Johnson v Johnson

[2009] NSWSC 503

CITATION:	Frances Madge Johnson by her tutor Karen Elisabeth Smith v Andrew Robert Stuart Johnson [2009] NSWSC 503 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	18/05/09, 19/05/09, 20/05/09, 21/05/09, 22/05/09
JUDGMENT DATE :	9 June 2009
JUDGMENT OF:	Forster J at 1
DECISION:	see para 111
CATCHWORDS:	Cheques signed by elderly dementing woman in favour of husband and son - non est factum - "catching bargains" - unconscionability - undue influence
CATEGORY:	Principal judgment
CASES CITED:	Beverley v Watson [1995] ANZ ConvR 369 Blomley v Ryan (1956) 99 CLR 362 at 415 Bridgewater v Leahy (1998) 194 CLR 457 Brown v Brown (1993) 31 NSWLR 582 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Da Yun Xu v Fang Lin [2005] NSWSC 569 Gallie v Lee [1971] AC 1004 Louth v Diprose (1992) 175 CLR 61 Nelson v Nelson (1995) 184 CLR 538 Petelin v Cullen (1975) 132 CLR 355 State of Queensland v JL Holdings Pty Limited (1997) 189 CLR 146
PARTIES:	Frances Madge Johnson by her tutor Karen Elisabeth Smith Andrew Robert Stuart Johnson
FILE NUMBER(S):	SC 2008/2304
COUNSEL:	Plaintiff: Mr L.J.Ellison SC Defendant: (in person)
SOLICITORS:	Plaintiff:Alistair Woodward Little, TressCox Lawyers Defendant: n/a

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

FORSTER J

TUESDAY, 9 JUNE 2009

(2008/2304) FRANCES MADGE JOHNSON BY HER TUTOR KAREN ELISABETH SMITH v ANDREW ROBERT STUART JOHNSON

JUDGMENT

Nature of the proceedings

1 HIS HONOUR: By statement of claim filed on 11 April 2008 the plaintiff, by her tutor Karen Elisabeth Smith (“Ms Smith”), who is her daughter, seeks declarations and orders the effect of which is to require the defendant to transfer to the plaintiff so much of the proceeds of certain transactions as remain in his control. The plaintiff also seeks damages for losses incurred by her as a result of the transactions complained of.

2 The plaintiff was born on 21 April 1925 and was accordingly a little over 82 years of age at the time of the said transactions. The defendant is a son of the plaintiff and lived with her and her husband (“Mr Johnson”) in the family home until 5 July 2007. On that day, Mr Johnson died, and the plaintiff was admitted to Hornsby hospital. She has not lived in the family home since.

3 On 17 September 2007 Ms Smith was appointed by the Guardianship Tribunal as the plaintiff’s Financial Manager. On 28 March 2008, the Office of the Protective Commissioner authorised her to bring these proceedings on behalf of the plaintiff.

The disputed transaction

4 In about 2005, the plaintiff sold certain property in Queensland and on 13 March 2006 the proceeds of their sale, namely the sum of approximately $510,000, was banked to the credit of her Maxi Direct Account at Westpac Bank. As at 1 May 2007 the credit balance of that account was slightly in excess of $540,000.

5 On 15 May 2007 the defendant and Mr Johnson opened two joint accounts in their own names at the National Australia Bank.

6 On 17 May 2007, an amount of $540,000 was withdrawn from the plaintiff’s said Maxi Direct Account by way of internet transfer and was deposited by six entries totalling the said sum of $540,000, to the credit of the plaintiff’s cheque account at Westpac Bank.

7 On the same day, that is to say on 17 May 2007, two amounts of $270,000 each were withdrawn from the plaintiff’s said Westpac cheque account. They were withdrawn by two cheques each for $270,000, and each bearing the signature of the plaintiff as the drawer. One of those cheques, which was made payable to both the defendant and Mr Johnson, was deposited to the credit of one of the two joint accounts that had been opened at the National Australia Bank in the names of the defendant and Mr Johnson. The other cheque, which was made payable to the defendant, was on the same day deposited in a bank account opened by the defendant in his own name at the Commonwealth Bank.

8 On 22 May 2007, both amounts of $270,000 were moved. The moneys that had previously been deposited in the joint account of the defendant and the late Mr Johnson at the National Australia Bank were transferred by internet transfer to their other joint account at the National Australia Bank, where they still remain.

9 The other amount of $270,000 was likewise moved from the defendant’s Commonwealth Bank account to another account that had been opened by him in his own name at the Commonwealth Bank. Some of those moneys have since been withdrawn from that account, but the balance of the said sum of $270,000 similarly remains in that account today.

10 The plaintiff’s claim for the return of those moneys, and for other related relief, can be categorised as resting on two bases, namely:

(i) that the plaintiff’s mental condition was such that she did not have the capacity to dispose of the funds in question; and
(ii) alternatively, even if she did have such capacity, nevertheless in all the circumstances, the defendant is still obliged to return their proceeds.

11 The plaintiff’s claims are disputed. Further, by his Defence, the defendant claims to be entitled to the presumption of advancement by reason of the fact that he is a son of the plaintiff. By her Reply, the plaintiff disputes that the principle of advancement applies in the circumstances, and relies further on two letters written by the solicitors then acting for the defendant as constituting admissions against interest as to the ownership of the funds in question, and claims that in the circumstances the defendant is estopped from making any assertion inconsistent with those admissions.

Application for adjournment

12 When the matter was first called on for hearing, Mr Malcolm Duncan of Counsel appeared for the defendant and made an application for the adjournment of the proceedings. The application was opposed by Mr Lindsay Ellison of Senior Counsel, who appeared for the plaintiff.

13 The grounds upon which Mr Duncan made his application is recorded at pages 1-3 of the transcript. They were substantially to the effect that he had only very recently been briefed, having been telephoned by someone from the Bar Association Legal Assistance Scheme and asked whether he could assist the defendant who had approached the Scheme for help on the basis that he is impecunious and cannot afford counsel.

14 Mr Duncan informed me that although he had managed to read the pleadings and some of the affidavits over the last few days, and had had a conference with the defendant, he was not in a position to conduct the case for the defendant. He said that he needed more time to familiarise himself with the material and to properly prepare the case on behalf of the defendant. He said that he was prepared to undertake to the court that he would be appearing for the defendant on any adjourned hearing date, subject to his retainer not being withdrawn by the defendant. Mr Duncan made it clear, however, that he was only available on the first day of the hearing, that is to say on Monday 18 May 2009, and that he would not be available for the following four days which had been set aside for the hearing. He also said that if the adjournment application was unsuccessful, he would be seeking leave to withdraw.

15 Mr Ellison SC put a number of submissions why the application should be refused. Those submissions are recorded at pages 3-5 of the transcript. I should mention some of them.

