The NSW Court of Appeal has set aside a transfer of property agreement after deeming it unjust in the recent case of Hanna v Raoul [2018] NSWCA 201. Mr Raoul was an elderly, ‘suggestible’ widower who defaulted on his mortgage. After speaking with his nephew, Mr Hanna, Raoul agreed that he would transfer the property to Hanna if he discharged the mortgage, subject to the condition that he could remain living in the property until his death. Mr Hanna’s solicitor prepared a deed of arrangement and a memorandum of transfer, but advised that Raoul should meet with another solicitor in order to have the terms explained.
However, the deed contained terms that significantly disadvantaged Mr Raoul, including the fact he would have no access to capital if he needed it as he aged, it subjected him to the discretionary decisions of Mr Hanna as to the management of the land and there was nothing in place to protect Mr Raoul in the event that Mr Hanna sold the property or died. The court found that Raoul’s solicitor appropriately explained the purpose of the agreement, but did not properly explain the aforementioned consequences. It was ultimately held that it was an invalid unconscionable agreement as there was no reasonable degree of equality between the parties; Hanna knew of Raoul’s desperation to discharge the mortgage as well as his frailty, and still sought to retain any benefit he could.