Stivactas v Michaletos

[1994] HCATrans 419

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S27 of 1994

B e t w e e n -

COSMAS STIVACTAS

Applicant

and

ARETE MICHALETOS

Respondent

Application for special leave

to appeal

MASON CJ
GAUDRON J

McHUGH J

Stivactas 1 8/8/94

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 8 AUGUST 1994, AT 11.41 AM

Copyright in the High Court of Australia

MR J.D. CUMMINS, OC: If the Court pleases, I appear for the

applicant with my learned friend, MR N. PERRAM.

(instructed by Slattery Thompson)

MR J.E. SEXTON: If the Court pleases, I appear for the

respondent. (instructed by Connery & Partners)

MASON CJ:	Mr Cummins.
MR CUMMINS:	If the Court pleases, there are two

applications, one is for an extension of time of a
period within which to lodge an application for

special leave and the second is for special leave

itself. We would simply rely on the Court's

general discretion under Order 60 rule 6 in

circumstances where there would appear to be no

prejudice to the respondent, or no prejudice

claimed, on the basis that if special leave were

granted that it would be an appropriate case where

the extension for the time should be granted.

The special leave question is if I might put

it, a short one. It is in Part I of our summary of

arguments. The question is whether the doctrine of

undue influence, as opposed to that of
unconscionable bargains, can apply to a situation

in which the desire to make the impugned

transaction originated with the donor rather than

the donee. If we might just add: not only the

desire but the whole transaction emanated from and

was insisted upon the donor and not the donee. So

it is not the type of usual case of undue

influence where there was some action or acts taken

by the donee at all.

Now, the brief statement of the facts are that

on 29 October 1987 the respondent signed three
documents of general power of attorney in favour of

the applicant and two forms of transfer under the

Real Property Act, each to the applicant and

expressed to be in consideration of $1. The

respondent was at the time 73 years old; the

applicant was 59 years old, and was and still is

the respondent's second-eldest nephew. The

applicant subsequently became registered as the proprietor of one of the respondent's houses at

Brookvale and some land at Clarence on the western

side of the Blue Mountains. At the time of the
signing of the documents referred to above, one,

the respondent was recovering from a cerebral

haemorrhage which he suffered about two months

beforehand.

MASON CJ:  we do not need to go through the facts; we are

aware of the facts, Mr Cummins.

Stivactas	8/8/94
MR CUMMINS:	Thank you, Your Honour.
McHUGH J:	Your difficulty is this, is it not, that you say

that the facts of the case make the case one of

unconscionable bargains, yet that is the point you

abandoned before the Chief Judge in Equity?

MR CUMMINS:  No, it was the other way round, Your Honour.

McHUGH J: Sorry.

GAUDRON J:  You had a concession to - - -

MR CUMMINS: That is the concession we are relying on,

Your Honour.

MASON CJ:  You are to be congratulated on the subtlety of

your argument. You have managed to convey to us

the very point you are relying on is, indeed, the

weakness in your case.

MR CUMMINS:  Your Honour, we put the situation that, if I

might go on - - -

GAUDRON J:	The problem, even though it is a concession, is this: given the concession and given the facts, is
this a suitable vehicle to elucidate any principle in relation to that Act?
MR CUMMINS:	We would submit that it is, Your Honour,

because, if we could go to page 3 of our written

submissions and specifically to the question under

Part IV as to why special leave should be granted,

we say that the judgments of President Kirby and

Justice of Appeal Sheller involve a serious

misapprehension as to the nature of undue

influence. As Justice Mason, as he then was, in

The Commercial Bank of Australia v Amadio said:

Although unconscionable conduct in this narrow

sense bears some resemblance to the doctrine

of undue influence, there is a difference

between the two. In the latter the will of

the innocent party is not independent and
voluntary because it is overborne. In the

former the will of the innocent party, even if

independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party

unconscientiously taking advantage of that

position.

GAUDRON J: But is that not descriptive of the situations

rather than an exposition of the general principles

to be applied in the situations?

Stivactas 8/8/94

MR CUMMINS: Well, if Your Honour pleases, what we submit

here is that where there was no act on behalf of

the applicant, who was the recipient of the gift,

and the intention of the donor was and, indeed, it

was put, badgered, on him, that she wanted the
property transferred. All he did was accept the
gift and he lost the case because it was held that

the solicitor giving the independent advice did not

give all of the options to the donor.

