Wilby v St George Bank Limited No. Scciv-99-635

WILBY v ST GEORGE BANK
[2000] SASC 138
Civil

LANDER J. The plaintiff’s claim is against the defendant for a declaration that a mortgage given by the plaintiff over his house property to the defendant is null and void and unenforceable against the plaintiff and for consequential orders.
The History to 1990
The plaintiff was born on 5 October 1911. He was educated at St Peters College and left in his intermediate year and took up occupation with a bank. He remained at the bank only a few months because he believed he was not suited to the work.
In 1942 he married his wife. They had three children. The eldest child, Christopher Wilby, is now 54, his sister, Denise, is 52 and the youngest child, Bradley is 46. Denise married in 1976. Her married name is Woollard.
After he married he became a Dairy Farmer. He bought the farm with the assistance of his parents, borrowing £800 from them. He kept the farm for about 26 years. In 1964 he sold the Dairy Farm. He was a toolmaker during the Second World War.
He and his wife then conducted three small businesses each of the same kind. They conducted a shop and associated post office. His wife acted as postmistress and he served in the shop.
The plaintiff’s parents owned a large property at Somerton Park. The property had a house and orchard on it. The plaintiff’s mother died in 1952 and his father in 1956. The plaintiff was their only child and inherited the property.
The property comprised two allotments facing Whyte Street and three allotments and part of three further allotments facing King George Avenue and College Road at Somerton Park. Originally the property was comprised in one Certificate of Title Register Book Volume 3245 Folio 9 (D78). In 1967 four separate titles were issued. One was for the house property which comprised the two allotments facing Whyte Street and the adjacent allotment facing King George Avenue (D82). The next Title was for allotment 32 which faced King George Avenue (D83). There were two further Titles which comprised respectively allotments 33 and 34 (D84) and allotments 35 and 36 all of which faced King George Avenue (D85).
There was a further rationalisation of the titles in 1978, as a consequence of which three titles issued covering the various allotments. The two allotments facing Whyte Street and allotment 31 (the house property) remained intact. Allotments 32 and 33 and part of 34 became a separate title (the second units) (D101). Part of allotment 34 and allotments 35 and 36 comprised the third title (the first units) (D102).
There has been a further subdivision of the house property and titles have issued but that subdivision is unimportant for the purposes of this case.
It is only important to understand for these reasons that at all relevant times there were three separate titles for three separate properties, the house property, and two separate properties on which two separate blocks of flats were built.
The plaintiff mortgaged the land first in 1957 to Farmers Co-operative Executors and Trustees Ltd and that mortgage was discharged in 1959. A further mortgage was taken in that year again to the same company and that mortgage was discharged in 1963.
In 1964 the plaintiff mortgaged the land to Bridging Service Pty Ltd for security for an advance of £500 (D79). The money was used to finance his dairy farm. That mortgage was discharged in 1965. In 1965 the land was mortgaged again this time for £3,500 to Alliance Acceptance Co Ltd. The advance was used for the purpose of supporting the Dairy Farm (D80).
In 1966 the plaintiff mortgaged the property to a Mr Alfred Kingston for a loan of $7,000 (D81).
In 1967 separate titles were issued. A separate title was issued for the house block and a separate title was issued for allotments 32, 33, 34, 35 and 36.
Mr Kingston’s mortgage was effected only over the house property which contained the four separate allotments on the corner of Whyte Street and King George Avenue.
In 1968 whilst there were still four titles the plaintiff transferred to himself and his wife the three properties, apart from the house property. Thereafter those three properties were held, until his wife’s death, by the plaintiff and his wife as tenants in common.
The plaintiff’s wife died in September 1970.
At or about the time of the plaintiff’s wife’s death the plaintiff was erecting six units on the property in King George Avenue which became the property which I have called the first units.
The labour for the erection of those units was partly supplied by his son, Christopher Wilby and partly by himself. His son not only laid the foundations, which was his trade, but contributed other labour.
After the erection of those units they were let and income derived from them by the plaintiff.
The plaintiff mortgaged the house property for the purpose of the erection of the flats borrowing $8,000 from Mr Kingston (D90).
In late 1970 Carroleigh Pty Ltd was incorporated and thereafter that company acted as the landlord of the premises (D87). The company was controlled by the plaintiff (D86). The plaintiff’s daughter, Denise, who became Mrs Woollard on her marriage, was also a director.
I think between 1970 and 1976 Mrs Woollard was living with her father.
Her evidence was that she carried out all the book work recording all income and expenditure in relation to the flats. It was she who instructed accountants for the preparation of income tax returns and the annual returns of Carroleigh Pty Ltd. She married in Melbourne in 1976.
The first units were mortgaged to a private investor, Mrs Matheson, in 1978 to support a borrowing of $49,000 (D103). In 1980 $65,000 was borrowed from the Uniting Church. That sum was secured by first mortgage on the first units and the mortgage to Mrs Matheson was discharged. There is no evidence why either of those sums were borrowed.
In 1979 Beneficial Finance Corporation Ltd placed a caveat on one of the titles to the second units to support an unregistered mortgage (D101). That was withdrawn in 1980 when the Australia and New Zealand Banking Group Ltd placed a caveat upon the same title to the second units to support an unregistered mortgage it had granted.
In 1982 the first units were sold to Township Development Pty Ltd. The proceeds of the sale were used to discharge the amount owing for the erection of the flats. $17,000 was given to Christopher Wilby in recognition of his efforts in building the flats.
Prior to the first units being sold the plaintiff had built a further set of units on the property in King George Avenue which I have called the second units. That property is adjacent to the house property.
When the plaintiff’s wife died she left half of her interest in the properties of which she was a tenant in common with her husband, to her children in equal shares. The effect of that was to give each of the children 1/12 interest in the three properties on King George Avenue apart from the house property. (Those three properties later became two as I have described).
The children received by way of transfer pursuant to their mother’s will their 1/12 interest in those three properties in 1978.
On the same date the plaintiff transferred a 1/12 interest to each of his children in the house property in consideration of their paying $13,750. (D98)
After 1978 the three children each had a 1/12 interest in all properties. As I have already mentioned in 1978 the properties were rationalised into three holdings.
In early 1978 the plaintiff and his children mortgaged those properties to Mr Kingston in the sum of $25,000 (D99). That mortgage was discharged on 3 March 1978.
In 1978 the plaintiff and his children mortgaged the properties for the sum of $49,000 (D103). That sum was used to assist in the erection of the second block of flats.
Mrs Woollard’s husband died in 1978. She was left a young widow with one child. She returned to live at Somerton Park on the house property in 1981.
In 1985 the house property was mortgaged to the ANZ Bank Ltd (D122) and Esanda Ltd (D123). At the same time the mortgage to Mr Kingston was discharged. The plaintiff and his daughter and son Bradley acted as guarantors in respect of a property development undertaken by Christopher Wilby at Pasadena. The house property was charged to support that guarantee.
The purpose of referring to the dealings with the house property and the other properties in King George Avenue is to show that the properties had, over a number of years, been used as security for the purpose of raising monies to finance the dairy farm, the shop and post offices and the erection of flats.
Mr Wilby understood, in my view, that the highest use of the properties would be achieved by using them for the purpose of obtaining finance to create income.
The properties were not only used for the advantage of Mr Wilby and his wife until her death but also for the advantage of their children.
As can be seen from the discussion so far one of the properties was mortgaged to finance Christopher in his building project at Pasadena.
To complete the history the plaintiff caused Brockwill Investments Pty Ltd to be incorporated on 3 March 1987 (D127). It would appear from the documents that that company was trustee company for the Garfield Trust.
The company was incorporated following the Pasadena crisis so that the parties could begin anew and without reference to Mr Christopher Wilby.
The Witnesses
The plaintiff’s case relied upon the oral evidence of three witnesses and the tender of other documents.
The plaintiff, his daughter, Denise Woollard, and his son, Bradley, gave evidence in the plaintiff’s case.
They were all excellent witnesses. I have no hesitation in accepting all of their evidence. I have no doubt they were trying to assist me to reach the appropriate conclusion in this matter.
The plaintiff did not call Christopher Wilby. In my opinion the plaintiff cannot be criticised for that. I was advised from the bar table that Mr Christopher Wilby had been subpoenaed and had answered the subpoena. I am not prepared to infer anything adverse to the plaintiff’s case by the plaintiff’s failure to call Mr Christopher Wilby. Having regard to the circumstances which unfolded between 1994 and to date it cannot be said that Mr Christopher Wilby was a witness that should have been called by the plaintiff.
The defendant called no oral evidence. It did tender a number of documents. The defendant did not submit no case to answer but simply tendered no oral evidence.
It was submitted by the plaintiff that the bank officer, who had the carriage of this matter, Mr Henningsen, was not called because his evidence would not have assisted the defendant; Jones v Dunkeland Another (1959) 101 CLR 298. Where the plaintiff’s evidence might have been contradicted by the evidence of Mr Henningsen the plaintiff’s evidence can be accepted more readily in view of the fact that Mr Henningsen did not give evidence. Moreover, where an inference is open from the facts proved by the oral evidence and by the oral and documentary evidence called by the plaintiff the fact that the defendant has not called Mr Henningsen will be taken into account in determining whether the inference should be drawn.
However Mr Henningsen’s absence cannot be used by the plaintiff to make up any deficiency in the evidence; Jones v Dunkel per Menzies J at 312.
Whilst it is true to say that a party’s failure to give evidence may lead rationally to an inference that his evidence would not help his case, his failure to give evidence cannot make the plaintiff’s case; per Windeyer J at 321.
The failure of the defendant to call Mr Henningsen, in my opinion, is not so important in this case. As I have already said I accept the evidence of the plaintiff and his two witnesses.
Mr Henningsen’s absence cannot elevate their evidence above that.
The Defendant
The defendant is a bank. The transactions were entered into with the Bank of South Australia Ltd (Bank SA). That bank merged with Advance Bank Australia Ltd and the Bank of South Australia Ltd’s undertaking was transferred to and invested in Advance Bank Australia Ltd pursuant to the Bank Merger (Bank SA and Advance Bank) Act 1996 (SA).
Subsequently the defendant took over Advance Bank Australia Ltd. The defendant can be treated for all purposes in connection with this case as Bank SA. Its rights and liabilities are the same as Bank SA.
The History From 1990
The plaintiff seeks to impugn a number of transactions which he entered into with the defendant. To understand the plaintiff’s case it is necessary to refer to the immediate history of the matter which commenced about 1990.
In early March 1990 the Pasadena development came to a head. Mr Christopher Wilby had got into serious financial trouble.
Apart from becoming indebted to Esanda Ltd, which left the rest of his family exposed, on 17 January 1990 AGC Ltd had judgment entered against him in the sum of $64,518.34 in the District Court of South Australia (P6).
The plaintiff and his children had received demands from the financiers (Esanda Ltd) who had advanced money in respect of the Pasadena project which had been guaranteed by the plaintiff and his daughter and son, Bradley. Esanda Ltd was seeking the sum of $185,926.91 being the amount unpaid by a company controlled by Mr Christopher Wilby, Ecroct Pty Ltd, which had been the developer at Pasadena.
The plaintiff and his daughter and son, Bradley, were liable to Esanda Ltd on the guarantee. Moreover, of course, the house property had been used as security for that guarantee.
Eventually Mr Christopher Wilby negotiated with the financiers for them to accept $60,000 in full settlement and the plaintiff made enquiries with financiers generally to borrow that sum. He also consulted a solicitor.
Eventually the plaintiff and his children entered into a Deed which is dated 14 March 1990 [P77].
It is recorded that the house property was then subject to a first registered mortgage to the ANZ Bank and a second registered mortgage to Esanda Finance Corporation Ltd:
“Securing loans made to Ecroct Pty Ltd a company of which Christopher Wilby is the principal shareholder. Pursuant to the terms of the said mortgages all of the parties hereto are jointly and severally liable for the repayment of the said loans.”
The Deed records that the loans were obtained to finance certain property development projects undertaken by Ecroct Pty Ltd commencing during the month of September 1985.
The amount due under the bank mortgage calculated to 5 January 1990 was $33,833.25.
The Deed records that default had occurred in the repayment of principle and interest under the terms of the second mortgage and Esanda had served notice of default upon Ecroct Pty Ltd and the plaintiff and his children claiming repayment of all monies due under the second mortgage amounting to $185,926.91 calculated to 28 February 1990.
The Deed further records that the parties had negotiated a settlement of Esanda’s claim whereby Esanda had agreed to accept the sum of $60,000 in full settlement of its claims under the second mortgage.
It is recorded that the plaintiff and Denise Woollard had obtained approval for a loan in the sum of $125,000 to be secured over the house property to be applied for the purpose of:
“I      Repaying the loan of the bank;
II      Paying the monies to complete the said settlement with Esanda;
III     Purchasing the interest of Bradley Wilby in the house property.”
The parties agreed that the plaintiff and Denise Woollard would accept the loan which had been negotiated and undertake the obligations of the repayment thereof and to apply the proceeds of the loan by paying out the balance of the amount due to the bank, the sum of $60,000 to Esanda and the sum of $30,860.50 to Bradley Wilby.
In consideration of the plaintiff and Mrs Woollard undertaking those responsibilities Christopher Wilby agreed to transfer to Denise Woollard his one twelfth interest in the house property and his one twelfth interest in the home units. In consideration of the payment of $30,860.50 Bradley Wilby agreed to transfer to Denise Woollard his one twelfth interest in the house property (D144).
Moreover, Bradley Wilby agreed to assign to the plaintiff and Mrs Woollard his entitlement to any share of the nett rents receivable for the home units for a period of seven years from the settlement date (P77).
On the same day the plaintiff and Denise Woollard entered into a loan arrangement whereby the Chase AMP Bank Ltd agreed to lend to the plaintiff and his daughter the sum of $125,000 over a period of 15 years at an interest rate of 14.95 per cent (D145).
As can be seen from the recital to the Deed the purpose of the transaction was to discharge existing indebtedness to the ANZ Bank Ltd and Esanda. Apart from discharging those mortgages the monies were to be used to enable Denise Woollard to purchase the interest of her brother, Bradley Wilby in the house property.
Of the $125,000 which was borrowed $30,000 was used for that purpose.
Christopher Wilby was not paid any money. The amount which he was entitled to for his interest in the properties was used to discharge his indebtedness to Esanda relating to the Pasadena project.
Bradley Wilby received about $30,000. Effectively $90,000 of the $125,000 was used to purchase the two sons’ interests, although $60,000 of that $90,000 had already been incurred in respect of the Pasadena project so Christopher Wilby, as I say, received no money at that time.
There can be no doubt that the transaction was in the interests of all of the parties. The plaintiff had previously offered the property as security for Christopher’s borrowing in respect of the Pasadena property. When that investment turned sour the members of the family restructured their affairs so that Christopher’s interest was bought by his sister although the mortgage was raised on both the father’s and the sister’s interests. That transaction was certainly in the interests of Denise Woollard and was in the interests of Christopher and Bradley.
Except to the extent that the monies borrowed were also secured against the plaintiff’s interests the transaction was also in the interests of the plaintiff.
In 1992 that mortgage was transferred to Westpac Banking Corporation and the mortgage remained in place until November 1994 (D148).
Between 1990 and 1994 little changed.
The plaintiff and his daughter retained their respective interests in both properties and Bradley retained his interest in the property upon which the flats were erected.
I have assumed, there being no evidence to the contrary, that the income from the flats was used to discharge the interest owing on the mortgage. That indeed was the expressed intention of the parties in the Deed dated 14 March 1990.
It can be seen that the interest rate payable on the mortgage at that time was quite high (D145).
I think that between 1990 and 1994 there was less contact between the plaintiff and Christopher Wilby. During this time there was a rift in the family between Christopher and Bradley Wilby. It is clear from Bradley’s evidence that he believed Christopher was a person who tried to be a “big wheel”.
Between 1990 and 1994 Mrs Woollard and her child continued to reside at Somerton Park. The house on the Somerton Park property is divided into two self contained flats. The plaintiff lived in one flat and Mrs Woollard and her child lived in the other.
I accept, as Mrs Woollard said, that she continued to carry out the bookkeeping associated with the flats. I accept her evidence and the plaintiff’s that he was no bookkeeper and that she was better able to carry out those duties than the plaintiff. I accept her evidence that when she undertook these responsibilities for the second time after she returned from Melbourne after her husband’s death the books were in a mess. I find that she conducted all the book work relating to the flats between 1987 and March 1994.
During this period of time Christopher Wilby was operating a helicopter charter business in South Australia and later in Victoria.

