Truran v Cortorillo
[2011] VSC 488
•30 September 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT GEELONG
COMMON LAW DIVISION
S CI 2010 01600
| KATHLEEN MARY TRURAN | Plaintiff |
| - and - | |
| SALVATORE CORTORILLO and | Defendants |
| CHRISTIE TYLER PTY LTD |
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JUDGE: | MUKHTAR AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 August 2011 | |
DATE OF JUDGMENT: | 30 September 2011 | |
CASE MAY BE CITED AS: | Truran v Cortorillo | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 488 | |
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EQUITY ― Unconscionable conduct ― Exploitation of special disadvantage ― Woman’s distressed personal life with loneliness and affliction of depression ― Infatuation with man and promise of marriage ― Substantial transfers of money and property ― Equitable intervention ― Financial detriment ― Exceptional circumstances justifying equitable damages or compensation
RESTITUTION ― Moneys had and received ― Personal relationship ― Position of ascendancy ― Exploitation ― Payment induced and made on faith of promise to apply it for joint endeavour ― Deception ― Failed purpose ― Recovery of moneys paid
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms R Sofroniou | Senia Lawyers |
| For the Defendants | No appearance |
HIS HONOUR:
The plaintiff pleads her case as one of vulnerability to a man who took advantage of her at a time in her life when she was afflicted with loneliness and depression. At the relevant time the plaintiff was a 64 year old widow who was in a sound financial position, at least by assets. The first defendant was a 56 year old man who had been married. The plaintiff, a South Australian, had not been in Victoria long, and being in a state of depression from tragedy in her personal life, quickly fell in love with him in July 2009. She became infatuated with him, and accepted his proposal for marriage. She readily agreed to his financial requests. In a relationship which lasted, in all, about six months before he was discovered in December 2009 as being on the search for another he: (i) relieved her in that time of a substantial amount of money to buy a new luxury car; (ii) persuaded her to transfer to him the title to her home; (iii) obtained an interest free loan for his company (the second defendant); and (iii) obtained substantial funds ostensibly as a contribution for a “joint endeavour” for them to buy land at Lovely Banks for subdivision and profit making. Unknown to her, he was in financial difficulties and already in disputations and litigation with the vendor of that land. All up, the benefits or advantages she gave to him were worth $ 1 071 026.
Mrs Truran commenced these proceedings on 25 March 2010 making four distinct claims seeking recovery of certain property, and monetary compensation for what she has lost to him. Mr Cortorillo initially had solicitors acting for him to the stage of filing a defence, but became self represented soon after that because, so he told the Court, he could not afford lawyers.
I gave summary judgment for Mrs Truran on two of those claims, eventually without much resistance from Mr Cortorillo despite the contents of his defence.[1] In details I shall give later, the first of those claims was for recovery of a BMW luxury motor car purchased by her for $188 000 at his request and registered in his name. The second claim was for the return of the certificate of title for her home at Indented Heads which she had transferred to him, and a re-transfer of the title back into her name. The facts concerning those two non monetary claims remain relevant as they form an integral part of the body of facts concerning the seduction and deceit, and the exploitation of her vulnerability that forms part of her overall case, and the equity raised.
[1]Orders made on 11, 29 October 2010.
That left the two remaining monetary claims which concerned a loan of $345 000 from her at his request to the second defendant, and the giving over of $543 026 to him for the joint venture property development. Mr Cortorillo maintained, in the face of the application for summary judgment, that the loan agreement was interconnected with what he pleaded as their joint endeavour to buy land for development which he said was undertaken by her knowingly and voluntarily. I decided those claims ought go to trial to investigate the facts. [2]
[2]Orders made 23 November 2010,
As it turned out, after multiple indulgences were given to Mr Cortorillo to comply with significant court orders concerning discovery of documents to investigate how he dealt with the plaintiff’s money for the joint endeavour, he did not comply with a self-executing order. This had the effect of striking out his defence and allowing the matter to proceed to trial undefended. I will not go into procedural details, but as he was legally unrepresented (after the filing of a defence) he was given ample opportunities and much explanatory assistance from the Court ― as well as many warnings ― to make discovery and to understand the demands and significance of the discovery exercise. Having had the management of this case since its inception I found that his explanations for non compliance lacked conviction, and he was temporising. On 31 May 2011 I gave him a last chance to give discovery under a self executing order, and also ordered him to attend for an oral examination under s 57 of the Civil Procedure Act to be cross examined on his affidavit of documents, especially as he was now saying that the documents had been destroyed in a fire.
