Iannella v Stirans by her tutor the NSW Trustee & Guardian

Proceedings before the magistrate

1. The magistrate was not assisted by the pleadings or the way in which the case was conducted on either side. The front page of the statement of claim foreshadowed the confusion that was to come, describing the type of claim as "mercantile law - debt - breach of fiduciary duty - undue influence".
2. Paragraphs 6 to 9 of the statement of claim made the following contentions: "6. The circumstances of the appointment of the defendant as a third party with authority to operate the plaintiff's bank accounts created an implied or resulting trust of the plaintiff's monies in the defendant's hands. 7. In the period from 7 March 2012 until 6 December 2013, the defendant withdrew a total amount of $57,300.00 from the plaintiff's account [number identified] contrary to the plaintiff's interest. 8. The defendant has failed to account to the plaintiff's financial manager for the plaintiff's funds had and received by the defendant. 9. The defendant has deprived the plaintiff wrongly of the monies withdrawn from the plaintiff's bank account (or a significant part of them) whereby the plaintiff has suffered loss."
3. Mrs Stirans' case was largely based on documents tendered through Ms Bozinovska, a legal officer employed by the New South Wales Trustee and Guardian. There was also a short statement of agreed facts.
4. The authority granted by Mrs Stirans to Mr Iannella to operate her accounts was signed by each of them and a bank teller and dated 6 February 2012. As at that date, the pension account had a balance of $31,386.54. Two withdrawals are recorded on that date, one in an amount of $2,000 and one in an amount of $20,000. However, on 10 February 2012, an amount of $20,006.84 went back into the account. That transaction was not explained. The increment of $6.84 is consistent with repayment with interest for 4 days at around 3%, possibly suggesting the return of an amount held on deposit. Confusingly, it was put to Ms Bozinovska in cross-examination that Mrs Stirans was present with Mr Iannella at the bank on 6 February 2012 when she gave him authority to operate her accounts (tcpt 24.46) but also that there was "no way" Ms Bozinovska could say that Mrs Stirans or Mr Iannella withdrew the $20,000 (tcpt 26.35). The case theory appears to have been that someone other than Mrs Stirans or Mr Iannella was accessing the pension account. However, the fact that the two withdrawals occurred on the day on which it appears they attended the bank together to sign the authority to operate the account suggests otherwise.
5. In any event, the $20,000 formed no part of the claim against Mr Iannella because it was apparently returned to the account on 10 February 2012. Coincidentally, that is also the date on which Mrs Stirans went into hospital after falling and breaking her hip. She remained in hospital until 15 March 2012. During her time in hospital Mrs Stirans underwent a "mini mental" examination in which she obtained a score of 19 out of 30, indicating mild cognitive impairment. The magistrate appears to have accepted that Mrs Stirans was developing dementia during the period of her dealings with Mr Ianella.
6. The documents tendered by the bank included a large number of withdrawal vouchers signed by Mr Iannella recording the amounts he withdrew from the pension account. All of those transactions were conducted at the St Mary's branch of the bank. Mrs Stirans' claim (as originally put) was confined to the sum of those amounts. Mr Iannella admitted making each of those withdrawals. It was his case that, on each occasion, he withdrew the amount Mrs Stirans asked him to withdraw and took the cash directly to her at her home, counting it out into her hand.
7. The amounts withdrawn by Mr Iannella were always round figures. For the first six months or so of the period during which he had authority to use the account, the amount was usually in the order of $2000, $1,500 or $1,000. In the later period the amounts were more commonly $1,000, $800 or $500. On two occasions, he made two withdrawals on the same day. For example, on 23 May 2012 he withdrew $2000 and $1000. He gave no explanation for doing so.
8. In addition to the withdrawals identified in the withdrawal vouchers from the St Mary's branch, there were five withdrawals identified in the bank's records as having been made by EFTPOS from St Mary's post office. Those withdrawals were in round sums in amounts falling within the pattern of the withdrawals made by Mr Iannella. Curiously, on 13 September 2013, there was both a bank withdrawal and an EFTPOS withdrawal, in amounts of $500 and $300 respectively.
