Macander [2010] NSWSC 929
Spina v Permanent Custodians Ltd [2008] NSWSC 561; (2008) 13 BPR 98, 316
Stone v Smith (1887) 35 Ch D 188
Taheri v Vitek [2014] NSWCA 209
Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1
Ward v Ward [2011] NSWSC 107
Ward v Ward (No 2) [2011] NSWSC 1292
Texts Cited: Ritchie's Uniform Civil Procedure (NSW)
Category: Principal judgment
Parties: Aviva Cohen by her tutor NSW Trustee and Guardian (Plaintiff)
Shalom Cohen (Defendant)
Representation: Solicitors:
Zucker Legal (Plaintiff)
File Number(s): 2015/271403
[2]
Judgment - EX TEMPORE (REVISED)
HIS HONOUR: This is a very unfortunate case between the Plaintiff, who is a person under a legal incapacity (a protected person within the meaning of that term in the NSW Trustee and Guardian Act 2009 (NSW)), who sues by her tutor, the NSW Trustee and Guardian, and the Defendant, her son, who has not appeared, or played any part, at any time, in the proceedings.
Although there were several claims for relief made in the Statement of Claim, at the hearing, Mr C M Zucker, solicitor, who appeared for the Plaintiff, only pressed the claim for a declaration regarding title to, and an order that the Defendant transfer to the Plaintiff, the whole of certain real estate situated at Burns Bay Road, Lane Cove ("the Lane Cove property"), consequential relief, as well as an order that the Defendant pay the costs of the proceedings.
The matter was called outside the Court several times during the course of the hearing, between 10:00 a.m. and 10:40 a.m., and then again, at 12:10 p.m., immediately prior to the Court delivering this ex tempore judgment. On no occasion the matter was called, was there an appearance by, or on behalf of, the Defendant.
[3]
Background Facts
The following facts appear to me to be uncontroversial. I have taken them, principally, from the affidavit of Maree Rice, a legal officer with the NSW Trustee and Guardian with the conduct of the matter in the interests of the Plaintiff, and the exhibit to that affidavit (Ex. A).
The Plaintiff was born in the Czechoslovak Republic (as it then was) in August 1923. She is currently aged 92 years and resides in an aged care facility in Chatswood, Sydney. She has been a resident of that facility since about June 2012. She is now a high care resident. (The Plaintiff's solicitor confirmed, from the bar table, that a telephone call to the aged care facility this morning confirmed that the Plaintiff is still alive.)
The Defendant was born in Tel Aviv, Israel, in February 1955, and is currently aged 61 years.
The Plaintiff made a Will dated 15 October 1974 in which she appointed her husband, Naftali Cohen, as executor and sole beneficiary of her estate, but in the event that he did not survive her by one calendar month, then the Defendant was appointed as executor and sole beneficiary of her estate in his stead. (It is not known whether this is the last Will of the Plaintiff, but there is no evidence of any later Will advanced on behalf of the Plaintiff.)
The Plaintiff's husband died in December 1994 (Ex. B).
On 6 October 2000, the Plaintiff granted to the Defendant an Enduring Power of Attorney in the form prescribed in Schedule VII of the Conveyancing Act 1919 (NSW), to which reference is made in s 163B of that Act. (Section 163B of the Conveyancing Act was repealed in 2004, but was given continued operation by s 6(3) and Schedule 1 of the Powers of Attorney Act 2003 (NSW).)
The Power of Attorney, which appears to have been prepared by a firm of solicitors, expressly stated that authority was conferred on the attorney to do, on the Plaintiff's behalf, anything that she may lawfully authorise an attorney to do, subject to the conditions and limitations specified in Part 2 of the Power of Attorney. There were no conditions and limitations specified.
In Clause 2 of the Power of Attorney, the attorney was given authority "to execute any assurance or other document, or do any other act, whereby a benefit is conferred on him". The inclusion of Clause 2 attracts s 163B(2)(B) of the Conveyancing Act.
Finally, the Power of Attorney was expressed to be given with the intention that it continue to be effective even if the Plaintiff suffered a loss of capacity through unsoundness of mind after its execution.
The Power of Attorney was registered on 12 September 2001. Section 163(2) of the Conveyancing Act is generally to the effect that most conveyances and deeds, if executed by power of attorney, only have "force or validity" if the instrument creating the power has been registered: Taheri v Vitek [2014] NSWCA 209 at [42] (Leeming JA).