Mr Cortorillo went no further. On 10 June 2011 I received private correspondence from Nelson Partners, lawyers in Geelong saying they had “limited instructions” from him to inform the Court that he had been admitted to a psychiatric hospital in Geelong on 7 June 1011 and was in no position to comply with Court orders. The lawyers said they could not go on the record as acting for him. I ordered on 4 July that the case simply had to be fixed for trial as undefended. There is evidence that after four attempts the order was served on his mother on 22 July 2011 who said she would hand them to him when he got home. Nothing more has happened.
The case had to go on. Having conducted that trial, I would allow the two remaining claims. I see the claim on the loan of $345 000 to the second defendant as a straightforward documented claim, with an efficacious remedy at law not equity. The second concerns the recovery of $543 026 given by her to Mr Cortorillo for the purchase of the land at Lovely Banks. That claim was pitched on a number of alternative causes of action, and called for legal analysis on identifying the apposite cause of action or basis of equitable intervention, and the question of remedy. Although this matter was undefended that does not, I think, lessen the necessity for replete reasons, especially as the judgment sum exceeds $1 million.
The facts
The plaintiff’s evidence was adduced in the form of an affidavit by her sworn on 22 July 2011. That constituted the entirety of her evidence. I have no hesitation in accepting its contents. It is a comprehensive and well prepared document. What follows is an expurgated account.
The plaintiff, a South Australian, was born on 27 May 1945. She had one child, a son, to her husband John Truran. Her son, at the age of 21, died by suicide in 1990. Her husband died in December 2001. She resigned as a university senior lecturer in mathematics for health reasons, and moved from South Australia to Indented Head in Victoria in 2007. As a result of the death of her son and husband, and then the death of a niece in 2009, she became clinically depressed. The evidence shows she had been attending a clinic in Geelong since early 2008 and was diagnosed as suffering from bipolar disorder. She was being medicated for that condition.
Mr Cortorillo ran an interior design, upholstery and furniture business in Geelong of which Christie Tyler Pty Ltd the second defendant was proprietor. He was the company’s sole director and shareholder. Mrs Truran met him on about 19 May 2009 when she purchased some furniture. On 12 June 2009 (she can be precise with dates) Mr Cortorillo telephoned her and asked her out for dinner. She agreed. By July 2009 they commenced a relationship. She says in her affidavit:
9.I had mentioned to the first defendant at the commencement of our relationship that I was suffering emotionally and mentally and having great difficulty in coping with the loss of my family … I also revealed to him that I was suffering from severe depression and was taking antidepressant medication for the condition at the time. …
10.I had told the first defendant that I was new to town and felt much uprooted, having left my home and career in South Australia, and that apart from my sister I didn’t know anyone in the region or area of Geelong or its nearby outer suburbs. I confided in the first defendant and was very open with him about my life. I relied upon him as my sole support, apart from my sister. On reflection, I was very vulnerable and jumped at the opportunity to be able to release in conversation with the first defendant the difficulties I was facing in my life.
11.During the period starting from late June 2009 and continuing for some months, the first defendant bombarded me with romantic and emotional messages, frequently by mobile phone text message. At this time I became increasingly infatuated with the first defendant.
The plaintiff has put into evidence a printout of some pithy telephone messages from him, and a personal card declaring his love. The telephone text messages go from early September 2009 to late December 2009. I shall not quote from any of them. Overall, in a plain and not subliminal way he states his love for her, the pain of being away from her, and his great need for her.
In the same month that they started a relationship (July 2009), he asked her to lend him $345 000 to purchase stock and to employ an additional person in the business. I doubt if the money was needed or used by Cortorillo for the purposes of his business. The facts below, as well as his defence,[3] show he was using at least some of the money to fund litigation concerning his acquisition of the Lovely Banks land for subdivision. She agreed to lend the money and arranged for a financial adviser to prepare a loan agreement which is quite elementary. The agreement named her as the lender and his company Christie Tyler Pty Ltd as the borrower. It is dated 30 August 2009. It says (and I draw attention to paragraph number 7 to reveal what must have been contemplated about future loans as well):
[3]See para 14 of the defence
5.The Lender agrees to loan $345 000.00 to the Borrower;
6.The Lender has the right but not the obligation to convert the loan amount into shares in the company at an agreed value at a future date;
7.The Lender may make further loans to the Borrower and these will be documented on subsequent Loan Agreements;
8.the Borrower shall pay interest on the loan at the agreed rate. The initial agreed rate is 0%.
The document was signed by them personally. Mrs Truran paid over the loan moneys by bank transfer from her bank account to the company’s bank account in five payments between 24 July and 11 August 2009. There is in evidence the plaintiff’s bank statements from her “NAB Retirement Account” which showed the various sums withdrawn to make up the loan moneys. Thus, the loan agreement and the advance of the moneys are proved.
