TEACHERS HEALTH INVESTMENTS PTY LID v WYNNE; BURNSWOOD v WYNNE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY P, BEAZLEY JA and WADDELL AJA 30 April 1996, 16 July 1996 EQUITY — Yerkey v Jones presumption — whether applicable law in NSW — application of principles of Commercial Bank of Australia vy Amadio — unconscionable bargains CONTRACTS — unjust contracts — Contracts Review Act 1980 (NSW) s7,s9 A mortgage was entered into by the respondent as mortgagor, and the appellant as mortgagee, as security for a loan granted by the appellant to the respondent's husband and his company. The mortgaged property was the respondent's matrimonial home. Although the property had been purchased in the joint names of both the respondent and her husband, shortly before the mortgage, the respondent became the sole registered proprietor. The respondent and the principal debtor had a history of poor marital relations. The trial judge found that at the time of entering the mortgage, the respondent was in a vulnerable position, which the principal debtor took advantage of in contriving to secure the respondent's entry into the mortgage. In these circumstances, a clear equity arose between the respondent and the principal debtor. Hunter J found that the loan application was made solely by the principal debtor. His Honour also found that the appellant dealt with the respondent through the solicitor for the principal debtor, rather than through her own solicitor. Hunter J held that the respondent was entitled to relief under the equitable presumption in Yerkey v Jones, which affords special protection to wives who act as sureties for their husband's debts against third parties who may be affected by any equity which, as between the wife and the husband. may arise from the husband's conduct. The trial judge held that the appellant's conduct was not unconscionable in the circumstances, although his Honour did not consider the application of the principles enunciated in Commercial Bank of Australia v Amadio. The question was also raised on the appeal whether there was any obligation on the appellant in these circumstances to ensure that the respondent was adequately advised in relation to the transaction. The application of the provisions of the Contracts Review Act 1980 to these circumstances was also considered. HELD: (1) On the basis of the evidence, the trial judge's factual findings that the loan application was made solely by the principal debtor, and that the appellant only dealt with the respondent through the solicitor for the principal debtor were correct. (2) The equitable presumption in Yerkey v Jones no longer represents the law in New South Wales as the principles of unconscionability propounded in CBA v Amadio(1983) 151 CLR 447, furnish adequate grounds of relief to wives who act as sureties for their husband's debts: Akins v National Australia Bank (1994) 34 NSWLR 155 followed. (3) The respondent wife occupied a position of 'special disadvantage' as she was unable to judge for herself whether the transaction was provident or not. (4) In the circumstances, it was incumbent upon the appellant, at the very least, to advise the respondent to obtain advice relating to the propriety of the transaction from her point of view. Such failure to advise renders the appellant's conduct unconscionable. (5) The appellant, but not the respondent, had information within its possession which enabled it to know the financial circumstances of the principal debtor and his company, Banksia and that their ability to service the loan was doubtful. However, the respondent 2 UNREPORTED JUDGMENTS wife was given false information by the principal debtor, and believed her interests were well protected. In these circumstances the contract was unjust within the meaning of the Contracts Review Act 1980. ORDERS 1. Appeal be dismissed. 2. Cross appeal be allowed. 3. In lieu of O1 and O2 made by Hunter J, order that: (a) Mortgage No 2846444 dated 8 august 1991 be set aside; and (b) the appellant forthwith deliver to the respondent a discharge of the said mortgage in registrable form. 4. Summons for possession in proceedings No 10954 of 1993 be set aside. 5. The appellant pay the respondent's costs of the appeal and the cross appeal. Mahoney P This appeal raises questions similar to those considered by this Court in National Australia Bank Ltd v Garcia (Court of Appeal, 3 July 1996, not yet reported). In that case I expressed my views as to the relevant law. I remain of the opinion expressed in that case. Ihave had the advantage of reading the judgment of Beazley JA in the present appeal. Upon the basis of the views which I have expressed in National Australia Bank Ltd v Garcia, I agree with the judgment of Beazley JA and in general with her Honour's reasons. Beazley JA This is an appeal from a decision of Hunter J sitting in the Common Law Division of this Court in which his Honour held that the respondent was entitled to relief in respect of a mortgage transaction into which she had entered as mortgagor with the appellant as mortgagee, upon the second of the equitable presumptions in Yerkey v Jones (1940) 63 CLR 649 per Dixon J at 676. The learned trial judge held, however, that the mortgage transaction was not unconscionable and was not unjust within the meaning of the Contracts Review Act 1980 (NSW). Nor did his Honour find conduct which contravened the provisions of s52 of the Trade Practices Act 1974 (Cth) nor any misrepresentation. The first issue on the appeal is whether Yerkey v Jones represents the law in New South Wales. If Yerkey v Jones does represent the law in New South Wales, the appellant contended that its principles did not apply to the facts of this case. By her cross appeal, the respondent challenged the trial judge's findings that the mortgage transaction was not vitiated by unconscionable conduct by the appellant, that the mortgage was not unjust within the meaning of the Contracts Review Act 1980 (NSW); that there had not been any contravention of the Trade Practices Act 1974 (Cth), or that there had been no misrepresentation entitling her to relief. THE FACTS The transaction subject of the proceedings was a Real Property Act mortgage entered into on 8 August 1991, by the respondent as mortgagor and the appellant as mortgagee, as security for a loan granted by the appellant to the respondent's husband (the principal debtor). The mortgaged property was the respondent's matrimonial home which had been purchased in 1986 in their joint names of the respondent and the principal debtor for $265,000 and which remained registered in their joint names until shortly before the mortgage. The respondent provided half the purchase price from her own resources. The principal debtor borrowed the balance of the purchase price from Westpac, secured by mortgage over the property. At the same UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE (Beazley JA) time, the principal debtor gave a further mortgage over his share of the home to the respondent. That mortgage secured an amount of $42,750. Apparently, this mortgage was intended to secure the respondent's position in relation to her contribution to the home, should their marriage result in Family Law proceedings. The respondent said she did not know how the amount of $42,750 was calculated. Later the State Bank took over from Westpac as mortgagee. The mortgage to the respondent remained on the title. The property was transferred into the sole name of the respondent at the same time as the mortgage subject of these proceedings was entered into in circumstances to which I will refer more fully later in these reasons. The respondent and principal debtor married in 1980 and had 2 children, aged 9 and 13 at the date of hearing. The respondent also had a child aged 20 from a previous marriage. The children lived with the respondent in the matrimonial home. The marriage had been in difficulty for some time prior to the entry into the mortgage. It was marked by inadequate financial support by the principal debtor and long absences by him from the family, whilst he lived a lifestyle which the trial judge described as "self indulgent". In 1986, prior to the purchase of the matrimonial home, the respondent commenced family law proceedings against the principal debtor. Those proceedings were partially resolved by the principal debtor agreeing to make maintenance payments and by an agreement between the principal debtor and the respondent to purchase the home. The respondent was the daughter of a hotelier and had assisted her father in his hotels from a young age. She had been in employment during the course of the marriage but was not so engaged at the time of the mortgage. The principal debtor was also a hotelier who operated 3 hotels through Banksia Settlements Pty Ltd (Banksia), the trustee of a discretionary family trust controlled by the principal debtor. The appellant had been a director of Banksia but resigned in 1984. The trial judge found that, at least since that time, the respondent was largely kept in ignorance of the principal debtor's business affairs. The principal debtor returned to the matrimonial home in January 1991 with promises that he was a "a changed man" and wished to resume the marital relationship. To gain the confidence of the respondent he gave her control of the certificate of title to the matrimonial home. This was possible as the principal debtor and Banksia had changed financiers from the State Bank to Barclay's Bank. The loan to the State Bank had been discharged and the certificate of title released. The matrimonial home was not part of the security provided to Barclays. Shortly afterwards, in March 1991, the principal debtor proposed that the property be mortgaged to Barclays to raise moneys, primarily for renovations to one of the hotels. The principal debtor told the respondent that the mortgage would be repaid within 12 months and that, if necessary, the hotel would be sold to repay the mortgage. The respondent refused. The principal debtor was angry and again left the matrimonial home. A few days later, the principal debtor (who during this time had stayed away from the matrimonial home) returned to the home and presented the respondent with a draft deed, prepared by his solicitor. The draft deed, which essentially contained the same proposal as the principal debtor had put to the respondent, included provisions for the transfer of the principal debtor's interest in the property to the respondent and for the property to be mortgaged on a non-recourse basis for no more than one year after completion of the renovations. The draft deed also provided that, if necessary, the hotel would be sold to enable repayment to take place. The respondent still 4 UNREPORTED JUDGMENTS refused to enter into such a proposal but agreed to refer the draft deed to her own solicitor, Mr Delaney, of Gillis Delaney Brown. Shortly after this, the principal debtor arranged for certain financial forecasts to be forwarded to the respondent and to her solicitor. Under cover of a letter dated 27 March 1991, the respondent's solicitor forwarded the material he had been sent to the respondent suggesting that she discuss it with her father. At that time, the respondent's father was almost 75 years old and was in poor health. The solicitor's letter gave no advice on the transaction. The trial judge found that from March 1991, the principal debtor made a series of requests or demands that the respondent provide the matrimonial home as security for the hotel renovations. His Honour found these requests/demands were accompanied by assurances that: "(i) [the principal debtor] would not "put the kids at risk"; (ii) his business interests were going extremely well; (iii) the funds were required for renovations which would increase the value of the hotel by $1 million and increase its turnover; (iv) if he was sold up the worst he would "come out with [was] $2 million"; (v) he was only "doing this for the benefit of [the respondent] and the kids" whom he claimed to be his "life now'; (vii) the loan would be of $400,000 for one year only to be held in trust by [Freehill, Hollingdale and Page] to carry out the necessary renovations." His Honour further found that: "Interspersed with this were protestations of love; lavish gifts on the occasion of birthdays of the children and of the [respondent]; providing for the [respondent] to become a signatory of the Banksia cheque account; holidaying with the family - a singular event as "he had never taken the family on a holiday and stayed with [them] the entire time before in [his] marriage". However, during the family holiday, unbeknown to the respondent, the principal debtor arranged a valuation of the matrimonial home for security purposes. Eventually, shortly after a birthday lunch in July which the principal debtor gave to the respondent, she agreed to the terms of the draft deed. The principal debtor opened "another bottle of champagne" when she did so. The deed was executed at the end of July 1991 (the July deed). The July deed recited that the respondent was both a beneficiary of the family trust and a shareholder of Banksia, that the title deeds to the matrimonial home were required as security for a loan from the appellant to Banksia and the principal debtor and that the principal debtor agreed to discharge the proposed mortgage on or before 1 September 1992. It provided for the transfer of the principal debtor's interest in the matrimonial home to the respondent. The principal debtor covenanted to carry out the required renovations to the Royal Albert Hotel and to sell any assets necessary to provide sufficient moneys to discharge the mortgage, should the principal debtor fail to effect the discharge prior to 1 September 1992. There were provisions of a family law nature whereby the principal debtor covenanted to continue certain maintenance provisions for the respondent and her children. Banksia and the principal debtor covenanted that they would not incur any further borrowings with Barclays or any other financial institution without the respondent's consent. Copies of all security documents executed by Banksia in relation to its facilities with Barclays were to be provided to the respondent within seven days of the mortgage. Banksia and the principal debtor were to make available to the respondent copies of financial documents which they were required to provide to Barclays in accordance with conditions of their borrowings from that bank. They were also to provide copies of all applications for loans and UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE (Beazley JA) supporting documents made by the principal debtor to the appellant within seven days of the mortgage. Whilst the deed referred to the proposed mortgage to the appellant, the amount of the mortgage was not specified. THE MORTGAGE TRANSACTION On 8 August 1991, the respondent executed a mortgage over the matrimonial home in favour of the appellant to secure a loan of $450,000 (not $400,000 as had initially been proposed) to the principal debtor. The loan transaction went through 2 stages. The initial application for loan was made at a time when the security property was registered in the joint names of the respondent and the principal debtor. The application was submitted to the appellant through its solicitors by a mortgage broker, under cover of a letter which was headed: "RE PG and K WYNNE" and stated: "The above wish to make application for a loan of $450,000". The purpose of the loan was stated to be to "refinance existing encumbrances with Barclay Bank,'. The nominated term of the loan was 3 years. The broker's letter set out the following information: "Accountants advise personal income of client is $235 000 pa. Accountants balance sheets/profit and loss 89/90 show a nett profit after add backs ie. Depreciation 55,981.00 Part interest 63,200.00 Borrowings costs 2,658.00 Personal motor vehicles 43,526.00 165,365.00 Less Loss 39,650.00 TOTAL NETT 125,715.00 On accountants advice: Total income Personal - 235,000 Company - 125,715 360,717" Attached to the broker's letter was a copy mortgage application, an assets and liabilities statement, a balance sheet and profit and loss statement and a letter from Bruce and Partner, accountants. The mortgage application comprised a 2 page pro forma document. On the first page provision was made for the insertion of personal details of the applicant(s). Under the column "Borrowers" and in the section "Christian or given name (A)" the Christian names of the principal debtor were inserted. In the section "Christian or given name (B) (spouse)" the Christian name of the respondent was inserted. The balance of the personal information inserted on the first page of the form related to the principal debtor only. The second page of the form provided space for the provision of relevant financial information, including a "Confidential Statement of Personal Position". This section of the form contained 2 notes. One stated: "insufficient space please attach a separate schedule". The other stated "Please note - Companies must supply last 2 years Balance Sheets and Profit and Loss Accounts". In the assets column, the matrimonial property was listed at its full value, but without any reference to its ownership. There was also listed as an asset "equity in company" in an amount of $1,700,000. It was clear from the other material provided to the appellant with the mortgage 6 UNREPORTED JUDGMENTS application that this purported to represent a half interest in Banksia. The application was signed by the principal debtor