Vesic v Vesic

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:	Vesic v Vesic
Citation:	[2022] ACTSC 109
Hearing Date(s):	2–4 May 2022
DecisionDate:	19 May 2022
Before:	Crowe AJ
Decision:	See [225]–[228]
Catchwords:	EQUITY – TRUSTS – Where the plaintiff seeks a declaration that the first defendant holds legal title over property on constructive trust for the plaintiff beneficially –– fiduciary duty – where the plaintiff claims that the second defendant breached its fiduciary duty owed to the plaintiff. CONTRACT – UNCONSCIONABLE CONDUCT – Where the plaintiff seeks a declaration that the transfer of property title was procured by the first defendant by unconscionable conduct – breach of contract – where the plaintiff seeks damages from the first defendant for breach of contract – misleading or deceptive conduct – where the plaintiff claims the second defendant made misleading or deceptive representations in contravention of s 18 of the Australian Consumer Law. TORTS – NEGLIGENCE – Where the plaintiff claims the second defendant was negligent in acting for both the plaintiff and the first defendant in drafting a deed of family arrangement.
Legislation Cited:	Civil Law (Wrongs) Act 2002 (ACT) Ch 11A, s 21 Competition and Consumer Act 2010 (Cth) Sch 2; s 236 Court Procedures Rules 2006 (ACT) Sch 2 Limitation Act 1985 (ACT) s 11
Cases Cited:	Collinson v Paxus Australia Pty Limited (No 3) [2022] NSWSC 438 Davies v Camilleri [2000] NSWSC 904 Gang v You (No 3) [2021] ACTSC 318 Hanflex Pty Ltd v NS Hope & Associates [1990] 2 Qd R 218 Provident Capital Ltd v Papa [2013] NSWCA 36; 84 NSWLR 231 Short v Delany [1999] NSWSC 1293 Sidhu v Van Dyke [2014] HCA 19; 251 CLR 505 Walton Stores Ltd v Maher (1988) 164 CLR 387
Parties:	Lillian Vesic ( Plaintiff) John Jovan Vesic ( First Defendant) William Love & Nicol Lawyers Pty Ltd trading as Bradley Allen Love Lawyers ( Second Defendant)
Representation:	Counsel M Noakhtar ( Plaintiff) A Muller ( First Defendant) A R Zahra SC ( Second Defendant)
Solicitors McInnes Wilson Lawyers ( Plaintiff) Reuben George Lawyers ( First Defendant) Sparke Helmore ( Second Defendant)
File Number(s):	SC 295 of 2020

Crowe AJ

Introduction

The plaintiff was born in either May 1943 or May 1945. She explained that her parents were refugees who were fleeing Eastern Europe as a consequence of the upheaval caused by World War II at the time of her birth. The earlier date had been recorded in official documents, however, for reasons which she gave, it was the plaintiff’s belief that the later date was correct. On that basis, the plaintiff is now 77 years old.

The plaintiff’s parents both died when she was very young and she was adopted. She and her adoptive parents migrated to Australia when she was two or three years old. She grew up at Bathurst and, after completing her schooling, trained as a pathologist at Bathurst District Hospital. She subsequently moved to Canberra where she met and married Michael Vesic in 1963. The couple had one child, John Vesic, who is the first defendant in these proceedings. He was born in 1964. He married Helen Kouper (now Vesic) in 1989. They have five children – Michael (junior), Peter, Catherine, Gabriel and Natalie.

I propose, for simplicity of identification, to refer to the various members of the Vesic family by their first names. Thus, I will refer to the plaintiff as Lillian, the first defendant as John, Mr Vesic as Michael (senior) and so on.

Lillian worked for the Australian Public Service until 1991 when she suffered an injury which led to her leaving the workforce. She initially went onto sickness benefits and then later, when she reached the appropriate age, the Age Pension. Lillian said that at the end of 1991 she and Michael separated. However, they have never divorced and indeed have continued to cohabit from time to time (and possibly for most of the time) since 1991.

In 2003, Lillian purchased a residential property in Phillip in the Australian Capital Territory (ACT). She has resided in that property since that time. In 2006, she entered into a loan with the Macquarie Bank. This loan was secured by a mortgage registered over the title to the Phillip property.

The loan was referred to in the evidence as a “reverse mortgage”. The essential characteristic of the loan was that Lillian was not required to make repayments by instalment. Rather, the interest (which was fixed for 10 years at 8.35 per cent per annum. compounding monthly) was added to the outstanding amount on an ongoing basis with the total amount repayable upon the sale of the Phillip property, or the death of the borrower. The principal was $50,000 as at November 2006. The total amount owing as at the end of 2013 (subject to some additional charges which would add a few thousand dollars) was over $90,000. The amount actually repaid to the mortgagee on 22 August 2014 for the discharge of the mortgage was $104,159.01.

John is a psychologist who has been for many years employed by the Australian Defence Force (ADF). He and his immediate family moved to Sydney in 2000. Initially, they lived in a large family house in the suburb of Castle Hill which they owned. That property was sold in 2010 and the family moved into rented accommodation for a time.

John was in about 1997 ordained as a priest in the Serbian Orthodox Church (the Church). From 2008 to 2015 he was the Parish Rector at St Michael’s at Homebush in Sydney. He performed his duties at the Church in addition to his full-time work with the ADF. In late 2010, John and his family moved into a residence provided by the Church at Homebush. This accommodation was rent-free.

Between 2010 and 2014, Lillian and John had a number of discussions about the possibility of jointly buying a residential property in Sydney which might allow them all to live together. That plan would require Lillian to sell the Phillip property to provide her contribution to the purchase of the new residence. At one stage, in December 2012, after the possible purchase of a particular property fell through Lillian emailed John in the following terms:

Perhaps for the time being until things improve you may want to consider buying into Phillip by getting rid of the Macquarie loan and then when the market improves either sell Phillip or mortgage it for purchase of another property.
We are all getting older and anything can happen………at least that way if I need to go into care for what ever [sic] reason, Phillip will be yours…

From early 2014, the conversations between Lillian and John became more focussed on the proposal that John would pay out the Macquarie loan and become the owner of the Phillip property. However, Lillian was concerned to ensure that any such arrangement did not interfere with her Centrelink pension entitlements. She contacted Centrelink and on two occasions met with persons who she described as “financial advisors”. At the first of these meetings Lillian was assured that if the plan to transfer Phillip accorded with the Centrelink “granny flat” rules it would not affect her pension. In essence, those rules required that upon any transfer Lillian should be given either a life tenancy or a life interest in the property. The person she met told Lillian that she should have the arrangement documented with a solicitor who had experience with the granny flat scheme.

Eventually, Lillian and John decided to proceed with the proposal. (There is an issue as to the precise terms of the consideration to be provided by John. I will return to that below.) Lillian arranged for John and herself to consult Mr Tim Morton, solicitor at the firm of Bradley Allen Love Lawyers (BAL) which is the second defendant in these proceedings. That consultation occurred at the BAL offices on 8 July 2014. After that consultation Lillian and John also met with a conveyancing solicitor working for BAL, Mr L Early. There is no issue that Mr Morton made it clear that he was acting for Lillian only, and that he was not acting for John. Nor is there an issue that, pursuant to written instructions in accordance with the form approved by the Law Society of the ACT signed by both Lillian and John, Mr Early was instructed to act for both parties in the conveyance.

As a consequence of these consultations, and after receiving a quote for the fees involved in drawing a deed in relation to the arrangement of $500-$1,000, Lillian instructed Mr Morton to proceed with drawing the deed (the Deed).

Drafts of the Deed were sent to both Lillian and John. There is an issue as to the precise circumstances under which the Deed was executed, however, it is clear that by 22 August 2014 the counterparts of the Deed had been signed by the parties. Settlement of the conveyance occurred on that day. At settlement John paid a total of $150,000. Of that $104,159.01 was paid to discharge the Macquarie Bank mortgage, and $45,840.99 was paid to Lillian.

Shortly after the settlement John paid $25,000 into Lillian’s bank account. There is an issue as to the basis on which that sum was paid.

After the settlement, Lillian and Michael (senior) remained living in the Phillip property. John received an offer to transfer to the Royal Australian Air Force base at Amberley in Queensland in early 2015. He accepted that offer and he, Helen and some of the children subsequently moved to Brisbane.

In mid-2015, Lillian began to insist on the payment of a further $25,000 by John in relation to the transfer of the Phillip property. Lillian claimed that the agreement which had been reached between them required John to pay a total sum of $200,000 for the property. John denied that such an agreement had been reached. Thereafter the relationship deteriorated rapidly. It has not recovered and has resulted in this litigation.

The pleadings

Lillian’s claim against John

I refer only to the causes of action which are pressed by the plaintiff.

After pleading the relevant background circumstances, the plaintiff pleaded in her Amended Statement of Claim (ASOC):

10During the 8 July Meeting, the plaintiff and Mr Vesic informed Mr Morton (the Instructions):
(a)Mr Vesic and his family presently lived in New South Wales, in a house provided by the Eastern Orthodox Church;
(b)Mr Vesic and his family were moving to Canberra;
(c)the plaintiff wanted to transfer the Property to Mr Vesic;
(d)in exchange for transfer of the Property, the plaintiff wanted Mr Vesic and his family to live with her at the Property and care for her;
(e)in the event that she was unable to attend to her care, hygiene and toiletry needs at the Property, the plaintiff wished to be placed in an appropriate nursing or care facility, with Mr Vesic to meet the costs associated with that care;
(f)the plaintiff was unsure of the amount outstanding on the plaintiff’s mortgage over the Property, but estimated it to be around $150,000;
(g)the plaintiff was a recipient of an Aged Pension from Centrelink; and
(h)the plaintiff wanted arrangements relating to the Property to comply with Centrelink’s rules.

…
13On around 11 July 2014, the plaintiff:
(a)informed the second defendant that her reason for wanting to enter into a deed of family arrangement was to spend her later years in the company of her family and feel assured that Mr Vesic would look after her welfare;
(b)agreed to pay the second defendant between $500 to $1,000 for preparation of a deed of family arrangement; and
(c)instructed the second defendant to prepare a deed of family arrangement.
Particulars
Email dated 11 July 2014 from the plaintiff to Mr Morton.

…
17On 22 August 2014:
(a)the plaintiff attended the second defendant’s offices, met with Mr Morton and signed the deed of family arrangement (Deed);
(b)Mr Vesic agreed to execution of the Deed by counterparts and signed the Deed; and
Particulars
Email dated 22 August 2014 from Mr Vesic to Mr Morton
(c)settlement of the Property transfer was effected.
Particulars
Transfer executed by the plaintiff and Mr Vesic both in the presence of Liam Patrick Early, a solicitor employed by the second defendant registered dealing number 1934400.

18The Deed’s express terms include:
(a)the plaintiff would transfer the Property to Mr Vesic (cl 1.1);
(b)in consideration for transfer of the property, Mr Vesic would discharge the plaintiff’s mortgage and any amounts secured or owing by the plaintiff in respect of the Property, and grant the plaintiff a life interest on the terms set out in the Deed (cl 1.2);
(c)the plaintiff was responsible for payment of twenty five percent (25%) of rates, taxes and utility charges for electricity and natural gas in respect of the Property, and Mr Vesic was responsible for the remainder (cl 4.1, 4.2);
(d)Mr Vesic was responsible for keeping the Property in good repair and condition (cl 5.1);
(e)Mr Vesic was responsible for keeping the Property insured and for paying the premiums in respect to the Property insurance (cl 6);
(f)the plaintiff’s life interest would terminate if the plaintiff were assessed as requiring residential aged care or no longer being able to safely occupy the Property (cl 2.2); and
(g)in the event that the plaintiff required residential aged care, she would be solely responsible for costs associated with that care (cl 8).

19The Deed indicated that the plaintiff’s mortgage was approximately $150,000 (Background B).