Within a week of the last transfer of funds for the loan on 11 August 2009, the first defendant suggested to the plaintiff that they buy a sports car to take with them on holidays and weekend trips away. The evidence is:
We went to the Melbourne BMW showroom and the first defendant engaged with one of the sale personnel, looking at various models. At his request we took a test drive in a black 2009 model BMW M3 two‑door convertible … and the first defendant started to negotiate prices with the salesman. The first defendant declared himself pleased with the BMW and, in my infatuation, I agreed to buy it. I would not have otherwise have bought the car, or indeed, any sports car but for the first defendant’s asking me to buy one. I was not prepared to buy the car exclusively for him, however, so, when the time came to fill out purchase details, I requested that the BMW be placed in a joint name. The salesman said to me words to the effect “No, that can’t be done”, which was a great surprise to me. The first defendant said to me words to the effect: “We’ll put it in my name and it’s safe to keep at my place but it’s your car, you can come over and drive it any time you want to” and I, thinking our relationship would be long-term, agreed.
The total price of the BMW car was $188 000. She paid the deposit. He contributed nothing. She paid the balance of $183 000 in September 2009 by selling some shares that she held. Her bank statement showing these payments is in evidence.
The car was registered in Mr Cortorillo’s name. In his defence, he says he was registered as sole owner of the car at her request, and that her request was given “freely and fully and in her own volition and in the free exercise of her own independent will, and in full knowledge of what she was doing…” They were each given an electronic door and ignition key for the car. The plaintiff says that she only used the car once because it was not convenient for her domestic purposes, because I suppose, it was a high performance sports car. At some time in late 2009, Mr Cortorillo changed the ignition code or made some other alteration so that her key could no longer electronically access the car or start it.
On 26 September 2009, Cortorillo asked the plaintiff to marry him. The relationship had been going for three months. She agreed. He took her shopping and bought her an engagement ring. In evidence is a photograph of the ring and a valuation from a Swanston Street jeweller of $4500 for an 18 carat gold ring with diamonds.
Apart from her home in Indented Head, the plaintiff owned two investment properties in South Australia from which she was earning rent to support herself. Her evidence is:
21.In about October 2009, the first defendant told me that he had a commercial proposal. He promised me that if I sold these investment properties and gave him the net, he would use the proceeds to purchase in the name of himself and myself jointly, some land in which he was interested at Lovely Bank. …
22.The first defendant went on to tell me as part of his “commercial proposal” that, in view of the rental income I would no longer receive once I sold my investment properties, he himself would pay me the sum of $3,000 per month plus all my utilities costs. Since these investment properties were my only form of income in my retirement, I had hitherto no intention of ever selling them, since to do so would leave me entirely financially unsupported.
23.The first defendant told me that his plan was that once we purchased the Lovely Bank Property with the net proceeds of sale of my investment properties we would subdivide and develop the Lovely Banks Property into lots. The first defendant told me that he believed that the divided lots could be sold for an estimated total of $14 000 000 which could be invested and that would provide an income stream for us.
The plaintiff says that in her infatuation she agreed to this. She sold her two Adelaide investment properties. One was at 48 Dukes Lane in Adelaide for $290 000 sold under a contract dated 23 November 2009. The other was a property at Unit 5, 162 Gover Street in North Adelaide for $225 000 sold under a contract dated 5 November 2009. The contracts are in evidence. The plaintiff then proves, by reference to bank statements, that by four separate transactions she transferred the total amount of $543 026 into the bank account of Christie Tyler Pty Ltd. This occurred between 6 November and 26 November 2009. Mr Cortorillo was pressing her to have the money paid over.
The plaintiff does not know and is in no position to know how these funds were used. She was dependant on Court processes in this case for discovery of facts, which have become frustrated in the procedural history as I have described it. At trial, therefore the plaintiff was in no position to adduce substantial direct evidence, outside publicly available documents. She produced a title search of the property at Lovely Banks which showed Jamanlea Pty Ltd as the registered proprietor. She believes that on 23 November 2009, Mr Cortorillo used her funds to complete a contract of sale that had been made over four years earlier on 23 February 2005 for that property. A title search shows that the land had been transferred to him on 16 August 2004 and mortgaged to the ANZ Bank. Then on 5 April 2005 the mortgage was discharged and the land was transferred from him to Jamanlea Pty Ltd. She produced a copy of a caveat dated 18 deceased 2007 which he lodged on the property in January 2008 claiming an estate in fee simple on the grounds of a contract of sale made between him and the registered proprietor dated 23 February 2005. A title search shows that his caveat was removed on 12 March 2010.
