clauses 8 and 9 are as follows:

“8. In the event of the death, mental disability or disappearance of Keith Freeman, all monies will be due and payable to Lisa Smith under the conditions as set out above for distribution to Keith Freeman’s estate. (in the need to prove mental disability a doctors report will be required)
9. If Clause 8 above comes to pass, then Lisa Smith will be the sole administrator of this agreement on behalf of Keith Freeman to its completion.”

The part of clause 8 in brackets has been added in handwriting identified in evidence as Ms Smith’s.

17 Mr Freeman, Ms Smith and Mr Brown all signed this document. There was provision for all three signatures to be witnessed and the words “Justice of the Peace” appeared below the line for the witness’s signature in each case. Only one of the parties’ signatures was witnessed, being that of Mr Freeman. The witness was Mr Wheatley who said in evidence that, because he is not a Justice of the Peace, he did not sign on the line provided, signing instead below Mr Freeman’s signature.

18 After the agreement had been signed, Mr Brown, according to his evidence, gave Mr Freeman $4,500 in cash and a personal cheque for $30,000. Mr Wheatley testified to having seen the cash counted out and handed over accompanied by the cheque and that Mr Freeman put the notes and cheque in his pocket. These payments, together with the $500 deposit already paid and the $50,000 covered by the 24 Months Investment Agreement accounted for the total price of $85,000. That position pertained at the end of 3 May 1999, the day on which Mr Brown caused the transfer to him to be stamped and registered.

19 Mr Brown gave evidence that four days later, on 7 May 1999, Mr Freeman and Ms Smith visited Mr Brown’s shop. Mr Freeman said that he wanted to “roll over” another $20,000 for 12 months at 6%. He handed back the cheque for $30,000 which Mr Brown had previously given him. Mr Brown tore it up. Mr Freeman asked for some more money in cash and Mr Brown gave him $1,000. Mr Freeman said, “Give $9,000 to Lisa later”. Mr Brown also testified that Mr Freeman said on two or three occasions, “It’s okay to give Lisa money on my behalf”. Ms Smith went to Mr Brown’s home at about 7.30 pm on 20 May 1999. He gave her $9,000 in cash which he had withdrawn from the bank for the purpose. Ms Smith then gave Mr Brown a handwritten document as follows:

“ Lisa Smith
90 Briens Rd,
Northmead
98904449
20-5-99
To Peter Brown
I Lisa Smith of 90 Briens [sic] have received the Sum of $9,000 Dollars in cash on Keith Freemans behalf as being his trustee and take full payment being the Balance Amount owing Peter Brown does not owe Keith Freeman or Lisa Smith any monies whatsoever Balance Paid in full except investment ongoing with Peter Brown.
(sgd) L. Smith
Peter Brown Paid $1,000 Cash being the total of $10,000 PAID IN ALL”

20 Mr Brown also gave evidence that some weeks later, Mr Freeman came to his shop and asked for more money. He says that the following conversation took place:

“Me: ‘What about the $9,000 I gave Lisa?’

Keith: ‘I didn’t get it’.

Me: ‘I did give it to Lisa’.”

21 Mr Brown then showed Mr Freeman the receipt Ms Smith had signed. Mr Freeman said:

“I believe you but Lisa didn’t give it to me. Don’t give Lisa any more money.”

22 In a police interview conducted in November 1999, Mr Freeman said that Ms Smith had not passed on to him money she had received from Mr Brown on his behalf. This police interview is referred to in paragraph 26 below.

23 Mr Brown gave evidence that Mr Freeman and Ms Smith again visited his shop on 25 August 1999 and that Mr Freeman said he wanted interest paid in advance on the $20,000 loan. Mr Brown said that he agreed to this and that Mr Freeman and Ms Smith brought to the shop a document headed “12 Month Investment Agreement”. An unexecuted copy of this is in evidence. Except as to the amount, term and frequency of interest payments it is in substantially the same form as the earlier 24 months agreement. Clause 6, corresponding with clause 8 of the earlier agreement, omits the handwritten addendum but accommodates a similar point in its different opening words:

“In the event of the death or disappearance of Keith Freeman or in the event that Keith Freeman is medically proven to be medically unfit to fulfill this agreement …”

24 Mr Brown also deposes to having paid various sums of money to Mr Freeman from time to time, including $1,200 on the day of signing the 12 months agreement and sums between $100 and $300 at subsequent times, with a receipt being obtained from Mr Freeman on each occasion. The receipts are annexed to Mr Brown’s affidavit. A list of the several payments by Mr Brown to Mr Freeman, according to Mr Brown’s evidence, is as follows:

Date Amount Nature
3 May 1999 $ 500.00 Cash deposit
3 May 1999 34,500.00 $4,500 cash plus $30,000 cheque
7 May 1999 (30,000.00) Cheque destroyed
7 May 1999 1,000.00 Cash to Mr Freeman
20 May 1999 9,000.00 Cash to Ms Smith
13 August 1999 200.00 )
25 August 1999 1,200.00 )
13 December 1999 1,500.00 )
4 January 2000 100.00 )
14 January 2000 100.00 )
25 January 2000 100.00 )
8 February 2000 100.00 )
10 February 2000 200.00 )
14 February 2000 100.00 )
22 February 2000 100.00 )
25 February 2000 200.00 ) Cash to Mr Freeman in each case
28 February 2000 600.00 )
1 March 2000 150.00 )
11 March 2000 300.00 )
14 March 2000 300.00 )
23 March 2000 $ 300.00 )
$20,550.00

Mr Freeman’s capacity

25 Mr Freeman did not give evidence. I admitted into evidence over the objection of counsel for Mr Brown medical reports to the effect that Mr Freeman would not be able to understand the nature of the court process. There was also evidence of an officer of the Office of the Protective Commissioner of recent attempts to contact Mr Freeman which warrants an inference that he is now living an itinerant life in caravan parks.

26 Admitted into evidence following a ruling by me that Mr Freeman was to be regarded as not available for the purposes of the Evidence Act were video tapes of an interview of Mr Freeman at Penrith Police Station on 27 November 1999. The interview was conducted by Detective Constable Wayne Jackson and Detective Constable Clarke. Detective Constable Jackson gave evidence to verify what transpired in the interview. A police transcript of the interview (with two pages missing) was also tendered and admitted. The interview did not concern any apprehended wrongdoing by Mr Freeman. It was directed towards eliciting information from Mr Freeman about the sale of the property.

27 A viewing of the video tapes shows that Mr Freeman was, at that time, of quite limited capacity when it comes to reading and understanding documents. He was, at one point, asked to read part of one of the documents involved in the transaction. He read aloud in a slow and halting way. He spoke in an indistinct and hesitant way. The general impression was of a person labouring under an intellectual handicap.

28 It would not be appropriate, of course, for me to rely on this general impression gained from a video interview. But an examination of the body of medical evidence amply confirms that impression. I shall not go into all the details of that medical evidence. It is sufficient to say that Mr Freeman has been diagnosed as suffering from an organic brain disorder, with significant symptoms of psychosis and cognitive impairment. His condition stems from a head injury sustained when he was hit by a truck when riding a bicycle in 1988. He has experienced auditory hallucinations since that time and was a patient at a psychiatric unit in 1996 and again in 1997. He consumes large amounts of alcohol on a regular basis. One medical examiner who saw Mr Freeman four times between March 1999 and March 2000 reported having been informed by Mr Freeman on several occasions (including at the first interview in March 1999) that it was his habit to drink some two litres of wine per day, sometimes up to four litres. Assessments made in May 2000 suggest that Mr Freeman was functioning at a level matched by only 2% of the population on certain scales and at levels of between 9% and 16% on other scales. His memory is described as quite severely impaired compared with most of the population.

29 A psychiatric assessment made in February 2001 notes that, after the accident in 1988, Mr Freeman’s self care and general social ability had deteriorated to a point where he required permanent living accommodation in a supportive boarding house and a considerable level of support from mental health team staff. These handicaps may be taken to be the source of his apparent preference for living in caravans both at the time of the transaction in question (April/May 1999) and in the period immediately before the hearing.

30 Mr Freeman is, on all the evidence, labouring under disabilities of significant intellectual impairment, social dysfunction and alcoholism. I find that he was also affected by these disabilities at the time of the several transactions with Mr Brown to which I have referred.

Mr Brown’s knowledge of Mr Freeman’s disabilities

31 Mr Brown was at pains to stress in his evidence that he had never seen Mr Freeman affected by alcohol and that Mr Freeman had always “seemed okay” in the sense of knowing what he was doing and acting according to his own wishes. He said that he had seen Mr Freeman consume alcohol only once, when the two of them, with Ms Smith, had lunch at a hotel in Penrith on 3 May 1999. Mr Freeman drank one glass of beer. On one of his visits to Mr Brown’s home, Mr Freeman drank a glass of coca-cola.

32 To support his assertion that Mr Freeman “seemed okay”, Mr Brown referred to an episode which took place when Mr Freeman, Ms Smith and he went to Lamrocks’ office in an attempt to obtain the certificate of title. Mr Brown said that the person at Lamrocks who came to the door in response to the night bell asked Mr Freeman for identification. Mr Freeman produced his pension card and automatic teller machine card. In order to show himself to be the owner of the cards, Mr Freeman recited their numbers from memory, each number consisting of 12 to 15 digits.

33 Mr Wheatley testified that when he witnessed Mr Freeman’s signature on 3 May 1999 at Mr Brown’s home, he formed the impression that Mr Freeman understood what he was doing, was clear in his intentions and appeared coherent and rational. I have reservations about Mr Wheatley’s evidence. His credit was challenged on the basis of his criminal record involving several convictions for offences of dishonesty.