The Plaintiff purchased the Lane Cove property in November 2001 for $245,000. It is a one bedroom residential apartment with an area of 45 square metres, comprising an open lounge/dining room, a kitchen, bathroom and laundry, and a very small balcony. It has an open single car space with an area of 13 square metres.
The Transfer, pursuant to which the Plaintiff was registered as the sole proprietor, was dated 7 November 2001. The title was unencumbered.
On 26 August 2008, the Plaintiff appointed the Defendant as her enduring guardian "if because of disability I am partially or totally incapable of managing my person".
A copy of Transfer of the Lane Cove property, which is undated but which was executed about 31 July 2013, shows the transferor as the Plaintiff and the transferee as the Defendant. The Transfer was made for an expressed consideration of $1.00.
It appears that the Transfer was signed by the Defendant as the Attorney for the transferor and by him as the transferee.
It is apparent that stamp duty of $5,490 was paid as there is a stamp from the Office of State Revenue NSW Treasury, for that amount, on the Transfer. The Duties Statement (which provides a summary of the transaction submitted to the Office of State Revenue through Electronic Duties Return) obtained from the Office of State Revenue, reveals that the transaction was assessed on a "dutiable amount" of $200,000.
The Transfer appears to have been registered in early August 2013. On 9 August 2013, a Certificate of Title to the Lane Cove property was issued under the Real Property Act 1900 (NSW), identifying the Defendant as the registered proprietor. He remains the registered proprietor of the Lane Cove property and title to the property remains free of any registered encumbrance.
In a document, apparently signed by the Defendant in front of Mr G P Meakin, solicitor, and dated 18 November 2013, the Defendant resigned his appointment as the Plaintiff's Attorney and Guardian.
As at 1 August 2013, the amount said to be owing to the aged care facility by the Plaintiff was $8,130.19. By late November 2013, it had increased by about $100.
There is no evidence that the Plaintiff had any other property, real or personal, of any value as at the date of the transfer of the Lane Cove property to the Defendant. (The suggestion made by the Defendant's then solicitor that the Plaintiff held funds in a bank account have not been able to be verified by the NSW Trustee and Guardian.)
In a health professional report dated 29 January 2014, the Plaintiff's general medical practitioner advised that the Plaintiff had blindness and poor hearing to a moderate degree, as well as mild dementia. He noted that on a mini-mental state examination, she had scored 21/30.
An earlier medical report in June 2012 revealed that she suffered from macular degeneration and had short term memory loss.
On 31 January 2014, Ms Pilar Uzabeaga, the Manager of the aged care facility, lodged an application with the NSW Civil and Administrative Tribunal, for the appointment of a manager for the Plaintiff.
By order dated 16 April 2014, the Tribunal was satisfied that the estate of the Plaintiff should be committed to the NSW Trustee and Guardian. The Defendant was not a party to the hearing. His then solicitor, Mr Meakin, in a letter dated 13 April 2014, informed the Tribunal that he "was not instructed to appear at the Hearing of this matter appointed for 16 April 2014 nor is my client, Mr Cohen who is, himself, too ill to participate".
The following passage also appears in the letter from Mr Meakin to the Tribunal:
"…
4. Residence at premises - my client is not residing at the premises as I am instructed that it is presently uninhabitable due to damage caused by Mrs Cohen's treatment of the place prior to her move to care in or about June 2012. The assertion that the property was purchased from the sale of her previous residence is not correct. The situation is rather complex, but involved my client advancing substantial loans to his mother when she decided to return to Europe to reside and the loan was repaid to my client on the sale of her property and my client acquiring the present property. Solicitors handled the transaction which was in good faith and properly documented."
Following the appointment of the NSW Trustee and Guardian as the manager of the Plaintiff's estate, by letter dated 27 August 2014, the solicitor for the NSW Trustee and Guardian wrote to Rickard Lawyers, a firm then understood to have acted on behalf of the Defendant on the conveyancing transaction, in the following terms:
"…
The NSW Trustee is managing the estate of Aviva Cohen pursuant to a Financial Management Order made by the NSW Civil and Administrative Tribunal on 16 April 2014.
We understand you acted for Mrs Cohen's son and former attorney Shalom Cohen in the transfer of her property at xx/xxx xxxxx xxxx Lane Cove to himself for $1. Enclosed is a copy of the Transfer signed by Shalom Cohen as both transferor and transferee and witnessed by yourself.
The NSW Trustee requires you to provide a copy of your file in relation to this matter not less than fourteen days after the date of this notice.
This request is made pursuant to s116 of the NSW Trustee and Guardian Act 2009 and we also enclose a copy of same for your reference."