16 First, he pointed out that the defendant had had, during the course of these proceedings and in the correspondence leading up to them, a number of solicitors acting for him. He clearly had not been without legal assistance along the way.

17 Second, he noted that the defendant has been able to prepare lengthy affidavits and to deal with interlocutory steps, including appearances on the hearing of various notices of motion. Further, the defendant has been able to engage in extensive correspondence relating to subpoenas, privilege and other matters associated with preparation for trial. Albeit a layman, the defendant was said to have a reasonable working knowledge of the legal process.

18 Third, Mr Ellison submitted that the defendant knew of the approaching hearing date, and yet it would appear that he left it until the middle of the week immediately preceding the hearing to take steps to secure the services of counsel. He pointed out that there was no evidence before the court to substantiate Mr Duncan’s instructions to the effect that there had been some misunderstanding between the defendant and the Bar Association as to who was to contact whom. I might add that even if there were a misunderstanding, it was always open to the defendant to make further contact with the Bar Association if he was seriously wishing to obtain legal assistance from that quarter. No explanation was offered as to how it came about that this contact was re-established only a few days before the hearing.

19 Fourth, he pointed out that it was in October 2008 that these proceedings were fixed for hearing. That was almost seven months ago and that no prior application for vacating the hearing date has been made.

20 There was much substance in Mr Ellison’s submissions. Mr Duncan had indicated that if he were given a month or so to prepare the case, it could then be heard. However, unfortunately that is not the way things work. If the hearing date were to be vacated, it would then have to be referred back to the Registrar to obtain a new hearing date. A case that is likely to take five days is unlikely to be allocated a hearing date in the near future. The court has only a limited number of dates available in five day stretches. I would doubt that this matter would come back for a hearing much before the end of this year, if not later.

21 Significantly, Mr Duncan did not submit that the defendant was incapable of conducting his own case. Indeed, at one point he indicated that the defendant had been researching on the internet and that some of his research went back to 1911. He added that if the proceedings were to continue with the defendant conducting his own case, the court may be treated to a complete exposition of the law of undue influence going “back to the beginning”. Whether or not that was put with an advocate’s flourish, the absence of any submission to the effect that the defendant was incapable of conducting his own case is clearly significant.

22 In reaching my decision to refuse the application for adjournment I did keep in mind what the High Court had said in State of Queensland v JL Holdings Pty Limited (1997) 189 CLR 146 but did not consider that anything said in that case prevented me from taking the course that I proposed to take. I should note that no submission was put to me to the effect that there were other defences that might have been propounded if the hearing date were vacated.

23 In all the circumstances, I considered that in the exercise of my discretion I should refuse the application to vacate the hearing date and I so ruled.

24 Later that morning, on his application, I gave Mr Duncan leave to withdraw, and thereafter the defendant conducted his own case. It should be noted that he appeared ready to take over that role.

The medical evidence as to the plaintiff’s mental condition

25 It was common ground between the parties that the plaintiff had always been extremely reluctant to obtain any medical assistance and that she refused to see doctors for most of her life. There is no evidence to suggest that the plaintiff visited any health professional prior to seeing Dr. Roberts-Smith in August 2006. Although that visit appears to have occurred in the context of an application by the defendant for a carer allowance, Dr Roberts-Smith described her condition at that time as suffering from “dementia-Alzheimers” and that he considered the condition to be permanent and not likely to improve. He also indicated that in his opinion the plaintiff needed help with personal care and that the plaintiff was cognitively impaired.

26 On 8 May 2007 and again on 14 May 2007, the plaintiff attended Dr Samantha Lander of the Chatswood East General Medical Centre. She had been brought to Dr Lander’s rooms by the defendant and Mr Johnson. Dr Lander found that on the first of those occasions, the plaintiff was oriented to person, but not to place or time, that she was very resistant to questioning or examination and was verbally aggressive. Dr Lander made a presumptive diagnosis of dementia. On the second of those occasions, Dr Lander found that the plaintiff remained resistant to intervention, and expressed the view that she had serious concerns about the plaintiff’s capacity to manage her life decisions and financial affairs.

27 On 15 May 2007 an initial assessment of the plaintiff was attempted at the plaintiff’s home by Ms Sarah Goodsell of the Mercy Complex Care, a body associated with Mercy Community Care, and by Ms Daphne Cluness, a registered nurse from Hornsby hospital. In a report subsequently provided by Ms Tracy Kemmett of Mercy Community Care, it was recorded that on that occasion, the plaintiff had presented as disoriented, confused and suspicious.

28 On 22 May 2007 a further assessment was made again at the plaintiff’s home by a senior care worker, Helga Thom. On that occasion, the plaintiff was described as being consistently aggressive towards the care worker and extremely resistive to intervention or assistance. The care worker also expressed her concern over the extent of the plaintiff’s dementia and the level of care she would need.

29 Ms Kemmett’s notes further record that on 31 May 2007 the care worker made a fourth visit to the plaintiff, but that the plaintiff still showed no sign of recognition of her and was not receptive. A further note records that on 13 June 2007 the care worker again visited the plaintiff at her home and noted that the house in which the family lived was in a mess, even worse than it had been previously, and that the plaintiff was inappropriately dressed for the cold weather, wearing a summer skirt and top. The notes continue to the effect that on 4 July 2007 the plaintiff was very aggressive and wanted the care worker to leave.

30 Similar visits continued until 23 July 2007, by which time the conclusion had been drawn, partly as a result of an ACAT assessment, that the plaintiff had high level needs. It was recommended that she be referred to a dementia specific nursing home for permanent residential care.

31 As already noted, on 5 July 2007 Mr Johnson died and on the same day the plaintiff was admitted to Hornsby hospital. She stayed there until 30 July 2007, at which time she was transferred to Grathwaite Nursing Home at North Sydney. She has remained there until recently, when the nursing home was closed, and when she was relocated to another nursing home.

32 At some time between the plaintiff’s admission to Hornsby hospital on 5 July 2007 and 24 July 2007, the plaintiff was evaluated by Dr Stephanie Polley, an advanced trainee in geriatric medicine at Hornsby hospital. Dr Polley reported that the plaintiff was found to have severe dementia of the Alzheimers type, and that cognitive testing in hospital revealed a Folstein MMSE of 10/30. Dr Polley also noted that the plaintiff was unaware of her surroundings and had poor comprehension and retention of information. She concluded that the plaintiff required the appointment of a guardian to make decisions in regard to health care and accommodation needs, with coercive power to enforce her residence in a secure nursing home. She also concluded that that plaintiff required a financial manager to be appointed, as she was unable to attend to her finances.