The following then appears under the heading “Subsequent events and breaches of Deed”:

20On 3 September 2014, transfer of the Property to Mr Vesic, as its registered proprietor, was recorded on its title.
21After 3 September 2014, Mr Vesic and his family moved to Queensland.
22By reason of the matters pleaded at paragraphs 20 and 21, the plaintiff lost the value of her interest as registered proprietor of the Property without obtaining the benefit of Mr Vesic and his family living with her at the Property and caring for her.
Particulars
In around August 2014, the Property had a market value of approximately $440,000 to $500,000 and there was approximately $104,000 outstanding on the plaintiff’s mortgage.

23By about 24 September 2014, the plaintiff paid the second defendant its fees for legal services associated with the Conveyancing Retainer and Deed Retainer.
24 By reason of transferring the Property, after about 3 September 2014, the plaintiff became disentitled to the following pensioner’s discounts for costs and outgoings associated with the Property:
(a)the pensioner rates rebate; and
(b)utilities concession for water.

25On numerous occasions between 24 August 2014 and present, the plaintiff incurred costs because Mr Vesic:
(a)failed to pay for works necessary to keep the Property in good repair and condition;
(b)failed to comply with his obligations to pay 75% of rates and utility charges in respect of the Property; and
(c)failed to comply with his obligation to pay the Property insurance.

25ABy reason of the matters pleaded at paragraph 25 above, Mr Vesic has breached the Deed.

The plaintiff also presses a claim for relief based on unconscionable conduct asserted against John. That is pleaded as follows:

27AThe plaintiff signed the Transfer in the following circumstances:
(a)The plaintiff had no other assets in her name;
(b)The plaintiff did not receive independent legal advice in relation to signing the Transfer as the second defendant was acting for both the plaintiff and Mr Vesic in respect of the Transfer;
(c)The plaintiff did not receive legal or financial advice as to how her future care and health needs were to be funded in the event that Mr Vesic failed to comply with the Deed;
(d)The plaintiff did not receive legal advice in relation to how her right to continue to reside at the Property could be protected in the event that Mr Vesic no longer wished for her to reside at the Property;
(e)The plaintiff did not receive legal advice in relation to how her right to continue to reside at the Property could be protected in the event that Mr Vesic granted a mortgage over the Property and a mortgagee sought to enforce its rights to possess and sell the Property pursuant to any such mortgage;
(f)Mr Vesic had instructed the second defendant in relation to the preparation of the Transfer;
(g) The interests of the plaintiff and Mr Vesic under the Transfer were the interests of opposite parties to the transaction;
(h)the effect of the registration of the Transfer was that Mr Vesic would become the sole registered proprietor of the Property; and
(i)Mr Vesic knew, or should have known, of the second defendant’s conflict in acting for both the plaintiff and Mr Vesic.

27BMr Vesic knew, or should have known, the circumstances pleaded at paragraph 27A above.
27CBy reason of the matters pleaded at paragraph 3(b), 3(c) and 27A above, there was a special disadvantage between the plaintiff and Mr Vesic.
27DBy reason of the matters pleaded at paragraphs 27A to 27C, Mr Vesic engaged in conduct that was unconscionable in relation to the signing and registration of the Transfer.
27EFurther or alternatively to paragraph 27D above, it would be unconscionable for Mr Vesic to retain the benefit of the Transfer.

The reference to paragraphs 3(b) and (c) in 27C is a reference to the allegations that the plaintiff was born on 4 May 1943 and that she is John’s mother.

The relief claimed by Lillian against John is:

A.Against the First Defendant:
…
ii. Alternatively to I, a declaration that first defendant holds the legal title to the Property on constructive trust for the plaintiff beneficially.
iii. Alternatively to I and ii, a declaration that Transfer number 1934400 (the Transfer) was procured by unconscionable conduct by the first defendant and is null and void.
…
v. Damages against the first defendant for breach of contract.

Lillian’s claim against BAL

The claim pleads two retainers, referred to as the Conveyancing Retainer and the Deed Retainer. The former is pleaded thus:

8On 8 July 2014, the plaintiff and Mr Vesic together:
(a)attended the second defendant’s offices;
(b)met with Timothy John Morton (Mr Morton), a solicitor employed by the second defendant (the 8 July Meeting);
(c)discussed transfer of the Property; and
(d)consented to the second defendant acting for both of them in relation to the transfer of the Property and instructed the second defendant to do so (Conveyancing Retainer).
Particulars
Law Society of ACT form for Solicitor Acting for Both Buyer and Seller, Instructions to Solicitor signed by the plaintiff and Mr Vesic on 8 July 2014.
The second defendant designated the Conveyancing Retainer as matter number 141863.

9By accepting the Conveyancing Retainer, the second defendant owed the plaintiff and Mr Vesic:
(a)a duty of care to exercise reasonable care and skill in performance of legal services; and
Particulars
The duty of care arose as a matter of common law tort, and by reason of the matters pleaded at paragraph 8(d), as a contract.
(b) a fiduciary duty to act in the best interests of the plaintiff and Mr Vesic.
Particulars
The fiduciary duty arose as a matter of equity, and by reason of the matters pleaded at paragraph 8(d), as a contract.

After the pleading in paragraph 10 of the ASOC (see paragraph 18 above) the pleading of the Deed retainer was in the following terms:

11On around 10 July 2014, the second defendant:

(a)represented to the plaintiff that it confirmed previous advice that it was in her best interests to execute a deed of family arrangement, to the effect discussed at the 8 July Meeting (10 July Representation);
(b)informed the plaintiff that preparation of a deed of family arrangement would cost her between $500 and $1,000; and
(c)asked the plaintiff to indicate whether she wished the second defendant to prepare a deed of family arrangement.
Particulars
Email dated 10 July 2014 from Mr Morton to the plaintiff.

12At all material times, the plaintiff relied on the second defendant’s 10 July Representation.
13On around 11 July 2014, the plaintiff:
(a)informed the second defendant that her reason for wanting to enter into a deed of family arrangement was to spend her later years in the company of her family and feel assured that Mr Vesic would look after her welfare;
(b)agreed to pay the second defendant between $500 to $1,000 for preparation of a deed of family arrangement; and
(c)instructed the second defendant to prepare a deed of family arrangement.
Particulars
Email dated 11 July 2014 from the plaintiff to Mr Morton.

14By reason of the matters pleaded in paragraphs 11 and 13, the plaintiff retained the second defendant to provide her with legal services relating to a deed of family arrangement (Deed Retainer).
Particulars
The second defendant designated the Deed Retainer as matter number 141875.

15By accepting the Deed Retainer, the second defendant owed the plaintiff:
(a)a duty of care to exercise reasonable care and skill in performance of legal services; and
Particulars
The duty of care arose as a matter of common law tort, and by reason of the matters pleaded at paragraph 14, as a contract.
(b)a fiduciary duty to act in the best interests of the plaintiff.
Particulars
The fiduciary duty arose as a matter of equity, and by reason of the matters pleaded paragraph 14, as a contract.

Lillian pressed three causes of action against BAL. These were claims in negligence, misleading or deceptive conduct and for relief based on breach of fiduciary duty.

The claim in negligence refers to both retainers as follows:

28By reason of the matters pleaded at paragraphs 9 and 15, in accepting the Deed Retainer after having accepted the Conveyancing Retainer, there existed risks that:
(a)the interests of the plaintiff and Mr Vesic presently conflicted, or could conflict in the future; and
(b)the second defendant would be unable to fulfil the fiduciary duties pleaded at paragraphs 9(b) and 15(b) simultaneously.

29By reason of the matters pleaded at paragraphs 3(b), 3(c), 8, 10 and 13(a), in preparing and executing the Deed, there existed risks that:
(a)the plaintiff was a vulnerable person;
(b)the interests of the plaintiff and Mr Vesic presently conflicted, or could conflict in the future;
(c)the plaintiff transferred the Property in circumstances where Mr Vesic and his family:
i. might not move to Canberra;
ii. might choose not to live with the plaintiff at the Property; or
iii. might not care for the plaintiff's welfare in her old age;
(d)Mr Vesic might not comply with his obligations under the Deed;
(e)if Mr Vesic defaulted on any mortgage he granted over the Property, a mortgagee could seek to enforce its rights aga· the Property to the plaintiff's disadvantage;
(f)the amount outstanding on the plaintiff's mortgage was not approximately $150,000;
(g)the plaintiff's Centrelink benefits would be adversely impacted by operation of the Deed or transfer of the Property; and
(h)the plaintiff could not occupy the Property safely or required residential aged care, or that could occur in the future.
Particulars
These risks can be inferred from the age of the plaintiff, the relationship between the plaintiff and Mr Vesic, their attending the 8 July Meeting together and the nature of the Instructions, including the Email dated 11 July 2014 from the plaintiff to Mr Morton.

30The risks pleaded at paragraphs 28 and 29:
(a)were not insignificant, carrying the potential of causing the plaintiff not insignificant financial and emotional harm; and
(b)were risks which a reasonable person in the defendant's position would be aware or, or ought to have been aware of.

31By reason of the matters pleaded at paragraph 30, a reasonable person in the second defendant's position would have avoided the risks of harm pleaded at paragraph 28 by not accepting the Deed Retainer after having accepted the Conveyancing Retainer.
32By reason of the matters pleaded at paragraph 30, a reasonable person in the second defendant's position would have taken reasonable precautions to avoid the risks of harm pleaded at paragraph 29.
Particulars
Precautions which a reasonable person in the second defendant's position would have taken include:
(1) advising the plaintiff and Mr Vesic to obtain separate legal advice;
(2) arranging to obtain instructions from the plaintiff when she was not accompanied by Mr Vesic;
(3) drafting the Deed to contemplate the possibility of Mr Vesic and his family not moving to Canberra, choosing not to live with the plaintiff or otherwise not caring for the plaintiff's welfare;
(4) drafting the Deed to contemplate the possibility of noncompliance and breach of its terms, including mechanism for dispute resolution and termination in event of breach;
(5) drafting the Deed to contemplate the possibility of Mr Vesic defaulting on any mortgage he granted over the Property;
(6) drafting the Deed to reflect the plaintiff's instructions regarding costs associated with her placement in a care facility, as pleaded at paragraph 10(e);
(7) drafting the Deed to reflect the actual amount outstanding on the plaintiff's mortgage; and
(8) ascertaining whether transfer of the Property would result in the plaintiff being disentitled to the pensioner rates rebate and utilities concession for costs and outgoings associated with the Property.

33The second defendant failed to discharge the obligations pleaded at paragraphs 31 and 32.
34In the premises, the second defendant breached the duties of care pleaded at paragraphs 9(a) and 15(a).
35But for the second defendant's breaches of its duty of care, the plaintiff:
(a)would have received legal advice about the existence or possibility of her interests conflicting with Mr Vesic's interests;
(b)would have provided further instructions to the second defendant when she was not accompanied by Mr Vesic;
(c)would have received legal advice about potential risks relating to the Instructions and a deed of family arrangement;
(d)would not have executed the Deed, as drafted;
(e)would not have transferred the Property based on the Deed;
(f)would not have incurred costs by reason of the matters pleaded at paragraphs 23 to 27, in circumstances where she was no longer the registered proprietor of the Property.

As to misleading or deceptive conduct the plaintiff pleads:

37The 10 July Representation was a statement of opinion.
38At the time the 10 July Representation was made, Mr Morton:
(a)had had the 8 July Meeting and received the Instructions;
(b)was aware, or ought to have been aware, that the plaintiff relied on the second defendant for legal expertise;
(c)was aware, or ought to have been aware of some or all of the risks pleaded at paragraph 29; and
(d)had not taken, or arranged to take, any reasonable precautions against risks, including those pleaded at paragraph 29.

