Chapter 3 – Incapacity and contracts and gifts during lifetime

Contributed by Nick O'Neill and Carmelle Peisah and current to 30 April 2021.

3.1 Introduction

In this chapter we will deal with capacity to enter contracts and related transactions and the issues arising when an incapable adult appears to enter into such transactions. We also deal with gifts during lifetime. While capacity to enter the transaction or to make the gift will often be the starting issue, this chapter necessarily needs to, and does, deal with the often related question of whether the transaction or gift was made as a result of the unconscionable conduct or undue influence of the person or persons who were given the gift or who benefitted unconscionably from the transaction.

While there are mechanisms in both the common law and in legislation by which incapable people can avoid being held liable for the consequences of contracts or other similar transactions they have apparently entered when they have no capacity to understand what they have undertaken; the common law also ensures that when incapable people are provided with necessary goods and services those who provide those goods and services are fairly compensated.

We deal with the law relevant to the recovery of gifts given, during their lifetime, by people with impaired decision making ability on the grounds of incapacity, undue influence or unconscionability. This often involves elderly people with cognitive or mental disorder, understanding of these issues is of particular importance in light of the increasing awareness of financial elder abuse in Australia and overseas.(1)

Preventing and addressing elder abuse is an obligation shared by legal, financial and health professionals alike. (2)

3.2 The starting points

If a person enters into a transaction or executes a document at a time when they lack the mental capacity to understand the nature or effect of the document, the transaction entered into or document executed is not effective at law. However, all persons who have reached the age of majority (18 years) are presumed to have the capacity to enter into contracts and other transactions and to execute documents that have legal effect. The onus of proving that they lack legal capacity lies with the person alleging the lack of capacity. These starting points have been long established in the common law.(3) However, there needs to be, and are, a number of exceptions to those basic and sometimes conflicting rules.

It may also be the case that a person, whose capacity to enter a contract or understand the complexity of a contractual transaction was marginal, but judged sufficient, may be able to avoid liability under that contract/transaction on the grounds that they were a person in a position of special disadvantage when they entered the contract, and that It was “unconscientious” of the other contracting parties to have agreed to the contractual arrangements. This matter is taken up in 3.4.2 and 3.4.4 below.

3.3 The legal “tests” for capacity

In this section we deal with the “test” for capacity and also with some cases in which it was argued that a person who was a party to a contract should not be bound by the contract because they lacked sufficient understanding of what the contract was about.

The test for capacity is not a fixed standard of capacity to be applied to all transactions. The current and long established law on this matter was set out by Dixon CJ, Kitto and Taylor JJ in the 1954 case, Gibbons v Wright. (4) They said:

The law does not prescribe any fixed standard of sanity as requisite for the validity of all transactions. It requires, in relation to each particular matter or piece of business transacted, that each party shall have such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation.(5)

The High Court continued, in the same paragraph:

They (their Lordships in Ball v Mannin (1829) EngR 165 set out in the last endnote) approved a statement in the charge that as one test of the requisite capacity the jury was at liberty to consider whether the person concerned was capable of understanding what he did by executing the deed, when its general purport was explained to him. …The principle which the case supports, appears to us to be that the mental capacity required by the law in respect of any instrument is relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of that transaction when it is explained.(6)

The High Court concluded the paragraph with the following sentence:

As Hodson L.J. remarked in Estate of Park, "one cannot consider soundness of mind in the air, so to speak, but only in relation to the facts and the subject-matter of the particular case”.(7)

It is important to note that the High Court continued, in the first sentence of the next paragraph, as follows:

Ordinarily the nature of the transaction means in this connection the broad operation, the "general purport" of the instrument; but in some cases it may mean the effect of a wider transaction which the instrument is a means of carrying out: Gibbons v Wright.(8)

We suggest that it is important to appreciate that ordinarily the capacity to understand the nature of a transaction when it is explained means the capacity to understand the ‘broad operation’ or ‘general purport’ of the transaction. However there will be cases in which it is necessary to go further than that. This is the significance of the Manches v Trimborn cited by the High Court of Australia as authority for their last statement quoted above.(9) That case concerned a claim against an 86 year old woman, the defendant in the case, about a cheque she had drawn payable to the plaintiff in respect of a debt owed to the plaintiff by her neighbour and friend, as part of a very involved transaction or series of transactions. The case was heard by Hallett J who said that, if he had been directing a jury, he would have told them that the test was: “that the degree of mental incapacity which the defence would have to establish to (the satisfaction of the jury), was such a degree of incapacity as would interfere with the capacity of the (elderly woman) to understand substantially the nature and effect of the transaction into which she was entering”. The transaction Hallett J was referring to was; “the wider transaction of which the cheque formed part”.(10) Hallett J held that the elderly woman had the capacity to understand that she was signing a cheque, that the effect of the cheque was to transfer money from her to someone else, for the benefit of her friend and neighbour, but that she did not have capacity to understand “substantially the nature and effect of the transaction into which she was entering”, that being the wider transaction of which the cheque formed part.

In the 2016 case in which he discussed Manches v Trimborn, namely Fehily v Atkinson, Jourdans QC sitting as a Deputy High Court judge in the Chancery Division on an appeal from a lower court, discussed a number of other English cases in relation to the question of capacity to make contracts and other “juristic acts”.(11) At the end of that discussion he concluded:

… I think that the law is as stated by the High Court of Australia in Gibbons v Wright. The summary of the law in Chitty(12),taken from that case, is accurate, although it would be possible to misinterpret it as only requiring the capacity to form a general impression of the nature of a contract, rather than the capacity to absorb, retain, understand, process and weigh information about the key features and effects of the contract, and the alternatives to it, if explained in broad terms and simple language.

In that discussion, Jourdans QC set out the often quoted view of Hoffmann J in In re K that; “It is well established that capacity to perform a juristic act exists when the person who purported to do the act had at the time the mental capacity, with the assistance of such explanation as he may have been given, to understand the nature and effect of that particular transaction.”(13) Jourdans QC then stated that the final part of Hoffmann J’s sentence accorded with the test stated in Gibbons v Wright.(14) Jourdans QC then noted that, when Hoffmann J applied that test to an enduring power of attorney, he identified the key characteristics of such a power that a person must understand. Hoffmann J then went on to comment on what was meant by understanding the nature effect of the enduring power of attorney in order to make a valid enduring power of attorney. He asked the rhetorical question; “What degree of understanding is required?”; to which he answered; “Plainly one cannot expect that the (maker of the enduring power of attorney) should have been able to pass an examination on the provisions of the Act. At the other extreme, I do not think that it would be sufficient if he realised only that it gave (the attorney) power to look after his property. He then set out the four matters that should be understood in order for it to be said that the maker of an enduring power of attorney its nature and effect.(15)

Also during that discussion Jourdans QC noted that the cases stated that in order to have mental capacity, a person must be capable of understanding the "nature of the transaction" or the "nature and effect of that particular transaction" or the "nature of the contract". This meant that the person had the ability to absorb, retain, understand, process and weigh information about the key features and effects of the proposed transaction, and the alternatives to it, if they are explained to them in broad terms and simple language.(16)

He also dealt with the submission that a person must be able to understand every aspect of a transaction, if it was explained to them, at least to the extent that aspects of the transaction would be understood by a person of ordinary intelligence, to the extent that elements of the transaction play a part in the decision making process. His response to that submission was that there is a distinction between the key features of a transaction, and ancillary, incidental or procedural aspects of it. His view was that the requisite capacity was to understand the key features, and that it was not necessary that a person had capacity to understand every detail of the proposed transaction.(17)

Returning now to Gibbons v Wright, what the judges considered was necessary for the two sisters to understand in that case, if the matter had been explained to them, was complicated and somewhat abstract. They had to be able to appreciate that:

[B]y executing the mortgages and the memorandum of transfer they would be altering the character of their interests in the properties concerned, so that instead of the last survivor of the three joint tenants becoming entitled to the whole, each of them would be entitled to a one-third share which would pass to her estate if she still owned it [her interest in the properties] at her death.(18)

The judges considered that they would not have been found to have understood these matters, so that the transactions they had entered into were merely voidable. However, a transaction that was voidable by reason of the incapacity of a party is valid unless, and until, it is voided by that party or the representative of that party (including an administrator). The judges pointed out that it was not open to others, particularly those claiming adversely to the incapable party to get out of the transaction.(19)

Moving now to a 2017 decision of the New South Wales Supreme Court appealed to the New South Wales Court of Appeal in 2018.(20) That case was about a complicated transaction involving the transfer of title to land, which was subject to mortgage. Lindsay J found that, on the relevant day, the landowner lacked the capacity to make the contract (enter the transaction) and that the purchaser ought to have known this. The purchaser tried to avoid that issue by using solicitors to “stand “between the parties”.(21) Lindsay J went into detail about the facts of the case before going on to state that, at common law, the owner’s lack of mental capacity to enter the contract coupled with the purchaser’s state of knowledge of it was sufficient to render the contract void.(22) It should be noted that, in this case, when the landowner entered the transaction his financial affairs were not under management. However, by the time the case came on for hearing, the landowner, because of his dementia, lacked capacity to manage his affairs and the proceedings were conducted on his behalf by a “tutor” as required under the Uniform Civil Procedure Rules 20005 NSW. The tutor sought an order that the deed of arrangement be declared void or set aside, see [13].}}

Lindsay J pointed out that the owner of the land was fixated on getting rid of his troublesome mortgage, without understanding how that could be, or was to be, brought about, and without understanding the disadvantages to him of the manner in which it was proposed that he be rid of the mortgage. He signed what was suggested to him he should sign to be rid of the mortgage, and without any appreciation of the meaning or legal and financial implications of what he was doing, These implications included the creation of a life estate in himself, the conferral of a remainder interest in his land upon the purchaser, and the respective rights and obligations of both himself and the purchaser. He signed the documentation without any appreciation of the fact, or extent, of his future dependence on the purchaser for security and support, or appreciation that the purchaser acquired a present entitlement to his land.(23)

It was this part of Lindsay J’s judgment that was set aside by the Court of Appeal. It held that the landowner (the respondent in the appeal) had capacity to enter the complicated contract. However as will be seen at 3.3.7, the Court of Appeal dismissed the appeal in relation to Lindsay J’s finding that the land transaction was unconscionable and could be set aside and that the transaction was “unjust” under the provisions of the Contracts Review Act 180 _(NSW).

President of the New South Wales Court of Appeal, Beazley P gave the leading judgment. Campbell and MacFarlan JJA agreed with her. She based her decision on Gibbons v Wright, and considered that it was probable that the landowner understood the general purport of the transaction into which he was entering.(24)

Beazley P noted that the High Court judges in Gibbons v Wright explained that the “nature of the transaction” referred to “the broad operation” or “general purport” of the instrument. But that, in some cases, it may mean the “effect of a wider transaction which the instrument is a means of carrying out. (25) She stated that:

A person will lack the mental capacity to enter into a binding transaction if they are not capable of understanding the general nature of what they are doing or do not have the capacity to understand the transaction when it is explained. Whether a person has capacity will depend on the particular transaction in question.(26)

Beazley P pointed out, by reference to the High Court of Australia’s joint judgment in Gibbons v Wright, that the law did not prescribe any fixed standard of sanity [mental capacity] for the validity of all transactions. Rather it requires, in relation to each particular matter or piece of business transacted, that each party shall have such soundness of mind as to be capable of understanding the general nature of what [they are] doing by [their] participation.(27) She noted Lindsay J’s finding that in the absence of a “careful explanation of the business to be transacted”, the landowner lacked the capacity to enter into the Deed and the Transfer (the contract/transaction). She noted Lindsay J’s reasons for this including that the landowner signed the Deed without any appreciation of the legal and financial implications of the creation of a life estate and the conferral of a remainder interest on the appellant, or of the respective rights and obligations of the appellant and himself under the agreement. She noted other reasons for Lindsay J’s conclusion namely, the landowner’s fixation on discharging the mortgage, his lack of appreciation of the extent of his future dependence on the appellant and, importantly, his lack of appreciation that the appellant (the purchaser) had acquired a present interest in the land.(28)

However, Beazley P took the view that not all of those reasons were relevant to the question whether the landowner lacked capacity. In her view the landowner’s fixation on having the mortgage discharged, his lack of appreciation of the financial implications to him of creating a life estate, and his lack of appreciation of the extent of his dependence on appellant under the arrangement, were not matters that related to the nature of the transaction. Rather, they related to his (the landowner’s) motivation for entering into the transaction and the financial implications of doing so. Also Beazley P stated that she did not consider that those matters were aspects of “a wider transaction which [the Deed and the Transfer were] a means of carrying out”: referred to in Gibbons v Wright.(29) She used the same reason for rejecting them as not relevant to the question of the landowner’s capacity, namely that those matters too part of the were the motivation for and some of consequences of the transaction.(30)

Beazley P considered that Lindsay J imposed too high a standard of what was required for the purpose of determining capacity because of his concern about the landowner’s solicitors’ failure to be vigilant in respect of the improvidence of the transaction he was entering into. Beazley P was of the opinion that for the purposes of determining capacity, it is sufficient if the explanation given them enables the person (the landowner in this case) to understand the general purport of the transaction.(31)

We note what was said by the Deputy High Court Judge said in the Chancery Division appeal case set out above, namely that, there is a distinction between the key features of a transaction, and ancillary, incidental or procedural aspects of it; and that while it was not necessary that a person had capacity to understand every detail of the proposed transaction, the required capacity was to understand its key features.(32) We suggest that among the key features and the effect of the transaction between the landowner and the purchaser in the New South Wales’ case were the financial implications for the landowner, including his loss of any security upon which to raise capital to purchase aged care, and the flimsiness of his right to stay in his own home. These are fundamental risks arising immediately as consequences of the landowner entering into the transaction. They are not ancillary, incidental or procedural aspects of doing so.