33 In Ms Smith’s application to the Guardianship Tribunal, made on 13 July 2007, she expressed the view that the plaintiff suffered from dementia. The same view was expressed by the defendant in his application to the Tribunal two weeks later on 26 July 2007. The only difference between the opinions expressed by Ms Smith and those expressed by the defendant was that in the opinion of Ms. Smith, the plaintiff had been under such disability for seven years, while in his application, the defendant described the plaintiff’s condition as having been “progressive with good and bad hours over pass (sic) two years, dependent (sic) on adult conversation to improve but does not always work, been quite confused week of 23 July”.

34 In its reasons for decision delivered on 17 September 2007, the Guardianship Tribunal noted that the parties before it, which included both Ms Johnson and the defendant, did not dispute the evidence presented in relation to the plaintiff’s disability and further that all of the plaintiff’s children agreed that their mother was no longer capable of managing her financial affairs. The Tribunal also recorded that the defendant had given evidence that this had been the case for some time and specifically that the plaintiff had ceased doing the banking at the beginning of 2006.

Other evidence as to the plaintiff’s mental condition

35 The defendant gave detailed evidence as to his observations of the plaintiff’s mental condition. He was of course in a good position to do so as he lived in the same house as she did and had very close day to day contact with her. He agreed that her mental condition had been declining and that by May 2007 she had deteriorated significantly from her condition a few months earlier. He said that at times the plaintiff was in a delirious state, while at other times she seemed more to disengage from the world and do nothing but sit in the sun. However, the defendant maintained that the plaintiff had “good days” and “bad days”. The days on which she was either delirious or had disengaged from the world were what he called “bad days”. He said that there were fewer and fewer “good days” and more and more “bad days” as time went on, and that by May 2007 there were very few “good days”.

36 However, the defendant maintained that on “good days”, the plaintiff was in as good a mental condition as she had been in earlier times, even as long as 5 or 10 years earlier.

37 Ms Smith, the plaintiff’s daughter, gave evidence to a somewhat different effect. She agreed that the plaintiff had been declining over the years and that by May 2007 she had deteriorated significantly. By that time, she stopped attempting to speak to her mother over the telephone as she could make no sense of what her mother was saying. The only way she could communicate with the plaintiff was by visiting her at home, which she usually did every second Sunday. Her evidence was that even during those visits, her communications with the plaintiff were extremely limited and that she had formed the view by May 2007 that the plaintiff had no capacity to look after her own interests.

38 There were two other witnesses who gave evidence on this issue. The first witness was Michael Bourke, who had been a friend of the defendant but had known the plaintiff and Mr Johnson for some time. Mr Bourke visited the family home in May 2007 at the request of the defendant. I will return later to other aspects of Mr Bourke’s evidence, but on this particular topic, Mr Bourke described conversations he had had with the plaintiff on the morning of Sunday 13 May 2007. Those conversations appeared on the surface to be relatively normal. However, under in cross-examination, Mr Bourke agreed that the plaintiff tended to meander from topic to topic, although within each topic she was coherent. Nevertheless, it should be noted that the topics on which the conversations focused related to matters that had occurred quite some time earlier. Mr Bourke formed the view that the plaintiff was quite lucid in the conversations he had with her about those matters, but that she did not have the attention span that she had had when he had last spoken to her in about 2000. He said that he noticed that her habit of moving conversations off onto different topics resulted in topics under discussion not being completed.

39 The other witness was a Mrs Jeffrey, who had been the family’s next door neighbour for some years. Her evidence was not of any great assistance, partly because she had little recollection of dates, and partly because she had not had much contact with the plaintiff or the rest of her family during 2007. Nevertheless, Mrs Jeffrey appears to have formed the same view as had the other witnesses, at least to the extent that she agreed that the plaintiff had deteriorated during 2007and that her mental condition was far poorer by that time than it had been previously.

The events of 14 - 17 May 2007

40 Much of the evidence centred on the events of 14-17 May 2007, and in particular on the plaintiff’s mental state during that period. The defendant’s evidence was to the effect that at least on 14 May 2007, the plaintiff was having what he called a “good day”. He gave evidence that at some time during the course of that day, he had a conversation with his father and the plaintiff in his parents’ bedroom, in the course of which the plaintiff said: “We’ve decided we want to write two equal cheques from the Maxi-Direct account. One of those is for a joint account between you and your father”. He says that the plaintiff then stood up, and picked up a cheque book and asked “what is the current balance”. On being told that the balance in the account was $540,000 plus a few dollars, she asked the defendant to come with her as she wanted to talk about some things.

41 The defendant went on to say that he and the plaintiff then went to the front verandah, where after an initial conversation about earlier family events, she said to him: “Right then, I want to write out these cheques. How much was in the account again?” According to the defendant, after being told, again, that the amount was $540,000 and that if she was writing out two cheques then each cheque would be $270,000, the plaintiff handed him the cheque book and said: “Write down the amount on each and write down your father’s name on one of the cheques and your full name on the other cheque”

42 The defendant’s evidence was that after he did what the plaintiff had instructed him to do, he left the cheques in the cheque book and suggested to the plaintiff that she should sign and date those cheques before witnesses, preferably at the bank. He then went on to give evidence about how he and his father opened the various bank accounts and to describe how, on the morning of Wednesday 16 May 2007, Mr Johnson, the plaintiff and he walked to the local branch of the Westpac Bank, at which the plaintiff had her cheque account. He said that the plaintiff spoke privately to an enquiries officer whose name was Ms Sawti and also to another Westpac staff member. After several minutes, the plaintiff returned and said “Everything is set”. According to the defendant, she also said that she had told the manager that she was signing the cheques for the benefit of her husband and her son and her reasoning for it.

43 Mr Bourke’s evidence was somewhat different. He said that on that Monday, 14 May 2007, he slept late and rose at around 10am or 11am. What must have been a significant period of time afterwards, he observed Mr Johnson and the defendant going out to the front verandah where the plaintiff was sitting. He recalled that he made himself a cup of coffee and then went to the front of the house, where he stood and listened to the conversation that was taking place on the verandah. He gave evidence that the defendant was quiet during the whole of the conversation but that he heard Mr Johnson say: “We have to transfer money from your account into a joint account in your name and Andy’s name. If we don’t do this, then Karen [i.e. Ms Smith] says David [i.e. the third child of the marriage between the plaintiff and Mr Johnson] will get 1/3 of the money. We need you to choose which of the two banks we have looked at that you prefer. One of them has higher interest rates, but it also has higher fees”.