39By reason of the matters pleaded at paragraph 38, Mr Morton:
(a)did not use a reasonable degree of professional skill and care in expressing the 10 July Representation as his opinion; and
(b)did not have reasonable grounds for expressing the 10 July Representation as his opinion.

40The 10 July Representation was a continuing representation in that the second defendant:
(a)did not correct the 1 O July Representation after receiving the plaintiff's email to Mr Morton on around 11 July 2014, or at any time before execution of the Deed;
(b)did not take, or arrange to take, any reasonable precautions against risks including those pleaded at paragraphs 28 and 29 at any time before execution of the Deed;
(c)prepared a draft Deed of family arrangement and facilitated the plaintiff and Mr Vesic executing the Deed; and
(d)was aware, or ought to have been aware, that the plaintiff relied on the second defendant for legal expertise when executing the Deed on 22 August 2014.

41In the premises, the 10 July Representation was misleading or deceptive, or likely to mislead or deceive the plaintiff.
42The making of the 10 July Representation was conduct occurring in trade or commerce.
43In the premises, the second defendant contravened s 18 of the Australian Consumer Law.

The plaintiff claims that she suffered damage and loss as a result of the negligence and/or misleading or deceptive conduct of BAL.

The fiduciary claim is pleaded in the following way:

45By reason of the matters pleaded at paragraphs 28 and 29, there was a real, substantial possibility of a conflict between the second defendant’s duty to the plaintiff and the second defendant’s duty to Mr Vesic.
46 In the premises, the second defendant breached its fiduciary duty pleaded at paragraph 15(b) in that:
(a)it provided legal services with respect to the Conveyancing Retainer and Deed Retainer;
(b)execution of the Deed, as drafted, was not in the plaintiff's best interests; and
(c)transfer of the Property based on the terms of the Deed was not in the plaintiff's best interests.

47The second defendant did not inform the plaintiff and Mr Vesic of the conflicts of interests.

The plaintiff claims equitable compensation in relation to the losses said to have been suffered as a result of the breach of BAL’s fiduciary obligations to her.

John’s defence

The matters of significance which are put in contest in relation to the 8 July 2014 meeting with Mr Morton are:

1.The assertion at paragraph 10(b) of the ASOC that John and his family were moving to Canberra. John pleaded that neither he nor his family had plans to move to Canberra as at 8 July 2014, and that further, he was informed that he would be transferred to Queensland on 9 February 2015;
2.The claim at paragraph 10(c) that Lillian wanted John and his family to live with her at the property and care for her;
3.The claim at paragraph 10(e) that John was to meet Lillian’s costs of care if she was to be placed in a nursing or care facility. John referred to and relied upon clause 8 of the Deed;
4.The claim at paragraph 10(f) that the plaintiff was unsure of the amount owing under the mortgage and estimated it to be $150,000. John pleaded that Lillian was aware that the amount owing was around $104,000 and had communicated that fact to him. Furthermore, on 9 July 2014 Lillian provided both defendants with a statement of account indicating that the amount owing was $95,280.05 as at 30 June 2014;

As to the pleading of the additional sum payment at paragraph 19B of the ASOC, and the claim of no further payment at 19C, John responded as follows:

19BIn response to the allegations in paragraph 19B of the Amended Claim, the First Defendant:
a.does not know what is meant by the words 'additional sum';
b.says on or about 22 August 2014, he:
i. discharged the loan and any other amounts secured against the Property or owing by the Plaintiff in respect of the Property;
ii. paid the stamp duty applicable to the transfer of the Property in the sum of $13,310;
iii. granted the Plaintiff the Life Interest referred to at clause 2 of the Deed; and
iv. directed the Second Defendant to transfer to the Plaintiff the sum of $45,840.99 under the mistaken belief that the sum was due and payable to the Plaintiff pursuant to the terms of the Deed (the Further 45K Payment);
c.further says that:
i. on 15 August 2014 he transferred the sum of $14,400 to the Second Defendant's trust bank account for payment . of the stamp duty payable in respect of the transfer of the Property;
ii. the stamp duty payable was $13,310;
iii. the balance of that amount transferred by the First Defendant in the sum of $1,090.00 was paid to the Second Defendant for the Plaintiff's benefit in relation to the Plaintiff's fees for legal services provided to her (the Stamp Duty Balance Payment); and
iv. the First Defendant did not authorise the Stamp Duty Balance Payment; and
d.further says that on 25 August 2014 he transferred the Plaintiff the further sum of $25,000 at the Plaintiff's request by way of electronic funds transfer (the Further 25K Payment).

19CIn response to the allegations in paragraph 19C of the Amended Claim, the First Defendant:
a.refers to and repeats paragraph 19B of the Defence;
b.says that the consideration he was to provide for the transfer of the Property to him was agreed with the Plaintiff and was the consideration recorded at clause 1.2 of the Deed (the Consideration);
c.further says the Consideration was provided to the Plaintiff and in addition to the Consideration the First Defendant paid the Plaintiff the Further 45K Payment and the Further 25K Payment and the Plaintiff received the benefit of the Stamp Duty Balance Payment;
d.refers to paragraph [49] and [50] below; and
e.otherwise denies the allegations in paragraph 19C.

In response to paragraph 22 of the ASOC the defence pleaded:

22In response to the allegations in paragraph 22 of the Amended Claim, the First Defendant:
a.refers to and repeats paragraphs [10c] to [10d] and 21 of the Defence;
b.says that at all material times in the period 8 July 2014 to 9 February 2015 the Plaintiff was aware that the First Defendant had not been informed of whether his position would be transferred from the RAAF base in Richmond NSW;
c.further says that there was no intention expressed in the Deed or otherwise between the Plaintiff and the First Defendant that the Plaintiff would retain the value of any interest as the registered proprietor of the Property or that the First Defendant and his family would live with the Plaintiff at the Property and care for her; and
d.otherwise denies the allegations in paragraph 22.

As to the breaches claimed at paragraph 25 of the ASOC the defence pleads an estoppel based on certain representations said to have been made by Lillian:

25In response to the allegations in paragraph 19C of the Amended Claim, the First Defendant:
a.says that in late July or early August 2014 the Plaintiff represented to the First Defendant (the Property Costs Representations):
i. she would pay all costs for rates, taxes, utility charges, maintenance costs and insurance for the Property (the Property Costs); and
ii. the First Defendant would only pay a portion of the Property Costs if he was living at the Property;
b.further says on 13 August 2014 the Plaintiff represented to the First Defendant that (the Utility Charges Representations):
i. she would pay for all utility charges for electricity and natural gas in respect of the Property (the Utility Charges); and
ii. the First Defendant would only pay 75% of all Utility Charges if he was living in the Property;
c.further says that he was induced into entering into the Deed in reliance on the Property Costs Representations and the Utility Charges Representations;
d.further says the Plaintiff knew that the First Defendant relied on the Property Costs Representations and the Utility Charges Representations and intended him to do so;
e.further says: -
iii. around March 2016 the Plaintiff requested the First Defendant pay part of the Property Costs because the Property Costs were more than the Plaintiff had been paying previously;
iv. until around May 2016 the Plaintiff was paying 100% of the Property Costs and the Utility Charges; and
v. on 2 May 2016 the Plaintiff represented to the First Defendant that the Utility Charges were her sole responsibility;
f.further says the Plaintiff is estopped from resiling from the assumed state of affairs that she would pay for the Property Costs and the Utility Charges unless the First Defendant was living in the Property in the events pleaded in paragraphs [25a] to [25e] above;
g.further says that:
i. he has paid 100% of the land charges in respect of the Property since around May 2016;
ii. to the extent that the Court finds he has failed to comply with his obligation to pay 75% of rates and utility charges in respect of the Property (which is denied), he is entitled to the set off referred to in paragraphs [49] to [50] below;
h.further says that from around May 2016 he has paid the Property insurance; and
i.otherwise does not admit the allegations in paragraph 25.

In relation to the pleading of special disadvantage (at 27C of the ASOC) John pleaded that there was no such disadvantage as between Lillian and himself in circumstances where:

27CIn response to the allegations in paragraph 27C of the Amended Claim, the First Defendant:
…
b.says that there was no special disadvantage between the Plaintiff and the First Defendant in the circumstances where: -
i. the Plaintiff approached the First Defendant in relation to the transaction affected by the Deed;
ii. the Second Defendant was introduced to the First Defendant by the Plaintiff; and
iii. the Second Defendant acted independently for the Plaintiff in relation to the Deed.

John denies the allegation that he behaved unconscionably and that Lillian was entitled to equitable relief.

In the event that any sum was found to be owing to Lillian, John claimed by way of set off the amount of $28,677.20 made up of the $1,090 paid by John in respect of Lillian’s legal costs (see 19B(c)(iii) of the defence), the $25,000 paid in August 2014 and Lillian’s 25 per cent share of the rates and taxes of the Phillip property since May 2016.

A counterclaim was also pleaded. However, I understand it not to have been pressed.

BAL’s defence

BAL denies that Lillian is entitled to any relief against it. In relation to paragraph 8 of the ASOC it pleads:

5In relation to paragraph 8 of the ASOC, the second defendant:
a. admits that the plaintiff attended the offices of the second defendant on 8 July 2014;
b. admits that the plaintiff met with Mr Morton, an employed solicitor of the second defendant;
c. further says that this meeting ran for approximately 40 minutes;
d. admits that the transfer of the Property was discussed by Mr Morton and the plaintiff at the 8 July 2014 meeting;
e. admits that, on 8 July 2014, both the plaintiff and the first defendant signed a form titled ‘Solicitor Acting for Both Buyer and Seller – Instructions to Solicitor’ instructing the defendant to act for both of them in the sale of the Property from the plaintiff to Mr Vesic;
f. further says that Mr Liam Early, an employed solicitor of the second defendant, telephoned the plaintiff on 4 July 2014 to also discuss the transfer of the Property prior to the 8 July 2014 meeting; and
g. otherwise, does not admit the balance of the paragraph.

As to paragraph 10 of the ASOC the defence responds as follows:

7In relation to paragraph 10 of the ASOC, the second defendant:
a. admits that at the 8 July 2014 meeting, the plaintiff instructed Mr Morton that she wished to transfer the Property to the first defendant;

b. admits that at the 8 July 2014 meeting, the plaintiff instructed Mr Morton that she wished for the arrangements for the Property to comply with Centrelink’s rules, being the plaintiff’s ongoing entitlement to the Aged Pension;
c. admits that the plaintiff advised Mr Morton that there was a mortgage over the Property which the plaintiff had taken out to make improvements to the Property;
d. further says that the plaintiff instructed Mr Morton at the 8 July 2014 meeting that she wished for the first defendant to have a right to sell the Property, but this was conditional on any new property purchased by the first defendant having a bedroom and bathroom for the plaintiff’s own use;
e. further says that the plaintiff instructed Mr Morton at the 8 July 2014 meeting that she wished to make modifications to the Property, if required for her heath [sic], without the first defendant’s consent;
f. further says that the plaintiff specifically asked Mr Morton whether a “Granny Flat Deed’ would achieve her objectives, and indicated that she understood what was involved with this Deed;
g. further says that Mr Morton advised the plaintiff that a ‘Granny Flat Deed’ would achieve her objectives, and that a gift of the property to the first defendant without a Deed would not be in the plaintiff’s best interests;
h. further says that the plaintiff instructed Mr Morton that she did not want the Deed to be ‘mercenary’;
i. further says that at the 8 July 2014 meeting, the plaintiff failed to instruct Mr Morton that:
i.the first defendant was in a ‘bad financial state’;
ii.the first defendant and his wife had a history of squandering money given to them;
iii.entering into the ‘Granny Flat Deed’ was entirely the first defendant’s idea;
iv.she had concerns regarding the motivations of the first defendant and his wife in having the Property transferred to the first defendant.

j. otherwise, does not admit the balance of the paragraph.

