Dynayski v Grant

4842 of 2003 Dennis Dunayski v Matthew Grant and Helen Grant JUDGMENT 1 MASTER: This is a dispute between family members all of whom are related by blood or marriage. The dispute concerns events that took place prior to the death of the plaintiff and the second defendant's father. The two defendants are married and the first defendant prior to the date of death of the deceased was appointed the deceased's attorney. 2 The deceased had made a will in which he left his estate to the plaintiff and the second defendant in equal shares on the occurrence of certain events that have happened. Some time prior to his death it was agreed that his house would be sold and the proceeds, less whatever was necessary to maintain the deceased, would be divided between the plaintiff and the second defendant in accordance with their entitlements under the will. 3 The first defendant was appointed the deceased's attorney for this purpose and in due course the house was sold. The dispute concerns, inter alia, the application of the proceeds from that sale.

The deceased, Stanislaw Dunayski, made a will on 27 October 1979. That will provided for the whole of his estate to pass to his wife or if she did not survive him, then for the estate to be divided between his two children in equal shares.

The deceased's wife did not survive him and she died on 12 December 1989. On 22 April 2000 the deceased had a stroke and was admitted to Bowral Hospital. In June of that year he moved to Abbey Nursing Home and the plaintiff continued to reside in the deceased's property at 60 Queen Street, Croydon. 4 On 26 July 2000 the deceased executed a general power of attorney in favour of the first defendant. It was an enduring power of attorney and gave authority to the attorney to do on the deceased's behalf, anything that he might have lawfully authorised an attorney to do. It was accompanied by the appropriate solicitor's certificate. 5 In mid September 2000 some $30,000.00 of the deceased's funds were transferred by the first defendant and consolidated with the second defendant's funds apparently to increase the interest yield on those funds. The first defendant says he forgot about this when disbursing the proceeds of the sale of the house that I will refer to later. 6 The plaintiff vacated the deceased's house in early July 2001 and on 28 July 2001 it was sold for $482,000.00. The contract of sale was settled on 3 September 2001 and the deceased's pension was then cancelled. 7 Thereafter there were distributions of the amount received on the sale. Between September 2001 and June 2002 the plaintiff received $191,466.75. This is not quite a half share and the first defendant concedes that he retained $54,000.00 from the sale proceeds. This was said to be part of an arrangement whereby both of the deceased's children would fund the upkeep costs and other expenses of the deceased for a period up to five years at $900.00 per month. The first defendant retained the $54,000.00 out of the plaintiff's share of the proceeds so that the money would still be available to pay for the deceased's upkeep. This was because the plaintiff had for many years suffered from drug addiction and other difficulties which made it unwise to leave him with these funds. 8 A similar contribution was to be made by his sister, the second defendant. However, it was thought that as she would be responsible, she should receive and still hold her half share of the proceeds. Precisely how much she received is a matter of dispute in the case. 9 Between mid 2001 and 10 May 2002 the first defendant borrowed various amounts from the funds of the deceased. These were alleged to have been with the agreement of the deceased. The precise amount borrowed is $16,428.14 and the first defendant concedes that he is liable to repay that amount to the estate. He also concedes that he obliged to pay interest from the date of death up until 22 February 2003 when a caveat was lodged on his property immediately prior to the commencement of these proceedings. 10 The deceased died on 10 May 2002 and the plaintiff retained David Austin, solicitor to act on his behalf. In due course a grant was made to the plaintiff. Initially the second defendant refused to take any part in the grant but later she obtained a double grant of probate.

Claims made by the plaintiff 11 The plaintiff has at all times been legally represented and at the final trial before me he appeared by counsel. The first defendant has at all times appeared in person and the second defendant initially appeared by her solicitor. Thereafter she discharged her solicitor and represented herself. Since 4 February 2004 she has filed a submitting appearance. When the matter was initially before me for hearing on 7 September 2004 the second defendant, who had been joined because she was a necessary party as an executor of the estate, indicated that she wished to take an active role in the proceedings. I directed her to file any evidence and also if she wished to take an active part to file and serve an appearance that was not a submitting appearance. She declined to do so and, accordingly, she has not taken part in the hearing other than being present and reading her affidavit so far as it may have dealt with costs. 12 When the matter was before me on 7 September 2004 the solicitor, Mr Austin, who then appeared indicated that he wished to make a claim for equitable compensation. I directed him to give notice of the basis of that claim to the defendants so that they would understand it. This he did. 13 By an amended summons filed on 23 September 2003 the relief sought was orders for an account. The account was sought against the first defendant in respect of his dealings under the power of attorney and against the second defendant in respect of the funds received by her from the first defendant. There were miscellaneous claims in support of these such as delivery up of books of account and a declaration for breach of fiduciary duty by the first defendant. There was also a claim for equitable damages and it was this that was said to support the claim for equitable compensation. 14 When the matter came on for hearing on 7 December 2004 the claims for an account were abandoned. Instead the plaintiff sought the following orders:

1. That the first and second defendant pay to the estate the sum of $29,493.73 to be distributed in accordance with the will of the deceased.

2. That the first defendant pay $8,000.00 to the estate, it being the difference between the amount of cash which the two defendants claim had been left by the deceased. The first defendant claimed that the deceased had left $14,000.00 and the second defendant claimed it was $22,000.00.

3. That the first defendant repays a loan of $16,428.14 plus interest. 15 The plaintiff sought interest on all the amounts from the date of death until judgment. The first defendant resisted interest after the date from when caveats were placed on his property shortly prior to the commencement of the proceedings. The basis for his objection seems to be that he was accorded no opportunity to account prior to proceedings being commenced. 16 The sum of $29,493.73 is said by the plaintiff to be the amount that was overpaid to the second defendant in the distributions of the sale proceeds prior to the date of death. 17 In relation to the third claim there is no doubt that these sums were lent by the deceased to the first defendant who used the funds to meet various family bills. He concedes that he is liable for the amount and accordingly there can be judgment against the first defendant for that sum. 18 I turn to consider the claim for repayment of the amount overpaid. 19 Normally, notwithstanding the width of the power of attorney, a donee has a duty and obligation to obey the instructions of the donor. In The Margaret Mitchell (1858) Swab 382; 166 ER 1174 at 1199 it was held that the use of a power of attorney by the donee, contrary to the known wishes and directions of the donor is a breach of trust. This principle was approved in R v Holt (1983) 12 Aust Crim Rep 1 where the Victorian Supreme Court at page 14 said: "It is not the law that an attorney given power by instrument under seal may, so long as the instrument remains unrevoked, exercise the power it confers in disregard of any subsequent orders of his principal conveyed to him… Subject to any contrary sense of the instrument there always resides in the donor the right later to instruct the donee not to act on the power, or to act only in a stated way.

That the effect of a power of attorney, even if given under seal, may be modified by parol is made clear by the decision of The Margaret Mitchell (1858) Sw 382 [166 ER 1174] the authority of which has so far as I am aware never been doubted. There, a power of attorney was given under seal by the owner of a ship to her master, one Stiles, who purported to sell her under authority conferred by the power of attorney. Dr Lushington, sitting in the High Court of Admiralty, found as a fact that: '... though the power of attorney was not formally revoked, yet that Captain Stiles, long before the sale, received letters informing him that he was to be dismissed, and of the owner's intention to dispose of the ship; the whole contents of those letters show that the owner did not desire that Stiles should sell this ship under this power of attorney, and Captain Stiles's letter shows that he was about to sell the ship not in accordance with the wishes and directions of the owner, but in despite of them ...' (p400).

"The learned judge continued, in a passage which I think exactly covers the present case, to say: 'I apprehend that, as a general rule, the grantee of a power of attorney is bound to follow the directions and wishes of the grantor; as, for instance, with respect to a power of attorney to sell stock, the grantee must exercise that power according to the orders of the grantor. I conceive, that to use a power of attorney contrary to the known wishes and directions of the grantor is a breach of trust.'