Another element of Gibbons v Wright to which recent cases in New South Wales and England refer is that capacity may be described as; “the capacity to understand the nature of that transaction when it is explained”.(33).In the English cases the issue is stated as whether the person had the ability to understand the transaction, not whether they actually understood it. The idea mooted is that few people have the capacity to manage all their affairs unaided, and whether they are capable of managing their property and affairs depends on whether they are capable of taking, considering, and acting upon appropriate advice. Consequently, in a case where a person needs advice and assistance to enable them to understand the transaction, the question of capacity is to be assessed by reference to the complexity of the transaction proposed, and the advice and assistance that they need to understand it, not the advice and assistance that they actually received. Otherwise a person's capacity would depend on whether they had received good advice, bad advice or no advice at all.(34)

MacFarlan JA took up this matter in the New South Wales Court of Appeal case when agreeing with Beazley P.(35) He referred to Gibbons v Wright as the case in which the test for determining whether a party to a transaction had the capacity to enter into it was authoritatively stated. However, he reworded the test so that it became whether the person or persons alleged to have lacked capacity had been capable of understanding at least the “general purport” of the relevant instrument “if the matter had been explained to them”.

MacFarlan J A then continued by pointing out that Lindsay J had concluded his discussion of the issue of capacity by stating that “[a]bsent a necessary, careful explanation of the business to be transacted … (the landowner) lacked the mental capacity to transact it” MacFarlan JA pointed out that Lindsay J did did not find that the landowner would not have been able to understand the general purport of the Deed and the Transfer if a proper explanation of them had been given to him. Consequently, a finding that the landowner lacked relevant capacity was not warranted because the Gibbons v Wright test had not been applied.(36)

However, the assumptions upon which both Fehily v Atkinson [2016] EWHC 3069 (Ch), [81]-[83] and Hanna v [2018] NSWCA 201, [161]-[162] are based are not consistent with the medical conceptualisation of capacity. Capacity can only be assessed if the person has been provided with the information relevant to making the decision. This was stated some years ago as the crucial information step for the determination of capacity. (37) What this means is that it is very difficult to make a determination of capacity unless the person has been given all of the information and support required to make a decision. Rarely can it be predicted whether or not a person “would have had capacity if the matter had been sufficiently explained to them”. The only exception would be for a very complex matter or estate where it is quite likely that even a person with mild cognitive impairment or of limited financial literacy could have understood the transactions or decisions to be made. As we point out in several areas in this book, particularly in Chapter 8 at 8.12.2.1, that there is scientific evidence to suggest that people with Mild Cognitive Impairment (a potential pre-stage of dementia) have difficulties with financial decision-making per se and particularly so for more complex transactions. (38)

But we are still left with the question how much understanding is required? As stated above, we suggest that there is no fixed standard of capacity to be applied to all transactions, reverting to the Gibbons v Wright principle that it depends upon “the particular transaction”. The next pressing question then is how can a lawyer decide if their client has capacity? We would counsel that the answer to this is to ask a suitably qualified health professional, and most judges recognise this contribution. In a 2016 case in the Exchequre Division of the High Court of Justice in England, Jourdan QC sitting as a Deputy High Court Judge noted: Fehily v Atkinson [2016] EWHC 3069 (Ch), Jourdan S noted:

Mr McCulloch emphasised the importance of medical evidence, drawing attention to what was said by Kennedy LJ in Masterman-Lister at [29]: “The final decision as to capacity, it is agreed, rests with the court but, in almost every case, the court will need medical evidence to guide it.”. I agree. Except in a very clear case, the court does not itself have sufficient expertise to know whether a person’s medical condition is such that they lack the requisite capacity.(39)

We note that several principles collide here. The most pressing is the presumption of capacity, which is echoed by other principles such as the right to equal legal capacity and the right to supported decision-making articulated in Article 12 of the Convention on the Rights of Persons with Disabilities (CRPD). The CRPD confirms the long held common law right of every adult to the presumption of capacity. It also creates, as a matter of international law, the right of all adults with disability to be given the opportunity to make decisions by being provided with whatever information and support is required to help them to make the decision. However, for some, the presumption of capacity will be rebutted by the existence of a significant mental or cognitive disorder affecting judgment. Some people with cognitive impairment, no matter how much support is given to them, will be incapable of making certain decisions. This is where suitably qualified experts can assist lawyers, tribunals or Courts to understand the person’s decision-making abilities in the context of the decision, notwithstanding the fact that the court is the ultimate arbiter of capacity.

It is also important to appreciate that the parens patriae jurisdiction of the Supreme Courts and the legislatively created jurisdictions of tribunals in all the States and the two Territories to appoint guardians to make personal and lifestyle decisions and administrators (financial managers) to make financial decisions for those who cannot make those decisions for themselves and need someone else to make those decisions for them, are protective in nature. These legislative provisions and the parens patriae jurisdiction are intended to protect, but not in a patronising or overweening way, the interests of persons with decision-making disabilities. Also they are consistent with the right to be safeguarded against undue influence and abuse, again articulated in Articles 12 and 16 of the CRPD.

3.3.1 How do doctors and psychologists determine capacity?

When determining capacity to understand a transaction, the general principle or ‘formula’ of decision-maker versus task must be applied. That is, the assessor must take into account both the abilities of the decision-maker and the demands of the decision-making task. The nature and effect of some transactions are simple and require less cognitive ability to understand, while others have complex and far reaching consequences. Complex decisions require a fairly high level of cognitive functioning to assimilate all of the relevant information and to form a clear and consistent decision. Accordingly, contractual capacity relates to the specific contract, not to contracts in general.(40)

Property sales or gifts are probably the most common transaction in which assessors are asked to assess the capacity of the person making the transaction.

These are also two of the most common situations in which older, cognitively impaired people are exploited, by virtue of their inability to understand the nature and effect of what they are doing. Yet requests for contemporaneous assessments of capacity to enter into contracts are rare. This is due to the common law presumption that a contracting party has the requisite mental capacity to enter into the contract and the onus of proving that this is not the case and that the contract should be voided lies with the person that alleges the incapacity.(41)

Consequently, requests for assessment usually come some time after the transaction has been made, often because an advocate for the impaired person becomes aware that the transaction has taken place and challenges the validity of the contract. In such cases, the assessor is asked to perform a retrospective assessment based on the person’s likely functioning at the time the transaction was made.

When asked to assess such a person, as with other types of capacity, it is usually helpful to perform a general mental status and cognitive examination first to gain an estimate of the person’s general cognitive abilities, the severity of any cognitive decline and their functioning in specific frontal lobe cognitive abilities such as judgment, reasoning and insight. It is then important to assess the person’s understanding of the nature and effect of what they are doing. It is the understanding of the effect of a transaction which has the broadest interpretation and probably requires a fairly high level of cognitive function, particularly frontal lobe functions of planning, judgment, reasoning and working memory. Darzins and others have outlined some of the cognitive and functional tasks involved which include: weighing risks and benefits in choosing purchases and investments, remembering assets, debts and obligations, detecting and avoiding fraud and performing calculations necessary to carry out the transaction.(42)

Using the example of property transaction suggested above, it is helpful to ask the following questions:

1. Does the person have an understanding in general terms of the value of the property they are selling or giving away?
2. Do they have an understanding of the risks, benefits and consequences of selling or gifting their property in terms of their lifestyle and accommodation e.g. if they reside in the property do they understand that they will have to leave and find alternative accommodation?
3. Do they have an understanding or can they comprehend advice regarding the financial implications of what they are doing, both in terms of their future needs and their estate?
4. Can they understand the document/s they are being asked to sign?

As always, the person needs to articulate their understanding in their own words, not just give affirmative answers to closed questions.

Beazley P pointed out in a 2018 case in the New South Wales Court of Appeal that it was an unresolved question whether actual knowledge of the incapacity is required or whether constructive knowledge was sufficient. (43) However, she introduced that comment by stating in a case in which all three Court of Appeal judges agreed that, for a transaction entered into by a person without the required capacity to be voidable, it was necessary that the other party to the transaction had knowledge of the incapacity.(44) It is because of this “rule” that experts are sometimes asked to comment whether the person’s incapacity should have been obvious to the other party when the contract was made. This is a very difficult issue. International experience suggests that only minimal enquiry of the client’s understanding is not unusual amongst lawyers whose often cursory interactions with clients during the execution of documents may allow them to miss even severe dementia.(45)

Even health care professionals dealing with the client may miss the diagnosis. Studies have shown that family doctors, many of whom rely on passive identification rather than active screening of dementia for diagnosis, often fail to identify dementia.(46)(47) It is thought that somewhere between 25-90% of cases of dementia are missed in clinical practice.(48) The same is often true for nursing staff in nursing homes and in hospitals.(49)(50)(51)

One of the reasons lawyers, doctors and nurses alike miss the diagnosis of dementia is the attribution of observed changes or abnormalities to “normal ageing".(52) Ignorance and ageist attitudes still predominate. For example, in one study of aged care nurses the word “old” most commonly prompted negative responses (e.g. “feeble”, “dependent” “incapable”) or at best, neutral responses (e.g. “glasses”, “walking sticks”, “grey").(53) Thus, even when abnormalities are observed lawyers may not make links between these observations and cognitive impairment or dementia.

3.3.2 Time at which the person must have capacity

If the contract, gift, conveyance or other transaction is put into writing and signed by the person said to lack capacity to enter into the arrangements set out in the written document, the question arises when is the critical time for the person to have capacity? If the person has capacity at the time they signed the relevant written document, then they will be held to have had capacity to enter into the transaction set out in the document. If however the person is found to have lost capacity between the time they gave instructions for the document to be drawn up and when they signed the document, if the document is consistent with the instructions given by the person when they had capacity, the transaction will be held to be valid.(54) The transaction will be enforceable against the person who gave the instructions for it to be put into writing unless there is another basis, such as undue influence and unconscionability, for setting the transaction aside. Undue influence and unconscionability are dealt with at 3.4.2 and 3.4.3 below.

3.4 Setting aside contracts, other transactions and gifts made during the lifetime on the gift-giver

If a person lacks the capacity to enter a transaction or to make a gift during their lifetime, and it is in their interests to cease to be bound by or to have any of the benefits of the transaction there, are grounds upon which they may have the transaction or gift set aside. The primary ground is that the person did not have the capacity to enter the transaction or make the gift. Related to that, and often arising in the same fact situation as lack of capacity, are the grounds of unconscionability and undue influence. These are dealt with at 3.4.2 and 3.4.2 respectively. There are other, perhaps more limited, ways of dealing with the matter too. These are the defence of non est factum, which is dealt with at 3.4.6; contracts and other transactions entered into by a person whose financial affairs are under administration or management under State or Territory legislation, which is dealt with at 3.4.5 and contracts that can be reviewed by legislation such as the Contracts Review Act 1980 (NSW).(55)

On the other hand there are contracts for necessaries which must be honoured and services rendered on the basis of quantum meruit. These matters are taken up at 3.5.1 and 3.5.2 respectively.