Now, what we say the difference in this case

to all of the other cases decided of undue
influence is that there was always some act on the

part of person receiving the gift, either of an

overbearing of the will, as distinct from a mere

acceptance of the gift. Now, the nearest case

which approaches that is Spong v Spong, which is

referred to in the judgment of Justice Sheller

where His Honour says that Spong v Spong is some

type of authority for the proposition that where,

even if the situation was that the recipient of the

gift took no part in initiating the gift, that the

law applied. But the facts were simply in that

case that it was simply a case of where, according

to Chief Justice Griffith at page 548 of that case:

when the transfer was signed the plaintiff,

was feeble-minded, weak and unable to transact

any business whatever.

So, he lacked capacity to do anything in that case.

So what we put to Your Honours is simply that all

of the traditional cases involving undue influence,

involve some act positive on the part of the

recipient of the gift and not, as we put it here,

where the whole intent emanated from the donor; was

insisted upon by the donor, and the only act of the

donee was to accept it. We say that that is a

difference and that, in those circumstances, it is

a proper vehicle for this Court to examine the

circumstances in which the doctrine of undue

influences applies.

GAUDRON J: But, on one view, your client did do something:

he obtained legal advice for her, independent legal advice, which, on analysis, or on the findings, was inadequate.

MR CUMMINS:  Yes.

GAUDRON J: That does take it a bit beyond merely being the

recipient of a gift, does it not?

MR CUMMINS: Well, one could assume that presumably, because

of the relationship between the parties, he must

have, one would assume, obtain some legal advice,

resulting in the fact that he then sent the woman

Stivactas 4 8/8/94

off to obtain independent advice herself. But, apart from that one act, there was nothing else done to show, or to evince, any - we will withdraw

the word "domination" - but there was no act on his

part in which her will was acted upon, so that

there was no free choice on her part.

GAUDRON J:  No, but it may have given her, if the advice was

inadequate, an impression somewhat different from

that which she would have obtained otherwise.

MR CUMMINS:  It may well have given her a different

impression but the situation simply was that at no

time did the applicant do anything other than, I

will use the expression "succumb", to her express

badgering, from time to time. It was no act on his

part at any stage in the whole transaction; either

the initiation of the original intention or the

carrying out of the transfer was done by any

positive act on his part.

Now, we would also submit, and it goes without

saying, that it would be a case where the doctrine of an unconscionable bargain would have applied on the facts in this case, but that case was

specifically abandoned, both at the - - -

McHUGH J:  I was getting my bearings then. I thought you

were for the plaintiff.	I forgot you were for the
defendant.

MR CUMMINS:  So I suppose I had better keep going while I am

ahead, Your Honour. So, Your Honours, we do not

feel that we can put any further submissions" to

you. We say that it is a proper vehicle.

MASON CJ: But, Mr Cummins, can I just put this to you on

undue influence: if there is a relationship of

trust and dependence between two individuals which

results in A wishing to confer a benefit upon B,

why, nevertheless, can there not be undue influence

constituted by B taking advantage of that

relationship of trust and dependence which has

given rise to the desire to confer the benefit?

MR CUMMINS:  We would say that that is not a case of undue

influence. It is a case of unconscionable

bargain. That is not the answer to Your Honour's
question though. Secondly, we would say that in

those circumstances the onus which is cast on the applicant has been satisfied in the circumstances

where there is an insistence upon the respondent,

the donor, that the gift proceeds. That is all we

feel we can assist with.

Stivactas 8/8/94

MASON CJ: Yes, thank you, Mr Cummins. Now, Mr Sexton, why

was it that unconscionable conduct was given away

as a ground for relief?

MR SEXTON:	I am not sure, Your Honour.
HIS HONOUR:	On the face of it, it seems a stronger case for

unconscionable conduct than undue influence.

MR SEXTON:  We accept that, Your Honour. I do not know why

it was not pressed.

MASON CJ: It seems incredible that a concession should have

been made.

MR SEXTON: That is so, Your Honour, but nevertheless,

Your Honour - it may be that the reason for that

was because it was clearly established that there

was a relationship of influence, and that -

McHUGH J:	What were the facts? What did you rely on for the influence?
MR SEXTON:	Your Honour, the facts were that the plaintiff

and the defendant were related and the plaintiff

had come to rely on the defendant over a period of

time - - -

GAUDRON J:  He was attending to her personal affairs and

business affairs.

MR SEXTON:	Yes, Your Honour.
GAUDRON J:	And her day-to-day needs while she was in

hospital and - - -

MR SEXTON: Yes, Your Honour.

McHUGH J: Yes, but what did he do in relation to this

transaction to influence her?

MR SEXTON:  Your Honour, it does not appear that he

influenced her in any way in particular to this
transaction but, as the Chief Justice said, what we

rely on in terms of the unconscientious conduct was

taking advantage of the transaction; not resisting

the transaction.