44 Mr Bourke said that he did not hear any reply from the plaintiff. He then observed the defendant walking back into the house. Mr Johnson and the plaintiff were still on the verandah and Mr Bourke heard a conversation to the following effect:

The plaintiff: “Go and get the cheque book”.
Mr Johnson: “I have brought it out already”.
The plaintiff: “What if something happened to you? Some of the money should be in Andy’s name”

45 There was a further matter on which there was a conflict of evidence. Ms Smith gave evidence to the effect that she visited her parent’s home on the morning of Sunday 13 May 2007 but that she did not see Mr Bourke there at that time. Mr Bourke likewise did not recall seeing Ms Smith there on that day. However, according to Mr Bourke, he spoke by telephone to Ms Smith in the evening of that day, in the course of which he told Ms Smith that her parents had made up their minds to carry out the plan that she had recommended, presumably to have transferred out of the plaintiff’s account the sum of $540,000. His evidence was that Ms Smith appeared to be pleased and that she had said:

“It is essential that the money be transferred before any incompetency hearing. I have told them what they have to do. The $540,00 must be transferred out of mum’s account”.

46 Ms Smith denies having any conversation with Mr Bourke on that day and specifically denies saying the words attributed to her. Her evidence was that the first thing she heard was when she was told by her father that some funds had been put into a joint account in the names of himself and the defendant. She said that at the time she had assumed that the amount involved was only a small amount that had been drawn out of a joint account in the name of Mr Johnson and the plaintiff at the Macquarie Bank. She said that she had assumed that as that account was a joint account in the names of her father and her mother, her father was entitled to draw out of that account such amount as he wished without having to obtain the consent of the plaintiff. Her evidence was that she only learnt of the true nature and extent of the transaction when the defendant told her about it after the death of their father.

The relationship between the plaintiff and her family

47 Despite the defendant’s attempt to cast doubt on the issue, I have no hesitation in finding that by May 2007, the defendant was the principal carer of the plaintiff. He attended to the household chores of cooking, cleaning, washing and otherwise attending to the physical wellbeing of the plaintiff. It is true that the family’s financial affairs were being attended to by Mr Johnson, the physical needs of the plaintiff were principally attended to by the defendant. It was only as a consequence of the care and assistance of the defendant that the plaintiff and Mr Johnson were able to remain in their home, at least until Mr Johnson’s death.

48 It is also clear that the plaintiff, as well as Mr Johnson, was extremely fond of the defendant and most grateful for his assistance. This came through very clearly from the evidence of Mrs Jeffrey who stressed how proud the plaintiff and Mr Johnson were of their children, particularly the defendant.

49 For some time prior to May 2007, the defendant had no occupation or employment other than as the full time carer of the plaintiff and to a lesser degree, his father. There was no evidence of his having any other family or social life or indeed any particular interest or hobby that would have competed with the attention that he gave to his parents.

50 Mrs Jeffrey’s evidence was to the effect that the plaintiff and her husband were also very proud of Ms Smith, who held a law degree and was employed as a teacher. There is no doubt that the plaintiff, as well as her husband, placed significant emphasis on any opinion or advice that might have been voiced by Ms Smith.

51 The third child of the marriage, namely David Johnson, had fallen out of favour with the plaintiff as well as with his father. There is no evidence to suggest that he was in any way involved in the transactions the subject of these proceedings.

The witnesses

52 I turn then to the witnesses who gave evidence, starting with Ms Smith. I am prepared to accept most of her evidence as being truthful and accurate, although I do have some difficulty with the evidence she gave in relation to not knowing of the transaction in issue until after her father died on 5 July 2007. That evidence is in conflict with the evidence of Bourke. I found her to be, not surprisingly, emotionally involved in this matter and to be somewhat dismissive, if not contemptuous, of the defendant, who clearly did not share her control of detail or her articulate and organised approach.

53 So far as the defendant is concerned, I found him to be most uncomfortable in the witness box, suspicious of questions which were put to him, and often taking an extremely long time to answer even relatively simple questions. His recollection of some events was at times quite clear whereas at other times he had very little recall and was generally vague in such recollections as he had. In particular, I found his recollection of the central events in question to be unsatisfactorily vague. When confronted with questions which required him to commit himself to particular positions, particularly where he was suspicious of the significance of those positions, he attempted to avoid answering the questions put to him.

54 Having said that, I would not dismiss all of his evidence as unreliable. At times I formed the impression that he was attempting to assist the court to the best of his recollection. However, he too has become extremely involved in this matter, and that emotional involvement has adversely affected the reliability of his evidence.

55 Where his evidence and the evidence either of Ms Smith or Mr Bourke conflict, I prefer the evidence of those other persons in preference to the evidence of the defendant.

56 The next witness who was called by the defendant was Mr Bourke. I found him to be an impressive witness. He did not appear to show any bias towards the defendant, or towards anyone else. I found that his evidence was clear and I formed the view that he was reliable witness, with no apparent axe to grind. Where his evidence is in conflict with either the defendant or Mrs Smith, I prefer his evidence.

57 The only other witness called by the defendant was Mrs Jeffrey, the lady who lived next door. I see no reason why I should disbelieve any of Mrs Jeffrey’s evidence as I found her to be a truthful and reliable witness. I do not consider that her evidence was in conflict with the evidence of any other witness.

Further findings of fact

58 As already noted, there was no dispute that the plaintiff’s mental state had deteriorated significantly by May 2007. However, I accept the defendant’s evidence that she had “good days” and “bad days”. Some “bad days” were worse than others. Sometimes the plaintiff seemed to disengage from her surroundings and did nothing other than sit in the sun. On other “bad days”, she was much worse. She seemed to have no comprehension of her surroundings, and was described by the defendant as being in a “delirious state”. Senior counsel for the plaintiff used the vernacular of the plaintiff being “away with the pixies”, a description that the defendant seemed to accept.

59 However, the defendant also claimed that the plaintiff had “good days”, although the number of “good days” was steadily decreasing. By May 2007 there were very few “good days”.

60 Where the defendant’s evidence diverges from that of Ms Smith is as to the quality of the “good days”. It was the defendant’s evidence that when the plaintiff was having a “good day” she was totally in control of her mental facilities, which were as good as they had been many years earlier. By contrast, the evidence of Ms Smith was that the plaintiff’s mental condition had so deteriorated by May 2007 that even her ability to converse and communicate about the most simple of things was severely impaired on each of her visits. I find that unless it be the case that Ms Smith only had contact with the plaintiff on her “bad days” and never on her “good days”, (which is unlikely given her uncontradicted evidence that she visited her parents regularly each fortnight) even on her “good days” the plaintiff’s mental capacities were nowhere near as good as they had been in earlier years.

61 By way of illustration, the defendant said that the plaintiff was having a “bad day” on the occasion of her first visit to Dr Lander, that is to say on 8 May 2007, but that on the occasion of her second visit, on 14 May 2007, she was having a “good day”. Yet Dr Lander’s note of the events of that second visit was to the effect that the plaintiff remained resistant to any intervention and that Dr Lander had serious concerns about the plaintiff’s capacity to manage her life decisions and financial affairs. That note is hardly consistent with what the defendant claims was the defendant’s mental state on a “good day”.

