Louis Diprose (a solicitor twice divorced) became friends with Carol Louth, initially in Tasmania. Diprose was 'utterly infatuated' with Louth. Louth, on the other hand, appeared somewhat indifferent to Diprose. Although they had intercourse on two occasions in the first year of their relationship, this did not occur again in their subsequent years of friendship. Diprose proposed in 1982 and was rejected. Louth moved to Adelaide in 1982. Diprose then moved to Adelaide in February 1983 where he lived with the three children of his first marriage. He composed love poems for Louth and regularly provided her with gifts, including paying household bills from time to time.
In 1984 Louth told Diprose she was depressed and contemplating suicide. Louth was in financial difficulties and was living in a house owned by her sister’s soon-to-be-ex husband. Louth told Diprose she was going to be asked to leave the house and that as a result she would commit suicide. In fact, she was under no pressure to vacate the house, although it had been suggested to her she could not live there forever and should consider putting her name on a housing list. In May 1985 Diprose agreed to buy the house for Louth for $58,000 and, at her insistence, purchased it in her name. Approximately three years later their relationship deteriorated and Diprose told Louth he wanted the house transferred to him. She refused and Diprose brought this action.
Further details of the facts between the parties are set out in the judgment of Justice Toohey.
Diprose succeeded at trial. The trial judge held
‘the appellant manufactured an atmosphere of crisis with respect to the house where none really existed so as to influence the respondent to provide the money for the purchase of the house …’. (Diprose v. Louth (No.1) (1990) 54 SASR 438, at p 448)
King CJ described the appellant as follows (at p 444)
'I formed the impression that the (appellant) was a calculating witness who was prepared to tailor her evidence in order to advance her case. In particular I found her evidence as to the circumstances leading to the house transaction quite unimpressive."
He described the weakness suffered by Diprose as follows (Diprose v. Louth (No.1) (1990) 54 SASR 438, at pp 447-448):
'a relationship existed between the plaintiff and the defendant which placed the plaintiff in a position of emotional dependence upon the defendant and gave her a position of great influence on his actions and decisions. From the time they first met he was utterly infatuated by her. He had had unhappy domestic experiences and was anxious to lavish love and devotion upon a woman. He fell completely in love with the defendant. ... The defendant, as her evidence confirms, was well aware that the plaintiff had a deep emotional attachment to her and desired only to have her love and to marry her. ... His willingness to devote himself to her and to lavish her with gifts, notwithstanding that she did not return his love, is quite pathetic. The degree of his emotional dependence upon her and his susceptibility to her wishes is obvious on the evidence and was obvious to her.'
Background to High Court proceedings
By majority the Full Court rejected the appeal by Louth.
Held (High Court)
Chief Justice Mason
Chief Justice Mason noted the findings of the trial judge as to the credibility of the witnesses and, in particular, noted (at para 6) that Louth had
'falsely told [Diprose] that she was under pressure to leave the Tranmere house which she was then occupying. .... The appellant told the respondent that she could not face the prospect of moving elsewhere and that she would kill herself if it came to that. She had previously told the respondent that she had slashed her wrists, or attempted to do so, on two occasions in 1984 and had pointed out to him marks on her wrist which may well have been consistent with a slash.'
[para 7] 'In the light of her history of unhappiness and insecurity, as she explained it to him, [Diprose] was convinced that [Louth] was in a state of emotional stress and that she would attempt to commit suicide if she lost the home. It was because the appellant insisted that having the title to the house in her name was essential to her security that [Diprose] agreed to provide the money for the purchase in her name.'
His Honour did not consider there was any basis for the Court to:
'interfere with the primary findings of fact made by the [trial judge] or the secondary findings which he made, in particular, that the appellant manufactured an atmosphere of crisis with respect to the house when none really existed and that her conduct in that respect "was dishonest and smacked of fraud". Nor is there any basis for disturbing the findings that the relationship between the parties was one in which the respondent was in a position of "emotional dependence" on the appellant and that she was in a position to influence his decisions and actions.' [para 9]
His Honour further observed that this was such an improvident transaction that:
'it is explicable only on the footing that he was so emotionally dependent upon, and influenced by, the appellant as to disregard entirely his own interests. By dishonestly manufacturing an atmosphere of crisis with respect to the house, the appellant played upon the respondent's susceptibility where she was concerned. Her conduct was unconscionable in that it was dishonest and was calculated to induce, and in fact induced, him to enter into a transaction which was improvident and conferred a great benefit upon her.' (para 10)
Justice Brennan noted that the 'jurisdiction of equity to set aside gifts procured by unconscionable conduct ordinarily arises from the concatenation of three factors:
- a relationship between the parties which, to the knowledge of the donee, places the donor at a special disadvantage vis-a-vis the donee;
- the donee's unconscientious exploitation of the donor's disadvantage; and
- the consequent overbearing of the will of the donor whereby the donor is unable to make a worthwhile judgment as to what is in his or her best interest ...' (para 1)
His Honour went on to discuss the distinction between unconscionable conduct and undue influence.