34 I return now to the conversation between Mr Gibson and Mr Grassi of Lamrocks, the ensuing conversation between Mr Gibson and Mr Brown and Mr Gibson’s letter of 3 May 1999 to Mr Brown. Mr Gibson’s account of the two conversations, which, as to the second, corresponds in all material respects with Mr Brown’s version, is as follows:

“23. During the morning of 29 April 1999 I had a telephone conversation with Mr Grassi of Lamrocks Solicitor. He said to me words to the effect of

‘Did you know that Keith Freeman has a brain injury?’

I said:
‘No.’

He said:
‘This firm acted for him in the third party claim. He suffered head injuries in a car accident and his compensation was for brain damage. He is not the full quid.’
24. I telephoned the Defendant on the same day and said to him words to the effect of:

‘I have just been told by Joe Grassi that Keith Freeman has brain damage. I don’t want to be involved in this matter.’

He said:
‘I don’t know what your problem is Keith Freeman came to me not the other way around. If you aren’t interested doing the job I’ll take it to Terry Stormer.’”

35 Mr Gibson deposes to having another telephone conversation with Mr Brown on 3 May 1999 in which he said:

“I have decided that I cannot act for you because of what I have been told. I had a look at the place on Saturday. It is as bad as you said, but I can’t act after what I heard about Keith Freeman’s condition.”

36 Mr Gibson’s letter of 3 May 1999 (received by Mr Brown a day or two later) was as follows:

“I am sorry you do not appreciate my point of view that I cannot act for you or Keith Freeman. It is not simply a matter of ethics, it is also a question of law.

A document prepared for both parties with an apparently low price followed by comment by another solicitor as to the vendor’s mental capacity = problem.

My licence to practice is too important to risk a complaint and this is why I said that Keith Freeman should have his own solicitor to advise him independently.”

37 Another matter to which reference should be made is the condition of the house at the time in question. Evidence about that was given by Mr Brown, Mr Gibson (who visited on 1 May 1999 and took photographs which were in evidence), Mr Wheatley and Mr Silburn (both of whom went there on the weekend of 8-9 May 1999 to help Mr Brown clean up).

38 The adjective consistently used by the witnesses is “trashed”. Doors were pulled off their hinges, windows were broken, there were holes in the plasterboard of walls, the toilet was blocked, the bath contained rubbish, the carpet was filthy, the kitchen and other rooms were littered with empty bottles, putrefying food and rubbish and there was a smell of urine throughout. The grounds were overgrown. It is true that Mr Freeman was not then in occupation, having moved to the caravan park some months earlier. But the state of the house nevertheless should have said something to Mr Brown about Mr Freeman’s capacity to exercise the kind of control and oversight normally to be expected of a landlord.

39 The evidence amply supports a finding that, despite his own observation that Mr Freeman “seemed okay”, Mr Brown was aware of Mr Freeman’s intellectual disability from what he should have regarded as a reliable, even if hearsay, source. I refer, of course, to what Mr Gibson told him had been said by Mr Grassi, the solicitor whose firm had acted for Mr Freeman in the action for damages arising out of the road accident. Furthermore, Mr Brown had been told by Mr Gibson that the latter would not act for him on the conveyancing transaction. Mr Gibson explained why, mentioning the delicate position which exists in relation to dealing with a person of impaired mental capacity. That should have (indeed, must have) caused Mr Brown to appreciate that he could be taking advantage of someone not able to look after his own affairs, even if he could memorise numbers consisting of a dozen digits.

40 Another factor is the presence throughout of Ms Smith. The evidence shows that, on each occasion between 26 April 1999 and 3 May 1999 on which Mr Brown met with Mr Freeman, Ms Smith was also present. She introduced them and played an active go-between role. It was she who obtained the title particulars Mr Gibson needed. She accompanied Mr Freeman and Mr Brown when they went to Lamrocks in the evening to try to obtain the certificate of title. She was present with them at the meetings and lunch on 3 May. Nothing Mr Brown has related as having been done by Mr Freeman during that week in relation to the sale of the property was done in the absence of or independently of Ms Smith. The same is true of the subsequent transactions.

Particular features of the transactions

41 I turn now to certain features of the transactions and the surrounding circumstances which lend credence to the view that Mr Brown was indeed taking advantage of Mr Freeman and should be taken to have been aware that he was doing so.

42 First, there is the fact that Mr Brown, as purchaser, arranged for the contract and transfer to be prepared by his solicitor. The normal procedure, sanctioned by conveyancing practice, would have been for the vendor to have had carriage of the preparation of the contract and for the purchaser, after exchange of contracts, to have prepared the transfer and tendered it to the vendor. Mr Brown may be taken to have been aware in general terms of the standard procedure, given the evidence that Mr Gibson had acted for him in a number of conveyancing transactions over a period of 20 years. The fact that Mr Gibson was instructed by Mr Brown to take the active role in preparing the documents may be taken as an indication that he did not expect Mr Freeman to take the course a vendor acting in his or her own interests would normally take.