In a letter dated 16 July 2014, but not sent until a copy of the file of Rickard Lawyers was provided to the NSW Trustee and Guardian under cover of a letter dated 25 September 2014, Mr J Rickard responded as follows:
"I act for Shalom Cohen
I refer to your letter dated 3 July 2014. The purpose of this letter is to respond on instructions to the matters raised in your letter.
In July 2013 Mr Cohen attended at my office with his mother's will showing him to be sole beneficiary and a registered enduring power of attorney of his mother appointing him as her attorney.
Mr Cohen also produced a valuation from a registered valuer for stamp duty purposes.
I was holding and have held the unencumbered Certificate of Title to the property from when Mrs Cohen purchased it in 2001.
Mr Cohen instructed me to transfer the title to him. I acted on his instructions, having regard to the following:
Mr Cohen is sole beneficiary of his mother's will;
Mr Cohen is Mrs Cohen's attorney under an enduring power of attorney;
Mrs Cohen does not have mental capacity;
Mrs Cohen is in a nursing home;
there were no outstanding debts against the property and Mrs Cohen's living expenses were being taken care of by her aged pension and her St George Bank account.
On the basis of the documents sighted and the explanation given in support of my instructions to transfer the property, to do so was reasonable in all the circumstances.
I am instructed that Mr Greg Meakin, solicitor is now acting for Mr Cohen and may be contacted on xxxx xxx xxx, fax number is xxxx xxxx, email: xxxxxxxxx or P.O. Box xxx Belrose NSW 2085."
The NSW Trustee and Guardian subsequently caused a caveat to be registered on title to the Lane Cove property.
Mr Meakin, in a letter dated 31 August 2015, wrote to the NSW Trustee and Guardian in the following terms:
"I refer to the above matter and confirm that I continue to act for Mr Cohen who has handed me a letter from the NSW Registrar General with a copy of Caveat attached.
Mr Cohen wants me to point out again that the subject property was purchased with his funds and put into his mother's name to be held in Trust for him. As previously advised, there was a change in circumstances and the property was legitimately transferred to my client as the lawful owner.
At no time was there ever an expressed or implied Trust that he would hold the property for his mother.
Nevertheless, it is the case that Mrs Cohen is 92 years of age and only in moderate health. My client is the sole beneficiary of her estate pursuant to a will, a copy of which I attach for your information.
Accordingly, and in all the circumstances noting in particular the legal costs that could be incurred in respect to action to remove the Caveat, my client will, at this stage, refrain from such action."
The NSW Trustee and Guardian responded in a letter dated 8 September 2015 in the following terms:
"…
I should tell you that proceedings have been prepared to effectively set aside the transfer of title of the property at xx/xxx xxxxx xxxx, Lane Cove. A copy of the final version of the Statement of Claim is enclosed. It will be filed shortly and you might wish to obtain instructions as to service.
Neither I nor NSW Trustee have ever seen evidence that the property was purchased with the funds of Mr Shalom Cohen. The only assertion that has ever been made was set out in your letter to NCAT Guardianship Division dated 13 July 2014 a copy of which is enclosed for your convenience. If Mr Shalom Cohen wishes to provide contemporaneous documentary evidence which establishes that he was the beneficial owner of the funds with which the property was acquired by Mrs Cohen in November 2001 then such material will be given immediate and careful consideration. The consideration shown on the Transfer was $245,000.
It is appreciated that Mr Shalom Cohen is the sole beneficiary of his mother's estate. However, NSW Trustee has the pressing and immediate problem of debts owing to the nursing home where Mrs Cohen resides the current debt balance being $20,797.02. In addition this property was assessed as an asset an effect of which was that Mrs Cohen's aged care costs exceed her pension.
If your client wishes to put a proposal that will deal with the present and future debt to Forest View Aged Care Centre, the shortfall in social security and costs then it will be considered. In the absence of any such proposal then this litigation will need to continue the ultimate (and indeed pressing) aim being sale of the subject property."
An offer to resolve the contemplated proceedings was made on behalf of the Defendant, but not accepted by the NSW Trustee and Guardian, on behalf of the Plaintiff.
As at 29 February 2016, the total amount said to be outstanding by the Plaintiff to the aged care facility is $26,524.91.
Ms Rice, in her affidavit affirmed 18 February 2016, discloses that the Plaintiff receives Centrelink benefits, but that "Centrelink 'deems' the Plaintiff to have gifted the Lane Cove property to her son. Accordingly, her aged care costs will continue to exceed her pension and the nursing home fee arrears continue to accumulate. In addition to the increasing debt to the nursing home, [the Plaintiff] has no funds to provide for comforts or other necessary expenses for her welfare".