BAL pleads as to paragraph 17 of the ASOC:

12In relation to paragraph 17 of the ASOC, the defendant:
a. denies the plaintiff attended the second defendant’s offices on 22 August 2014 to meet with Mr Morton and sign the Deed, but says this occurred on 20 August 2014;
b. further says that, at the 20 August 2014 meeting, Mr Morton explained each clause of the Deed to the plaintiff before she executed the Deed;
c. further says that the plaintiff provided instructions to the second defendant regarding the terms of the Deed prior to its execution;
d. admits that the first defendant agreed to execution of the Deed by counterparts and signed the Deed;
e. says further, that the Deed signed by the first defendant was provided to Mr Morton on or about 22 August 2014;
f. admits that the settlement of the Property transfer was effected on 22 August 2014;
g. otherwise does not admit the balance of the paragraph.

Thereafter BAL contests the claims of negligence, misleading or deceptive conduct and breach of fiduciary duty.

At paragraph 26 BAL says that if Lillian had suffered loss or damage as claimed that outcome was caused solely by the breach by John of the terms of the Deed.

In relation to the entirety of the claim against it BAL relies on the time bar erected by s 11 of the Limitation Act 1985 (ACT) and/or s 236(2) of the Australian Consumer Law, contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth). It also pleads contributory negligence on the part of Lillian having regard to the matters alleged at paragraph 7(f) to (i) in the defence.

Finally, BAL pleads reliance on the provisions of Chapter 11A of the Civil Law (Wrongs) Act 2002 (ACT) which would have the effect of limiting any judgment against BAL to the proportion of the loss or damage suffered by Lillian which the Court considered just having regard to the relative responsibility of BAL and John for that loss or damage. (In that context, I should note that a contribution notice was filed by BAL against John seeking relief pursuant to s 21 of the Civil Law (Wrongs) Act 2002. It will only be necessary to address that notice in the event that some liability is established against BAL which is not the subject of Chapter 11A.)

The evidence

Lillian relied on her own affidavits sworn on 26 October 2021, 25 November 2021 and 28 April 2022.

John relied on his affidavits sworn on 15 October 2021 and 28 April 2022.

BAL relied on the affidavit of Timothy Morton affirmed on 18 March 2022.

On 1 July 2021 McWilliam AsJ ordered that where a material fact relates to a conversation that is disputed evidence of that conversation must be given viva voce. The affidavits were taken into evidence in that context. Each of the witnesses testified as to the relevant conversations and was cross examined.

A number of additional documents were tendered. They were:

P4 Letter to Christine Horvath from John regarding his parents’ marital status dated 14 July 2010;

P5 Email from the John to David Toole of BAL dated 16 September 2015;

P6 Email from Michael (junior) to Lillian dated 27 June 2016;

P7 Email from Catherine to John dated 13 April 2016;

P8 Two-paged document dated 5 July 2015 commencing as an email from Lillian to Michael (junior);

P9 Two Consumer Credit Schedules from the Commonwealth Bank referring to disclosures dated 4 February 2016;

P10 Two Commonwealth Bank Home Loan summaries.

After submissions I gave leave to Mr Muller, counsel for John, to provide references to evidence in relation to the estoppel relied on by his client. This led to the tendering of a copy email which had been omitted from the evidence tendered during the hearing. There was no objection to the reopening of John’s case for that purpose and I admitted the email into evidence as exhibit “P11”.

The witnesses

Lillian

The bulk of Lillian’s evidence in support of her case was set out in her first affidavit and her testimony in chief. I will refer to those parts of it which appear to me to be relevant to the factual matters in issue in this case.

Lillian said in her affidavit that she had lost access to many emails which she had sent or received around 2014. She had been informed by her service provider that the messages had been deleted or cleared from her account. In the course of cross-examination, she said that her computer had been tampered with in the course of a break-in which had occurred at her home one year when she was visiting John and his family for Christmas.

According to Lillian, she suffered a cardiac incident in 2010 or 2011 which led to her being admitted to The Canberra Hospital. She said that John had visited her there and suggested that she should come and visit him and the family in Sydney. She did that about 10 days later. She said that John and Natalie had met her at the Airport and that John had taken her to look at a house at Bella Vista. John said that it was a house which she should look at with a view to buying it to move to Sydney. He said that she was getting older and it would be nice for her to move to Sydney and spend the rest of her life close to the family.

Lillian recounted that John had gone on to say that he and his family were about to move into a house, but that it was only “approved” for four children. He said that perhaps Michael (junior) and Peter could live with her at the Bella Vista property. The reference to the house which John and his family were to move into appeared to be a reference to the Church house.

In any event, Lillian then gave evidence about numerous telephone conversations between herself and John from early 2014. She said that these occurred at least once or twice a week. In the course of these conversations, John often expressed his concern about no longer being a homeowner, and with the escalation of property prices, not being able to buy a home in the future. Lillian formed the view that John was depressed and deeply emotional in these telephone calls. She thought that he might have been crying at times.

Then in April or May of 2014, John rang Lillian in a better frame of mind. He told her that the ADF was moving him back to Canberra. However, he said that Peter, Gabriel and Catherine would have to remain at university in Sydney and he would have to continue supporting them financially. He asked if he, Helen and Natalie could come and live with Lillian at Phillip, although it was his intention to buy a property in Jerrabomberra where blocks of land were larger than those in Canberra. He said that a lot of properties there had granny flats.

At that time, Lillian and John were talking two to three times a day, mainly about these plans. On one occasion, John said that he had spoken to a friend named Marcel, who was a solicitor, who had told him about a granny flat scheme which would mean that her pension was not affected. She told him that she would approach Centrelink to check it out. She did that and told John that such a scheme would allow her to preserve her pension, although she had been advised to consult a solicitor who was experienced with such matters.

Lillian said that during one of these conversations John had told her that he needed to have the Phillip property transferred into his name. She said that she would need some extra money, beyond that required to repay the Macquarie loan. She referred to a plan she had to visit Turin, Italy (where her biological parents were buried) and the need to pay some small debts, and well as the desire to have some “emergency money”. Eventually, she said that she would need about $100,000.

The following then occurred during the examination-in-chief (Mr Noakhtar appeared for Lillian):

And how did John respond to those things that you relayed to him?---I think he said it was going to be all right, but later on when - I think he calculated, he decided to calculate.
Okay?---And his calculations turned out to be, well, he said round about - 'Make it 150. It's always better to make it a little bit more than less. I will need to give you money anyway, so if we say 150 for the mortgage and then up to 200,000,' I will get whatever is left after the mortgage is paid out.

The reference to John calculating the mortgage figure was further addressed in the following answer given by Lillian to a question from her counsel:

It's not so much the calculation. I did receive a monthly account from Macquarie Bank in relation to my reverse mortgage and I had all the documentation. And actually John asked me about it and I can remember pulling out the latest one. I can't remember what day - date it was or for what month it was, and I think it said 95,000 that I owed. And then John asked me for that I think I emailed it to him, from memory, and then he decided to work out what it would be now because there would be a payout sum too that would be charged, and that's where he got to the 150. I didn't think it was that much. I thought it would be round about the hundred thousand.

According to Lillian, John told her that they should move quickly because of escalating prices. He asked her whether she had found a solicitor on at least a couple of occasions. Lillian said that she contacted a number of solicitors and eventually decided to make an appointment with BAL.

On 8 July 2014 Lillian and John attended on Mr Morton. Lillian said that she introduced herself and her son, and told Mr Morton that John was being transferred to Canberra. She said that she was interested in a granny flat deed. She probably said that she was getting older and her health was not the best, and she was thinking of moving in with her son and his family. She told Mr Morton about the reverse mortgage. John said that the payout was about $150,000, although she said that she did not think it was that much.

There was then a somewhat confusing interchange between Lillian and her counsel. It was as follows:

I mean what we had decided between John and myself was that from 200,000, whatever the mortgage was, that required to be paid off because John - he told me he needed an unencumbered property to guarantee this new property that he was going to buy. He needed that as guarantee.
Okay. So - - -?---So whatever there would have been left from 200,000, I would have been happy to sort out those things that I have mentioned, e.g. pay out a few bills that I had. I would - they weren't excessively high and the trip to Italy and perhaps 20,000.
So let's - I just want to make sure I have understood the sequence of events. You have described a meeting with Mr Morton. You've just said John mentioned the 150 and then you've described - - -?---John was with me at that meeting.
Yes. You have also described a discussion about $200,000 unencumbered and things of that nature. Let's focus on that conversation. Do you remember when that conversation took place?---That day.

In answer to further questions Lillian made it clear that this conversation about the $200,000 occurred in the presence of Mr Morton.

Lillian then recalled that Mr Early came into the room, she thought to witness signatures. She and John signed a Law Society document, and she left the conveyancing and transfer documents to John to do.

When asked about the conclusion of the meeting Lillian recounted:

Mr Morton said to me, 'I know what I need to do for you. Let me do a draft and I'll send you a draft'. And I told him I think I wanted to spend, you know, my older years, my aging years with my family and that they would – and John said to me, 'You don't want to go into a nursing home. You'd be better off doing this'.

Mr Noakhtar then asked Lillian about the clauses of the Deed dealing with the apportionment of rates, utilities and the like. Lillian said that the first time she became aware of the apportionment provisions was when she received a copy of the draft Deed, some time after 8 July 2014. John then contacted her to ask why he should be paying 75 per cent. Lillian said that she then communicated with Mr Morton, probably at a short meeting, when he said to her:

I understand that you don't want to overburden John, but I've got to put that in because Social Security – John – no, 'John will be getting quite a substantial amount of money and Centrelink needs to be shown that John is doing something in return for that money'.

In relation to the meeting when the deed was signed Lillian said that both she and John attended upon Mr Morton. Both she and John had copies of the deed and there were no significant alterations made or corrections. However, as she read through it, Lillian noticed the reference to $150,000 in paragraph B under “Background”. She said:

I turned around to John and I said, 'That's not right', and he said, 'Oh, don't worry about it. I've got to give you money anyway. We'll sort that out between us.' Now, I would've thought that Tim heard that because, as I said, we were about here and he was there. I didn't whisper it. At the same time, I don't think I yelled out about it. I just made a comment. I didn't hear any response from Tim, so I presume that it was fine and I guess I didn't want to second guess him.

Lillian signed the Deed and Mr Morton witnessed her signature. John took his copy of the Deed and Mr Morton advised him to take it to his solicitor for explanation. John was to sign it and return it by email or post.

Lillian then described an occasion when she was upstairs in the BAL offices for some reason. Michael (senior) was driving her car and ran into a bus. This led to her car being a “write-off”. She said that she then rang John and asked for $25,000 of the money which he was to pay her so she could replace her car. John agreed and transferred the money to her account.

Soon after this, in September 2014 John telephoned Lillian and told her that he would be transferring to Queensland. When asked as to her response Lillian said:

'Oh, that's all right, darling.' Probably something along those lines. It didn't really make much difference to me. I wasn't dead set on it being Canberra for these plans that we'd made, that there'd be one house and we'd all be living in it. I'd be with them. His job was number 1.

John assured Lillian that they would be still able to carry out the plan of living together in Queensland.

Lillian said that John asked if she would not mind waiting a little for the remaining $25,000 until after the move to Queensland. She was happy to do that. She did ask him about it later and he said that he was still not in a position to pay it to her. Lillian then discovered that John and his family were going on a long holiday to Europe. This led to her to ask him whether he was going to spend the money he owed her on that trip. John became angry and abusive and their relationship went downhill from there.

Eventually, Lillian returned to see Mr Morton at BAL. This resulted in a letter of demand to John dated 27 August 2015 advising as to the registration of a caveat over the title to the Phillip property to protect Lillian’s life interest, and insisting on compliance with the Deed in respect of the apportionment of outgoings in relation to the property.

