This judgment arises from a dispute concerning the ownership of a family home. The property was previously owned by Mr Sandip Guha and his wife, Mrs Sreyashi Guha. Mr Guha died in December 2017, after which Mrs Guha became the sole proprietor. Mrs Guha later transferred ownership of the property (by two successive transfers) to one of her daughters. Mrs Guha, by her tutor, has now brought proceedings to have those transfers rescinded in equity.
[2]
Background
Mr and Mrs Guha had three daughters. For convenience and without disrespect, I will refer to them by their given names.
Mrs Guha's tutor in the proceedings is the eldest daughter, Debadrita. Samadrita, the second daughter, is the defendant. The youngest daughter, Diwali, suffers from disabilities including quadriplegia and cerebral palsy. Debadrita now has parental responsibility for her as a result of an order by the Family Court in 2018. She is not a party to these proceedings.
Mrs Guha was born in June 1965 in Hazaribagh, India. She completed a degree in history, but has never been engaged in paid employment. She married Mr Guha in 1987 at the age of 22 and was wholly dependent on him for financial support and lifestyle decisions. The couple lived in India until 1995 when they migrated to Australia.
The property the subject of the proceedings is a three-bedroom residence at Marayong in north-western Sydney. The Guhas bought the property as joint tenants in 2002. The purchase price was $250,000. It appears to have been their only substantial asset.
In 2017 Mr Guha was diagnosed with an aggressive form of brain cancer. He underwent surgery in August, after which he suffered from complications. Conflict arose between Samadrita and Debadrita about how his affairs should be managed. Guardianship proceedings were instituted in the New South Wales Civil and Administrative Tribunal ("NCAT").
On 5 October Mr Guha signed a will prepared by Samadrita. The will was signed when Mr Guha was in hospital and before NCAT had decided the guardianship proceedings, which were disputed between Debadrita and Samadrita. It left his personal effects and "finances" to Samadrita, and the Marayong property and the residue of the estate to Mrs Guha, Samadrita and Diwali in equal shares. No provision was made for Debadrita.
The will was overtaken by events. Following a hearing later in October 2017, NCAT made an order placing Mr Guha under the care of the Public Guardian. He died on 3 December. Mrs Guha thus became the sole proprietor of the Marayong property by survivorship.
Also in the second half of 2017 concerns had been raised about Mrs Guha's ability to manage her own affairs. In late September 2017 Samadrita lodged applications with NCAT to be appointed as her mother's guardian and financial manager. Debadrita opposed Samadrita's appointment and was formally joined as a party.
Mr Guha's hospitalisation seems to have left Samadrita (and Diwali) living at the Marayong property with their mother. Debadrita had her own home at Pendle Hill, about ten kilometres away.
On 17 October Mrs Guha signed a general power of attorney in favour of Samadrita. This was twelve days after the will was prepared by Samdarita, and, as with the will, the power of attorney was signed while the NCAT proceedings concerning Mrs Guha were pending. The powers granted to Samadrita were, however, limited. They only allowed her to use Mrs Guha's money and credit card to pay for shopping and other "bills".
The NCAT proceedings concerning Mrs Guha were listed for hearing on 12 March 2018. Six days beforehand, on 6 March, Mrs Guha executed a transfer of 50% of her interest in the Marayong property to Samadrita. There was no consideration for the transfer which was made without any legal advice. The transfer form was apparently prepared by Samadrita. In due course it was registered.
Following the hearing on 12 March, NCAT made an order in the financial management application appointing the New South Wales Trustee and Guardian ("the Trustee") as Mrs Guha's financial manager for the time being. The guardianship application was adjourned until May.
It appears that the other parties to the NCAT hearing were unaware of the transfer in favour of Samadrita having been executed. On 13 March the transfer executed by Mrs Guha was stamped and on 16 March it was lodged for registration. The Trustee prepared a caveat against unauthorised dealings with the property, but this was not lodged for registration until 27 March, after the transfer had been registered.