62 In his submissions, the defendant pointed to Dr Lander’s comments as supporting his submission that on 14 May 2007 the plaintiff exhibited no apparent mental deficiency other than her resistance to “any intervention”, which he submitted was a reference to surgical intervention in relation to her hernia. I do not read Dr Lander’s notes in that way. The doctor’s serious concerns about the plaintiff, as expressed in Dr Lander’s subsequent written letter to the Guardianship Tribunal, certainly confirms her view that the plaintiff’s mental condition even on 14 May 2007 was far from what it would have been in the past.

63 Similarly, Mr Bourke’s evidence of his conversation with the plaintiff the day before does not suggest that the plaintiff’s mental capacity was anywhere near the same level as it had been in years past.

64 Having regard to all of the evidence, including the medical evidence to which reference has already been made, while I accept that there were “good days” and “bad days”, I do not accept the defendant’s description of the plaintiff’s “good days”. I find that even on days that the defendant would describe as “good days”, the plaintiff’s mental capacity and abilities were significantly impaired, the level of impairment varying only in extent as between “good days” and “bad days”.

65 I turn then specifically to the events of 14 May 2007, which I accept was that the defendant would class as a “good day”. In his principal affidavit of 12 May 2008 the defendant gave a detailed narrative of the events of that day and on subsequent days. I have set out the substance of that narrative. I also have the evidence of Mr Bourke, to which I have likewise referred above.

66 I am unable to accept the defendant’s evidence in its entirety. There are a number of reasons for this. First, although the defendant has set out in detail the conversations he says he had with the plaintiff on that day, his evidence in the witness box was vague about those events. Although some nine months have passed since he swore his affidavit, I do not think that that period of time would so erode his recollection as to explain his unsatisfactory recall of those events in the witness box. By way of example, I note that when he was pressed on the issue of whether he wrote his name as an additional payee on the cheque which was ultimately deposited to the credit of his joint account with his father, he was totally unable to shed any light on that issue.

67 Second, his evidence was vague and unsatisfactory as to the order in which events occurred on that day. In particular, his evidence as to whether his conversation with the plaintiff occurred before or after the other events of that day, including the visit to Dr Lander, left me in serious doubt as to his actual recollection of the events of that day. Further, his evidence is inconsistent with that of Mr Bourke, whose evidence I prefer. The defendant also deposes to having had his conversation with his mother at “some time during the day”. The paragraph dealing with that subject matter follows after the paragraphs in which he describes the family’s visit to Dr Lander. Yet in his evidence he places the visit with Dr Lander early in the afternoon.

68 Third, there are some internal inconsistencies in his own description of events. For example, he gave evidence that the plaintiff said: “We’ve decided we want to write two equal cheques from the Maxi-Direct account. One of those is for a joint account between you and your father”. He says nothing as to what was said as to the identity of the payee of the second cheque. Nor is there any explanation how it was that he had had a conversation with his father at around 9:00 a.m. the same day, presumably before his conversation with his mother “some time during the day”. Yet in that conversation he deposes to his father saying: “I still haven’t selected a bank for the joint account”. No explanation is offered as to what “joint account” he understood his father to be referring to.

69 Further, when he claims the plaintiff told him to put his name on the other cheque during the course of his conversation with his mother, he does not refer to any reaction on his part. Instead, he deposes to a conversation with his father on 17 May 2007, some 3 days and a number of visits to various banks later, where he deposes to his father saying to him, as they left the National Australia Bank, words to the following effect:

“Your mother wants you to open a savings account at the Commonwealth Bank in your sole name for the other cheque”.

He says he replied:
“Really? Thank you very much. I won’t use the money unless something happens to you or Mum”.

70 He continues his narrative by saying that when he and his father, on 17 August 2007 walked into the Commonwealth Bank at Lindfield and opened the account, presumably in his sole name, he looked at the cheque and saw that it had his name on the cheque and that at the time he was surprised because he thought that the cheque with his name on it would be deposited into the joint account. I find that evidence to be quite unsatisfactory.

71 Fourth, I find his evidence also to be inconsistent with that of Mr Bourke, whose evidence I prefer. As I have earlier recorded, Mr Bourke recalls the conversation on the front verandah between the plaintiff and Mr Johnson in quite different terms from those deposed to by the defendant. Mr Bourke’s evidence was to the effect that the defendant was present while the conversation took place between his parents on the verandah. The conversations as deposed to by Mr Bourke are also inconsistent with the conversations deposed to by the defendant in that if the defendant was present at the time of the conversation between the plaintiff and her husband as recorded in Mr Bourke’s evidence, there would have been no need for the defendant to have a discussion with the plaintiff on the verandah in the terms deposed to by the defendant.

72 The defendant also gave evidence of the plaintiff having had conversations with two bank officers at Westpac on the morning of Wednesday 16 May 2007. The defendant named at least one of the bank officers as Ms Sawti. Neither Ms Sawti nor any other bank officer was called as a witness and there is no evidence as to why they were not called. Given that the mental capacity of the plaintiff has always been the most significant issue in these proceedings, and it must have been obvious to the defendant that this alleged conversation between the bank officers and the plaintiff would be a significant matter, I consider that I am entitled to draw the inference, which I do, that the evidence of those witnesses would not have assisted the defendant’s case.

73 Evidence was also given by the defendant to the effect that the dates on the two cheques, namely 17 May 2007 were not written by him. He relied heavily on the fact that in those parts of the cheques which he conceded having written, the numbers “7” were not crossed in the European style, whereas those numbers where they appeared in the date were crossed. Similarly he pointed out discrepancies in the manner that the capital “J” had been written.

74 It is unclear what flows from whether the date on the cheques was inserted by the defendant or by some other person. There is no dispute that the signatures appearing on the cheques are those of the plaintiff. If anything were to flow from this, I should record that I see no difference in the style of the writing and I attach no significance as to whether or not the numbers “7” were crossed or not crossed. Instances were pointed out in the course of the evidence where in one and the same document the defendant crossed some of the numbers “7” but did not cross others. I find that it is more likely than not that the dates were written by the defendant.

75 A final area of factual dispute that I propose to resolve is whether, and to what extent, Ms Smith was aware of the proposal to transfer the sum of $540,000 from the plaintiff’s bank account before the transaction actually took place. Ms Smith firmly denies that she was aware of the true nature and extent of the transaction before the death of her father on 5 July 2007. As I have already recorded, she was adamant in her evidence that her understanding was, until the evening of the day her father died, that a relatively small amount of funds were being withdrawn from an account at Macquarie Bank which had been a joint account in the names of her father and mother. By contrast, the evidence of Mr Bourke is equally clear to the effect that he spoke to Ms Smith by telephone on the evening of Sunday 13 May 2007 and had the conversation which, if accepted, would clearly establish that she was aware of the proposal even before it was put into effect. Ms Smith denies having any such conversation.