[4]
Service of Documents on the Defendant
The Statement of Claim was filed on 16 September 2015. A request was made to Mr Meakin to accept service but he responded that he would no longer be acting, but that the Defendant would be instructing Ms S Nash of Sally Nash & Co, Solicitors, to handle the matter.
The evidence reveals that the Plaintiff's solicitors filed a notice of motion on 17 November 2015 seeking substituted service of the Statement of Claim.
The court made an order for substituted service, pursuant to Uniform Civil Procedure Rules ("UCPR") rule 10.14, on 4 December 2015. That order provided for service of the Statement of Claim by Express Post to Mr Meakin; by facsimile transmission to Mr Meakin; by letter sent to the Defendant at the Lane Cove property; and by email transmission to an email address (which appears to have been that of a person by the name of Alexandra. (I should mention that there are several references to "Alexandra" in the evidence as "the partner" of the Defendant.)
In addition, it appears that there was correspondence between Ms Nash and the Plaintiff's solicitors, in which she stated that the Defendant had not attended a scheduled meeting with her, but that her firm "have advised him of the listing on 15 December 2015".
There is evidence, subsequently filed, demonstrating the steps that have been taken, by the Plaintiff's solicitors, since December 2015, to have the Defendant informed of the hearing date. For example, there is a letter dated 17 December 2015, addressed to the Defendant at the Lane Cove property; there is a letter sent to the email address referred to earlier; and there are a number of letters that were sent to Mr Meakin.
No response to any of the correspondence has been received from the Defendant. However, in a letter dated 15 March 2016, Mr Meakin responded in the following terms:
"I refer to the above matter and numerous letters and telephone conversations and confirm my telephone advice that I do not presently regard Mr. Cohen as my client.
When proceedings were instituted, as I advised you, I did not propose to continue to act but rather to send it to a solicitor of Mr. Cohen's choice upon my recommendation.
All papers and my file were sent to Sally Nash Solicitor in Sydney and I assumed that the matter was in hand.
Further correspondence from you indicated that this was perhaps not the case and accordingly, I endeavoured to contact my former client on numerous occasions by telephone and text message but without success.
I understand your predicament however, I can do no more than request that no further material be forwarded to me as Mr. Cohen is clearly not interested in talking to me."
I am satisfied that reasonable efforts have been made to bring the commencement, and the nature, of the proceedings, as well as the contents of the Statement of Claim, and finally the date the matter has been listed for hearing, to the attention of the Defendant. In light of all of the evidence, I am also satisfied that the Defendant has, for some time, continued to ignore contact made with him, or others on his behalf, by the solicitors acting for the Plaintiff. He has chosen to not engage at all in the litigation.
[5]
The Hearing
As stated, the Defendant has not filed an Appearance or played any part in the proceedings at any time. I have earlier referred to the matter being called several times outside the Court today.
UCPR rule 6.9(1) provides that a defendant may enter an appearance in proceedings by filing a notice of appearance. The time for filing the appearance is provided in UCPR rule 6.10(1)(a), in the case of proceedings commenced by statement of claim, being 28 days after service on the defendant of the statement of claim or such other time as the Court directs for the filing of a defence. The Court has not directed any other time.
Following the first call of the matter outside the Court, a call which was not answered by the Defendant or any person representing him, Mr Zucker made an application for the matter to proceed in the absence of the Defendant. In support of that application, he referred to NSW Trustee & Guardian as Executor of Will of Walsh (decd) v Gregory [2012] NSWSC 681; (2012) 18 BPR 35,153 at [17]-[22], in which I had written:
"Hearing in the absence of a Party
[17] Rule 29.7 of the UCPR, relevantly, provides:
"29.7 Procedure to be followed if party is absent
(1)This rule applies when a trial is called on.
(2) If any party is absent, the court:
(a) may proceed with the trial generally or so far as concerns any claim for relief in the proceedings, or
(b) may adjourn the trial.
…"
The clear purpose of UCPR r 29.7 is the efficient dispatch of court business. However, in dispatching court business, I cannot ignore the right of a defendant to be informed, or, at least, to be made aware, of a trial date. It is a fundamental principle that a party who may be adversely affected by the making of court orders has a right to be heard: Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571, in which Rich J said (at 589):
It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside, and a court which finds that it has been led to purport to determine a matter in which there has been a failure to observe the principle has inherent jurisdiction to set its determination aside. … In such a case there has been no valid trial at all.
