Williams v Maalouf
[2005] VSC 346
•1 September 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 4749 of 2004
| SYLVIA WILLIAMS | Plaintiff |
| v | |
| NABIL MAALOUF | Defendant |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 31 May, 1, 2 and 3 June 2005 | |
DATE OF JUDGMENT: | 1 September 2005 | |
CASE MAY BE CITED AS: | Williams v Maalouf | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 346 | |
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EQUITY – gift – unconscionable conduct - whether plaintiff under a special disadvantage at time of gift – whether special disadvantage evident to donees of gift – legal and beneficial donees - subsequent gift – whether special disadvantage of original donor evident to subsequent donee – whether subsequent donee unconscionably procured gift to original donee – whether gift subject to a condition – whether condition fulfilled.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | S.J. Hibble | Slater & Gordon |
| For the Defendant | S.P. Newton | Galbally & O’Bryan |
HIS HONOUR:
Overview of facts and issues
In July 2003, the plaintiff made a gift in the sum of $200,000 (“the gift”). The gift was effected by a cheque drawn on the plaintiff’s account (“the cheque”). The cheque was drawn in favour of Ms Denise Jeremic, a work colleague of the plaintiff, who is now deceased (“Ms Jeremic” or “the deceased”) and the defendant. The defendant was also a work colleague of the plaintiff at the time.
At the time of the gift, Ms Jeremic had been diagnosed with ovarian cancer. She had previously been in a de facto relationship with the defendant, which relationship had terminated in about November 2002 and had been resumed following the diagnosis of her cancer.
There are many disputed facts about the circumstances in which the cheque was drawn and delivered to Ms Jeremic and the defendant. The plaintiff’s case is that the gift was expressly stated to be a gift to Ms Jeremic only, and that the defendant’s name appeared on the cheque because Ms Jeremic expressed a concern that receipt by her of the gift would have an adverse effect upon her pension or sickness benefits. Accordingly, the proceeds of the gift were to be banked to the account of the defendant, to hold on trust for Ms Jeremic.
Further, it is the plaintiff’s case that the gift was made on an express condition that the proceeds of the gift would be used to purchase a house for Ms Jeremic to live in and recuperate from her illness, which house would be registered in the name of Ms Jeremic (“the condition”).
The defendant denies that the gift was made to Ms Jeremic only. Further, the defendant denies that the gift was subject to the condition.
On behalf of the defendant, it is contended that the gift was made to him and Ms Jeremic jointly on an unconditional basis, in contemplation of their marriage.
It is not in dispute that, on the day the gift was made, the cheque was banked into the joint account of the defendant and Ms Jeremic and that, shortly thereafter, the proceeds of the cheque were transferred from that joint account to an account in the sole name of the defendant.
The proceeds of the gift were subsequently used by the defendant towards the purchase, in his own name, of a property at 16 Fraser Street, Coburg (“the property”).
When the plaintiff discovered that the proceeds of the gift had been used by the defendant and Ms Jeremic to purchase the property in the name of the defendant, she realised that the condition of the gift had been broken. Accordingly, she demanded repayment of the gift from the defendant. There was no response to this demand.
Although she had been involved in the selection of the property, Ms Jeremic never resided in it. She died before the purchase of the property was completed.
Pleadings
The plaintiff first put her case on the basis of an agreement between her and the defendant, to the effect of the condition. It is alleged that the condition was not fulfilled and that, as a result, the plaintiff is entitled to a return of the proceeds of the gift, an amount of $200,000.
Although the statement of claim uses the terminology (“the agreement”) to describe the gift and the condition, the case was conducted on the basis that it concerned the gift.
Next, the plaintiff alleges that, at the time of the gift, she was suffering from special disabilities. She alleges that, at all material times, she was an elderly woman who was mentally impaired due to depression and clinical distress and, in addition, that she was emotionally dependent upon Ms Jeremic.
The plaintiff alleges that, at the time the gift was made, the defendant knew or ought to have known that she was suffering from these special disabilities and that, as a result, the receipt of the gift and its retention by the defendant is unconscionable.
Alternatively, the plaintiff alleges undue influence on the part of the defendant in the obtaining of the gift.
Finally, the plaintiff alleges that the property is held on a resulting trust for the plaintiff to the extent that the proceeds of the gift were applied in the purchase of the property in the name of the defendant.
The defendant’s defence is a simple one. He alleges that the gift was made to the defendant and Ms Jeremic jointly, in contemplation of their marriage, and could be used for any purpose which they saw fit. The defendant denies that the plaintiff was suffering from any special disability or, if she was, that he knew or ought to have known of the existence of that special disability at the time of receipt of the gift.
Facts
(1) The Plaintiff
The plaintiff is 69 years old. At the time of the gift she was aged 67.
The plaintiff was born in Romania. When the plaintiff was a young child, her family settled in New Zealand, where the plaintiff grew up.
The plaintiff married in New Zealand. She has no children. The plaintiff’s husband died in 1976 or 1986.[1]
[1]In oral evidence, the plaintiff said 1976. However, in the history taken by Dr Kennedy, (whose evidence is referred to later in these reasons), it is recorded that the plaintiff’s husband died in June 1986, having been ill for ten years following upon a car accident in 1976.
The plaintiff’s father died in New Zealand in 1957. From that time on, including during her marriage, the plaintiff had her mother living with her. The plaintiff’s mother continued to live with her until about one year prior to her mother’s death in January 2003. It is apparent that the plaintiff was devoted to her mother and cared for her on a daily basis.
In the late 1990s the plaintiff had ovarian cancer and had her ovaries removed.
At some stage, the plaintiff and her mother re-located from New Zealand to Melbourne. About 20 years ago, the plaintiff commenced working as a tram conductor in Melbourne. Later, the plaintiff became a tram driver. At relevant times, the plaintiff was based at the Brunswick tram depot.
Through her work, the plaintiff met the defendant and Ms Jeremic. It appears that the plaintiff met Ms Jeremic in about 1995. The plaintiff met the defendant in about 1990.
As I have said, until the last year of her life, the plaintiff’s mother resided with her. It is apparent that the plaintiff’s mother was extremely unwell in the later years of her life. The plaintiff’s mother had a number of strokes and was paralysed. She developed gangrene in both of her feet. Whilst the plaintiff’s mother was in care or in hospital during the last year of her life, the plaintiff visited her every day until she died on 26 January 2003.
The plaintiff’s reaction to her mother’s death was quite extraordinary. Although the plaintiff’s mother was 92 years old when she died, and was obviously suffering greatly from her illnesses, the plaintiff was extremely traumatised by her mother’s death.
The plaintiff’s conduct in response to her mother’s death included the following matters:
(1)Taking photographs of her mother’s body after death, and showing those photographs to others, including Ms Jeremic and the defendant.
(2)Repeatedly telling others, including the plaintiff and the defendant that the hospital and its staff had been negligent in allowing her mother to die and that the hospital had done the wrong thing by “putting my mother down.”
(3)Spending an inordinate amount of money on her mother’s funeral. Notwithstanding her limited financial means, the plaintiff spent approximately $50,000 on her mother’s funeral expenses, including travel to New Zealand and about $45,000 on an elaborate mausoleum.
(4)As a result of her mother’s death, the plaintiff determined to sell her home and converted the proceeds to cash. After paying for her mother’s funeral and mausoleum in New Zealand and related expenses and some outstanding bills, the plaintiff had approximately $225,000 in cash in her bank account. As a result of the sale of her house, the plaintiff was living in rented accommodation. The plaintiff said that she acted in this way because:
“I couldn’t live in a house without my mum, and my life has no more meaning.”
The plaintiff said in evidence that she was:
“…completely totally lost without my mum in my life.“
I accept this evidence. As appears hereafter, it is supported by the expert evidence of Dr Kennedy, a clinical and forensic psychologist, and is wholly consistent with the plaintiff’s conduct in response to the illness of Ms Jeremic.
In short, the plaintiff sought to fill the void in her life which resulted from her mother’s death by transferring her emotional focus from her mother to Ms Jeremic. In this way, the plaintiff’s emotional dependence upon her mother was replaced with emotional dependence upon Ms Jeremic and the problems associated with her illness.
I have said that I accept the plaintiff’s evidence about the profound effect upon her of her mother’s death. That is not to say that I accept all of the evidence given by the plaintiff. Much of her evidence was affected by emotion. She had great difficulty concentrating on the subject matter of many questions and often provided confused and irrelevant responses. She sometimes exaggerated. There were occasions where the plaintiff’s recollection is contradicted by objective or other credible evidence. However, from her demeanour as a witness, I am satisfied that the plaintiff did not tell any deliberate untruth in the course of her evidence and, unless specifically mentioned in these Reasons, I accept her evidence.
(2) The Defendant
The defendant is 57 years old. At the time of the gift he was aged 55.
The defendant was married but is now divorced. There are no children from his marriage.
The defendant is a fleet controller with Yarra Trams. He has been employed by Yarra Trams and its predecessors for some thirty years. At all times relevant to this proceeding, he was employed in a supervisory position in which he acted as supervisor to both the plaintiff and Ms Jeremic.
The defendant first met the plaintiff in about 1990. At that time, the plaintiff was still a tram conductor. In about 1994, the defendant met Ms Jeremic. At that time, Ms Jeremic was a tram conductor, and later became a tram driver.
As I have said, the defendant supervised both the plaintiff and Ms Jeremic.
Towards the end of 1994 the defendant commenced a relationship with Ms Jeremic and in early 1995 they commenced cohabitation at 166 Melville Road, Pascoe Vale South.
In 1998 or 1999, Ms Jeremic ceased cohabitation with the defendant for a period of about five months. In that period, Ms Jeremic moved in with her mother at a house in Coburg. Thereafter, Ms Jeremic resumed cohabitation with the defendant at the Melville Road property.
At times, Ms Jeremic’s mother resided with the defendant and Ms Jeremic at the Melville Road property.
In November 2002, the defendant and Ms Jeremic separated. The defendant said in evidence, and I accept, that the reason for this was that Ms Jeremic had a compulsive gambling problem and, as a result, was borrowing large sums of money without first informing the defendant. This resulted in Ms Jeremic being unable to contribute to her share of household expenses.
At this stage, the defendant moved out of the Melville Road property and into a property at 23 John Street, Brunswick East. The defendant said in evidence that this was a property owned by his brother and had previously been owned by his mother. This evidence by the defendant is inconsistent with a statutory declaration which he swore on 16 February 2004 in support of his application to be paid Ms Jeremic’s superannuation benefits, following her death. In that statutory declaration, which was prepared on behalf of the defendant by his then solicitors, the defendant swore that the property at 23 John Street, Brunswick East, was:
“... my late mother’s home which is now owned by my siblings and me.”