only. The accompanying accountant's letter was addressed to the mortgage broker. It was headed "REPG and K WYNNE". In the body of the letter, the accountant stated that he acted for the principal debtor and his company; that the proposed security was the principal debtor's residence (the matrimonial home); and that the purpose of the loan was to refinance an overdraft facility with Barclays Bank. The principal debtor's income was stated to be $235,000 per annum, comprising a salary of $35,000 and drawings of $200,000 from his business. The letter noted that the principal debtor's assets and liabilities statement had already been provided. Save for the heading, there was no reference to the respondent in the letter. The assets and liabilities statement purported to be an assets and liabilities statement of Banksia, and contained the following information: "ASSETS Freehold Hotels - at Collier's Valuation St Peters Inn Hotel $2,100,000 Botany View Hotel 2,000,000 Royal Albert Hotel 2,300,000 $6,400,000 Personal Residence Charleroi Road, Belrose 600,000 Other Assets Shares in Unlisted companies 35, 000 Superannuation Fund 40,000 75 000 Total Assets $7,075.000 LIABILITIES Barclays Bank Australia 4,100,000 Provision for Renovations to Royal Albert Hotel 500,000 Total Liabilities 4,600,000 NET ASSETS $2,475,000" It is to be noted that the assets and liabilities statement included the matrimonial home as an asset. Clearly, it should not have done so. The balance sheet and profit and loss statement were those of Banksia for the period ended 31 December 1990. Both documents showed the comparative position with the previous financial year, and also did a breakdown for the quarters ended 30 September 1990 and 31 December 1990. A number of items in these documents are of particular relevance. In contrast to the assets and liabilities statement, the balance sheet did not include the matrimonial home. The balance sheet revealed that Banksia had an excess of assets over liabilities of approximately $3 million, compared to $67,000 the year before, due, in part, to a purported increase in the value of the 3 hotels. Liabilities had also altered. Current liabilities were stated to be $213,427.87 for the half year compared to $1,476,507.87 the previous year. This state of affairs appears to have been achieved b the conversation of a $1.2 million current liability in the previous year to a fully drawn loan from Barclays and therefore to a non-current liability as at UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE (Beazley JA) 31 December 1990. The major current liability as at 31 December 1990 was the overdraft to Barclays in the sum of $411,541. The total amount of current liabilities were reduced by a beneficiaries' loan account entry of $258,705.63. There was no note to explain this entry which appeared incongruously as a credit under the heading "current liabilities". Non current liabilities were $3,700,000 for the half year compared to $2,486,026 the previous year. A $2.5 million fixed loan from the State Bank as at 1990 had been transferred to Barclays. The profit and loss statement revealed that in the 6 months to 31 December 1990, Banksia had paid interest of $343,691 compared to total interest the previous year of $232,403.97. Banksia's gross profit for the 6 months to 31 December 1990 was $18,417.13. This was comparable, on a half yearly basis, to the previous year's gross profit of $42,434. Significantly, the consolidated profit and loss statement did not reflect any drawings by the principal debtor. On 18 June 1991, the appellant's solicitors wrote to the appellant enclosing the "Application of PC Wynne for a first mortgage advance of $450,000". On 20 June 1991, the appellant wrote to its solicitors advising them that the mortgage advance to the principal debtor had been approved, subject to a satisfactory valuation of the security property. The next day, the appellant's solicitors wrote to the mortgage broker "Re mortgage application - PG and K Wynne", confirming that the first mortgage advance had been approved. On 2 July 1991, the appellant's solicitors wrote to Freehill Hollingdale and Page stating "We act for the mortgagees herein and understand that you act for the mortgagors, Mr and Mrs PG Wynne." They advised that the loan had been approved subject to valuation. On 9 July 1991, the appellant's solicitors again wrote to Freehill Hollingdale and Page confirming that the mortgage advance had been approved and requested particulars of title so as to allow mortgage documents to be prepared. On 10 July 1991, Freehill Hollingdale and Page wrote to the appellant's solicitors as follows: "Wynne mortgage to [the appellant] Security: 34 Charleroi Street, Belrose We have your letter of 2 July. Particulars of the subject property are as follows: Mortgagor: Kerry Anne Wynne Present registered proprietors: Peter Gordon Wynne and Kerry Anne Wynne. Freehill Hollingdale and Page also advised the appellant's solicitors that it was proposed, either prior to or simultaneously with the drawdown of funds, for the principal debtor to transfer his half interest in the property to the respondent. The letter continued: "As we would understand the position, your client is lending $450,000 to Mr Peter Gordon Wynne, on the security of what will now be a third party mortgage". The solicitors further advised that the principal debtor was anxious to draw down the funds as soon as possible and sought advice as to whether the transfer of title would result in any delay. The appellant's solicitors responded the following day, enclosing requisitions on title. For the most part, the requisitions were standard requisitions. No comment was made as to whether the transfer of the principal debtor's interest in the property to the respondent posed any problem to an early settlement of the mortgage. The appellant's solicitor's letter concluded by advising that they held an irrevocable authority from "your client" to pay out of the mortgage advance a sum of money for brokerage fees. That authority had been forwarded to the appellant's solicitors by the mortgage broker, under cover of a letter which referred to the principal debtor as the client. The 8 UNREPORTED JUDGMENTS authority was signed by the principal debtor only, although in the heading to the document the borrowers were specified to be both the principal debtor and the respondent. On 18 July 1991, the appellant's solicitors wrote to Freehill Hollingdale and Page stating that on settlement they required a duly executed and registrable discharge of mortgage and withdrawals of caveats. The mortgage referred to was that in favour of the respondent secured over the matrimonial home. The caveats had both been lodged on behalf of the principal debtor by Freehill Hollingdale and Page. Under cover of a letter dated 18 July 1991, the appellant's solicitors forwarded a statement of their costs as solicitors for the mortgagee. The addressee was "Mr PG Wynne, c/- Freehill Hollingdale and Page". On 22 July 1991, Freehill Hollingdale and Page wrote to Gillis Delaney Brown, the solicitors for the respondent, enclosing the various documents necessary to be executed by the respondent to give effect to the transfer and the mortgage. Gillis Delaney Brown returned the duly executed mortgage to Freehill Hollingdale and Page on 30 July 1991. They forwarded other documents necessary for completion of the transfer and the mortgage on 31 July 1991. Also on 31 July 1991, Freehill Hollingdale and Page replied to the appellant's requisitions. The response "Not to the mortgagor's knowledge", or "So far as the mortgagor is aware was made to various of the requisitions. The principal debtor's signature on the transfer was witnessed by his solicitor, Mr Jones of Freehill Hollingdale and Page. The respondent's signature on the transfer and on the mortgage was witnessed by her solicitor, Mr Delaney, of Gillis Delaney Brown. On 6 August 1991, Freehill Hollingdale and Page wrote to the appellant's solicitors enclosing various documents including the executed and stamped mortgage in duplicate, relevant to completion of the mortgage transaction. They also advised that they held the Certificate of Title. The transfer and the mortgage transaction were completed on 8 August 1991. On 21 August 1991, the appellant's solicitors forwarded an epitome of mortgage to Freehill Hollingdale and Page. On 26 August 1991, the appellant forwarded an epitome of mortgage direct to the respondent. The respondent said that her solicitor assured her that by the July deed, the principal debtor was "stitched up", that the increase in the loan from $400,000 to $450,000 was not worth making a fuss about, that the increase from a I year term as initially proposed by the principal debtor to a 3 year term was not significant - that