43 It is noteworthy that there is no suggestion in the evidence that Mr Brown ever asked Mr Freeman if he had a solicitor or intended instructing one to act on the sale. When it became known to them that Lamrocks held the certificate of title on Mr Freeman’s behalf, neither Mr Brown nor Mr Gibson, his solicitor, asked what would have been the natural and expected question, namely, whether Lamrocks would be acting for Mr Freeman on the sale. Rather, there was an immediate move to go to Lamrocks’ office after business hours in order to obtain the certificate of title so that it could be put it into the possession of Mr Brown’s solicitor.

44 It is also noteworthy that, when Mr Brown learned that Mr Gibson was no longer willing to act, he collected from Mr Gibson not only the contract and transfer but also Mr Freeman’s certificate of title. On any view of matters, Mr Brown had no right to the certificate. Mr Gibson had clearly held it to the account of Mr Freeman. Having no authority from Mr Freeman to do so, he should not have released it to Mr Brown. It is true that Mr Brown acknowledged in the witness box that, having received the certificate from Mr Gibson, he held it on behalf of Mr Freeman. But there is nothing to suggest that he acknowledged or even recognised that at the time, whether to Mr Gibson, to Mr Freeman or otherwise. He was clearly anxious to get his hands on all the papers. Had he really intended to retain Mr Stormer to act in place of Mr Gibson the normal and logical thing for Mr Brown to have done was to instruct Mr Gibson to send the file to Mr Stormer.

45 Having obtained possession of the documentary means of becoming registered proprietor of Mr Freeman’s property, Mr Brown met with Mr Freeman and Ms Smith and had lunch with them. He says that he then re-confirmed with Mr Freeman the latter’s desire to sell the house which, by that time, Mr Brown virtually held in his hands. After lunch, having paid a cash deposit of $500 but with no other arrangements as to payment of the purchase price even discussed, let alone agreed or in place, he promptly set off for Parramatta and the city and obtained stamping and registration of the transfer in a single afternoon, returning home with the certificate of title recording him as registered proprietor in time for the evening meeting with Mr Freeman and Ms Smith at which $50,000 of the unpaid balance became the subject of an agreement putting it under the thumb of Ms Smith and the remainder was paid to Mr Freeman as to $4,500 in cash and as to $30,000 by Mr Brown’s personal cheque.

46 Having obtained without payment the means of becoming registered as proprietor of Mr Freeman’s property, Mr Brown acted immediately and in the course of one afternoon to achieve that position, having paid in the meantime a mere $500. It was only after he had become the registered proprietor that anything was done about the balance of $84,500. But the arrangements with respect to that balance were also entirely at odds with normal conveyancing practice and the expectations and requirements of any prudent vendor. A sum of $30,000 was paid by personal cheque. Mr Brown’s experience in the transactions in which Mr Gibson had acted for him over a period of 20 years would have made him aware that bank cheques are invariably given by purchasers to vendors. He did not give Mr Freeman a bank cheque. As for the “roll over” of $50,000 under the agreement produced by Ms Smith, the submission made on behalf of Mr Brown that it was, in effect, normal “vendor finance” does not withstand even a moment’s scrutiny. A vendor who agrees to finance the purchaser invariably proceeds by way of terms contract (so that title remains in the vendor until payment in full has been made) or by way of mortgage-back (so that the vendor obtains, contemporaneously with conveyance, a security interest in the property). Any astute or well advised vendor would never agree to “vendor finance” by way of collateral unsecured promise to pay.

47 It is clear that Mr Brown was the dominant figure in this sequence of events, actively assisted by Ms Smith. He acted in a way which was obviously out of line with normal conveyancing practice with an intention of getting the certificate of title, transfer and contract into his sole possession without one cent being paid to Mr Freeman and in the knowledge that Mr Freeman had had no legal or other advice on the transaction. I leave entirely to one side, I might say, such advice as Mr Freeman may have been given by Ms Smith as I regard her as having also been party to a course of dealing calculated to take advantage of Mr Freeman. Mr Brown became party to transactions which, of their very nature, must have been recognised by him as having features of concession, risk and unorthodoxy which a counterparty having the capacity to look after his or her own interests would never have dreamed of accepting.

The role of Ms Smith

48 Ms Smith clearly played an active role in bringing about the various transactions between Mr Freeman and Mr Brown. She had first met Mr Freeman about a year before the events in question, although initially it seems that they did no more than exchange greetings at the Kingswood shopping centre. She was an acquaintance of Mr Freeman’s sister.

49 At some point, Ms Smith became aware that Mr Freeman might wish to sell his house. She interested herself in this and took steps towards arranging a sale to her sister. However, that did not come to anything and Ms Smith then suggested to Mr Freeman that Mr Brown would be interested, she having first raised the matter with Mr Brown.