9. Mr Iannella denies making the EFTPOS withdrawals. It was put to Ms Bozinovska in cross-examination that the account to which Mr Iannella had access "used a bank book" and that "this bankbook could not be operated at an ATM". While it may be self-evident that a bankbook cannot be inserted into an ATM, it does not follow that the pension account could not be accessed by EFTPOS (it appears from the records that it could), still less that it was impossible that Mr Iannella conducted those transactions. Again, the case theory underlying the cross-examination appears to have been that someone other than Mr Iannella and Mrs Stirans must have been operating the account but that theory appears to have been based on an illogical assumption that because Mr Iannella had the bank book, he could not have had any other means of operating the account (which he was authorised to do). In any event, unlike the position with the withdrawal vouchers, there was no direct evidence that the EFTPOS transactions were conducted by Mr Iannella and those amounts were not included in Mrs Stirans' claim.
10. The pension payments went into the account fortnightly. At the beginning of the relevant period, the payment was $748.80. It was increased from time to time and, by the end of the relevant period on 24 October 2013, was $827.10. It was an agreed fact that the total amount of the pension payments deposited into the account during the relevant period was $35,309.64.
11. Apart from the pension and the apparent repayment of the $20,000 withdrawn on 6 February 2012, only two other deposits were made into the account. One was a deposit in the sum of $10,147.25 on 13 March 2012. I note that was two days before Mrs Stirans came out of hospital. The other was an amount of $1,000 deposited on 7 June 2012. Neither of those deposits was explained in the evidence.
12. Leaving aside what is established by the documentary case, Mrs Stirans relied on an affidavit sworn by Narelle Bossard, the coordinator of the services provided by Anglicare. Much of her affidavit was based on hearsay statements made by other Anglicare care workers and was excluded. However, Ms Bossard had also seen Mrs Stirans herself on three occasions. She gave evidence at the hearing of her observation that, on the occasions when she saw Mrs Stirans at her home, there was a lack of food and Mrs Stirans' clothing was worn and dirty. She said: "The kitchen was dirty. The floors were dirty. She had long, really, really long, unwashed hair. Her toenails were curling over her feet. She had mud down her legs that had been there for quite some days. The house smelt of urine. She smelt of urine."
13. Ms Bossard said that she only got to see the bathroom and could not see the bedroom because the door was closed. She said that the air conditioner and television did not work, that the place was generally dirty and ill-kempt, that the lawns were sometimes overgrown and that nothing was being maintained.
14. Ms Bossard said she made a number of attempts to contact Mr Iannella because she had been told that he was undertaking banking and shopping for Mrs Stirans. On 4 December 2012 she asked him to return Mrs Stirans' bankbook so that food could be purchased for her. He said that he was doing the banking and shopping. He refused to return the bankbook. She said that he would not enter into any further discussion, that he refused to meet her and that he did not answer any of her subsequent messages.
15. Mr Iannella gave evidence. He said that he had known Mrs Stirans for "two or three months" before he agreed to do her banking at her request. He described them as "close friends". He said they went to the same bank and that they talked at the bank and "that's how it happened". As already noted, he said that Mrs Stirans would tell him how much money she wanted and that he would go to the bank and withdraw that amount and take it back to her house where he would count the money out into the palm of her hand. He said that he also paid her bills. She would give him the bill itself and the money and he would go to the post office and pay the bill. He agreed that he had frequently withdrawn thousands of dollars within a month. He said he was worried about that but that she told him it was her money and it was none of his business. He said there were two other women who came to the house (possibly the Anglicare care workers) but that he never raised his concerns about money with them because he hardly ever saw them. He denied that the Anglicare care workers had contacted him and asked to speak about Mrs Stirans' financial affairs. He was asked whether he paid himself to perform services for Mrs Stirans. He responded "no, not - not really. All that may have happened is that I put $10 - $20 - $30 for gasoline". He said in his affidavit sworn 6 March 2017 that she once paid him $1600 to trim some trees and remove the clippings.