Apparently he conducted his businesses by hiring helicopters and then re-hiring those helicopters to customers on charter.
He gave his family the impression that he was successful in his business.
From Early 1994
Sometime early in 1994, Mr Christopher Wilby returned from Melbourne and put a proposal to the plaintiff for finance for an enterprise which he wished to enter into.
The proposal required the plaintiff offering, I think, both the house property and the second units as security for what was to be a significant borrowing.
Of course the plaintiff could not, without reference to his daughter, offer either property as security. It is to be remembered she had a three twelfths interest in the house property and two twelfths interest in the property upon which the flats were erected.
Therefore if the house property was to be offered as security she needed to consent and if the second units were to be offered as security both she and Bradley, who still retained one twelfth interest in that property, had to consent.
The proposal put forward by Christopher Wilby was that both properties be mortgaged so as to enable a significant advance of monies to be made which he would use to buy a helicopter. That helicopter would be used at his business in Melbourne to fulfil some contracts that he had almost secured in that State.
Mrs Woollard was not prepared to agree to the properties being offered as security for advances to her brother. She said, in her evidence, that she had suffered enough in relation to the 1990 troubles (referring to Pasadena) and she did not want any more suffering of that kind. I accept her evidence in that regard.
She moved out of the Somerton Park property in early 1994. She said she moved out to obtain peace and I accept that. I find that she moved out to avoid pressure from her brother in relation to his proposal.
Her refusal to agree to the properties being offered as security meant that Mr Christopher Wilby’s plans were frustrated. It did not matter whether his father and brother were prepared to agree, so long as his sister continued to hold an interest in both properties, and she refused to agree to his proposition, then the proposal could not go forward.
Mrs Woollard said that Christopher Wilby well knew that she would not agree and I accept that evidence and I so find. I find that because she would not agree to the properties being offered as security it was Christopher Wilby’s idea that her interests in both properties be purchased.
On 1 July 1994, the plaintiff entered into an agreement with his daughter whereby she agreed to sell to him her interest in the house property for $30,000 [P66]. It was Mrs Woollard’s evidence that on the same day she agreed to sell her interests in the second units for $56,500. That second agreement was not tendered. I am not sure she is right about that at least as to the date because the plaintiff executed a will on the same date in terms inconsistent with her having surrendered her interests (P64).
It was a term of the agreement that she would be released from any liability or obligation pursuant to the mortgage to Westpac but if she was not the plaintiff would discharge the mortgage and re-finance the properties with another lending institution.
It was further agreed that Mrs Woollard held no beneficial interest in properties owned by the plaintiff at Sedan and that she held her interest as co-proprietor on the titles upon trust for her father.
It was further agreed, notwithstanding the sale of her interests in the properties, that she would receive one sixth of the income from the flats in the future, although she surrendered any interest in a partnership, Carella Enterprises, which she conducted with her father.
She acknowledged in the agreement for sale of her 1/4 interest in the house property that:
“The Vendor is aware that the Purchaser intends to develop the premises and upon completion of that development the premises are likely to increase in value.”
The parties entered into that transaction, because Mrs Woollard was not prepared to enter into a transaction, whereby monies were borrowed on the security of land in which she had an interest, for the purpose of providing capital to her brother. She had had previous experience in relation to the Pasadena transaction and she was not prepared to undergo the same stress as she previously had.
She therefore agreed to sell her interest in the properties to her father for $85,000.
On the same day the plaintiff executed a will [P64] in which he appointed his children as executors and trustees. He provided in that will that his son, Christopher Wilby would receive the house property and that his interests in the second units would be distributed:
“As to two twelfths to Denise; as to three twelfths to Bradley and as to four twelfths to Christopher.”
The remainder of his estate he left between his children equally.
That disposes of only 9/12. If Mrs Woollard had transferred her interests in the second units on that day the plaintiff would have had 11/12 of the second units to dispose of. Moreover, the terms of the Will indicate the plaintiff wished each party to have 1/3 interest in the second units after his death. That can be seen from the terms of the Will itself.
I believe therefore it is more likely that at the time the plaintiff executed, his will his daughter still retained 2/12 interest and Bradley 1/12. That is consistent with the terms of the will providing the children with 1/3 interest each in the flats.
On 6 September 1994 a little after those documents were executed, Growden Pty Ltd a finance and investment broker, wrote to the plaintiff offering him a loan of $280,000 on the security of the house property for a term of one year at an interest rate of 10 per cent. [P72]
Growden Pty Ltd, at that time, acted as finance and investment brokers on behalf of investors and syndicates of investors. It acted on behalf of investors and arranged for the lending by their clients of sums of money to borrowers.
The plaintiff’s evidence was that Christopher Wilby took him to Growden Pty Ltd and parked his car near its premises. The plaintiff was left in the car and his son entered Growden Pty Ltd’s premises. Christopher Wilby did not tell his father why it was that they were going to Growden Pty Ltd. This happened on two occasions.
I am less confident that the plaintiff is accurate about this matter. The plaintiff agreed in July of the same year to purchase his daughter’s interests in the house property and had probably agreed subsequent to that time to purchase her interest in the second units. He had an existing mortgage to Westpac Banking Corporation who had succeeded as mortgagee, Chase AMP Ltd, which could not have been reduced much below the original loan. I suppose in the four years in which the loan had been in place perhaps some of the principle had been repaid, but I would have expected very little.
In those circumstances the plaintiff needed to raise a further $86,000 to purchase his daughter’s interest. He had no other source of funds. He must have appreciated at that time that he needed to re-finance the house property for that purpose.
He must have also appreciated that a mortgage would have to be raised on the house property so that the second units were able to be offered as security for a loan to enable Christopher Wilby to purchase the helicopter.
Both had to go hand in hand. There was no point in buying out Denise’s interests unless he was intending to proceed with offering the second units as security for the helicopter loan. On the other hand the helicopter loan could not go ahead without Denise being bought out.
I am therefore not as confident about the plaintiff’s evidence in respect of that matter as I am in respect of his evidence on other matters.
Neither counsel sought to lead any evidence from him in respect of that topic.
On 23 September 1994 the plaintiff executed [P65] a mortgage in favour of a syndicate of mortgagees arranged by Growden Pty Ltd (the Growden’s mortgage). The property secured was the house property. The sum borrowed was $280,000. Interest was payable at the rate of 15 per cent. The principle was repayable on 23 September 1995.
The mortgage was signed in the presence of a legal practitioner, a Mr Neville Jordan.
Mr Jordan has signed a certificate in the following form:
“I Neville Jordan of 49 Goodwood Road, Wayville, a Legal Practitioner employed independently of the Mortgagees certify that I am satisfied that the within name Lancelot Egerton Wilby understands the true purport of the within mortgage and it freely and voluntarily execute the mortgage in my presence.”
Whilst the Growden’s mortgage was executed on 23 September 1994 it was not registered until 22 November 1994. At that time the Chase AMP Bank Ltd mortgage which had been itself transferred to Westpac Banking Corporation was discharged. (D149)
I was not told why there was a delay between the date of execution and registration.
I think it was probably because of the collateral transaction between the plaintiff and his daughter in which the plaintiff and his daughter had agreed to sell and the plaintiff to purchase her interest in the properties.
Of the sum of $280,000 which was borrowed from Growden $86,500 was paid to Mrs Woollard for her interest in the property. She received that money in two cheques. She received the sum of $30,000 on 23 September 1994 which represented her interest in the house and $56,500 on 15 November 1994 for her interest in the second units.
On completion the plaintiff became wholly entitled to the house property. He was entitled to 11/12s of the flats and Bradley Wilby remained entitled to 1/12 interest in the flats.
The sum of $280,000 was borrowed. The Chase AMP/Westpac Banking Corporation mortgage was discharged. Mrs Woollard was paid out.
In my opinion for the reasons already given this transaction was collateral to the other transaction to which I am about to refer. I think it is likely that part of the moneys which were borrowed, in addition to the monies necessary to pay out the Chase AMP/Westpac Banking Corporation mortgage and Denise Woollard, were to be used by Christopher Wilby for the purchase of a helicopter. When I say the evidence on that is unclear the parties did not attempt to associate this transaction with the next transaction.
In any event before I move to the next transaction it can be noticed that the Growden mortgage was repayable on 23 September 1995.
The mortgage to Growden must have settled prior to 30 September 1994 but the registration did not take effect until November 1994. That is evidenced by the fact that on 30 September 1994 a sum of $100,000 was invested by the National Bank at Coburg in Victoria in the plaintiff’s name [P6B].
Shortly after the Growden’s mortgage was entered into on 2 December 1994 a mortgage was given over the second units in favour of Advocate Nominees Pty Ltd [P68].
It is to be remembered that after the July 1994 transaction had settled the plaintiff was entitled to 11/12 of the second units and his son, Bradley to 1/12. It was necessary, of course, that both the plaintiff and Bradley agree to giving a mortgage over the second units.
The mortgage which was taken over the second units was for the purpose of satisfying the proposal which Christopher had first mooted in February or thereabouts of the same year. That proposal was that he be provided with sufficient funds to buy a helicopter to use in his charter business. It was that proposal which had caused Mrs Woollard to sell out her interests in both the house property and the second units.
The mortgage to Advocate Nominees Pty Ltd was in the sum of $415,000 which sum was required to be repaid on 15 December 1997. Interest was payable at the rate of 11.5 per cent provided payments were made on the due date. If payments were late the interest rate was 13.5 per cent (P68).
I have no doubt that the plaintiff well understood the transaction into which he entered. He well understood that the money was being borrowed for the purpose of Christopher buying a helicopter for the use in his business.
Bradley Wilby gave evidence. He said that his father, Christopher and Clyde Copeland, who was an associate of Christopher visited him at his workshop at Gilman. The only warning that he had that they were coming was a telephone call from his father to say that they would be attending for the purpose of having him sign a mortgage. He said that he had no idea why it was that the monies were being borrowed except that he knew it was “for a deal for Chris and that Chris was supposed to be buying a helicopter”. He had been told that much by his father before the three men attended at his workplace.
He also had a telephone conversation with his brother, Christopher, before he signed the mortgage. His brother told him that he would buy his share of the units. At the time that the mortgage was signed Christopher told him that he, Bradley, would get $5,000 and a block of land at Sedan which was valued at $27,500. Bradley objected telling Christopher that his father had already promised him that block of land. He told Christopher that he wanted the money.
When he signed the document he thought that he was going to get $50,000. He told his father that.
Eventually, sometime later, he received $5,000 from Christopher in two cheques. One, however, was dishonoured. Later he spoke to Christopher about the remaining monies but he was fobbed off. He was told from time to time that Christopher was waiting on monies from Joe. Eventually Christopher arranged for a mortgage to be taken out over the Sedan property which was the property which Bradley said his father had promised him in any event.
Whilst it was marginally relevant to understand the circumstances in which Bradley signed the mortgage, because the circumstances indicated the hurriedness in which the transaction was entered into, most of Bradley Wilby’s evidence was irrelevant. His evidence indicated that his brother misled him in respect of what would have been an associated transaction. His brother’s conduct towards him is not really relevant in determining whether or not the defendant is liable to the plaintiff.
It was the plaintiff’s evidence that the Advocate Nominees Pty Ltd’s mortgage was entered into in a rush.
I accept that evidence. That evidence is consistent with Bradley’s evidence. I believe that the transaction which gave rise to the Advocate Nominees Pty Ltd’s transaction was entered into in a rush. It would have suited Christopher to obtain access to the funds as soon as possible after settlement with his sister.
The plaintiff believed, prior to signing the mortgage, that Christopher Wilby was conducting a business involving the charter of helicopters in Victoria. He believed that Christopher had contracts which necessitated him purchasing a helicopter to expand his business.
He believed that Christopher could not expand his business without showing potential contractor’s business that he owned a helicopter. Mr Wilby believed that at the time that he signed the mortgage with Advocate Nominees Pty Ltd that the sum of $415,000 would be used for the purchase of a helicopter.
He believed that Christopher would make payment of the interest on the mortgage.
I accept that evidence. I find that Mr Wilby had those beliefs as a result of representations made to him by his son, Christopher.
I find that Christopher was conducting a business involving the chartering of helicopters in Victoria. I further find that he continued to conduct that business after that time. Mrs Woollard visited him in 1995 and visited the helicopter business.
I am not in a position to make any findings as to whether or not the representations made by Christopher Wilby to his father were true or not. I do not know whether he intended, at the time that the Advocate Nominees Pty Ltd’s mortgage was entered into, to purchase a helicopter. It is clear enough that no helicopter was ever purchased but that does not necessarily mean that it was not Christopher Wilby’s intention to purchase a helicopter at the time that the Advocate Nominees Pty Ltd’s mortgage was entered into. There is indeed an account from a chartered accountant, Mr Fiedler, to Mr Christopher Wilby which suggests that Mr Fiedler was instructed to act on behalf of Mr Christopher Wilby in relation to an agreement for the purchase of a helicopter from Reg Smith.
In the absence of evidence I am not prepared to find that Mr Christopher Wilby’s representations were false at the time they were made.
That mortgage was executed on 2 December 1994. The mortgagors were, of course, the plaintiff and Bradley Wilby. The mortgagee was Advocate Nominees Pty Ltd. The consideration for the grant of the security was $415,000. The principal was repayable on 15 December 1997. Interest was repayable on the fifteenth day of each calendar month and the rate of interest was 13.5 per cent. Provided interest was paid punctually then the mortgagee would accept interest at the rate of 11.5 per cent.
A company, Lorboh Pty Ltd, guaranteed the mortgagor’s obligations under the mortgage.
The mortgage sum was probably advanced on 15 December 1994 some days after the execution of the mortgage.
Of the sum of $415,000 borrowed on 13 January 1995 $405,568.10 was invested with the National Australia Bank in a term deposit account in the names of the plaintiff and his son, Christopher Lancelot Wilby for a term of seven days (P60).
A sum of $10,000 was invested in the account at Coburg on 30 September 1999. A certificate from the Bank indicates that by 11 October 1994 $10,000 of the $100,000 had been withdrawn (P6B). A certificate from the Bank shows that $405,568.10 was invested in the account as at 16 January 1995.
It would appear that the sum invested with the National Australia Bank at the end of 1994 and early 1995 was the product of the two mortgages to which I have referred.
What had happened to nearly $100,000 of that sum is unexplained.
Borlane Pty Ltd
Borlane Pty Ltd was incorporated on 9 December 1994 in the State of Victoria (P60A).
Its original directors were Peter and Patricia Johnson but I think they probably acted as directors of a shelf company. On 23 December 1994, Gary Garoni and Stuart Paul were appointed directors. Alexander John Morrison became a director on 28 December 1994 and so also did John Stratton.
Messrs Stratton and Morrison ceased to be directors on 8 February 1995 and Stuart Paul resigned on 31 March 1998, Clyde Copeland on 21 December 1998 and Gary Garoni on 12 January 2000. Mr Copeland was appointed a director again on 29 November 2000.
Mr Garoni and Mr Copeland are the present secretaries of the company.
On 8 February 1995, Mr Christopher Wilby was appointed secretary and he remained secretary of the company until 9 February 1998.
When the company was originally incorporated Mr Christopher Wilby held 400 shares. 400 shares represented about 30 per cent of the capital of the company. It is not clear when he disposed of them. At some stage Mr Stuart Paul, Mr Gary Garoni and Mr Clyde Copeland acquired shares in the company.
Borlane Pty Ltd filed an annual return on 31 March 1999 (P61). The directors were shown as Mr Copeland and Mr Garoni. The shareholders were Mr Copeland, Mr Paul, Mr Garoni and a Ms Everingham.
Mr Copeland was the gentleman who accompanied Mr Christopher Wilby to Mr Bradley Wilby’s premises when the Advocate Nominees Pty Ltd mortgage was signed.
Sarlak Enterprises Pty Ltd
On 14 December 1994 Sarlak Enterprises Pty Ltd gave a debenture to Borlane Pty Ltd over the whole undertaking of the company pursuant to a loan agreement made on the same day as the deed of debenture (P63).
Sarlak Enterprises Pty Ltd is the trustee of the Joe Sarlak Family Trust.
The defendant tendered the deed of debenture but not the loan agreement.
It would appear, from evidence to which I will shortly refer, that the monies which were lent to the plaintiff and Mr Christopher Wilby in respect of the Growden mortgage or, more particularly the balance of those monies and the monies advanced by Advocate Nominees Pty Ltd on the mortgage over the second units were on lent to Borlane Pty Ltd, who in turn on lent the monies to Sarlak Enterprises Pty Ltd and received a debenture over that company’s assets to secure that last mentioned loan.