Apart from sporadic conversations on the mobile telephone, the defendant and Ms Jeremic did not see each other outside of work until some time in April or May 2003. At that time, the defendant learned that Ms Jeremic had been diagnosed with cancer. On learning this news, the defendant visited Ms Jeremic who, by that time, had moved from the Melville Road property to a flat at 5/17 Sturrock Street, Brunswick.
The defendant said in evidence that, from this time, he re-commenced a relationship with Ms Jeremic which continued until her death in November 2003. However, the defendant did not move into the Sturrock Street flat until July or August 2003. This was because Ms Jeremic was sharing the flat with another work colleague, Michael Stevens, whose house was under renovation at the time. Although the defendant swore that he moved into the Sturrock Street flat in July 2003, Mr Stevens swore that he lived at the Sturrock Street flat until approximately 17 August 2003 when his renovations were completed. Mr Stevens was a most impressive witness. His evidence that he lived at the Sturrock Street flat and contributed to the rent until 17 August 2003 was not challenged in cross-examination. I accept his evidence. I find that the defendant did not move into the Sturrock Street flat, and re-commence cohabitation with Ms Jeremic, until on or about 17 August 2003. The relevance of this will become apparent.
The defendant was an unimpressive witness. In my view, the defendant gave false and implausible evidence on a number of issues, in an endeavour to portray his own conduct or motives in a positive light. In particular, the defendant’s evidence concerning the drawing of the cheque, the circumstances in which it was handed over by the plaintiff and his reaction to the receipt of a cheque for $200,000 were simply not credible.
For example, the defendant’s evidence of his reaction to seeing his name on the cheque was as follows:
“I was a little bit happy to have my name on the cheque because by having my name on the cheque it means that Sylvia considered us as one item, not two.
That was the only reason you were a little bit happy? --- Not because of the money, no.”
In my view, this evidence was deliberately untruthful. It was inconsistent with the evidence of the defendant in cross-examination that he likened the receipt of the gift to “winning Tattslotto”.
That is not to say that I reject all of the evidence given by the defendant. In some cases, I have preferred the evidence of the defendant to that of the plaintiff. There are, however, other examples of the defendant’s evidence being deliberately untruthful.
(3) Ms Jeremic (the deceased)
Ms Jeremic died on 10 November 2003 of cancer, aged 49 years.
Ms Jeremic was divorced and had no children. As I have said, she was employed as a tram conductor and subsequently a tram driver. In that capacity, she met the plaintiff and the defendant.
The relationship between Ms Jeremic and the defendant has been described above.
Following the initial diagnosis of cancer in April or early May 2003, Ms Jeremic underwent surgery on 22 May 2003. At this time, a large left ovarian tumour was found. The tumour was cancerous and was found to have spread to other organs within her pelvis. Her uterus, tubes and ovaries were removed. Following this surgery, Ms Jeremic was treated for depression and had chemotherapy.
On 11 August 2003, Ms Jeremic received medical advice that her cancer was not responding to the chemotherapy. There was a dispute in the evidence as to whether, at this time, Ms Jeremic was advised that she only had a short while to live or whether she was merely advised that, at the time, the cancer was not responding positively to the chemotherapy. It is not necessary to resolve this dispute.
Subsequently, Ms Jeremic underwent radiotherapy on 17 September 2003 because the chemotherapy was not yielding positive results.
By 7 October 2003, Ms Jeremic was back in hospital and, from 15 October 2003 she required narcotic pain relief until she died on 20 November 2003.
(4)Relationship between the plaintiff, the defendant and Ms Jeremic before cancer diagnosis
The plaintiff returned to work in the first week of May 2003 after a break of some three months due to her grief about her mother’s death. At this time, the plaintiff learned of the fact that Ms Jeremic had been diagnosed with ovarian cancer.
Prior to this time, the relationship between the plaintiff and Ms Jeremic appears to have been one of friendly work colleagues. Although the plaintiff occasionally visited Ms Jeremic at home, the friendship between the plaintiff and Ms Jeremic was mainly centered around work where they socialised at meal breaks and at the end of shifts. The plaintiff and Ms Jeremic also celebrated News Year’s Eve together on a regular basis, sometimes with the defendant.
I find that the plaintiff and Ms Jeremic were not close personal friends. Rather, they were friendly work colleagues as described above.
Prior to May 2003, the plaintiff was also a work colleague of the defendant. He was her supervisor. It appears that the relationship between the plaintiff and the defendant became more familiar due to the relationship between the defendant and Ms Jeremic from late 1994 or early 1995.
I find that the plaintiff and the defendant were not close personal friends at any time. The plaintiff’s relationship with the defendant was work based and became more familiar as his relationship with Ms Jeremic flourished.
(5) Reaction of plaintiff to illness of Ms Jeremic
The reaction of the plaintiff to the news that Ms Jeremic had been diagnosed with ovarian cancer was as extreme and extraordinary as her reaction to the death of her mother. As I have said, the plaintiff had been emotionally dependent upon her mother until her death. Her mother’s death left her with a void in her life. The plaintiff said in evidence, and I accept, that she felt that her life had no meaning following the death of her mother.
Upon learning of the illness of Ms Jeremic, the plaintiff immediately found a meaning and purpose for her life. Her sudden and strong devotion to Ms Jeremic and her welfare dominated her life from this time until the making of the gift. This devotion continued until her relationship with Ms Jeremic and the defendant soured, following the discovery by the plaintiff that the gift had been used to purchase the property in the name of the defendant.
On the day that the plaintiff was informed of Ms Jeremic’s illness, she visited Ms Jeremic at the Sturrock Street flat in the company of some other work colleagues. From that day on, until the making of the gift and for a time thereafter, the plaintiff visited Ms Jeremic on a daily basis and devoted her time, energy and resources towards the welfare of Ms Jeremic. During this period, the only time which the plaintiff spent away from Ms Jeremic was whilst she was at work, asleep or performing activities directed at the welfare of Ms Jeremic, such as preparing food for her and purchasing medication and other items for her.
The plaintiff said in evidence that she prepared all of the food for Ms Jeremic during this period. This often involved her cooking late into the evening after having worked and spending the earlier part of the evening visiting Ms Jeremic and attending to her needs. During these visits, as well as providing emotional support for Ms Jeremic, the plaintiff attended to cooking and cleaning the Sturrock Street flat.
The plaintiff also purchased various items for Ms Jeremic and paid a number of her bills. For example, the plaintiff purchased bedding and Manchester in the sum of $902.50, and a recliner chair for $714. The plaintiff also paid the sum of $650 in respect of a month’s rent on the Sturrock Street flat. Further, the plaintiff purchased expensive medication for Ms Jeremic and paid for a number of household expenses for her, such as her share of the electricity bill at the Sturrock street flat.
After the making of the gift and before the relationship soured, the plaintiff paid for legal and medical expenses on behalf of Ms Jeremic and even paid a veterinary bill in respect of care of Ms Jeremic’s cat. When Ms Jeremic lost her hair, she bought her a wig.
In addition to this expenditure, the plaintiff was expending her own funds to buy food for Ms Jeremic. The plaintiff prepared most of this food and it was consumed by Ms Jeremic, the plaintiff and the defendant when they shared meals together.
According to Dr Kennedy, the plaintiff told him that she spent nearly $8,000 in food and other expenses assisting Ms Jeremic.
Given the financial position of the plaintiff prior to the making of the gift, this level of financial contribution to the welfare of Ms Jeremic was extremely unusual. This must have been apparent to the defendant and Ms Jeremic. At the time, they had worked together for many years. Although there was no evidence of the annual salary of the plaintiff at the time, the defendant said that his salary, as the plaintiff’s supervisor, was around $50,000 per annum.
The plaintiff also lent Ms Jeremic furniture from her home, including a bed .
The conduct of the plaintiff in response to the illness of Ms Jeremic was not limited to caring for her and providing for her needs. The plaintiff had herself experienced ovarian cancer and had been in remission for a considerable period of time. The plaintiff believed that, with her assistance, Ms Jeremic could recover from her cancer and lead a happy life. The plaintiff discussed her own experience with cancer, which she described as a “miracle”, with both the defendant and Ms Jeremic. She took holy water, rosary beads and icons to Ms Jeremic at home and prayed with her for her recovery. She arranged for a priest to attend at the Sturrock Street flat in an endeavour to persuade Ms Jeremic that God can bring about miracles.
The plaintiff said in evidence that “God sent me Denise.” She told Dr Kennedy - “God sent me a sufferer and I was devoted to her …it was a gift to help me get over the grief of my mother.” I accept that this was the state of mind of the plaintiff from the time she learned of Ms Jeremic’s illness until the making of the gift.
The fact that the plaintiff saw Ms Jeremic as a substitute for her mother is evidenced by the fact that, before the plaintiff made the gift, she commenced calling Ms Jeremic her “daughter.” Ms Jeremic did not object to this. Further, the defendant conceded that he may have used the term “daughter” when describing Ms Jeremic to the plaintiff. I find that he did so. I find that both the defendant and Ms Jeremic encouraged the plaintiff’s emotional attachment to Ms Jeremic by participating in references to Ms Jeremic as the plaintiff’s “daughter.”
(6) Plaintiff’s continuing distress about her mother’s death
The plaintiff gave evidence that she frequently discussed her mother’s death, and her continuing grief and distress about it, with the defendant and Ms Jeremic. She said that she showed them the album of photos taken of her mother after her death and told them of her belief that her mother had died because of neglect by the hospital because the hospital was concerned that her mother was occupying a bed for too long and “they wanted her out.”
The plaintiff said that she became upset during a number of these conversations and broke into tears, despite her best efforts to avoid depressing Ms Jeremic. The plaintiff said that this occurred on more than three occasions prior to the making of the gift. I accept this evidence.
The defendant agreed that the plaintiff discussed her distress over her mother’s death, and her belief that it was the result of bad treatment of her mother in the hospital, on many occasions. He said that the plaintiff would mention her reaction to her mother’s death more than once a week during her regular visits to Ms Jeremic.
The defendant did not accept that the plaintiff became upset and was in tears on some occasions when discussing her mother’s death with him and Ms Jeremic. He gave evidence that the plaintiff would mention the subject and then become “a little bit withdrawn, that’s all and then five or ten minutes later she becomes happy again.” I do not accept this evidence. In my view, it is more probable than not that, despite her best efforts, the plaintiff did in fact become upset and cry, in the presence of the defendant and Ms Jeremic, when discussing her mother’s death.