it was a usual term allowing for early repayment and that the principal debtor was liable under the mortgage for repayment. She said that the execution of the mortgage was brought on unexpectedly by the principal debtor and took place during a very brief attendance at her solicitor's office. The solicitor's evidence differed. He said the mortgage was fully explained to the respondent, that she read through the documents and that there was no haste in its execution. The trial judge, whilst finding aspects of both the respondent's and the solicitor's evidence unsatisfactory, held that there was little time spent on the explanation of the mortgage. Notwithstanding that, he found the respondent understood the nature and effect of the mortgage and in particular, her liability under it, with one possible qualification, that being whether she understood that the mortgage was a full recourse mortgage. His Honour found that the respondent understood that she stood to lose the matrimonial home "but no more than that". His Honour further found in relation to the respondent's entry into the mortgage: UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE: (Beazley JA) "There is no doubt that the [respondent's] will was overborne by the principal debtor nor that the [respondent] was throughout in a particularly vulnerable position. She clearly wanted to believe in the genuineness of the principal debtor's conduct in the hope that his return to the matrimonial home presaged a re-establishment of their married relationship, as much for the benefit of their children as for herself." The appellant did not dispute this finding, nor that a clear equity between the respondent and the principal debtor arose in these circumstances. CHALLENGE TO FINDINGS OF THE TRIAL JUDGE For the most part, the findings of the trial judge were not in dispute. However, two specific findings were challenged by the appellant. They were the findings that the loan application was made by the principal debtor only and the further finding that the appellant dealt with the respondent through the principal debtor's solicitor. These findings did not involve any consideration of a witness' credit. They were based solely on the documents to which I have referred. In those circumstances, this court is in as good a position as the trial judge was to decide these matters: see Warren v Coombes (1979) 142 CLR 531 at 551,552. There were inconsistencies in the documentation which related to the loan application. The respondent's name was included in the mortgage application. However, apart from her name being inserted in the second bracket providing for the name(s) of the borrower(s), (which was qualified by the word "spouse''), none of her personal details were included in the application form. Except for the inclusion of the matrimonial home as an asset, none of her financial details were inserted. However, as I have stated earlier, the home was listed as an asset without reference to its ownership. It must also be kept in mind that the respondent was a necessary party to the mortgage so that it would have been necessary to include her name on the mortgage application. The question in issue however, is whether the loan application was made by the principal debtor, not whether the respondent was a party to the mortgage. It is in this respect that the accountant's letter, which was included as part of the application forwarded to the appellant's solicitors, is significant. It stated that the accountant acted for the principal debtor and his company and that the principal debtor was seeking a loan of $400,000. All information in the letter related to the principal debtor and Banksia. There was no reference to the respondent. Finally, if any doubt remained, when the appellant's solicitors forwarded the mortgage application and other documentation to the appellant, it specifically stated that it was enclosing the mortgage application of the principal debtor. In my opinion, his Honour's finding was correct and the loan application was made by the principal debtor only. His Honour also found that the appellant dealt with the respondent through the solicitor for the principal debtor. The appellant contended however that it dealt with the respondent "apparently through Freehill Hollingdale and Page who appeared to be acting for her and in fact through Michael Delaney who was acting for her." This submission is internally inconsistent. It seems that what the appellant is really asserting is, as it submitted in relation to the Yerkey v Jones claim, that Freehill Hollingdale and Page "purported to be the solicitors for both the respondent and her' husband" and that in any event it was entitled to assume Freehill Hollingdale and Page acted for both. As I have stated already, the correspondence and documentation is inconsistent and does not allow a clear picture to emerge as to whether Freehill Hollingdale and Page were acting for the respondent. In the absence of any clear inference emerging from the 10 UNREPORTED JUDGMENTS documentation, I do not consider that the appellant or its solicitors were entitled to make any assumption about the matter, or if it did, it took the risk as to whether its assumption was correct. I should also add that there was no evidence that the appellant had made any such assumption. In so far as the appellant relied on Gillis Delaney Brown acting for the respondent, there was no evidence that the appellant knew this to be the case. The only reference to those solicitors in the documents which passed between the appellant, its solicitors and Freehill Hollingdale and Page was in respect of the witnessing of the respondent's execution of the mortgage. Accordingly, I do not consider that the appellant can make good its submission that it was dealing with the wife through her solicitors when it was not aware that those solicitors were acting for her. DOES YERKEY v JONES REPRESENT THE LAW IN NEW SOUTH WALES? The trial judge held that the respondent was entitled to relief under the equitable presumption in Yerkey v Jones that: "... the position of strangers who deal through the husband with the wife in a transaction operating to the husband's advantage may, by that fact alone, be affected by any equity which as between the wife and the husband might arise from his conduct. [A presumption which] must have a special importance when the transaction in question is one of suretyship and the wife without any recompense, except the advantage of her husband, saddles herself or her separate property with a liability for his debt or debts." per Dixon J at 676. In applying Yerkey v Jones, his Honour followed Warbuton v Whiteley and Ors (1989) NSW Conv R55-453, and declined to follow Akins v National Australia Bank (1994) 34 NSWLR 155. Counsel for the appellant submitted that the trial judge was bound by the Court of Appeal's decision in Akin and erred in following Warbuton. In Warbuton, the New South Wales Court of Appeal, whilst doubting that Yerkey v Jones should continue to operate as a basis for relief separate from the principles applied in Commonwealth Bank of Australia Ltd v Amadio (1983) 151 CLR 447, considered that as it had been applied by the High Court, it should be applied in the case before it. Counsel for the respondent submitted, however, that Yerkey v Jones still applies in New South Wales, notwithstanding the views expressed in Akins, which, it was submitted, were obiter. In Akins, Clarke JA (with whom Sheller JA, and Powell JA in a separate judgment, concurred) stated at 172 that: "the principles of unconscionability propounded in Commercial Bank of Australia Ltd v Amadio furnish adequate grounds of relief to a wife who claims to have been the subject of her husband's improprieties and, in circumstances where, for instance, a creditor knew, or must be taken to have known of the risk that that might have occurred (or facts raising that possibility in the mind of a reasonable person)". His Honour considered therefore that Yerkey v Jones ought no longer be applied in New South Wales. The question of the continued application of Yerkey v Jones arose again for consideration recently in this Court in National Australia Bank Limited v Garcia, (unreported, Court of Appeal No 40231/93, 3 July 1996). In that case, Sheller JA stated that although he had expressed his agreement with the judgment of Clarke JA in Akin, he considered it appropriate to reconsider that agreement and to review the authorities himself. Having done so, his Honour, with certain qualifications, (which are not relevant for present Purposes) stated at 34, that his: UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE (Beazley JA) "conclusion is unchanged that Clarke JA was correct to say that the so - called principle in Yerkey v Jones should no longer be