Sarlak Enterprises Pty Ltd, as I have said, is the trustee of the Joe Sarlak Family Trust. A company extract from the Australian Securities Investments Commission shows a registered debenture from it to Borlane Pty Ltd lodged on 29 December 1994 ranking ahead of a registered debenture to the ANZ Banking Group Ltd (P62).
The company extract shows that Sarlak Enterprises Pty Ltd is under the control of Mr Joe Sarlak and other persons apparently members of his family.
In any event, the company extract which is dated 29 October 1999, shows the debenture from Sarlak Enterprises Pty Ltd to Borlane Pty Ltd still to be in existence (P62).
However, the same extract shows that Sarlak Enterprises Pty Ltd is subject to a strike off application.
IOOF Loan
Apparently the plaintiff did not pay the interest and principal due under the Growden mortgage due on 23 April 1995. On 28 April 1995, Growden Pty Ltd wrote to Mr Wilby informing him that a penalty payment of $3,502.28 had been incurred by his failure to make a mortgage payment due on 23 April 1995 (P71).
On 1 August 1995 the plaintiff entered into a loan agreement with IOOF Australia Trustees Ltd (P75). The borrowers were both the plaintiff and his son Christopher. It was that loan agreement which supported a mortgage given by Mr Wilby over the house property. On 26 July 1995, the plaintiff executed a mortgage in favour of IOOF Australia Trustees Ltd over the house property. The mortgage was to secure a loan to the plaintiff and his son.
The amount of the principle was $313,000. The term of the loan was for three years commencing on 1 August 1995. The interest rate was 9.5 per cent. The higher interest rate was 11.5 per cent.
The plaintiff did not expressly say why the IOOF loan was entered into. I think it is clear enough that there had been default on the amount owing on the Growden mortgage. In those circumstances it was necessary to re-finance so as to repay the principle outstanding and to borrow further funds to re-pay the outstanding interest to Growden Pty Ltd. I find that on the balance of probabilities that the IOOF mortgage was entered into because of default in relation to the Growden Pty Ltd mortgage.
The plaintiff was not examined or cross examined about the letter from Growden Pty Ltd claiming default in respect of the Growden Pty Ltd mortgage.
It is hard to think that he would not have been aware at that time that there had been a default in the payment of interest. It may be that his son intercepted the letter so that he was aware of its terms but the evidence is silent on that matter.
It appears, because of a Westpac Banking Corporation cheque which was tendered, Mr Wilby was paid $19,977 after repayment of the principal owing on the Growden Pty Ltd mortgage and accumulated interest. That tends to confirm that the plaintiff was unable to pay interest on the amount then outstanding to Growden Pty Ltd.
The Events Leading Up To The Impugned Transaction
There was no doubt that because of the plaintiff’s inability to pay interest on the loans outstanding that the following events took place.
On 30 May 1995, the plaintiff signed an application for First Mortgage Finance seeking the sum of $407,000 to purchase a residential unit at 7/37 Whyte St, Somerton Park and to re-finance the property at 39 Whyte St, Somerton Park (P74).
It would appear from the document that the report was prepared by Mr Tony Fiedler, an accountant to whom further reference will be made.
On 23 May 1995, a finance application was apparently published to a Mr Jim Newman by Tony Fiedler, a chartered accountant practicing in East Melbourne (D9).
Attached to the application is a Statement of Assets and Liabilities of Mr Wilby as at 5 January 1995 which includes amongst the assets an investment in Sarlak Enterprises Pty Ltd of $500,000. It is claimed in the body of the letter (P9):
“The investment with Sarlak Enterprises Pty Ltd is an investment in a private company involved in the development of Aircraft Hangars in Australia and overseas.”
I am satisfied that information could only have been provided to Mr Fiedler by Mr Christopher Wilby.
The application is to support the purchase by the plaintiff of a unit at 7/37 Whyte St, Somerton Park.
I think there is no doubt that Mr Fielder was Mr Christopher Wilby’s accountant. I accept the plaintiff’s evidence that the plaintiff was told that by his son. There is a contemporaneous fee account from Mr Fiedler to Mr Christopher Wilby which supports the plaintiff’s evidence. I accept also his evidence that at no time did the plaintiff retain Mr Fiedler to act for him. I accept and find that Mr Fiedler was never authorised by the plaintiff to hold himself out as his accountant/tax agent nor was Mr Fiedler instructed to prepare taxation returns for the plaintiff.
Lorboh Pty Ltd
Lorboh Pty Ltd was incorporated on 25 June 1993 (P69). The original directors of the company were Mr Christopher Wilby and a Mr Stephen Bazic.
On 16 December 1994, the plaintiff was appointed a director of the company.
It is not clear on the evidence the business of the company nor is it clear why the plaintiff was appointed director on 16 December 1994. His appointment coincides of course with the Borlane Pty Ltd/Sarlak Enterprises Pty Ltd transaction. It may have been that Lorboh Pty Ltd was incorporated to purchase the helicopter from Reg Smith. Mr Fiedler’s fee note would support that conclusion. In the end there is insufficient evidence to make any finding.
Lorboh Pty Ltd guaranteed the payment of interest and repayment of principal secured by the Advocate Nominees Pty Ltd mortgage.
In any event on or about September 1995 the plaintiff apparently resigned as a director.
The Appointment of Australia Wide Management Finance Services Pty Ltd
On 21 September 1995 the plaintiff signed a document appointing Australia Wide Management Finance Services Pty Ltd to act as his agent to obtain First Mortgage Finance over the house property (D12). The agreement between the plaintiff and Australia Wide Management and Services Pty Ltd indicates that the plaintiff was seeking a loan of $380,000 over a period of 25 years at an interest rate substantially less than the IOOF mortgage. The purpose of the loan was to discharge the IOOF mortgage and renovate the house property. The agreement indicates that the outstanding amount to IOOF was $313,000 and that it was envisaged that $65,000 would be spent renovating the house property. The remainder of this sum was to be applied to the costs associated with the borrowing. The IOOF mortgage had then only been in place for about two months.
Attached to that agreement is a confidential statement of the financial position of the plaintiff which indicates the two major liabilities to which I have already referred being the IOOF mortgage and the Advocate Nominees Pty Ltd mortgage.
The assets disclosed include an investment in Sarlak of $500,000.
The Approach to the Bank
On 26 September 1995, Mr Korallis, who was the proprietor of Australia Wide Management and Finance Services Pty Ltd, sent a facsimile transmission to Barry Henningsen of Bank SA, in which he referred to a loan application which had apparently been made on behalf of the plaintiff and Mr Christopher Wilby from Bank SA (D14). In that communication he advised Mr Henningsen that Mr Christopher Wilby was a company director and the sole beneficiary of his father’s estate.
The Bank’s Assessment
On 27 September 1995, Mr Henningsen prepared a credit paper which is an internal document for submission to the Senior Manager Commercial (D15).
The credit paper records that credit is being sought by the plaintiff in the sum of $380,000 “to take out existing facility from IOOF and fixed rate for one year plus meet renovation costs with the position to be reviewed prior to next review with option to fix rate up to further 4 years.”
In that document it is recorded that the plaintiff had been introduced to the bank by Mr Korallis. The plaintiff is described as 83 years of age and a long time property investor. It is said that he has been involved in the development of aircraft hangers in Australia and overseas via Sarlak Enterprises Pty Ltd in which he has $500,000 invested.
It is proposed that the plaintiff will move from his residence at Somerton Park and live with one of his son’s at Sedan.
That piece of information suggests that the earlier application of Mr Fiedler has found its way to the bank. That was a representation which he made in his application addressed to Mr Jim Newman.
The document records that Mr Wilby is now retired but his son Christopher manages his business affairs. The document suggests that it is understood that Christopher is also sole beneficiary of his father’s estate.
The bulk of income, it is recorded, it is derived from property rentals with a $500,000 investment in Sarlak Enterprises Pty Ltd which currently returns $31,000 per annum increasing to $120,000 per annum on 8 March 1996.
The credit paper concludes that Mr Wilby has the capacity to meet the proposed facility.
The key risk, it is recorded, was Mr Wilby’s age however that risk could be reduced by bringing in his son as co-borrower who is “understood to be the sole beneficiary of his father’s estate”.
On the same day Mr Henningsen sent a facsimile transmission to Mr Korallis (P16) in the following terms:
“i     Indicative approval to 380K investment home loan confirmed for 1 year fixed interest (current rate 9.25% pa) confirmed to your client.
·       Establishment fee $500 plus stamp duty and govt fees.
Conditions
·       Formal application being submitted.
·       Sum being co-borrower.
·       Satisfactory valuation of residence 1 King George Ave. Somerton Park.
·       Details of costings for renovations and or copy of planning approval if required.
·       Statement of assets/liabilities see Wilby (signed).
·       Satisfactory credit checks borrowers.”
