Jenyns v Public Curator

Jenyns v Public Curator - [1953] HCA 2 - HCA 1953 case summary — Zoe

[13]

8. The use she made of her children in her business varied from time to time and now one was constituted her lieutenant, now another. From the time of the rupture with her husband, Harold, the eldest son, seems to have been in charge of the office. The second son Randolphus then seems to have been recognized as manager, a position he occupied from March 1920 until about November 1925. He was then dismissed. In 1922 a proposal had been started to form a company to take the business over. Mrs. Jenyns was to hold half the share capital and the daughters and three of the sons, that is, Randolphus and the two youngest, were to hold the rest. Randolphus, according to a note made by his mother and still preserved, was to be manager definitely for twelve months and if he did well for the company he could continue. He made the mistake of pressing for a greater proportion of share capital and also of siding with his father in some litigation between the latter and Mrs. Jenyns. Hence, doubtless, his dismissal. After an interval in which a stranger was brought in as manager, the fourth son John was given that office. Of the third son George, little is heard. John became manager about 1927 and continued to be so until 1942, subject to an interruption in 1933 when he visited the United Kingdom. During his absence Herbert the youngest son acted as manager. Herbert is the appellant in this appeal against whom the order complained of was made setting aside a transfer to him of shares in the company ultimately formed in 1946. In 1942 John was called up for military service and Herbert became manager again. The purpose of forming a company to take over the business was never abandoned. Indeed in or about 1926 the documents by which it would be effected were, it is said, all ready for signature. According to John his mother said that there must be alterations and then discussed the matter from time to time over a number of years. In 1944 the subject was renewed. John arrived back from his war service in June of that year and rejoined the business. Apparently friction between him and Herbert arose almost at once. On 13th October 1944 Mrs. Jenyns announced to the brothers the appointment of John as manager. The announcement was expressed in the form of a divine message and the message included the information, which can hardly have been received by Herbert with much satisfaction, that the purpose for which Herbert had been brought into existence in answer to his mother's prayer was to help and protect his brother and that the one position was as important as the other. Apparently John then assumed the managerial chair but Herbert retained the management in his own hands, at all events that is John's story. Whether because of the difficulties between the brothers or for other reasons Mrs. Jenyns set up a committee of management. She herself, John, Herbert and an employee named Gilmore were members. She authorized Mr. R.C. Hancock, a public accountant who had been called in as adviser, to act as chairman. This seems to have lasted from the beginning of December 1944 until August 1945. Mr. Hancock recommended them to form a company for the carrying on of the business and to redistribute the work for which the various members of the family were responsible. Three of Mrs. Jenyns' children and Mr. Hancock met her on 14th December 1944 to discuss the formation of the company. John and Herbert were there and so was her surviving daughter Mrs. Sadie Scott. There was an idea of transferring her landed property not employed in the business to the company in exchange for preference shares and of transferring the business in consideration of ordinary shares and then of distributing the two classes of shares in different proportions among the family. Of the ordinary shares Mrs. Jenyns was to retain a comparatively small number; John and Herbert were to be on an equality and were to be the largest shareholders, Sadie was to participate substantially and Harold was to be included, but Randolphus, like George, was omitted. An agreement was actually prepared for execution by Mrs. Jenyns and dated 16th January 1945. It was an agreement by her with John as trustee for the intended company for the sale of the business to the company as a going concern, in consideration of 27,000 paid up shares of 1 pound each. The company was actually registered. But Mrs. Jenyns refused to proceed with the transaction, her reason being, according to a note in her handwriting, that after reading the agreement (with divine guidance) she felt impressed with the view that it was worded in favour of John as manager of the business and of the draftsman as solicitor for the business. Some attempt was made in May 1945 to obtain her assent to a transfer of the business to the company, the distribution of the shares being stood over for independent consideration, but eventually the name of the company was struck off the register. In the meantime she had remonstrated with both Herbert and John in a letter to them jointly and this led to incidents which provoked John into abuse of Herbert. They seem to have brought to her their complaints of one another. Her notes show, however, that John was falling more and more into disfavour and correspondingly the cause of Herbert was prospering with her. At length on 20th June 1945 she, as in professed pursuance of a divine decision, announced that John was dismissed and Herbert invested with the management of the business. The agreement was returned to the solicitor for necessary alterations. John's case was examined by the authorities under the National Security (Man Power) Regulations, with the result that John was temporarily reinstated. Presumably the business was a protected undertaking. At all events, according to the evidence Jenyns Patent Corsets Proprietary appealed to a tribunal which decided to permit the termination of his employment: cf. regs. 14 and 16. Mrs. Jenyns attended the appeal and heard some of the evidence. This took place about September 1945. Herbert was thus enabled to resume the management of the business without John. Harold at this time lived in the house with his mother, whom he was supposed to look after, and received some allowance for doing so. Randolphus visited his mother from time to time. Sadie (Mrs. Scott) lived in Newcastle with her husband and family but came up to stay with her mother for some weeks practically every year. In Sadie her mother seemed to have unbroken confidence. Herbert, besides managing the business, supplied Hancock with the information and figures for making up his mother's returns for income tax and he attended to questions for her concerning her landed property outside the business. For many years she had ceased to go to the business premises regularly and doubtless the frequency of her visits had progressively diminished. But she had never lost touch altogether with what was going on. Probably in 1946 her visits to the premises would not average two a month. She would speak to members of the staff and sometimes question them. She made occasional visits to her accountants, bankers and perhaps others in order to make some particular enquiry or seek some advice or information. At this time Herbert discussed business affairs with her and gave his advice, solicited and unsolicited. Besides Hancock, she occasionally consulted another accountant, a Mr. Offner. She had first done so in 1927. (at p123)