His Honour noted that in this case Diprose suffered from a weakness with respect to Louth, as described by the trial judge (above). Given those findings, the relationship between the parties 'was so different in degree as to be different in kind from the ordinary relationship of a man courting a woman'. (para 4)
His Honour then referred to authorities on unconscionable conduct and to the trial judge's explicit findings of unconscientious exploitation by Louth. He observed (at para 7) that when 'a donor who stands in a relationship of special disadvantage vis-a-vis a donee makes a substantial gift to the donee, slight evidence may be sufficient to show that the gift has been procured by unconscionable conduct.' He continued (at para 8):
Once it is proved that substantial property has been given by a donor to a donee after the donee has exploited the donor's known position of special disadvantage, an inference may be drawn that the gift is the product of the exploitation. Such an inference must arise, however, from the facts of the case; it is not a presumption which arises by operation of law. The inference may be drawn unless the donee can rely on countervailing evidence to show that the donee's exploitative conduct was not a cause of the gift. At the end of the day, however, it is for the party impeaching the gift to show that it is the product of the donee's exploitative conduct. ...
His Honour considered that Diprose had discharged that onus in this case. Appeal dismissed
His Honour began by reviewing the facts as determined by the trial judge and accepted by the majority in the Full Court.
On the law of unconscionable conduct, his Honour observed (at para 11):
It has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which (i) 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 (ii) 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. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: "the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain" or retain the benefit of it ...
He further noted that the 'adverse circumstances which may constitute a special disability for the purposes of the principle relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible of being comprehensively catalogued' (para 12) but 'the common characteristic of such adverse circumstances "seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other".'
His Honour noted (at para 13) that the
'relationship between the respondent and the appellant at the time of the impugned gift was plainly such that the respondent was under a special disability in dealing with the appellant. That special disability arose not merely from the respondent's infatuation. It extended to the extraordinary vulnerability of the respondent 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 suicide unless he provided the money for the purchase of the house. The appellant was aware of that special disability. Indeed, to a significant extent, she had deliberately created it. She manipulated it to her advantage to influence the respondent to make the gift of the money to purchase the house. When asked for restitution she refused. From the respondent's point of view, the whole transaction was plainly a most improvident one.
His Honour considered the trial judge's finding of unconscionable conduct was 'inevitable and plainly correct' (para 14). This was not merely a case in which Diprose had 'under the influence of his love for, or infatuation with, the appellant, made an imprudent gift in her favour' but was one in which 'the appellant deliberately used that love or infatuation and her own deceit to create a situation in which she could unconscientiously manipulate the respondent to part with a large proportion of his property. The intervention of equity is not merely to relieve the plaintiff from the consequences of his own foolishness. It is to prevent his victimisation ...'
Dawson, Gaudron and McHugh JJ
Their Honours noted that there were two questions raised by the appeal (para 2):
'is there an appealable error attending the conclusions of the trial judge as to the relationship of the parties and the appellant's manipulation of the respondent's infatuation?'
'do those conclusions permit of equitable relief with respect to the gift?
On matters of fact, their Honours concluded that (at para 6)
It is precisely because different people may come to different conclusions as to character, credit and disputed matters of fact that, in a forensic contest, findings as to those matters are entrusted to the trial judge (or, in cases of trial by jury, to the jury) ... And in a forensic contest, findings as to those matters will usually be bound up with each other and involve some consideration of demeanour in the witness box - as they did in this case. Thus, the trial judge said, in the context of his "impressions of the witnesses who gave evidence", that the respondent was "a strange romantic character" with "a sustained infatuation for the (appellant)" and that much of his evidence was convincing but that his "demeanour was not such as to persuade me to accept evidence which I consider to be improbable or which is in conflict with other convincing evidence" ... And in the same context, his Honour said that he "formed the impression that the (appellant) was a calculating witness who was prepared to tailor her evidence in order to advance her case" ....