On 3 October 1995, Mr Richard Thorpe, the senior manager commercial gave an in principle approval only. He indicated a number of matters needed to be attended to and a further supplementary paper submitted for formal approval. Amongst the matters which needed to be attended was further explanation of the purpose of the loan, details of renovations to the property and the term of the loan.
More particularly evidence was required of the costs of investments and some evidence was required of Sarlak Enterprises Pty Ltd’s income. That endorsement is dated 3 October 1995.
On 5 October 1995 Mr Henningsen wrote to Australia Wide Management and Finance Services Pty Ltd confirming approval in principle to the application for finance but for a sum of $360,000 (D17). The purpose of the loan, at least as far as Bank SA understood, was to re-finance the existing home loan plus provide additional funds for renovations.
The term was one year with an interest rate of 8.95 per cent.
The conditions included the previous conditions advised by facsimile.
The Meeting of 18 October 1995
On 18 October 1995, Mr Henningsen prepared a diary note which indicates that on that day he met with the plaintiff and Christopher Wilby and Mr Korallis (D18).
There was no doubt that the purpose of the meeting was for Mr Henningsen to assess Mr Wilby’s physical and mental capabilities and to confirm previous information provided to the bank. Mr Henningsen made the following note:
“Mr L E Wilby spoke clearly and was fully aware of the transaction. There was no question that he was still an astute businessman, although his son handles the paperwork and running around.
He has also noted:
“Mr L E Wilby confirmed that his son Chris was the only one of his three children who showed interest in his Property Investment Business and in view of this, the other two (daughter and son) had been paid out and that Chris would inherit all his assets on his death. I do not believe that we will receive evidence of this nor do I think we should pursue the matter further.”
It is also recorded:
“Overall term of loan is 20 years, but likely to be cleared in 12 months from pay back of Sarlak Enterprises Pty Ltd Investment next year - expected to be $360K. Investment has been rolled from 31/05/95.”
It is also recorded that Mr Wilby and his son produced up to date CRAA reports on themselves indicating nothing adverse.
Mr Wilby remembered the conversation with Mr Henningsen and his son which must have occurred, so the documents show, on 18 October 1995.
He said there was minimal discussion about rental income, investments, expenses loans and loans and things like that. What was discussed, he said, went over his head.
He said that Mr Henningsen asked him very little.
The plaintiff’s memory and therefore his evidence is not entirely consistent with the contemporaneous file note prepared by Mr Henningsen. That file note indicates, if it truly records the meeting, that Mr Wilby entered into the conversation and comprehended the transaction.
However, notwithstanding the note, I am not prepared to disbelieve Mr Wilby about the conversation. I find that there was minimal discussion about financial matters.
However I am not prepared to find that Mr Wilby did not understand the conversation. For reasons which I shall give I have no doubt that he understood the financial transaction into which he entered.
The plaintiff said he went to the Bank somewhere between two and four times. On other times a Mr Mesiti, a solicitor, was present.
It is probable, as Mr Wilby has said, that he did go to the Bank more than two times and possibly as many as four times. I think, however, he was not able to discriminate between the occasions on which he attended the Bank in relation to the first loan and the occasions where he attended the Bank in relation to the further loans.
I can only be satisfied that he attended on two occasions in relation to the first loan. The first occasion was 18 October 1995 when he attended with his son and met with Mr Henningsen. Mr Mesiti was not present. The file note to which I have referred relates to that meeting. The second was on 30 November 1995 when Mr Mesiti was present and the plaintiff and Mr Christopher Wilby signed the loan agreement with the Bank in relation to the first loan, and the plaintiff executed the mortgage.
I will come back to the second occasion.
On 31 October 1995, Mr Henningsen sent a facsimile transmission to Mr Joe Sarlak in the following terms (D20):
“We have been requested to provide finance for above clients (referring to Mr L E Wilby/Mr C Wilby) and in order to confirm income, we need information in writing to confirm the following:-
1      Amount of investment in your company.
2      Term/Interest paid.
3      Any dividends and if paid monthly.
4      Repayment arrangements.
The above request can be confirmed with Chris Wilby on 041 119 3666.
It would also be appreciated if you could confirm the name of your bankers and branch.
Your assistance will be greatly appreciated.”
On 1 November 1995, Mr Joseph Sarlak, director, wrote to Mr Henningsen on the letterhead of Sarlak Enterprises Ltd in the following terms: (D21)
“My Dear Mr Henningsen,
This letter serves to confirm that Mr C Wilby has the sum of $400,000 invested with Sarlak Enterprises through BORLANE Pty Ltd ACN 067 489 356.
The principal and interest of 12.5% and a fee of 25% are payable to Mr C Wilby.
I hope this information is of use to your good self.
Should you have any further enquiries please do not hesitate to contact me.”
On 10 November 1995, a further credit paper was prepared by Mr Henningsen as had been requested by Mr Thorpe in response to the original credit paper (D22).
Annexed to that credit paper was the diary note of 18 October 1995.
Mr Thorpe approved the application and amongst the terms of the approval he indicated:
“Due to age of Wilby senior documentation to be executed with solicitor.”
The amount required to pay out the IOOF loan as at 1 December 1995 was $318,305.32.
On 14 November Bank SA made a formal offer to the plaintiff and Mr Christopher Wilby offering a facility in the sum of $450,000. This was for the purpose of refinancing the existing home loan on the residence at 1 King George Avenue, Somerton Park, and to provide lending for renovations and assistance with the purchase of a property at 60 Newcastle Street, Rosewater.
The bank sought security on the residence at 1 King George Avenue, Somerton Park and over the residential flats at 60 Newcastle Street, Rosewater.
It would appear that notwithstanding that offer was accepted by the plaintiff and Mr Christopher Wilby on 15 November 1995 that loan was not proceeded with at that time.
Following upon Mr Thorpe’s approval a further loan application was made on 30 November 1995 by Mr Wilby and by Christopher Wilby (D25). On the same day the plaintiff signed a statement of position which included an investment with Sarlak Enterprises Pty Ltd of $400,000 (D26).
On 30 November 1995 the plaintiff and Christopher Wilby entered into a loan agreement with the defendant (the first loan). The terms of the loan agreement were that the defendant would advance $330,000 at an interest rate of 8.95 per cent with a default interest rate of 11.95 per cent. The principal was repayable in one year. In the meantime, interest payments of $2,461.25 had to be made. Security was to be taken over the house property.
On the same day and at the same time the plaintiff executed a mortgage in the presence of Walter Mesiti, a solicitor in the offices of Bank SA at North Adelaide (D27). That mortgage has been described by the plaintiff in the pleadings as the home mortgage [see par 4 of the Statement of Claim]. I shall refer to it in the same terms.
The mortgage was signed by Mr Walter Mesiti who I am satisfied had been a legal practitioner. I am not satisfied that he was a legal practitioner at the time.
Mr Mesiti was present because Mr Thorpe had requested a legal practitioner be present at execution. No doubt Mr Thorpe contemplated that the legal practitioner would explain the transaction to the plaintiff.
The plaintiff’s evidence was that there was no conversation between himself and Mr Mesiti about the contents of the document. He was given no advice by Mr Mesiti in relation to the document prior to him signing it.
I accept that evidence.
Although I think the plaintiff was a little confused about the circumstances in which he met with Mr Henningsen on 18 October and with Mr Henningsen and Mr Mesiti on 30 November, there is no evidence contrary to his. The defendant did not call evidence to establish that Mr Mesiti had given independent legal advice to Mr Wilby.
I therefore accept Mr Wilby’s evidence that he was not given independent legal advice.
In the end result the amount borrowed was $330,000 (D27). Of that sum $318,305.32 was used to discharge the existing indebtedness to IOOF.
A fee of 1 per cent of the principal was payable to Australia Wide Management and Finance Services Pty Ltd. That would amount to $3,300. There was a fee to the Bank of $500, stamp duty amounted to $1,145 and transfer fees were $70. In all the transactional costs of the loan were $5,015.
I find that Christopher Wilby initiated the application to Australia Wide Management and Finance Services Pty Ltd for the purpose of obtaining finance to pay out the IOOF loan. I find that the plaintiff, however, was well aware of the existing indebtedness to IOOF as he had been aware of the previous indebtedness to the syndicate of lenders organised by Growden Pty Ltd.
I find that the plaintiff knew that almost all the sum borrowed from the defendant would be used for discharging the existing mortgage to IOOF.
I find that the plaintiff was well aware of the nature of the transaction. He had a good understanding of the loan arrangements and of the giving of security in relation to loan arrangements. I find that he knew when he entered into the transaction that if interest payments were not paid as required under the home mortgage, or principal not repaid in accordance with the terms of the home mortgage, the mortgagee was entitled to realise on the security of the house property.