[14]

9. On 9th June 1946 Mrs. Jenyns wrote to Herbert saying that she wanted him to help her form the business into a company and requesting him to get a solicitor whom she named to draw the agreement and articles of association. The solicitor she named had in fact died some years before. Instead of seeing a solicitor in the first instance Herbert procured a model memorandum and set of articles of association through the agency of a law stationer. These he left with his mother, pointing out, however, that they were out of date. According to his evidence she asked him to enquire for the names of some good solicitors and on a subsequent day he returned with the names of several firms which had been recommended. From these she chose, with his help, the firm of which Mr. Rowland is a member. Herbert consulted Mr. Rowland who pronounced the model memorandum and articles useless. He produced a new draft memorandum and articles which he sent to Herbert for Mrs. Jenyns' consideration on 12th November 1946. Harold says that Herbert gave him documents about September or October which his mother read and discussed: there was a meeting at the shop in the evening at which they were discussed. Perhaps Harold is wrong in the time he gives and she was in fact considering Mr. Rowland's draft. But it may have been the model memorandum and articles obtained through the law stationer. Mr. Offner says that she visited his office on 16th August 1946 with a memorandum and articles to ask him whether they were suitable. Later he consulted with Mr Rowland about the matter. He was instructed by Herbert to do so on behalf of Mrs. Jenyns. Mr. Rowland received back the first draft with a request for alterations and sent a final draft on 19th November 1946. Mr. Offner says that on 23rd November Mrs. Jenyns again called on him and discussed various matters concerning the proposed transfer of the business to a company including the draft memorandum and articles. She made another visit to him, he says, on 13th December in which they discussed the agreement, the capital of the company and proposed gifts of shares to members of the family and to certain employees. Then on 17th December Mr. Offner met Mrs. Jenyns, Harold and Herbert at the office of Mr. Rowland. (at p124)

[17]

12. The agreement for the sale of the business to the company fixed a consideration of 42,000 pounds to be satisfied by the allotment to Mrs. Jenyns of 42,000 paid up shares in the company. Of these 42,000 shares it was proposed that Mrs. Jenyns should retain only 21,000. She was to transfer the remaining 21,000 by way of gift as follows: to Herbert 13,665, to Sadie (Mrs. Scott) 3,200, to Harold 3,200, to George 500, to Gilmore 200, to Wood 200, and 5 each to seven old employees. The purpose of Mrs. Jenyns' visit on 17th December 1946 to the office of Mr. Rowland was to subscribe the memorandum and articles of association. These Mr. Rowland discussed, referring particularly to the position of governing director. Mr. Rowland had asked that Mrs. Jenyns' capacity should be investigated by a medical practitioner and he had as a result a certificate or certificates of her mental and physical capacity to transact the business. He considered that she understood the transaction. She and Herbert subscribed the memorandum and articles and the company was registered on that day. On the following day, 18th December 1946, they met to sign the agreement of sale, to hold the first meeting of directors and to allot the shares and execute the transfers. Of these proceedings some shorthand notes were taken. From the transcript it appears that when Mr. Rowland was going over the transaction Mrs. Jenyns made what in effect were three points. The first was that she had an invention she intended to patent and she did not want the patent to pass to the company. As to this she was told that since it would come into existence after the agreement it would belong to her and not the company. The second point was to enquire whether if she wished she could raise, say 25,000 pounds or 10,000 pounds. This produced an explanation or discussion of how she might realize her shares or raise money upon them or upon her own private estate. Her third point, to which she made a transition, was that she had been accustomed to give or to lend without interest money to deserving people. Could she do this? She described the religious guidance under which, and the religious principles on which, she had conducted her business and said that she could not hand over to this company as if it was just her. She felt she must continue under divine guidance. This led to reassurances from Mr. Offner based chiefly on her position of governing director, while Mr. Rowland reminded her of her private account. Mr. Offner's picture was possible open to criticism as obscuring the limitations which might well restrict the use of the company's money for ends outside the objects of the company. But perhaps the difference between the things she had in mind and what the company might do within its objects would not have been very material to her if it had been explained and analysed. When they passed to the directors' meeting the agreement was adopted and executed by the company, the 42,000 shares were allotted to Mrs. Jenyns as well as the one share for which she had subscribed the memorandum, the share for which Herbert had subscribed was similarly allotted to him, and the transfers were executed and their registration approved. Mr. Rowland asked Mrs. Jenyns some brief questions directed to the comprehension of the meaning of what was in hand and her desire that it should be done. Income tax was mentioned but all that was said was by Mr. Offner, who expressed the optimistic view, true only of future earnings, that she would benefit from the formation of the company. (at p126)

