Daher v Doulaveras [2008] NSWSC 583 | Case summary

5931/06 GEORGETTE DAHER (by her tutor Basil Daher) v HELEN DOULAVERAS JUDGMENT 1 The plaintiff, Georgette Daher, by her tutor Basil Daher claims that the transfer of 16/100 of her 66/100 interest in 26 Ocean Avenue, Newport (the Newport property) to the defendant and subsequent transfer by the plaintiff and defendant of their equal shares as tenants in common of the Newport property to themselves as joint tenants, on 8 July 2005, was procured by the defendant's undue influence or unconscionable conduct. In addition to these transfers, the plaintiff and defendant mortgaged the Newport property to the ANZ Bank as collateral security for a loan to the defendant over a property of the defendant at St Ives. It is claimed this mortgage was also procured by undue influence or unconscionable conduct. The plaintiff seeks an order setting aside the transfers and an order that the defendant discharge the mortgage. The question for decision is whether or not the plaintiff is entitled to that relief. Family Background 2 A number of facts were not disputed or were clearly established by the evidence. 3 Georgette Daher is 78 years old. Mrs Daher and her husband lived in their matrimonial home at 31 Franklin Street, Marrickville for 35 years until his death on 20 November 2000. There were two sons of this marriage, Spiro Daher and Basil Daher. The older son, Spiro Daher, is married to the defendant Helen Doulaveras. The younger son and tutor for the plaintiff, Basil Daher, is married to Mandy Daher. I will refer to these people by their first names. After her husband's death, Mrs Daher continued to live in the Marrickville house, despite concerns expressed by her two sons about her living alone given her age and deteriorating health. 4 Mrs Daher had not been in good health, even prior to her husband's death, suffering from non-insulin dependent diabetes, atrial fibrillation, chronic hypertension and a dominant hemisphere stroke in 1994 which caused Mrs Daher's speech to lapse into a mixture of languages. From November 2001 onwards, Basil and Mandy did their best to assist Mrs Daher with her domestic, financial and health matters, visiting her up to 4 times a week, despite the considerable distance to Matraville. At this time, Helen and Spiro together with their three children lived in Riyadh, Saudi Arabia and were unable to provide practical assistance on a regular basis, although they did visit Mrs Daher on the several occasions each year when they returned to Sydney. 5 In early 2003 Helen returned to Sydney permanently with the children, living initially at Newport and later at Bilgola Plateau. Spiro joined his wife and children in Sydney in 2004. It is clear on the evidence that as much as possible Mrs Daher's children sought to provide practical assistance, although perhaps not equally. There was some argument as to who was the primary care giver. This does not need to be decided as it seems Mrs Daher relied to some extent on both her children and their wives for practical assistance. 6 On 1 November 2002 Mrs Daher made a will, prepared by Mr Hourigan of Messrs Lee Hourigan and Brooks, which appointed Spiro and Basil as executors, and gave the whole of her estate to them in equal shares. On 22 July 2004 Mrs Daher made a second will, again prepared by Mr Hourigan, which named Basil and Mandy as executors and gave the whole of the estate to Basil or in the event of his death to Mandy. The following day, on 23 July 2004 Mrs Daher made a third will, again prepared by Mr Hourigan, which appointed Spiro and Basil as executors, and gave the whole of her estate to them in equal shares. There was some discussion of a will made on 22 October 2004. Mr Hourigan gave evidence that it did not appear on the wills register kept at his office and no copy of it could be produced. On 8 July 2005, Mrs Daher made her fourth will, prepared by Mr Smith solicitor under which she gave the Newport property to Spiro if Helen predeceased her and the residue of the estate to Basil and Spiro. It should be noted that the Newport property is the major asset owned by Mrs Daher. 7 There was some evidence about a series of loans between Mrs Daher and her late husband and their two sons but in the long run nothing was claimed to turn on this. 8 On 1 November 2002 Mrs Daher had executed a power of attorney in favour of Basil. On 22 October 2004 a new power of attorney in favour of Basil and Spiro jointly was executed. The earlier power of attorney was revoked on 13 November 2004. Newport Property 9 On 5 October 2001 Helen Doulaveras purchased the Newport property for $625,000. In December 2001, with the agreement and assistance of both her sons and their wives, Mrs Daher moved from Marrickville to the house at Newport. Mrs Daher continues to live in the Newport property. It appears she is quite happy there. 