It is not possible to say with much safety what has happened to the plaintiff’s money or what dealings Cortorillo had with Jamanlea concerning the land at Lovely Banks. There is evidence that on 20 January 2010 a telephone conversation occurred between the plaintiff’s solicitor and Cortorillo in which he said:
The bottom line is that I have to get this Lovely Banks deal through or I will have arrears drama with the money I owe Banks, who currently owns the Lovely Banks property. Kath [that is, the plaintiff] knows what is going on, no‑one will lose anything, she won’t lose anything. The purchase is getting more complicated. Your client will get her money back, I won’t walk away. She’s worked all her life for her money. She will get it back.
The only other information comes from an affidavit sworn by Mr Cortorillo on 12 November 2010 in opposition to summary judgment. It is discursive, but this much can be picked out of it:
(a)From 2008 until late November 2009 (that is, at the later end, when he was in a relationship with Mrs Truran and had promised marriage) he was engaged in litigation in the Supreme Court and in VCAT against one Robert Costa and Jamanlea Pty Ltd concerning his interest in the Lovely Banks property.
(b)He settled the litigation by agreeing to repurchase the Lovely Banks property by paying $62 000 by 8 December 2009 and then two subsequent instalments of $558 000 and $320 000 by February and March 2010.
(c)He had no money and lots of debts to pay off and that if he could not get enough money to buy back the Lovely Banks property he would lose the property together with his mother’s home against which he had borrowed.
(d)He was offering very large returns for anyone who invested in the Lovely Banks project.
(e)All the investors were to get their money when the Lovely Banks property had been subdivided;
(f)If he lost “the case” (that is the case against Jamanlea) then all the investment moneys would also be lost.
This suggests to me that Mr Cortorillo, who was running a business as an upholsterer and furniture seller, had bought the Lovely Banks land in February 2005 (see the caveat); defaulted or came into dispute in some way (hence the litigation); he settled with the vendor by agreeing to buy back on certain terms; and Mrs Truran may not have been the only one who was being asked for money as an “investor”. At the time he obtained these moneys from Mrs Truran to reacquire Lovely Banks: he was in a relationship with the plaintiff; had promised to marry her; had obtained a BMW luxury car; had obtained the $375 000 from her interest free; and he was in financial trouble and looking to desperately obtain money for his property development project for which his mother’s property might have been security in some way and was at risk.
The fact is that having obtained the money from the plaintiff from the sale of her South Australian properties, he never paid her the $3000 per month or paid for her utilities bill as promised by him. She does not know what has happened to the $543,026 that was transferred to him. She has got nothing for it. The land at Lovely Banks was not purchased jointly in her name. The defence as filed by the first defendant admits the sale of the two investment properties, the receipt of the money from the plaintiff and the fact that the Lovely Banks property purchase did not occur. The caveat has been removed and it appears that all traces of her money have gone.
But it did not stop with the Lovely Banks “joint endeavour”. On 1 December 2009, Cortorillo asked Mrs Truran to transfer into his own name the title of her home at Indented Head. She was living at that property and still is. He told her that the purpose of the transfer was part of his commercial proposal to enable him to use it as security to borrow further money to purchase the Lovely Banks property. He told her that this was just a temporary measure until he had undertaken the borrowings after which time he would return the title back to her. It is astonishing that she agreed to do that, and then did transfer to Mr Cortorillo an estate in fee simple in the land, which was registered on 1 December 2009.
I say astonishing in the sense that it naturally attracts the conclusion that, in giving over so readily and easily and unconditionally, she truly did not realise what she was doing or was blinded. Her risky and irrational actions are explicable only, I say respectfully, with a woman who truly was infatuated with a man who had promised to marry her; a woman who was clinically depressed and doing all of this believing that the man she loved would extricate her from her troubles and certainly not deceive her. His defence pleads that she made the transfer of the Indented Heads property in consideration of natural love and affection, and like the BMW motor car, the transfer was given voluntarily and in the free exercise of her own independent will.
The tragic end to this, was on about 10 December 2009 Cortorillo was seen advertising himself on a dating website under a heading “Men Seeking Women in Victoria”. The advertisement is in evidence. He was at that time engaged to be married to the plaintiff. It was then when she felt deep humiliation and, fortunately for her, took very prompt legal action.
The claims in this proceeding – recovery of property
For completeness, I should record the orders I made on 11 October 2010 giving summary judgment for recovery of the BMW car and the title to her property at Indented Head.
On the claim concerning the BMW motor car, I found the facts supporting her case in conversion and detinue proved. She bought the car and on 28 December 2009 (after the relationship was over) I found proved a demand for the return of that car which was refused. I declared that the BMW motor car was the plaintiff’s sole property and directed the first defendant to take all steps to release the car into the plaintiff’s possession. At that stage the car was in the possession of the police. The Court was informed that the car was released to Mrs Truran.