In February 2016, John sought to refinance his mortgage loan (which he had taken out in order to pay out the sums required for the transfer of the Phillip property). Lillian said that she agreed to withdraw the caveat to allow that transaction on the basis that John had said that he was looking for houses with granny flats.

Subsequently, when nothing transpired in relation to the granny flat plan Lillian became concerned about the new mortgage loan. She worried about John’s capacity to meet the repayments. She lodged a further caveat. The relationship with John did not improve.

From approximately mid-2016, John has paid the rates in relation to the Phillip property. He has not contributed to utility charges or maintenance costs.

Lillian was cross-examined by both Mr Muller and Mr Zahra SC (counsel for BAL). In response to questioning by Mr Muller, Lillian emphasised that she entered into the arrangement for transferring the Phillip property primarily to assist John to get back into real estate ownership. Initially, she denied wishing not to appear mercenary in the transaction with John. However, when she was taken to her email to Mr Morton of 11 July 2014 (in which she said that she did not wish the Deed to be ““mercenary” in nature” (quotes around mercenary in the email) she agreed that that reflected her intention at the time.

Mr Muller put to Lillian that a benefit of the transaction for her was relief from the increasing amount of the Macquarie loan. Lillian said that she did not need such relief. She also said that she did not accept that under the Deed she was entitled to remain living in the Phillip property for as long as she chose. She referred to emails from John and his children in which they threatened to send to her to live in a Serbian village.

Questions were put to Lillian about the nature of her relationship with Michael (senior). Lillian emphasised the periods when he did not live with her. She said that he had been seeking public housing at various times. When they were together, they each had their own bedroom. The reason why they had not divorced was because John had asked them not to. This related to his clerical position. In recent years she had become Michael (senior)’s carer, due to him suffering dementia and cognitive decline.

Mr Muller put to Lillian that she had misrepresented her age to Centrelink to obtain the age pension two years earlier that she should have. She denied that.

When challenged as to the practicality of John and his family moving into the Phillip property, Lillian conceded that it would have been very “tight” in the house. She said that John and Helen could have had the main bedroom, Natalie the second bedroom and Michael (senior) could have slept on the couch. Lillian would have slept on the floor in the study.

Lillian denied that she knew in 2014 that John and his family would be staying in Sydney, contrary to her evidence about the transfer to Canberra. When it was put to her that John and Helen had free access to a 5-bedroom house on a property at Symonston owned by Helen’s parents Lillian said that it was in a state of disrepair and full of vermin. She claimed that when the family came to Canberra all of the children stayed with her at Phillip.

Mr Muller put to Lillian that the only reason she told Mr Morton that John and his family were coming to live with her was because she believed that to be a Centrelink requirement for the granny flat scheme. She denied that proposition.

Lillian also denied that it was her, rather than John, who first raised the possibility of a granny flat arrangement. Lillian said that in 2014 she was unconcerned about the growing Macquarie loan. She said that John had told her that he was happy with the money Helen was likely to inherit, and that he had millions of superannuation. He had said to her not to worry about him. She denied a conversation with John in May 2014 when she said that she was concerned about the rate of growth of the reverse mortgage and suggested that he buy into the property.

Lillian maintained her claim that there was a restriction on the Church house at Homebush which prevented the whole of John’s family from living there. She did not accept that John’s financial position was such that he did not need to come to her for help in getting back into the property market. Indeed, she said that he did approach her as she had said in her evidence in chief.

Mr Muller pointed to an email from Lillian to John dated 22 May 2014 which attached information about the Centrelink assets test limits. He put that John had then said in a conversation with Lillian that she should discuss the proposal with Centrelink to confirm what she could and could not do. Lillian accepted that such a conversation may have occurred. However, she denied that John told her that he was to contact the St George bank about a loan to provide the money needed for the arrangement. She claimed that John told her that Helen had a $100,000 in a bank account left over from the sale of Castle Hill. Lillian said that there was “no way” she would have proceeded with the arrangement if she knew that John was borrowing the money he required to pay out the mortgage and pay her what she needed.

Lillian further denied that John had, in a conversation on 21 June 2014, asked her for a copy rates notice to provide to the St George bank for his loan application. When taken to her email to John on 21 June 2014 enclosing a copy rates notice Lillian was unable to explain why she sent it. However, she said that she was definitely not aware of the St George loan because if she had been, there would have been no deed. Lillian also denied that John had told her in a conversation in late June that the loan had been approved.

Mr Muller put to Lillian that it was at about that time that there was a discussion about the money to be paid by John in which he said the maximum he would want to transfer to her account would be $100,000 and 'it can't cost me more than $200,000'. Lillian agreed that he had said something along those lines, but that because of the uncertainty of the Macquarie loan payout she had said: 'Look, $200,000, whatever is left after you pay out the Macquarie reverse mortgage.' Lillian denied that she said to John 'I don't know how much I want yet because I need to speak to the lawyer about how much I can receive without affecting my pension’.

Lillian was questioned about an email she had sent to John in December 2012. Mr Muller suggested that it was then that she had first raised the possibility of John buying into the Phillip property. She strongly denied that proposition. She also denied that she her assertions that John had introduced her to the granny flat scheme, and had said that he needed to own Phillip unencumbered so he could buy another property, were false.

It was also put to Lillian that her evidence that John had told her he was short of money was untrue. She denied that and claimed that he had said he was unable to afford a cup of coffee.

In relation to the attendance on Mr Morton on 8 July 2014, Lillian said that Michael (senior) had driven John and herself to the appointment. Mr Muller put to her that in the course of that trip she had said to John that she knew what was required by Centrelink and that he should let her do the talking to Mr Morton. She said to John that she would need to tell Mr Morton that John was moving to Canberra, and John had replied by saying that he would not be moving to Canberra, and would not be living at Phillip. Lillian denied those conversations.

Mr Muller put to Lillian that John had at no stage told her that he was being transferred to Canberra. She denied that. She also reiterated that she had asked John for the extra $25,000 in September 2014.

In relation to the second meeting with Mr Morton (which was on 20 August 2014) Lillian strenuously maintained her account that John was present. When it was put to her that Mr Morton had recorded that only she was present Lillian suggested that perhaps he was being untruthful.

Mr Muller returned to the issue of when the suggestion of John “buying into” the Phillip property was first made. Lillian cavilled with the idea that she would have used such words. Even when taken to her email of 6 December 2012 (see [9] above) Lillian maintained that those words must have come from John. She also said that she was happy for the Macquarie Bank to take the whole of the Phillip property. She claimed that John did not need it, that Helen would have millions, and that John had told her that he had approximately “11 million” in superannuation.

In relation to the issue of the outgoings in relation to the Phillip property the following exchange occurred:

You accept, don't you, that while you remained in the property it was not your expectation that John would pay for the rates, utilities and maintenance? Not until he settled his situation with the three children at university, and then we would decide what was happening. In the meantime, I would continue to do as I had done prior to that: take care of all the outgoings necessary for the property, and that was my way of helping my son and his family.

In response to further questioning, Lillian stated that it was always her expectation that she would be responsible for the outgoings only for a limited period of time.

Mr Zahra SC then asked Lillian some questions about her background and experience. She agreed that she was the elected president of the Serbian Cultural Club in 2002. She thought of herself as an intelligent and competent woman, both in 2014 and at the present time. She regarded herself as highly capable in 2014. She had been involved in litigation (in relation to the Serbian Cultural Club) in 2001/2002 when she had been involved in providing instructions to solicitors and in giving evidence in court. She had also been involved in defamation proceedings in 2017. She had been a court interpreter in the ACT for 12-15 years. She had arranged for the registration of a caveat over the title to the Phillip property, and its withdrawal, without the need for a solicitor.

Lillian was taken again to the 6 December 2012 email. Notwithstanding the contents of the email, she denied that she had suggested to John at that time that he buy into Phillip and get rid of the Macquarie Bank loan. Lillian repeated her claim that she was not concerned about the loan eating away her equity in the property.

In relation to her visits to the advisors at Centrelink Lillian agreed that after those visits she was comforted that the granny flat arrangement in relation to the Phillip property would not affect her pension. She contacted BAL with a view to having the arrangement she had agreed with John documented. Mr Zahra SC took Lillian to the file note of Mr Early dated 4 July 2014. Lillian was not sure that she had spoken to him at that stage. She thought that she would have spoken to a receptionist to arrange the appointment. She did not agree that file note was accurate.

Lillian again denied the conversation with John on the way to the 8 July 2014 appointment (see [93] above). She denied that the account of John’s transfer was designed to mislead Mr Morton.

Mr Zahra SC put to Lillian that the essence of the arrangement was that John would pay out the Macquarie loan, she would transfer the property to him, she would be entitled to ongoing accommodation, and John would pay her about $100,000 in addition to the loan repayment. She agreed. Lillian also agreed that she needed a solicitor to document the arrangement. She confirmed that at that time she had a close and loving relationship with John, and that she trusted him.

Lillian was then questioned about the 8 July 2014 meeting. It is apparent that these questions were asked by reference to Mr Morton’s file note of the meeting, and Mr Morton’s recollection of what had occurred. Lillian agreed with some of the propositions put to her. However, she did not agree with, or denied, the following:

(1) That she had been looking into a granny flat arrangement and wished to proceed with one. She said that she told Mr Morton that she had been to Centrelink and had been told to make sure she saw an experienced solicitor to do what was necessary.

(2) That John worked with the ADF but might be transferred to Canberra. Lillian said that she would have told Mr Morton that John worked for the ADF and was definitely getting a transfer.

(3) That she had decided to mislead Mr Morton into believing that John would move into the property in circumstances where that was not going to occur.

(4) That Mr Morton had raised other possible options such as John obtaining a loan to pay out the Macquarie loan but retaining the property in Lillian’s name.

(5) That Lillian queried the need for a Deed and asked whether she could simply transfer the property to John.

(6) That she told Mr Morton that she could trust John and that he was a priest.

(7) That the Macquarie mortgage was becoming quite significant on the property and she did not want it to go to the bank one day. She wanted to keep it in the family.

(8) That if John is transferred to Canberra he would “live with me”. Lillian agreed that she said that, but said that she had also qualified that comment with the words “For a short time”.

(9) That she said to Mr Morton that she wanted the property to be transferred to John so he would own it.

(10) That Mr Morton said that he strongly recommended that Lillian have a deed to record the arrangement and for her protection.

(11) That Lillian asked Mr Morton as to the cost for the preparation of a deed.

(12) That Mr Morton said that he might be able to do it for $1,000 or so.

(13) That Mr Morton recommended provision in the Deed for the sharing of expenses for utilities, rates and water charges on the basis that John would be moving in and Lillian would be losing her pension subsidies.

(14) That Mr Morton suggested that Lillian paid 25 per cent of those charges and John 75 per cent.

(15) That Mr Morton said that the 25/75 split would help her with her cash flow and was fair since she was giving her property to John.

(16) That Lillian said that she did not wish to be mercenary against John.

(17) That Mr Morton raised with her the issue of privacy within the house if John and his family were to move in.

(18) That Lillian said she did not need any provision for privacy because she trusted John.

(19) That Mr Morton raised the need for some provision about sale of the property and the provision of accommodation for her should John buy a new property.

(20) That Mr Morton raised with her the question of who should pay Lillian’s moving costs in such an eventuality and that she responded that she could pay such costs.

(21) That Lillian said that if she was to go into aged care the life estate could terminate.

(22) That Lillian had said that if she was to go into aged care she would pay her own way.

(23) That Mr Morton said that the transfer of the property would be handled by BAL’s conveyancing specialist Mr Early.

(24) That Mr Morton left the meeting when Mr Early came in discuss the conveyance, and that Mr Morton was not present when Lillian and John signed the Law Society forms.