McHUGH J: That seems to me to be stepping into the area of

unconscionable bargaining.

MR SEXTON: That may be so, Your Honour, but nevertheless,

whilst there is a distinction between the two

areas, they do overlap to some extent. What we say

is that whilst there is a matter of labelling, it

may be preferable to label this as unconscientious

dealing or bargaining. Nevertheless, on the

Stivactas 6 8/8/94

principles of undue influence, this case does fall within the boundaries of that principle and it can

be decided in accordance with principle. So that

whilst there may be some criticism of the way in

which that concession was made, it does not mean

that the -

McHUGH J: It seems to me that Justice Mahoney did decide

the case on unconscionable bargaining, or close

enough to it.

MR SEXTON:  Yes, but he expressly, Your Honour, said that he

did not dissent from the trial judge's conclusions

or the principles which were inherent in the trial

judge's reasoning. That appears from his judgment

at page 70 of the appeal books, Your Honour. In
effect, what Mr Justice Mahoney did was to say it

may be preferable to label this as an
unconscientious bargain case, but that does not

mean that it was not appropriate to deal with it as

an undue influence case.

Your Honour, there is no doubt that there have

been cases in which, even though there has been no

overt act of influence but, nevertheless, where

there has been a gift made, the decision being made

by the donor to provide a gift to the donee, that

that has been held to fall within the area of undue

influence.

MASON CJ: They are relationship of influence cases, are

they not?

MR SEXTON:  Yes, Your Honour.

MASON CJ: Cases in which there is a prima facie presumption

of the exercise of undue influence?

MR SEXTON: Well, yes, Your Honour, although

McHUGH J: Which then casts the onus on the receiver to show

that the transaction was a purely voluntary and

well-understood act on the part of the donor.

MR SEXTON: Yes, Your Honour, but Louth v Diprose was a case

in which there was a relationship not dissimilar to

this one of - - -

MASON CJ: But that was unconscionable conduct. It was not

relationship of influence.

MR SEXTON:  That is so, Your Honour, but in that case there

was discussion about the fact that there was an

overlap of two areas of principle, and that was an
influence case. There was a relationship there

which led to the defendant in that case having to

Stivactas 7 8/8/94

rebut the presumption that the gift was

unconscionable.

McHUGH J: 

I must say I cannot help but feel that because of

the way the case was conducted the law of undue
influence has been stretched a bit in this case.

MR SEXTON: 

I do not resile from that, Your Honour. There

is not sufficient doubt, we would say, about the

ultimate decision in the case, whatever the label

for it, to justify special leave because of a

label.

MASON CJ: But, when you say, "not sufficient doubt about

the ultimate decision in this case", what do you

mean by that?

MR SEXTON:  About the fact that it was appropriate for there

to be intervention by equity on the basis of either

undue influence or unconscionable bargain.

MASON CJ: But that is not good enough, is it, if there is a

concession that unconscionable conduct was not the

basis of the claim?

MR SEXTON:  Your Honour, it is good enough if there is

sufficient to bring the matter within the category

of "undue influence", which we submit that there

is, because the trial judge and all of the judges

on appeal found that there was a relationship of

influence and that the applicant did not discharge

the onus of showing that the transaction was not

unconscionable.

MASON CJ:  I would have thought your strongest point is that

this case cannot, in the circumstances, including

the concession that was made, constitute a suitable

vehicle for the determination of any question of

general principle.

MR SEXTON:  That is one of the points that we make in

paragraph 9 of our written outline, Your Honour,

that because of those concessions, it is not a

suitable vehicle. The other concession that was

made was a concession which the trial judge had

some difficulty with, that the applicant did not

know about the defendant's lack of capacity. Both

of those concessions create difficulties when

considering whether this is a suitable vehicle to

look at the wider principle. If it please the

Court.

MASON CJ:  Yes. What do you wish to say in reply,

Mr Cummins?

MR CUMMINS:  I do not think there is anything further we can

usefully put, Your Honour.

Stivactas 8 8/8/94

MASON CJ:  The unusual facts of this case, including the

concession that it was not a case of unconscionable

conduct, make it an unsuitable vehicle for the

determination of any question of general principle.

The application is therefore refused.

MR CUMMINS: If the Court pleases.

MASON CJ: Do you apply for costs?

MR SEXTON:	Yes, Your Honour.
MASON CJ:	You do not oppose costs, Mr Cummins?
MR CUMMINS:	No, Your Honour.

MASON CJ: The application is refused with costs.

AT 12.03 PM THE MATTER WAS ADJOURNED SINE DIE

Stivactas 9 8/8/94