76 Although I do not consider that the resolution of this conflict of evidence has a significant impact on my decision in this case, resolve it I will. I have earlier indicated that where there is a conflict between them, I prefer the evidence of Mr Bourke over that of Ms Smith. I see no reason why Mr Bourke would fabricate such a conversation, while on the other hand, I can see that it might be embarrassing for Ms Smith to be found to have been aware of the proposed transaction in circumstances where she now seeks to have it set aside.

77 Yet I find nothing strange in Ms Smith having been aware of the proposed transaction. It is clear on her own evidence that she considered that the plaintiff had seriously deteriorated in her mental condition and it must have been obvious to her that it was merely a matter of time (and a short time at that) before the plaintiff’s financial affairs were taken out of her hands. Plans were already in place to have a guardian appointed to her. She was also concerned for her mother’s welfare and was conscious of the costs involved were she to have been institutionalised. Her legal knowledge must have made her realise that in the event that the plaintiff was declared incompetent, her assets, including the proceeds of her bank account at Westpac, would be frozen and that the family would be at the mercy of the plaintiff’s guardian who would control those funds. In those circumstances, it would undoubtedly have occurred to her that there would be some benefit to the family as a whole if the funds were moved from her account to other safe hands within the family.

78 For those reasons, I would not find it at all surprising that Ms Smith would have been aware of the proposal in question. After all, the relationship between Ms Smith and her father, and also between Ms Smith and the defendant, were at that time quite satisfactory, even if one takes into account the sometimes inevitable personality clashes between adult siblings.

79 Insofar as it may be relevant, I find that the conversation as deposed to by Mr Bourke did take place. However, I do not think that much turns on this finding. At the time, Ms Smith was neither the tutor of the plaintiff nor did she in any respect represent her or act as her agent. She stood in much the same position to the plaintiff as did the others in the family. The fact that she is bringing these proceedings in her capacity as tutor of the plaintiff has no legal consequence. What Ms Smith knew and did in May 2007 cannot be attributed to the plaintiff and it has no effect on the claim the plaintiff now makes on the defendant.

80 If anything, the foregoing finding might even have assisted the plaintiff’s case in that one might have thought that Ms Smith joined her father and her brother in taking whatever steps were taken to have the plaintiff sign the cheques in question. However, there is no evidence to that effect and I am not prepared to infer that the apart from knowing about the proposal, Ms Smith had any part in bringing it to fruition.

81 I also find that during the period approaching May 2007, the plaintiff’s husband was most concerned about her health, both physical and mental. That much is obvious not only from the evidence of Ms Smith and the defendant, but also from the evidence of the neighbour, Mrs Jeffrey. It was becoming obvious that the plaintiff’s health, including her mental health, was declining rapidly and that she was becoming incapable of making any sensible decisions either about her health or about her financial circumstances. She had stopped writing cheques some time earlier and was no longer acting as a productive member of the household. Even on “good days” she was not her old self, and it must have been obvious to Mr Johnson and to the defendant that the plaintiff was no longer capable of reasoning and had to be guided. She had not reached a vegetable state, but was heading rapidly towards it.

The plaintiff’s submissions

82 As I have noted earlier, Senior Counsel for the plaintiff put his submission in two alternative ways. First, he submitted that the plaintiff’s mental condition was such that she did not have the capacity to dispose of the funds in question. Alternatively, he submitted that if, contrary to his first submission, the plaintiff did have such capacity, then nevertheless in all the circumstances the defendant was still obliged to return their proceeds.

83 I deal with those two submission in turn.

First Submission: Lack of Capacity

84 The first submission of the plaintiff is effectively a plea of non est factum. That principle was considered at some length by the House of Lords in Gallie v Lee [1971] AC 1004. In that case, Lord Reid said at 1015-1016:

“The plea of non est factum obviously applies when the person sought to be held liable did not in fact sign the document. But at least since the sixteenth century it has also been held to apply in certain cases so as to enable a person who in fact signed a document to say that it is not his deed. Obviously any such extension must be kept within narrow limits if it is not to shake the confidence of those who habitually and rightly rely on signatures when there is no obvious reason to doubt their validity. Originally this extension appears to have been made in favour of those who were unable to read owing to blindness or illiteracy and who therefore had to trust someone to tell them what they were signing. I think that it must also apply in favour of those who are permanently or temporarily unable through no fault of their own to have without explanation any real understanding of the purport of a particular document, whether that be from defective education, illness or innate incapacity”.

85 The other members of the House delivered speeches much to the same effect.

86 That decision was subsequently approved by the High Court in Petelin v Cullen (1975) 132 CLR 355 where the Court said at 359-360:

“The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence. All this is made clear by the recent decision of the House of Lords in Saunders v. Anglia Building Society (Gallie v. Lee) “

87 Reference is also made to the decision in Beverley v Watson [1995] ANZ ConvR 369, a decision of Owen J of the Supreme Court of Western Australia, in which his Honour stated the following:

“The contract of a person of unsound mind is binding upon him unless it can be shown that at the time of making the contract he was wholly incapable of understanding what he was doing and that the other party knew of his condition. In Imperial Loan Co v Stone [1892] 1 QB 599 Lord Esher MR said at 601: "When a person enters into a contract, and afterwards alleges that he was so insane at the time that he did not know what he was doing, and proves the allegation, the contract is binding on him in every respect whether it is executory or executed, as if he had been sane when he made it, unless he can prove further that the person with whom he contracted knew him to be so insane as not to be capable of understand what he was about."

The onus of establishing that the contracting party was mentally incapable at the time when the contract was entered into lies on the person seeking to set aside the transaction…Of course, mental disabilities are not necessarily present at all times. A person may be incapable due to mental disturbance at one time but quite capable at another. In such a case, the dicta of Griffiths CJ in McLaughlin v Daily Telegraph Newspaper Co Ltd (No 2 ) [1904] 1 CLR 243 at 277, is apposite: 'It is not disputed, however, that when it is once established that a person is of unsound mind the burden of making out that a particular transaction took place during a lucid interval is cast upon the person alleging the fact."

Thus, the person who alleges that a contracting party is of unsound mind must first satisfy the Court of that fact. Only then does the burden shift to the other party to establish that the transaction occurred at a time when the contracting party possessed contractual capacity”

88 Later, His Honour continued as follows:

“The extent or degree of unsoundness of mind must be established depends on the nature of the transaction under scrutiny. In Gibbons v Wright [1954] 91 CLR 423 the court said at 438: "The principle which the case supports and for which Boughton v Knight; Jenkins v Morris; Birkin v Wing and Estate of Park may also be cited, appears to us to be that the mental capacity required by the law in respect of any instrument is relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of the transaction when it is explained. As Hodson LJ remarked in the last-mentioned case, 'one cannot consider soundness of mind in the air, so to speak, but only in relation to the facts and the subject-matter of the particular case'. Ordinarily the nature of the transaction means in this connection the broad operation, the 'general purport' of the instrument; but in some cases it may mean the effect of a wider transaction which the instrument is a means of carrying out..."