applied in New South Wales." In confirming his conclusion, his Honour also stated at 34: "Tt is the duty of this court to accept loyally the decisions of the High Court; Broome v Cassell and Co Ltd [1972] AC 1027 at 1054; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 129. Yerkey v Jones was decided nearly sixty years ago. If a majority of the Court had agreed with Dixon J's reasons for judgment I think this Court would have been bound to follow it regardless of what the House of Lords said about it in Barclays Bank Plc v O'Brien. However in none of the judgments of the other three Justices is there support for the principles which have been said to flow from Dixon J's decision. At best what is said to be the principle in Yerkey v Jones is a principle to which one Judge only adhered." His Honour added: "Moreover at its heart it is based upon general assumptions about the capacity of married women which were then accepted as correct and which today are known to be wrong." I agree with the underlying sentiment in this statement that in this area, as in all cases of special disadvantage where no legal presumption operates, general assumptions cannot be made. The circumstances of each case must be considered. For my part, I do not accept that education and experience are necessarily an answer to a claim of unconscionability, particularly where a person is otherwise in an emotionally vulnerable state, as was the respondent. This Court is not strictly bound by its previous decisions. However, it is only on rare occasions that it will not follow a previous decision: see Bridges v Bridges and Hooper (1945) 45 SR (NSW) 164 at 172 per Jordan CJ; Richardson v Mayer [1964-5] NSWR 105 at 106; Bennett and Wood Ltd v Orange City Council [1967] I NSWR 502 at 503-4 per Wallace P, at 505 per Walsh JA, at 512 per Holmes JA; Flanagan v HC Buckman and Son Pty Ltd [1972] 2 NSWLR 761. In Bennett and Wood Ltd v Orange City Council, Wallace P stated, at 503 - 504, that occasions when the Court of Appeal would overturn an earlier decision should not: "\..be confined intransigently to decisions which are "manifestly" or "demonstrably" wrong...Giving full credit to the desirability of certainty in the law (which occasionally appears to be rather a pious aspiration) I consider that even an intermediate Court of Appeal may, on special occasions and in the absence of higher authority on the subject in hand, play its part in the development of the law and in ensuring that it keeps pace with modern conditions and modern thought and, accordingly, in an appropriate case I do not think an earlier decision of the Court (including this Court) should be allowed to stand where justice seems to require otherwise." See also Nguyen v Nguyen (1990) 169 CLR 245 at 269 where Dawson, Toohey and McHugh JJ stated: "Where a Court of Appeal holds itself free to depart from an earlier decision it should do so cautiously and only where compelled to the conclusion that the earlier decision is wrong." There are now two decisions of this Court which have held that Yerkey v Jones no longer represents the law in New South Wales. Having regard to the examination of the question in Akin and the detailed review of the authorities in Garcia, it is not necessary to revisit this area of the law. Garcia is a considered decision of this court where the application of Yerkey v Jones was directly in 12 UNREPORTED JUDGMENTS issue and follows a strong obiter statement in Akin to the same effect. In my opinion it should be followed. The result for the present case is that the trial judge's decision, based as it was on the principles in Yerkey v Jones, cannot stand. It is not necessary therefore to consider the appellant's second submission that his Honour wrongly applied Yerkey v Jones to the facts. SHOULD THE MORTGAGE BE SET ASIDE AS UNCONSCIONABLE His Honour found that the appellant's conduct did not fall within the principles governing the court's jurisdiction relating to unconscionable bargains. However, in holding that the evidence did not support a finding that the appellant took unconscientious advantage of the respondent, his Honour did not engage in any examination of the principles propounded in Amadio as they might apply to the facts of this case. In Commercial Bank of Australia Ltd v Amadio, Mason and Deane JJ examined the principles which apply when a contract or dealing is sought to be set aside on the ground of unconscionable conduct. As Mason J said at 461: "relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage..." Both Mason and Deane JJ noted the distinction between unconscionable conduct and undue influence It is sufficient to refer to the explanation of Mason J at 461: "Tn the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position." His Honour further observed at 462 that the principles relating to unconscionability may he invoked "..whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-a-vis another and unfair or 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 party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party. Mason J drew a distinction between the duties of a principal creditor under a contract of guarantee and the obligations which a party to a transaction may have to avoid being found to have acted unconscionably. A contract of guarantee is not a contract uberrimae fidei. It involves a limited duty on the part of the creditor to disclose to an intending surety anything which has taken place between the principal debtor and the creditor "which was not to be expected". There is no duty to disclose matters relating to the credit of the principal debtor. His Honour at 463-4 stated, however, that even where the creditor has not breached this limited duty of disclosure, it "may none the less be considered to have engaged in unconscionable conduct in procuring the surety's entry into the contract of guarantee". UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE (Beazley JA) Mason J then recapitulated the principles governing an unconscientious bargain in these terms at 467: "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, takes 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 that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same." Deane J at 474-5 stated the principles which govern the court's jurisdiction in these terms: "The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or "unconscientious" that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In Blomley v Ryan (1956) 99 CLR at 405, Fullagar J listed some examples of such disability: "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". As Fullagar J remarked, the common characteristic of such adverse circumstances "seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other"." His Honour further stated at 475, that it is not essential that there be an inadequacy of consideration moving from the stronger party. Deane J also considered the question of onus, stating, at 479, that once the bank officer was put on inquiry, the onus was cast upon the bank to show that the transaction was "in point of fact fair, just and reasonable: Fry v Lane (1888) 40 Ch D at 321". Thus, two matters need to be established to invoke the court's jurisdiction to set aside an unconscientious transaction. The first is that the party seeking to impugn the transaction was under a relevant disability. In describing this disability, Deane J at 476 referred to the statement of McTiernan J in Blomley v Ryan (1956) 99 CLR at 392 that: "His weakness was of the kind spoken of by Lord Hardwicke [in Earl of Chesterfield v Janssen (1751) 2 Ves Sen, 125, at 155-156; 28 ER 82, at 100] "in defining the fraud characterised as taking surreptitious advantage of the weakness, ignorance or necessity of another. The essence of such weakness is that the party is unable to judge for himself"." In dealing with this element in so far as it related to the Amadios, Deane J said at 477: "That weakness constituted a special disability of Mr and Mrs Amadio in their dealing with the bank of the type necessary to enliven the equitable principles relating to relief against unconscionable dealing. Put more precisely, the result of the combination of their age, their limited grasp of written English, the 14 UNREPORTED JUDGMENTS circumstances in which the bank presented the document to them for their signature and, most importantly, their lack of knowledge and understanding of the contents of the document was that, to adapt the words of Fullagar J quoted above, they lacked assistance and advice where assistance and advice were plainly necessary if there were to be any reasonable degree of equality between themselves and the bank." The second element is that any special disability be, as Deane J said at 477: "sufficiently evident to the [other party to the transaction] to