In the circumstances, the first issue to address is whether I am satisfied that it is appropriate to proceed in the absence of the Defendant or of anyone representing her.
A party is "absent" within the meaning of the rule, when the trial is called on, only if it can be shown that he, or she, has knowledge, or notice, of the date of the trial, and is not physically present, or not represented. In other words, before the rule can be relied upon, there should be proof that the absent party has been given reasonable notice of, or has knowledge of, the date of the trial.
Having read the evidence of service, some of which I have set out, I am now satisfied that all reasonable attempts have been taken to notify the Defendant of the Plaintiff's intention to obtain orders when the matter was listed before me today. Overall, I am satisfied that attempts have been made, fruitlessly, to get in contact with the Defendant, to provide her with the documents to be relied upon, and to allow her to participate in the proceedings. The Plaintiff has also established that all reasonable attempts to notify the Defendant of the date for the trial and that it was to then proceed have been made.
Finally, on the question, I have not forgotten what I said in Smirski v Macander [2010] NSWSC 929 at [34]:
It is to be remembered that the primary considerations on whether to proceed ex parte concern whether there is urgency; whether irreparable damage would flow from making an ex parte order; whether hardship would flow to a party against whom an order is made and whether such an order can be set aside: Ndjamba v Toyota Finance Australia Ltd [2010] NTSC 23, per Blokland J at [8]."
More recently, in Lezaja v Hannover Life Re of Australasia Ltd (No 2) [2016] NSWSC 167 (a case in which a Plaintiff had failed to appear at the hearing), after referring to some of the passages quoted above, I added, at [37] and at [40]:
"Of course, I must also have regard to the obligations imposed by s 56 to s 60 of the Civil Procedure Act 2005 (NSW). Section 56 emphasises that the overriding purpose of the Act and the rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. The court is required to give effect to the overriding purpose when it exercises any power given to it by the Act or by the rules of court. Section 57 in turn requires the court to have regard to specified matters. Section 58 requires the court, in deciding whether to make any order or direction for the management of the proceedings, to act in accordance with the dictates of justice, and the court must have regard to the provisions of ss 56 and 57. These sections recognise the fact that delay and case backlog are matters which affect not only the public cost in delivery of justice, but the court's ability to provide individual justice, and that the reforms introduced by the Civil Procedure Act promote the provision of individual justice notwithstanding that they may have adverse effects on the claims of individual parties in particular circumstances: Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [37] (Allsop P).
…
…The Court is not required to indefinitely delay the completion of the hearing in the hope that he might change his mind and appear: Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172 at [182]-[186], [189]-[191]; Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1 at [4]. The Plaintiff, proved to be on notice of the proceedings, has been afforded the opportunity to appear and to be heard. He has chosen not to do so. It follows that it is appropriate for the proceedings to be determined in his absence."
I have considered whether the Court should adjourn the proceedings to give the Defendant a further opportunity to appear. However, it seems to me that there would be no utility in doing so, in the absence of an explanation why he has not appeared at any time during the proceedings. There is simply no reason to believe that he would be more likely to appear on the next occasion than on this occasion.
It is important that the matter be heard in order that NSW Trustee and Guardian can properly manage the affairs of the Plaintiff, which affairs include paying her proper debts at the aged care facility where she resides and having sufficient funds for her continued residence, care and support. The proceedings have been driven by these facts and they have been on foot for some time. Prior to their commencement, attempts were made to engage with the Defendant and his lawyers without any real success.
There will be no irreparable prejudice to the Defendant since the stated intention of the NSW Trustee and Guardian, as manager, is to sell the Lane Cove property and use the proceeds of sale during the Plaintiff's lifetime in her interests. After her death, any amount that remains will be for the Defendant pursuant to the Plaintiff's Will (assuming it is her last Will). It can thus be said that the damage to him is not irreparable because he will receive the proceeds of sale, less such amounts as are properly spent in the interests of the Plaintiff and in which regard her manager is bound by its statute.
As to hardship, the Defendant should not be permitted to frustrate the determination of the proceedings by his non-attendance without explanation. If, as has been stated, he is not living in the Lane Cove property, and it is, in fact, untenanted because of its condition, then the Defendant will not suffer any hardship by its sale.
In my view, there is no ground on which it would be appropriate for the court to adjourn the hearing, of its own motion. Accordingly, I determined to proceed with the trial generally, and so far as it concerns any claim for relief in the proceedings.