50 Ms Smith was, as I have said, a customer of Mr Brown and had a social relationship with him. Mr Brown gave evidence that, at an undefined stage, he was a regular visitor to a club at St Marys where he became acquainted with a group of people which included Ms Smith. Because he did not drink much alcohol, he became the driver for the group when they left the club.

51 Ms Smith’s business relationship with Mr Brown dated from about a year before the transactions with Mr Freeman. Ms Smith had pawned jewellery on several occasions and, by late April 1999, owed Mr Brown about $1,000. Because of the role she played in introducing Mr Freeman, Ms Smith was released from this debt and given back her jewellery. Mr Brown thus obviously regarded Ms Smith as having performed a valuable service to him in creating the opportunity for him to purchase the property from Mr Freeman.

52 The evidence as a whole shows that Ms Smith was, in a real sense, an instigator of the transactions. It was she who suggested to Mr Freeman that Mr Brown might be interested in buying the property. It was she who introduced them. It was she who set about obtaining the title particulars and giving them to Mr Gibson. It was she who prepared the two investment agreements containing the statement that “all matters relating to this agreement must be directed to Lisa Smith” and nominating her as “sole administrator of this agreement on behalf of Keith Freeman” in the event of his death, “disappearance” or mental incapacity. And it was she who, according to Mr Brown, was nominated by Mr Freeman on several occasions as authorised to receive money on his behalf.

53 There is a clear inference here that Ms Smith deliberately set about assuming a position of ascendancy over Mr Freeman with a view to obtaining personal gain through the sale of his property.

The value of the property

54 As already noted, Mr Brown’s assessment, when he saw the property in late April 1999, was that it might have had a value of between $110,000 and $120,000 if in reasonable repair and that it would probably cost $25,000 to make the necessary repairs. It was not suggested that Mr Brown was qualified to give expert evidence about value or repair costs. Nor did he purport to do so.

55 Mr Freeman said in the police interview that he had had the property on the market for $114,950 at some unspecified time before the sale to Mr Brown. He said that there had been some interest but it had not sold. It must be inferred that this was before the damage to the house occurred.

56 Expert evidence of value was given on Mr Brown’s behalf by Mr Moschione, a registered valuer with 28 years experience. He inspected the house on 28 August 2001 in company with Mr Brown and made a valuation as at 3 May 1999. In doing so, he had access to the photographs of the damage taken by Mr Gibson and took into account the effects of that damage on value.

57 From the photographs, as supplemented by a description by Mr Brown both in his letter of instruction (which was in evidence) and during Mr Moschione’s visit with Mr Brown on 28 August 2001, Mr Moschione made an estimate of the cost of necessary repairs. He was cross-examined as to his qualification – or that of any property valuer – to provide an opinion on that matter but I am satisfied from the explanations he gave that it is within his area of expertise to do so.

58 Mr Moschione estimated the cost of repairs at $14,566 (rounded up to $14,600). Based on normal valuation methodology, he assessed the value of the house “in average condition”, as at 3 May 1999, at $130,000. Its value in its damaged state was assessed at $91,000. Mr Moschione arrived at this figure by subtracting from the “average condition” valuation of $130,000 not only the sum of $14,600 for the estimated cost of repairs but also three separate sums each of $1,000 to which I shall return, together with a factor of $21,670 which he described as “20% profit factor to undertake major works”.

59 Mr Moschione was extensively cross-examined about this deduction of “profit factor to undertake major works”. I am satisfied that it is appropriate and that it would be wrong to regard an extensively damaged house as having a value equal to the assessed “average condition” valuation minus the estimated cost of effecting the necessary repair work. Determination of value depends on predicting the behaviour of a willing but not anxious buyer in an assumed transaction with a willing but not anxious seller: Spencer v The Commonwealth (1907) 5 CLR 418. What Mr Moschione’s evidence recognises is that a willing but not anxious buyer, acting reasonably and faced with the prospect of having to carry out extensive works to make a house habitable, will expect some allowance or compensation for the time, trouble and effort involved in undertaking those works. In response to a suggestion that the correct course was simply to deduct the estimated cost of works from the “average condition” valuation to reach the value of the house in damaged condition, Mr Moschione explained the “profit factor to undertake major works” by posing the rhetorical question:

“Then why would you take on the effort and problem of buying such a mess?”

60 As to the particular percentage of 20% used in calculating the “profit factor”, Mr Moschione explained that there is an industry standard for profit and risk for real estate developments and that this ranges from 10% to 30% depending on the style of property, the location and the risk. He formed the view that the location of the property and the amount of work made a rate of 20% reasonable. There is no reason why this should not be accepted.