Before moving to the question of setting aside transactions it is worth noting that, in Queensland, the Supreme Court is empowered by the Powers of Attorney Act 1998 (Qld) to make a declaration about a person’s capacity. Any declaration the Court makes about whether a person has capacity to enter a contract is binding in a subsequent proceeding in which the validity of the contract is in issue.(56) The Queensland Civil and Administrative Tribunal also has power to make a declaration about a person’s capacity to make a contract. Such a declaration is evidence of a person’s capacity in any proceedings in which the validity of the contract is an issue.(57)

3.4.1 Seeking to have a transaction or gift declared void on the ground of incapacity to enter the transaction or to make a gift

As the High Court noted in Gibbons v Wright, the common law developed over time to establish the principle that where a person who lacks the capacity to enter a transaction goes through the process of doing so, but then seeks to be freed from their obligations under the transaction, the transaction is treated as being voidable by them and not void.

This means that that person will be bound by the transaction until a court or tribunal with power to do so declares the transaction to be void. It is the incapable person, or others authorised to act on their behalf, who may seek to have the transaction declared void, and not the other parties to it, or third parties. However, the incapable person will not be able to have the contract declared void if:

1. it is a contract for necessaries as perceived in relation to the person challenging the contract; or
2. if the other party to the contract believed that the person with whom they were dealing was not incapable.

Consequently, in order to succeed in avoiding a transaction on the ground of incapacity, the incapable person must be able to prove:

1. their mental incapacity, and
2. that their mental incapacity was known to the other contracting party.
   (58)

These requirements also apply if incapacity to make a contract is raised as a defence.(59)

To illustrate the difficulty of proving that a person did not have the capacity to enter into a transaction, even a complicated transaction, it is useful to consider a case from New South Wales that was dealt with by the Supreme Court in 2017 and the NSW Court of Appeal in 2018. The case is discussed in detail at 3.3 above. (60) As already noted, the case was about a complicated transaction involving the transfer of title to land, which was subject to mortgage. The trial judge, Lindsay J, found that, on the relevant day, the landowner lacked the capacity to make the contract (enter the transaction) and that the purchaser ought to have known this. The purchaser tried to avoid that issue by using solicitors to “stand “between the parties”.(61) Lindsay J went into detail about the facts of the case before going on to state that, at common law, the owner’s lack of mental capacity to enter the contract coupled with the purchaser’s state of knowledge of it was sufficient to render the contract void.(62) Lindsay J pointed out that the landowner was fixated on getting rid of his troublesome mortgage, without understanding how that could be, or was to be, brought about, and without understanding the disadvantages to him of the manner in which it was proposed that he achieve that goal. He signed what was suggested to him he should sign to be rid of the mortgage, and without any appreciation of the legal and financial implications of what he was doing, These implications included the creation of a life estate in himself, the conferral of a remainder interest in his land upon the purchaser, and also the creation of certain rights and obligations in both himself and the purchaser. He signed the documentation without any appreciation of the fact, or extent, of his future dependence on the purchaser for security and support, or appreciation that the purchaser acquired a present entitlement to his land.(63)

In 2018, this part of Lindsay J’s judgment was set aside by the Court of Appeal. It held that the landowner (the respondent in the appeal) had capacity to enter the complicated transaction. The President of the New South Wales Court of Appeal, Beazley P, gave the leading judgment. Campbell and MacFarlan JJA agreed with her. She based her decision on Gibbons v Wright. She stated the test that: “the mental capacity required by the law in respect of any instrument is relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of that transaction when it is explained. “ She noted that the High Court explained that the “nature of the transaction” referred to “the broad operation” or “general purport” of the instrument, but that, in some cases, it may mean the “effect of a wider transaction which the instrument is a means of carrying out”.(64)

After further considering the facts of the case, she held that it was probable that the landowner understood the general purport of the transaction into which he was entering.(65) As already noted in 3.3 above, Beazley P took the view that not all of the reasons Lindsay J gave for finding that the landlord lacked capacity when he entered the transaction were relevant to that question. In her view the landowner’s fixation on having the mortgage discharged, his lack of appreciation of the financial implications to him of creating a life estate, and his lack of appreciation of the extent of his dependence on appellant under the arrangement, were not matters that related to the nature of the transaction.(66)

However Lindsay J also dealt with the unconscionability of the transaction. He noted that whether or not it was correct to characterise the landowner as lacking mental capacity to enter the transaction, his age, frailty and state of health were sufficient to attract characterisation as a special disability. Lindsay J said that the landowner was at a serious disadvantage, vis-a-vis the purchaser at the time he entered the transaction. He was unable to make a sound judgement as to his own best interests, or to protect his own interests.(67)

Lindsay J noted that, the purchaser, knowing the landowner’s age and frailty, ought also to have known of his vulnerability. Notwithstanding this, he, the purchaser, took advantage of the landowner’s weakness of mind and body by rushing him towards entry into an improvident transaction. Because the purchaser’s conduct in inducing the landowner to enter the transaction and retaining the benefit of it for himself was unconscientious, Lindsay J held that the purchaser could not, in good conscience, retain the benefit of the transaction.(68)

Lindsay J then went on to state that, to the extent that they might otherwise have legal force, the major elements of the transaction namely, the deed of arrangement and the memorandum of transfer, were liable to be set aside in equity. Consequently, the purchaser must be viewed as holding his interest in the landowner’s land on trust for the landowner, subject only to the landowner himself doing equity by allowing for the purchaser’s discharge of the landowner’s mortgage.(69)

The Court of Appeal held that Lindsay J was right in finding that the purchaser had taken unconscientious advantage of the landowner in entering into the transaction.(70) Beazley P stated that the purchaser’s unconscientiousness in entering the transaction was, “reinforced by the following circumstances”:

First, (the landowner) did not know the extent of the undervalue at which he had agreed to transfer the remainder interest. Secondly, subject to his statutory rights under the Conveyancing and Law of Property Act 1898 (NSW), the transfer of the remainder interest to (the purchaser) meant that (the landowner) had lost his recourse to capital. This was potentially of significance should he, in the future, require aged residential or nursing home care. Thirdly, (the purchaser) was not constrained by the terms of the Deed from selling or otherwise dealing with his remainder interest. Although he could not sell the property without (the landowner’s) consent, Mr Raoul’s mental state and, in particular, his suggestibility were likely to make him particularly vulnerable should (the purchaser) seek to sell the property.(71)

Lindsay J noted “for completeness” that the Contracts Act 1980 (NSW) was available to the landowner to seek “relief”.(72) However, he also stated that: “In substance, the relief available under the Contracts Review Act is the same as that available in equity”.(73)

The Court of Appeal considered whether the Deed and the Transfer (the transaction) were “unjust” at law or within the meaning of the Contracts Review Act 1980 (NSW); and found that it was.(74)

3.4.1.1 A summary and where to from here

To sum up the situation, as understood by us at the time of writing (November 2018), in relation to the question of having a transaction or gift declared void on the ground of incapacity to enter the transaction or to make a gift; the New South Wales Court of Appeal has held that the requirement for capacity to enter a transaction or make a gift is the capacity to understand the “general purport” of the transaction. In the case in which the Court of Appeal made that statement, some matters which the trial judge thought needed to be understood by the person seeking to have the transaction set aside were seen by the Court of appeal as not matters that related to the nature of the transaction. The Court of Appeal saw them as related to his motivation for entering into the transaction and the financial implications of doing so.(75) This left open the question of when did the idea of understanding the “effect of a wider transaction which the instrument is a means of carrying out” become relevant. However as noted above, the Court of Appeal did treat these matters as relevant to the question of whether or not the transaction should be set aside as unconscionable.

In a 1983 case Deane J noted that, the equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence, while closely related, were distinct. Undue influence, like common law duress, looked to the quality of the consent or assent of the weaker party, while unconscionable dealing looked to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it was not consistent with equity or good conscience that they should do so. He also noted that the adverse circumstances, which may constitute a special disability for the purposes of relief against unconscionable dealing, may take a wide variety of forms and were not susceptible to being comprehensively catalogued.(76)

As already noted in 3.3.1 above, gifts during lifetime (inter vivos) and sales of property well below market value are probably two of the most common situations in which older, cognitively impaired people are exploited, because of their inability to understand the nature and effect of what they are doing. When such gifts or sales are made between parents who are elderly and frail and lack the capacity to execute the deed making the gift and their adult children, parents can be left in a difficult position financially and relations between them and other members of the family whose expectations are disappointed by such transactions can be disrupted or destroyed. Nevertheless, gifts of real property between family members, particularly from parents to adult children during the lifetime of the parent, are a normal occurrence.

Where real property, such as a house or land, is transferred from a parent to a child as a purely voluntary act or where love and affection is the only consideration, there will be no presumption of undue influence or that the transaction was improper unless there is evidence to raise such matters. In the United States, the parent is presumably the dominant party even where the parent is aged, or aged and infirm.(77)

There will be situations in which a transfer of property has been obtained by an adult child where the parent had no idea what they were doing and so no capacity to carry out the transaction. In Australia, the cases brought to retrieve such property either for the gift-giver or their estate, have been argued on the basis of unconscionability or undue influence or both.(78)

Nevertheless, we consider it appropriate to consider unconscionability and undue influence separately before considering cases in which both unconscionability and undue influence are both alleged against the defendant in the case.

3.4.2 Unconscionability

In a speech given in 2007, Gleeson CJ of the High Court of Australia referred to the use of the concept of unconscionability as a basis for giving equitable relief to one party to a transaction where that person, because of some special disadvantage, was unable to act in their own best interests.(79) He referred to a 1948 case in which the High Court upheld the decision of a trial judge to set aside a deed in which an uneducated man of dull intellect and defective hearing was bustled into making a gift of his share of his wife’s estate to his stepson.(80) In that case Latham CJ noted that courts of equity can set aside a transaction and cancel a document on various grounds, such as fraud, undue influence, mistake, lunacy, duress, non-disclosure of material facts when there is a duty to disclose, abuse of confidential relationship, or, in some cases, failure to show that there had been no such abuse. However, Latham CJ also noted that this was not such a case and, specifically, that there had been no confidential relationship between the parties. He also noted that this was not a business transaction where different considerations might apply. Nevertheless, although he didn’t use the term “unconscientious” that his colleague judges used, he noted that where a gift was not a business transaction, the gift-receiver was the moving spirit in the transaction, the gift was all or most of the person’s property and the gift-giver is “of weak will or of poor mentality”, a court of equity will set aside the gift unless it is shown that the gift-giver understood the substance of what they were doing.(81)

Rich J, with whom Dixon J agreed, noted that in this case:

1. the contents of the deed and its implications were not explained to the gift-giver and that, although he executed it, he did not know he was making a gift of his share in his late wife's property,
2. the gift-giver did not know the extent of the share of his wife’s property to which he was entitled or its value,
3. he was bustled into executing the deed with unseemly haste,
4. a copy of the deed was not left with him, and
5. the gift-receiver made no attempt to explain the nature of the transaction to the gift-giver beyond some reading of the deed which, even if the gift-giver had heard it, he would not have been able to understand.(82)

Rich J stated that the jurisdiction of courts of equity is based upon unconscientious dealing and continued:

It has always been considered unconscientious to retain the advantage of a voluntary disposition of a large amount of property improvidently made by an alleged donor (gift-giver) who did not understand the nature of the transaction and lacked information of material facts such as the nature and extent of the property particularly if made in favour of a donee (gift-receiver) possessing greater information who nevertheless withheld the facts.(83)

He concluded by stating that the transaction was “neither fair nor righteous and in the view of a court of equity it must be regarded as unconscientious for the [gift-receiver] to take the gift or retain it".(84)

In a 1992 case which shows that the unconscionability principle can be applied in a broad range of situations, Deane J noted that it has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which:

1. a party to a transaction was under a special disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them, and
2. that special disability was sufficiently evident to the other party to make it prima facie unfair or "unconscionable" that that other party procure, accept or retain the benefit of, the disadvantaged party's assent to the impugned transaction in the circumstances in which he or she procured or accepted it.