In May 2018 NCAT made an order in the guardianship proceedings conferring control over most aspects of Mrs Guha's living and care arrangements on the Public Guardian. Pursuant to this order, the Guardian in November 2018 determined that Mrs Guha should be moved from the Marayong property to Debadrita's home at Pendle Hill. It seems that Samadrita continued to live at the Marayong property.
In March 2019 a further caveat was lodged over the Marayong property in the name of Mrs Guha. The caveat referred to the management order made by NCAT and the subsequent transfer of a half share in the property in favour of Samadrita, noting in particular that the transfer was made without consideration. It claimed on Mrs Guha's behalf "ownership in fee simple" of the property by virtue of "beneficial interest in trust" (presumably a constructive trust arising from Mrs Guha having a right to rescind the transfer).
The evidence does not explain the background to the registration of this caveat. According to Debadrita, it was done on the Trustee's instructions. For some reason not explained in the evidence, the caveat was lodged by a law firm at Leura in the Blue Mountains (the previous caveat had been lodged by the Parramatta office of the Trustee). The firm's Leura address was nominated as the address for service of notices (and also as Mrs Guha's residential address).
In May 2019 the guardianship and financial management orders for Mrs Guha were reviewed by NCAT. The guardianship functions were divided between the Public Guardian and Debadrita. Debadrita also replaced the Trustee as Mrs Guha's financial manager.
It seems that at the beginning of July, Samadrita was trying to sell the Marayong property and came up against the caveats. Samadrita then arranged for lapsing notices to be issued. This resulted in the removal of the caveats in August. Why there was no opposition is not clear on the evidence. Samadrita claimed that on 20 July she served a lapsing notice for each caveat on her mother at the Marayong property "when she came over". She further claimed that on 22 July she delivered copies of the notices to the respective addresses for service, namely the Parramatta office of the Trustee and the Leura law firm office. According to Debadrita, she never heard anything about the matter from the Trustee or the law firm which lodged the March 2019 caveat.
Nothing further seems to have happened with the sale of the Marayong property despite the removal of the caveats. But on 19 August Mrs Guha executed a second transfer of "100%" of the Marayong property to Samadrita. Again, the transfer form was apparently prepared by Samadrita and there was no consideration for the transfer. On 11 November the transfer was lodged for registration and Samadrita became the sole registered proprietor.
These proceedings were commenced soon afterwards, on an urgent basis. On 19 November, to prevent the Marayong property from being sold or encumbered, Kunc J granted leave for Mrs Guha's solicitors to lodge a fresh caveat.
[3]
Claims for determination
As already mentioned, the proceedings were commenced by Debadrita as tutor for her mother as plaintiff. Samadrita was named as the first defendant. The Trustee and the Registrar-General were named as the second and third defendants.
Mrs Guha's statement of claim was filed on 13 December 2019. Amended statements of claim were filed on 24 January and 5 February 2020.
The plaintiff sought, among other things, declarations that the transfers by Mrs Guha to Samadrita in March 2018 and August 2019 were executed as a result of either Samadrita's undue influence over Mrs Guha, or as a result of unconscionable conduct on the part of Samadrita. The plaintiff also sought orders pursuant to s 138(3) of the Real Property Act 1900 (NSW) that the Registrar-General cancel the transfers from the folio of the register.
Samadrita filed her defence on 22 January. She also filed a cross-claim seeking orders that the Marayong property be sold, with the profits to be divided equally between her and Mrs Guha. Alternatively, she claimed a 50% interest in the property as a result of the contributions made by her to the house, in addition to a refund of the stamp duty on the second transfer in the amount of $9,000.
In February 2020, with the consent of the parties, the proceedings were discontinued against the Registrar-General. In July 2020 the Trustee brought an application to be released from the proceedings, which was opposed by the plaintiff.
In September 2020 the Chief Judge ordered the removal of the Trustee from the proceedings. Her Honour later dealt with the question of costs in a judgment dated 1 October 2020: Guha v Guha [2020] NSWSC 1337.
Samadrita's legal representation in the proceedings appears to have been somewhat fragmentary. Initially she was represented by a solicitor. But by early this year she was unrepresented, and facing a hearing fixed for May.
