In the case of Hanna v Raoul  NSWCA 201 the NSW Court of Appeal set aside a deed of arrangement for the transfer of property after deeming it unjust under the Contracts Review Act 1980 (NSW). Mr Raoul was an elderly 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 paid out the mortgage, subject to the condition that Mr Raoul 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. In 2015 Mr Raoul’s home was destroyed by fired. Later that year proceedings were begun by a tutor for Mr Raoul to recover the land from Mr Hanna on the basis that he did not have the capacity to enter the transaction and the transaction was unconscionable. 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 Mr Raoul 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.