Having decided to proceed to a hearing, the Plaintiff is entitled to prove her claim so far as the burden of proof lies upon her and, if she can establish that she is entitled to the relief claimed, and such other relief as is consistent with what is sought, the Court should proceed to make final orders: Ritchie's Uniform Civil Procedure (NSW) [29.7.2], referring to Stone v Smith (1887) 35 Ch D 188 and Kingdon v Kirk (1887) 37 Ch D 141; see also, Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365 at [64].
Of course, because the Defendant did not file an Appearance or a Defence within 28 days after service of the Statement of Claim, he is regarded as being "in default": UCPR rule 16.2(a). In addition, by his failure to file a defence traversing the allegations of fact in the Statement of Claim, each of those allegations of fact is taken to be admitted as against him: UCPR rule 14.26(1): Ward v Ward [2011] NSWSC 107 at [28]; Konica Minolta Business Solutions Australia Pty Ltd v Vongkeneta [2013] NSWSC 486 at [31].
Finally, UCPR rule 16.3, which deals with the case where a Defendant is in default, allows the Plaintiff to apply for judgment under UCPR Part 16 "according to the nature of his or her claim for relief". Unless the Court otherwise orders, such an application for judgment must be accompanied by an affidavit of service of the statement of claim and an affidavit in support of the application. In this case, the Plaintiff has complied with this requirement.
The Plaintiff has, in support of the application, read affidavit evidence and tendered documentary evidence in support of her claim.
[6]
DETERMINATION
Relevantly, Part 16 of the Conveyancing Act dealt with powers of attorney. Part 16 included ss 158-163H. Section 159(1) relevantly provided that an attorney under a power may, in the exercise of the power, execute any instrument with his own signature and, where sealing is required, with his own seal, or do any other thing in his own name. In this case, the Defendant signed the Transfer of the Lane Cove property to himself on behalf of the Plaintiff as transferor.
Section 163B(1) relevantly provided that an instrument in, or to the effect of, the form in Sch 7, conferred on the attorney thereby appointed authority to do, on behalf of the person executing the instrument, anything the person executing the instrument may lawfully authorise an attorney to do. However, under s 163B(2), that authority did not include authority to execute a document, or do any act, as a result of which a benefit would be conferred on the attorney appointed by the instrument, unless such authority was expressly conferred by the instrument. In this case, the Power of Attorney executed by the Plaintiff did confer such authority.
In Taheri v Vitek, at [115], Leeming JA noted that
"[a]s between principal and agent, the agent is a fiduciary, and speaking generally is required not to place himself or herself in a position of conflict, nor to obtain a profit or benefit from the position, without first obtaining fully informed consent": see most recently Howard v Cmr of Taxation [2014] HCA 21 at [33] and [56]. Those fiduciary obligations inform the decisions on which reliance has been placed in the decisions dealing with s 163B, particularly the way in which instruments conferring authority have been construed. However, the obligations imposed by equity are ordinarily subject to the terms of the contractual arrangement between principal and agent; each of those fiduciary obligations "must then accommodate itself to the relationship between the parties created by their contractual arrangements": Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 99."
In relation to what an attorney could do, relying upon the form of the Power of Attorney, Leeming JA wrote, at [111]:
"The issue is simply stated: does an instrument which includes a benefit clause in accordance with s 163(2)(b) authorise the attorney to act other than in the interests or for the benefit of the donor? With respect to those judges who have reached the opposite conclusion, I conclude that it does."
His Honour added, at [130]:
"An instrument complying with s 163B may as a matter of law (and very often will) empower an attorney to do "anything" the principal may lawfully authorise an attorney to do, even if there is a benefit to the attorney and no benefit to the principal."
The Plaintiff does not submit that the Defendant lacked the power to transfer title of the Lane Cove property to himself. The contention the Plaintiff makes, and which is pleaded, particularly in paragraphs 17 and 22 of the Statement of Claim, is that by reason of the Power of Attorney, the Plaintiff's then condition and the Defendant's relationship with her, the Defendant, whilst authorised to transfer the property to himself, should not have done so.
The Plaintiff submits that the authority given to the Defendant by the Power of Attorney does not exonerate the Defendant, as attorney, from the fiduciary obligations by which an attorney under power is bound. Reliance is placed on Ward v Ward (No 2) [2011] NSWSC 1292 at [3], in which Brereton J wrote:
"The relationship of principal and attorney under power is a recognised class of fiduciary relationship [Hospital Products Ltd v United States Surgical Corporation (1985) 156 CLR 41 at 68 (Gibbs CJ)]. Although the power of attorney under which the first defendant entered into the loan agreement was expressed to authorise the attorney "to execute an assurance or other document, or do any other act whereby a benefit is conferred on him", that is a matter of power or authority, and does not exonerate the attorney from the fiduciary obligations by which an attorney under power is bound."
