Malherbe v Silver [1999] VSC 176

Supreme Court of Victoria|1999-06-15|Before: BEACH, J.

This matter comes before me by way of an appeal from the orders of a Master of the court made on 28 May 1999. It is unnecessary to recite the orders at this stage of my reasons for judgment. In due course I shall do so.

At the outset I should say that I have gleaned some of the matters referred to in my reasons for judgment not from the documentation in this proceeding but from two applications in a proceeding before the Family Court of Australia involving the plaintiff, Bonnie Averill Malherbe (Mrs Malherbe) on the one hand and her husband, the second-named defendant, Samuel Francis Malherbe (Mr Malherbe) on the other (proceeding No.5173 of 1999), an order of that court of 25 May 1999 and certain matters which were told to me by counsel for the parties during the course of the hearing and which were not the subject of any dispute.

Mrs Malherbe was born on 2 September 1920 and is now aged 78. She worked from the age of 14 to her retirement in 1975 at the age of 55.

In May 1969, when she was aged 48, Mrs Malherbe purchased Unit 2, 38-40 Holyrood Street, Hampton (the property) for $11,800. She used her own savings and a loan of $4,700 from the then State Savings Bank of Victoria to pay for the property.

In 1971 Mrs Malherbe met Mr Malherbe. Mr Malherbe was born on 25 November 1914 and was then aged about 57. At that time Mr Malherbe was separated from his wife and was caring for his youngest son who was then aged 15.

Mr Malherbe and his son were then living next door to Mrs Malherbe in a property jointly owned by Mr Malherbe and his wife.

Mr and Mrs Malherbe became engaged on 29 July 1972 and married on 21 October of that same year. Mr Malherbe was then aged almost 58 - Mrs Malherbe was aged 52.

At the time of their marriage Mrs Malherbe was employed as a secretary at Brighton Grammar School. She continued to work at the school until her retirement in 1975 purely for the purpose of completing the repayments of her loan from the State Savings Bank.

By 12 March 1974 Mrs Malherbe had completed repaying the loan and that day the mortgage over the property was discharged by the bank. At that time Mr Malherbe was employed in Glen Huntly. However, one month before his 60th birthday on 25 November 1975, he was dismissed from his employment and at the age of 60 was granted a pension by the Department of Veteran Affairs. At the present time Mr Malherbe is receiving a pension of $753.70 per fortnight, whilst Mrs Malherbe is receiving a pension of $369.18 per fortnight.

At no time did Mr Malherbe make any contribution towards the mortgage payments in respect of the property to the State Savings Bank. Indeed between 1972 and 1974 Mr and Mrs Malherbe had separate bank accounts and the mortgage payments were made directly from Mrs Malherbe's account to the bank.

In 1973 Mr Malherbe lost the sight in his right eye after it became infected as a result of glaucoma. In August 1983 he suffered a stroke from which he never fully recovered.

By May 1994 Mr Malherbe's state of health was so poor that Mrs Malherbe arranged for him to give her an enduring power of attorney. The power of attorney was witnessed by Mr and Mrs Malherbe's general practitioner, Dr David Shap. It is Dr Shap's opinion that at that time Mr Malherbe's mental capacity was such that he fully understood the significance of his actions in that regard.

By 9 December 1998 Mr Malherbe's condition had deteriorated to such an extent that it was necessary that he be admitted to Hampton House, which is a special accommodation home in Hampton. At about that same time Mrs Malherbe was herself hospitalised. Towards the end of 1998 Mrs Malherbe spent some eleven days with her husband at Hampton House.

The medical and mental condition of Mr Malherbe continued to deteriorate. In January 1999 Dr Shap and another medical practitioner determined that Mrs Malherbe could no longer care for Mr Malherbe at home. Thereafter Mr Malherbe remained at Hampton House. Mr Malherbe's mental condition continued to deteriorate and on 17 February 1999 he was admitted to the psychiatric ward of the Kingston Hospital at Heatherton, where he remained until he was transferred to the Rosehill Nursing Home in Highett on 5 April 1999. Mrs Malherbe continues to visit Mr Malherbe at Rosehill every second or third day.

On 15 April 1998 Dr Shap prepared a medical report concerning Mr Malherbe for Mrs Malherbe's solicitor. This medical report concludes:

"In summary Sam is an 84 year old man who has had evidence of dementia at least since 1994 but he coped reasonably well at home until recently when his wife was unable to care for him and he was transferred to Hampton House. Since transfer to Hampton House it became clear that he needed a high level of care due to his physical frailty and moderately severe dementia and now resides in a nursing home long term. It is my belief that Sam would not have been of sound mind with respect to signing any legal documents within the last six months at least. Clearly in 1994 Sam had evidence of early dementia which has been steadily progressing since that time."

Pausing at this point - the evidence before me is that Mrs Malherbe has been a devoted wife and has done everything she can to care for Mr Malherbe since the date of their marriage.

Until such time as Mr Malherbe was admitted to Hampton House the marriage was a happy one, and the last place one would expect to find Mr and Mrs Malherbe in the concluding days of their lives is involved in litigation both before this court and the Family Court.