61 I have referred to three items, each of $1,000, which Mr Moschione deducted in coming to his valuation of $91,000. These were for back rates, selling commission and vendor’s legal costs. The first was deducted because it was a term of the particular transaction (to be assessed according to the willing but not anxious seller, willing but not anxious buyer approach) that Mr Brown should accept responsibility for arrears of rates, that being something which, in a normal transaction, would be borne by the vendor. That deduction was therefore warranted. But there is no equivalent basis for treating the other two in the same way. There was no equivalent special arrangement in relation to the vendor’s legal costs. Indeed, as Mr Brown knew full well, Mr Freeman had no solicitor. And as to selling commission, there was again no expense incurred by Mr Freeman as vendor. Although Mr Brown gave Ms Smith back her jewellery and forgave her $1,000 debt, that is not an expense that affects the valuation equation.

62 On the basis of Mr Moschione’s report, I find that the market value of the property in its damaged state as at 3 May 1999 may be accepted as being $93,000, that is, his figure of $91,000 adjusted so as to add back two of the three deductions of $1,000 each. On that basis, the contract price of $85,000 may be accepted as representing about 91% of the market value.

Repair of the house

63 Mr Brown gave evidence of steps taken by him to clean up the house and to effect repairs. Some of the work was done by friends of his without payment. Some was done by Mr Brown himself, including plumbing, he being a plumber by trade. The actual outlays to which he deposed were:

Carpenter $ 2,700
Painter 2,500
Electrician 500
Carpet layer 500
Purchase of carpet 1,400
Cleaning work 800
Hire of skips 500
Glazier $ 400

$ 9,300

Mr Brown estimated the value of the plumbing work he did himself at $3,600 (60 hours at $60 per hour).

64 The repairs were effected within a few weeks after 3 May 1999. It is reasonable to infer that the house was in reasonable and habitable condition by 30 June 1999. I therefore take that as the date from which the property became capable of producing rent.

The relevant equitable principles

65 This case does not call for a lengthy exposition of the law. The principles are clear. Equity will intervene where undue influence undermines the sufficiency or reality of assent, also where an unconscientious use of power is perpetrated by a stronger party upon a weaker. The basic principle was stated in these terms by Fullagar J in Blomley v Ryan (1956) 99 CLR 362:

“The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other.”

66 Speaking of the jurisdiction of courts of equity to relieve against unconscionable dealing, Deane J made the following observations in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447:

“The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or “unconscientious” that he procure, or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable.”

67 The relationship between such unconscionable dealing and undue influence was then described by Deane J:

“The equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence are closely related. The two doctrines are, however, distinct. Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party (see Union Bank of Australia Ltd v Whitelaw [1906] VLR 711, at p.720; Watkins v Combes (1922) 30 CLR 180, at pp.193-194; Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710, at p.713). Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so.”

68 Mason J emphasised in Amadio that the two bases of intervention by equity are parallel in their operation:

“There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest.”

69 The relationship was described in these terms by Brennan J in Louth v Diprose (1992) 175 CLR 621:

“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.”

70 The relevance of the adequacy or otherwise of the consideration in a case where consideration was given is dealt with thus in the judgment of Deane J in Amadio:

“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 (1928) 23 Tas LR; 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 viewpoint of the party under the disability.”

71 In Blomley v Ryan, Fullagar J referred to the same matter in these terms:

“It does not appear to be essential in all cases that the party at a disadvantage should suffer loss or detriment by the bargain. In Cooke v Clayworth (1811) Ves Jun 12 [34 ER 222], in which specific performance was refused, it does not appear that there was anything actually unfair in the terms of the transaction itself. But inadequacy of consideration, while never of itself a ground for resisting enforcement, will often be a specially important element in cases of this type.”

72 The relative unimportance attached to the question of the adequacy of any consideration is borne out by the decision of Kelly SPJ in Baburin v Baburin [1990] 2 Qd R 101. His Honour there observed that to establish undue influence it is not necessary to show that the transaction was to the manifest disadvantage of the person influenced. Likewise of no real relevance is the fact that the person concerned understood and intended what he or she was doing. Someone who proceeds intentionally and with knowledge may nonetheless act under influence or in response to unconscionable procurement or encouragement justifying the intervention of equity. The principles in this respect are of long standing and are briefly dealt with in the judgment of McLelland J in Quek v Beggs (1990) 5 BPR 11,761.

73 The real point is that equity will neither allow advantage to be taken of a person labouring under a disability nor sanction an overbearing of a vulnerable party’s judgment by a stronger party’s influence. These forces may be at work even though the person affected becomes a willing participant in a transaction which on its face shows no real sign of unfairness. The equitable wrong lies in the taking of the benefit produced by unconscionable conduct in circumstances where the person engaging in that conduct knows or is to be taken to know of the circumstances of unconscionability.