[18]

13. In fact the chief objection to the transaction which a business man might see in it was that she was left to find the outstanding tax on past profits. These profits were of course hers and her liability to tax upon them was not a proper item in the balance sheet on which the figure of 42,000 pounds was based as the purchase price satisfied in shares. The accounting period of the business ended on 31st March. She had not been assessed to tax on the income derived in the twelve months ending 31st March 1946, and she would of course be liable to assessment on the profits derived between that date and 18th December 1946. In the event the tax and provisional tax for the first of these two periods turned out to be 15,972 pounds. The tax on her taxable income for the year ending 31st March, 1947, which took into account the business profits of the second period was 3,957 pounds. Further, the gifts of the shares attracted state and federal gift duty. Apparently that was mentioned to Mrs. Jenyns at an earlier stage but it may be doubted if she understood how large the amounts would be. In the result state gift and stamp duty was assessed at 3,609 pounds and federal gift duty at 2,518 pounds. No doubt in point of logic Mrs. Jenyns could have no complaint on the score that she bore her own income tax in respect of profits earned before the transfer of the business to the company. For if the company had borne that liability, the amount of the consideration for the sale must have been proportionately reduced, if the value of the assets was put at the same figure. But for the business or the company to find cash and for her to do so in order to discharge the liability might be two different things. Further, according to the valuation of the Stamps Commissioner another 7s. 6d. a share was contained in the net value of the business. These considerations do not seem to have been fully present to the minds of those responsible for framing the transaction and for advising Mrs. Jenyns. How far she would have regarded them as material is a matter of speculation. (at p127)

[22]

17. After John's dismissal in September 1945 he had turned his attention to the possibility of causing a protection order to be made with respect to his mother under Pt. IIIA. of The Public Curator Acts 1915 to 1947 (Q.), legislation which it will be necessary to examine later in this judgment. But for the time being no steps were taken. Then in September 1948 at his instigation the curator applied to the Supreme Court of Queensland for such an order. On 16th December 1948 a protection order was made in respect of Mrs. Jenyns and the court ordered that the public curator should be appointed manager of her estate with the powers and duties defined in The Public Curator Acts 1915 to 1947. On an application made under s. 85K of those Acts by the curator an order was made on 16th August 1950, making Herbert a party to the proceedings (scil., the proceedings on which the protection order was made) in respect of a claim by the public curator as manager of Mrs. Jenyns' estate in respect of shares acquired by Herbert in December 1946, and all benefits derived by him from the possession of those shares. It was further ordered that the issues of fact arising out of the claim should be stated and tried by the Supreme Court as between the curator as such manager and Herbert as in an ordinary action, and directions were given for pleadings, discovery of documents and interrogatories. Pursuant to O. XXXIX, r. 4, of the Rules of the Supreme Court (Q.) a jury was required for the purpose of trying the issues of fact. By his statement of claim the curator alleged that Herbert at the material time stood in a confidential and fiduciary relationship to his mother; he was manager of the business and had gradually assumed the control and conduct of her affairs in relation thereto; she was dependent upon him to such an extent that she was not a free agent and the transactions were not, nor were any of their subordinate details, the outcome of her free volition. The statement of claim also alleged that Mrs. Jenyns was induced to enter into the transactions by the undue influence of Herbert and by the unconscientious use of his fiduciary position and by his taking unfair advantage of her mental weakness and of her reliance upon him. A third allegation was that Mrs. Jenyns did not understand the transactions; that she was mentally incapable of forming a proper judgment and did not realize the extent of the disposition made by her, its effect upon her financial position or the fact that she was obliged to assume obligations in respect of gift duty and otherwise or the extent of such obligations and that she had no independent advice. Strangely enough, although the company was not made a party to the proceedings, the relief claimed, like the allegations, covered all the transactions of 17th and 18th December 1946. (at p129)