(7) The gift
As I have said, after her mother’s death, the plaintiff sold her house and converted the proceeds into cash. After paying for her mother’s funeral and mausoleum in New Zealand and related expenses and some outstanding bills, the plaintiff had approximately $225,000 in cash in her bank account. As a result of the sale of her house, the plaintiff was living in rented accommodation.
The plaintiff said that the idea of giving money to Ms Jeremic was the result of her thinking about her dead mother. When asked how the idea of giving money to Ms Jeremic first occurred to her, the plaintiff gave the following evidence:
“Your Honour, after my mother’s suffering and illness when mum passed away naked, she was naked on her hospital bed, I realised that nothing matters. Nobody takes anything with them, …so having another ...cancer sufferer… the best thing I can do in memory of my loving mother and I was going to take nothing with me, and to help a sufferer and as a Christian do and I had nobody in my life, no responsibilities after selling my house, your Honour, I was wondering what I am going to do with all that money. I couldn’t think over and over, I was thinking that way, God would show me the way because my head was not working. I mean, I couldn’t think straight what I am going to do with the money and then God send me Denise so….”
I accept this muddled explanation by the plaintiff as to her motivation for making the gift. It is consistent with her extreme over-reaction to her mother’s death and the loss of the person upon whom she had been emotionally dependent for decades. It is consistent with the plaintiff becoming emotionally dependent upon Ms Jeremic as her way of filling the void in her life left by her mother’s death. I find that this is what occurred.
At the time that the plaintiff had the idea of making a substantial gift to Ms Jeremic, and before the gift was made, she had already engaged a solicitor to prepare a new will for her and also to advise her in respect of some employment related issues. The solicitor, Mr Rechnitzer, gave evidence that he recalled the plaintiff telephoning him about one or both of these retainers and, in the course of her discussion, indicating that she wanted to give away a sum of money to a person that she described as her daughter. Mr Rechnitzer said he was surprised at this because he had acted for the plaintiff for some time and did not believe that she had any children. He said that he cautioned the plaintiff against making such a gift and recalls being very concerned that the plaintiff was not acting in a sensible manner. Although Mr Rechnitzer could not locate a specific file note dealing with this conversation, he believed from the content of his file note of 16 July 2003 (which is not in evidence) that this was one of the conversations in which the plaintiff had raised with him the possibility of making a gift to Ms Jeremic.
On or about 18 July 2003 the plaintiff raised with Ms Jeremic, for the first time, the making of a gift of $200,000 to her. The plaintiff’s evidence of this conversation comprised a lengthy answer, including much comment. I will set it out in full:
“Mrs Williams, can you tell me to the best of your recollection what it is that you said to Denise about the $200,000 when you first mentioned it to her?---Yes. I had on the flat as usual, Your Honour, it was - it was - I think it was Friday from - I don't think - I don't - can't remember the date but it was - it was alone - she was alone and obviously upset because she was - she had complications after the operation in and out and then - it came out of my head, my heart, and I said to her - she was complaining about the flat, it was a very nasty place, noisy, horrible, at the back of the factory but she couldn't find - she couldn't afford a better - a more expensive flat and that’s why always she was having flatmates to share expenses and the rent, and it was such a horrible - a car wash thing, seven days a week, till nine o'clock - from early morning to night and she couldn't sleep and then was another factory next to it - oh, it was terrible, for her. And that night I said to her, ‘Okay, how would you feel to live into your own home?’ and she says, ‘How come? I've got no money?’ I said, ‘Look, I just sold my house, I’ve got money in the bank, I’m alone, I have no family, I’m an old woman, I can’t take it with me, I lost Mum as you know and I kept it all these - for my Mum but Mum did not live long enough and I want - I want you to have something because you're young, you're going to live’ and she says, ‘Stop here Sylvia, something is wrong here’. I said, ‘What is wrong?’ she says, ‘It can’t be right, nobody can give away such a large amount of money’. I said, ‘It’s me. I don’t care, I haven’t got to do with this, it’s in the bank’, she says, ‘No, no, I can’t accept it - I can’t accept it, number – I’m a beneficiary and it will have affect on my pension, and this is no lie, this is you need it it's something wrong here, obviously but you need it because this is your retirement - your pension money, you going to live with it when you're not be able to work’. I said, ‘Look, think about it, I want to help you, you want to live - you're young, you get well – I’m sure you will get - if I got well you get well’. Anyhow, it was maybe 10 minutes later Bill arrived. He walked in, he said, ‘Hello’ then he’s turned around and I said to him, ‘Bill, sit down’. He says, ‘Why, what’s up?’ ‘I got something to tell you’, then she said to Bill, ‘Bill, Sylvia wants to give me $200,000 to buy a house’ and Bill say ‘What?’ She say ‘Yeah just ask Sylvia’. So Bill said to me, ‘Sylvia is it true?’ I say, ‘Yeah, that’s true’, and he raise his hands - he was sitting on the couch - he raised his hands he said, ‘My God, if someone - someone offer me $200,000 I will kiss his hands’. I said, ‘Bill, she refused it flatly, she doesn’t want the money’ and he said, ‘That’s crazy. I don’t believe what you telling me Sylvia’. I said, ‘Look, you ask her’ and she said, ‘Yes’ to him. ‘It’s not right, there’s something wrong here, I don't want her pension money’. I said, ‘Very well, if you don’t want the money, my help, fine. I can’t force you so I will bank - put the money - my money will stay in my account and from the interest then still I can look after you’, meaning look after her daily needs and whatever she needed. That was it. It was about 9.30 and I got up to leave because I had to go home.”
The defendant gave a different version of events insofar as they involved him. He said in evidence that he learned of the offer of the gift during a private conversation between him and Ms Jeremic some time in May 2003. At the time, although he believed that the offer of the gift had been made, he did not believe that it would come to fruition. The defendant said that the proposed gift was subsequently discussed between him, the plaintiff and Ms Jeremic, during which discussions the plaintiff said that Ms Jeremic should buy a property with the money. According to the defendant, he was never informed by Ms Jeremic that she had rejected the initial offer of the gift.
The defendant said that, in his mind, he linked the gift to his proposed marriage to Ms Jeremic, although the plaintiff never said that to him. The plaintiff says, that at the time of the gift, she had not been informed that the defendant and Ms Jeremic were engaged to be married. I do not have to resolve this factual issue.
According to the defendant, the subject of the proposed gift was discussed in May, June and July 2003. Then, on 21 July 2003, the plaintiff walked in the door of the Sturrock Street flat with a cheque in her hand and handed over the cheque to Ms Jeremic and said to both the defendant and Ms Jeremic “here’s what I promised… a cheque for $200,000.” The cheque was already completed with the defendant and Ms Jeremic as the named payees.
The plaintiff’s evidence about the circumstances of the completion and handing over the cheque is in stark contrast to that of the defendant. According to the plaintiff, at about 9.00am on the morning following the initial offer of the gift to Ms Jeremic, and her refusal of it, the defendant telephoned her on her mobile telephone and said words to the following effect:
“Sylvia, you still want to buy the house for your daughter?”
to which the plaintiff replied:
“There’s no point – there’s no point now because she – she refused it…”
and the defendant then said:
“There are other ways – there’s other ways you can help your daughter. Come along tonight and we will talk about it.”
The plaintiff said in evidence that, that evening, Ms Jeremic said to her:
“Sylvia, Bill has something to tell you.”
to which the plaintiff replied:
“Fine, what is it?”
and the defendant then said:
“Sylvia, if you trust me, you can give the money – the cheque into my name and then I will see that your wishes come true for your daughter.”
The defendant disputes that he contacted the plaintiff on her mobile phone and had the conversation referred to above. He also denies that the conversation deposed to by the plaintiff on that evening took place. I accept the evidence of the plaintiff. In my view, something must have happened to cause Ms Jeremic to change her mind and receive the gift when it was made soon after this conversation. In my view, it is more likely than not that there was discussion between the defendant and Ms Jeremic about the plaintiff’s offer of the gift, and that this discussion commenced immediately after the plaintiff left the Sturrock Street flat at approximately 9.30 pm on 18 July 2003. I find that the result of these discussions, which I infer took place, was that the defendant convinced Ms Jeremic to accept the gift if it was offered again. I also infer that, during these discussions, the defendant and Ms Jeremic discussed the effect which the receipt of the gift by Ms Jeremic may have upon her entitlement to be paid sickness benefits.
Further, something must have happened to convey to the plaintiff a belief that, if she made the gift to Ms Jeremic, it would be accepted. It must be remembered that on 18 July 2003, Ms Jeremic had rejected the gift. Yet by 21 July 2003, the cheque had been handed over.
I find that the defendant induced the plaintiff to believe that, if she repeated her offer of the gift, it would be accepted by Ms Jeremic. The defendant did this by the mobile telephone conversation on the following morning and by the conversation that evening at the Sturrock Street flat. I find that it was these conversations which persuaded the plaintiff to make the gift.
There is also a dispute about the drawing of the cheque constituting the gift. As I have said, the evidence of the defendant is that the plaintiff arrived at the Sturrock Street flat with the cheque already completed and handed it to Ms Jeremic in his presence. The plaintiff’s evidence is in direct conflict. She said that she went to the Sturrock Street flat on 21 July 2003 with her cheque book with the intention of writing out a cheque and making the gift. She said that there was a discussion between her and Ms Jeremic about the name to write on the cheque as payee. In this discussion, Ms Jeremic said that she did not want the cheque to be made out to her as it would or may affect her entitlement to sickness benefits. Ms Jeremic asked for the cheque to be made out in the defendant’s name. The plaintiff says that she then commenced to write the defendant’s name on the cheque by placing the letter “B” on the cheque, intending to write “Bill Maalouf” as payee. At this time, she was stopped by Ms Jeremic who told her that the defendant’s true name was not Bill but “Nabil”. At this stage, the defendant entered the conversation and noted that the plaintiff was running late for work. According to the plaintiff, he said words to the effect:
“Sylvia, you are going to be late, I will fix it up. I will fill it in.”
The plaintiff says that she accepted this and then signed the cheque and passed it back to the defendant. At the time, all that she had written on the cheque was the letter “B” and her signature.
The original cheque was not in evidence. There was no expert handwriting evidence given. There are documents in evidence in the handwriting of each of the plaintiff and Ms Jeremic. There are no documents in evidence in the handwriting of the defendant.