Contracts Review Act

74 I have not so far mentioned Mr Freeman’s reliance on the Contracts Review Act 1980. Section 7 of that Act empowers the Court to make certain orders where it finds that a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made. In determining whether a contract or a provision of a contract is of that description, the Court must, in accordance with s.9(1), have regard to the public interest and to all the circumstances of the case. The Court is directed by s.9(2) to have regard to certain specific matters, although without prejudice to the generality of s.9(1). Among the factors to which s.9(2) directs attention are the following:

· whether or not there was any material inequality in bargaining power between the parties to the contract (para (a));

· whether or not prior to the time the contract was made its provisions were the subject of negotiation (para (b));

· whether or not it was reasonably practicable for the party seeking relief under the Act to negotiate for the alteration of or to reject any of the provisions of the contract (para (c));

· whether or not any party to the contract (other than a corporation) was not reasonably able to protect his or her interests because of the state of his or her mental capacity (para (e)(i));

· the relative literacy of the parties to the contract (other than a corporation) (para (f)(i));

· whether or not independent legal advice was obtained by the party seeking relief under the Act (para (h));

· the extent to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under the Act, and whether or not that party understood the provisions and their effect (para (i));

· whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under the Act by any other party to the contract or by any person to the knowledge (at the time the contract was made) of any other party to the contract (para (j)).

75 It is provided by s.14 of the Act that the Court may grant relief in accordance with the Act in relation to a contract notwithstanding that the contract has been fully executed.

76 It is emphasised in the decision of the Court of Appeal in Amcor Ltd v Watson (2000) Aust Contract R 90-110 that the Court must approach the application of s.7 by reference to the whole of the circumstances of the case and an assessment of what is just or unjust as a whole. The specific matters in s.9(2) are not necessarily independent hallmarks of what is unjust. Each is but one matter to which the Court is to have regard. The Court of Appeal also drew attention to the following passage in the judgment of Kirby P in Baltic Shipping Company v Dillon (1991) 22 NSWLR 1:

“The duty of a court remains to have regard to ‘all the circumstances of the case’. It must consider the ‘public interest’, including in the observance of agreements duly entered. But in the end, the focus of attention must be upon the contract. The court must decide whether ‘in the circumstances’ the contract is ‘unjust’. A contract may be ‘unjust’ because of peculiarities inherent in the circumstances of one of the parties of which the other party was quite ignorant. It may be ‘unjust’ although the other party has acted quite honourably and lawfully. …. Finally, the grant of relief is discretionary.”

Applying the law to the facts

77 I have found that Mr Freeman was, at all relevant times, labouring under disabilities of significant intellectual impairment, social dysfunction and alcoholism. I have also found that, despite Mr Brown’s observation that Mr Freeman “seemed okay”, Mr Brown was aware of Mr Freeman’s intellectual disability from what he should have regarded as a reliable, even if hearsay, source. Mr Brown was also aware from the physical condition of the house that Mr Freeman could not function as a responsible landlord. Furthermore, the sale transaction and the subsequent “roll over” transactions had features from which any person even remotely familiar with conveyancing and its financing -- or, for that matter, anyone at all with a modicum of commercial common sense -- would readily have recognised them as transactions which were at odds with fair dealing and in which the interests of the vendor were left entirely unprotected and at the mercy of the purchaser. Mr Brown, as a professional moneylender and someone who had been involved in several conveyancing transactions over a period of 20 years, must have known this. In that state of knowledge, aware that he was dealing with Mr Freeman on quite unequal terms and in circumstances where Mr Freeman was under a disability, he proceeded with the transactions in the way I have described.

78 Mr Freeman was under a special disability in dealing with Mr Brown and at a serious disadvantage vis-à-vis him. Mr Freeman’s disability, disadvantage and vulnerability deprived him of the ability to give a competent and informed assent to the transactions with Mr Brown and to appreciate where his own interests lay. Furthermore, the limitations and disabilities under which Mr Freeman laboured were sufficiently evident to Mr Brown to deprive him of any entitlement he may otherwise have to rely on Mr Brown’s apparent assent to those transactions.

79 It is true that the contract price of $85,000 was not significantly out of line with the adjusted market value suggested by Mr Moschione’s valuation, having regard to the condition of the house. But even if some redeeming or countervailing argument on Mr Brown’s part might be constructed on the basis that something approaching full value was contracted to be given (itself not enough, in any event, to overcome the equitable wrong), it is an argument which quickly falls away when it is recognised that a very large proportion of the price was not paid at all, being left as an unsecured obligation of Mr Brown – who, surprisingly, I thought, made much of the fact that a caveat lodged by the Protective Commissioner on Mr Freemen’s behalf had thwarted a subsequent attempt to use the property as security for a borrowing which would have further prejudiced Mr Freeman’s position as an unsecured creditor.

80 Mr Brown, for his part, has not shown that the transactions were fair, just or reasonable. Nor could he, given the characteristics to which I have referred.

81 The transactions between Mr Freeman and Mr Brown are transactions which a court of equity will not allow to stand. Equity’s intervention against unconscionable dealing and undue influence will ensure that Mr Brown does not retain the benefit of those transactions.

82 Turning to the Contracts Review Act, a conclusion that each of the contracts between Mr Freeman and Mr Brown (that is, the sale contract and the two “roll over” agreements) was unjust is indicated by each of the criteria in s.9(2) of the Act extracted and set out above. The findings I have made, viewed in the light of each such criterion, show that the criterion is satisfied. In addition, the combined or cumulative effect of those findings is a firm conclusion that each of those contracts was, in the global sense envisaged by s.7(1), unjust in the circumstances relating to it at the time it was made. Relief in one or more of the ways provided for in s.7(1) may therefore be ordered.