[28]

23. It is important to keep steadily in mind the finding that the transfer of the 13,665 shares to Herbert as well as the agreement of sale to the company was the result of the free exercise of the independent will of Mrs. Jenyns. The question eliciting this finding is of course a consequence of the question which precedes it enquiring whether Herbert stood in a confidential relationship to his mother. In his charge to the jury the learned judge said: "This is a case in which the question of capacity is largely interlaced with the question of undue influence. It is by reason of the alleged mental incapacity of Mrs. Jenyns that the case arises, or is presumed to arise because of the trust and confidence which she placed in her son in making him the manager of her business and in placing - it is said - implicit confidence in him." But, as the jury found, she was capable of understanding both transactions. His Honour directed the jury that a relation of confidence raised a presumption that a gift was made by reason of undue influence but one which the donee might rebut. The charge proceeded: "It has been said that there are several ways of rebutting the presumption. If you find there was a confidential relationship then the onus of proving that there was no undue influence is upon Herbert Jenyns. This may be done by showing either that the relationship has ceased; in other words, that she is an entirely independent person; or if it still continues, by showing that she had independent advice. 'Independent advice' means it must be that of some independent person who is not connected with the donee in business or in any other confidential way and he has a knowledge of all the material facts and he, in fact, advises the donor, Mrs. Jenyns, on all matters which might affect her consideration in determining whether to make a gift. The onus, therefore, of proving - if you find there was a confidential relationship - that there was no undue influence, falls upon Herbert Jenyns. He is the one who has to prove that the gift is all right and is free of any undue influence". (at p131)

[32]

27. Now in answering this question it must not be forgotten that the expression "relation of confidence" does not describe a category possessing fixed and uniform characteristics. The expressions "relation of influence", "relation of confidence" and "fiduciary relation" are often used as interchangeable. They are not, however, necessarily the same or coextensive in their application. But it is worthwhile quoting in reference to the expression "relation of confidence" used in this case what Fletcher Moulton L.J. said in In re Coomber; Coomber v. Coomber (1911) 1 Ch 723 with reference to the expression "fiduciary relationship", for it is true also of the former expression. His Lordship said: "It is said that the son was the manager of the stores and therefore was in a fiduciary relationship to his mother. This illustrates in a most striking form the danger of trusting to verbal formulae. Fiduciary relations are of many different types; they extend from the relation of myself to an errand boy who is bound to bring me back my change up to the most intimate and confidential relations which can possibly exist between one party and another where the one is wholly in the hands of the other because of his infinite trust in him. All these are cases of fiduciary relations, and the Courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation must be such that it justifies the interference. There is no class of case in which one ought more carefully to bear in mind the facts of the case, when one reads the judgment of the Court on those facts, than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them" (1911) 1 Ch, at pp 728-729. (at p133)

[46]

41. There is one further matter that is relevant arising under Pt. IIIA. of The Public Curator Acts 1915 to 1947. The provisions of that Part are entirely concerned with the protection of a living person regarded as incompetent to manage his affairs or property. There is nothing in the legislation to continue the operation of the order or the curator's powers beyond the life of the protected person. The question thus involved was raised by this Court during the hearing of the appeal and it was suggested that the appeal might not be properly constituted in the absence of some representative of the estate of Sarah Ann Jenyns as a deceased person. However, the parties passed this suggestion by. But in view of the conclusion already expressed that the curator in the lifetime of the deceased exceeded his statutory powers in maintaining these proceedings, there appears to be no reason why the appeal should not be decided as it stands in favour of the appellant Herbert Jenyns, although the estate is not represented before the Court. There is no reason why Herbert should not have his costs of the appeal and of the proceedings in the Supreme Court where the issues were "stated and tried" to quote from the order as an ordinary action. But a question must arise, if not now at some subsequent time, whether or not the costs should be paid out of the protected estate or whether or not the curator should be indemnified out of the estate for the costs payable to the appellant. It may be that as the curator was suing in a representative capacity in the purported exercise of his functions that an order could have been made in the originating summons which could not have been made in an action. Even so it may be another question whether such an order is or was proper in the circumstances. Moreover it may be necessary that the estate should be represented, even if death has not made it too late to act under s. 85K(1). None of these questions was argued before this Court on the appeal and as the question of the curator's right to be recouped out of the estate for the costs he must pay to the appellant must be one of great importance, it is better that this Court should leave the whole question to the Supreme Court and make an order simply against the curator without prejudice to his right to be recouped. (at p138)

At a glance

Court

Decision date

Source

Judgment (51 paragraphs)

Jenyns v Public Curator (Qld) [1953] HCA 2; (1953) 90 CLR 113 (27 February 1953)

Parties

Cases Cited (11)