10 The house at Marrickville was initially rented out and all rental payments received were deposited in Helen's bank account. In November 2003. The Marrickville property was sold for $720,000 and the balance of the proceeds amounting to around $698,000 were deposited in Mrs Daher's bank account. From this bank account, in January 2004, $691,104 was withdrawn and paid to the defendant to purchase from the defendant a 66/100 interest in the Newport property, although the transfer form states the consideration was $655,250. 11 It is unclear how the transfer amount of $655,250 was calculated, as the independent valuer, Mr John Randall of T.S. Webster & Associates, engaged by the plaintiff estimated the value of the Newport property at 14 January 2004 to be $895,000. A 66/100 interest in this property would be $590,700 however; nothing turns on this, as the plaintiff alleges no impropriety in relation to this transaction. The other 34/100 interest in the Newport property continued to be held by Helen Doulaveras. It was not until March 2004, when informed by Spiro, that Basil became aware of this transaction. Facts surrounding the transactions The Transfers 12 On 8 July 2005 Helen went with Mrs Daher to the office of a solicitor, Mr S A Smith, at 2/57-59 Foamcrest Avenue, Newport. Mr Smith had previously been retained by Helen from about 7 June 2005 to act in relation to a proposed sale of the Newport property which did not proceed. 13 Helen claims that Mrs Daher knew Mr Smith, waved to him in the street, had always been with her and Spiro when they visited Mr Smith's office in relation to the sale of the Newport property and that it was Mrs Daher's suggestion that they see Mr Smith to arrange the transfers to which I will come. Mr Smith in cross-examination said he first met Mrs Daher when she came into his office and was introduced by Helen as her mother-in-law on 8 July 2005. I accept his evidence. 14 Helen claims that Spiro accompanied her and Mrs Daher, when they attended Mr Smith's office on 8 July 2005. Mr Smith says he does not remember Spiro being present. I accept his evidence as more credible since Spiro was working in Bendigo at the time, although it may be as Helen claims that Spiro was aware about what was happening. 15 Initially Helen denied communicating with Mr Smith before 8 July 2005. However, she later admitted she had had discussions with him several days earlier about the creation of the joint tenancy in the Newport property between her and Mrs Daher. Mr Smith's evidence was that Helen rang to arrange an appointment and "she would have said she wanted to end up with a joint tenancy. And I would have told her how to go about that. You would need two transfers for that". On the basis of these discussions with Helen, prior to 8 July 2005, Mr Smith had prepared two transfers involving the Newport property. 16 On 8 July 2005, the will of that date, which had not been prepared in advance, was signed first. The instructions were given either by Mrs Daher and Helen together or only Helen but Mr Smith said that after it was prepared and after spending considerable time with Mrs Daher, he was satisfied she understood it. 17 The first transfer Mrs Daher signed was to transfer 16/100 of her 66/100 share in the Newport house to Helen for $132,000. Mr Smith said that he saw Mrs Daher and Helen together and explained the transaction and was satisfied that Mrs Daher understood the transfer. The amount of $132,000 was calculated on the basis of an independent valuation dated 4 July 2005, again provided by Mr John Randall of T.S. Webster & Associates, which estimated the value of the Newport property to be $825,000. Mr Smith then witnessed the signatures of both Mrs Daher as transferor and Helen as transferee to the transfer. 18 The $132,000 has not been paid. Mr Smiths' evidence was that he did not know if the money was to be paid. He left that to the parties, but the overall effect of his evidence was that it was better for capital gains purposes to put in the value as the consideration and let the partes make arrangements for exchange of cheques. I do not understand this but it does not matter. Helen claims that she planned to pay Mrs Daher the $132,000 when she reached the stage she could no longer live alone and required nursing. I do not accept the evidence. Her earlier evidence was she was not required to pay. Neither do I consider any proper explanation as to the stated consideration was given by Mr Smith to Mrs Daher. 