89 Applying those principles to the present case, it is the plaintiff who bears the onus of proving their applicability. I am not satisfied that the plaintiff has discharged that onus. Further, insofar as the onus shifts to the defendant to prove, in circumstances where the plaintiff had some lucid intervals, that the transaction in question took place during such an interval, I am satisfied that the defendant has discharged that onus.

90 I have already noted that I accept the defendant’s evidence to the effect that on 14 May 2007, the plaintiff had a “good day” in the limited sense I have ascribed to it. She had not disengaged herself from her surroundings, let alone being “away with the pixies”. I am comforted in this conclusion by the evidence of Mr Bourke, who was able to observe the plaintiff on that day (and on the previous day) and whose evidence suggests that at least on the surface, the plaintiff appeared generally alert to her circumstances, and she was able to conduct a conversation at least at some level of rationality. It must also be kept in mind that what the plaintiff was asked to do was a relatively simple task. All she did was to affix her signature to two cheques, a simple mechanical exercise. That task was of such minor complexity that even a person with a reduced mental capacity would have been able to understand that what she was doing was signing two cheques. She had previously completed and signed the family’s cheques. I am satisfied that if asked on that day what she was doing, the plaintiff would have been able to respond to the effect that she was signing cheques.

91 The evidence does not satisfy me that at least on a “good day” her mental capacity had deteriorated so far that she was unable to appreciate that she was signing two cheques. It is not relevant in this context that she may not have understood all of the ramifications and consequences of signing those cheques. So long as she knew, in the broadest sense, what she was doing, the defence of non est factum would not be available to her. Accordingly, I do not accept the plaintiff’s first submission based on non est factum..

Second Submission: Equitable Principles

92 As already noted, the plaintiff puts forward the submission, in the alternative to the submission based on non est factum, that in any event, the defendant is still not entitled to retain the proceeds of the subject cheques. The plaintiff relies on a number of equitable doctrines in support of that submission namely the principles of “catching bargains”, unconscionability and undue influence.

93 Turning first to the submission based on the principle of “catching bargains”, the relevant principles were summarised by Kitto J in Blomley v Ryan (1956) 99 CLR 362 at 415, where his Honour said that the principle applied:

"whenever one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands."

94 In the same case Fullagar J at pages 401-402 compared the principles of “non est factum” and that of “catching bargains”. His Honour said:

“The case is not one of that comparatively rare class where a man's faculties, whether from age or natural infirmity or drink or any other cause, are so defective that he does not really know what he is doing — that his mind does not go with his deed. In such a case his instrument is void even at law — non est factum. Nor is it a case like Gore v Gibson, as to which see Gibbons v Wright. It is a case, I think, in which relief could be obtained by the defendant, if at all, only in equity. And, when we look for the principle on which equity did grant relief in such cases, we find as so often in equity, only very wide general expressions to guide us. There was, I think, a typical difference in approach between equity and the common law. To the common law the transaction in question might be void or voidable, but the primary question was as to the reality of the assent of the person resisting enforcement of the contract. Equity traditionally looked at the matter rather from the point of view of the party seeking to enforce the contract and was minded to inquire whether, having regard to all the circumstances, it was consistent with equity and good conscience that he should be allowed to enforce it”.

95 In my view, the facts in the present case are clearly such as to satisfy the requirements of the application of the principle. The plaintiff obtained no benefit from the transaction under challenge, it being the voluntary disposition by her of a substantial sum of $540,000. No contractual or other obligations were assumed by the recipients, for example to utilise the funds for her benefit. It might have been the subjective intention of Mr Johnson and the defendant to ensure that the plaintiff was well looked after in her old age, but no enforceable legal obligation arose out of the transaction. Indeed, as events subsequently unfolded, some of those funds have been used by the defendant for his own private purposes. It does not assist the defendant to say that the plaintiff always wanted him looked after. From the plaintiff’s point of view, this was a totally disadvantageous transaction.

96 It is also quite clear in light of the plaintiff’s mental condition that she was a person who was at a special disadvantage vis-a-vis Mr Johnson and the defendant. No attempt was made to provide her with independent advice of a legal, financial or of any other nature. Nor were any steps taken to obtain the assistance of any health care professional or government bodies. Indeed, I find that her purpose of the transaction and its timing was precisely to ensure that her funds were removed before the Guardianship Tribunal made orders dealing with the control of the plaintiff’s financial affairs.

97 Not to put the matter too finely, the intention of the defendant and his late father was to take financial advantage of the plaintiff by procuring her to sign the cheques that resulted in the transfer to them of the $540,000. I do not impute immoral or dishonest motives either to the defendant or to his late father. Undoubtedly in their own minds they were doing what they considered was beneficial not only for themselves but also for the plaintiff. However, the subjective motivation of the defendant and his late father are not the determinative factors here. I must consider the matter from the point of view of the plaintiff who was detrimentally affected as a result.

I reach the same conclusion when I apply the related principles of unconscionability. The locus classicus of the modern law relating to unconscionability is to be found in the decision of the High Court in Commercial Bank of Australia v Amadio (1983) 151 CLR 447. In that case Deane J (as his Honour then was) with whom Mason J (as his Honour then was) summarised the relevant principles at 474-475 in the following terms:


“The jurisdiction of courts of equity to relieve against unconscionable dealing developed from the jurisdiction which the Court of Chancery assumed, at a very early period, to set aside transactions in which expectant heirs had dealt with their expectations without being adequately protected against the pressure put upon them by their poverty (see O'Rorke v Bolingbroke). The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them, and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or “unconscientious” that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: “the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract” (see per Lord Hatherley, O'Rorke v Bolingbroke , supra, at 823; Fry v Lane; Blomley v Ryan at 428–9).

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 ; Watkins v Combes at 193–4; Morrison v Coast Finance Ltd at 713 ). Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In Blomley v Ryan (supra, at 405). Fullagar J listed some examples of such disability: “poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary”. As Fullagar J remarked, the common characteristic of such adverse circumstances “seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other”.”

98 The above principles have been further extended and refined in numerous decisions of appellate courts in Australia including Louth v Diprose (1992) 175 CLR 61 and Bridgewater v Leahy (1998) 194 CLR 457.

99 Again, I consider that all of the above elements are present in this present case. The plaintiff suffered from a special disadvantage when compared to the defendant and his father, such special disadvantage being such as to seriously affect her capacity to judge or protect her own interests. The defendant and his late father knew of this special disadvantage and took advantage of the opportunity presented by the disadvantage in an unconscientious manner. Once again, it is not sufficient, or indeed relevant that they may have had the best of intentions. The plaintiff is entitled to be considered in her own right. From that point of view, the transfer from her of the substantial sum in question constituted an unconscionable dealing on the part of the defendant and his father.