Deane J noted that where such circumstances are shown to have existed, an onus was cast upon the stronger party to show that the transaction was fair, just and reasonable in order to obtain or retain the benefit of it.(85)

He also noted that the adverse circumstances, which may constitute a special disability for the purposes of the principle, may take a wide variety of forms and are not susceptible of being comprehensively catalogued. However, he listed some established examples of special disability as 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 and noted that the common characteristic of such adverse circumstances seemed to be that they had the effect of placing one party at a serious disadvantage vis-a-vis the other.(86)

Deane J and the other majority judges were of the view that the gift-giver was under a special disability in dealing with the gift-receiver at the time the gift-giver gave the impugned gift to the gift-receiver. That special disability arose not merely from the gift-giver’s infatuation with the gift-receiver but that it extended to the extraordinary vulnerability of the gift-giver in the false "atmosphere of crisis" in which he believed that the woman with whom he was "completely in love" and upon whom he was emotionally dependent was facing eviction from her home (and intended suicide if that happened) unless he provided the money for the purchase of the house. The gift-receiver was aware of that special disability which, to a significant extent, she had deliberately created. She manipulated the situation to her advantage to influence the gift-giver to make the gift of the money to purchase the house. When asked for restitution she refused. Also, from the gift-giver's point of view, the whole transaction was plainly a most improvident one.(87)

3.4.3 Undue influence

This area of equity law is evolving, with some parts of it more clearly established than others. In 2007 in the Supreme Court of New South Wales, Biscoe AJ noted that undue influence cases fall into two classes. These are:

1. cases where undue influence will be presumed from a relationship (presumed undue influence), and
2. cases where undue influence must be affirmatively proved (actual undue influence).(88)

In cases of presumed undue influence, the party benefiting from the transaction has the burden of rebutting the presumption. This reversal of the onus of proof is of practical importance in many cases, particularly where the circumstances in which the transaction occurred are peculiarly within the knowledge of the party benefitting, and the gift-giver is under a disability.(89)

The cases of presumed undue influence themselves divide into two categories. First, those in which certain types of relationships per se give rise to the presumption, without any need to prove more. These include relationships between solicitor and client, physician and patient, parent and child, guardian and ward, and religious advisers and their adherents.(90) They may also include the relationship between express trustee and beneficiary.(91) The second category is where it is proved that the party benefiting from the transaction occupies or assumes towards the other person a position naturally involving an ascendancy or influence over that other person, or a dependency or trust on that other person’s part.(92)

It has been suggested, by Ridge, that the current state of English equity law is that actual and presumed undue influence have been conflated so that if it can be shown that:

1. one party to a transaction had such strong trust and confidence in the other party, that the other (the trusted party) had the power significantly to influence (the trusting) party's decisions in relation to the transaction, and
2. the transaction entered into by the parties was not readily explicable according to the ordinary motives by which people act (thereby suggesting that influence was exercised by the trusted party),

then a factual inference of actual undue influence, rather than just a presumption of it, is raised. The evidential burden is then on the trusted party (and third parties who receive the benefit of the transaction, if affected by notice or agency principles) to show that the gift or contract was “the spontaneous act of the donor or grantor acting in circumstances which enable him to exercise an independent will and which justify a court in holding that the gift or transaction was the result of a free exercise of his will".(93)

That position appears on its face to be more favourable to the weaker party who may have been taken advantage of and compensates for the difficulty such persons have proving their case. It is also consistent with the legal policy behind the Australian position that actual undue influence does not have to be proved before the person who benefits from the transaction has to rebut the presumption that they gained their benefit though undue influence. Asprey JA pointed out in Whereat v Duff that in cases of presumed undue influence, the court sets aside the gift unless the person who benefits from it rebuts the presumption. The court does not act on the ground that any wrongful act has been committed by that person, but on the ground of public policy and to prevent the relations which existed between the parties and the influence arising from that relationship being abused.(94)

In an article published in 2002, Burns has suggested that notions developed in English law in the 19th century made it clear that old age in itself was not a sufficient ground for setting aside a contract or gift because the ability to make a valid transaction was not necessarily impaired with age. Secondly, that elderly parents were unable to rely on an automatic or established relationship of influence to set aside contracts and gifts made in their lifetimes for the benefit of their children, even as adults, because there was a strong expectation that parents would make gifts of property to their children as it was incumbent on parents to care for them and to advance their interests. Consequently, the relationship of parent and child would justify transfers of property from a parent to a child.(95)

Burns argued that the assumption that parents make gifts to their children has become deeply entrenched in the legal system (as it has in the United States system) so that property transactions in favour of children, during the lifetime of the parents, are considered to be natural and normal.(96) She also argues that, as a result of these 19th century developments, courts have not considered that the advanced age of the person entitles them to any special protection or treatment under the doctrine of undue influence and that the courts maintain a healthy scepticism about the frailty of the elderly. Furthermore, she argues, this has had a significant impact on the application of the doctrine of “undue influence inter vivos” because illness and feebleness will not necessarily be sufficient to persuade a court that a transaction ought to be set aside because ‘experience teaches us to be astute to vulnerability and inequality’ and in some cases elders have been considered to be quite shrewd. Also, courts have not been persuaded that, where elders and their relatives are involved, transactions should be subject to special scrutiny or that adult relatives (or third parties acting through them) should automatically be subject to specific obligations.(97)

In a 2009 case, Ward J of the New South Wales Supreme Court noted, contrary to what was noted by Biscoe AJ, that the relationship between parent and child did not automatically give rise to a presumption of undue influence where a gift was given by a parent to a child and that there was a rebuttable presumption that money given by a parent to a child was advanced by way of a gift.(98) However, she went on to note: “That said, undue influence is presumed where there is a sufficient relationship of dependency upon (or ascendancy exercised by) the [gift-giver]".(99)

However, it is clear that Johnson v Buttress remains a leading authority in this area of the law. In that 1936 case, a 67 year old, who was wholly illiterate, of low intelligence and devoid of experience in business affairs, transferred his home by way of a gift to a relative of his wife. He had become reliant on her in many ways, was constantly in her company, relied upon her advice and depended on her kindness after the death of his wife. The transfer was executed in the office of the gift-receiver’s solicitor. The gift-giver did not have independent advice. It was held that, because of the special relationship of influence that was shown by the circumstances to have arisen, there was a presumption of undue influence that arose from that relationship. Dixon J explained the basis of the jurisdiction Supreme Courts had to deal with this matter:

The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor’s (gift-giver’s) will or freedom of judgment in reference to such a matter.(100)

Using the language of and examples from the time, Dixon J noted that where the parties stand in a relation that gives to one an authority or influence over the other, it is proper that the latter should be protected from any abuse of that relationship. In these circumstances, the party in the position of influence cannot retain as a gift the beneficial title to property of substantial value given to them by the other person, unless they satisfy the court that they took no advantage of the gift-giver, and that the gift was the independent and well-understood act of a person in a position to exercise a free judgment based on information as full as that known by the gift-receiver. This burden is imposed upon one of the parties to certain well-known relationships as soon as it appears that the relationship existed and that they had obtained a substantial benefit from the other person. Consequently, a solicitor must thus justify the receipt of such a benefit from their client, a physician from their patient, a parent from their child, a guardian from their ward, and a man from the woman he has engaged to marry.(101)

Burns referred to that case but claimed that:

In practice, courts in Australia and New Zealand have set a high standard for proof of an antecedent relationship of trust and confidence where elders are concerned. Generally elders have had to demonstrate a physical, emotional and/or financial dependence on the defendant. An elder will be dependent upon a relative or caregiver if the elder relies on that person for the basic necessities of life, leaves the management of their financial affairs in that person's hands and/or is incapable of looking after himself or herself without the intervention of the relative or caregiver. Severe physical or mental impairment can be an important factor leading to the conclusion that the elder is dependent.(102)

While those who claim that they have gifted away their property under undue influence have to make their claims in the Supreme Court and have to go through the psychological stress and the financial risk of running a court case, cases decided since Burns wrote her article suggest that proving undue influence that elderly parents should be protected from is not as difficult as she suggested.(103) In a 2008 case, Barrett J of the New South Wales Supreme Court held that a mother’s transfer of half her home to her daughter and creating a joint tenancy through which it was almost certain that the daughter would become the sole owner of the property on her mother’s death could not stand because of presumed undue influence. The mother had moderate dementia at the time the transfer took place. The daughter paid off the balance of the mortgage on the property, but did not pay anything for her half interest in it. Just before the transfer the daughter took her mother out of an aged care facility and brought her back to her home and cared for her there.(104)

Barrett J noted that the circumstances in at the time of the transfer were such that the mother’s dementia based incapacity, combined with her gratitude towards her daughter for having brought her home from Queensland and restored her to her home environment, consolidated both dependence and trust on the mother’s part and ascendancy and influence on the part of the daughter. He continued:

This situation was a natural one in the circumstances. An old lady with failing mental powers and in deteriorating health was cared for diligently and with affection by her daughter. The [daughter] is to be commended for the way in which she looked after her mother. But the fact that the [daughter] acted towards her mother as she did out of respect and affection does not change the legal conclusion that the [daughter] stood in a position of undue influence towards [her mother].

That being so, the law requires that the [daughter] positively justify the retention of the benefit conferred upon her by [her mother].(105)

After considering the evidence Barrett J concluded:

In the circumstances, it is not possible to conclude that the transfer was the independent and well-understood act of a woman in a position to exercise a free judgment based on information as full as that of the [gift-receiver]. The freedom of the mother’s will, her understanding and her decision-making were affected by the dependence on her daughter that was, in part at least, the product of her mental deterioration. And the evidence provides no basis for concluding that the [daughter] has positively justified the retention of the benefit conferred on her.(106)

The 2009 case Barkley v Barkley Brown is another example.(107) In that case a childless woman raised her niece, her nearest relative, from childhood. Later in life she became dependent on her niece after a period when the niece was away. Ward J found that the woman’s vulnerability or susceptibility to her niece’s influence was clear. Her niece cared for her and spent a considerable time with her. The woman’s health was deteriorating and her delight in her niece’s return was manifest. The fact of the woman’s physical dependence on and emotional attachment to her niece and the position of trust and confidence in which her niece was placed, in which the niece acknowledged obliged her to act in best interests of her aunt, and not her own best interests, led Ward J to conclude that the niece (without being conscious of any impropriety) benefited from her aunt’s disadvantageous position, by taking for her own benefit or for that of her family gifts and money in accordance with what she understood to be her aunt’s instructions and ordered her to repay at least some of the gifts.(108)

Ridge has claimed that is regarded as settled law that the equitable doctrine of undue influence does not apply to gifts given in wills despite the fact that the factual scenarios involving a gift in a will may be virtually indistinguishable from a gift given during lifetime.(109) Undue influence in relation to wills is dealt with in Chapter 4.(110)

In a 2017 case also discussed in 3.4 4 below, Lindsay J of the New South Wales Supreme Court dealt with a set of circumstances in which breach of fiduciary duty and undue influence were alleged. (111) A myriad of variations on the fact situation in that case - involving gifting of assets by an older person - are likely to present themselves as more people live on with reduced decision-making capacity, but have substantial financial assets. In 2002, after her husband died, a woman (Mrs H) whose only child had died aged 7 asked a nephew on her husband’s side and his wife to move in with her. They sold their house and moved in with her in 2003 and looked after her rent-free. However on 3 February 2009 she asked them to leave her house, which they did. From 1 May 2001 until 14 January 2009 they were her joint enduring attorneys and joint enduring guardians. On the day their appointments were revoked, a nephew on her side of the family was appointed to replace them as enduring attorney and enduring guardian.

These changes in circumstances, by which a nephew on her husband’s of the family fell out of favour with Mrs H and was replaced by a nephew on her side of the family occurred over a period in which Mrs H’s mental faculties were failing. She made four wills after her husband’s death. The first three of these wills contained provisions in relation to her husband’s nephew and his wife as a form of recompense to them for them selling their house and moving in with Mrs H. However, there was no reference to her husband’s nephew and his wife in Mrs H’s last will made on 27 March 2009. None of these wills was challenged and probate of the final will was granted as one of the orders made at the end of the case.