On 2 February, an order was made in the Duty List (coincidentally by me) referring Samadrita to the Registrar for referral to a barrister or a solicitor on the pro bono panel for legal assistance. It was a result of this referral that her current solicitors and counsel came onto the record.
In April 2021 Samadrita's lawyers withdrew her defence to the plaintiff's claim, save for any admissions she had made. Her lawyers also sought to discontinue her cross-claim, but on terms that there be no order as to costs. Mrs Guha's lawyers did not object to the discontinuance, but contended that Samadrita should pay Mrs Guha's costs.
The matter came before me for directions on 12 April. The parties agreed the hearing should be vacated and the remaining issues dealt with on the papers. Directions were agreed to this effect.
On 12 April the parties seemed to have agreed that in the light of the withdrawal of Samadrita's defence and her desire to discontinue the cross-claim, there were only two issues to be resolved:
1. whether Mrs Guha was entitled to the relief claimed; and
2. costs.
In due course, however, counsel for Mrs Guha filed lengthy written submissions indicating that there were in fact further issues to be determined. These were:
1. the validity of Mr Guha's will dated 5 October 2017; and
2. whether Samadrita was guilty of fraud in procuring the execution and lodgement of the second transfer.
Counsel for Samadrita contended that neither of these questions should be addressed by the Court. Counsel submitted that they had not been pleaded in Mrs Guha's statement of claim and it was too late to raise them now.
Counsel for Mrs Guha accepted that no declaration had been claimed in the statement of claim that the will was invalid. But counsel submitted that the issue had been raised by the cross-claim. Counsel argued that because there had been no consent to the discontinuance of the cross-claim, it still needed to be determined. According to counsel, it was thus necessary to determine the will's validity.
I do not accept these submissions. It is clear that the validity of the will was not raised as an issue on Mrs Guha's statement of claim. As already described, the Marayong property passed to Mrs Guha by survivorship; the validity of the will has nothing to do with the rescission of the transfers from Mrs Guha to Samadrita. And it is unnecessary to consider whether the issue arose on the cross-claim. Although the cross-claim has not formally been discontinued, it clearly is not being pursued. The only remaining question is whether Samadrita should pay the costs.
In any event, these proceedings would have been an inappropriate vehicle for deciding any dispute about the validity of Mr Guha's will. Because of the special features of such litigation, it belongs in the Probate List.
So far as the fraud issue was concerned, counsel for Mrs Guha sought to adduce in evidence a report prepared by a handwriting expert. Counsel for Samadrita replied that the service of the expert report was unfair and contrary to the Rules. It was further submitted that in any event, there were no pleaded allegations in the amended statement of claim as against the defendant on the issue of fraud.
Counsel for the plaintiff submitted that in fact, the amended statement of claim did raise the issue of fraud, although conceded that it did not specify which defendant was the subject of the allegation. Counsel relied on paragraphs [40]-[41]:
40 The signature appearing on the Second Transfer which purports to be the plaintiff's signature, was forged and applied to the Second Transfer without the plaintiff's knowledge or consent.
41 In the premises, and by the second defendant's registration of Transfer AP536718H, the plaintiff suffered loss or damage by reason of the plaintiff having been deprived of the whole of the interest in her land as a consequence of fraud.
Rules 14.14 and 15.3 of the Uniform Civil Procedure Rules 2005 (NSW) make it clear that an allegation of fraud or dishonesty is a serious matter that can take a defendant by surprise and requires proper pleading and particularisation: Sgro v Australian Associated Motor Insurers Ltd [2015] NSWCA 262 at [55]-[56] per Beazley P. Such an allegation should not be expressed in general or ambiguous terms: see J Earle Hermann Ltd v Ferry (1915) 32 WN (NSW) 31.
In the present case, I am not satisfied that the plaintiff has properly pleaded an allegation of fraud against Samadrita, and it is not clear to me what it adds to the claim for rescission. In any event the procedure agreed by the parties, namely a decision on the papers, is quite unsuitable for ruling on such an allegation. I could not make a finding that Samadrita committed a fraud without hearing her evidence orally (even if by video-link). Furthermore counsel for Samadrita was clearly justified in objecting to the freshly produced handwriting report.