Lillian confirmed that she received the draft Deed on or about 19 July 2014 and that she had read it carefully and understood its terms. When taken to clauses 4 and 5 she insisted that the Deed was not properly drafted because it did not deal with what was to happen with the purchase of a property by John in the future. After being taken to paragraph 91 of her affidavit, Lillian conceded that she did understand that clause 4 made her responsible for 25 per cent of rates and utility charges, with John responsible for the other 75 per cent in relation to the Phillip property. She said in the affidavit that she preferred the apportionment to be the other way around, so as not to overburden John. Lillian said that after reading the draft Deed she contacted Mr Morton to inform him of her wish to change the apportionment. She was unable to recall how that communication occurred

Mr Zahra SC again put a number of propositions to Lillian as to what occurred at the 20 August 2014 meeting with Mr Morton. The propositions which she disagreed with, or denied, were:

(1) That Mr Morton said that Lillian was being very generous to John and that it was possible to provide extra protection, particularly in relation to aged care.

(2) That Lillian responded to that comment that she was happy with the Deed, she trusted John completely and did not want to appear mercenary.

(3) That Mr Morton took Lillian through the Deed clause by clause, giving an explanation of each clause as he went through the Deed.

(4) John was not at that meeting. Lillian confirmed what she had said in her affidavit. That is, that she did not invite John to attend the meeting because she expected he would meet with his own solicitor. Lillian said that John arrived at the Phillip property unannounced driving a government car, and that Michael (senior) had then driven John and herself to the meeting with Mr Morton.

(5) That she was fabricating her evidence about John being at the meeting.

Lillian was taken to the email from Mr Morton to John dated 20 August 2014 (at 2:59 pm). That email referred to the attachment of a copy of the Deed. It stated “Can you please let me know if you will be in Canberra soon so that you can sign the deed yourself? I will need it to be signed before Friday. Worst case, you can print the attached copy and return it to me with confirmation you are happy to sign the documents as counterparts.”

Notwithstanding the contents of that email Lillian maintained her account that John was at the meeting. She was not prepared to concede that she might be mistaken about that.

Mr Zahra SC put to Lillian that her claim that she had not had an opportunity to consult with Mr Morton in John’s absence was false. She disagreed.

At one point Mr Zahra SC asked Lillian “… You accept, don’t you, that so far as Mr Morton was instructed this deed recorded what you and John had agreed to?” The answer to that question was “yes”. Mr Zahra SC then suggested that in fact Lillian and John had reached a different agreement in relation to the payment of outgoings relating to the property. Lillian agreed with that proposition, however she said that it was to operate only for a very short period of time.

Lillian was taken to her email to John dated 13 August 2014. In that email she had said: “… Just so you know as discussed team has put in the Deed that you are to pay 75% of all utility charges. He needs to do that for Centrelink. Don’t worry dad and I will pay for all these costs. If you end up living in Phillip and of course you can pay as per Deed.” Mr Zahra SC put to Lillian that she had not told Mr Morton about the contents of that email. Initially, Lillian said that she had told Mr Morton. However, she did concede that she did not tell him. She did not accept that she should have told him. Lillian also accepted that she had not told Mr Morton about the extra $100,000 which John was to pay to her, although she suggested that Mr Morton should have asked her about it.

Mr Zahra SC questioned Lillian about a number of the instructions given to Mr Morton when she returned to see him in July/August 2015. These were recorded in a letter from Mr Morton to Lillian dated 24 August 2015. Lillian accepted that she had not raised any issue with Mr Morton as to the contents of that letter. She said that she did not think it was necessary for her to have raised those concerns in 2014 because “John and Helen had settled down” by then.

John

As with Lillian’s evidence the main part of John’s account is set out in his affidavit. His oral evidence in chief was primarily concerned with the various conversations which were in issue.

He commenced by recounting conversations at the end of 2012 after Michael (junior) had indicated that he was not in a position to contribute to the Bella Vista property. Lillian had then suggested to John that he might buy into Phillip. That was confirmed in the email of 6 December 2012.

In May 2014 Lillian again spoke to John about buying into Phillip. There was discussion about an arrangement which would preserve Lillian’s pension benefits, and which would stop the Macquarie loan from escalating. John said that he was clear in advising Lillian that he would need to obtain a loan for any such arrangement.

At that time John said that he was not under pressure to acquire a property. He and his family were living rent-free in the Church property at Homebush. There were no restrictions on the number who could live in the house. He and Helen were not paying for the education of the children at university. They were provided with accommodation and meals, however, their fees were covered by the Higher Education Contribution Scheme (HECS) and they otherwise covered their expenses from income generated by part-time work. John was not under any financial pressure at that time.

After John received from Lillian a copy of the Macquarie loan statement and some material from Centrelink, he spoke to her and said that it looked good to him, and that he could probably get the $100,000 loan. He said that she should check with Centrelink as to what she could do.

In early June 2014, John received an email from the St George Bank requesting documents to progress his loan application. He then spoke to Lillian. He told her that he had “pre-approval” but that he would need a copy rates notice and that a valuation would be required.

In relation to the 8 July 2014 meeting with Mr Morton, John confirmed that he travelled to the meeting by car with Michael (senior) and Lillian. Michael (senior) was driving. In the course of the trip Lillian said words to the effect “..you know we are going to a lawyer’s office; you know I’ve done the research on the granny flat arrangement with Centrelink and I’m going to have to tell Tim something to the effect that you will be moving to Canberra.”

In response John said, “all right, but you know that I’m not going to be moving to Canberra and I’m not going to be living at Phillip…” Lillian said “I know that, but I need that for Centrelink purposes.” John said that Lillian suggested that he follow her lead and just let her talk to her lawyer.

John described what he could recall about the meeting. Lillian said words to the effect “I want to formalise a contract or granny flat arrangement with my son John. I own a property at Phillip. It has a reverse mortgage attached to it…and the bank could take the property if we didn’t do something about it.” Lillian introduced John and advised that he worked with the ADF and was a priest in the Orthodox Church. John’s recollection was that at one point Lillian did say that she did not wish the Deed to be mercenary. Mr Morton was informed that there was a possibility that John could be moved to Canberra with his job.

Mr Morton at one point explained that he was not a specialist in conveyancing. He introduced Mr Early and then left the meeting.

The reality at that time was that there was no real prospect that John would be transferred to Canberra. There was no position in Canberra available for him having regard to his qualifications and designation. In August 2014, there was discussion about the possibility of a relocation to the Amberley base in Queensland.

I should say that while I am satisfied that Lillian was a fond and loving mother to John in 2014, I do not accept that John was depressed and distressed as Lillian portrayed in her evidence. Nor do I accept that Lillian was unconcerned about the growing Macquarie loan. Such unconcern is simply implausible. It is far more likely, consistently with the 6 December 2012 email and John’s evidence as to the conversations in the first half of 2014 that Lillian was worried by the prospect that the compounding interest accruals of the loan would erode her equity in the Phillip property. Indeed, I find, contrary to her evidence, that she did wish to pass the property to John with her equity intact. This was one of her main purposes in pressing ahead with the granny flat arrangement.

In that regard I also reject the suggestion in Lillian’s evidence that John was pressing for the transaction to be completed as quickly as possible. That is not reflected in the emails between them at that time, nor is it consistent with Mr Morton’s perception of John’s position in relation to the arrangement. It is not entirely clear who first came up with the concept of the granny flat arrangements. Given the passage of time it is difficult to determine which of Lillian and John might first have raised it. It does not really matter, in my view, having regard to my conclusion that John was not pressing Lillian at that time to transfer the property to him as she alleges. Rather, it seems to me, both Lillian and John saw the arrangement as having some mutual benefits. Lillian undertook her own research into the relevant Centrelink rules. She was able to satisfy herself that the transfer of the Phillip property to John, subject to the creation of an appropriate life interest in her favour, would not engage the Centrelink gift rules which might adversely impact her pension entitlement. Having reached that conclusion, I also accept that Lillian did wish to have her understanding confirmed by a lawyer who had some experience of granny flat arrangements.

An unusual feature of this case is the lack of clarity as to what was actually agreed as between Lillian and John in relation to the amount to be paid by the latter. It is to be remembered that the Phillip property was valued (for stamp duty purposes) at $440,000 in mid-2014. The Macquarie loan to be repaid was a little over $104,000. That the loan repayment was around $100,000 must have been clear to both Lillian and John by June of 2014. While Lillian intended to make a substantial gift to John in transferring the property to him, I do not accept that the two of them agreed that all John would have to pay was the sum necessary to discharge the Macquarie loan mortgage. It is far more plausible that Lillian would have wanted some additional monies, as she said in her evidence, to clear some other debts and give her funds for a planned trip to Italy and other eventualities.

One would have expected that the details of such an agreement would have been given to Mr Morton on 8 July 2014. However, it is clear that he was not told about that agreement.

One possibility is that Lillian and John had not reached an agreement by that time. However, having regard to the email extract forming part of Exhibit “P8” I consider that unlikely. It seems more probable in my view that Lillian and John would have reached a final position before going to see a solicitor than after. The email, which as John said in his evidence, appears to have been sent after 30 June 2014, refers to the need for Lillian to double check the implications of the transfer arrangement for her Centrelink pension. It seems likely that it was that urging which led to Lillian making a second appointment with a Centrelink advisor.

I see the references to John paying the stamp duty and then paying “$100k” to the Macquarie Bank and “Transfer to you 100K into your bank account” as John’s summary of the agreement which they had reached by then. It is clear from the last sentence that it was conditional on Lillian obtaining confirmation from Centrelink that her pension would not be affected. She obtained that confirmation before the 8 July 2014. Therefore, it seems likely, and I find, that the email must have been sent between 30 June and 8 July 2014.

I do not accept John’s evidence that the email was merely discussing “options”. Nor do I accept his claim that he only ever expected to pay $150,000 for the property. It seems to me that given the context and the timing that the contents of this email, it does provide corroboration of Lillian’s claim that she and John had agreed that he would pay the amount required by Macquarie and a further sum up to $200,000 in return for the transfer of the title to the Phillip property into his name. I see the fact that John paid the $25,000 to Lillian, without demur, on 25 August 2014 after having paid the amount of $150,000 (including the mortgage repayment) at settlement on 22 August 2014 as supporting that conclusion.

In that context I should say that I reject the evidence of Lillian that she was not aware that John was borrowing money from the St George Bank in order to pay what was required from him for the transfer of the Phillip property. I note that such ignorance was not pleaded as part of Lillian’s case. Moreover, having regard to the extract which I have found to have been part of an email sent to Lillian in early July 2014, and the contents of the 1 August 2014 email which was copied to Lillian (see [134] above), I find that she was aware of the St George advance to John before she signed the Deed on 20 August 2014. Contrary to her evidence, she was not concerned about John borrowing that money or that the loan would be secured over the Phillip property.

It is difficult to know with any absolute confidence why the true nature of the agreement between Lillian and John was not disclosed to Mr Morton. Having regard to all of the circumstances, I infer that both mother and son were content to treat the $200,000 obligation as something of a side agreement which was not necessary to document as part of the granny flat Deed. This may have been because of their relationship at the time, which was close, trusting and friendly. It is also consistent with Lillian’s decision that there was no need to document her willingness to waive the benefit of the 25/75 apportionment provisions in relation to the outgoings in relation to the property (as to which see [199]–[201] below).

At one point it had seemed to me that perhaps the agreement which Lillian and John had reached was for John to pay $150,000 for the transfer of the property. That would explain why that amount had appeared in the contract for sale and the memorandum of transfer. However, on examination of the BAL files it appears likely that the original documents were signed by Lillian and John in the course of the meeting with Mr Early on 8 July 2014. I accept the evidence of both Mr Morton and John that Mr Morton was not present during that meeting. I also reject the suggestion in the evidence that the documents were blank when they were signed. While it is true that the dates were added at later times it seems likely in my view that the names of the parties, the property details and the consideration were in the documents when they were signed.