Mrs H became part of her nephew’s household and was “ostensibly” under his care until her death aged 90 in June 2013. During that time she, “conferred substantial financial benefits on [her nephew] and his family, [but] dying with an estate of ostensibly nominal value”. (112)

The case raises the issue of fiduciary duty because Mrs H’s nephew became her attorney under an enduring power of attorney in 2009 and, as noted, substantial financial benefits flowed to him and his family. However, Lindsay J noted that while, “the concepts of fiduciary relationship and a special relationship of influence attracting a presumption of undue influence are nevertheless closely aligned in a factual setting such as the present case”, “the existence of a fiduciary relationship does not automatically give rise to a presumption of undue influence”. (113)

Lindsay J’s view, on the facts of this case, was that Mrs H’s nephew did not breach his fiduciary duty as her enduring attorney because he did not take any action, by signing documents or by taking other actions to transfer her financial resources to himself or others. Lindsay J was also of the view that Mrs H’s nephew was not in breach of his fiduciary duty to Mrs H as her enduring attorney when he acquiesced in her making a large and improvident gift to his bankrupt daughter; and failed to maintain control over and investigate dealings with her [Mrs H’s] assets.(114)

Nevertheless, Lindsay J sets out in his judgment a range of facts in the case that give rise to Mrs H’s nephew having “the obligations of a fiduciary” and “to give rise to a presumption of undue influence against him in the event (as occurred) of an alienation of substantial property by her in his favour”.(115) These included him, after Mrs H had moved in with him and his family, encouraging or facilitating dissipation of Mrs H’s property by displays of improvident generosity, which contributed to her dependency upon him. (Mrs H had moved in with him and his family at their instigation. Their house was far away from where she used to live.) He aided her in accessing an ATM or a bank on a regular basis. He readily accepted gifts. In no practical way did he discourage, or limit, her unbridled giving away of property. Also Mrs H was an elderly woman suffering, and known by him and his wife to be suffering, dementia. Her mental faculties were deteriorating.(116) However Lindsay J was of the view that while her nephew was in a position to influence her, he was not engaged to control her affairs or, against her will, to stand between her and third parties. This was because, while she was vulnerable to exploitation, Mrs H retained autonomy in management of her affairs until the end.(117) This meant he avoided having to account for and pay into Mrs H’s estate the $375,000 Mrs H had made available to his bankrupt daughter.(118)

The outcome of the case contains elements of a cautionary tale. The husband’s nephew and his wife, who sold their house and moved in with Mrs H at her request did not challenge Mrs H’s final will. They claimed some of the proceeds of the sale of her house which, as already noted, was sold at the time she moved in with her nephew and his family, on the basis of promissory estoppel. Their claim failed because when in February 2009 Mrs H asked them to leave the property, they “dutifully did so without protest”. Lindsay J considered they did this as a matter of family comity rather than perceptions of personal advantage. It was because of the missing element of any detrimental reliance by them upon promises by Mrs H that their claim failed.(119) However they did succeed in their uncontested claim for family provision relief and were awarded $40,000 each from Mrs H’s estate.

Another of the plaintiffs in the case was granted administration of Mrs H’s estate.(120) Although he was a nephew on Mr H’s side of the family, he was a residuary beneficiary under all four on Mrs H’s last wills.

While Mrs H’s nephew escaped liability in relation to Mrs H’s gift to his daughter, he was required to account to and pay into her estate $560,000 plus interest in relation to those sums from the dates they were obtained by him between mid 2009 and about 2 March 2011.(121) He was the other residuary beneficiary of Mrs H’s last will.

3.4.4 Setting aside lifetime gifts on grounds of undue influence or unconscionability where gift-maker has “special disadvantage”

Please note that the words unconscientious and unconscionable are used interchangeably in this chapter, and have the same meaning. The words unconscientiousness and unconscionability are also used, and with the intention that they have the same meaning.

In a 2017 case, in a joint judgment, five members of the High Court set out a summary of duress, undue influence and unconscionable conduct.(122) The “plurality” Kiefel CJ, Bell, Gaegler, Keane and Edelman JJ set aside the pre-nuptial and post-nuptial agreements in the case on the basis of undue influence and also on the basis of unconscionable conduct. Nettle J, in a short judgment that went to the heart of the matter, held that Mr Kennedy took unconscientious advantage of Ms Thorne's position of special disadvantage.(123) He then set out the factual situation that demonstrated that finding. (124) Gordon J took the view that Ms Thorne signed the agreements as a result of Mr Kennedy’s unconscionable conduct, but not undue influence.(125)

While the case discussed in the last paragraph dealt with pre and post-nuptial agreements set aside on the basis of undue influence and also on the basis of unconscionable conduct, the statements made by the plurality about undue influence and unconscionable conduct were quoted at length by Sackar J of the New South Wales Supreme Court when he was setting out the current law in a 2018 case.(126) In that case a son persuaded his elderly mother, among other things, to transfer a property to him. Sackar J, in a necessarily long judgment, set out both the relevant facts and detailed his findings.

The son began to apply pressure on his mother to achieve this outcome soon after the death of her husband, his father. The evidence showed that she was in no position to assess her financial needs and what was in her best interests generally and that her son acted solely in his own interests with total disregard for his mother’s present and future needs. Sackar J was also satisfied that the son took advantage of his mother’s vulnerable and confused state and engaged in unconscionable conduct. The son knew of the existence and effect of his mother’s special disadvantage and unconscientiously took advantage of it.

Further, and in the alternative, Sackar J was of the view that the facts also supported a finding of undue influence, stating that the mother’s will was so subordinated to her son that the impugned transactions raised a presumption of undue influence that was not rebutted. The transactions were improvident and procured by the son in such a way that they ought to be set aside as between the mother and the son. (127)

This case, and another one, Hartley v Woods, handed down by Lindsay J of the same court six months later shows how Supreme Court judges are prepared to use their equitable jurisdiction to deal with injustices arising, particularly in families, as more people live on with reduced decision-making capacity and in situations of increasing dependency; but have substantial financial assets.(128) Hartley v Woods, which is also discussed in 3.4.3 above, is a case involving breach of fiduciary duty and undue influence. Both cases show the care that has to be taken by the judges to discern the varying shades of grey in fact situations that may appear black and white on first consideration, and to apply the concepts of equity, nuanced by experience over the years, as well as by the need to apply those concepts in new situations that arise and require the involvement of the courts to bring about just resolutions.

A case decided by Gzell J of the New South Wales Supreme Court in 2007 also involved both undue influence and unconscionable conduct. In that case a father and son had owned a farm together as tenants in common in equal shares. In 1981, when the son was faced with the prospect of criminal charges and, acting on advice, transferred his interest in the property to his father. In 2002, the father conveyed the entire interest in the property to his son. The father understood that the documents he had signed were to return interests in the property to what they had been in 1981when father and son were tenants in common in equal shares. At the time of the 2002 conveyance, the father was 79 years old. The son knew that his father had difficulty with English and that he was partially deaf. He also knew that his father trusted him and, in particular, that his father was prepared to do whatever he asked him to do in relation to the property and he knew that his father was relying upon him to accurately convey to the solicitor the terms of any agreement that had been reached between them as to how the title should be held.(129)

The father did not raise a case of non est factum, but put his case on two bases: undue influence and unconscionable conduct. Gzell J found that both had been made out. He found that the father was under a special disability in dealing with his son. He was partially deaf following his heart by-pass operation and his son knew that his father had difficulty reading English and placed his complete trust in his son. The relationship between them was that the son had such influence over his father that the father’s decision to sign the documents without taking independent advice, without having them read to him and without explanation was not voluntary but was overborne by his son’s instruction to him to sign the documents. The father’s decision to sign the documents did not arise from an independent and well-understood act on his part. Gzell J also found that when the father signed the documents the relationship between him and his son was such that his son was in a superior position to his father. The son was aware that his father trusted him and that that trust was such that his father would do anything his son asked him to do with respect to the property. Gzell J found that the son made unconscientious use of his superior position to the detriment of his father and that the conveyance was caused by the undue influence of the son over the father.(130) Gzell J ordered the son execute all documents and do all the things that were necessary to return the interests in the property to what they were before the 1981 transfer.(131)

However, while recent cases show how Supreme Court judges are prepared to use their equitable jurisdiction to deal with injustices arising, particularly in families, the facts of each case are the major determinants of their outcomes. This is shown in a case in a 2018 case decided by Sackar J of the NSW Supreme Court.(132) In that case a widowed, wealthy, financially astute woman with no children and no other family gave a substantial sum of money to a close friend in 2012 and again in 2014. The giver of the money was 83 in 2012 and 85 in 2014. The reason for giving the money was that the close friend and her husband found themselves needing to sell out of the home they were sharing with other members of their family and purchase a separate house for themselves.

When the money was given, there was no suggestion that it was a loan. Nothing suggesting that had been raised in conversation and there was no verbal or written contract. However, in July 2016 the elderly woman wrote to her friend asking for the money back. The close friend and her husband did not reply; but after they received a formal letter of demand from a solicitor six months later, they did so.

The matter came before the NSW Supreme Court in July 2018. Sackar J said the money was provided as a gift; not a loan. He was also of the view that the circumstances of the relationship between the parties did not give rise to a presumption of undue influence. But even if it did, there was sufficient other evidence to rebut the presumption.

Sackar J was of the view that there was not any subordination of the elderly woman’s will to either, or both of the defendants, to support the idea she was lacking free will. Rather, Sackar J’s evaluation of the elderly woman was that she was the stronger of the parties.(133)

On the question of unconscionable conduct, Sackar J was not satisfied that she suffered from any special disadvantage which seriously affected her ability to make a gift of money or make a judgment to as to her own best interests. He found her mentally competent, astute and reasonably healthy at the time of the relevant transactions.(134)

For a thorough 2020 consideration of the caselaw on the separate concepts of undue influence and unconscionability see, Torok v Becker [2020] NSWSC 1570.

3.4.5 Setting aside contracts, other transactions and gifts made by a person whose financial affairs were under management

Now back to Gibbons v Wright again for another, different point; but still relevant to the question of capacity and voidable transactions or contracts.(135) The judges noted an important exception to the rule that transactions entered into by incapable persons were voidable only. Where the property and affairs of a person are placed under management by a tribunal or court because of that person’s incapacity to manage their property and affairs, the control, custody and power of disposition of that property passes to the administrator (financial manager). As a consequence, any dealing or disposition of that property by the person themselves, and not the appointed administrator, is void and of no effect. This is because their capacity to manage their affairs has been suspended by the administration (financial management) order.(136) This exception is dealt with further in 3.3.6.3 below.

The right of a person whose estate is under management to deal with their property and affairs in any way is suspended and any transaction they enter into is void and of no effect.(137) This is an exception to the rule that contracts and other transactions entered into by an incapable person are valid until avoided by them in certain limited circumstances. All contracts and other transactions entered into involving a person whose estate is under management should be entered into by their administrator at least in relation to that part of their estate that is under management in situations where the whole of their estate is not covered by the order.

While that is the proper practice, does the exception operate to allow a person whose estate is under administration who purports to enter a contract to avoid having to meet their side of the bargain? The cases in which the exception was established may have been cases in which the incapable person needed their interests protected or were trying to avoid having their property controlled by the legislatively established processes. In Re Walker the incapable person executed a deed poll giving significant elements of her property to her “executors and administrators” in trust for her benefit for her life when her affairs were being controlled under a court order.(138) In Re Marshall the incapable person signed a deed in the form of a charge on his property acknowledging a loan of 30 pounds and repayment of it and any further advances at 30% interest per annum.(139) In the David Case, Mrs David purported to transfer a property to a company which was effectively her family’s discretionary trust after her estate had been placed under an administration order.(140)

While administrators would negotiate with other the parties to contracts that those whose estates they are managing entered into and decide which contracts should be continued in the best interests of the person whose estate they were administering, they would be able to treat as void contracts for certain goods and services, such as a mobile phone and attendant phone service contract, if the person whose estate they were managing could not use a mobile phone or who was at financial risk because of their inability to control the use of the phone by themselves and others.

Administrators would be obliged, as part of their responsibility to act in the best interests of those whose estates they were managing, to get back into their control any property of the person that the person had purported to transfer to others or to recover the value of that property.

Nevertheless, the issue is addressed, to some degree, in the legislation of all the States and Territories except Tasmania. The NSW Trustee and Guardian Act 2009 (NSW) restates the common law to the effect that the power of a person whose estate is under administration to deal with that estate is suspended during the currency of the administration order.(141) However, the person may be authorised to deal with part of their estate.(142)

In Queensland if the Supreme Court, in the exercise of its jurisdiction under the Public Trustee Act 1978 (Qld), appoints the Public Trustee to administer the estate of an incapacitated person who is under 18 years of age, that person is not capable, of making any transfer, lease, mortgage, or other disposition of any part of the estate under management, or of entering into any contract (other than for necessaries) without the leave of the Court. However, any such transaction or contract is voidable by that incapacitated person or the Public Trustee on the incapacitated person’s behalf.(143) Nevertheless, the Court may give leave to an incapacitated person to enter any such transaction or contract, if it is satisfied that the transaction or contract is for the benefit of the incapacitated person and that the incapacitated person consents to the transaction or contract with adequate understanding of its nature.(144)

The Public Trustee Act 1978 (Qld) also adopts the common law position in relation to incapable people set out in Gibbons v Wright by providing that no contract, transfer, lease, mortgage or other disposition entered into or made by an incapacitated person can be invalidated if the other party to the contract or other transaction proves that they acted:

1. in good faith,
2. for adequate consideration, and
3. without knowledge that the other party was an incapacitated person.(145)

There are no similar provisions under the Guardianship and Administration Act 2000 (Qld), consequently the common law, as set out above, applies in relation to adults in Queensland. However, the Queensland Civil and Administrative Tribunal has the power to make a declaration of capacity for a matter in relation to any adult and also a declaration that a person had capacity to enter a contract.(146)

In South Australia the Guardianship and Administration Act 1993 (SA) provides that while the property of a person is the subject of an administration order made by the South Australian Civil and Administrative Tribunal (SACAT), a disposition of property or contract made by the person is voidable at the option of the administrator. However, the administrator cannot avoid the transaction if the other party to the transaction did not know and could not reasonably be expected to have known that the person they were dealing with had a mental incapacity. Nevertheless, if SACAT is satisfied that the person had an adequate understanding of the nature of the transaction and that it would be for the benefit of the person, it may make an order allowing the person to make a disposition of property or enter contract which cannot be made voidable by the administrator.(147) The Aged and Infirm Persons Act 1940 (SA) has the same provision in relation to protection orders made by the Supreme Court.(148)

In Tasmania the Guardianship and Administration Act 1995 (Tas) provides that the Tasmanian Guardianship and Administration Board may direct that the person whose estate is the subject of an administration order may continue to be responsible for part of their estate.(149) As to that part of their estate that is covered by the administration order, the common law as set out above applies.