I also ordered summarily that Mr Cortorillo deliver up the duplicate certificate of title for the Indented Heads property on which, fortunately for Mrs Truran, there had been no dealings, or at least no registered dealings. On 29 October 2010, I made a further order that the Registrar of Titles under s 103 of the Transfer of Land Act register the plaintiff as sole registered proprietor of the land. That left the two remaining claims for the loan of funds to Christy Tyler and the so‑called investment of money to the joint endeavour with him for the purchase and subdivision of the Lovely Banks property.
The loan to the second defendant
Although it might be said that the loan agreement was the product of what I shall call equitable fraud, it was not necessary for the plaintiff to seek redress by that means in order to achieve recovery on this part of her claim. Having proved the written agreement, her case is that the absence of a repayment date in the loan agreement meant at law that the moneys loaned were liable to be repaid at once without requirement for prior demand. It is alleged and proved that on 28 December 2009 her solicitors demanded repayment of the loan moneys immediately. Mr Cortorillo refused to do so. His defence pleaded there was an implied term of the agreement that the loan was repayable once he became registered as proprietor of the Lovely Banks land. He pleaded that he is not liable to repay until that event occurs, and, that event has not occurred.
Mr Cortorillo is not here to propound that case, but I cannot see how such a term is so obvious that it goes without saying on the well known Codelfa[4] test. The parties went to the trouble to put the agreement in writing yet nothing is said in any way consistent with an implied term. Moreover there is something manifestly repugnant in seeking to be excused from repaying a loan on the ground that, for reasons having nothing to do with Mrs Truran, and not disclosed to her, he did not become registered owner of the land ― unless it is going to be suggested that in the circumstances I have described she knowingly took that risk too. That is an unacceptable proposition.
[4]Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.
It is correct for the plaintiff to submit that in the absence of any stipulation for a date of repayment of a loan, the law takes the debt to be repayable on demand. The question tends to arise in cases involving the statute of limitations. The principle was expressed by Fullagar J in Ogilvy v Adams[5] as follows:
Where there is a loan of money simpliciter (i.e. with nothing at all said as to repayment), the money is repayable instanter. Where there is a loan of money and the borrower contracts to repay on demand, again the money is repayable instanter. Where there is a loan of money which is recorded or acknowledged by the parties to be a loan repayable on demand, again the money is repayable instanter. The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor’s money … Therefore if A lends money to B, then instantly B is detaining A’s money. In order to prevent a cause of action for recovering in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation.
[5](1981) VR 1042 at 1043.
This principle was revisited by Nettle J (as he then was) in VL Finance Pty Ltd and Legudi.[6] The question in that case was whether Ogilvy v Adams should no longer be regarded as representing the law, as it was submitted, that the test is whether it was reasonably open to infer that the parties would have agreed that the cause of action to recover the loan should not accrue until some sort of reasonable notice was given. No such question arises here. But in any event, his Honour affirmed the test in Ogilvy v Adams.
[6][2003] VSC 57.
Therefore, I would hold that the loan made by the plaintiff to the second defendant was repayable on demand. As the demand was made on 23 February 2009 the plaintiff’s case is plainly made out. I would order that interest be calculated under s 58 of the Supreme Court Act as from the date of demand. Attached to this judgment are the calculations based on figures produced by the plaintiff’s counsel which the Court will adopt. The calculation of the debt up to the date of trial (8 August 2011) is $403 196. That figure needs to be adjusted to take it up to the date of final orders
Claim for recovery of moneys for the “joint endeavour”
The plaintiff seeks to recover the $543 026 paid over to Cortorillo which she obtained after selling her two investment properties in South Australia. And she seeks to be restored to her former position by also claiming the loss of net rental from those properties up to the trial. The rent foregone was something for which he said he would in effect compensate or indemnify her by promising to pay her $3000 per month and pay the costs of her utilities. But he never did. The relationship was over by December 2009.
The plaintiff relied on the affidavit evidence of Brian Truran, an estate agent in South Australia who has calculated the net rental the plaintiff would have received had she not sold the properties. He is related to the plaintiff in that her late husband, John Maxwell Truran, was his cousin. Despite that connection, the Court has no reason to question the reliability of his evidence. The fact is that as at November 2009 Mrs Truran was receiving $215 rent per week from the Gover Street property, and $300 per week from the Dukes Lane property. He says as from 30 July 2010 the weekly rent would have increased to $245 and $350 respectively. To reach a net rental figure, he then calculates the weekly expenses for which the plaintiff as landlord would be liable at $62 and $82 respectively. The calculations are set out in an attachment to this judgment. It comes in at less than the $3000 promised to her.