83 It remains to consider the relief the Court should order. Because Mr Brown cannot be permitted to retain any property or advantage he obtained by reason of the three contracts he entered into with Mr Freeman, the positions of the parties must be adjusted, in a general sense, to equate with those they would have occupied had those contracts not been made and so that the advantage which came home to Mr Brown from ownership of the property after 3 May 1999 is made to accrue instead to Mr Freeman.

84 While the matter must be approached in a broad sense by setting the contracts aside, it is necessary to pay attention to particular aspects. Mr Brown expended money on repairs to the house. The actual outlay, as already mentioned, was $9,300, leaving aside any value of work done by him and by friends without payment. He also paid over money, some to Mr Freeman ($11,550) and some to Ms Smith ($9,000). Against this, he had the benefit of ownership of the repaired house from a date I have found may be taken to be 30 June 1999 and has therefore enjoyed the rents and profits (at the same time bearing the outgoings) for almost two and a half years or, more precisely, some 126 weeks. At the rate of $200 per week stated in Mr Brown’s affidavit and allowing for an assumed change of tenants every six months involving two weeks lost rent on each occasion, it may be taken that rent of some $23,400 has been available to Mr Brown from the property. Mr Brown has also had the advantage of having paid neither principal nor interest in respect of some $64,000 of supposed purchase moneys since 3 May 1999, that is, a period of over two and a half years which, at the rate of 6% per annum provided for in the “roll over” agreements, involves an interest advantage of about $9,900.

85 The task of equity in a case such as this is to effect restitution. It may be appropriate for intervening changes in the subject matter to be recognised by a payment by the party to whom restitution is effected to the party by whom it is effected. An example may be found in Alati v Kruger (1955) 94 CLR 216 and, as was pointed out in the majority judgment in Maguire v Makaronis (1997) 188 CLR 449, the setting aside of a contract of sale at the suit of the vendor will normally require repayment by the purchaser of whatever has been received on account of the purchase price, together with interest.

86 The restitution which equity effects is one which denies the perpetrator of equitable wrong the gain which should have accrued to the victim of that wrong and gives that gain to the victim. This is certainly so in the case of a fiduciary who “must answer for his default according to his gain”: United StatesSurgical Corporation v Hospital Products Ltd [1983] 2 NSWLR 157, and see Ferrari Investments (Townsville) Pty Ltd v Ferrari [2000] 2 Qd R 359. It must also be so here. In the particular circumstances of the present case, I am satisfied that the respective benefits and detriments, by way of receipts and payments, in the period since 3 May 1999 may be regarded as sufficiently balanced between the parties to make it both possible and appropriate to allow them to lie where they have fallen, without the need for any accounting to be undertaken. Restoration to Mr Freeman of what should have accrued to him will be sufficiently achieved, without injustice to Mr Brown, by re-transfer of the property and release from the two so-called investment agreements. On that footing, the substantive relief may be confined to orders which cause Mr Freeman to acquire an unencumbered estate in fee simple in the property at 16 Kingsley Grove, Kingswood, and make the investment agreements void. Such orders are supported not only by equitable principle but also by the statutory jurisdiction under the Contracts Review Act. Justice will be achieved if, in the context of such orders, other benefits and detriments are left to lie where they have fallen. There is accordingly no need for further orders aimed at restoring parties to their previous positions or securing to Mr Freeman the results of the court’s decision in his favour.

Orders

87 The orders of the Court are as sought by the plaintiff in his amended statement of claim, namely:

1. Declare that the defendant holds the whole of the land in certificate of title folio identifier 35/714473 together with the house and improvements thereon situated at and known as 16 Kingsley Grove, Kingswood on trust for the plaintiff.

2. Declare that the plaintiff is entitled to avoid and has avoided the transfer by the plaintiff to the defendant of the property referred to in Order 1.
3. Order that the transfer referred to in Order 2 be set aside and is made void.
4. Order that the defendant transfer to the plaintiff all his right, title and interest in the property referred to in Order 1.
5. Order that the defendant take all steps and execute all documents as are necessary to transfer to the plaintiff the property referred to in Order 1.
6. Order that, in the event of the defendant failing to comply with Orders 4 and 5, the Registrar shall execute an instrument of transfer and any other documents the plaintiff requires to effect the transfer by the defendant to the plaintiff of the property referred to in Order 1.
7. Order that each of the agreements entitled “12 Month Investment Agreement” and “24 Month Investment Agreement” made between the defendant and the plaintiff be set aside and is made void.

88 It is also ordered that the costs of the plaintiff of these proceedings as agreed or assessed on a party and party basis be paid by the defendant.

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Last Modified: 12/05/2001