"So here, assuming that the power of attorney given to the applicant on its face authorised him to sell Morgan's shares, that power was exercisable as between the applicant and Morgan subject to Morgan's later expressed instructions, if any. It cannot have been wrong to have left to the jury that question of fact whether Morgan conveyed to the applicant extraneously to the power of attorney a limitation of his authority to sell Morgan's shares." 20 These principles have recently been applied by Austin J in Vickery v JPP Custodians [2002] NSWSC 782. 21 Therefore the claim against the first defendant is based upon the breach of his fiduciary obligations relating to the terms which were conveyed to him by the deceased. 22 The power of attorney, as I have said, was given on 26 July 2001 and the first defendant in his affidavit described the circumstances in which instructions were given to sell the house during April 2001. The details of that conversation were expanded upon in the course of the first defendant's oral evidence in these terms: "Q. Pursuant to that power of attorney you got instructions from the deceased? A. Yes. Q. Part of those instructions was in order to accommodate his life in the nursing home his house would be sold? A. Yes. Q. Indeed, part of the proceeds of which sale were put into a bank account? A. You are asking me were part put into a bank account? Q. $54,000? A. Yes. I don't know if it was $54,000 but from the proceeds of the sale of the house some went direct to one or other beneficiary and others went direct to the bank account. Q. The bank account was the Abbey Fund, are you familiar with that name? A. I am familiar with that name. It was not a single contiguous physical fund. Q. The Abbey Fund was set up to make the payments to the nursing home for the deceased's expenses for his expected life which would be paid by my client, the plaintiff? A. That is correct. Q. Indeed, the deceased did not live five years after admission to the hospital? A. No, definitely not. Q. He lived about eight or nine months? A. Yes. Q. It is fair to say the fund itself was approximately $54,000 derived out of a figure to accommodate about $900 per month payments? A. Yes, $54,000 exactly as you say to be withdrawn at $900, equivalent to $900 a month for his maintenance from the plaintiff." 23 Later in his cross-examination he said: "MASTER: Q. There are one or two matters I would like to ask questions on. What happened to the Abbie account? A. The Abbie account, as I tried to explain before, wasn't on one physical repository, like one physical bank account but for argument sake it was by and large, it was one St George pensioner account. Q. In whose name? A. In the deceased's. Q. Is that funds that have been paid to Mr Austin, solicitor? A. Yes. Q. In paragraph 14 of your affidavit you talk about the "reluctant agreement that he decided to sell the house and make arrangements to finance his living expenses." In oral evidence you have said that the deceased instructed you to sell the house, that is correct, isn't it? A. Yes. Q. What else did he say to you at that time when giving you those instructions to sell the house, that you were to do with the proceeds of the sale of the house? A. What did the deceased instruct me to do with the proceeds of the sale of the house? Q. That is right? A. To distributed them as according to the will but in a way that would provide for his financial needs. Q. How did he describe that way that you were to deal with that? A. I put to him that the best way probably would be - for each of the beneficiaries to be responsible to fund his real costs 50/50. Q. Was that the only discussion about that matter with the deceased? A. Well I am not - I obviously had discussions with financial institutions about what other options there might be, including whether to - there is a need to sell the house or not. All the options just seemed to be more costly in terms of fees, charges and interest and these sorts of things and the deceased basically had resigned himself to the fact that beyond being financially supported there wasn't much point in him having any residue tied up until his death. He seemed happy to pass that on to his beneficiaries. Now, at the time when I was speaking with him-- MASTER: Thank you. Mr Sneddon, do you have any questions arising from the questions I have asked? SNEDDON: No."