make it prima facie unfair or "unconscientious" of the [other party to the transaction] to procure [the] execution of the [contract] in the circumstances in which the execution was procured". In dealing with this element, both Mason and Deane JJ referred to the circumstances which put the bank on inquiry as to whether the transaction had been explained to the Amadios and the extent of the explanation to which they were entitled. As Mason J stated at 466-467: "Tt must have been obvious to [the bank officer], as to anyone else having knowledge of the facts, that the transaction was improvident from the viewpoint of the respondents. In these circumstances it is inconceivable that the possibility did not occur to [the bank officer] that the respondents' entry into the transaction was due to their inability to make a judgment as to what was in their best interests, owing to their reliance on their son, whose interests would inevitably incline him to urge them to sign the instrument put forward by the bank." It is clear from the judgments of Mason and Deane JJ that the advice and assistance which might be necessary in a given situation may involve more than mere legal advice as to the terms and effect of the document in question. I have already referred above to Mason J's statement on this issue. Deane J at 480 stated that the knowledge which the Amadios needed in that case extended to the financial position of the son's companies. The first question in this case, therefore, is whether the respondent was under a special disability. I have referred to the difficult marital relationship between the respondent and the principal debtor, and to the principal debtor's return to the matrimonial home in January 1991. The trial judge described his return "as a cynical exercise...to obtain the matrimonial home as an asset security for urgently needed loan funds to carry out renovations at the Royal Albert Hotel". His Honour found that: "Shortly after his return began a series of misrepresentations, assurances and pressures, alternately subtle and blunt to the point of bullying, to gain that agreement. The provision by the principal debtor to the [respondent] of the title deeds for the matrimonial home was an exercise in gaining the [respondent's] confidence. There were protestations that the principal debtor was a "changed man". As the learned trial judge recognised, and as the appellant acknowledged, there was, in the circumstances, a clear equity as between the respondent and the principal debtor. The wife was not only in a highly vulnerable state, her will had in fact been overborne. Education or experience may not be sufficient to overcome such vulnerability, and, in this case, it clearly was not. In my opinion, the respondent was in a position such that, to echo the words of Lord Hardwicke, she was "unable to judge for herself' whether the transaction was provident or not. In other words, she has established that she was in a special position of disadvantage sufficient to satisfy the first element of the principles governing unconscionable bargains. UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE (Beazley JA) The next question and in this case, one of two vital questions for determination, is whether the appellant should have known of the respondent's special disadvantage. There had been no previous relationship between the appellant and the principal debtor. I have referred in some detail to the information requested in the mortgage application, including, in the case of a company, the balance sheet and profit and loss statements for a period of two years. The mortgage application bore the title of the mortgage broker not the appellant. It was submitted to the appellant's solicitors along with three other mortgage applications for unrelated clients. It is clear from the brevity of the broker's covering letter to the appellant's solicitors, that the broker made regular applications to the appellant for finance on behalf of clients. This inference is reinforced by the fact that the applications were forwarded to the appellant's solicitors and not direct to the appellant. In my opinion, the broker must have been aware of the information which the appellant required in the normal course in respect of loan applications and that that information included the information in the broker's letter to the appellant's solicitors dated 17 June. Otherwise, there was no point in the broker writing separately to the appellant's solicitors setting out and referring to the financial information which was in fact provided in this regard. The information in the mortgage application would have sufficed. The loan transaction was approved within 2 days of receipt. The only qualification to the approval was that it was subject to a satisfactory valuation. There was no evidence as to whether any, and if so what, consideration the appellant gave to the financial information supplied in support of the loan application. No requisitions were raised by the appellant in respect of the principal debtor's or Banksia's financial affairs. However, even a cursory consideration of the financial information provided would have demonstrated that the principal debtor had no ability to service the interest on the loan. His annual salary was $35,000. His only other stated source of cash flow was from purported drawings of $200,000 from Banksia. However, not only were such drawings not reflected in Banksia's accounts, it accounts revealed that it could not have supported such drawings. Further the obvious inconsistencies in the financial material would have alerted a reasonable, careful lender that the financial position of the principal debtor and Banksia was suspect. In the circumstances, the appellant should have been on notice that the transaction was perilous from the principal debtor's point of view and improvident from the respondent's point of view. That conclusion raises the second vital question on this appeal, namely whether there was any obligation on the appellant to ensure the respondent was adequately advised in relation to the transaction. This in turn raises the question as to what constitutes adequate advice in the circumstances and whether the appellant is protected by any assumption it may have made that the respondent was adequately advised. The appellant contended that the appellant was under no obligation to make any inquiry as to whether the respondent was properly advised. Alternatively, it was submitted that the appellant was entitled to assume that the respondent was adequately advised by Freehill Hollingdale and Page, who, from all the information in their possession, appeared to be acting for her. Two comments should be made about these submissions. The principles which govern equity's jurisdiction in relation to unconscientious dealings do not depend upon the 16 UNREPORTED JUDGMENTS performance or non-performance of a duty. A party to a transaction may have acted in strict compliance with a duty imposed by law but may have done so in circumstances which render its conduct unconscionable. Thus, a party may, for example, by failing to make an inquiry as to whether the other party was in receipt of adequate advice, expose itself to the risk of the dealing being found to be unconscionable. In this case, there was no direct dealing between the appellant, the principal debtor or the respondent. At all times, the appellant acted through the agency of its solicitors. The correspondence between those solicitors, the mortgage broker and Freehill Hollingdale and Page, made it clear that the appellant's solicitors at all times knew and understood that Freehill Hollingdale and Page were acting for the principal debtor and not for the respondent. The appellant is fixed with that knowledge and understanding. The appellant contended alternatively that it was entitled to assume the respondent had been advised in respect of the transaction as her signature on the mortgage had been witnessed by a solicitor. The fact a solicitor witnessed her signature may have been sufficient for the appellant or its solicitors to assume that the respondent had been advised of the terms and effect of the documents. In any event, his Honour found that the respondent understood the terms and effect of the mortgage. What she did not know was the perilous financial position of the principal debtor or Banksia. That leaves two final matters for determination. First, what constitutes adequate advice in the circumstances? Secondly, what assumptions may a party to a transaction make and rely upon in order to avoid a finding of unconscionability which might otherwise be made? The question of what advice will be adequate in a given situation depends upon the circumstances surrounding the special disability which is found to exist. In this case, the