However, no party suggested that the price of $150,000 was discussed with Mr Early. It seems to me that Mr Early was informed of what later appeared as paragraph B under “Background” in the Deed, which recited: “Lilli has a loan of approximately $150,000 secured against the Property...”. It was in that context that Mr Early included that sum as the consideration for the transfer in the conveyancing documents.

In the light of my findings, I reject the submission that John misled his mother about the possibility that she might at some stage live with him and his family. It seems to me that the true position was that that eventuality was accepted by both Lillian and John as a potential long-term possibility, which (aside from the outgoings apportionment provisions) they both saw as adequately addressed by the provisions of the Deed as drafted.

I therefore reject the contention that John acted unconscionably in taking the transfer of the Phillip property. Lillian, as an intelligent and competent person, decided for what she saw as good reasons, to give John the Phillip property having a value, after payment of the $200,000, of around $250,000. She saw this as a desirable step to stop the running of the interest on the Macquarie Bank loan, and as a method of helping John to re-enter the property market. In return, she obtained a life interest in the property, with the reasonable expectation that she would be provided with ongoing accommodation with John and his family should John wish to sell the Phillip property in the future.

It may be that if Lillian had been aware of the dispute which would occur in 2015 about the remaining $25,000 she would not have entered into the arrangement. However, that does not seem to me to provide a basis for asserting special disadvantage. In a slightly different context Adamson J in Collinson v Paxus Australia Pty Limited (No 3) [2022] NSWSC 438 said:

147The unconscionability and special disadvantage on the basis of which equity will intervene do not extend to cover every bargain struck or transaction entered into which could have been bettered, had a party realised the true position.
148In Turner v Windever [2005] NSWCA 73, Giles JA at [72] said:
“Mere unawareness of a matter material to the interests of a party to a transaction is not a special disadvantage. That is a commonplace of commercial and other negotiations, and good conscience does not require the other party to guard against the party inadequately informing himself any more than it requires the forfeiture of a superior bargaining position (see Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [10], [15]-[17], [56], [185]).”
149The equitable doctrine of unconscionability is concerned, in part, to protect weaker parties from exploitative conduct. Its purpose is not to save a party (whether weaker or not) from the consequences of disregarding its own interests or providing relief from a bargain which, on reflection, did not prove to be as beneficial for the party as had been appreciated at the time of its conclusion: Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [26] (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ).

I am far from convinced that Lillian was a “weaker” party here. Indeed, insofar as the pleaded case (at paragraph 27A of the ASOC) focusses on the conveyancing part of the transaction it seems to me that it misses the point. The reality is that the conveyancing occurred as a consequence of the Deed being entered into. In the making of the Deed the Lillian was separately represented and obtained and acted upon the advice of Mr Morton. Once the terms of the Deed were agreed there was, it seems to me, no issue of conflict in relation to the mechanics of the conveyance.

I reject Lillian’s claim that John acted unconscionably.

Enforcement of the contract

It seems to me that this falls into two broad categories, although the pleadings are not as clear as they might be. I have concluded that the consideration for the transfer of the Phillip property which was agreed between John and Lillian was $200,000. John paid $150,000 at the time of settlement on 22 August 2014. John said in his evidence that he paid Lillian the further $25,000 on 25 August 2014 “because she asked for it..” and that she “..did not give me anything in return..”. I have not accepted that evidence. As noted above I have concluded that John paid that money pursuant to the oral agreement which he and Lillian had entered into probably in early July 2014.

I accept that Lillian probably did raise the outstanding $25,000 in passing in conversations with John during late 2014 and 2015. I also accept that she was content to not to press for payment of that sum until mid-2015. Once Lillian made a clear demand for that payment it seems to me that the sum became payable within a reasonable time thereafter. However, from that time it is clear that the relationship between the parties rapidly deteriorated. That $25,000 has never been paid.

While that cause of action has not been pleaded in clear terms it seems to me that Lillian’s case has been run on the basis that she is entitled to recover the $25,000 which should have been paid in the latter part of 2015. In my view she should succeed in that claim.

The second category of contractual claims relies upon the enforcement of the apportionment provisions of the Deed. On the face of it, the Deed required John to pay 75 per cent of all of the property outgoings identified in clauses 4, 5, and 6. In summary, these clauses related to rates and taxes, utility (i.e., electricity and natural gas) charges, maintenance and insurance respectively.

Mr Muller submitted that the evidence supported the assertion that Lillian had represented to John that, notwithstanding the contents of the Deed, she would pay all of the property outgoings, unless John and his family should at some time commence living at Phillip. Mr Muller relied upon the following:

(1) The conversation between Lillian and John summarised at [126] above.

(2) Email from Lillian to John dated 13 August 2014. This email was sent in the context of an email from BAL to Lillian requesting that an amount of $14,400 be paid into the BAL trust account for stamp duty. Lillian forwarded that email to John (pursuant to their agreement he was to pay the stamp duty on the transfer). She stated in her covering message:

also, just so you know has discussed Tim (Mr Morton) has put in the Deed that you will pay 75% of all utility charges. He needs to do that for Centrelink. Don’t worry dad and I will pay for all these costs. If you end up living in Phillip then of course you can pay as per Deed.

(3) The email from Lillian to John dated 4 March 2016, when the parties were in dispute, in which Lillian said:

… I do recall that when we were at the solicitors drawing up the deed conditions, Tim did advise that you pay the utility costs and I refused and said I would continue as I had been doing previously… However I did not expect to be paying MORE than I had been paying so please be considerate and understand that together with the maintenance which is always coming up, small amount or larger amounts, it all has to come out of the miserable pension…

(4) Email from Lillian to Mr Morton dated 30 July 2016 (Ex “P11”) in which Lillian recounted:

… I initially told John I would continue to pay 100% of rates, utilities, Building Insurance and maintenance as necessary, and I also agreed to loan him (his request) the $25,160 for several months due to his move to Brisbane instead of Canberra…

(5) The evidence given by Lillian under cross-examination by Mr Muller as follows:

You accept, don't you, that while you remained in the property it was not your expectation that John would pay for the rates, utilities and maintenance?---Not until he settled his situation with the three children at university, and then we would decide what was happening. In the meantime, I would continue to do as I had done prior to that: take care of all the outgoings necessary for the property, and that was my way of helping my son and his family.

(6) The evidence given by Lillian under cross-examination by Mr Zahra SC, as follows:

Ms Vesic, before the deed was even signed by you or John, you had a conversation with John where he asked you about the draft deed and queried the requirement that he pay 75 per cent of the rates, utilities?---Yes, that – yes.
And all the maintenance costs. Correct?---That is correct.
And you said to him, 'Don't worry. Nothing will change. Your dad and I will continue to pay all the costs and take care of the maintenance', didn't you? Yes, again referring to the short period of time when he and his wife and youngest daughter would be coming to live at 35 Hallen Close in Phillip, and then after that, I guess we would have worked things out. I mean, I probably would have been in a bedroom/bathroom situation and I would have not only wanted to, but insisted that I do provide something for the electricity and whatever else. I've been paying those costs all my life.
And you also said to him, 'Tim just put it in for Centrelink but you don't have to worry about it. Your dad and I will continue paying all the costs like we are now'?---Again, only for a very short period of time. His dad wasn't going to be with us for really - - -
Ms Vesic, you said that to him didn't you?---I did, but - - -
Thank you?--- - - - you need to say – know in reference to what I said it.

(7) In the course of her evidence in chief when asked about the conversation with John about the apportionment clauses in the draft deed Lillian said that at that time “I didn’t want to burden (John) with electricity or other payments…”

The statements at (3)-(7) are presumably put as admissions, given that it is John’s case that he relied upon (1) and (2) in signing the Deed on 22 August 2014.

There is considerable force it seems to me in the submission made by Mr Muller. I conclude that the following occurred:

(1) Lillian did tell John not to worry about the apportionment provisions of the Deed, and that she and Michael (senior) would cover all of the outgoings, unless John was to move into Phillip. Contrary to the suggestion by Lillian that that representation was only to operate for a “short time”, nothing was said to qualify the words she actually used before John signed the deed on 22 August 2014;

(2) The representations made by Lillian encouraged John to believe that the apportionment provisions in the Deed would not be enforced;

(3) John, to his detriment, signed the Deed on 22 August 2014 on the assumption referred to in (2); and

(4) It would be unconscionable now for Lillian to be permitted to ignore the promise that, in effect, she would not enforce the apportionment provisions as contained in the Deed so long as John and his family were not living at Phillip.

In my view these findings enliven the power of the Court to remedy the situation created by Lillian’s conduct in accordance with the principles of Walton Stores Ltd v Maher (1988) 164 CLR 387 (see also Sidhu v Van Dyke [2014] HCA 19; 251 CLR 505). I conclude therefore that Lillian is estopped from relying on the apportionment provisions in the Deed. That estoppel is subject to John’s agreement in or about March 2016 to pay all of the rates and taxes in relation to the Phillip property (see paragraph 153 of Ex “D1-1”). I note that John took that step in an attempt to assist his parents given their difficult financial circumstances.

John’s set-off and counterclaim

The bulk of the set-off claim is comprised by the $25,000 payment which John made to Lillian in August 2014. I have found that that payment comprised part of the agreed consideration for the Phillip property. Therefore, the claimed set-off in relation to that amount must fail.

John also claimed that he paid the sum of $1,090 towards Lillian’s legal costs. While the agreement reflected in the extract email forming part of Ex “P8” included a term that John would pay the stamp duty for the transfer, it did not include an obligation to pay Lillian’s legal expenses. It appears clear from the evidence that the sum paid for legal costs was paid from the amount held in trust after the payment of stamp duty. Strictly, that sum was held in trust for John. There is no evidence that John authorised the use of those funds to pay the legal costs. In the circumstances it seems to me that John is entitled to set off the $1,090 against the amount which he owes to her.

There is also a claim for 25 per cent of the amounts paid by John for rates and taxes since May 2016. According to a schedule provided, with leave of the Court, after the completion of the hearing by John’s solicitors, 25 per cent of the rates and related charges paid by John is $5,854.48. However, given John’s undertaking to pay 100 per cent of those amounts from mid-2016 onwards it seems to me that he has waived his right to insist on the 25 per cent contribution. I do not accept that he is entitled to set off this amount.

In relation to the counterclaim, I have noted above that it did not appear to have been pressed in the submissions made by Mr Muller. That decision is understandable in the light of the evidence in this matter. In any event, having regard to my finding as to the terms of the agreement made between John and Lillian it is apparent that the counterclaim (which was for the repayment of the $45,840.99 paid to Lillian at the time of settlement on 22 August 2014) was untenable.

Lillian’s claim against BAL

In his final submissions, Mr Noakhtar emphasised the width of a solicitor’s duty of care to a client. He put the submission this way:

So it is orthodox principle that a solicitor's duty of care extends to taking all reasonable steps to advise the client appropriately, concerning all material aspects of the matter entrusted to the solicitor, and that the nature of the matter to require the solicitor not only to carry out the client's specific instructions but the solicitor may need to initiate action or undertake enquiries to protect him or her from a real and foreseeable risk of economic loss

I was referred to four authorities which Mr Noakhtar relied upon to support the proposition that Mr Morton was, in all of the circumstances, obliged to have made enquiries which would have led to the disclosure of the side agreements made by the parties.

The first matter was Short v Delany [1999] NSWSC 1293. The plaintiff in that matter was a wife who consulted the defendant solicitors in relation to the break-down of her marriage. She claimed that the defendant had failed to properly investigate the extent of the assets available for division upon the end of the marriage. As a consequence, she had received, in the settlement of her property claim under the Family Law Act 1975 (Cth), very much less that she was entitled to.