An examination of the photocopied cheque which is in evidence does not appear to support the plaintiff’s version of events. The letter “B” appears in the middle of the second line of the space to write the name of the payee of the cheque. It appears to be in the same handwriting as the rest of the name of the payee and the amount of the cheque. On the other hand, the cheque butt supports the plaintiff’s version of events. It appears to be in different handwriting to that on the cheque. Ms Jeremic’s name has been written first on the cheque butt, as payee, and has been crossed out and the following has been written:
“B. MAALOUF
NABIL”
It may well be that the plaintiff was confused in her evidence and was speaking about the cheque butt when she referred to her only placing a “B” on the cheque. This would be consistent with other evidence given by the plaintiff, to the effect that, before she commenced writing the cheque, she attempted to persuade Ms Jeremic to accept a cheque drawn in her favour.
I find that the plaintiff was confused in her evidence, as discussed above, and was speaking about the cheque butt when she referred to her only placing a “B” on the cheque. In making this finding, I am substantially influenced by the apparent difference between the handwriting on the cheque butt and the handwriting on the cheque. Furthermore, although the plaintiff was obviously confused about the cheque and the cheque butt, her detailed account of the circumstances of the drawing of the cheque was otherwise convincing and accords with the probabilities when regard is had to other evidence. There was no doubt that it was the intention of the plaintiff to benefit Ms Jeremic. There is no evidence of an intention on the part of the plaintiff to make the gift to the defendant beneficially. I am satisfied that Ms Jeremic had a real concern that receipt of the gift in her name would or may give rise to an adverse affect upon her entitlement to sickness benefits. It is in my view extremely unlikely that the plaintiff would have completed the cheque butt in the manner that she did, and then written out the cheque in favour of both Ms Jeremic and the defendant in different handwriting, prior to delivering the cheque to the defendant and Ms Jeremic. Such a course is so improbable that I find that the defendant’s evidence in this regard was deliberately untruthful.
(8) Legal advice and wills
As I have said, at the time of the gift, the plaintiff had already been consulting her solicitor, Mr Rechnitzer, about a new will and about an employment problem. In the course of these retainers, she mentioned to Mr Rechnitzer that she intended to make a gift to Ms Jeremic. Mr Rechnitzer cautioned her against doing so.
There is no evidence that the plaintiff sought any advice, legal, accounting or otherwise, before making the gift. In my view, an oral caution during the course of a telephone conversation concerning another retainer does not amount to obtaining independent legal advice before proceeding to make the gift. Mr Rechnitzer’s evidence supports the inference that the caution which he gave on the telephone was incidental to the main subject matter of the telephone attendances.
On 23 July 2003, the plaintiff met with Mr Rechnitzer concerning her will. He conferred with her for approximately 35 minutes. In the course of the conference, he was informed about the gift. He made a very short file note of this conference, which is limited in its content to the gift. The file note records:
“C/W Sylvia Williams
Bill Malouf is Denise’s fiancé. He’s been previously married and has no kids.
Sylvia proposes to give them $200,000 towards purchase of house. Yesterday she’s given $200,000 to them. Already. Does not want advice or assistance in respect of it. I advised that this was a great mistake but she doesn’t care.”
This file note is consistent with the plaintiff not seeking or obtaining legal advice before making the gift. It is also consistent with the gift being made to the defendant and Ms Jeremic jointly – “she’s given $200,000 to them.” However, in his oral evidence, Mr Rechnitzer was adamant that he understood at all times, as a result of discussions with the plaintiff, the defendant and Ms Jeremic, that the gift was to Ms Jeremic and that the only reason that payment had been made to the defendant arose out of the request by Ms Jeremic and the defendant that the monies be paid to the defendant so as not to affect Ms Jeremic’s entitlement to sickness benefits. As will appear, I accept this evidence, notwithstanding this file note and other documentation prepared by Mr Rechnitzer which indicates that the gift was made to the defendant and Ms Jeremic jointly.
On 24 July 2003, the plaintiff telephoned Mr Rechnitzer. Mr Rechnitzer made a file note of the conversation, as follows:
“P/In Sylvia Williams
(1) Need a contract with Him & DENISE.
(2) I said Try to stop payment on CHG.
(3)o/wise see me next week with them to work out terms of Agreement.”
Mr Rechnitzer could not recall how this conversation began. However, based on the content of the file note, he inferred that the plaintiff rang him in response to the concerns which he had expressed the previous day concerning the gift. I draw the same inference.
The plaintiff’s evidence concerning the subject matter of the file note was confused. In evidence, the plaintiff had difficulty in separating the 23 July conference, the 24 July telephone call to Mr Rechnitzer and a subsequent attendance on Mr Rechnitzer, together with the defendant and Ms Jeremic, on 30 July 2003. However, the plaintiff clearly recalled being asked to see if she could stop the cheque, making attempts to do so and being informed by the bank that the cheque had already been cleared.
On 30 July 2003, the plaintiff, the defendant and Ms Jeremic all attended Mr Rechnitzer’s office. The plaintiff executed her will on that day. That will names Ms Jeremic as her principal beneficiary and the defendant as beneficiary in the event that both the plaintiff and Ms Jeremic pre-deceased him.
Mr Rechnitzer consulted with the defendant and Ms Jeremic separately, whilst the plaintiff waited outside. The evidence is unclear as to whether there was a joint meeting at which all parties were present and, if so, what was said.
The defendant and Ms Jeremic asked Mr Rechnitzer to prepare mutual wills for them, naming each other as sole beneficiary. Further, each of them instructed Mr Rechnitzer to provide in their will for a gift of $200,000 to the plaintiff in the event that both of them pre-deceased the plaintiff. It appears that the instructions to provide for $200,000 to go to the plaintiff were the result of a suggestion made by Mr Rechnitzer. Mr Rechnitzer prepared wills accordingly and they were subsequently executed.
Mr Rechnitzer told the defendant and Ms Jeremic that he thought the plaintiff had acted impulsively in making the gift and that he wanted to protect her interests. In addition to suggesting that $200,000 be left to the plaintiff if both the defendant and Ms Jeremic pre-deceased the plaintiff, Mr Rechnitzer suggested to the defendant and Ms Jeremic an idea which he said he had not yet discussed with the plaintiff. His idea was for an agreement to be executed between the plaintiff, the defendant and Ms Jeremic which would give the plaintiff a right to cohabit with the defendant and Ms Jeremic in the property which was to be purchased with the proceeds of the gift. Apart from the mention of this idea by Mr Rechnitzer, there does not appear to have been much discussion about it, if any.
The defendant said that he “wasn’t for the idea” of a cohabitation agreement. He said that he said to Mr Rechnitzer words to the effect “if the gift was conditional, I would not accept the gift.” The defendant also asked whether or not the plaintiff could ask for the gift back. In substance, Mr Rechnitzer replied that “if you give a gift you can’t ask for it back.”
At some stage during his consultations with the plaintiff at this time, Mr Rechnitzer discussed with the plaintiff the idea of a cohabitation agreement. Mr Rechnitzer could not recall exactly when he discussed the cohabitation agreement with the plaintiff. Mr Rechnitzer’s file note of a telephone conversation with the plaintiff on 24 July 2003, set out earlier in these reasons, suggests that the need for an agreement between the plaintiff, Ms Jeremic and the defendant was discussed at that time. Mr Rechnitzer said that his impression from this, and other conversations with the plaintiff, was that he had received instructions to proceed to draft such an agreement.
Following the attendance on Mr Rechnitzer, the defendant and Ms Jeremic discussed Mr Rechnitzer’s idea of a cohabitation agreement. According to the defendant, they agreed that if the plaintiff sought to impose a cohabitation agreement as a condition of the gift that they would give the money back. Further, the defendant says that it was Ms Jeremic who then suggested that the money be transferred into his name alone. The defendant said that Ms Jeremic suggested this because there may be a need to repay the money and she did not want to upset her application for disability benefits. In any event, on the way back from Mr Rechnitzer’s office, the defendant drove the plaintiff and Ms Jeremic to a Melbourne Credit Union branch where he and Ms Jeremic arranged to transfer $200,000 from their joint account to the defendant’s sole account. The plaintiff says that she did not know what business was being transacted at the credit union, and I accept this.
Mr Rechnitzer then proceeded to draft a cohabitation agreement. In the recitals to that draft agreement, he refers to the gift having been made by the plaintiff to the defendant and Ms Jeremic jointly. Mr Rechnitzer said in evidence that he used “poetic licence” in drafting the cohabitation agreement in this way. The reason for this was that he had to deal with the fact that he had been informed that the gift had been made by a cheque which had been banked by the defendant, so as not to affect Ms Jeremic’s entitlements to sickness benefits.
Subsequently, on 31 October 2003, after the dispute between the plaintiff and the defendant had crystallised, Mr Rechnitzer wrote to the plaintiff in the following terms:
“Pursuant to your request, we write to clarify our understanding of the ‘gift’ that you made to the abovenamed.
It was our understanding from discussions held with you and with Denise Jeremic and Bill Malouf in your presence and remains our understanding, that the gift you made was solely from yourself to Denise Jeremic and you had no intention of making any gift or payment to Bill Malouf. The payment to Bill Malouf arose out of the request by Denise and Bill that the monies not be given to her as it would affect her entitlements to sickness benefits. For that reason, it was our understanding that you would pay the money to Bill who would then hold it on trust for the benefit of Denise.
In respect of the draft Agreement that we sent you on 7 August 2003, we included Bill in it as he had by that stage received the monies and we were concerned to ensure that in the event that something happened to Denise, your rights of cohabitation would be honoured by Bill. The Agreement was never intended to reflect anything other than this, nor was it intended to imply that you had made the gift to Bill for his own benefit.”
Although the statements in the 31 October 2003 letter are inconsistent with the brief file note made by Mr Rechnitzer of his conference with the plaintiff on 23 July 2003, and with the recitals in the draft cohabitation agreement, Mr Rechnitzer was adamant in his evidence that the contents of his letter of 31 October 2003 were true and accorded with his recollection and understanding at that time and now. I accept this evidence of Mr Rechnitzer. He is a practising solicitor. He was an impressive witness. He candidly conceded that his letter is inconsistent with his file and the recitals to the draft cohabitation agreement. However, in his letter, he put forward cogent reasons for the discrepancy. When it was put to him that he was being untruthful in his letter and in his evidence, he said that he wrote the letter in the knowledge that he may be called as a witness if the dispute went to court and that he was aware that it was important to reflect the truth in his letter. He said that his practising certificate was worth far more to him than his duty to the plaintiff as a previous client.