Thus, despite the submissions from counsel for Mrs Guha, I am not persuaded that there are any further issues to be determined other than those identified at the hearing on 12 April. The only matters to be resolved are whether the plaintiff has adduced evidence which demonstrates an entitlement to relief and what orders as to costs should be made.
[4]
Documentary evidence
I have already set out at [2] to [21] the sequence of events disclosed by the documents. There are two further pieces of documentary evidence to which I will refer.
It is not contentious that in 2017 Mrs Guha had been diagnosed as suffering from intellectual disabilities and cognitive impairment. In January 2018 she underwent formal cognitive and psychometric testing. In a report dated 5 February 2018, Ms Sharma, psychologist, considered that Mrs Guha's IQ scores were low enough to be classified as "intellectual delay". Ms Sharma's conclusions were as follows:
It is my opinion that the combination of Mrs Guha's limited intellectual capacity, lack of insight, her impaired adaptive functioning skills and avoidant coping strategies deem her functionally deficient in most areas of life. She is clearly a vulnerable woman who can be an easy target of manipulation and exploitation.
In my professional opinion, Mrs Guha is incapable of making her own financial and lifestyle decisions and would need the support and guidance of professional intervention to address her financial and other lifestyle issues. I would leave the financial decision to the expertise of the NCAT team to provide the most needed guidance to Mrs Guha.
It is also clear that Samadrita was aware that there were concerns about her mother's mental state from at least September 2017. In her application to NCAT dated 28 September, Samadrita ticked a box titled "intellectual disability" and responded to the question, "Why do you think the person has a decision making disability", as follows:
Resulting from the doctor indicate that mum has cognitive impairment been present. Mum takes oroxine, thyroxine tablets to control her thyroid. The medication makes her nervous & anxious. Also mum is not good in her English.
[5]
Witnesses
There were three affidavits in support of Mrs Guha's case: two from Ms Greta King, the solicitor acting for Mrs Guha in these proceedings; and one from Debadrita. Objections were taken by counsel for the defendant to various parts of these affidavits. Counsel also submitted that the entire affidavit of Debadrita should not be read on the basis that it was only filed in respect of the cross-claim, which was not being pursued.
I do not accept counsel's submission. Debadrita's affidavit clearly contains evidence that is relevant to whether the plaintiff is entitled to the relief sought. I accept counsel for the plaintiff's submission that it was filed in relation to both the plaintiff's claim and the defendant's cross-claim.
This left the objections to specific paragraphs in the affidavits. But I did not consider it necessary to rule on these objections. The documentary evidence and the affidavit paragraphs which were not the subject of specific objection were sufficient for me to establish that Mrs Guha is entitled to the relief sought.
[6]
Rescission
The plaintiff advanced her case for rescission on two bases. The first was that the defendant acted unconscionably in relation to the two transactions. The second was that the transfers were the result of undue influence.
In relation to the claim for unconscionable conduct, the applicable legal principles were summarised by Ward CJ in Eq in her Honour's recent decision in Turner v O'Bryan-Turner [2021] NSWSC 5 at [399]-[400], which I respectfully adopt (citations omitted):
[F]irst, that the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the stronger party; second, that the special disadvantage must seriously affect the weaker party's capacity to judge or protect his or her own interests; third, that the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person); fourth, that the stronger party must take advantage of the opportunity presented by the disadvantage; and, fifth, that the taking of advantage must have been unconscientious.
. . .
[O]nce the first three of those elements is established and the improvidence of the transaction shown, the plaintiff's task is "made easier by an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage".
The requisite disadvantage or disability must be one which seriously affects the ability of the weaker party to make a judgement as to his or her own best interests.
In the present case I am satisfied that at the time the transfers were made, Mrs Guha was at a special disadvantage vis-à-vis Samadrita. This is for two main reasons. First, it is evident that at the time of the transactions, Mrs Guha was unable to look after herself. In particular, I accept Ms Sharma's evidence that she was vulnerable to exploitation.