19 The second transfer Mr Smith had prepared for Mrs Daher and Helen, was to transfer the Newport property from Mrs Daher and Helen as tenants in common in equal shares to themselves as joint tenants. Mr Smith thought it was appropriate for Mrs Daher to receive independent legal advice to ensure she understood the effect of the transaction, but strangely sent both Mrs Daher and Helen away from his office to seek independent legal advice and get the transfer signed. Later the same day, the transfer was returned, signed by Mrs Daher and Helen. 20 Helen said she took Mrs Daher to see a solicitor around the corner from Mr Smith's office in Newport, but could not remember his name or the firm. When the transfer was returned to Mr Smith's office, it had been witnessed by Lillian Gerges. When cross-examined Helen could not remember who Lillian Gerges was and said she thought she was a solicitor who worked in Mr Smith's office. Mr Smith was unable to assist as to the identity of Lillian Gerges. I do not accept the evidence of seeing another solicitor, which was quite unconvincing. I find no legal advice was given. But even if it was, it was not independent advice given to Mrs Daher. It might have been independent of Mr Smith but that is irrelevant. Mr Smith said he explained the effect of the transfer not the wisdom of the transaction. 21 It is clear on the evidence that the reason for the first transfer of 16/100 from Mrs Daher to Helen was to enable a joint tenancy to be brought into being. Mr Smith said in cross-examination that when Helen telephoned him to arrange the appointment for 8 July 2005 she told him she wanted to achieve a joint tenancy and had sought his advice on what needed to be done. Mr Smith said he advised Helen she would need two transfers. Helen said it was Mr Smith's suggestion that there should be a joint tenancy and that she did not know what a joint tenancy was before she had spoken with Mr Smith. Again I do not accept that. 22 Both transfers occurred without the knowledge of Basil and Mandy. Something Mrs Daher said in April 2006 in a conversation with Basil raised his suspicions. He ordered a legal search and the transfers were discovered. Helen said that she thought Spiro would have informed his brother Basil. 23 Helen said that both transfers were what Mrs Daher wanted, they were not brought about through her suggestions, and that Mrs Daher understood what she was doing. Mr Smith was not informed that Mrs Daher had any form of disability. He said it was not easy to understand Mrs Daher but was confident he understood what she wanted and that she knew what she was doing. Basil and Mandy claim that Mrs Daher would not have understood the concept of a transfer of part of the Newport property. Mandy acknowledged that the phrase "50-50", or equal shares, was used in conversations with Mrs Daher and was understood. 24 Basil and Mandy's evidence was supported by the expert opinion of Dr Ross Mellick, a neurologist. It is accepted by both parties that Mrs Daher's dominant hemisphere stroke in 1994 caused a speech disorder known as aphasia. However, Dr Mellick's opinion is that in addition to the speech disorder, Mrs Daher suffers from a problem in cognitive function which affects her ability to understand concepts such as a contract or a 16/100th part of something. Mortgage 25 For whatever reason the Newport property was listed by Ray White Northern Beaches for sale by auction on 23 December 2006. Basil was alerted of this fact in early December when Mrs Daher telephoned to tell him that a large billboard had been erected in her front yard listing the property for sale. Basil asked his wife Mandy to drive to the Newport property to obtain the real estate agent's details. On 6 December 2006 Basil's lawyer, Mr Mark Hourigan, telephoned Margie Masson, the real estate agent from Ray White Northern Beaches and was informed that Margie Masson did have an agency agreement signed by Helen and Mrs Daher to sell the Newport property. 26 Basil who was concerned that the sale was not in Mrs Daher's best interests and that she had not understood the document she had signed, brought an action as tutor to Mrs Daher to prevent the sale of the Newport property. On 14 December 2006, Justice Brereton granted an ex parte injunction, paragraph 1 of which reads as follows: The Defendant, her servants and agents are restrained up to 5pm on 19 December 2006 from selling, mortgaging, leasing or otherwise dealing with the land comprised in folio 33/381014 and known as 26 Ocean Avenue, Newport, NSW. 27 On the evening of Saturday 16 December 2006, a few days after Helen had been served with the court order at her house in Bilgola Plateau, she telephoned Mr RG Hughes, solicitor, to arrange a meeting the following day. Mr Hughes was then retained to act for Helen and instructed to oppose the extension of the orders. He appeared with his client present, before Justice Brereton on 19 December 2006. Justice Brereton extended the injunctive order of 14 December 2006 until further order of the court. 