But that is what has occurred, and the responsibility for it in my opinion rests solely upon the shoulders of Mr Malherbe's sons, Paul and Michael, and Michael's solicitor, Harry Silver, who is either employed by or a member of the firm of solicitors McGrath Carey Katz.

I shall now detail the events leading up to what I consider to be that totally outrageous situation.

On 23 December 1998 Paul Malherbe visited his father at Hampton House and had him sign another enduring power of attorney in favour of himself (Paul).

It is clear from Dr Shap's report to which I earlier referred that at that time Mr Malherbe was of unsound mind and would be incapable of appreciating the nature and effect of the document he signed.

The clear inference to be drawn from what subsequently occurred is that Paul obtained his father's signature to the power of attorney to enable him or Michael to have a caveat registered on Mrs Malherbe's title to the property.

I say that because on 5 February 1999 such a caveat was lodged with the Registrar of Titles.

The caveat is dated 14 January 1999 and is signed by Mr Silver as the agent of Mr Malherbe (I stress not Paul or Michael Malherbe). The caveator is said to be Samuel Francis Malherbe and the estate or interest claimed is an equitable estate in fee simple. The grounds of the claim are said to be:

"Pursuant to a constructive trust whereby Bonnie Averill Malherbe formerly Bonnie Averill Evans of 2/38-40 Holyrood Street Hampton 3188 holds the said land upon trust for herself and the Caveator."

The caveator's address for service on the caveat is that of McGrath Carey Katz.

In the circumstances of this case it would be difficult to find a more spurious claim.

At all events, when served with a copy of the caveat by the Registrar of Titles on 11 February 1999, Mrs Malherbe contacted her solicitor.

On 12 February Mrs Malherbe's solicitor spoke to Mr Silver. The following are the relevant paragraphs in Mrs Malherbe's solicitor's affidavit sworn 24 May 1999 dealing with the matter:

"7. I then spoke by telephone with Mr Silver by telephone on Friday, 12 February 1999. I advised Mr Silver that I was ringing him on behalf of Mrs Malherbe and in relation to a Caveat which had been served upon Mrs Malherbe. I stated further that the Caveat was apparently lodged by Mr Sam Malherbe or by Messrs McGrath Carey Katz on behalf of Mr Malherbe. I advised him that Mrs Malherbe had purchased the unit before her marriage to Mr Malherbe and that she had paid for the unit herself.

8. Upon my telling Mr Silver my instructions as to the financial matters in relation to the ownership and Mrs Malherbe's purchase of the unit, Mr Silver responded:

9. I then asked Mr Silver if he could advise me from where he had his instructions as I understood that Mr Sam Malherbe was currently in care at Hampton House, Ludstone Street, Hampton, an aged care facility and further, that he had not had capacity for months. I asked Mr Silver if he had instructions from one of Mr Malherbe's sons. Mr Silver then said words to the effect:

'Without prejudice, Michael Malherbe is my client. I look after his work. He was in here seeing me about something else and we discussed a Caveat in regard to this. I had better get some instructions.'

10. I understand that Mr Sam Malherbe has three sons by his first marriage and that Michael is the youngest son, now approx. 43 years old. 11. I then advised Mr Silver that we would require him, his firm, Mr Sam Malherbe or any of the sons responsible for the lodging of the Caveat to withdraw the Caveat in the circumstances. Mr Silver responded with words to the effect that he thought that any settlement of matters should be by way of a 'without prejudice' roundtable conference between the parties. I asked him how he envisaged such a conference, as one of the 'parties', the 'Caveator' shown on the face of the Caveat, was without capacity and in care. I asked Mr Silver from where he would get his instructions. Mr Silver simply repeated to me that he would get instructions. 12. In closing the conversation, I advised Mr Silver as a matter of courtesy that I would be writing to him immediately demanding the removal of the Caveat. He said that he understood that and would respond himself in writing in due course. He again stated however that he thought the matter should be settled by a without prejudice roundtable conference."

On 15 February 1999 Mrs Malherbe's solicitor wrote the following letter to Mr Silver:

"Dear Sir ... We act for Mrs Bonnie Malherbe in respect of the above matter. We write by way of open letter. We note that on Thursday last, 11 February, 1999 our client handed us a Notice from the Land Titles Office of Victoria that a Caveat had been lodged by your office over our client's property. The date on the face of the Caveat is 14 January, 1999. We also note that the Caveator is shown as Mr Samuel Francis Malherbe, the Husband of our client. That is, the Caveat was lodged by your practice purportedly on the instructions of Mr Sam Malherbe, the Caveator. Sherrill O'Connor-Sraj of this practice immediately telephoned to speak with the Solicitor at your office having the conduct of this matter. We were told that your Mr Harry Silver was not available but would return the call. It was then on Friday, 12 February, 1999 that Sherrill O'Connor-Sraj of this practice spoke with Mr Silver. We understand from our discussions with Mr Silver that in fact your office had not received instructions from Mr Sam Malherbe, but simply from one of his sons. We are instructed to advise you that should:- a. the said Caveat not be removed and, b. you not provide this practice with a copy of the Withdrawal of the Caveat and LTO Dealing Number, by close of business next Monday, 22 February, 1999 then we shall immediately institute proceedings for removal of the Caveat together with costs. We hereby give you notice that we shall seek all costs in relation to any acts or proceedings required to enforce the withdrawal of the said Caveat. We shall also produce this letter to the Court as may be required on the question of notice to you of these matters and on the question of costs. In addition, this matter may ultimately be referred to the Law Institute of Victoria in respect of your practice apparently acting without instruction from the Caveator in this matter. Further, this letter will be produced as may be required on the question of notice to you of this."