Furthermore, Mr Rechnitzer’s evidence as to his understanding that the gift was made to Ms Jeremic, and not to the defendant or the defendant and Ms Jeremic jointly, is supported by a handwritten letter dated 9 August 2003 from the plaintiff to Mr Rechnitzer, in response to the draft cohabitation agreement. This handwritten letter was drafted by Ms Jeremic and originally written in her handwriting. It states in this regard:
“I have received your draft agreement and I am not happy with the wording between myself, Denise and Bill. At the time of our meeting I made it clear that the $200,000 was a gift to Denise Jeremic and not to Mr Bill Maalouf. If in the event that anything happens to Denise then he becomes 1st beneficiary.”
The defendant was present at the Sturrock Street flat when Ms Jeremic drafted this letter. He was aware of its contents. He said that he understood the reference to the gift being to Ms Jeremic and not to him as being a reference to the gift being to him also “because we are one item.” I reject this evidence. It lacks any credibility. I also reject his evidence that he thought that the plaintiff only made this statement in the letter because she was upset that he would not sign the cohabitation agreement.
I find as a fact that the gift was made by the plaintiff to Ms Jeremic alone. I find that the only reason that Mr Maalouf’s name was included on the cheque was because of a concern on the part of Ms Jeremic that, if the gift was placed in her bank account, this may affect her application for sickness benefits.
(9) Ms Jeremic receives bad news about her prognosis
At some stage in August 2003, Ms Jeremic and the defendant attended an appointment with Ms Jeremic’s oncologist. At this time, Ms Jeremic was advised that her cancer was not responding to the chemotherapy. The plaintiff says that she was informed of this bad news and was told that Ms Jeremic had been advised she only had about three months to live. The defendant, who was present at the consultation, denies that any timeframe was mentioned by the oncologist. He says that the oncologist simply said that the type of chemotherapy which had been used had not been successful and it was time to try a second type of chemotherapy.
The events which followed this medical advice tend to support the plaintiff’s version. The defendant says that, as a result of the advice, he offered to give the $200,000 back to the plaintiff, but she refused. The plaintiff says that, Ms Jeremic told her that, as a result of the medical advice she received, she would no longer have any use for the money and there was no time to buy her house. Both the plaintiff and the defendant said that, after this medical consultation, other alternative uses for the money were discussed, such as renting a luxury flat for Ms Jeremic to live in and travelling overseas to obtain treatment for Ms Jeremic. None of these alternatives were proceeded with. Instead, the defendant used about $20,000 of the proceeds of the gift for the benefit of Ms Jeremic. First, he paid about $10,000 of her credit card bills. Second, he allowed Ms Jeremic to gamble away about $10,000 at Crown Casino. The defendant said that the credit cards were paid at the suggestion of the plaintiff. The plaintiff denies this. I accept the plaintiff’s evidence in this regard.
As to the monies which were gambled at Crown Casino, the plaintiff was not informed of this. Had she been informed, she would most likely have objected. The use of such a large sum on gambling was inconsistent with the whole idea of using the proceeds of the gift for the purchase of a property.
Further, I note that the defendant expressed strong disapproval of Ms Jeremic’s gambling habits. Indeed, this was the reason for him terminating their de facto relationship in 2002. The fact that the defendant agreed to the use of $10,000 for the purpose of gambling by Ms Jeremic confirms my view that the defendant well understood that no part of the gift had been made to him beneficially. He was only holding the money in his name because Ms Jeremic was concerned about the effect upon her entitlement to sickness benefits if the money was held in her own name.
(10) The property is purchased
After a number of alternative uses for the money had been discussed and discarded, Ms Jeremic re-commenced looking for a property to purchase. The evidence is not clear as to why she did so. It may be that she had some renewed confidence in her prognosis, following radiation treatment on 17 September 2003.
Mr Gorlin, the real estate agent who sold the property to the defendant, gave evidence. His evidence was that, based on discussions with Ms Jeremic, the motivation behind the purchase was to find a quiet property, off a main road, for her to recuperate from her illness. He particularly recalls Ms Jeremic expressing concerns about noise levels and her being most impressed with the garden at the property. Mr Gorlin could not recall anything about the name of the purchaser on the contract note.
The plaintiff said that Ms Jeremic invited her to inspect the property one Saturday evening. The defendant appeared unhappy that the plaintiff had been invited to this inspection. At the inspection, there were direct negotiations with the vendor and a price of $315,000 was agreed for the property.
The defendant says that, prior to the inspection and agreement on price, he had agreed with Ms Jeremic that the property would be purchased in his name only, because of the need to take out a mortgage.
In any event, it is clear that, when the contract note was drawn up, it was the plaintiff who insisted that Ms Jeremic’s name appear on it. This is what occurred. Both the defendant and Ms Jeremic signed the contract note for the purchase of the property as joint purchasers.
The contract note is not in evidence. Accordingly, there is uncertainty as to the date on which it was signed. The plaintiff said that it was signed on 27 September 2003 in her presence. Having regard to what next transpired, I think this is open to doubt. I think it is more likely that the plaintiff has seen a copy of a subsequent contract note, signed in substitution for the contract note signed by the defendant and Ms Jeremic as joint purchasers, under which the defendant is named as the sole purchaser of the property.
In any event, following the execution of the contract note by the defendant and Ms Jeremic, the defendant said that there were further conversations between them, and the proposed mortgagee of the property, concerning the necessity for Ms Jeremic, as a joint purchaser, to also be a joint borrower and to sign loan application documents and the like. As a result, the defendant telephoned Mr Gorlin to see whether the contract note could be re-executed with him as the sole purchaser. The vendors agreed to this and a second contract note was signed, naming the defendant as the sole purchaser.
A day or two later, Ms Jeremic informed the plaintiff that this had occurred. The evidence is confused and contradictory as to how, and in what circumstances, this occurred. It is not necessary for me to resolve this dispute. It is common ground that the plaintiff was informed of the execution of a fresh contract note naming the defendant as sole purchaser of the property and that she was extremely upset at this. In the plaintiff’s words “Denise told me and I went berserk… It was a big argument. This time I abuse her. I called her ungrateful and everything else…. I accused her of setting me up, both of them of setting me up.”
It appears that, during this argument, Ms Jeremic attempted to explain to the plaintiff why she and the defendant had taken this action in relation to the purchase of the property. However, the plaintiff refused to listen to Ms Jeremic’s reason and she left the Sturrock Street flat.
The plaintiff then consulted Mr Rechnitzer to assist her in obtaining repayment of the gift. Mr Rechnitzer said that he could not act for the plaintiff against the defendant and Ms Jeremic because of a possible conflict of interest, as he had acted for all of them in drawing wills. As a result, the plaintiff consulted another firm of solicitors who wrote a letter of demand to the defendant, demanding repayment of the $200,000. It appears that this letter was not only sent by mail to the defendant, but the plaintiff gave a copy of it to the manager of the Brunswick tram depot to pass on to the defendant. In this way, the fact of the gift and that there was a dispute in relation to it became known at the defendant’s workplace. This added great heat to the dispute.
In any event, a short while later the plaintiff attended at the Sturrock Street flat to collect some furniture and there was a further argument between the parties.
Apart from one mobile telephone conversation between the plaintiff and Ms Jeremic, they never spoke again before Ms Jeremic died on 20 November 2003.
The defendant proceeded to purchase the property in his own name. For this purpose, he used the balance of the gift – approximately $180,000[2] - and a loan of $150,000 from a mortgagee. It appears that the contract of sale for the purchase of the property was not completed before Ms Jeremic died. Accordingly, it was never available for her to convalesce, recuperate or live in, as intended by the plaintiff.
[2]After payment of approximately $10,000 of the credit card expenses of Ms Jeremic and approximately $10,000 for her to gamble at the Casino.
Further, I infer that the defendant has never resided at the property. He continues to reside at 23A John Street, East Brunswick. As I have said, he said that this property was owned by his brother. This is in direct conflict with his statutory declaration in support of his application to obtain Ms Jeremic’s superannuation benefits. In that statutory declaration, he swore:
“The abovenamed Denise Jeremic died on November 20, 2003. On November 30, 2003 I moved back into the property at 23A John Street, East Brunswick which is my late mother’s home which is now owned by my siblings and me.”
As I have said, this statutory declaration was drawn with the assistance of legal advice. I find that it is more likely to represent the true position, rather than the sworn evidence which the defendant gave before me that the John Street property is owned by his brother.
(11) Medical evidence about plaintiff’s mental state
Two medical practitioners were called to give evidence on behalf of the plaintiff as to her mental state at the time of the gift. First, the plaintiff’s treating practitioner, Dr Boyapati. Second, an expert clinical and forensic psychologist, Dr Kennedy.
Dr Boyaparti’s evidence regarding the plaintiff’s mental state at the time of the gift
Dr Boyaparti is a general practitioner. Dr Boyaparti first saw the plaintiff on 29 December 2000 and last saw the plaintiff on 5 October 2004. Dr Boyaparti was the plaintiff’s general practitioner over the relevant period surrounding the gift. From January to December 2003, Dr Boyaparti saw the plaintiff approximately 13 times. While Dr Boyaparti is not a psychologist, as the plaintiff’s treating doctor at the time of the gift Dr Boyaparti was able to offer direct insight into the plaintiff’s frame of mind around the time of the gift.
Dr Boyaparti’s patient notes in respect of the plaintiff were subpoenaed by the defendant and introduced into evidence.
Dr Boyaparti’s patient notes from a consultation with the plaintiff on 1 February 2003 record that the plaintiff told her that her mother had died in hospital the previous week and that the plaintiff felt that the hospital had not treated her mother well. Dr Boyaparti’s entry for that consultation finishes with the word “counselled.”
It was put to Dr Boyaparti during cross-examination that nowhere in her notes did it record that the plaintiff was suffering from depression as a result of her mother’s death. Dr Boyaparti’s response was that, although she had not expressly written that the plaintiff was suffering because of her mother’s death, the plaintiff did become very distressed when discussing her mother’s death and that the word “counselled” in her patient notes was short-hand for the fact that Dr Boyaparti counselled the plaintiff in relation to her distress over the death of her mother. I accept this evidence.
Dr Boyaparti’s patient notes from 26 June 2003 record that the plaintiff was depressed and “down in the dumps” due to problems with her employment.
Dr Boyaparti’s patient notes from a consultation with the plaintiff on 20 August 2003 record that the plaintiff told Dr Boyaparti that she was caring for a co-worker who was suffering from cancer. Dr Boyaparti’s notes record that the plaintiff became upset and cried when discussing Ms Jeremic’s illness. Again Dr Boyaparti has written “counselled” in her patient notes. Dr Boyaparti elaborated in oral evidence that she would have warned the plaintiff about the importance of looking after the plaintiff’s own physical and mental health when caring for somebody else. I accept this evidence.