16. In closing submissions, counsel for Mrs Stirans said very little, relying on written submissions which were handed up to the magistrate but which have not been included in the material before me. In oral submissions, he introduced the notion that Mr Iannella was in breach of a fiduciary duty to Mrs Stirans (no such case had been pleaded). He said: "In essence, your Honour, the plaintiff says that it has been established that far more was withdrawn from this account than the defendant can explain, other than with an explanation which, in my respectful submission, your Honour will not accept. If your Honour is not with me on the issue of Mr Iannella keeping this money for himself then the plaintiff's secondary position is that he is in breach of his duty as a fiduciary to have presented [scil: prevented] this unfortunate situation occurring in the first place, and secondly, having been alerted to it or aware of it, he did nothing to prevent the position getting worse. He's in breach of his duty as a fiduciary at the very least."
17. Counsel for Mr Iannella did not object to the introduction of an allegation of breach of fiduciary duty and did not dispute the Court's jurisdiction to grant an equitable remedy on that basis, instead confining himself to addressing (and in some respects misstating) the evidence. He submitted that the withdrawal of $20,000 could not have been made by Mr Iannella because it was not supported by a withdrawal voucher signed by him. It was correct that there was no withdrawal voucher for that payment, but that did not exclude Mr Iannella's involvement in that transaction. Counsel submitted it did, because the withdrawal was made when Mrs Stirans was in hospital. That was incorrect. Confusingly, he also submitted that "she withdrew it, we didn't". He later said "I think she was actually released on the 9th and it came out on the 10th". That was incorrect. The contemporaneous documents establish that the $20,000 was withdrawn on 6 February 2012, the day on which it appears Mrs Stirans and Mr Iannella attended the bank together to sign the authority for him to operate her accounts. The sum of $20,006.84 was paid into the account four days later, on 10 February 2012, the day Mrs Stirans was taken to hospital after falling. She remained in hospital until the middle of March.
18. The confusion concerning the $20,000 continued into the judgment, the magistrate finding that Ms Bozinovska had agreed that Mr Iannella was not authorised for the account at the time of that transaction. That was incorrect, both as to what the witness had said and as to the fact. Ms Bozinovska had agreed only that there was no withdrawal voucher for the $20,000. The authority was granted on the same day as the withdrawal transaction, a day on which it was put to Ms Bozinovska by counsel for Mr Iannella that his client and Mrs Stirans had attended the bank together.
19. Mr Iannella's closing submissions otherwise focussed primarily on the paucity of evidence of bills paid and reiterated the contention that all amounts withdrawn by Mr Iannella had been handed to Mrs Stirans.
20. The magistrate's findings reflected the language of the pleading and the confusing submissions presented by the parties. Her Honour summarised the fiduciary argument as follows: "On behalf of the plaintiff in closing submissions it is said that Mr Iannella had a fiduciary relationship with Ms Stirans following the signing of a bank authorisation and that this duty was breached when he failed to ensure her money was being used to her advantage and that her funds were not being depleted unnecessarily. It is also asserted that Mr Iannella knew that the plaintiff was vulnerable and incapable and should have concerned himself with how those monies were being used. It is submitted that Mr Iannella has failed to account for the bulk of the money. To the extent that a fiduciary fails to account absent of any proof to the contrary it is to be assumed against the fiduciary that the monies were converted to his own benefit."
21. Her Honour found that it was not a fiduciary relationship "apart from the authorisation to access the accounts and the voluntary nature of Iannella's participation in paying bills etc". Mr Iannella submits that finding was legally misconceived. The magistrate went on to find that, "having constructively assumed the role of support person for Mrs Stirans he was in a position of trust and therefore owed her a duty of care". The existence of a duty of care had not been pleaded. In his closing submissions, counsel for Mrs Stirans had used the expression "duty of care" interchangeably with "fiduciary duty".