The plaintiff was entirely aware of the nature and purpose of the transaction at the time the transaction was entered into.
Further Loans
At or about the same time as the first loan was settled (8 December 1995) he made an application for further finance in the sum of $60,000 in order to purchase a residential property at 368 Sturt Road, Clovelly Park and to carry out renovations on that property including partitioning the property for the purpose of strata title residential sites (D30).
The plaintiff thereafter entered into a series of further loans with the defendant whereby he borrowed monies for the purpose of investing in properties.
The first of these took place on 8 December 1995 when the plaintiff and his son, Mr Christopher Wilby, applied for further finance in the sum of $100,000 in order to purchase a residential property at 368 Sturt Road, Clovelly Park (D30). This loan, which was for the purpose of carrying out renovations including partitioning the property for the purpose of strata title residential sites, was approved.
The second transaction took place on 21 December 1995. The plaintiff and Mr Christopher Wilby secured a loan from St George Bank for $120,000 (D33 and D34) to purchase property at 60 Newcastle St, Rosewater which contained four units. Security for this second transaction was provided by extending the home mortgage to the sum of $550,000. That loan apparently relates to the approval given by the Bank on 14 November 1995.
The third transaction occurred on 13 February 1996. The purpose of this $40,000 loan was so the plaintiff could continue renovations on the Clovelly Park property (D35).
On 25 July 1996, the plaintiff and his son secured another loan for $25,000 in order to purchase a land allotment number 91 Government Road, Georgetown (D44). The first mortgage was now consolidated to $615,000, and security for this loan was provided by extending the home mortgage (D27), the Clovelly Park mortgage (D31), the Rosewater mortgage (D34) and the provision of the Georgetown mortgage (D45).
The final loan was entered into on 16 September 1996 (D48) in the amount of $75,000 in order for the plaintiff to purchase a property at 17 Musgrove Avenue, Aberfoyle Park. Security was a consolidation of all of the above mortgages to a total figure of $690,000.
It can be seen that the defendant took security in respect of these further loans upon the investment properties and by extending the home mortgage.
Mr Christopher Wilby’s Bankruptcy
On 18 December 1996 an order was made in the Federal Court of Australia for the sequestration of the estate of Christopher Wilby in relation to an act of bankruptcy on 20 September 1995. Mr Wilby’s statement of affairs later disclosed unsecured creditors of $1,433,365 and available assets of $200.
The Plaintiff’s Case on the Further Loans
The plaintiff’s case was that the further loans to which I have just referred between 8 December 1995 and September 1996 were advanced by the defendant for the purchase of other property:
“To be registered in the name of the plaintiff and for other purposes but the amounts and other purposes were not fully known to the plaintiff.”
Whilst I have been able to identify the further loans referred to in par 9 of the Statement of Claim from the documents, in fact Mr Wilby gave no evidence at all of those other loans, the circumstances leading up to them, the purposes for which the monies were borrowed or the use to which the monies were put. It was the defendant which identified the further loans made in its defence and tendered the documents which evidenced those transactions.
I have not overlooked the plaintiff’s counsel’s submission that I could have regard to three affidavits sworn by the plaintiff and tendered by the defendant.
These proceedings have a long history. The plaintiff’s proceedings were brought in response to the defendant issuing a Notice of Default and Intention to Sell under the mortgages. On 21 April 1997 on the application of the defendant a Master of this Court made an order for possession of the house property and four other properties then owned by the plaintiff, namely: Sturt Road, Clovelly Park; Newcastle Street, Rosewater; Musgrove Avenue, Aberfoyle Park and Allotment 91 Government Road, Georgetown.
Subsequently the plaintiff made an application in those proceedings (588 of 1997) to set aside those orders but that application was dismissed by another Master of this Court and an appeal from that Master to a Judge of this Court was also dismissed.
In March 1999 a warrant for possession of the house property was issued. The plaintiff made application to set aside the order for possession and later sought a stay of the order for possession. Accompanying that application for a stay was an application for pre-action discovery. Having obtained a stay and an order for discovery the plaintiff brought these proceedings.
In the possession proceedings (588 of 1997) the plaintiff filed two affidavits which the defendant tendered in these proceedings.
In the first of those he said [D52]:
“26 The borrowings from the Bank secured by the mortgage commenced in late 1995 and continued through 1996. All the borrowings were arranged by Christopher and he would take them to see the Manager of the Bank at the North Adelaide branch. I did not provide any information to the Bank. I do not know what financial details were given to the Bank for the purpose of the borrowings, all I know is that Christopher would ask me to attend the Bank and sign documents saying that he had purchased a property. He told me the property would go into my name and he would take me to the land agent. I did nothing except sign documents because I trusted him.
27 Christopher took me to the Bank on every occasion. I did nothing without him. Christopher handled all of the money. I was aware properties were purchased at Clovelly Park, Rosewater, Aberfoyle Park and Georgetown. Christopher was involved with somebody by the name of John Griggs who either a land broker or builder, but I have since learnt he was made bankrupt and recently gaoled.”
In the second affidavit which was sworn on 22 April 1999 after referring to the above paragraphs Mr Wilby said:
“2 I remember very little regarding my dealings with the bank giving rise to the various mortgages over properties including the home. I did not initiate any transaction.”
The plaintiff then outlined each of the transactions relating to the further loans which formed the subject matter of these proceedings.
He said that the loan of $100,000 in relation to Sturt Road, Clovelly Park, was taken so that he and Christopher could put units on the property. He had no other knowledge of the loan arrangements. The next loan of $120,000 for the Rosewater property was to build four units. He said he had no knowledge of the financial arrangements except he was told by his son that they would make money out of it. He said that he has no knowledge of the loan of $40,000 for renovations to his home or how the funds were applied or what financial information was given.
The sum of $25,000 was borrowed, he said, to purchase a home at Georgetown in which he would reside so that the house property could be let. The sum of $75,000 was borrowed in relation to Aberfoyle Park.
The plaintiff recognised his signature on all of the security documents. He also recognised Mr Mesiti’s signature on all but one of the security documents. He said, in his affidavit, that Mr Mesiti had not acted for him.
In a third affidavit sworn by the plaintiff and filed in these proceedings which again was tendered by the defendant, the plaintiff repeats in more general terms the matters to which I have referred in the second affidavit.
I am not prepared to act upon the information contained in the plaintiff’s affidavits where it has not been confirmed by the plaintiff in his evidence in this Court.
There is no suggestion that the plaintiff was suffering from any infirmity which prevented him recalling anything that he was able to recall the previous year. The plaintiff elected to give no evidence in relation to these further loans in these proceedings and I am not prepared to act upon assertions made in those affidavits notwithstanding that the affidavits were filed by the defendant.
I am not prepared to make any findings as to the circumstances in which the further loans were obtained.
There is no reliable evidence before me which would allow me to make any findings as to the circumstances in which these loans were obtained. or the purposes for which these transactions occurred apart from the purposes to which I have already referred, or the use to which these monies were put. I do not know whether the plaintiff used the monies for the purposes which he disclosed to the defendant.
I do not know whether the loans were commercial or non commercial or whether they were in the interests of the plaintiff or otherwise.
It is pleaded, as I have already mentioned, that the purposes of these further loans were not “fully known” to the plaintiff. That allegation was not established. No effort was made to prove that the plaintiff was not fully aware of the nature of and purposes of the further loans. Nor was any effort made to establish that these further loans were not in the plaintiff’s best interests.
I find that the plea that the plaintiff did not know or understand the further loans were being secured by the home mortgage or that he did not know or understand the manner of repayment of such loans has not been made out.
There is no evidence to support the findings contended for by the plaintiff.
Insofar as the plaintiff’s case complains about these further loans it must fail.
I believe that in due course all of the properties which were secured against the further loans were sold and the various further loans which had been made to Mr Wilby and to Mr Christopher Wilby, with the exception of part of the loan made on 8 December 1995, were recovered by realisation of the securities.
As at the date of trial $434,904.36 which included the sum of $330,000 principal which had been borrowed was outstanding in respect of the original loan. The sum of $130,337.41 was outstanding in respect of the second loan.
However, I shall address the plaintiff’s case hereafter upon the basis that he seeks relief only in respect of the original loan.
Summary of Plaintiff’s Position as at 30 November 1995
It would be as well then to summarise the plaintiff’s position immediately before he entered into the transaction with the defendant which he now seeks to have set aside.
The plaintiff had sold the first units in 1982. He had transferred to his children various interests in the house property and the second units.
In the various transactions which I have identified he had recovered the interests which he had previously transferred away. By the time of this transaction he was the sole proprietor of the house property and held 11/12 of the second units. Bradley retained a 1/12 interest in the second units.
The house property was mortgaged to IOOF in the sum of $313,000. The term of the loan was for three years commencing on 1 August 1995. The interest rate was 9.5 per cent but a higher interest rate of 11.5 per cent applied in the event that interest was not paid on the due date.
The first units were mortgaged to Advocate Nominees Pty Ltd in the sum of $415,000. The terms of that mortgage required the plaintiff to repay the principal on 15 December 1997. He was obliged to make interest payments at the rate of 11.5 per cent per annum and, if in default, at the rate of 13.5 per cent per annum.
Apart from any Social Security payments to which the plaintiff was entitled his only income was from the rents on the second units. He had an obligation to share those rents with his son Bradley and, because of the agreement with Mrs Woollard of 1 July 1994, had a continuing obligation to share those rents with her.
The sums of money which had been raised on the IOOF mortgage and the Advocate Nominees Pty Ltd had been invested with the National Australia Bank at Coburg on term deposit. By the time of this transaction those monies had been on lent to Borlane Pty Ltd, which in turn had on lent them to Sarlak Enterprises Pty Ltd upon the security of a debenture. Notwithstanding representations made to the contrary the plaintiff received no income in respect of those monies.
At this time there was no prospect that the plaintiff could meet the interest payable on the mortgages to IOOF and Advocate Nominees Pty Ltd without obtaining the repayment of the money which had been lent through Borlane Pty Ltd to Sarlak Enterprises Pty Ltd. The only alternative was further mortgaging the properties to use the principal thereby advanced to meet ongoing interest obligations.
Any transaction with a new financier in respect of the house property would require the discharge of the IOOF mortgage. The repayment of that mortgage, of course, was in the plaintiff’s best interests. He had a separate obligation to IOOF, prior to any transaction with the defendant, which required the repayment of the principal and interest in accordance with the terms of the mortgage. He was unable to meet the interest so any further transaction which gave rise to the discharge of the IOOF mortgage, on any understanding, was in his best interests.
Therefore it can be seen that insofar as relief was sought against the defendant, this case really concerned only that part of the transaction with the defendant which related to the difference between the sum advanced by the defendant with respect to the first loan, and the amount of principal and interest then outstanding to IOOF and any fees associated with the obtaining of the loan, and any interest which accrued on that difference over the period to trial.
That follows because in seeking equitable relief the plaintiff was bound to do equity: Maguire v Makaronis and Another (1997) 188 CLR 449; Vadasz v Pioneer Concrete (SA) Pty Limited (1995) 184 CLR 102; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 per Deane J at 481.
The plaintiff recognised his obligation to do equity. In his Statement of Claim he pleaded:
“13 Save for the amount required to discharge the prior mortgage (IOOF) over the mortgaged land the plaintiff has not received financial benefit from the first and further loans advanced by the defendant upon security of the home mortgage.”
“17(b) The first loan and the further loans being subject to the home mortgage, save for the discharge of a prior security, were not for the benefit of the plaintiff but for the benefit of Christopher Lancelot Wilby.”
There was no doubt on the plaintiff’s Statement of Claim and the defendant’s Defence that both parties recognised the plaintiff’s obligation to do equity in relation to the first loan. Whatever else might have been said about the first loan the plaintiff received the benefit of the discharge of the IOOF mortgage.
The Proposed Amendment
The plaintiff’s obligation to do equity was raised by me with plaintiff’s counsel immediately before he opened. He sought an adjournment and later sought to amend the Statement of Claim so that the plaintiff might avoid the consequences of having to do equity (the proposed amendment). The plaintiff sought to avoid those consequences by pleading that the earlier transactions with IOOF and Growden Pty Ltd were also entered into in circumstances where the plaintiff would have been entitled to equitable relief against those mortgagees.
It was claimed in the proposed amendment that by entering into this transaction with this defendant the plaintiff “had lost a valuable opportunity of challenging the validity of each of those mortgages in any proceedings between the plaintiff and the said mortgagees”.
In the proposed amendment the plaintiff was seeking to claim that he ought not to be called upon to do equity in relation to the IOOF loan because in entering into this transaction he had lost the opportunity of taking proceedings against IOOF; the opportunity being to have that transaction set aside on similar grounds to those advanced against this defendant. So as not to be met with the suggestion that he would at least have to do equity in relation to the amount of the principal outstanding at the time of the discharge of the mortgage to the syndicate organised by Growden Pty Ltd the plaintiff also sought, in the proposed amendment, to argue that that transaction would have been set aside on similar equitable grounds as those advanced against this defendant and proposed to be advanced against IOOF.
The proposed amendment would have necessitated an inquiry as to whether the plaintiff was under a special disability, or under the undue influence of his son at the time of entering into each of the transactions with Growden Pty Ltd and IOOF, and a further inquiry into the knowledge and the conduct of each of those mortgagees.
After some argument the plaintiff abandoned his application to amend.
In those circumstances if the plaintiff were to succeed in obtaining equitable relief on either of the bases advanced he could not avoid an obligation to do equity in relation to any benefit which accrued to him by the discharge of the IOOF mortgage.
Was The Transaction To The Disadvantage Of The Plaintiff?
In my opinion, for the reasons already given, it cannot be said that this transaction was to the disadvantage of the plaintiff. It was an ordinary commercial transaction in which the plaintiff borrowed $330,000 to refinance an existing obligation.
It is beyond doubt that the plaintiff obtained the benefit of the transaction at least to the extent to which I have referred in discharging the IOOF indebtedness.
There is no evidence that he did not receive the balance of the monies himself.
This transaction left the plaintiff no worse off than he was before.
The plaintiff may have entered into transactions which were to his disadvantage, in particular the mortgage to Advocate Nominees Pty Ltd, but this defendant, of course, was in no way responsible.
No advantage accrued to Christopher Wilby that did not accrue to the plaintiff.
This transaction made his son a joint borrower of the monies owing on the house property. Christopher had guaranteed the mortgage arranged by Growden Pty Ltd. He was a joint borrower of the IOOF loan. He continued to be a joint borrower in respect of this transaction. Christopher did not receive any greater benefit in this transaction than his father. There was no evidence as to Mr Christopher Wilby’s financial position as at 30 November 1995. In due course he became bankrupt but there is no evidence that there was no value to the plaintiff in his son being a joint borrower.
There was a direct benefit in the transaction to both the plaintiff and his son in that the interest payable on the principal, provided interest was paid on the due date, was 0.55 per cent less.
There is, in my opinion, no reason for equity to intervene in respect of the first loan.
However, in case I am wrong about that I shall proceed upon the basis that, in some way the plaintiff has not been able to identify, it was unconscientious of the defendant to take advantage of the plaintiff’s position or alternatively unconscionable of the defendant not to ensure that the plaintiff understood the purported effect of the transaction into which he entered.
Advocate Nominees Pty Ltd Realises on its Security
In due course, so I am told, Advocate Nominees Pty Ltd exercised its power of sale in relation to the second units and recovered the principal and interest outstanding on its mortgage in that way.
The Plaintiff’s Case
It is the plaintiff’s case that the defendant relied upon oral representations made to the defendant by Christopher Wilby and/or his agents and in particular:
a)The plaintiff had an investment of approximately $400,000 in the company Sarlak Enterprises Pty Ltd.
b)The plaintiff owned a block of flats at King George Avenue, Somerton Park worth $630,000 mortgaged to J B Were for $415,000
and
c)The plaintiff could service the home mortgage and the first and further loans.