relevant disability arose from the respondent's vulnerable emotional position which was such that she was unable to judge for herself the providence of the transaction. There are clear indications in Amadio that adequate advice may need to include advice as to the financial circumstances of the principal debtor or the principal debtor's business. Mason J said at 468: "\.. the inevitable conclusion is that the bank was guilty of unconscionable conduct by entering into the transaction without disclosing such facts as may have enabled the respondents to form a judgment for themselves and without ensuring that they obtained independent advice." Wilson J, who also based his decision on the principles governing unconscionable bargains, said at 469: "The circumstances required that the respondents be acquainted with the true financial position of the company and thereby enabled to make an informed decision." The requirement that adequate advice extends this far is not novel. In Harrison v The National Bank of Australasia Ltd (1928) 23 Tas LR 1, Crisp J held at 9: "The court will relieve a person of advanced age and no business knowledge from the consequences of an improvident bargain, where she became a party to the transaction without due deliberations, without independent advice and not knowing its true nature and effect. The advice contemplated in Harrison's Case was information about the prospects of the business venture for which the loan was required "to enable [the complainant] to form any judgment at all as to the prospects of the adventure'. UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE (Beazley JA) In the present case, the respondent was not in receipt of any advice as to the providence of the transaction. The trial judge, in dealing with the matter on the basis of the principles in Yerkey v Jones' found that the respondent had not been adequately advised by her solicitor of the financial risks of the transaction. He also found that any advice she received from her father was inadequate. Her father was old and frail. I agree with those findings. It was incumbent in these circumstances for the appellant, at the very least, to advise the respondent to obtain advice relating to the propriety of the transaction from her point of view. The appellant's failure to so advise, whether that failure be innocent, due to ignorance or oversight, or because it was considered unnecessary or irrelevant to inquire, renders its conduct unconscionable. This finding is subject however to one further consideration, namely, whether the appellant is protected from a finding of unconscionable conduct on the basis that it was entitled to assume that the respondent was adequately advised, either because it believed that Freehill Hollingdale and Page were acting for her or because her signature on the mortgage was witnessed by a solicitor. It is well established that it is no part of a solicitor's function to give commercial or financial advice unless retained to do so: Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 at 277 per Meagher J; Hogan v Howard Finance Ltd (1987) ASC 55-594; Esanda Finance Corporation Ltd v Murphy (Hunt J, unreported, 17 March 1989). In my opinion, in circumstances such as these, a party cannot shelter behind an assumption that a solicitor's engagement had been extended beyond the usual retainer of a solicitor. If it did act upon such an assumption, it must bear the consequence of having done so. In this case, that consequence is that the assumption does not protect the appellant from finding that its conduct was unconscionable. If I am wrong as to the extent of a solicitor's duty and it does extend to inquiring whether the client understands the providence of the transaction, that does not avail the appellant in this case. The first the appellant knew that a solicitor had had any involvement in respect of the mortgage was when the executed mortgage document was forwarded to its solicitors on or shortly after 6 August. It was not open to them to make any assumption as to when that solicitor had become involved, other than that at about the time he witnessed the execution of the document. That would not have allowed sufficient time for the respondent to have obtained expert advice as to the providence of the mortgage. In any event, as from 6 August, the transaction was out of the control of the respondent. She had handed over the executed mortgage and the principal debtor's solicitors had possession of the certificate of title. RELIEF ON THE BASIS OF THE PRINCIPLES IN BARCLAYS BANK PLC v O'BRIEN Counsel for the respondent also submitted that the respondent was entitled to relief on the basis of the principles enunciated in Barclays Bank Plc v O'Brien [1994] 1 AC 180. In that case, Browne-Wilkinson LJ rejected that there was any "special equity" which accorded special protection to wives in surety situations. His Lordship held that where a wife was induced to go surety for her husband through undue influence, misrepresentation or any other legal wrong, she had an equity against him to have the transaction set aside. If the creditor had actual or constructive notice of the facts giving rise to her equity, the wife's right was also enforceable against the creditor. However, when considering the matters which would put a creditor on notice, his Lordship regarded the law's "tender treatment" of married women as relevant. 18 UNREPORTED JUDGMENTS There is no doubt in the present case, that if Barclays Bank Ple v O 'Brien represented the law in Australia, the respondent would be entitled to relief under it. However, in Garcia, Sheller JA. after considering his Lordship's judgment in detail, stated at 32-33 that: "if it be correct, as I think it is, that the extended principle expounded in Yerkey v Jones has no sure foundation in Australian law, the High Court 's decision in Amadio describes the jurisdiction in equity to relieve against unconscionable dealing." I agree with Sheller JA in this respect. Accordingly, the wife is not entitled to relief in accordance with the principles in Barclays Bank Ple v O'Brien. CONTRACTS REVIEW ACT 1980 (NSW) S7 of the Contracts Review Act (1980) (NSW) provides: "(1) Where the Court funds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if if considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result..." make various orders granting relief in respect of the contract. "Unjust" is defined in s4 to include "unconscionable' harsh or oppressive". S9 provides, relevantly: "(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract; or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subs(1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract; (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his interests; or (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act; (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect;" The Contracts Review Act is "beneficial legislation', to be "interpreted liberally": West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 631 per McHugh JA. In West, McHugh JA at 620-1 noted that the definition of "unjust" was not exhaustive nor confined to the "tautological trinity" of the inclusive definition. McHugh JA also stated, at 621, that the Act is directed to contracts or the provisions of a contract, not to the transaction from which the contract emerged nor to investments. In European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 at 200, Rogers J expressed the view that McHugh JA's construction of the operation of the Act may have been too narrow. It is not necessary to enter that debate in this case, as McHugh JA had earlier pointed out UEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNNE: (Beazley JA) at 620, a contract may not be unjust in itself but may be unjust in the circumstances if the party concerned did not have the opportunity to make an informed or real choice as to whether to enter into the contract: see s9(2)(a), s9(2)(e), s9(2)(f), s9(2)(g), s9(2)(h) and s9(2)(i). Thus regard may be had to circumstances which existed at the time the transaction was entered into regardless of whether the party against whom relief is sought was aware of such circumstances. In Gough v Commonwealth Bank of Australia (Court of Appeal, 31 May 1994), Mahoney JA stated at 16 that the terms of the Act should be applied according to their ordinary meaning. His Honour continued at 16-17: "Tt is necessary to consider whether the fact that a financier who does not ensure that a woman in this situation has independent advice is, in the relevant sense, acting unconscionably....In my opinion, there are no presumptions or general rules in this regard. Each case must be dealt with upon its own facts." In this case, the mortgage document itself was unexceptional. However, the respondent was