28 In November 2007 Helen and Spiro purchased a property at A19 Hunter Avenue, St Ives for $1,060,000. The evidence, but not the documentary evidence, is that this was originally purchased by both Helen and Spiro and that Spiro's share was later transferred to Helen. In any event that is not of relevance. In spite of the court order dated 19 December 2006, all the purchase moneys, except for the 10 per cent deposit contributed by Helen, were provided by loan from the Australia and New Zealand Banking Group (ANZ Bank) secured by mortgage over the St Ives property and the Newport property. The mortgage over the Newport property was signed by Mrs Daher and Helen on 5 November 2007 in the Brookvale Branch of the ANZ Bank. In executing this mortgage Helen breached the injunctive orders. 29 Mrs Daher received no independent legal advice in relation to the mortgage or indeed any advice as to whether the transaction would be in her best interests, apart from the advice of the involved parties such as the mortgage broker of Helen and Spiro. 30 In cross-examination Helen's evidence was that she was not aware the court order prevented her from mortgaging, as distinct from selling, the Newport property. On the evidence, I find that Helen was aware the 19 December 2006 order prevented her from mortgaging the Newport property. First, Helen said she had read the sealed order of the court dated 14 December 2006 before she took it to Mr Hughes. Second, Helen was present in court when the orders were made on 19 December 2006. Third, Helen acknowledges that Mr Hughes took her and Spiro to a conference room in the court building to explain what had happened in court. Mr Hughes said he explained the consequences, restrictions and effect of the order and that Helen did not ask him any further questions. Fourth, in case there was any doubt, Mr Hughes sent Helen a letter dated 22 December 2007 which explained the effect of both orders. Helen claims that she did not receive or read the letter, although it was addressed to her alone; she said that such correspondence was typically handled by Spiro. I find she was aware of the terms of the order. Medical evidence 31 In 1994 Mrs Daher suffered a dominant hemisphere stroke which caused a speech disorder known as aphasia which impairs the ability of Mrs Daher to be understood and to express herself. Prior to suffering the stroke, Mrs Daher spoke English, Greek, French, Arabic and a little bit of Italian. After the stroke, Dr Mellick described her language ability as "snatches of conversation in either Greek, Italian or English." It is clear that communication was extremely difficult for her. Both Mr Hourigan and Mr Smith said it took a considerable time to explain the proposed transactions to her, although they both said that they were satisfied that she had sufficient understanding of them at the end of their explanations. I am satisfied that Mrs Daher was and is unable to read ordinary writing or printing although Helen said that she could. Helen said that Mrs Daher said on occasions, "the house is yours" or "I want you to have it". Mandy said Mrs Daher had no understanding of money and left it to shopkeepers to take the necessary amount for purchases from her purse. I accept that. Mrs Daher, on the other hand did live on her own at the Newport, but to do so she needed considerable assistance from her sons when they were available and from their wives at other times. Such assistance was usually given on a daily basis and included looking after the house, shopping, taking the plaintiff to medical appointments and the like. 32 Dr Mellick said that he showed Mrs Daher a copy of a Real Property Act transfer form. He said that she could not comprehend the words or the document. He asked her to take down some dictation in English. He said that she could not understand what he was saying. His report includes the following passages: …