Second, the transfers were clearly improvident. The Marayong property was the only substantial asset in the family and Mrs Guha had transferred it to Samadrita for no consideration. I am satisfied that the transactions were so improvident as to be explicable only by reason that she was affected by a special disadvantage at the time they were made: see Williams v Maalouf [2005] VSC 346 at [185].
The NCAT application indicates that Samadrita had actual knowledge of her mother's condition as early as September 2007. Accordingly, there is an equitable presumption that the transactions were a consequence of the plaintiff's disadvantage and that Samadrita unconscientiously took advantage of the opportunity presented by that disadvantage. Samadrita withdrew her defence to the plaintiff's claim and thus has not sought to rebut the presumption.
Even without the assistance of the presumption, the sequence of events speaks for itself. I am satisfied that Samadrita took unconscientious advantage of Mrs Guha's special disability in obtaining the two transfers. Mrs Guha's claim for rescission on the basis of unconscionable conduct succeeds. It is not necessary to consider undue influence.
[7]
Costs
It was agreed between the parties that Samadrita should pay the plaintiff's costs of the proceedings at least on the ordinary basis. It was also agreed that the costs order in favour of the plaintiff should exclude any costs referable to the claims against the second and third defendants, the Trustee and the Registrar-General. The latter agreement reflects the ordinary approach where the plaintiff succeeds against one defendant but fails against another: see Dimos v Willetts (2000) 2 VR 170 at 187 [45].
Although the costs of the cross-claim were formally in issue, I do not think there is any reason of substance why Samadrita should not pay Mrs Guha's costs. Her decision to discontinue can only have resulted from an appreciation that her cross-claim, like her defence, could not succeed. Effectively she has capitulated.
The real issue between the parties arose out of a claim on behalf of Mrs Guha that the costs order against Samadrita should be made on an indemnity basis (either for all of the costs of the proceedings or for the costs of the proceedings excluding the costs associated with certain specified procedural motions). Counsel for Mrs Guha supported this contention on two bases.
First, counsel submitted that Samadrita's defence and cross-claim had always been doomed to fail, and that Samadrita, had she been properly advised, should have appreciated that that was so. Secondly, counsel relied on an offer of compromise made on 6 April this year. The offer of compromise required Samadrita to vacate the property in exchange for a payment of $20,000.
It is convenient to deal first with the offer. Although it may have been more favourable to Samadrita than the ultimate result of the proceedings, the offer was open for only two days. In my view this was such a short period, given the nature of the claims in the proceedings, that failure to accept should not be seen as sufficiently unreasonable to merit an indemnity costs order.
As to the contention that, properly advised, Samadrita should have realised that her defence and cross-claim was hopeless, on no view would it be appropriate to make an indemnity costs order against her for the period during which she has been represented by her current lawyers. Since they were retained, Samadrita's defence and cross-claim have been, quite properly, withdrawn. The submissions presented on her behalf have been entirely reasonable. So far as I can see there has been nothing which would justify the award of costs on an indemnity basis.
The earlier period is more problematical. As early as November 2019, at a directions hearing, Kunc J asked pointed questions of the solicitor for Samadrita about whether she had any viable defence. But on balance I am not prepared to make an indemnity costs order against Samadrita for this period. The plaintiff's claim was too widely framed as is shown by the unsuccessful joinder of the second and third defendants. This can only have created confusion. In any event I doubt that, given the nature of the litigation, there would be much, if any, difference between what would be recoverable on the ordinary basis and what would be recoverable on an indemnity basis.
An award of indemnity costs is the exception rather than the rule. I think that justice will be done if Samadrita is required to pay Mrs Guha's costs on the ordinary basis.
[8]
Orders
The orders of the Court are:
1. Order that the first defendant forthwith take all steps reasonably required to transfer to the plaintiff Lot [XX] also known as [XX] Terrigal Street, Marayong New South Wales.
2. Grant liberty to apply with three days' notice with respect to Order (1).
3. Order that the plaintiff's claim be otherwise dismissed.
4. Order that the first defendant's cross-claim be dismissed.
5. Order that the first defendant pay the plaintiff's costs of the proceedings between herself and the plaintiff, including the costs of the cross-claim, on the ordinary basis.
[9]
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Decision last updated: 28 June 2021