In Spina v Permanent Custodians Ltd [2008] NSWSC 561; (2008) 13 BPR 98, 316, Hammerschlag J held that that the plain meaning of s 163B(1) of the Conveyancing Act was that the attorney was vested with the power to do anything which the principal may do whether it was against the interest of the donor or not. He referred to the fiduciary obligation owed to the principal by the attorney stating at [153] that
"[w]hether a particular action by the agent under a general power of attorney on the principal's behalf involves a breach of fiduciary duty is a different matter. The principal may have redress against his agent and a third party who participates in the breach with requisite knowledge. Such a case would have to be pleaded."
On the question of the existence of the fiduciary duty, His Honour wrote at [113]-[121] :
"An agent may be in a special position to exercise a power or discretion given to him by his principal to the detriment of the principal, who is accordingly vulnerable to abuse by his agent. For this reason equity imposes on such an agent obligations or duties called fiduciary obligations or duties which regulate the manner in which the agent may exercise powers or discretions given by the principal. Principal and agent is one of the accepted fiduciary relationships. They are also sometimes called relationships of trust and confidence: see Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96-7.114
The scope and extent of fiduciary obligations imposed will depend on the nature of the relationship: Kelly v CA & L Bell Commodities Corporation Pty Limited (1989) 18 NSWLR 248 at 256-8.115
Two of the accepted fiduciary obligations which are imposed upon an agent are the duty to act in good faith towards and for the benefit of his principal, and the duty to refrain from putting himself in a position where his own personal interests conflict with the interests of his principal.
In Hospital Products Ltd v United States Surgical Corp at 97, Mason J explained the relationship between a contract and a fiduciary relationship which existed with it as follows: "The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction."
Accordingly where fiduciary obligations arise because of a contractual relationship the terms of the contract will affect the scope and extent of the fiduciary obligations between the parties, not the other way round.
The ambit of the authority conferred by a principal on an agent pursuant to a power of attorney is derived by properly construing the terms of the instrument in accordance with accepted canons of construction.
It follows that the nature and ambit of a posited fiduciary obligation arising out of a contractual relationship cannot permissibly be used to construe the terms of the contract (in particular a written contract) between the parties.
The terms of a power of attorney will circumscribe the extent of the power. Fiduciary duties will regulate how the power may properly be exercised. There is accordingly an important difference between lacking power and abusing it.
Where a transaction is entered into in breach of a fiduciary obligation, the Court may grant relief including by setting aside the transaction or awarding equitable damages or compensation."
In this case, I am satisfied that by transferring the Lane Cove property to himself, a transfer which does not appear to have been disclosed to the Plaintiff, and which had the effect of depriving the Plaintiff of her only substantial asset, the Defendant acted in breach of his fiduciary obligations to the Plaintiff.
There can be no suggestion that the transfer of the Lane Cove property was for the benefit of the Plaintiff; indeed, it is patently clear that it was to her significant disadvantage. In my view, the Defendant abused the power bestowed upon him by the Power of Attorney.
In addition, the Plaintiff effectively seeks to set aside the transaction as an unconscionable dealing and relies on Ward v Ward [2011] NSWSC 107 at [33]-[36], in which Brereton J wrote:
"Where a party impugns a transaction on the ground that it is an unconscionable dealing, first the Plaintiff must establish that there was a relevant relationship of "special disadvantage"; secondly, the Plaintiff must establish that the Defendant understood that the Plaintiff was at a special disadvantage - although in this respect actual knowledge of any specific diagnosis or condition is not required, and it suffices that the Defendant knew, or ought reasonably have known that the Plaintiff was not in a position to look after his or her own interests; and thirdly, the defendant then bears the onus of establishing that the transaction was fair, just and reasonable, which involves showing either that the Plaintiff received full value or was independently advised.
In this context, "special disadvantage" is usually associated with conditions that make people vulnerable to exploitation and less able to conserve their own interests. At the heart of the doctrine is the prevention of unfair exploitation of the disadvantaged or vulnerable. A relationship of emotional dependence that renders a party susceptible to improvidence in favour of the stronger party may attract the doctrine [Louth v Diprose (1992) 175 CLR 621; Bridgewater v Leahy (1998) 194 CLR 457; Tillett v Varnell Holdings Pty Ltd & ors [2009] NSWSC 1040 [52]-[54]].