These findings were (at para 8): 'substantially dependent on the trial judge's assessment of character and credit and which were reached having regard to the demeanour of the parties in the witness box. As such and as the authorities repeatedly acknowledge, they are findings which, unless some error is to be discerned, an appeal court must respect ....' Their Honours considered (at para 14) that there was 'no appealable error attending the trial judge's conclusions with respect to the relationship between the parties and the appellant's manipulation of it.' On this basis, Louth's conduct was unconscionable and Diprose was entitled to equitable relief.
Toohey J (dissenting)
His Honour set out the facts in some detail, noting that the 'story' was a 'curious one' (para 3). He noted that the (para 3) 'key is to be found in the following passage from the judgment of King C.J. ((58) ibid., at p 439):
'This litigation results from a deep and persistent, albeit unrequited, emotional attachment of the (respondent) to the (appellant), the (respondent's) bizarre behaviour in pursuance of that attachment and the (appellant's) response to that behaviour.'
The history of the relationship
[para 4] The parties met at a party in Launceston in November 1981. The appellant was married but her marriage was about to end. Her husband left her shortly afterwards. There were two children of her marriage; she has had custody of them at all relevant times. The respondent, a practising solicitor, was married. His first marriage had ended in divorce and the final separation from his second wife was about to take place.
[para 5] The parties became friendly and began to go out together fairly regularly. Intercourse took place shortly after their first meeting and again about eight months later. During a relationship which continued for about seven years, intercourse took place on those two occasions only. It is obvious that feelings were much stronger on the respondent's side. Over the years he composed many poems which he called "The Mary Poems". They were, in the words of King C.J., "tender, often sentimental, sometimes passionate, and very often on the theme of unrequited love" ...
[para 6] On 23 August 1982 the appellant left Launceston for Adelaide. The reason was that she was in straitened financial circumstances following the breakdown of her marriage and she hoped for help from her sister and her sister's husband, Mr and Mrs Volkhardt. She also told the respondent that she had friends in Adelaide. The respondent tried to persuade her to stay in Launceston. His proposal of marriage was rejected.
[para 7] In January 1983 the respondent visited Adelaide. The appellant said she could not go out with him because she had met another man. The respondent returned to Launceston but decided to move to Adelaide permanently, mainly because the appellant was there. He moved to Adelaide in February 1983. At first he made no contact with the appellant, being concerned that she might think he was harassing her. He did send her a partly completed volume of "The Mary Poems" in April 1983. Later he called at her home but a man, whom the respondent had known from Tasmania, answered the door. Mr Volkhardt then contacted the respondent to say that the appellant did not wish to see him. In May 1983 the appellant telephoned the respondent twice but refused to give him her telephone number.
[para 8] In July 1983 she rang again to say that she was depressed and that the respondent might like to take her to lunch the next day. They did in fact lunch together. At first the appellant was in a very bright mood but later her mood changed suddenly. She said that "life was very bad" and that a few nights earlier she had put a Stanley knife to one of her wrists and had thought of slashing it. She did not show the respondent a scar at that time though she did so later, in 1984 and again in 1985. The evidence does not disclose any reason for the scars. The respondent drove the appellant home after lunch and said that his attitude to her had not changed. The appellant replied: "Oh well, if you don't try and hassle me, I would probably let you sleep with me occasionally, but I don't want any commitment." Nevertheless, the appellant did not give the respondent her telephone number until November 1983 although she telephoned him a couple of times during that period.
[para 9] Thereafter the respondent telephoned and called on the appellant regularly. He continued to express the depth of his feelings for her. The appellant made it clear that she did not feel the same way about him but that she was happy to treat him as a friend. The pattern of their relationship continued as before until the middle of 1985. The respondent made many gifts to the appellant, some of jewellery and others of a less personal nature such as a television set and a washing-machine. From time to time he picked up unpaid household bills lying around and paid them.
[para 10] In September 1984 the Volkhardts separated; they were later divorced. Mr Volkhardt owned a house in Tranmere in which the appellant was living with her children and for which she paid a low rent. The Volkhardts' matrimonial home was in their joint names. Shortly after the separation Mr Volkhardt said to the appellant, speaking of the house at Tranmere, that: "(M)aybe she should be paying more rent or maybe it would be a good idea to put her name down on the housing list because she couldn't assume she would live there forever". The conversation as reported to the respondent by the appellant was that: "She said that she had been told by her brother-in-law Arch that her sister Sarah was seeking a property settlement from him and that, among other things, the house at (Tranmere) would have to be sold."