22. The magistrate entertained the possibility that Mr Iannella may have been siphoning monies for his own benefit but, applying the Briginshaw standard of proof, did not make that finding. However, she found that, in failing to account for the funds he withdrew, he had breached his "duty of care" and that, as a result, the plaintiff had suffered.
23. The judgment concluded: "I find in favour of the plaintiff and I agree with the statement of claim where it is claimed that the circumstances of the appointment of the defendant as a third party with authority to operate the plaintiff's bank accounts created an implied or result in (sic) trust of the plaintiff's money in the defendant's hands and that the defendant has failed to account to the plaintiff's financial manager for the plaintiff's funds and that he had and received by the defendant (sic). As a result, as I said, the plaintiff has suffered a loss. I find against the defendant, so there will be judgment for the plaintiff in the matter."
24. The order made was "judgment and verdict for the plaintiff in the amount of $19,177.89" and "interest in the amount of $6,600."

Grounds of appeal

1. The plaintiff relied on the following grounds of appeal: 1. The verdict and judgment of the court below was against the evidence and the weight of the evidence in circumstances where the court accepted the evidence of the plaintiff (the defendant in the court below) that all of the funds which the plaintiff withdrew from the account of the defendant (the plaintiff in the court below) for her assistance and at her request were personally given to the defendant by the plaintiff and where there is no evidence or assertion that the plaintiff stole or otherwise misappropriated any of the defendant's funds. 2. In the premises the court erred in holding that there was an 'implied or result in (sic) trust' of the defendant's money in the plaintiff's hands. 3. The court erred in holding that the plaintiff owed a duty of care to account to the defendant. 4. The court erred in holding that the defendant was entitled to judgment in the sum of $19,177.89 and interest of $6,600 and post judgment interest and costs. 5. The judgment and verdict against the plaintiff amounts to a miscarriage of justice. 6. Further, the court had no jurisdiction to award equitable relief or make declarations of trust.
2. It is convenient to address the grounds in the order in which they were addressed by the parties.

Grounds 6, 2 and 3: absence of jurisdiction to grant equitable relief

1. Grounds 6, 2 and 3 raise questions of law or mixed questions of fact and law. To the extent necessary, I would grant leave to argue those grounds.
2. It may be accepted that the Local Court does not have jurisdiction to grant relief in the nature of the enforcement and execution of a trust or the taking of accounts. Counsel for Mrs Stirans (who did not appear in the primary proceedings) conceded that to be the case. He submitted, however, that no such relief was granted in the present case. He acknowledged that the framing of Mrs Stirans' case in the Local Court was "over-engineered", particularly in the references in the pleading to "implied or resulting trusts" and the development during closing submissions of an allegation of breach of fiduciary duty. However, he submitted that the case, at its core, contained a simple claim for monies had and received. Such claims fall squarely within the jurisdiction of the Local Court. The authorities were considered by Beech-Jones J in Albanis v Eleftheriou [2014] NSWSC 416, where a similar argument was put. His Honour said at [27]: "It follows that counsel for Mr Albanis was correct in submitting to his Honour that his client was able to make a claim in restitution based on the alleged repudiatory behaviour of Mr Eleftheriou. Such a claim for refund is one 'which the count for money had and received lies', being a 'common law count' (Roxborough at [15] and [16]). Such counts have often been brought in courts that do not exercise any equitable jurisdiction (see Coastal Estates Pty Ltd v Melevende [1965] VicRp 60; [1965] VR 433 at pp 447 to 448 per Adam J). The 'common law count' to which the plurality referred in Roxborough has an ancient lineage which was traced in the various judgments in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; 162 CLR 221. In Lagos v Grunwaldt [1910] 1 KB 41 at p 48, Farwell LJ observed that 'everything that could be sued for under those counts comes within the description of debt or liquidated demand', as that latter phrase was used in the English High Court Rules. This passage from Lagos was referred to with approval by Deane J in Pavey & Matthews at p 251."