There is no direct evidence of any oral representations of that kind made by Christopher Wilby to the defendant. However there is evidence that representations were made to the defendant that the plaintiff had an investment of approximately $400,000 in Sarlak Enterprises Pty Ltd and, of course, that he owned a block of flats at King George Avenue, Somerton Park. That evidence is contained in the loan applications.
There is some evidence that it was represented to the defendant that the plaintiff could service the home mortgage and the further loans. That evidence is contained in the correspondence emanating from Mr Fiedler.
It must be inferred from the transaction itself that the defendant believed the plaintiff could service the loan.
It is claimed that the defendant made the first loan relying upon those representations which it is claimed were made orally by Christopher Wilby or his agents. There is no evidence that those representations were made orally by Christopher Wilby or his agent. There is no evidence of any oral representations. I cannot find that there were any oral representations of that kind.
However I do find that the plaintiff by signing a Statement of Position – Business on 30 November 1995 (D26) represented the following:

Liabilities ($) Assets ($)

Home Loan – IOOF    313,000 Cash - Adelaide Bank      10,000

Other Loans – J B Were    415,000 Property – King George Avenue    500,000

   728,000

6 Units – 3/3 King George    630,000

Land Holdings (Rural)    115,000

Motor Vehicle      20,000

Shares      10,000

Sarlak Enterprises P/L    400,000

Furniture      20,000

Private Loans      21,000

1,706,000 (sic)