[para 11] Mr Volkhardt's remark was obviously the catalyst for the discussions between the appellant and the respondent in May 1985. The content of those discussions was a matter of dispute between the parties but one thing is clear: the respondent agreed to buy the Tranmere house from Mr Volkhardt for $58,000, expenses being $933. ...In the respondent's presence and by arrangement between them, the appellant signed the contract of sale as purchaser and the land was transferred directly to her.
[para 16] For the remainder of 1986, 1987 and into 1988 the relationship between the parties was much as it had always been. The respondent continued to telephone the appellant and to call on her. He brought food to the home and paid bills from time to time. The appellant's children moved to private schools and the respondent met their fees for a while. The respondent's ardour seems to have continued unabated; the appellant's generally offhand approach to the respondent does not seem to have altered.
[para 17] However, in mid-1988 things changed. The respondent bought a house at Crafers, borrowing the entire purchase price from his mother and a building society. He had to vacate the house he was renting before he was able to take possession of his new home. By arrangement, the respondent's son moved into the house at Tranmere and in August 1988 the appellant permitted the respondent to do likewise, in both cases pending settlement of the Crafers purchase. The respondent was there for two to three weeks, during which time his relations with the appellant deteriorated. She had a male friend and, clearly, she resented the respondent's presence. There was a quarrel. The respondent told the appellant he wanted her to transfer the Tranmere house to him and to pay some rent for her occupation of it. The appellant refused on both counts, saying that the house was hers. ...
His Honour then went on to outline the respondent's claim and the findings at trial and on appeal to the Full Court.
His Honour set out the traditional types of weaknesses that have given rise to relief against unconscionable dealing, including poverty or need, sickness, age, infirmity etc, as set out in Blomley v Ryan, bot noted that there was no exhaustive list. It was, however, 'incumbent on the respondent to bring himself within the general principle.' (para 28)
In this case (para 29)
'there can be no doubt as to the strength of the respondent's feelings for the appellant and the lengths, including the financial lengths, to which he was prepared to go to express those feelings. But equally, while the appellant was content to accept the many benefits she received from the respondent, there can be no doubt that she made her position in the relationship quite clear. It was the respondent who continued to seek her out. She did not mislead him in regard to her position; she did not hold out any false hopes to him. They were both adults; each had been married before (the respondent twice); and the respondent was a practising solicitor who must have appreciated fully the consequences that the law would ordinarily attach to the gifts he made to the appellant, including the money involved in the purchase of the Tranmere house. It was the respondent's idea to buy the house, not the appellant's. In those circumstances, there is much force in the appellant's criticism of certain expressions used by the trial judge, such as "unrequited love", "pathetic devotion", "utter infatuation", "feeding the flames of the (respondent's) passion" and "bizarre behaviour". ...'
His Honour then referred to the trial judge's finding that Louth had manufactured an 'atmosphere of crisis' and that this was dishonest and 'smacked of fraud'. His Honour did not consider that the evidence supported that finding. (para 32). His Honour observed that Diprose bought the house for Louth because he wanted her to be secure and that this act was not one he committed on impulse, but after taking 'plenty of time to consider what he was doing' (para 33).
His Honour further observed that, while this was a very generous gift, and one that Diprose may have regretted, the mere fact that there was inadequate consideration or that the transaction was unreasonable or unjust, is not itself grounds to set it aside (para 36). Although the concept of unconscionability is wide, there is no 'general power to set aside bargains simply because ... they appear to be unfair, harsh or unconscionable' (para 37). Rather, the 'equitable jurisdiction exists when one of the parties "suffers from some special disability or is placed in some special situation of disadvantage" [citing Amadio per Mason J at p 461]. ...' No special disability was readily apparent in this case.
Toohey J held that (at 39) Diprose
'failed to make good the proposition that his relationship with the appellant placed him in some special situation of disadvantage so that he should be recognised as the beneficial owner of the Tranmere house. The relationship was one which might be thought to have little to offer him but it was one in which he was content to persist and which the appellant in no way misrepresented or disguised. The respondent was well aware of all the circumstances and of his actions and their consequences. This applies particularly with respect to the purchase of the house. That knowledge and his clear appreciation of the consequences of what he was doing run directly counter to a conclusion that he was suffering from some special disability or was placed in some special situation of disadvantage. It is clear that the respondent was emotionally involved with the appellant. But it does not follow that he was emotionally dependent upon her in any relevant legal sense ...'
Toohey J would have allowed the appeal.