3. It was acknowledged in the present case that the relief claimed was described as "damages" whereas, framed as a common money count, it would have been appropriate to seek an order for the payment of the amount claimed as a liquidated debt. Counsel for Mrs Stirans drew my attention in that context to the judgment of Santow J in Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (No 2) (1996) 20 ACSR 170. That decision contains a helpful discussion of the nature of a common money count. It was submitted on behalf of Mrs Stirans that the substance of her claim was to seek "restitution" of her own monies which Mr Iannella had admitted receiving for her use.
4. It may be accepted that the language of the magistrate's findings combined the notion of a trust together with the finding that Mr Iannella had failed to account for the plaintiff's funds that he "had and received". However, it is well established that an appeal lies only against the Court's order or judgment, not against the reasons. The word "judgments" in that context refers only to operative judicial acts, not to the reasons for judgment: Driclad Pty Ltd v Federal Commissioner of Taxation [1968] HCA 91; (1968) 121 CLR 45 at 64.
5. Furthermore, the approach in such matters in this Court has been to consider the substance of the claim in the Local Court rather than being too wedded to the language in which it was framed. Mrs Stirans noted in that context the decision of Campbell J in Cho v Park [2016] NSWSC 871 in which his Honour refused an application to have a claim transferred from the Local Court to the Supreme Court on the basis that declaratory relief was sought. Justice Campbell said at [8]: "By and large I am of the view that most of what is sought by way of declaration and rectification is really in the category of a conceit and that the real remedy sought in respect of such matters is a monetary sum, whether it is called damages, contribution or restitution. Those latter remedies are available within the usual monetary jurisdiction of a local court."
6. Mrs Stirans also relied on the earlier decision of Campbell J in Ji v Firth [2013] NSWSC 186 where his Honour similarly remarked at [30] that, "stripped of the unnecessary claims for equitable relief, and the reliance upon breach of fiduciary duty", the Local Court would have had jurisdiction to hear a claim for overpayment of legal fees as a claim for monies had and received.
7. The primary claim in the present case, at least in closing submissions, was that Mr Iannella had retained the cash he withdrew from the account for his own benefit. However, that case had not been squarely pleaded or put in cross-examination. It is unsurprising, having regard to the way in which the case was conducted, that the magistrate did not make that finding. The alternative case was framed, unnecessarily and inappropriately, in terms that combined notions of equitable duty and a simple common money count. I am satisfied that the substance of the alternative claim was a common money count and that that was, in substance, the basis for the relief granted. Ground 6 is not made out.
8. It follows from that conclusion that grounds 2 and 3 must also fail. The submissions put on behalf of Mr Iannella addressed the merits of the trust claim and the alleged failure to account at some length. However, as already noted, it was not in dispute in the appeal that the Local Court did not have jurisdiction to grant equitable remedies in respect of those claims. The only contest was as to whether the magistrate purported to exercise any such jurisdiction.
9. For those reasons, grounds 6, 2 and 3 must be dismissed.

Grounds 1, 4 and 5: Miscarriage of justice

1. In his written submissions, Mr Iannella grouped grounds 1, 4 and 5 together, submitting that there was a miscarriage of justice in that there was no evidence or assertion that the plaintiff stole or otherwise misappropriated any of the defendant's funds. So framed, the submission appears to raise a question of law but it misconceives what the magistrate found. As already noted, her Honour was not satisfied to the appropriate standard of proof that Mr Iannella had been siphoning monies for his own benefit, notwithstanding her Honour's apparent recognition of a strong basis for drawing that inference.
2. Contrary to the proposition implicit in Mr Iannella's submissions on this ground, there is no inconsistency between the magistrate's rejection of the contention that Mr Iannella "siphoned" moneys for his own benefit and the acceptance of the common money count. In order to establish the former, Mrs Stirans would have had to establish a dishonest state of mind to a standard of cogent proof. It does not follow from the failure to satisfy that onus that the magistrate held or was bound to hold that Mr Iannella had accounted to Mrs Stirans for the whole of the substantial amount he withdrew.