There is no doubting the merits of the plaintiff’s case. But on what basis can the law properly order payment for the money she has lost in having to sell the two investment properties in Adelaide? Unlike the situation with the loan agreement, a case in contract for damages is pointless. Even if it could be established there was an intention to create legal relation in a domestic relationship so to attract the law of contract, she has no interest in pursuing an expectation loss for the failed contract, and specific performance would be impossible and unwanted anyway. All the facts are unknown but it is clear enough that Mr Cortorillo did not purchase the land. Indeed he was in dispute with the vendor. That also means it cannot be a case where a failed contract or a joint undertaking within domestic relations leads to the Court imposing a constructive trust in her favour over the Lovely Banks land as a remedial device.
The plaintiff puts her case for recovery of the amount paid and rent foregone on four grounds. First, there has been a complete failure of consideration entitling her to recovery of her money as money had and received. If available that gives the $543 026 as restitution but not consequential damage such as rent the rent foregone: see Roxborough v Rothmans of Pall Mall.[7] Secondly, the money gave a benefit to the defendants at her expense and she is entitled to a restitution on the grounds of unjust enrichment. If available, that ground of restitution would not give compensation for the rent foregone. Thirdly, that it would be unconscionable for the defendants to retain the benefit of her payments. Fourthly, the plaintiff puts in the alternative (although this seemed to be given prominence in submissions) a case that his breach of promise in not acquiring the Lovely Banks land and paying her $3000 per month on the faith of which she sold her two properties, was misleading and deceptive conduct in contravention of s 9 of the Fair Trading Act. She seeks damages under s 159 of the Fair trading Act on a reliance loss basis (see Marks v GIO Australia[8]) which would give recovery of the amount paid and the rent foregone. She submitted that the statute can be attracted in a domestic context where the parties intended to enter into commercial relations.
[7][2001] 208 CLR 516 at 529 [26] and 554-5.
[8][1998] 196 CLR 494.
It is plain that the so called joint endeavour was abortive and Mrs Truran has got nothing for her money, and lost her two income producing properties on the faith of the proposal and the promise to pay her $3000 per month. Much reliance was placed by counsel on the case of Moses v Macferlan[9] decided over 250 years ago, but considered by the High Court in Roxborough[10] and before then, in Baltic Shipping v Dillon[11] and Muschinski v Dodds.[12] Without going into the cases and historical analysis based upon forms of action, the outcome is that equitable notions of good conscience, or, unconscionable retention of money, find their way into the common law action for money had and received and are recognised by both the common law and equity as the underlying rationale of the law of unjust enrichment.[13] In Moses v Macferlan, Lord Mansfield said that if the defendant be under an obligation “from
the ties of natural justice and equity” to refund, then the law would imply a debt and give an action founded in the equity of the case as if it were upon a contract. The rationale was:[14]
If one man takes another’s money to do a thing, and refuses to do it; it is a fraud. It is at the election of the injured, either to affirm the agreement, by bringing an action for the non‑performance of it; or to disaffirm the agreement ab initio by reason of the fraud, and bring an action for money had and received to his use. … This kind of equitable action, to recover back money, which ought no in justice to be kept, is very beneficial, and therefore much encouraged.
[9](1762) Burr 1005; 97 E.R. 676.
[10](2001) 208 CLR 516 at 552-3 (per Gummow J).
[11][1992] 176 CLR 344 at 356-8 (per Mason CJ).
[12](1985) 160 CLR 583 at 620.
[13]See Baltic Shipping (1992) 176 CLR 344 at 376.
[14]97 E.R. 676 at 680.
The same facts are said by plaintiff’s counsel to correlate as a matter of substance with an action based on a total failure of consideration, another variety of restitution. As a concept, it embraces recovery of payment not only where there has been non performance of an entire contractual obligation, but also recovery where the purpose for the payment has failed, or where a contemplated state of affairs has disappeared: see generally Jackmann, The Varieties of Restitution.[15]
[15](Federation Press, 1998), Chapter 4.
I can accept that the ties of natural justice and equity in this case call for a restitution of the $543 026 paid by Mrs Truran. But to my mind, on an appraisal of the natural force of the facts here, the equity has truly arisen not because of a failed endeavour of a commercial proposal, but by reason of Mr Cortorillo’s knowledge and exploitation of her emotional condition and disadvantage. The common substratum of facts running through all these pleaded causes of action is that at a time when she was depressed and vulnerable she was seduced by Mr Cortorillo, promised marriage, and he took advantage of her infatuation and dependence on him as part of a strategy to obtain money from her. Her case is that he preyed on her. I think the evidence shows he certainly did see her as easy prey, and he made the most of it in a way that is abhorrent to good conscience.