The plaintiff did not assert that he was influenced by his son to misrepresent his assets when he signed this document. Nor did he claim that the information was not correct at that time. He believed and his son may well have believed that he was entitled through Borlane Pty Ltd to the loan secured by the debenture over Sarlak Enterprises Pty Ltd.
I also find that the defendant relied upon the representations made by the plaintiff in that document in making the loan of $330,000 on that day.
It is pleaded [par 12 of the Statement of Claim] that the plaintiff entered into the home mortgage and agreements for the first loan and the further loans for two reasons. First because the plaintiff was dependent upon assurances given to him by his son that there was no risk to the plaintiff in servicing the first loan and the further loans and of losing the mortgaged land. Secondly because the plaintiff was both physically and emotionally dependent upon his son, Christopher Wilby, because of the plaintiff’s age, poor eyesight, frailty and limited understanding of financial matters.
I accept that the plaintiff was assured by Christopher Wilby that there was no risk to the plaintiff in him offering the property as security for the home mortgage and the further loans which were made.
I do not, however, accept that the plaintiff was dependent upon those assurances. I find that the plaintiff believed that Christopher Wilby would generate sufficient income in his business as a helicopter charterer to meet the payments due on the loan secured by the mortgage on the property upon which the units are erected. There is no evidence that Christopher Wilby did not believe the representations to be true. I think it is likely that Mr Christopher Wilby did think he could acquire a helicopter and that his income would be improved thereby.
I also find that the plaintiff believed that there would be sufficient income generated in that business coupled with the income generated from the flats to meet the interest due on the loan which was secured by the mortgage over the house property.
It is my opinion that the plaintiff had that belief because he believed that his son was a reasonably successful business man and would generate the necessary income by his endeavours in his business.
I do not accept that the plaintiff was either physically or emotionally dependent upon his son for any of the reasons mentioned in the Statement of Claim or for any other reason.
I do not believe he was physically dependent upon anyone. At this time the plaintiff lived alone and cared for himself. Indeed he still does. He drove and drives a motor vehicle. Notwithstanding his age, he is wholly independent. I do not believe that he was emotionally dependent on his son nor do I believe that Mr Wilby is emotionally dependent upon anyone. He has very strong feelings for each of his children, and that is to be expected, but I do not believe that he is in any way emotionally dependent upon any of them.
The plaintiff has based these proceedings on alternative bases. First that the defendant has been guilty of unconscionable dealing with the plaintiff such that equity would intervene. The factors relied upon for that claim were that the plaintiff was a person under a special disadvantage in his relationship with the defendant. Secondly, the defendant was aware of that special disadvantage. Thirdly, the defendant took advantage of that special disadvantage. It is claimed that the defendant’s exploitation of the plaintiff’s disadvantage is such that equity ought to intervene and set aside the bargain.
The second basis upon which the claim is put is that the plaintiff was under the undue influence of his son Christopher Wilby, which was known or should have been known to the defendant such that it was unconscionable for the defendant not to ensure that the plaintiff understood the purported effect of the transaction into which he entered, which he did not, and that therefore the transaction should be set aside.
The Distinction Between Unconscionable Conduct and Undue Influence
The distinction between unconscionable conduct and undue influence was explained by Mason J in Commercial Bank of Australia Ltd v Amadio (supra) at 461:
“Historically, courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of “unconscionable conduct” is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, e.g. a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.”
Deane J explained the distinction at 474:
“The equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence are closely related. The two doctrines are, however, distinct. Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party (see Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 at 720; Watkins v Combes (1922) 30 CLR 186 at 193-194; Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710 at 713). Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so.”
In Bridgewater and Others v Leahy and Others (1998) 194 CLR 457 at 477 Gaudron, Gummow and Kirby JJ said:
“In addition to the distinction between the doctrine of undue influence as understood in courts of probate and courts of equity, it is appropriate to emphasise the distinction between the equitable doctrines concerned with undue influence and unconscionable dealings or conduct. On occasion, both doctrines may apply in the one case: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461. Each doctrine may be seen as a species of that genus of equitable intervention to refuse enforcement of or to set aside transactions which, if allowed to stand, would offend equity and good conscience. However, there are conceptual and practical distinctions between them and these were insufficiently expressed by the primary judge.
In Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474, Deane J said that the two doctrines are distinct, undue influence looking to ‘the quality of the consent or assent of the weaker party’, whilst unconscionable conduct looks to the attempted enforcement or retention of the benefit of a dealing with a person under a special disability. Further, the recognition of certain special relations, the existence of any of which would itself support a presumption of undue influence (the examples of such relations given by Latham CJ in Johnson v Buttress (1936) 56 CLR 113 at 119 included parent and child, guardian and ward, solicitor and client, physician and patient, ‘and cases of religious influence’. Cf as to presumptions of advancement, Nelson v Nelson (1995) 184 CLR 538 at 574-576, 583-586, 600-603), could provide a particular forensic advantage to plaintiffs.
Sir Anthony Mason, with reference to the well developed Australian body of authority on the subject, has contrasted the two doctrines as follows (Mason, ‘The Impact of Equitable Doctrine on the Law of Contract’, Anglo-American Law Review, vol 27 (1998) 1, at pp 6-8):
‘My understanding of undue influence … is that it denotes an ascendancy by the stronger party over the weaker party such that the relevant transaction is not the free, voluntary and independent act of the weaker party (Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461, 474). In other words, it is the actual or presumed impairment of the judgment of the weaker party that is the critical element in the grant of relief on the ground of undue influence (See Peter Birks and Chin Nyuk Yin , “On the Nature of Undue Influence” in Beatson and Friedmann (eds), Good Faith and Fault in Contract Law, pp 57 et seq).
…
Unconscionable conduct, as the term suggests, focuses more on the unconscientious conduct of the defendant. As a ground of relief in England unconscionable conduct has been confined largely to “catching bargains” with expectant heirs and others in particular categories of disadvantage eg those who are illiterate … In Australia, it has been recognised that unconscionable conduct is a ground of relief which will be available “whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is taken of the opportunity thereby created” (Amadio (1983) 151 CLR 447 at 462). Unconscionable conduct is also recognised in New Zealand as a ground of relief in these circumstances (Hart v O’Connor [1985] AC 1000; Bowkett v Action Finance Ltd [1992] 1 NZLR 449).’ ”
Whilst they are distinct equitable doctrines they are not mutually exclusive. In Commercial Bank of Australia Ltd v Amadio (supra) at 461 Mason J said:
“There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest.”
Unconscionable Conduct
It is well settled that a person under a special disadvantage may be entitled to equitable remedies if that person enters into a transaction with another party and that other party is aware of his or her special disadvantage and exploits that special disadvantage to the detriment of that person.
In Blomley v Ryan (1954) 99 CLR 362 at 415 Kitto J said:
“This is a well-known head of equity. It applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.”
In Commercial Bank of Australia Ltd v Amadio (supra) at 474 Deane J referred to the principle a little differently and in the following terms:
“The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make a prima facie unfair or ‘unconscientious’ that he procure, or accept, the weaker party’s asset to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, and onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: ‘the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract’ (see per Lord Hatherley, O’Rorke v Bolingbroke (1877) 2 App Cas at p 823; Fry v Lane (1888) 40 Ch D 312 at p 322; Blomley v Ryan (1956) 99 CLR 362 at pp 428-429.”
In this case we are dealing with a bank and a transaction involving an elderly man.
The jurisdiction is not exercised for the purpose of protecting persons who enter into onerous risk obligations. It is not a jurisdiction generally available for protection of those who deal with banks and moneylenders.
The jurisdiction will only be exercised in circumstances such as this when the party seeking to set aside the transaction with the bank can establish that he or she was under a special disability of the kind referred to in the authorities and that the bank was aware of that fact. Then it will only be exercised if that person can further establish that it was unconscientious in the circumstances for the bank or moneylender to exploit the borrower’s special disadvantage.
It is claimed that the plaintiff laboured under a special disability in the following respects:
“17(a)       (i)     The plaintiff was of advanced years and frail.
(ii)    The plaintiff had poor eyesight.
(iii)   The plaintiff had little understanding of financial matters.
(iv)The plaintiff was subject to or likely to be subject to the undue influence of his son Christopher Lancelot Wilby.”
In para 17(a) (iv) the pleader recognises the observation of Mason J in Commonwealth Bank of Australia Ltd v Amadio (supra) at 461 where his Honour said neither doctrine operated to the exclusion of the other.
The plaintiff has claimed in subparagraphs (i), (ii) and (iii) that his special disability is of a kind traditionally recognised by the courts as indicating that kind of weakness which prevents the party making a judgment for himself or herself as to his or her own best interests: Bridgewater v Leahy (supra) at 470/471. However in subparagraph (iv) the plaintiff also relies upon the fact that he was not able freely, voluntarily and independently to enter into the transaction, because of the undue influence of his son, as the special disability of which the defendant was aware and of which it took advantage.
I reject the plaintiff’s case inasmuch as it is claimed that he is a person at a disadvantage because of his age, poor eyesight, frailty and limited understanding of financial matters.
Certainly he is an elderly man. At the time that these events occurred he was 83/84 years of age. He lost the sight in his left eye in about 1987 after an operation on that eye failed. He can, however, see quite well. He still holds a licence to drive and still drives a motor vehicle. He can read.
It is now more than six years since these events commenced and it is about five years since the home mortgage was entered into.
Even so, I would not describe Mr Wilby as frail. True, it is, that he moves slowly and deliberately. He is bent. He has lost the sight in one eye and for the last six months, after being involved in a traffic accident as a pedestrian, he has had difficulty in hearing. He is not, however, frail. He appears to me to be a fit man for his age.
I also reject the plaintiff’s contention that the plaintiff is a person of limited understanding of financial matters.
In my opinion, on the contrary, the plaintiff had a firm grasp of financial matters. He well understood the concept of using the real estate which he inherited for the purpose of generating income. He understood the concept of using that real estate for the purpose of borrowing funds and using those funds to generate income. The transactions which I have identified over the period of 30 or 40 years indicate the plaintiff’s familiarity with commercial transactions. He not only had a number of mortgages over that period of time on the various pieces of land which he owned but he also borrowed money on unregistered mortgages and had experience with caveats. He understood that to obtain a loan security had to be given. He was well aware of the concept of a mortgage. He understood if the obligations under the mortgage were not met the mortgagee had the power to sell the mortgaged property.
In my opinion he had known this for many years. He had, however, had personal experience of that risk in 1990 when Esanda moved in relation to the Pasadena project. Mr Wilby also understood that if monies were lent the lender should obtain security. He admonished himself for not obtaining a bill of sale when Christopher Wilby lent the monies which had been obtained from Advocate Nominees Pty Ltd to Sarlak Enterprises Pty Ltd. Mr Wilby was as aware as any other person, and probably more aware than most, of the concept of giving security on loans.
In this case I am not satisfied for the reasons already given that the plaintiff was under any special disadvantage of the kind pleaded in 17(a)(i)(ii) or (iii). He was elderly but his age was not a disadvantage. He did not suffer any impaired intellectual faculties. He had some physical disabilities but they were of no consequence. He was not ill. He was certainly not ignorant or inexperienced. Indeed he was experienced in borrowing monies.
In the end result because the plaintiff was not under a special disability for any of the three pleaded reasons which I have dealt with the plaintiff cannot succeed even in a very limited way unless he can establish that he was under the undue influence of his son, Christopher, or unless he laboured under some other special disability not directly pleaded.
I will separately address the plaintiff’s financial position on this question of the plaintiff being under a special disability, notwithstanding that factor was not relied upon by the plaintiff. Severe financial need or ‘poverty’ could as Fullagar J observed in Blomley v Ryan (supra) put a party at a special disability. For reasons which I will give I do not believe that the plaintiff’s financial position put him under a special disability. He did have a need for money because he had previously entered into other, what might be termed with the benefit of hindsight, imprudent transactions. He had previously borrowed money to assist his son, Christopher, in relation to the Pasadena project. At the same time he borrowed money to enable his daughter to purchase his son Bradley’s, interest in property. In that one transaction in 1990 he borrowed a significant sum of money to assist his three children.