or by extension through UCPR 7.13 "a person who is incapable of managing her affairs". 37 The defendant, by way of defence, denied that the plaintiff was a disabled person who needed a tutor. At my direction, a note was sent to the solicitors for the parties drawing their attention to the fact that this matter could not be raised as a defence: Richmond v Branson & Sons [1914] 1 Ch 968 and an opportunity was given to make any submissions on 11 June 2008. This is a matter of some significance. The plaintiff must be taken to have been under incapacity when the proceedings commenced and the general thrust of the evidence is that her condition had not changed between the impugned transactions and the commencement of the proceedings. While I do not consider the question of requirement for a tutor can be argued in substantive proceedings, no argument was addressed to this during the hearing. Had it been raised without opposition it might have been appropriate to deal with it in some way as suggested in Australian Workers Union v Bowen (1946) 72 CLR 575, but as the real issue was the question of capacity when the transfers were signed, it seems unnecessary to go into this further. However, I remain of the view that a challenge to the requirement for a tutor is to be brought by challenge to retainer. I am satisfied on the evidence before me that if such a challenge had been mounted it would have failed. Undue influence and unconscionable conduct 38 The claim to set aside the transactions is made on grounds of undue influence and unconscionable conduct. There is no claim of non est factum. I will deal first with undue influence. At the time of the transaction Mrs Daher was 75 years of age. Communications with her were difficult. On the evidence of Dr. Mellick, she had cognitive impairment. The fact that she needed daily assistance in obtaining food, preparing meals, being taken to medical appointments and the like, establishes, I think, a state of affairs in which she could be dominated by another and that she would be on an unequal footing in entering into any transaction of significance with another party in a position of domination. The transfers here were intended to and did bring about a substantial benefit to the defendant with no apparent benefit to the plaintiff. I find that she did not understand the effect of the first transaction and I find that it was never intended that Helen should pay the stated consideration. On the balance of probabilities I find that there was a relationship of undue influence, not being one of the presumed circumstances in which such a relationship arises, but because of the lack of understanding of the plaintiff and the fact that it seems clear, particularly from the wills, made on consecutive days, that her condition was such that it was easy to influence her into decisions. These transactions were of substantial benefit to Helen and of no benefit whatever to Mrs Daher unless she, of her own free will, intended to bring about a position which was likely to be to the great advantage of Helen; and Mrs Daher received no independent advice. So far as the mortgage to the bank is concerned it seems to have been suggested by some finance broker, as an appropriate means of obtaining funds to purchase the house at St Ives. On any basis it was a transaction which could be detrimental to the plaintiff and was entered into purely for the benefit of the defendant. Although, all the terms of the mortgage are not in evidence it was in effect a third party mortgage given to secure the loan made to the defendant. 39 I have come to the conclusion that the requirements of Johnson v Buttress (1936) 56 CLR 113 are met. The plaintiff was worse off as a result of the transactions and the defendant much better off. The transfers should be set aside. 40 I turn the question of unconscionable conduct. I deal with this in case I am incorrect in my finding as to undue influence. The position here is, I think, clearer. The plaintiff was under a significant disability. She was unable to communicate without great difficulty; she suffered a cognitive deficit; she could not read. The transactions as a whole were of no benefit to her and financially detrimental to her and of considerable benefit to the defendant. The conduct of the defendant, who I find brought about the transactions, was unconscientious. The inequality of position arising from the proved weakness of capacity, age and special problems of the plaintiff, make this conclusion inevitable on the principles in Blomley v Ryan [1956] 99 CLR 362; Commercial Bank of Australia v Amadio (1983) 151 CLR 447; Bridgewater v Leahy (1998) 194 CLR 457. This applies as between the parties here to the bank mortgage as well as to the transfers.

Daher v Doulaveras

At a glance

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Judgment (15 paragraphs)

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Cases Cited (4)

Cited By (2)