Adams J set out the relevant general principles as follows:

5Subject to the nature of any particular retainer and the ambit of any additional assumed responsibility, a solicitor has a duty of care to exercise a reasonable level of professional care and skill and take all reasonable steps to advise the client appropriately concerning all material aspects of the matter entrusted to the solicitor. Depending on the circumstances, this might involve advice as to the client's rights and obligations as to matters in dispute between that client and another person, identifying material issues which ought to be apparent from the due exercise of the solicitor's professional skill and experience, whether specifically sought by the client or not, and advising as to or undertaking necessary or desirable enquiries. The nature of the matter entrusted to the solicitor may require him or her not only to carry out the client's specific instructions but the solicitor may need to initiate action or undertake enquiries in order properly to discharge the duty to the client and protect him or her from a real and foreseeable risk of economic loss. The standard of care usually applying is that of the ordinary skilled solicitor practising in the field relevant to the matter in respect of which the particular solicitor is retained and where the solicitor professes special expertise in a particular field of law to do work within that field, the relevant standard of care is that of the ordinary skilled solicitor who exercises and professes such special expertise. In this case, it is conceded, and rightly so, that Mr Goldstein both had and professed special expertise in family law matters of the kind entrusted to him by the plaintiff. Mere adherence to well-established practice may not excuse a solicitor from responsibility for avoidable damage which was reasonably foreseeable if the particular circumstances of the case as were known or ought to have been known to him or her required particular steps to be taken in order to avoid the risk of loss to the client.

Provident Capital Ltd v Papa [2013] NSWCA 36; 84 NSWLR 231 concerned the advice given to a mother who was borrowing a large sum on the security of her home (and only significant asset) to on-lend to a company being set up by her son to take over a gym business which had previously gone into administration. The New South Wales Court of Appeal (McFarlan JA, Allsop P and Sackville JA agreeing) held that the solicitor retained by the mother to advise on the loan documentation had breached his duty of care to her in not giving her advice as to the risks inherent in the whole transaction. The solicitor should have advised Ms Papa to obtain independent financial advice as to the capacity of her son’s business to repay the sums due under the prospective loan.

Mr Noakhtar also referred me to Davies v Camilleri [2000] NSWSC 904. That was also a case in which a party (Ms Camilleri) had agreed to borrow money secured over her home and only asset. The money was to be used for investment through the mortgage broker who had put together the loan transaction. The second defendant solicitor acted for the plaintiff lenders and Ms Camilleri in the mortgage transaction. Bell J held that the solicitor was in breach of his contractual and common law duty of care in failing to adequately explain the mortgage loan to Ms Camilleri, and in failing to advise her in the absence of the mortgage broker who was present during the consultation. In the course of the judgment His Honour said:

[128]… it has been recognised that circumstances may exist which require that a solicitor take some positive step to avoid a real and foreseeable risk of economic loss to his or her client. In Gellert v Bellamy [1999] NSWCA 123 Meagher JA (with whom Handley JA agreed) considered that there was ample evidence that the solicitor had been negligent in discharging his duty in the circumstances of that case:
"[a]t no stage did he warn Mrs Bellamy of the danger she was in: any new change in Mr Barton's affairs for the worse (and they never changed for the better) and her house would go..." .

Finally, in Hanflex Pty Ltd v NS Hope & Associates [1990] 2 Qd R 218 a solicitor was found to have been negligent in failing to check whether a lease had been executed by the lessor when the lessees, his clients, had asked whether it was possible to get out of the transaction. Demack J (the other judges agreeing) said at page 228 of the report that “It was the agreement to lease about which his advice was sought, and in giving advice he failed to inform himself fully of the relevant circumstances.”

I accept the statements of principle contained in the cases relied upon by Lillian’s counsel. However, each of them turns very much on the particular factual circumstances of that dispute. As is made clear by the opening sentence in the passage from the judgment in the case of Short v Delany at [210] above the analysis of the solicitor’s duty of care is always subject to the particular retainer and the circumstances under which that retainer is entered into.

In relation to the 8 July 2014 meeting, I accept the evidence of Mr Morton as to the conversation which occurred. In so far as Lillian’s account differs, I reject her evidence. In my view, Mr Morton’s account is consistent with his file note and is plausible having regard to the circumstances. Mr Morton made it clear in that meeting that he would be drafting the Deed on instructions from Lillian, and that John should obtain his own legal advice. While it is true that there was a significant voluntary element in the transaction, it is clear that Mr Morton was satisfied that Lillian was an intelligent and competent person who knew what she was doing. There was nothing to suggest that she was acting under pressure from John, or that he was seeking to take advantage of her. Moreover, the purposes of preventing the erosion of Lillian’s equity in the Macquarie Bank loan and keeping the property in the family by transferring it to John made good sense. It was not as if Lillian was acting irrationally.

As Mr Zahra SC submitted it is important to distinguish between the two retainers which are relevant here. Mr Morton was instructed to document the granny flat arrangement on behalf of Lillian. She was primarily concerned that the arrangement did not offend the Centrelink gift rules so as to affect her pension. The Deed achieved these purposes. Because he was acting only for Lillian, Mr Morton was not placed in a position where he owed conflicting duties to Lillian and John.

Mr Noakhtar argued that Mr Morton should have included some provision in the Deed to deal with the possibility of John not coming to Canberra. I do not accept that submission. It seems to me that, contrary to Lillian’s evidence, John’s move to Canberra was raised with Mr Morton as a background matter. It was certainly not raised as a matter which formed an essential term of the agreement between Lillian and John such that it should be included in the Deed. This conclusion is only strengthened in the context of my finding that Lillian, and John by his silence, misled Mr Morton in telling him of the possible move when, at that time, it was not a realistic prospect.

It is true that one would ordinarily expect that the Deed would have included a reference to John’s agreement to pay Lillian the difference between the Macquarie payout and the figure of $200,000. I infer that the reason there is no mention of this is because Lillian chose not to disclose it to Mr Morton. I am unable to make a finding as to why she chose to say nothing about it. Perhaps, as with the waiver of the apportionment provisions, Lillian considered that it was a family matter which did not need to be documented. Perhaps Lillian had some concern about exceeding the Centrelink assets test. Whatever the case, I have no doubt that Mr Morton was only given the information which appears in paragraph B under Background in the Deed. Contrary to the suggestion made in the course of Lillian’s evidence I do not accept that the circumstances here required Mr Morton to question her about the agreement so as to discover that which she had chosen not to disclose. I also do not accept that her non-disclosure was in some way unwitting. In my view, Lillian made a deliberate and informed decision about what information was provided to Mr Morton, and what information was not provided.

By choosing not to advise Mr Morton of matters such as her opinion that John was, or had been, in a bad financial state or that he and Helen had a history of squandering money, it seems to me that Mr Morton was left with no reason to suggest to Lillian that she should obtain independent advice as to any risks in the transaction (as in the Provident Capital case).

Mr Noakhtar relied on the particulars of negligence pleaded under paragraph 32 of the ASOC. I will briefly address each of these in turn:

(1) Advising Lillian and John to obtain separate legal advice. Mr Morton did provide such advice in relation to the Deed. I accept that there was no need for such advice to be given in relation to the conveyancing transaction. Providing the terms of the Deed were agreed the conveyancing was a straightforward somewhat mechanical transaction in which there was little prospect of a conflict of interests.

(2) Obtaining instructions from Lillian in John’s absence. This occurred. After the 8 July 2014 Mr Morton sent a draft of the Deed to Lillian for her consideration. He then met with her (in John’s absence) to go through the Deed on 20 August 2014. In any event I reject the suggestion that Lillian was acting under some pressure applied by John.

(3) Failing to include provision in the Deed to deal with the possibility of John and his family not moving to Canberra, not living with Lillian or otherwise not caring for her welfare. I have addressed this at [217] above. In relation to the issue of aged care Lillian made it plain to Mr Morton that she would look after herself when the time came for her to move into a nursing home or the like.

(4) Failing to include a provision for dealing with breach of the terms of the Deed by way of dispute resolution or termination. It is true that such terms were not included. It is difficult to see, in the context of my findings in this case, how such provisions would have made any difference. However, it is not clear to me that the standard of care required of Mr Morton in this case extended to the inclusion of such terms. In the absence of expert evidence on this point I am not prepared to find that Mr Morton was negligent in failing to include such provisions.

(5) Failing to include a provision in relation to John defaulting in a loan secured over the property by mortgage. No submission was made as to the substance of such a provision. It is to be remembered that Lillian was granted a life interest under the Deed and that a caveat was registered to notify any person searching the title of her interest. If a mortgagee did attempt to exercise its power of sale that sale would be subject to Lillian’s life interest. Reliance on this particular is, in any event, academic. There is no evidence to suggest that there has ever been any default by John in relation to the mortgage loans he has secured over the Phillip property, or that there is any real risk of that occurring in the future.

(6) Failing to include a condition in the Deed requiring John to bear the costs of Lillian’s aged care should that be required. The evidence demonstrated that Lillian provided instructions inconsistent with such a condition.

(7) Failing to correctly state the amount required to discharge the Macquarie Bank loan. I have found that the Deed reflected the information given to Mr Morton. Also, it is difficult to see what difference it would have made in this case if the correct amount had been stated.

(8) Failing to ascertain whether the transfer of the property would affect Lillian’s concessions on rates and utilities. I have accepted Mr Morton’s evidence that he did raise this with Lillian. It was in that context that he suggested at the 8 July 2014 meeting that there be a 75/25 split in relation to such outgoings.

There was a suggestion in Lillian’s evidence that she had, after receiving the draft Deed, contacted Mr Morton with instructions to alter the apportionment in the Deed. I understood her to be saying that she preferred to alter it so that she was responsible for 75 per cent and John for only 25 per cent. However, as submitted by Mr Zahra SC, Lillian’s evidence was confusing and inconsistent. There is nothing in the BAL files to support that suggestion and I reject it.

Having regard to my findings in this matter, I reject the allegations of negligence against BAL. In so far as the allegation of a breach of fiduciary duty was pressed, that cause of action depended upon a real and substantial possibility of a conflict between the duties owed by BAL to Lillian and John. By reference to my conclusions that Mr Morton was not acting for John, and that there was no such conflict in relation to the conveyance conducted by Mr Early, the claim of a breach of BAL’s fiduciary duty to Lillian must fail.

Lillian also relied on a plea of misleading and deceptive conduct. This turned on the statement in the 10 July 2014 email from Mr Morton to Lillian on 10 July 2014 (see [162] above). Mr Noakhtar submitted that the words of that sentence should be read in some absolute sense. That is that they provided some form of encouragement to Lillian to enter into the granny flat arrangement, even though it has, arguably, turned out to have been not in her best interests.

I do not accept that submission. It is plain from the context, and Mr Morton’s explanation (see [163] above), which I accept, that he was addressing the issue which Lillian had raised as to whether there was a need for a deed at all, or whether the transaction could just be done with the conveyancing documents. There was nothing misleading or deceptive about the statement.

Conclusion

I have determined that Lillian should succeed against John in recovering the $25,000 which he failed to pay when she demanded it in mid-2015. However, the sum of $1,090 must be set off against that. I would therefore propose that judgment be entered for $23,910 plus interest at the rate prescribed under clause 2.1 of Schedule 2 to the Court Procedures Rules 2006 (ACT). I calculate that interest to be $7,744.45 (on the assumption that the outstanding balance should have been paid by John by no later than the end of 2015).

Lillian’s claim against BAL must be dismissed.

I will hear the parties as to costs.

Orders of the Court

The orders of the Court are:

(1) Judgment for the plaintiff against the first defendant in the sum of $31,654.45.

(2) Judgment for the second defendant.

(3) The Notice claiming contribution or indemnity filed on 26 March 2021 and issued by the second defendant against the first defendant is dismissed

I certify that the preceding two hundred and twenty-eight [228] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Crowe.

Associate:

Date:

[2022] ACTSC 109

19 May 2022