cajoled and bullied into entering into the mortgage by the principal debtor. Whilst she understood the nature and effect of the mortgage she did not know, at the time she entered into it, that it was an improvident transaction. She had no knowledge of or advice as to the principal debtor's ability to service the loan, (which in turn depended upon the viability of Banksia), save for the false information he gave her that he could do so. She believed her interests were adequately protected by the July deed. That was not, and could never have been the case, given the financial circumstances of the principal debtor and Banksia. As I have stated earlier, his Honour found, and there was no dispute as to the finding, that the circumstances in which the mortgage was entered into gave rise to an equity between the principal debtor and the respondent. Although the appellant was not aware of the history of the relationship between the parties or of the principal debtor's conduct in obtaining the mortgage, it knew, or had the information in its possession to enable it to know, that this mortgage was sheer folly when looked at from the ability of the principal debtor to make the interest payments. The only part of the transaction which was not folly was the extent of the security. The appellant was well protected in this regard. In the circumstances, I am of the opinion that the contract was unjust within the meaning of the Contracts Review Act 1980. CLAIM FOR RELIEF FOR CONTRAVENTION OF S52 OF THE TRADE PRACTICES ACT OR FOR MISREPRESENTATION Counsel for the respondent also submitted that the principal debtor was the appellant's agent for the purpose of having the mortgage executed, and as agent made a number of representations which were false and also misleading and deceptive in contravention of s52 of the Trade Practices Act. The representations relied upon included that there was no risk involved in the respondent providing the mortgage and that Banksia was in a sound financial position. It was also alleged that the appellant contravened s52 in failing to explain to the respondent, and to ensure that she understood, amongst other things, the terms and effect of the mortgage, the risks associated with signing the mortgage and the financial circumstances of the principal debtor and Banksia. This claim was not developed in submissions. Having regard to the conclusion to which I come in respect of the claims on the basis of unconscionability and under the Contracts Review Act, I do not consider it necessary to determine this aspect of the respondent's claim. RELIEF 20 UNREPORTED JUDGMENTS The trial judge found that had the respondent been aware of the financial position of the principal debtor and of Banksia, she would not have entered into the transaction. As the appellant failed to ensure that the respondent had adequate and appropriate advice, it took the risk the transaction would be held to be unconscionable, as I have found it to be. Relief in respect of an unconscionable dealing is a purely equitable remedy. In Amadio, Deane J said at 480-481: "The concept underlying the jurisdiction to grant the relief is that equity intervenes to prevent the stronger party to an unconscionable dealing acting against equity and good conscience by attempting to enforce, or retain the benefit of that dealing Equity will not, however, "restrain a defendant from asserting a claim save to the extent that it would be unconscionable for him to do so. If this limitation on the power of equity results in giving to a plaintiff less than what on some general idea of fairness he might be considered entitled to, that cannot be helped" (per Lord Greene MR, Wrottesley and Evershed LJJ, In re Diplock [1948] 1 Ch 465 at 532". In determining what relief is appropriate in this case, two circumstances need to be considered. In July 1992, the respondent brought equity proceedings against Freehill Hollingdale and Page, Mr Jones, Barclays, Banksia, the principal debtor and the principal debtor's accountants (the defendants). In those proceedings, the respondent claimed damages which extended beyond the liability she may have under the mortgage. The proceedings were settled on the basis that judgment be entered against the respondent and that she pay the costs of the defendants. However, there was also a provision that the costs order would not be enforced and that the respondent would be paid $300,000 if she provided certain releases to the defendants. The deed of settlement did not specify how the $300,000 was calculated nor how it was to be borne as between the defendants (except for the accountants, who had no obligation under the deed of settlement in respect of the payment). The respondent incurred legal costs of approximately $170,000 relating to the equity proceedings, part of which she has paid and part of which are subject of a dispute with her solicitor. As it cannot be said that the deed of settlement was intended to compensate the respondent only in respect of her potential liability under the mortgage, I do not consider that the settlement should affect the relief to which the respondent is entitled. The second matter relates to the benefit the respondent received under the July deed, namely the transfer to her of the principal debtor's interest in the matrimonial home. The trial judge found that the value of the benefit thus received was $182,250 being half the value of the home as at 1991 (which his Honour found was $450,000, not $800,000) less $42,750 secured by the principal debtor's mortgage of that interest to the respondent. His Honour found that whilst the respondent and her solicitor treated the transfer of the principal debtor's interest in the property to the respondent as security for what she was entitled to under the Family Law Act, he found that the transfer was an intrinsic part of the July deed. His Honour took this into account when dealing with the question of relief under the purported principles in Yerkey v Jones. Whilst this transfer is a relevant consideration to the relief which should be granted for unconscionable dealing, it must be kept in mind that the respondent would not have entered into any part of the transaction had she known the truth as to the principal debtor's financial circumstances. The appellant's conduct was unconscionable because it failed to ensure the respondent was adequately advised UIEACHERS HEALTH INVESTMENTS PTY LTD v WYNNE; BURNSWOOD v WYNI@E (Waddell AJA) in relation to those matters. Further, the respondent and her solicitor both considered that the transfer of the property represented her entitlement under a family law settlement. I do not consider, therefore, that in the relief which should be granted, any allowance should be made for the benefit of the respondent supposedly received under the July deed. In my opinion, the appropriate relief is that the mortgage be set aside. Relief under the Contracts Review Act is also discretionary, but is confined to the relief specified in s7(a), s7(b), s7(c) and s7(d). Having regard to my conclusion as to relief on the basis of unconscionable dealing, it is not necessary to separately determine the relief to which the respondent would have been entitled under the Act. PROPOSED ORDERS The proceedings had been commenced by the appellant by way of Summons for Possession of the matrimonial home. The respondent brought separate proceedings for relief in respect of the mortgage. Whilst his Honour did not make a separate order dismissing the summons, the effect of his Orders was that it should have been dismissed. The same result follows from my judgment on the appeal and cross appeal. I proposed that the orders which should be made are as follows: 1. Appeal be dismissed. 2. Cross appeal be allowed. 3. In lieu of Ol and O2 made by Hunter J, order that: (a) Mortgage No 2846444 dated 8 August 1991 be set aside, and (b) the appellant forthwith deliver to the respondent a discharge of the said mortgage in registrable form. 4. Summons for possession in proceedings No 10954 of 1993 be set aside. 5. The appellant pay the respondent's costs of the appeal and the cross appeal. Waddell AJA I agree with Beazley JA. 1. Appeal be dismissed. 2. Cross appeal be allowed. 3. In lieu of Ol and O2 made by Hunter J, order that: (a) Mortgage No 2846444 dated 8 August 1991 be set aside, and (b) the appellant forthwith deliver to the respondent a discharge of the said mortgage in registrable form. 4. Summons for possession in proceedings No 10954 of 1993 be set aside. 5. The appellant pay the respondent's costs of the appeal and the cross appeal. Counsel for the Appellant: BA Coles QC/PB Walsh Solicitors for the Appellant: JA Julian, Boulton, Rex, Julian Counsel for the Respondent: A Rannon/V Kerr Solicitors for the Respondent: RL Fitzgerald, Shaw McDonald