On 16 September 2003, Dr Boyaparti prescribed the plaintiff with Zoloft. Dr Boyaparti gave evidence that this is an anti-depressant and that she prescribed the plaintiff with Zoloft because the plaintiff was agitated and depressed and had been for a while. Dr Boyaparti’s evidence was that the plaintiff had been up and down with anxiety, depression and lowered mood over the entire time that she had treated the plaintiff but she was not able to say when these symptoms began.
Other than these specific entries in Dr Boyaparti’s notes, all other entries for the period 1 January to 31 December 2003 relate to Dr Boyaparti’s treatment of the plaintiff for various physical ailments which are not relevant.
I am satisfied that Dr Boyaparti’s evidence establishes that the plaintiff was distressed about the death of her mother in early February 2003 and required counselling from her doctor at that time. I am also satisfied that Dr Boyaparti’s evidence establishes that the plaintiff presented as generally anxious, agitated and depressed over the relevant period leading to the making of the gift. In particular, I find that the plaintiff was, at this time, complaining to Dr Boyaparti of distress in relation to Ms Jeremic’s illness and also in relation to problems which she was experiencing with her employment.
Dr Kennedy’s evidence regarding the plaintiff’s mental state at the time of the gift
Dr Kennedy assessed the plaintiff on 4 and 6 February 2004. Dr Kennedy’s written report of his psychological evaluation of the plaintiff was in evidence. Dr Kennedy also gave viva voce evidence and was cross-examined by Mr Newton for the defendant.
In the first place, Dr Kennedy’s assessment of the plaintiff consisted of a clinical interview. This clinical interview comprised unstructured questioning about the plaintiff’s personal history and then structured questioning designed to identify and clarify the nature of any psychological difficulties. The structured questioning utilised by Dr Kennedy is known as the “Structured Clinical Interview for DSM-IV (SCID-IV)”.
Secondly, Dr Kennedy’s assessment involved the use of two formal tests:
1.The Wechsler Adult Intelligence Scale-Revised (WAIS-R) (“the intelligence scale”); and
2.The Minnesota Multiphasic Personality Inventory (MMPI-2) (“the personality inventory”).
The intelligence scale equates to what is widely known as an “IQ test” and is designed to measure a person’s level of current cognitive functioning. The personality inventory is designed to measure a person’s current emotional state.
Dr Kennedy said that the plaintiff presented with ongoing grief about her mother’s death and broke down in tears many times during the clinical interview. Dr Kennedy said that the plaintiff also presented with some agitation and depression. From the clinical interview, Dr Kennedy formed the view that the plaintiff had a symbiotic relationship with her mother, in the sense that their closeness was unusual and to the exclusion of other people. Dr Kennedy also formed the view that the plaintiff had suffered an unusually strong grief reaction to her mother’s death. Part of this grief reaction was extreme loneliness and feeling like “nothing mattered”. Dr Kennedy’s view was that the plaintiff also developed an emotional dependence on Ms Jeremic, to some extent as a replacement for her mother but also out of a religious conviction that God had sent her a sufferer and that she must behave like a Christian and help Ms Jeremic so that she could be with her mother in heaven.
The plaintiff’s results on the intelligence scale indicated that she was functioning within the low average range of intelligence. The plaintiff fell within the 12th percentile which indicates that about 88% of the population have a higher level of cognitive functioning than the plaintiff. This represents cognitive functioning at a point in time, not necessarily over time.
Dr Kennedy gave evidence that the plaintiff’s test results on the intelligence scale indicated that the plaintiff generally would have problems concentrating, retrieving and processing information. Dr Kennedy said that these test results were consistent with the plaintiff’s presentation which was as vague and “quite slow”.
On the personality inventory, the plaintiff scored significant results across a range of scales indicating significant emotional distress, depression and agitation. The plaintiff showed most strongly elevated results for scale 6 which Dr Kennedy interpreted as indicating the plaintiff was having problems with her interpersonal relationships, for example, feeling suspicious about the motives of others and having difficulty trusting others. The plaintiff also showed elevated results for scale 8 which assesses the degree of social and emotional alienation form every day society, the degree of appropriate judgment and behaviour in social situations and the degree of impulsivity.
In summary, Dr Kennedy’s evidence was that the plaintiff’s test results, consistent with her presentation before him, indicated that she was having difficulty coping, trusting other individuals, controlling her emotions and thinking clearly.
Dr Kennedy’s evidence was that, in terms of the plaintiff’s mental state at the time of the gift, it is a case of putting the plaintiff’s emotional distress together with her cognitive difficulties. A person in the 12th percentile on the intelligence scale may be perfectly capable of functioning in ordinary society, however, they are likely to have more difficulty than a person of high-average or high intelligence in thinking and making decisions when under emotional stress. In circumstances of emotional stress, a person with low-average cognitive functioning will usually have difficulty making sound decisions. Emotional distress can also, itself, actually lower cognitive functioning. Dr Kennedy’s evidence was that, in his view, the plaintiff had probably operated within an average to high-average range of intellectual functioning for most of her life and that her lowered cognitive functioning at the time of testing was causally linked to her depression and emotional distress.
Dr Kennedy’s evidence was that, at the time of the gift, the plaintiff was suffering from what he described as an “abnormal grief reaction” to the death of plaintiff’s mother, with whom the plaintiff had an unusually strong, “symbiotic” relationship. The manifestations of this abnormal grief reaction were that the plaintiff was depressed and emotionally dependent on Ms Jeremic whom the plaintiff saw as providing her with a replacement for her deceased mother. The plaintiff was also affected by lowered cognitive functioning, related to her depressive reaction to her mother’s death.
Dr Kennedy concluded that, at the time of the gift, the plaintiff was emotionally dependent on Ms Jeremic, was inclined to do whatever she could to help Ms Jeremic and was experiencing difficulty in making appropriate decisions. Dr Kennedy said that these conclusions were derived from, and supported by, his structured and unstructured clinical interview of the plaintiff and the plaintiff’s test results on the intelligence scale and the personality inventory.
Mr Newton put it to Dr Kennedy in cross-examination that Dr Kennedy’s principal practice was in preparing psychological evaluations of this kind for the purposes of litigation and tested Dr Kennedy on the requirements imposed on expert witnesses in litigation by the Expert Witness Code of Conduct under the Supreme Court (General Civil Procedure) Rules 1996 (Vic). Despite the fact that Dr Kennedy had some difficulty in describing “the gist” of the requirements under this Code of Conduct, I am satisfied that Dr Kennedy’s evidence was his own and was not tainted by any attempt to assist the plaintiff in her cause.
Mr Newton’s main theme in his cross-examination of Dr Kennedy was that the plaintiff had manipulated her test results by “faking bad”.
Dr Kennedy’s evidence in response to this suggestion in respect of the clinical interview, unstructured and structured, was that in his view the plaintiff gave a fairly genuine presentation. Dr Kennedy’s reasoning behind his conclusion was that the plaintiff did not portray other individuals in an overly negative light, she was open about herself having made mistakes and wrong decisions, she did not appear to exaggerate in her responses and there were no “histrionics”. The plaintiff also cried when discussing particular themes, for example, the death of her mother. Dr Kennedy’s evidence was that, although not impossible, it was difficult for people to manufacture a particular emotional reaction to particular issues in this way.
In relation to the intelligence scale, Dr Kennedy gave evidence that, in his experience of conducting “probably thousands” of IQ tests, it is reasonably obvious when a person is “faking bad”. Typically a person attempting to “fake bad” will tend to:
1)perform poorly in the testing right from the beginning on simple questions that ordinarily a person will be able to perform unless they are brain damaged; and
2)have a consistently flat presentation in answering questions and generally demonstrate an “I don’t care attitude”.
Dr Kennedy’s evidence was that the plaintiff did neither of these things during her IQ test. His evidence was the plaintiff followed a more normal pattern of response in that initially she performed quite well but that her performance deteriorated as the questions became more difficult and her concentration flagged. In addition, the plaintiff appeared to be attempting to do her best and demonstrated distress when she realised she was not doing well, repeating words to the effect that, “I know this”, “I just can’t remember this” and so on and asking Dr Kennedy to repeat the question. The plaintiff also complained that the test was going on too long.
In relation to the personality inventory, Dr Kennedy said that normally when someone is trying to “fake bad”, the “L”, “K” and “S” scales would be elevated, indicating that the person being tested is attempting to show themselves in a particular light. The “L” scale assesses lying or defensive behaviour. The “K” scale assesses the extent of the subtle defensiveness or strength of defences and the “S” scale assesses the extent to which the patient is presenting themselves in an overly positive light. The plaintiff did not show clinically significant results on these scales.
A further reason given by Dr Kennedy as to why he was satisfied that the plaintiff was not “faking bad” was because her results in the formal testing were consistent with her presentation in the clinical interview. Dr Kennedy explained that the formal testing provides a check on the accuracy or honesty of a person’s presentation in the clinical interview because it will ordinarily detect any attempt to manipulate the test like, for example, “faking bad”, and a person’s presentation in the clinical interview will be re-evaluated in this light.
Although not determinative in terms of accepting or rejecting Dr Kennedy’s evidence, the plaintiff’s presentation as a witness in this court was consistent with Dr Kennedy’s observations of the plaintiff. During questioning the plaintiff had difficulty concentrating, would drift off-track with her answers and often needed to be re-focussed on the task at hand. Particularly during cross-examination the plaintiff complained repeatedly about the lengthy and involved questioning and her performance deteriorated markedly as she tired and her concentration lapsed.
Dr Kennedy’s responses to the suggestion that the plaintiff was “faking bad” her psychological evaluation were comprehensive and compelling. I am satisfied that Dr Kennedy’s evidence supports the conclusion which I have myself reached on the basis of other evidence that, at the time of the gift, the plaintiff was suffering from depression and a strong emotional dependence on Ms Jeremic as a result of an abnormal grief reaction to the death of her mother. Further, I am satisfied that Dr Kennedy’s evidence establishes that, at the time of the gift, the plaintiff’s level of cognitive functioning was lowered as a result of her depression and she was experiencing difficulties in making appropriate decisions.
Was the gift subject to the condition?
A gift of money may be given on condition that the money is used for a particular purpose. In Mushinski v Dodds[3], Brennan J summarised the relevant law:
“A condition annexed to a gift may be of either of two kinds; a condition involving a forfeiture for non-fulfilment or a condition creating merely a personal obligation to fulfil it. A donee who takes a gift to which a condition of the latter kind is annexed incurs an equitable obligation to perform the condition… Whether a condition is such that its non-fulfilment involves forfeiture of the property given depends upon the intention of the donor communicated to the donee at the time when the latter accepts the property, that is, the intention which the donee reasonably understands to be the donor’s intention from what the donor has said or done. “
[3](1985) 160 CLR 583 at 605-6 (dissenting as to the result).