Although the evidence is explained in terms of Mr Cortorillo putting up a commercial proposal, I find it difficult to naturally characterise what occurred here as a dealing in trade or commerce so as to attract the Fair Trading Act. I readily accept, as counsel urged, that within domestic and loving relationships, there can be a commercial dealing which attracts such legislation and the commercial law. It will be a matter of assessing the circumstances to see whether the parties intended to create legal relations where they would put aside emotional and loving attachments and regard themselves as bound, for this part of their lives, by the strictness and impersonality of the Law. But the facts here are distressed and the product of interpersonal relations. I cannot see it as a commercial deal.
Nor do I see it as a case of restitution for moneys paid as a benefit. The money was voluntarily conferred as a benefit in one sense but I cannot see it as a situation where, faithful to legal principle, there was implicitly a promise by Cortorillo to reimburse her for the benefit.
I see the case as one of equitable fraud ― actual and meditated. To my mind the facts of this case attracts the law of unconscionability in equity, very much along the lines as happened in the High Court case of Louth v Diprose.[16] That was a case of a man who gave money to a woman with whom he was infatuated, on whom he had been emotionally dependent and who had great influence on his actions and decisions. It was a situation where a woman manipulated a man’s infatuation, and the Court accepted that as a type of special disability which would justify equity’s intervention to set aside dealings and adjust property interests. The essential principles to be found in well known High Court authorities are:
(a)relief on the ground of unconscionable conduct is usually taken to refer to a type of case in which a party makes unconscientious use of its superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage.
(b)The special disability must be one that seriously effects a person’s ability to make a judgement as to his or her own best interests. Otherwise courts of equity will not intervene on the ground of folly, imprudence, or want of foresight on the part of the person seeking to set aside the dealing.
(c)What is necessary for the prospect of equitable intervention is exploitation by one party of another person’s special disability or disadvantage. The exploitation can consist of active extortion of a benefit, or passive acceptance in unconscionable circumstances.
[16](1992) 175 CLR 621.
I make the finding that Cortorillo knowing of her fragile emotional and needy condition, and seeing the ease with which he was able to obtain the loan in July 2009 and then the luxury car, took advantage of this by promising to marry her and then extracted substantial amounts of money to try and rescue his property development proposal at a time when he was in financial trouble and litigating in the Supreme Court and in VCAT. I see this as the use of power over another in the procurement of a bargain or gain which a Court of conscience will not enforce and ought make whatever compensatory orders are necessary to neutralise the benefit gained. Concurrently with that, in my view the same facts give rise to a claim for money had and received for the sum of $543 026. The question is how to recover the lost rental.
Cases in this field tend to involve situations where the person under a special disability seeks equitable intervention to be relieved of the burden of an onerous contract, usually a mortgage or a guarantee. In this case, the plaintiff seeks no such relief. But in the same way she seeks to have taken away from Mr Cortorillo the benefits he received from her under the unconscionable arrangement. Akin to the law of estoppel, I see equity’s function to compensate her for the detriment suffered. The detriment came in two forms. First she sold her two properties and paid over the $543 026. Secondly she lost her ability to earn income on the faith of a broken promise that he would pay her $3000 per month. One way of doing equity would be to hold him to the promise to pay $3000 per month on the basis that it was an inducement, and that was the amount he saw as the detriment to her for the loss of income producing properties. That figure exceeds the claim for lost rental as calculated by the real estate agent.
Taking the approach of doing the minimum equity according to facts rather than broken promises in an unconscionable dealing, the just and convenient approach is to assess the detriment as I have called by reference to the calculated loss of rental. That calculation cannot go beyond the judgment date because, as I see it (prospects of recovery aside) its puts her in the position, imperfect as it is, as if she had recovered the capital value of her properties and earned income to the point of judgment.
The claim for $543 026 but not the lost rental would be recoverable on restitutionary principles. Both claims are capable of an award of damages or compensation in equity. This can be done as a matter of inherent power. The applicable principle is conveniently stated in Spray, Equitable Remedies[17] as follows:
Courts of equity are superior courts that are able to enforce a direction to pay damages in a similar manner to that whereby they compel the performance of or abstention from other acts. The better view is that courts of equity have always had it within their jurisdiction or power to award damages but that from a very early time they considered it to be ordinarily undesirable to do so, partly because their main concern was to enforce performance in specie of legal and equitable obligations and partly because in many instances damages could be obtained in courts of law, where, moreover, satisfactory procedures were available by which the amount of damage that had been suffered could be quantified … But although it was ordinarily considered to be inappropriate to award equitable damages, exceptional circumstances sometimes arose in which this course was adopted. Further, where appropriate courts of equity have awarded compensation, whether in relation to specific performance, for example, or in regards to breaches of fiduciary duties.
Although therefore it was not a general practise in equity to award damages, yet if in special circumstances it appeared to be desirable to do so the court would act itself and would not compel the plaintiff to resort to proceedings at law.
[17]8th ed. at 623.