In Victoria the new Guardianship and Administration Act 2019 (Vic) provides for a variation of the common law. It states that while the property of a person is the subject of an administration order made by the Victorian Civil and Administrative Tribunal (VCAT), that person is “deemed” incapable of dealing with any part of their property or of becoming liable under any contract without an order of VCAT or the written consent of the administrator. Any transaction entered into by the person without such order or consent is void and of no effect, and the money or property the subject of the transaction is recoverable by the administrator in any court of competent jurisdiction. However, the legislation does not render invalid any transaction by the person made for adequate consideration with or to or in favour of any other person who proves that they acted in good faith and did not know or could not reasonably have known that the person was the subject of an administration order.(150)

The Western Australian Guardianship and Administration Act 1986 (WA) is very similar to, but not identical with, the Victorian Act. It also provides for a variation of the common law. It states that while the property of a person is the subject of an administration order made by the State Administrative Tribunal, that person is incapable of entering any contract or dealing with, any part of their property except to the extent that their administrator or the State Administrative Tribunal authorises them to do so. Any money or property the subject an unauthorised transaction is recoverable by the administrator in any court of competent jurisdiction. However, the legislation does not render invalid any contract for necessaries or any transaction by the person made for adequate consideration with or to or in favour of any other person who proves that they acted in good faith and did not know that the person was the subject of an administration order.(151)

In the Australian Capital Territory s 71(1) of the Guardianship and Management of Property Act 1991 (ACT) states that if a person whose property is the subject of an administration order purports to enter into a transaction in relation to the property, the transaction is not void on the ground that the person was not legally competent to enter into the transaction. However, if an application is made to it within 90 days of the date of the transaction by the guardian, the manager or some other person concerned in the transaction, the ACT Civil and Administrative Tribunal, the Supreme Court or the Magistrates Court may, as is just:

1. confirm the transaction,
2. declare the transaction void, or
3. adjust the rights of the parties to the transaction.

The section appears to invoke an application of the law as laid down in Gibbons v Wright by which transactions entered into by incapable people are voidable and provide a 90 day period in which such transactions may be avoided.(152) It does not appear to exclude the possibility of a defence of non est factum in circumstances in which the facts required to ground that defence can be proved.(153)

Since 29 July 2016, the Northern Territory Civil and Administrative Tribunal (NTCAT) has had the power (jurisdiction) to appoint guardians for financial matters under the Guardianship of Adults Act (NT). That Act reflects the policy that requires such guardians to exercise their decision maker’s authority in a way that is least restrictive of the freedom of decision of those they have been appointed guardians for as is practicable and to provide those they are guardians for with as much support as is practicable to make their own decisions. However, there will be applications made NTCAT that require it to appoint guardians to make all of the decisions about the property and financial affairs of the person they are appointed as guardians for. Sometimes it will be most of the decisions about the property and financial affairs of such persons and at other times the guardianship order may cover only a few financial matters.

However, the question of what is the ability of the person to make decisions about the financial matters covered by the guardianship order in relation to them arises? The accepted position is that when such an order is made, the power of the person whose financial matters are the subject of the orders to deal with those matters is suspended while the order is in force.(154) Given the policy behind the Guardianship of Adults Act (NT) (related legislation) referred to in the last paragraph, the question of the ability of a person whose financial matters are the subject of a guardianship order to deal with the real and personal property, including selling it, may be the subject of very subtle consideration.

3.4.6 The defence of non est factum rendering contracts and other transactions unenforceable

In 1975 a unanimous High Court allowed the extension of the defence of non est factum to cases in which a defendant had actually signed the contract or other transaction on which they were being sued. The Court noted that the principle was not easy to formulate because it must accommodate two policy considerations which pull in opposite directions. The first principle is the injustice of holding a person to a bargain to which they have not brought a consenting mind. The second is the necessity of holding a person who signs a document to that document, particularly so as to protect innocent persons who rely on that signature when there is no reason to doubt its validity. The High Court also noted that the principle must necessarily be kept within narrow limits, but that:

1. it was available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing,
2. it was also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document,
3. to make out the defence a defendant must show that they signed the document in the belief that it was radically different from what it was in fact,
4. at least as against innocent persons, their failure to read and understand it was not due to carelessness on their part, and
5. there is a heavy onus on a defendant who seeks to establish the defence.(155)

The case in which the principle was adopted involved a man who spoke little English, who could not read English. He thought that the document he was signing was his receipt acknowledging money loaned to him; however it was an extension of an option to buy his land. The principle has been applied in a case in which the defendant was a 75-year-old woman who had suffered a stroke. She was confused and unable to maintain a train of thought. She signed, when asked to sign, a mortgage and guarantee as part of a complex financial transaction.(156) The trial judge doubted, after she gave evidence, that the woman had anything more than a transient appreciation of those questions she answered or had any real understanding of her involvement in the proceedings.(157)

The principle has also been applied in a case in which a man, who had an intellectual disability and who was functionally illiterate but could sign his name. He mortgaged, at the behest of his son so that his son could buy a business, the property in which he lived and which he had inherited from his mother. The trial judge considered that the man was in no real sense a participant in this scheme but rather a hapless victim of his son's manipulation and that the man in fact had no positive belief at all about the nature and effect of the documents he was signing.(158) The trial judge set the mortgage aside so that it no longer encumbered the man’s property. However, the trial judge ordered the man to repay the loan money because to retain the money would have unjustly enriched him.(159)

The NSW Court of Appeal upheld the trial judge’s findings about non est factum, but ordered that the man only had to restore to the lender only the approximately $25,000 he benefitted from out of the $200,000 loan.(160) The Court of Appeal considered that the man was a manipulated intermediary with no understanding of any aspect of the overall transaction. He received no benefit from the loan, beyond the receipt and retention in his account of the approximately $25,000. He did not know what he was signing. Looking at the matter as one of substance, he was the innocent, mentally incapable dupe of his son. Except for the approximately $25,000, “in no real or substantive sense did he receive and retain benefits such that it would be unjust for him not to repay the loan".(161)

The Court of Appeal noted that the following matters reinforced this conclusion. The loan was not for necessaries. The lender made no enquiry of the borrower who in fact was deeply intellectually impaired and the subject of manipulative influence. Instead, it was prepared to lend on the basis of documentation that requested the loan be assessed without documentary evidence of the financial position of the borrower. The Court said these were relevant considerations in assessing whether or not it was unjust for the man not having to repay the whole of the loan money. Furthermore, because the defence of non est factum had been made out and the loan contract was invalid, it was contrary to public policy for a party to obtain restitution and so obtain the same result as if the invalid and void contract was in fact valid and enforceable.(162)

The Court of Appeal also noted that the principle was that the signer must know what they are signing, but that the cases revealed the difficulty of expressing in words how to identify the line marking the boundary of non est factum. The Court then continued:

It is sufficient to state for present purposes that a signer who has no understanding at all about what he or she is signing, because of incapacity, does not know what he or she is signing such that the mind does not go with the pen.(163)

In a 2010 case, Simmonds J of WA Supreme Court, in a case about a memorandum of understanding, noted, in reliance upon Gibbons v Wright(164) and the NSW Court of Appeal case just referred to that a successful plea of non est factum based on incapacity resulted in the contract being void and that it does not matter whether the other party to the contract was aware or ought to have been aware of the state of affairs to which the plea (of non est factum) relates.(165)

3.5 Contractual or similar (quantum meruit) obligations that have to be met despite the person’s capacity to enter the contact

Under the common law anyone who lacks capacity, for whatever reason, has an obligation to pay for necessities provided to them. In addition there is an obligation to pay for services rendered – quantum meruit.

3.5.1 Implied obligation of an incapable person to pay for necessaries

The common law recognizes that there is an implied obligation on a person who lacks capacity to consent to a contract to pay for necessaries provided to them.(166) The judges try to avoid calling this implied obligation an implied contract because of the incapacity of the receiver of the necessaries to make a contract. Ipp AJA of the New South Wales Court of Appeal noted the preference to describe the implied obligation as quasi-contractual or restitutionary in nature.(167)

If the necessaries are provided by family members, there is a presumption that the services are being provided out of affection without there being a contractual arrangement or an intention to recoup their cost.(168) However, that presumption is rebuttable and was held to have been rebutted by the evidence in a 2002 case in which a mother took care of her seriously brain damaged adult daughter injured in a horse-riding accident. The daughter was entitled to claim, on behalf of her mother, the cost of the services she provided to her daughter on a daily basis and to the interest she did not receive during the time she was deprived of the use of the money she spent providing services to her daughter. In that case there was no dispute that the mother’s services were necessaries and the evidence showed that the mother had, from an early stage, sought to be compensated.(169)

The term “necessaries” has been treated as a broad term by the judges. It includes the provision of, at least, meat, drink, apparel, medicine, medical services, education and transportation services. In a 1908 case involving a man who had been declared insane by the Supreme Court of New South Wales who wished to have that order set aside, and consulted a lawyer for that purpose, Griffith CJ of the High Court said:

Now, it is settled that work done for the benefit of an insane person, although he is incompetent technically to make a contract, may nevertheless be regarded as something in the nature of necessaries. Consequently an action will lie against him, as it will in some other cases, for necessaries.(170)

This broad approach to the term necessaries both raises questions and provides answers. It raises questions as to whether, in the 21st century, some things that are used on a daily basis by many people, such as mobile phones and television sets, are necessaries for all people or only some people or not necessaries at all. It provides the answer to the question of the entitlement of service-providers for compensation they provide to people incapable of entering contracts for the provision of such services. The provision of services to assist an incapable person to stay in their own home or the provision of care services to them in an aged care facility creates an obligation in that person to pay for the services being supplied to them even though they were totally unaware of what was happening. The same applies to an incapable person being provided with services in a hospital.