In this case, I am not satisfied that the evidence establishes that the intention of the plaintiff was in accordance with the condition alleged. Nor am I satisfied, if such was her intention, that the condition was communicated to Ms Jeremic with sufficient clarity that she should be taken to have reasonably understood the gift to have been made subject to the condition and, if the condition was not complied with, forfeiture.
Although there is the real dispute on the evidence that the plaintiff wished the proceeds of the gift to be used to purchase a property for Ms Jeremic, to be used by her to recuperate in and then live in once she recovered from her illness, the evidence does not establish that the gift was made and accepted by Ms Jeremic on the condition that it would be repaid if a house was not purchased in her name before her death. The evidence of the plaintiff in this regard, even if accepted in full, does not establish such a condition. Although I accept that the plaintiff offered the gift to Ms Jeremic “to buy a house” for Ms Jeremic to live in, on the assumption that Ms Jeremic would recover from her illness, that does not establish, in my view, a condition of the gift that, unless a house was purchased in the name of Ms Jeremic before she died, that the gift must be repaid. Nor does the evidence establish that Ms Jeremic ever understood the gift to have been made on such a condition.
In my view, the plaintiff simply did not think through the consequences of the gift. In evidence in chief, the plaintiff said of her mental state at the time of offering and making the gift:
“I couldn’t think over and over, I was thinking that way, God would show me the way because my head was not working. I mean, I couldn’t think straight what am I going to do with the money and then God send me Denise…”
And in cross-examination:
“Why didn’t you make an arrangement that rather than hand the cheque over there and then, you’d wait until some property had been chosen and a contract was signed before handing over some money? --- Mr Newton, between the – when I heard about Denise’s illness, the time she spend in hospital and the time it cross my mind to offer her the money, I never thought to arrange anything, it wasn’t – it wasn’t something that I prepared, I was well prepared for it while I was offering the money to her, it came just out of my chest, out of my heart.”
Given the plaintiff’s mental state at the time of the offering and making of the gift, I am not satisfied that she spoke with sufficient clarity to Ms Jeremic, or the defendant, to communicate to either of them an intention in accordance with the condition alleged. It follows that the plaintiff has not established her first ground for relief based on the condition. I turn to consider the second ground for relief, based on unconscionability.
Was the receipt and retention of the gift unconscionable?
The applicable law is not in doubt. In Commercial Bank of Australia Ltd v Amadio[4], the High Court considered the equitable jurisdiction to set aside a transaction on the ground of unconscionable conduct where a party to the transaction, who suffers detriment by reason of the transaction, is suffering from some special disability or is placed in some special situation of disadvantage at the time of the transaction.
[4](1983) 151 CLR 447.
Mason J, as he then was, stated the applicable principles as follows[5]:
[5](1983) 151 CLR 447 at 461-2.
“It almost goes without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. As Fullagar J said in Blomley v Ryan:
‘The circumstances adversely affecting a party which may induce a court of equity either to refuse its aid or to set a transaction aside are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis à vis the other’.
Likewise Kitto J spoke of it as ‘a well-known head of equity’ which –
‘...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’.
It is not to be thought that relief will be granted only in the particular situations mentioned by their Honours. It is made plain enough, especially by Fullagar J, that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis à vis another and unfair and unconscientious advantage is then taken of the opportunity thereby created. I qualify the word ‘disadvantage’ by the adjective ‘special’ in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasise that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other parties knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.”
On the question of the degree of knowledge of the special disadvantage, short of actual knowledge, which is sufficient to enliven the jurisdiction of the Court to set aside a transaction on the ground of unconscionable conduct, Mason J said[6]:
“As we have seen, if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, take unfair advantage of his (A’s) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that the situation may exist or is aware of facts which would raise that possibility in the mind of any reasonable person, the result will be the same.”
[6](1983) 151 CLR 447 at 467.
Deane J expressed the relevant principle in the following way[7]:
“The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or ‘unconscientious’ that he procure, or accept, the weaker parties’ assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable….”
[7](1983) 151 CLR 447 at 474.
As to whether a special disability is “sufficiently evident” to the stronger party, in the sense discussed by Deane J, his Honour stated[8]:
“It would, at least by that stage, have been plain to any reasonable person, who was prepared to see and to learn, that he was put on enquiry. The stage had been reached at which the bank … was bound to make a simple enquiry as to whether the transaction had been properly explained to Mr and Mrs Amadio. The bank cannot shelter behind its failure to make that enquiry. The case is one in which ‘wilful ignorance is not to be distinguished in its equitable consequences from knowledge’… Mr and Mrs Amadio’s disability and the inequality between themselves and the bank must be held to have been evident to the bank…”
[8](1983) 151 CLR 447 at 479.
The transactions which may be set aside in equity as a result of unconscionable conduct include gifts. In Louth v Diprose[9], the High Court considered a gift of $58,000 from a man of comparatively modest means (who was a solicitor) to a woman with whom he was so infatuated that the trial judge found him to have been emotionally dependent upon her. The woman was completely indifferent to the man.
[9](1992) 175 CLR 621.
The trial judge found that the woman was aware of the man’s emotional dependence upon her and manipulated it to bring about the gift. He set aside the gift on the grounds of unconscionable conduct. The majority of the High Court (Mason CJ, Brennan, Deane, Dawson, Gaudron and McHugh JJ, Toohey J dissenting) held that the facts found by the trial judge were supported by the evidence and upheld the order setting aside the gift.
Mason CJ described the gift as[10]:
“…so improvident, judged in the light of the respondent’s financial position, that it is explicable only on the footing that he was so emotionally dependent upon, and influenced by, the appellant as to disregard entirely his own interests.”
[10](1992) 175 CLR 621 at 626.
In Louth v Diprose, the defendant contended, as does the defendant in this case, that the proper conclusion to be reached on the evidence was that the plaintiff made the gift simply because he wished to do so, imprudent though the gift may have been. In this regard, Brennan J stated[11]:
“If that be the right conclusion, so that the gift was not the result of unconscionable conduct on the part of the defendant, the plaintiff cannot recover the gift. As Lindly LJ pointed out in Allcard v Skinner: ‘Courts of Equity have never set aside gifts on the ground of the folly, imprudence or want of foresight on the part of donors. The Courts have always repudiated any such jurisdiction … it would obviously be to encourage folly, recklessness, extravagance and vice. If persons could get back property which they foolishly made away with, whether by giving it to charitable institutions or by bestowing it on less worthy objects.’” (Citations omitted.)
[11](1992) 175 CLR 621 at 631.
As to the setting aside of gifts on the ground of unconscionable conduct on the part of the donee, Brennan J stated[12]:
“Once it is proved that substantial property has been given by a donor to a donee after the donee has exploited the donor’s known position of special disadvantage, an inference may be drawn that the gift is the product of the exploitation. Such an inference must arise, however, from the facts of the case; it is not a presumption which arises by operation of law. The inference may be drawn unless the donee can rely on counter-veiling evidence to show that the donee’s exploitative conduct was not the cause of the gift. At the end of the day, however, it is for the party impeaching the gift to show that it is the product of the donee’s exploitative conduct. This is the final and necessary link in the chain of proof of unconscionable conduct leading to a decree setting aside the gift.”
[12](1992) 175 CLR 621 at 632.
In Bridgewater v Leahy[13], the High Court again considered the equitable jurisdiction to set aside a transaction resulting from unconscionable conduct in circumstances where the weaker party to the relevant transaction was emotionally dependent on the other party. The case involved a sale of land by an elderly uncle to a nephew and his wife at an undervalue, in circumstances where the uncle had a strong emotional dependence upon the nephew. The deed of forgiveness, which had the effect of rendering the sale of land at an undervalue, was set aside on the ground of unconscionable conduct. The majority judgment was delivered by Gaudron, Gummow and Kirby JJ (Gleeson CJ and Callinan J dissenting).
[13](1998) 194 CLR 457.
In their joint judgment, the majority in Bridgewater v Leahy applied Amadio and Louth v Diprose. In the course of doing so, the majority approved the statement of Deane J in Amadio[14] to the effect that unconscionable conduct may occur where, in the circumstances, it is unconscientious to “procure, or accept the weaker party’s assent to the impugned transaction.” (Emphasis added).
[14]Bridgewater v Leahy (1998) 194 CLR 457 at 479; Amadio (1983) 151 CLR 447 at 474, per Deane J.
On the question of unconscionable acceptance of the weaker party’s assent to the impugned transaction, the majority continued[15]:
“It also should be noted that in Hart v O’Connor, an appeal from New Zealand, the Privy Council described unconscionable conduct which provided a basis for equitable relief as ‘victimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances’.” (Citations omitted; original emphasis.)
[15](1998) 194 CLR 457 at 479.
On the authority of Louth v Diprose, the majority accepted that emotional dependence can amount to the special disadvantage for the purposes of the equitable jurisdiction to set aside a transaction on the ground of unconscionable conduct.[16]
[16](1998) 194 CLR 457 at 490.
As to the argument on behalf of the nephew, that the transaction was merely an improvident one by the uncle, who was in full possession of his faculties, the majority approved a statement of Jacobs A – CJ in the Full Court of the Supreme Court of South Australia in Diprose v Louth[17] that:
“It is an oversimplification to say that because the respondent acted as he did with his eyes open, and with a full understanding of what he was doing, he was not in a position of disadvantage, and therefore not the victim of unconscionable conduct.”
[17]Diprose v Louth [No. 2] (1990) 54 SASR 450 at 453; Bridgewater v Leahy (1998) 194 CLR 457 at 490.
In this case, it was submitted on behalf of the defendant that:
(1)The plaintiff was not under any special disadvantage. She knew precisely what she was doing and simply made an imprudent gift.
(2)If the plaintiff was under a special disadvantage, that special disadvantage was not sufficiently evident to either Ms Jeremic or the defendant at the time the gift was accepted.
(3)The defendant did not exploit the situation to procure the gift, but merely accepted it. Something more than passive acceptance is required.
I do not accept the submissions on behalf of the defendant. I find that the plaintiff was under a special disadvantage vis à vis Ms Jeremic and the defendant at the time that she made the gift and that this special disadvantage was sufficiently evident to them at this time. Further, I find that the defendant did exploit the situation to procure the gift to Ms Jeremic, with the intention of benefiting himself.