I shall put to one side what is generally referred to as the provisions of Lord Cairn’s Act to be found in s 38 of the Supreme Court Act. That provision empowers the Court to give damages in addition or in substitution for an application for injunction or specific performance. Recent authority has it that it is not necessary in order to get damages to show that the Court would have exercised its discretion to grant an injunction or specific performance: see Giller v Procopets.[18] I shy away from the statutory basis because no part of this case involves enforcement of a contract or some other relief arising out of disappointment under a contract. My evaluation of the facts is that the essence of this case is that the plaintiff should never have been exploited into agreeing to contribute to the joint endeavour in the first place. It is for that reason I think there are special circumstances making this case fit for the exercise of the Court’s inherent power to award damages or equitable compensation. It happens in cases of breach of the fiduciary obligation and I cannot see why it should not happen here. There is no difficulty or special assessment needed for the calculation of the compensation. It is set out in the attached schedule. Interest on the equitable compensation is payable under section 60 of the Supreme Court Act or if not then it is payable on equitable principles as equitable compensation: see Giller v Procopets.[19]
[18](2008) 24 VR 1 (Ct Appeal)
[19](2009) 24 VR 1 at 128 [37]
The outcome as is shown in that attached calculation. The figures go up to the date of trial. The grand total for the loan, the joint endeavour moneys, and the lost rental is $ 1 068 047. I ask counsel to check that figure, take it to the date of final orders, and prepare a form of judgment.
CALCULATIONS FOR JUDGMENT
A. The loan (para 14 to 22 of statement of claim)
1. Principal of $345 000
2.Interest is to be allowed “on a debt or sum certain” under section 58 of the Supreme Court Act 1986 from date of demand to hearing.
3.Relevant rate of interest fixed under the Penalty Interest Rates Act 1983 is: 10% pa from 23 February 2009 to 31 January 2010, and 10.5% from 1 February 2010 to date.
4.Statutory interest is payable on $345 000 from (and not including) date of demand on 28 December 2009 until (and including) date of hearing on 8 August 2011 being a duration of 588 days. Interest calculable as follows (to nearest dollar):
34 days at 10%. = $3214 (until and including 31 January 2010)
554 days at 10.5% = $54 983 (until and including 8 August 2011)
Total interest up to 8 August 2011 is $58 196 and is accruing at $99 per day.
5.Judgment debt under this claim as at 8 August 2011 is $345,000 plus interest of $58 196 = $403 196.
* * *
B. The Lovely Banks moneys (para 23 to 34 of statement of claim) –
1. Damages of $543 026
2.Interest is to be allowed under section 60 of the Supreme Court Act 1986 from date of writ to judgment. Writ was filed on 25 March 2010.
3.Relevant rate of interest fixed under the Penalty Interest Rates Act 1983 is 10.5 % from 1 Feb 2010 to date.
4.Interest on $543 026 from (and not including) date of filing of writ on 25 March 2010 until (and including) date of hearing on 8 August 2011 = 501 days.
5. 501 days at 10.5% p.a. = $78 262.69.Interest is accruing at $156.21 per day.
6.Judgment debt as at 8 August 2011 is $543 026 plus interest of $78 262.69
= $621 288.69
C. Loss of income from two investment properties in South Australia
1. Net loss of $38,074 as at 8 August 2011, calculated as follows:
(a) First property at Unit 5, 162 Gover Street Adelaide
Date of settlement of sale: 5 November 2009
Net income foregone since sale to 8 August 2011= $15 784.83
(b) Second property at 48 Dukes Lane Adelaide
Date of settlement of sale: 23 November 2009
Nett income foregone since sale to date = $22 289.51
2. Daily accrual rates:
(a)first property: rental foregone accruing at $35.00 per day and expenses accruing at $8.82 per day, thus a net position of $26.18 accruing per day; and
(b)second property: rental foregone accruing at $42.86 per day and expenses accruing at $11.71 per day, thus a net position of $31.15 accruing per day ―
giving a total of $57.33 net rental income loss accruing per day.
3.Calculation of interest under Penalty Interest Rates Act 1983 based on rate of 10.5% from 1 Feb 2010 to 8 August 2011:
(a)interest on $38 074.34 from (and not including) date of filing of writ on 25 March 2010 until (and including) date of hearing on 8 August 2011 = 501 days;
(b)501 days at 10.5% p.a. = $5487.40 accruing at $10.95 per day
4. Total judgment debt under this claim = $38 074.34 + $5487.40 = $43 561.74
* * *
GRAND TOTAL
(as at 8 August 2011)
Loan = $403 196 (and accruing at $99.25 per day) and
Joint endeavour moneys = $621 288.69 (and accruing at $156.21 per day) and
Lost income from rental properties = $43 561.74 equals
$1 068 047 as at 8 August 2011.
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