However, despite 1903 authority to the contrary, it is unlikely that State or Territory instrumentalities would succeed in seeking payment for services provided to those admitted to State run psychiatric facilities, particularly involuntary patients.(171) In a 1961 case Sholl J of the Supreme Court of Victoria dismissed a claim brought under the common law and the Victorian mental health legislation by the State of Victoria for reimbursement of the money spent on the maintenance of a patient 1924 to 1948 because the legislation did not show an intention to create an obligation to pay and because of the compulsory detention element of the legislation and its analogy with the prison system.(172)

There has been some statutory codification of the common law in this area, but it is arguable that the common law in relation to necessaries operates more broadly than envisaged in the sale of goods legislation and remains in full effect as implied by the recent case law.(173)

In New South Wales, the Sale of Goods Act 1925 (NSW) provides that the capacity to buy and sell is regulated by the general law (the common law) concerning capacity to contract and to transfer and acquire property. However, where necessaries are sold and delivered to a person who, by reason of mental incapacity or drunkenness, is incompetent to contract, that person must pay a reasonable price for those necessaries. The term “necessaries” is defined to mean goods suitable to the condition in life of the person, and to the person’s actual requirements at the time of the sale and delivery.(174) Legislation in all the other States and the two Territories is in the same terms or to the same effect.(175)

3.5.2 Entitlement to payment for services rendered - quantum meruit

Another approach that may be available where a person provides personal services to an incapable person or carries out work on their behalf or for their benefit is to seek payment on the basis of quantum meruit. That is, to seek to be paid a reasonable sum given the nature of the services provided or work done where it is clear that work is not to be gratuitous.(176)

3.6 Liability of lawyers and others who fail to protect the interests of their clients

Recent cases in New South Wales show that lawyers can be held to be liable to pay damages for losses made by their clients if they do not act prudently to protect their client’s interests. In a 2004 case, a son forged the signatures of his parents on a power of attorney and then used that forged power of attorney to obtain a loan to buy a home unit for himself. The son instructed the solicitor who obtained the certificate of title to the parents’ property, and with the solicitor’s help obtained the loan. The son’s parents knew nothing about either the power of attorney or the mortgage. They brought claims against their son and the solicitor. They settled the claim against their son and pursued the solicitor for the balance of their loss. Young J upheld their claim against the solicitor and also held that his insurance policy did not cover his conduct so that he was personally liable for his clients’ loss.(177)

Young J noted the argument that the point of a power of attorney is that people deal with the attorney and do not consult the maker and that people must be able to treat attorneys under power of attorney as prima facie having authority to do what they have to do, but continued:

However, especially for solicitors, red lights should flash when certain factors exhibit themselves, one red light flashes when one can see that the donor of the power of attorney is to receive no benefit at all from a transaction yet the done [the attorney] is to receive a considerable benefit. One can rationalise that this is because it is a family dealing, but a prudent solicitor when he or she sees the red light, makes enquiries. Furthermore, a prudent solicitor is extremely careful about documents to which he or she puts his or her signature and professional reputation and takes precautions against misleading anyone else. Unfortunately, Mr Murphy, whilst probably not dishonest in the criminal sense, fell short of the standard here and is liable to indemnify the mortgagee for its loss without recourse to his insurer.(178)

A 2006 case, Graham v Hall, extended the liability to both justices of the peace and ordinary witnesses attesting documents.(179) In that case both the solicitor who drew up and registered a mortgage and the justice of the peace who attested to the signing of the mortgage and the statutory declaration relating to the mortgage were held to be liable in damages because of their part in the process by which a fraudulent mortgage was obtained.

Mr and Mrs Hall were joint owners of the family home. When Mr Hall found himself in financial trouble, he decided to re-mortgage the family home without telling his wife. He instructed a solicitor, to act for both him and Mrs Hall in effecting and registering the mortgage. Mr Hall told the solicitor that his wife was dying of cancer and therefore the solicitor could not see her or visit her. Mr Hall said that he would take the papers to his wife and arrange for her to sign them.

The solicitor knew that, after payment of the existing mortgage and some business debts, the rest of the money from the new mortgage was to be paid to Mr Hall alone. Nevertheless, he did not investigate why a woman dying of cancer would want to enter into a new mortgage. In fact, Mrs Hall did not have cancer and was not aware of either her husband’s financial difficulties or his visit to the solicitor. The solicitor got Mr Graham, a justice of the peace, attested a mortgage document and a statutory declaration related to the mortgage both of which appeared to have been signed by Mrs Hall as co-mortgagor. In fact her signature had been forged by Mr Hall. However, by signing the mortgage document Mr Graham attested that it was “signed in my presence by the mortgagor who is personally known to me.” In fact, Mrs Hall had never met Mr Graham.

The new mortgage was registered in 2001. Mr Hall died in 2003. After his death Mrs Hall discovered the existence of the new mortgage. She sued both the solicitor and Mr Graham. Both were found liable in damages apportioned 60% to the solicitor and 40% to Mr Graham as justice of the peace. On the appeal by Mr Graham, the Court of Appeal held that the risk of harm to Mrs Hall’s interests in the property that arose from the fact that the falsely attested mortgage was likely to be registered was clearly foreseeable and that not only a justice of the peace but also an ordinary witness owes a duty of care in these circumstances.(180)

Notes

1 : Lowndes G., et al. (2009) Financial abuse of elders: A review of the evidence Protecting elders’ assets study Melbourne Monash University. https://www.eapu.com.au/uploads/research_resources/VIC-Financial_Elder_Abuse_Evidence_Review_JUN_209-Monash.pdf .

2 : Elder abuse – A national legal response) ( ALRC Report 131 https://www.alrc.gov.au/publications/elder-abuse-report ) see also https://www.parliament.nsw.gov.au/committees/DBAssets/InquiryReport/ReportAcrobat/6063/Report%2044%20-%20Elder%20abuse%20in%20New%20South%20Wales.pdf) as recognized by Articles 12 and 16 of the Convention of the Rights of People with Disabilities. https://www.un.org/development/desa/disabilities/convention-on-the-rights-of-persons-with-disabilities.html.

3 : Gibbons v Wright [1954] HCA 17, 91 CLR 423, 441; Imperial Loan Company, Limited v Stone [1891] UKLawRpKQB 215; [1892] 1 QB 599, 602-3; Re Cumming [1852] EngR 427; (1852) 42 ER 660, 668; Masterman-Lister v Brutton & Co [2002] EWCA Civ 1889 [17] and Dalle-Molle by His Next Friend Public Trustee V Manos [2004] SASC 102 [16]-[19][2004] SASC 102; , 88 SASR 193.

4 : Gibbons v Wright [1954] HCA 17, [7]; [1954] HCA 17; 91 CLR 423.

5 : The case relied upon for the concept of understanding the “general import” of a deed when it was explained is a case in which two members of the House of Lords considered an appeal by way of a bill of exceptions to the directions given to a jury in the Court of Exchequer Chamber, Ireland, Ball v Mannin (1829) EngR 165, 6 ER 658. The leading judgment was from the then Lord Chief Justice of England, Lord Tenterden; with whom Lord Plunckett agreed. Lord Tenterden stated: “To be sure the Judge goes on to say that, as one test of capacity or incapacity, the jury was at liberty to consider whether the party was capable of understanding what he did by executing the deed in question, when its general import was explained to him; and surely that is one good test, and there is nothing irregular in that”. We note that Lord Tenterden was saying that the test applied by the trial judge was ‘one good test’ not ‘the test’.

6 : The High Court cited the following cases as also authority for the statement - Boughton v. Knight (1873) LR 3 P & D 64, at p 72 ; Jenkins v. Morris [1880] UKLawRpCh 134; (1880) 14 Ch D 674; Birkin v. Wing (1890) 63 LT 80 and Estate of Park (1954) P 112.

7 : Estate of Park (1954) P 112, at p 136.

8 : [1954] HCA 17, [8]. The High Court cited as authority for this sentence Manches v. Trimborn (1946) 174 LT 344, at p 345.

9 : Manches v Trimborn, (1946) 174 LT 344.

10 : For easy (electronic) access to this quotation from Hallett J see, Fehily v Atkinson [2016] EWHC 3069 (Ch) [92].

11 : Fehily v Atkinson [2016] EWHC 3069 (Ch) [76]-[[102].

12 : _Chitty on Contracts_ is a major textbook on English contract law. First published in 1826, it has run to 32 editions so far.

13 : [1988] Ch 310 at 313].

14 : Fehily v Atkinson [2016] EWHC 3069 (Ch) [96].

15 : Ibid [95]-[97]. In re K (1988) Ch 310, 313. The four matters that should be understood are: First, (if such be the terms of the power) that the attorney will be able to assume complete authority over the donor's affairs. Secondly, (if such be the terms of the power) that the attorney will in general be able to do anything with the donor's property which he himself could have done. Thirdly, that the authority will continue if the donor should be or become mentally incapable. Fourthly, that if he should be or become mentally incapable, the power will be irrevocable without confirmation by the court.

16 : Fehily v Atkinson [2016] EWHC 3069 (Ch) [99].

17 : Ibid. [100]-[101].

18 : Gibbons v Wright [1954] HCA 17, [8].

19 : Ibid. [8] and [9].

20 : Raoul (by his tutor Karamihas) v Hanna [2017] NSWSC 728; and on appeal, Hanna v Raoul [2018] NSWCA 201.

21 : Raoul (by his tutor Karamihas) v Hanna [2017] NSWSC 728 [116]-[117].There were other factors relevant to the land owner’s capacity to make the Deed of Transfer that the defendant was aware of; see [116]-[118].

22 : Ibid. [119].

23 : Ibid [116}.

24 : Ibid. [58].

25 : Ibid. [50].

26 : Hanna v Raoul [2018] NSWCA 201 [48], quoting Gibbons v Wright. [1954] HCA 17 [7].

27 : Ibid. [48]. Gibbons v Wright [1954] HCA 17, [7].

28 : Hanna v Raoul [2018] NSWCA 201, [52].

29 : Gibbons v Wright [1954] HCA 17, [8].

30 : Hanna v Raoul [2018] NSWCA 201 [53].

31 : Ibid. [54].

32 : Fehily v Atkinson [2016] EWHC 3069 (Ch) [100]-[101].

33 : Gibbons v Wright [1954] HCA 17, [7].

34 : Fehily v Atkinson [2016] EWHC 3069 (Ch), [81]-[83] and the cases cited in those paragraphs.

35 : Hanna v Raoul [2018] NSWCA 201, [161]-[162], citing Guthrie v Spence [2009] NSWCA 369, [174]-[175].

36 : Ibid.

37 : Darzins P, Molloy DW, Strang D. Who Can Decide?, Memory Australia Press: Adelaide, 2000.

38 : Griffith HR, Belue K/., Sicola A., et al (2003); “Impaired financial abilities in mild cognitive impairment”; Neurology 60: 449-457; Okonkwo OC., Wadley VG., Griffith H.R. et al (2006) “Cognitive correlates of financial abilities in mild cognitive impairment” J Am Geriaitric Society 54: 1745-1750.

39 : Masterman-Lister v Brutton and Co [2003] EWCA Civ 70; Fehily v Atkinson [2016] EWHC 3069 (Ch) [84].

40 : British Medical Association and The Law Society, Assessment of Mental Capacity – Guidance for doctors and lawyers, London, BMJ Books, 2nd. ed. 2004, p. 84.

41 : Cockerill J., Collier B., Maxwell K. Legal requirements and practices. In Collier B., Coyne C., Sullivan K. Mental Capacity 2005, Federation Press: Leichardt, p 38.

42 : Darzins P., Molloy DW, Strang D. Who Can Decide? Memory Australia Press: Adelaide, 2000, p73.

43 : Hanna v Raoul [2018] NSWCA 201,[51]. She cited Public Trustee (WA) v Brumar Nominees Pty Ltd [2012] WASC 161, [90]-[96].

44 : Hanna v Raoul [2018] NSWCA 201,[51].

45 : Succession of Mary Louise Helen Leda De La Vergne St. Paul No. 2000-CA-0660 Court of Appeal Fourth Circuit State of Lousiana; see also Barry L. (2015) Submission No 21. Inquiry into Elder Abuse in New South Wales http://www.parliament.nsw.gov.au/committees/DBAssets/InquirySubmission/Body/53753/0021%20Ms%20Lise%20Barry,%20Macquarie%20Law%20School.pdf

46 : Brodaty H, Howarth GC, Mant A, Kurrle SE. “General practice and dementia. A national survey of Australian GPs.” The Medical Journal of Australia 1994;160(1):10-4.

47 : Ashford W, Borson S, O’Hara R et al, “Should older adults be screened for dementia? It is important to screen for evidence of dementia!” Alzheimer’s & dementia. 2007; 3: 75-80.

48 : Freund B, “Office–based evaluation of the older driver” J American Geriatric Society 2006; 54:1943-4.

49 : Sorensen L, Foldspang A., Gulman N & Munk-Jorgensen P. “Assessment of dementia in nursing home residents by nurses and assistants: criteria validity and determinants.” International Journal of Geriatric Psychiatry, 2001; 16: 615-621.

50 : McDonald AJ Carpenter GI, “The recognition of dementia in “non-EMI” Nursing home residents in south East England” Int J Geriatric Psychiatry 2003; 18(2) ;105-108.

51 : Maslow K, Mezey M, “Recognition of dementia in hospitalized older adults” Am J Nursing 2008; 08:40-49.

52 : Knopman D, Donohue JA, Gutterman EM, “Patterns of care in the early stages of Alzheimer’s disease: impediments to timely diagnosis” J American Geriatric Society 2000; 48: 300-4.

53 : Peisah C, “Caring for the institutionalised elderly: how easy is it?” Aust J Public Health. 1991; 15(1):37-42.

54 : Singellos v Singellos [2010] EWHC 2353 [169], [2011] Ch 324, [2011] 2 WLR 1111.

55 : While we do not discuss the Contracts Review Act 1980 (NSW), we note the discussion of it by Beazley P in Hanna v Raoul [2018] NSWCA 201 [127]-[140] and Lindsay J in Raoul (by his tutor Karamihas) v Hanna [2017] NSWSC 728 [125]-[132]. We also note two brief references to the Act in 3.4.1 below.