In 1994 he entered into another transaction for the purpose of purchasing his daughter’s interest in his property and he borrowed a further $85,000 for that purpose. At that stage in total he more than doubled the amount he owed to financiers again for the purpose of assisting his daughter and also his son, Christopher. He increased his liabilities to financiers from $125,000 to $280,000. True, it is, that he recovered the interest he had in his own properties but he left himself exposed to mortgage payments which on any understanding he would have been unlikely to have been able to service.
In 1994 he entered into the further transaction to borrow $415,000 on the security of the second units. Again, on any understanding, he would not have been able to service that loan unless the sum borrowed was put to proper use to enable him to discharge interest payments on the amount borrowed.
Next, he entered into the transaction with IOOF so as to be able to repay Growden Pty Ltd the amount owing on that mortgage together with the interest which had accrued. He borrowed the sum of $313,000 from IOOF to enable that to occur.
It is true that at the time he entered into this transaction he needed finance. In that sense it may be said that he was a person with special disability. His need for finance, however, was to discharge existing obligations for which the bank had not been responsible. He needed to borrow at least the amount then outstanding to IOOF but that did not put him at a special disadvantage vis-à-vis the defendant: Blomley v Ryan (supra) at 405. His ability to make a judgment, in dealing with the defendant at least, was not affected by his financial position: Commercial Bank of Australia v Amadio (supra). He had not lost the ability to make an informed judgment as to his interests: Bridgewater v Leahy (supra) at 470.
I do not believe that he was a person at a special disability by reason of his financial position at the time of entering into this transaction. Nor for the reasons I have already given do I believe that he was a person under a disability as claimed in para 17(a)(i), (ii) or (iii).
Even if he was, there is not a scintilla of evidence to support the finding that the defendant was aware that he was a person under a special disability. Indeed contrary to the plaintiff’s case the defendant believed that the plaintiff was in a sound financial position and was intending to use this money for good commercial reasons. There is therefore no evidence that the Bank was aware that the plaintiff suffered such a disability.
The very transaction into which the Bank entered establishes, in my opinion, its lack of knowledge of this aspect of the plaintiff’s claimed special disadvantage. If the plaintiff’s special disadvantage was his impecuniosity and his inability to service his debts why would the Bank have taken the place of one of his then secured creditors?
There is no evidence that the Bank knew he was otherwise under a disability.
Moreover, there is not, in my opinion, any evidence to make out the third element required to be established and that is that the Bank took unconscientious advantage of the plaintiff by exploiting his special disadvantage.
If the Bank had known that the plaintiff was a person under a special disadvantage in that he was then impecunious, the Bank would not have lent any money. It did not intend to take any advantage of any disadvantage of the kind which the plaintiff relies upon.
Nor is there any evidence that the defendant took advantage of the plaintiff in respect of his advanced age, his physical condition or his lack of understanding of financial matters.
The third element is also not made out.
That disposes of that aspect of the plaintiff’s case except insofar as the plaintiff relied upon undue influence as a special disability.
For the reasons I have given the plaintiff cannot succeed unless he was under the undue influence of his son, Christopher. To succeed on this ground the plaintiff must establish he was thereby under a special disability (as I have attempted to explain it), the Bank was aware of the weakness resulting from that special disability and took advantage of it.
In the alternative he will succeed if he can establish that being under the undue influence of his son he was not able to bring an independent and voluntary will to the transaction and the defendant took advantage of that fact.
Undue Influence
Undue influence can be established in two ways. Actual undue influence may be proved. In cases where there is no reason to presume that a person is under the undue influence of another the party claiming there was such influence must prove it. In other cases where there is a relationship where one party reposed trust and confidence in another the relationship itself will raise the presumption of undue influence. If the presumption is raised the burden of proving that a party to a transaction was not subject to undue influence will move to the other party to the transaction: Bank of New South Wales v Rogers (1941) 65 CLR 42.
In Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 134 the majority (Debelle and Wicks JJ) cited with approval the speech of Lord Brown-Wilkinson in Barclays Bank plc v O’Brien [1994] 1 AC 180 at 189 where his Lordship classified the circumstances giving rise to undue influence:
“Undue influence may be actual or presumed from particular relationships. In Barclay’s Bank plc v O’Brien [1994] 1 AC 180 at 189 Lord Browne-Wilkinson adopted the following classification.
‘Class 1: Actual undue influence
In these cases it is unnecessary (sic) for the claimant to provide affirmatively that the wrongdoer exerted undue influence on the complainant to enter into the particular transaction which is impugned.
Class 2: Presumed undue influence
In these cases the complainant only has to show, in the first instance, that there was a relationship of trust and confidence between the complainant and the wrongdoer of such a nature that it is fair to presume that the wrongdoer abused that relationship in procuring the complainant to enter into the impugned transaction. In Class 2 cases therefore there is no need to produce evidence that actual undue influence was exerted in relation to the particular transaction impugned: once a confidential relationship has been proved, the burden then shifts to the wrongdoer to prove that the complainant entered into the impugned transaction freely, for example by showing that the complainant entered into the impugned transaction freely, for example by showing that the complainant had independent advice. Such a confidential relationship can be established in two ways, viz, Class 2(A).
Certain relationships (for example solicitor and client, medical adviser and patient) as a matter of law raise the presumption that undue influence has been exercised.
Class 2(B)
Even if there is no relationship falling within Class 2(A), if the complainant proves the de facto existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, the existence of such relationship raises the presumption of undue influence. In a Class 2(B) case therefore, in the absence of evidence disproving undue influence, the complainant will succeed in setting aside the impugned transaction merely by proof that the complainant reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer exerted actual undue influence or otherwise abused such trust and confidence in relation to the particular transaction impugned.”
In my opinion the plaintiff did not establish affirmatively that Christopher exerted undue influence upon him to enter into the impugned transaction.
The circumstances giving rise to other transactions, and more particularly the Advocate Nominees Pty Ltd transaction, were relevant to establish the relationship between the plaintiff and his son and indeed the wider relationship between the plaintiff and his children.
It can be seen, from the circumstances which I have recited, that the plaintiff entered into a number of transactions after 1994 to enable him to provide finance for his son to enter into the helicopter charter business.
That was the underlying purpose in relation to all of the transactions in 1994 and up until the time of the Advocate Nominees Pty Ltd transaction.
The plaintiff purchased his daughter’s shares to enable him to enter into a transaction whereby he provided finance for his son.
I am not satisfied that he was so much under the influence of his son in relation to those transactions that he was unable to bring an independent and voluntary will to those transactions.
I am satisfied that he was not under the influence of his son in relation to this transaction and that he was able to bring an independent and voluntary will to the transaction. The plaintiff has failed to prove, in my opinion, that he was subject to the actual undue influence of his son.
The plaintiff, however, could rely upon a presumed undue influence even though he was not able to establish actual undue influence. It was the plaintiff’s case that the relationship between the plaintiff and his son gave rise to such a presumption as a matter of law. That is to say the relationship was one which Lord Browne-Wilkinson described as “a Class 2(A) relationship”.
In my opinion, the relationship between the plaintiff and his son is not one which would give rise to a presumption of undue influence as a matter of law.
There are certain special relations from which it may be presumed that undue influence exists. In Johnson v Buttress (1936) 56 CLR 113 at 119 Latham CJ said, referring to those relations:
“These relations include those of parent and child, guardian and ward, trustee and cestui que trust, solicitor and client, physician and patient and cases of religious influence.”
The same categories were identified by Brennan J in Louth v Diprose (1992) 175 CLR 621 at 628.
In Yerkey v Jones (1939) 63 CLR 649 at 675 Dixon J explained why it is that there are certain relationships from which it may be presumed where one party has obtained a benefit from another that the second party has been subject to undue influence as a matter of law.
“But in the relations comprised within the category to which the presumption of undue influence applies, there is another element besides the mere existence of an opportunity of obtaining ascendancy or confidence and of abusing it. It will be found that in none of those relations is it natural to expect the one party to give property to the other. That is to say, the character of the relation itself is never enough to explain the transaction and to account for it without suspicion of confidence abused.”
The relationship of husband and wife is not one of those relations where it is not natural to expect a husband or wife to give property to the other. That is not a relationship which gives rise to undue influence as a presumption of law. As I have already indicated, a relationship of parent and child where the child gives property to the parent, is one that does give rise to a presumption as a matter of law that the child has been subject to undue influence. It is not natural to expect a child to give property to his or her parent. The relationship can come to an end such that the presumption does not arise if the child has become “emancipated” from parental dominion. In West v Public Trustee (1942) SASR 109 at 119 Mayo J said:
“Where there is a gift from a child to a parent, the burden of proving that the gift was not due to parental influence rests on the parent, unless the child has previously become emancipated from parental dominion. In such cases there is a presumption of undue influence which must be displaced by the person on whom the burden lies.”
However there is no presumption at law where the gift or the benefit of the transaction has moved from the parent to the child. It is not unnatural for a parent to make provision for his or her children. Indeed it is natural. In those circumstances the character of the relation itself is enough to explain the transaction and to account for it.
In my opinion therefore the plaintiff cannot as a matter of fact bring himself within Class 1 and is not entitled as a matter law to claim the presumption in Class 2(A).
That leaves for consideration whether the plaintiff has established a relationship where, as a matter of fact, it may be presumed that the plaintiff was subject to undue influence.
The relationship which the plaintiff must establish must be something other than a relationship in which there was undue influence. Otherwise the plaintiff would be able to bring himself within a Class 1 classification.
The relationship must be of a kind whereby the plaintiff reposed trust and confidence in his son such that it may be presumed that the son had dominion over the father and that therefore the presumption should arise.
In my opinion the plaintiff has failed to prove the existence of such a relationship. As I have already said the plaintiff had a relationship with each of his children whereby he provided each of them with interests in his property and in due course purchased back the interests which he had given them.
He provided financial assistance for each of them in different ways. He assisted Christopher in respect of the Pasadena transaction. He assisted his daughter, Denise, by providing her with accommodation for a number of years and in due course purchasing her interest in the property. He assisted Bradley by providing him with accommodation in the country for a number of years and also repurchasing property from him.
It is clear that after the plaintiff’s wife’s death the plaintiff used his resources for the benefit of his children. However he was not under the inference of his children. In particular I do not accept that the plaintiff’s relationship with Christopher was of a kind where it may be presumed that there was a dominion by Christopher over the will of the plaintiff. On the contrary I think the relationship between the plaintiff and his son was no more than that of between parent and child with the love and affection which flows from each to the other. I think the plaintiff was proud of Christopher. I think the plaintiff believed that Christopher would succeed in business. The plaintiff was no doubt disappointed that Christopher did not. Still, however, in these proceedings, the plaintiff did not speak ill of Christopher even though the plaintiff’s circumstances now are due, in no small way, to his financing of Christopher’s unsuccessful business.
In my opinion, the relationship between the plaintiff and Christopher was not such that it could be said that the plaintiff reposed so much trust and confidence in Christopher that the presumption could arise.
In my opinion, the plaintiff did not bring himself within a Class 2(B) classification.
It follows from that that the plaintiff’s claim that he was under the undue influence of his son must be dismissed.
If I am wrong about that and the plaintiff did establish actual undue influence or that undue influence may be presumed because of the actual relationship between the plaintiff and his son then different considerations arise in respect of each limb.
However, the plaintiff would not have to rely on the first limb of his claim because, as I have found, the defendant did not provide the plaintiff with any independent advice in respect of this transaction. If undue influence, contrary to my opinion, is to be presumed the defendant needed to establish that it did whatever was necessary to protect the plaintiff from the influence to which he was subject. If the plaintiff was subject to the undue influence of his son the defendant needed to establish that it had provided the plaintiff with independent advice or had required the plaintiff to obtain independent advice. The defendant called no evidence to establish that it took whatever steps were necessary in that regard.
If the plaintiff has established undue influence whether actual or presumed, in my opinion, the onus would be on the defendant to establish that it had provided independent advice in relation to the transaction: Bank of New South Wales v Rogers (supra); Johnson v Buttress (supra). The defendant would have the onus of establishing that the plaintiff entered into the transaction voluntarily and independent of his son’s influence. It has failed to discharge that onus and the plaintiff would be entitled to succeed on that second limb.
If, however, the plaintiff was entitled to succeed on that second limb it would only be after the plaintiff was obliged to do equity. On any understanding of the transaction between the plaintiff and the defendant the plaintiff obtained the benefit of the discharge of the IOOF mortgage in the sum of $318,305.32. The transactional fees were $5,015. The only benefit which it might be said did not flow to the plaintiff was the difference between the amount required to discharge the IOOF mortgage and the transactional fees incurred in obtaining the first loan and the amount advanced. To do equity the plaintiff would have to account to the defendant for the sum of $323,320.32 and the interest which would have accrued on that sum if the plaintiff had not received the benefit to which I have referred.
The plaintiff would not be entitled to any relief or a remedy setting aside the transaction and discharging him from his obligations under the mortgage without bringing to account on his part the benefit which he has received.
Conclusion
In any event for the reasons earlier given in my opinion the plaintiff’s claim must fail.
The action will be dismissed.

Liabilities ($)		Assets ($)
Home Loan – IOOF	313,000	Cash - Adelaide Bank	10,000
Other Loans – J B Were	415,000	Property – King George Avenue	500,000
728,000
6 Units – 3/3 King George	630,000
Land Holdings (Rural)	115,000
Motor Vehicle	20,000
Shares	10,000
Sarlak Enterprises P/L	400,000
Furniture	20,000
Private Loans	21,000
1,706,000 (sic)

[2001] SASC 138

2 May 2001