In the present case, the "special disadvantage" is said to arise from the circumstance that the Plaintiff Mr Ward, was elderly, had been consuming substantial quantities of alcohol, had been assaulted by his younger son, and had just re-established a relationship with his elder son, the First Defendant, which he anticipated would continue. Bearing in mind that at the relevant time he was aged only 77; though he says that he was drinking five schooners a day, there is no suggestion that he was under the influence of alcohol at the time of any relevant transaction; and that it is not unnatural for a parent to make provision before, as well as after death, for their offspring, this is not a strong case of "special disadvantage".
The notice of that disadvantage, such as it was, to the First Defendant, is said to arise substantially from the improvidence of the transaction, namely that the Plaintiff received no consideration for it, that it involved exposing him and his de facto spouse to the potentially considerable risk that, as a joint tenant Brian, could insist on a sale and effectively put them out of their home, that given the brevity of the re-established relationship with Brian, there might be grounds to doubt his long-term loyalty, and that while it may be that it was hoped that giving Brian an interest in the property would give him an incentive to be involved in its upkeep and maintenance, that was not much more than a mere hope, without any assurance. In those circumstances, it might well be said that the transaction involved practically no benefit for the Plaintiff, and incurred a substantial risk; whereas on the other hand it was entirely without risk for Brian (beyond the potential that he might be called on to contribute to outgoings), but conferred on him a substantial benefit."
In this case, I am satisfied that each of the elements identified by Brereton J has been established. There was a relevant relationship of "special disadvantage" between the Plaintiff and the Defendant. At the relevant time, the Plaintiff was elderly; she was blind; she suffered some cognitive impairment; and she was in an aged care facility. The Defendant understood that the Plaintiff was at a special disadvantage. Certainly, he knew, or ought reasonably to have known, that she was not in a position to look after her own interests. Finally, the Defendant has not attempted to establish that the transaction was fair, just and reasonable. Certainly, there is no evidence that shows either that the Plaintiff received full value or that she was independently advised.
Although the Statement of Claim does not specifically refer to the transaction being an unconscionable one, all of the elements referred to have been identified in it - see, [16], [19], [20], [21], and the particulars to [23], and [25].
In my view, the Plaintiff has made out her entitlement to set aside the transaction and a declaration that the Defendant holds the Lane Cove property in trust for her should be made. Since the Defendant remains as the sole registered proprietor of the Lane Cove property, which remains free of any registered encumbrance, there is no reason why the Defendant should not be ordered to transfer it back to her.
In view of the history of this matter and the possibility that the Defendant will not comply with the orders made, it seems to me, for abundant caution, and to avoid further costs being incurred, that I should make an order under s 94 of the Civil Procedure Act 2005 (NSW) nominating Imelda Margaret Dodds, the Chief Executive Officer of the NSW Trustee and Guardian to execute a Transfer in favour of the Plaintiff in the event that he does not do so.
The Court:
(i) Orders that the transfer, pursuant to which the Defendant was registered as the proprietor of the Lane Cove property, be set aside.
(ii) Declares that the Defendant holds title to the Lane Cove property on trust for the Plaintiff absolutely.
(iii) Orders that within 14 days of receipt of these written reasons for judgment, the Plaintiff is to serve the Defendant with a copy of the reasons, a copy of the declaration and orders entered, together with a Transfer, in registrable form, of the Lane Cove property by him to the Plaintiff.
(iv) Orders that, within 14 days of service of a copy of these reasons for judgment, a copy of the declaration and orders entered, and the Transfer in registrable form, the Defendant is to transfer to the Plaintiff the Lane Cove property by executing that Transfer and delivering it, or causing its delivery, to the NSW Trustee and Guardian at 19 O'Connell Street, Sydney, marked for the attention of Ms Maree Rice.
(v) Orders that, in the event that the Defendant does not comply with order (iii) directing him to execute and deliver the Transfer in registrable form, a Transfer, in registrable form, may be executed by Imelda Margaret Dodds, the Chief Executive Officer of the NSW Trustee and Guardian and that such executed Transfer is to operate, and is for all purposes available, as if it had been executed by the Defendant, as the person originally directed to execute it.
(vi) Orders that the Defendant pay the Plaintiff's costs.
(vii) Grants liberty to the Plaintiff to apply in these proceedings for consequential and ancillary orders for the purpose of, or with respect to, giving effect to, and implementing the declaration and orders made in favour of the Plaintiff.
(viii) Orders that the exhibits be retained.
[7]
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Decision last updated: 31 March 2016