Special disadvantage?
I find that the plaintiff was suffering from a special disadvantage at the time she made the gift. This special disadvantage was constituted by her abnormal grief reaction to the death of her mother and consequent development of a sudden and unusually strong emotional dependence upon Ms Jeremic.
In my view, this special disadvantage of the plaintiff seriously impaired her ability to make a rational decision in her own interest about the gift. This is especially so in circumstances where the gift was so improvident from the plaintiff’s point of view that it is explicable only by reason that the plaintiff was affected by a special disadvantage at the time of making the gift. In this regard, it must be remembered that the plaintiff gave away virtually all of her assets to Ms Jeremic in circumstances where, prior to the death of the plaintiff’s mother and Ms Jeremic’s diagnosis with ovarian cancer only two months earlier, the plaintiff’s relationship with Ms Jeremic had been one of friendly work colleagues only. The gift was also made at a time when the plaintiff was 67 years old, nearing retirement and was in any event experiencing difficulties with her employment. If the plaintiff had been thinking clearly, she would have realised that her days of earning an income through full-time work were limited.
This is not a case of the plaintiff, in full possession of her faculties and with the ability to make a judgment about what was in her own best interests, making a foolish gift. All of the evidence points to the conclusion that, in deciding to make the gift, the plaintiff was motivated by her emotional dependence on Ms Jeremic consequent upon her extreme distress and disillusionment following the death of her own mother. The plaintiff’s evidence establishes that, in deciding to make the gift, she had no regard at all for her own interests. Instead, she was motivated by the fact that, following the death of her mother, she felt that her own life had no meaning. She did not know what to do with her money because her mother’s death had made her realise that “nobody takes anything with them”. She believed that God had given her a purpose in life by sending a “sufferer” (Ms Jeremic) for her to care for and that, in this way, God had indicated to her what she should do with her money. In the plaintiff’s own words, at the time of deciding to make the gift, and at the time of making it, her “head was not working” and she acted spontaneously “out of my chest, out of my heart”.
The plaintiff’s evidence about her motivation for the making of the gift is supported by the evidence of Dr Kennedy and Dr Boyaparti. It is also supported by the evidence of Mr Rechnitzer, the plaintiff’s solicitor, about his concerns at the time that the plaintiff was acting impulsively, irrationally and contrary to her own interests.
Special disadvantage was sufficiently evident to Ms Jeremic and the defendant
In my view, the evidence establishes that the special disadvantage of the plaintiff was sufficiently evident to both the defendant and Ms Jeremic at the time that the gift was made. In my view, the behaviour of the plaintiff prior to and at the time of making the gift was so unusual or, to borrow a word used by the defendant to describe the plaintiff’s behaviour generally “odd”, that it must have been apparent to both Ms Jeremic and the defendant that the plaintiff lacked the ability to make a judgement in her own interests. I find that the knowledge of the defendant and Ms Jeremic of the plaintiff’s special disability was actual knowledge or, at the very least, knowledge of facts which would raise in the mind of any reasonable person the possibility that the plaintiff was suffering from a special disability which was impairing her ability to make a judgement in her own interests as to whether it was prudent to make the gift.
My findings that the special disadvantage of the plaintiff was sufficiently evident to each of the defendant and Ms Jeremic are based upon the following facts and circumstances which were known to each of them:
(1)The plaintiff was suffering an extreme grief reaction to the death of her mother, such that she would often break into tears when discussing this matter with the defendant and Ms Jeremic.
(2)The plaintiff’s relationship with Ms Jeremic, prior to Ms Jeremic’s diagnosis with ovarian cancer, was one of friendly work colleagues who occasionally socialised outside of work.
(3)The plaintiff’s relationship with the defendant prior to Ms Jeremic’s diagnosis with ovarian cancer was one of work colleagues.
(4)The plaintiff developed a sudden and intense attachment to Ms Jeremic immediately upon learning of her diagnosis with ovarian cancer.
(5)Following Ms Jeremic’s diagnosis with ovarian cancer, the plaintiff visited her every day and shopped, prepared food and cleaned for her.
(6)The plaintiff commenced calling Ms Jeremic her “daughter”.
(7)The plaintiff spent approximately $8,000 on Ms Jeremic’s medical and other expenses.
(8)The plaintiff worked as a tram driver and had done so for a considerable time. Her salary was likely to be less than that of her supervisor, the defendant, who earned about $50,000 per annum.
(9)The plaintiff did not own a house and was living in rental accommodation.
(10)The plaintiff was experiencing problems with her employment.
(11)The plaintiff was in her late sixties and was approaching the end of her working life.
(12)It was unusual in the extreme for a person in the position of the plaintiff, and having regard to the relationship between the plaintiff and Ms Jeremic, to make the gift of $200,000 to Ms Jeremic.
Further to the above, I find that the plaintiff made known to Ms Jeremic that:
(1)The plaintiff had herself suffered ovarian cancer and viewed her own recovery as a “miracle”. As a result, the plaintiff believed that God would save Ms Jeremic in a similar way.
(2)The money for the gift represented virtually all of the plaintiff’s assets.
I find that it is more likely than not that Ms Jeremic discussed these matters with the defendant when they discussed the initial offer of the gift and whether Ms Jeremic ought, against her initial instincts, to accept the gift. In this regard, I note that Ms Jeremic’s reaction to the initial offer of the gift was to refuse it because:
“... it can’t be right, nobody can give away such a large sum of money... you need it because this is your retirement – your pension money, you’re going to live with it when you’re not able to work.”
In my view, this initial reaction of Ms Jeremic to the offer of the gift was that of a person acting in good conscience. However, as I have found, something happened which caused her to cease acting in good conscience. That something must have arisen out of discussions between Ms Jeremic and the defendant, as discussed above.
I accept that the initial offer of the gift was not procured by Ms Jeremic or the defendant. However, the initial offer having been rejected, there was in my view a substantial element of procurement, particularly on the part of the defendant, in bringing about the situation where the plaintiff attended at the Sturrock Street flat with her cheque book and handed over the cheque which had been signed by her. However, in my view, the level of this procurement, or exploitation of the position of the plaintiff, is not a necessary element which the plaintiff must establish to prove a case of unconscionable conduct. In my opinion, the mere receipt by the defendant (as legal owner) and Ms Jeremic (as beneficial owner) of the gift, in circumstances where the plaintiff’s special disadvantage was sufficiently evident to them, is sufficient to set aside the gift on the ground of unconscionable conduct.
I have referred to the gift being made to the defendant as to a legal interest only. I find that the plaintiff intended to give the gift to the defendant so that he could hold it on behalf of Ms Jeremic because of concerns expressed by Ms Jeremic as to her entitlement to receive sickness benefits if the gift was placed in her name. I find that the plaintiff had no part to play in the private discussion between the defendant and Ms Jeremic which led to one of them writing both their names on the cheque and depositing the cheque into their joint account for a short while, prior to the whole of the proceeds of the gift being transferred into the sole account of the defendant.
The fact that the plaintiff intended to pay the proceeds of the gift to be held by the defendant, on behalf of Ms Jeremic, and that this is what in fact occurred, is sufficient to warrant the Court to set aside the gift and order that its proceeds be repaid by the defendant to the plaintiff. In my view, the same result would follow if the gift is viewed as having been received by Ms Jeremic only and then, subsequently, given by her to the defendant both inter vivos and by her will. In these circumstances, equity would treat the defendant as having received the proceeds of the gift subject to the equity of the plaintiff to set the gift aside for unconscionable conduct on the part of Ms Jeremic. This result would follow because the defendant took the proceeds of the gift with notice that it had been accepted by Ms Jeremic in circumstances where the plaintiff’s special disadvantage was sufficiently evident to her, and also to the defendant. In no sense would equity treat the defendant as a bona fide purchaser for value without notice of the proceeds of the gift. He would be treated as a mere volunteer who had notice of the plaintiff’s equity.
In this regard, I refer to and accept the position as stated by the learned authors of Meagher, Gummow & Lehane’s Equity Doctrines & Remedies[18]:
“The equitable doctrine extends to cases where the party exerting the undue influence was not the direct recipient of the disponor’s property. It extends to set aside transactions involving third parties in the following capacities:
... (c) cases where Z acquires property from X and, as against X, Y could have reclaimed the property; it would appear that Y’s rights will persist against all but a bona fide purchaser for value without notice and those claiming under him, and further that Y’s rights are assignable and devisable.” (Citations omitted.)
[18]Meagher, Heydon and Leeming, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies (4th ed) at para (c) in paras [15]-[150].
Although this passage appears in the learned authors' treatment of undue influence, I see no material distinction to be made from a case where the right to reclaim the property arises from unconscionable conduct. However, as I have said, it is my view that the plaintiff is entitled to recovery from the defendant directly on the basis that he did directly receive the proceeds of the gift, albeit in the capacity as trustee for Ms Jeremic.
Other claims
Having regard to my decision that the gift was the result of unconscionable conduct on behalf of the defendant and Ms Jeremic, it is not necessary for me to consider the alternative claims based on undue influence or resulting trust.
Relief
On behalf of the plaintiff it was submitted that, if I set aside the gift, the appropriate remedy would be to order its repayment, secured by a charge over the property. In my view, that is an appropriate way to approach the grant of equitable relief in this case. I propose to make orders accordingly.
An issue arises as to whether I should give judgment for the whole of the proceeds of the gift, a sum of $200,000, or for $180,000 only, having regard to the expenditure of approximately $10,000 on the credit card debts of Ms Jeremic and approximately $10,000 which was gambled away by Ms Jeremic. On behalf of the defendant, it was submitted that these monies were irrecoverable, because they were expended for the “benefit” of Ms Jeremic and, in respect of the credit card debts, the plaintiff had authorised their payment from the proceeds of the gift. As I have said, I do not accept that the plaintiff gave such authorisation for the payment of the credit card liabilities.
In my view, the plaintiff is entitled to recover the whole of the proceeds of the gift, a sum of $200,000. Once the gift is set aside as being the result of unconscionable conduct on the part of the defendant and Ms Jeremic, there is no basis to reduce the amount of the plaintiff’s recovery by reference to factors such as whether the proceeds which have been expended were used for the benefit of Ms Jeremic.
As I have said, I am satisfied that it is appropriate to order that repayment of the judgment sum be secured by a charge over the property.
It was submitted on behalf of the plaintiff that I should allow interest on the judgment sum at the rate fixed under s. 2 of the Penalty Interest Rates Act 1983. I will hear the parties further as to whether interest ought be ordered and, if so, for what period and at what rate.
I will hear the parties as to costs.
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