56 : Powers of Attorney Act 1998 (Qld) ss 111 and 112.

57 : Guardianship and Administration Act 2000 (Qld) s 147.

58 : Gibbons v Wright [1954] HCA 17, 91 CLR 423, 441; Imperial Loan Company, Limited v Stone [1891] UKLawRpKQB 215; [1892] 1 QB 599, 602-3; Molton v Camroux (1848) 154 ER 548, affirmed [1849] EngR 659; 154 ER 1107; Bevan v M’Donnell [1854] EngR 101; (1854) 156 ER 131; Drew v Nunn [1879] UKLawRpKQB 48; (1879) 4 QBD 661 and Dalle-Molle by His Next Friend Public Trustee v Manos [2004] SASC 102 [16]-[19][2004] SASC 102; , 88 SASR 193.

59 : Gibbons v Wright [1954] HCA 17, 91 CLR 423 and Imperial Loan Company, Limited v Stone [1891] UKLawRpKQB 215; [1892] 1 QB 599.

60 : Raoul (by his tutor Karamihas) v Hanna [2017] NSWSC 728; and on appeal, Hanna v Raoul [2018] NSWCA 201.

61 : Raoul (by his tutor Karamihas) v Hanna [2017] NSWSC 728 [116]-[117].There were other factors relevant to the landowner’s capacity to make the Deed of Transfer that the defendant was aware of; see [116]-[118].

62 : Ibid. [119].

63 : Ibid [116}.

64 : Hanna v Raoul [2018} NSWCA 201 [49]-[50].

65 : Hanna v Raoul [2018} NSWCA 201 [58].

66 : Ibid. [53].

67 : Raoul (by his tutor Karamihas) v Hanna [2017] NSWSC 728 [121].

68 : Ibid. [122]-[123].

69 : Ibid. [124].

70 : Hanna v Raoul [2018] NSWCA 201 [102].

71 : Ibid. [101]. See generally [98]-[125].

72 : Ibid. [126]; but see generally [125]-[132].

73 : Ibid. [132].

74 : Hanna v Raoul [2018] NSWCA 201 [127]-[140].

75 : Ibid. [53].

76 : Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447, 474. For a case in which unconscionability and undue influence pleas were made our, but not non est factum, see Johnson v Johnson [2009] NSWSC 503.In that case a majority of the judges held that it would be unfair and unconscientious for a bank to rely on a guarantee obtained from the elderly migrant parents of a customer, who were unfamiliar with written English.

77 : In re Estate of Lane 930 So. 2d 421, 425 (2006) and Holmes v O’Bryant 741 So. 2d 366, 371 (1999).

78 : As an example see, Sleboda v Sleboda [2007] NSWSC 361.

79 : Gleeson, M, “Australia’s contribution to the common law” (2008) 82 ALJ 247, 250.

80 : Wilton v Farnsworth (1948) 76 CLR 646, [1948] HCA 20.

81 : Ibid. 649.

82 : Ibid. 654.

83 : Ibid. 655.

84 : Ibid.

85 : Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621, 637, [1992] HCA 61.

86 : Ibid. 637-638. See also Blomley v Ryan (1956) 99 CLR 365, [1956] HCA 79.

87 : Ibid. 638.

88 : Janson v Janson [2007] NSWSC 1344 [71]. This approach seems to have been followed in Winefield v Clarke_ [2008] NSWSC 882 and Barkley v Barkley Brown [2009] NSWSC 76. For a detailed consideration of the law relating to undue influence in the context of an elderly mother who still had capacity acting as “guarantor” for her son and unknowingly putting her home at risk, see Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10 [166]-[188].

89 : Ibid.

90 : Johnson v Buttress [1936] HCA 41, 56 CLR 113, 119 (Latham CJ) and 143 (McTiernan J); Union Fidelity Trustee Co v Gibson [1971] VicRp 69; [1971] VR 573, 577; Louth v Diprose [1992] HCA 61, 175 CLR 621, 629. For a recent Queensland example of undue influence on the part of a son, see Anderson v Anderson [2013] QSC 8.

91 : Janson v Janson [2007] NSWSC 1344 [72].

92 : Ibid. For a case on the second category of presumed undue influence see, Mattila v Gardner (No 2) [2013] NTSC 32.

93 : Ridge, P, “Equitable undue influence and wills” (2004) 120 Law Quarterly Review 617, 619. Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 Ch. D. 145; Goldsworthy v Brickell [1987] Ch. 378 and Royal Bank of Scotland Plc v Etridge (No.2) [2001] UKHL 44, [2002] 2 AC 773.

94 : [1972] 2 NSWLR 147, 167.

95 : Burns, F, “Undue Influence Inter Vivos and the Elderly” (2002) 29 MULR 499, 509.

96 : Ibid. 509

97 : Ibid. 511-512.

98 : Barkley v Barkley Brown [2009] NSWSC 76 [140]-[141].

99 : Ibid. [142].

100 : Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 134.

101 : Ibid.

102 : Burns op cit (footnote 70) 518.

103 : See for example, Smith v Glegg [2004] QSC 443 and Sleboda v Sleboda [2007] NSWSC 361.

104 : Winefield v Clarke [2008] NSWSC 882.

105 : Ibid. [43]-[44].

106 : Ibid. [50].

107 : [2009] NSWSC 76.

108 : Ibid. [170], [171] and [175]. For an example of another situation in which a transaction was set aside on the grounds of undue influence see, Badman v Drake [2008] NSWSC 1366.

109 : Ridge op cit (footnote 57) 617.

110 : See 4. 7, 4. 7. 2 and 4. 7. 3 in particular.

111 : Hartley v Woods [2017] NSWSC 1420.

112 : Ibid. [12].

113 : Ibid. [63].

114 : Ibid. [83].

115 : Ibid. [569].

116 : Ibid. [67]-[68].

117 : Ibid. [70]. See generally [63]-[72].

118 : Ibid. [83].

119 : Ibid. [97]-[98].

120 : Ibid. [128] at 1.

121 : Ibid. [128] at 3.

122 : Thorne v Kennedy [2017] HCA 49; duress at [26]-[29], undue influence at [30]-[36] and unconscionable conduct at [37]-40].

123 : Ibid. [74].

124 : Ibid. [75]-[78].

125 : Ibid. [79]. She also discussed undue influence and unconscionable conduct in her judgment.{{Ibid. Undue influence [83]-[108] and unconscionable conduct [109]-[123].

126 : Gillian Fisher Pollard by her tutor Miles Fisher-Pollard v Piers Fisher-Pollard [2018] NSWSC 500 [124]-[125].

127 : Ibid. [526]-[552].

128 : Hartley v Woods [2017] NSWSC 1420.

129 : Sleboda v Sleboda [2007] NSWSC 361. For a detailed consideration of the law relating to unconscionable dealing in relation to an elderly mother who still had capacity acting as “guarantor” for her son and unknowingly putting her home at risk, see Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10 [215]-[256]. See also Agripay Pty Ltd v Byrne [2011] QCA 85.

130 : Ibid. [51]-[52].

131 : Ibid. [54]. For a recent case in which primarily a plea of undue influence was successful, but so also was a plea of unconscionable conduct, see Anderson v Anderson [2013] QSC 8.

132 : Sybil Dawne Hintze v Ratna Tsering & Anor [2018] NSWSC 1190.

133 : Ibid. [230] – [233].

134 : Ibid. [236].

135 : [1954] HCA 17.

136 : Ibid. [10]. Re Walker [1904] UKLawRpCh 150; [1905] 1 Ch 160; Re Marshall [1920] 1 Ch 284 and David by her tutor the Protective Commissioner v David (1993) 30 NSWLR 417, 437-440. See also NSW Trustee and Guardian Act 2009 (NSW) s 71.

137 : Gibbons v Wright [1954] HCA 17, 91 CLR 423, 438-439; Re Walker [1904] UKLawRpCh 150; [1905] 1 Ch 160; Re Marshall [1920] 1 Ch 284 and David by her tutor the Protective Commissioner v David (1993) 30 NSWLR 417, 437-440.

138 : [1904] UKLawRpCh 150; [1905] 1 Ch 160.

139 : [1920] 1 Ch 284.

140 : David by her tutor the Protective Commissioner v David (1993) 30 NSWLR 417.

141 : NSW Trustee and Guardian Act 2009 (NSW) s71(1).

142 : Ibid. s 71(2)-(5).

143 : Public Trustee Act 1978 (Qld) ss 64, 65 and 83(1).

144 : Ibid. s 83(2).

145 : Ibid. s 83(4) and Gibbons v Wright [1954] HCA 17, 91 CLR 423.

146 : Guardianship and Administration Act 2000 (Qld), ss 146 and 147.

147 : Guardianship and Administration Act 1993 (SA) s 42(1)-(3).

148 : Aged and Infirm Persons Act 1940 (SA) s 27(1)-(3).

149 : Guardianship and Administration Act 1995 (Tas) s 56(3).

150 : Guardianship and Administration Act 2019 (Vic) s 75(1)-(3).

151 : Guardianship and Administration Act 1990 (WA) s 77(1)-(3).

152 : Gibbons v Wright [1954] HCA 17, 91 CLR 423, 441.

153 : See 3. 4. 6.

154 : David by her Tutor the Protective Commissioner v David (1993) 30 NSWLR 417; Bergmann v Daw [2010] QCA 143, McMurdo P [16] and Muir JA [35] in particular.

155 : Petelin v Cullen [1975] HCA 24 [10]-[12][1975] HCA 24; , 132 CLR 355.

156 : PT Limited v Maradona Pty Ltd (1992) 25 NSWLR 643 [73].

157 : Ibid.

158 : Perpetual Trustees Victoria v Ford [2008] NSWSC 29 [76-[78].

159 : Ibid. [126].

160 : Ford by his tutor Watkinson v Perpetual Trustees Victoria [2009] NSWCA 186.

161 : Ibid. [127].

162 : Ibid. [129]-[131].

163 : Ibid. [77].

164 : Gibbons v Wright [1954] HCA 17, 91 CLR 423, 442-444.

165 : Lampropoulos v Lynne Kolnik [2010] WASC 193 [102]. For a Queensland case in which the onus of proving non est factum was not met, but in which the requirements for succeeding with a plea of undue influence (and also unconscionable conduct) were, see Anderson v Anderson [2013] QSC 8.

166 : Manby v Scott [1714] EngR 440; (1659) 82 ER 1000, 1002; In re Rhodes [1890] UKLawRpCh 32; (1890) 44 Ch D 94; McLaughlin v Freehill [1908] HCA 15; (1908) 5 CLR 858.

167 : Northern Rivers Charity Racing Association v Lloyd [2002] NSWCA 129 [16].

168 : Ibid. [23]-[26]. See also, In re Rhodes [1890] UKLawRpCh 32; (1890) 44 Ch D 94 and Balfour v Balfour [1919] 2 KB 571.

169 : Northern Rivers Charity Racing Association v Lloyd [2002] NSWCA 129.

170 : Mc Laughlin v Freehill [1908] HCA 15, 5 CLR 858, 861. See also Stedman v Hart [1854] EngR 518; (1854) 69 ER 258.

171 : In re Brooks (1904) WN (NSW) 4.

172 : Victoria v Public Trustee [1961] VR 81, 92.

173 : Northern Rivers Charity Racing Association v Lloyd [2002] NSWCA 129.

174 : Sale of Goods Act 1925 (NSW) s 7.

175 : Sale of Goods Act 1896 (Qld) s 5; Sale of Goods Act 1895 (SA) s 2; Sale of Goods Act 1896 (Tas) s 7; Goods Act 1958 (Vic) s 7; Sale of Goods Act 1985 (WA) s 2; Sale of Goods Act 1954 (Tas) s 7 and Sale of Goods Act 1972 (NT) s 7.

176 : Way v Latilla [1937] 3 All ER 759 and Kellar v Williams [2004] UKPC 30. For an Australian case involving a person with limited capacity having to pay for building work done under a claim for quantum meruit see, Matilla v Gardner (No 2) [2013] NTSC 32. [135]-[138].

177 : Yaktine v Perpetual Trustees Victoria Ltd [2004] NSWSC 1078.

178 : Ibid. [65].

179 : [2006] NSWCA 208, 67 NSWLR 135.

180 : Ibid. [68]. See also Re: Dr Athanasios Gouras [2004] MPBV 10 about the professional responsibilities of doctors witnessing the making of a document by incapable persons [69-[79].

---