3. Taking each ground separately as it was framed in the amended summons, there are different difficulties. Ground 1 asserts that the verdict and judgment was against the evidence "where the Court accepted the evidence of [Mr Iannella] that all of the funds which he withdrew from [Mrs Stirans'] account" were personally given to her by him. The magistrate made no finding to that effect. Even if her Honour had made that finding, a ground asserting that it was "against the evidence" would raise a pure question of fact and would not be amenable to appeal to this Court.
4. The second proposition made by ground 1 is that there was no evidence or assertion that the plaintiff stole or otherwise misappropriated any of the defendant's funds. As already noted, the magistrate expressly declined to make any finding to that effect. Accordingly, I would refuse leave to argue ground 1.
5. Ground 4 contends that the magistrate erred in holding that Mrs Stirans was entitled to judgment in the sum awarded. As framed, that ground identifies no error of law. As the argument was developed, it appears what was intended was not to challenge the factual conclusion as to quantum but to invoke a ground of failure to give adequate reasons. The submissions contended that the magistrate entered judgment in the amount ordered without giving any reasons or explanation as to how or on what basis she arrived at "these arbitrary amounts". The submissions relied on remarks of Mason P in Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430 at 431 that "there is a miscarriage where what is and is not disclosed involves a breach of the principle that justice must not only be done but must be seen to be done", applying the principles stated in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247. Both decisions were concerned with failure to give adequate reasons. That was not a ground of appeal identified in the amended summons in the present case.
6. In any event, as to the amount in which judgment was entered, it was not arbitrary at all but had been identified in closing submissions as the quantum claimed on behalf of Mrs Stirans. Mrs Stirans contended in the appeal that, "by agreement, that amount represented the difference between the amount that Mr Iannella had drawn from Mrs Stirans' account that was not later replaced by one means or another". Whether that reflected an agreement between the parties or simply an agreed calculation is not clear. At the very conclusion of his submissions in the Local Court, counsel for Mrs Stirans said "I am instructed that having regard to the statement of agreed facts in this matter, the claim will be limited to the difference between what was withdrawn from the account and what went into the account". In other words, Mrs Stirans' claim was reduced at the last minute to the amount by which the account was depleted over the relevant period rather than the sum of the amounts withdrawn, which was considerably higher.
7. That concession was made in circumstances where counsel for Mr Iannella had made a forceful submission concerning the paucity of evidence of Mrs Stirans' actual living expenses, regular bills and so on. The logic behind the concession is not entirely clear. It appears to reflect an assumption that Mrs Stirans would not have authorised the withdrawal of funds in excess of the amount of the pension, which is a reasonable assumption if she was in fact giving the instructions and acting rationally. On the other hand, it does not appear to bear any correlation to her likely actual expenses.
8. In any event, the concession was made and appears to have been very favourable to Mr Iannella. The critical question is whether it then reflected an agreed quantification of the claim. At the time the concession was announced, it was explained by reference to the agreed statement of facts. Counsel for Mr Iannella was distracted because he did not even remember that there was an agreed statement of facts. When the document that had been handed to the magistrate at the outset of the hearing was put before him, he accepted that he understood how the amount was calculated and made no further submissions about it. When the judgment was published, the magistrate noted her recollection of the amount claimed. At that point, counsel for Mr Iannella made no submission.
9. The magistrate appears to have taken that amount to be an agreed sum by reference to the agreed statement of facts. Ground 4 accordingly raises a question which is primarily if not exclusively a question of fact. Assuming it involves any question of law, I would refuse leave on this ground in light of the small amount involved, the way in which it arose without objection or assistance to the magistrate on behalf of Mr Iannella and my assessment that the concession appears to have been generous to him.
10. Ground 5 asserts a "miscarriage of justice" which, as already explained, appears to raise the same issue as has been addressed in the consideration of ground 4.
11. For those reasons, I make the following orders: 1. Refuse leave in respect of grounds (1) and (4); 2. Otherwise dismiss the appeal; 3. Order the plaintiff to pay the defendant's costs.

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