24 There does not seem to be any doubt that the instructions of the deceased were that apart from looking after him, the proceeds were to be distributed equally between his children in accordance with their prospective entitlements under his will. Earlier in these proceedings the first defendant filed an affidavit on 17 December 2003 which, because of the earlier claim for an accounting, contained a detailed set of accounts by him prepared as far as he was able to as a layperson to show the distribution of funds that he had received in exercise of the power of attorney. 25 In that accounting the first defendant set out the details of the funds which he had received and he conceded that after taking into account $14,000.00 cash in jars, the term deposit from the NRMA and the house sale proceeds, less the sale costs, the net funds for the beneficiaries were $499,106.37. As he expressed it, the plaintiff and the second defendant were each entitled to a gross amount of $249,553.19. 26 I have already explained that most of this entitlement was paid to the plaintiff as part of his share except for the sum of $54,000.00 which was retained and referred to as the Abbey fund in order to support the deceased. The balance of this $54,000.00 was eventually collected by the executor plaintiff, and this was accounted for by the solicitor for the estate. I will return to this matter shortly. 27 The first defendant's accounting went on to deal with the actual transfer of the funds to the second defendant by reference to her entitlement of $249,553.19. Taking into account, for instance, the earlier $30,012.00, the first defendant concedes that the second defendant, his wife, was overpaid the sum of $29,493.73. His accounting then goes on to claim that this amount should be reduced by the second defendant's entitlement to one half share in the estate. Taking into account what in fact he believed she should have been entitled to as of her first half share of that amount which was overpaid, he conceded that there was an amount of $13,133.35 due by way of overpayment. 28 The question therefore is whether it is appropriate that these other adjustments should be taken into account. The problem that arises is that the balance of the Abbey fund, which was $54,000.00, was paid to the solicitors for the purposes of the estate. Their trust account shows a receipt, which included this amount, and perhaps the sale of some ING (NRMA) shares in the sum of $37,660.38. There is in evidence exhibit "C" which is a copy of the ledger and that shows the whole of those sums have been paid to Packer & Austin, solicitors or others substantially in payment of fees for administering the estate of the deceased and the plaintiff's costs of these proceedings. 29 It should be borne in mind that the cause of action against the first defendant is a claim for equitable compensation based upon the breach of his fiduciary duties as the donee of the power of attorney. In the circumstances it seems that on his own admission, he overpaid the amount and, accordingly, he is liable for that amount by way of equitable compensation. Any entitlement resulting from the fact that his wife has a half share in the estate to those monies is her entitlement and will be paid to her as a result of her interest under the will. It is not available to the first defendant as a setoff against the claim by the plaintiff acting on behalf of the estate. In these circumstances it seems to me that the plaintiff is entitled to an order sought in the terms of order 1 above. 30 I note that there was no cross-claim brought by the first defendant against the second defendant in order to recover any overpayment. No doubt he would be able to recover such overpayment and I assume no such cross-claim has been brought because there are appropriate arrangements or understandings between them on this aspect. 31 The next question is whether the second defendant is also liable. The basis for the claim against the second defendant was said in oral submissions to be "unjust enrichment". There is no expansion of how this was said to arise other than that she had been overpaid. 32 The plaintiff sought to rely on the first defendant's accounting to prove that the second defendant had in fact been overpaid. That accounting did not involve any primary documents and it was really the first defendant's conclusions based on his analysis of the primary documents. Accordingly, it is nothing more than admissions by him as to his disbursement of the funds. For her part, the second defendant in that part of her affidavit that was in evidence admitted that she received funds and the way she referred to it did not concede that she had received or owed amounts in the amount claimed by the first defendant. In other words she did not concede that she had been overpaid. The plaintiff sought to suggest that the second defendant was bound by the admission of the first defendant simply because of the fact that they were husband and wife. However, this cannot be. In the circumstances it seems that no entitlement to recover against the second defendant has been established. Money in the jars 33 The first defendant gave evidence on oath that the amount of money in the jars was $14,000.00. There was an email from the second defendant to the solicitor for the plaintiff claiming that the amount was some $22,000.00. She gave no sworn evidence on this aspect. 34 The first defendant was cross-examined on his evidence. He gave a credible explanation as to the amount notwithstanding that some of it was in notes and some of it was in coins. In the circumstances I accept the first defendant's evidence that the amount of cash was only $14,000.00 and accordingly there is no liability to account for this amount. 35 The only outstanding issue that needs to be determined is the question of from when interest should run. This dispute as to whether interest should be up until 26 February 2003 or should continue until judgment. 36 Notice of the proposal to bring the claim was given and this resulted in a somewhat intemperate response from the first defendant to the solicitors for the plaintiff. Even if the first defendant may have had some complaint about the shortness of the notice given before commencing action, it seems to me that he has had adequate time over the years since the action was commenced to make the payments for which he is now liable. In these circumstances interest should continue up until judgment. The first defendant's complaint seems to be that a caveat was lodged against his property and he considered this a quite inappropriate way of challenging his administration of the deceased's funds pursuant to the power of attorney. It may well be that the first defendant has some appropriate concerns about the caveat but that is not a matter which is an issue in these proceedings as there is no cross claim seeking its removal and apart from a passing reference in the first defendants affidavit no submissions were put on the validity of the caveat. 37 The orders that I make are as follows:

1. That the first defendant pay to the executors of the estate of the late Stanislaw Dunayski the sum of $29,493.73 together with interest from 10 May 2002 at the Supreme Court rates to the date of judgment.

2. That the first defendant pay to the executors of the estate of the late Stanislaw Dunayski the sum of $16,428.14 together with interest from 10 May 2002 at Supreme Court rates to the date of judgment. 38 I will hear the parties on costs. **********

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