100 I might add at this point that in my view it makes no difference whether the unconscionability, or indeed the acts constituting “catching bargains” were attributable to the defendant, his late father, or even Ms Smith or Mr Bourke or to a combination two or more of them. If the transaction was unconscionable and it resulted in a particular person obtaining its benefit, then so far as that person was aware of the circumstances, and presumably even more so if he co-operated in the transaction, the above principles still apply.

101 Turning then to the third basis on which the plaintiff puts her case, namely that of undue influence, again I reach the same conclusion. The defendant in his defence asserts that he is entitled to the benefit of a presumption of advancement in relation to the transfer of funds from the plaintiff to him, he being a son of the plaintiff. While it is true that there is a presumption of advancement in the case of a transfer or property from a mother to her child (Brown v Brown (1993) 31 NSWLR 582; Nelson v Nelson (1995) 184 CLR 538), it is clear that such presumption is rebuttable. In the present case, there has been substantial evidence adduced not only to rebut the presumption, but to satisfy me that the influence operated in the opposite direction.

102 Before applying the principles of undue influence to the present case, I borrow with respect from what Barrett J said in Da Yun Xu v Fang Lin [2005] NSWSC 569, namely:

"[25]. The plaintiff contends that the transaction was brought about by the undue influence of the defendant. "Undue influence" was defined by Hodges J in Union Bank of Australia Ltd v Whitelaw [1906] VR 711 at 720:

‘... equity recognises that persons possessed of the usual capacity to contract may, as a matter of fact, not be free agents, and may enter into obligations under the pressure of what it calls undue influence. 'Influence', as I understand the term in this connection, is the ascendancy acquired by one person over another. ‘Undue influence’ is the improper use by the ascendant person of such ascendancy for the benefit of himself or someone else, so that the acts of the person influenced are not, in the fullest sense of the word, his free, voluntary acts.’

[26]. In Johnson v Buttress (1936) 56 CLR 113 at 134 Dixon J explained the principles relating to relief from the exercise of undue influence:

’The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor's will or freedom of judgment in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the deliberate contrivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act. But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected. When they stand in such a relation, the party in the position of influence cannot maintain his beneficial title to property of substantial value made over to him by the other as a gift, unless he satisfies the court that he took no advantage of the donor, but that the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee.’


…

[29]. In Bank of Credit and Commercial International SA v Aboody [1989] 1 QB 923 at 967, the English Court of Appeal propounded the requirements of actual undue influence:

’... a person relying on a plea of actual undue influence must show that (a) the party to the transaction (or someone who induced the transaction for his own benefit) had the capacity to influence the complainant; (b) the influence was exercised; (c) its exercise was undue; (d) its exercise brought about the transaction.’"

103 I find that the elements of undue influence are also comfortably established in the present case. The plaintiff was, even on a “good day”, in a mentally weakened state. She was also at all times in a physically weakened state and despite the obvious reluctance of the defendant to concede as much, he was the principal carer of his mother as at May 2007 and had been such for some significant time. It is true that Mr Johnson also assisted in housekeeping matters, but at all times the principal responsibility for his mother’s physical welfare fell on the defendant. This of course is nothing to be ashamed of, but it did render the plaintiff to a large extent dependent on him, and to a lesser extent on her husband. In those circumstances, it is hard to resist the clear conclusion that when the proposal was put to her that she transfer to her son and her husband the sum of $540,000, constituting substantially the whole of the proceeds of the sale of her property in Queensland, she was in no position to resist even if she did appreciate the consequences of her doing so.

104 I have no doubt that the plan to transfer the $540,000 from the plaintiff’s bank account in the matter described was one devised by her family. The plaintiff was not in a mental state to do so and there is nothing in the evidence to suggest that the plaintiff was in any way responsible for initiating the transaction. The moving parties included the defendant and his late father, particularly once they had formed the view that the plaintiff was no longer in a position to execute a valid power of attorney in anyone’s favour. I also find that at least one of the reasons for the defendant requesting the presence of Mr Bourke was to assist him persuading the plaintiff to accede to the plan.

105 In the circumstances, I am also of the view that the plaintiff is entitled to succeed by application of the principles of undue influence.

106 I should add that although I have not dealt with each and every point raised by the defendant in his written or oral submissions, I have carefully considered all of them. A copy of the defendant’s written submissions have been initialled by me and placed with the papers.

107 I considered in particular the submission made by the defendant as to his theory why the expert examination of the plaintiff scheduled for 18 June 2008 was cancelled by Ms Smith. It is an interesting theory and one that might or might not be correct, but the evidence does not permit me to make a finding that would substantiate it. It remains only a theory. In any event, I consider that even if proved, it would not have any bearing the outcome of these proceedings.

108 Dealing with one other submission of the defendant, I am of the view that the difference between the plaintiff’s MMSE scores in July 2007 and January 2008 is equally consistent with the defendant’s evidence of the plaintiff having “good days” and “bad days”. In any event, in the absence of detailed evidence about the significance that test I would not be prepared to conclude that I was not satisfied that the plaintiff suffered from dementia. The evidence as a whole, including the medical evidence, leaves me in no doubt that the plaintiff had been suffering from dementia for some considerable time prior to May 2007 and that by that time, her condition had significantly deteriorated.

109 I am also satisfied on the evidence that the amounts of $261.72, $57.85 and $1,700.00, referred to respectively in paragraphs 12, 13 and 14 of the Statement of Claim were withdrawn by the defendant for his own benefit and without the consent of the plaintiff. Accordingly, I propose to grant the relief sought by the plaintiff in paragraphs 1 and 3 of the Statement of Claim, as well as granting the parties liberty to apply in the event that any difficulties are encountered in giving effect to my orders.

110 However, as presently advised, I do not consider it necessary or appropriate to make an order to the effect sought in paragraph 2 of the Statement of Claim. I have not heard the parties on the issue of further damages, but at the moment, I am not disposed to make any such order. Likewise I have not heard the parties on interest and costs. As to the former, I cannot presently see that I should make an order for interest given the form of the declaration and the order that I have indicated I propose to make. As to costs, I presently see no reason why I should depart from the general rule that costs follow the event. However, I am prepared to hear the parties on the issues of further damages, interest and costs.

111 The only formal order that I now make is to direct the parties to bring in short minutes to give effect to these reasons and that they do so within 7 days. If there is any disagreement between the parties as to what the short minutes should provide, the matter is to be listed before me for argument by arrangement with my Associate. If there is no disagreement between the parties, the short minutes should be delivered to my Associate so that I can make them in chambers without the parties having to incur any further costs.

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02/02/2010 - amendment to the cover sheet -appearance of defendant's counsel - Paragraph(s) coversheet