On 19 February 1999 Mrs Malherbe's solicitor received the following reply:

"Dear Madam We refer to your letter of 15 February 1999. We are seeking instructions on some of the issues raised in that letter and will advise you further in due course. In the meantime, suffice to say that any application to remove the Caveat will be strenuously resisted on the basis that the proper jurisdiction for the claims of our respective clients is that provided by the Family Law Act. In any event, the Caveat contains a valid claim. Any application made to remove the Caveat without reference to the substantive issues between the parties will be treated as an attempt to deal with the matter without addressing the merits. The effect will simply be that our respective clients will incur unnecessary costs in defending the standing of the Caveat. This letter will, of course, be produced on the very question of costs."

On 3 May 1999 Mrs Malherbe's solicitor filed an originating motion in this court naming Mrs Malherbe as plaintiff and Mr Silver, Mr Malherbe and the Registrar of Titles as defendants, by which Mrs Malherbe seeks, inter alia, the following orders:

"3. Under section 90(3) Transfer of Land Act 1958 that the third defendant remove Caveat No. V840193E in relation to the land described in Certificate of Title Volume 8773 Folio 298. 4. Such further or other orders, directions or relief, including an order that the firstnamed defendant pay to the plaintiff compensation, as the Court deems just. 5. The first and second defendants pay the plaintiff's costs of this application on a solicitor-own client basis."

On 5 May 1999 McGrath Carey Katz filed an appearance for Mr Silver and Mr Malherbe.

The originating motion came before Master Evans on 6 May 1999. On that day the Master ordered that any affidavits on which Mr Silver or Mr Malherbe intended to rely were to be served and filed by 4 p.m. on 17 May 1999 and adjourned the further hearing of the matter to 21 May.

On 11 May 1999 McGrath Carey Katz filed notice that they had ceased to act for Mr Silver and on 19 May 1999 they filed notice that they had ceased to act for Mr Malherbe.

On 20 May 1999 Mr Aitan Schmideg of Kliger Partners filed two applications in the Family Court. The first application names Mr Malherbe as applicant and Mrs Malherbe as respondent and seeks the following orders:

"1. That there be a declaration of the parties' interests in Unit 2, 38-40 Holyrood Street, Hampton in the State of Victoria. 2. That the wife pay to the husband by way of spousal maintenance $200 per week. 3. The husband will further particularise his claim after discovery by the wife."

One asks: Where did Mr Schmideg think Mrs Malherbe was going to get $200 from to pay to her husband each week - her fortnightly pension of $369.18?

The second application named Mr Malherbe as Applicant No.1 and, again I quote, "Putative Next Friend Paul Francis Malherbe" as Applicant No.2. Mrs Malherbe is named respondent. The following are the orders sought in the application:

"1. That PAUL FRANCIS MALHERBE be appointed next friend for SAMUEL FRANCIS MALHERBE pursuant to Order 23 of the Family Law Rules. 2. That pursuant to Order 31A Supreme Court proceedings 5280 of 1999 be transferred to the Family Court of Australia. 3. That until further order the wife be restrained from disposing of, encumbering or otherwise dealing with the former matrimonial home, being the property situate at and known as Unit 2, 38-40 Holyrood Street, Hampton in the State of Victoria. 4. That the costs of this application be reserved."

On 21 May 1999 the following documents were filed in the proceeding in this court:

2. A notice of consent of litigation guardian signed by Paul Malherbe and filed by Kliger Partners.

3. A notice of conditional appearance filed by Kliger Partners. That notice reads:

"File a conditional appearance for the second Defendant Samuel Francis Malherbe by his putative litigation guardian Paul Francis Malherbe."

Later that same day Mrs Malherbe's originating motion came back before Master Evans. Master Evans made further orders concerning the filing of affidavits by Mrs Malherbe and Mr Silver, then adjourned the further hearing of the application to 28 May 1999.

On 25 May 1999 counsel for Mrs Malherbe and Paul Malherbe appeared before Morgan, J. in the Family Court. Her Honour ordered that the applications filed in the court on 20 May 1999 be struck out and then by consent of the parties made the following orders:

"3. The applicant Paul Francis Malherbe shall pay to the respondent Bonnie Averill Malherbe on or before the 25th of August 1999 costs fixed in the sum of $25,000 by way of bank cheque payable to the respondent and delivered to the offices of her solicitor Sherrill O'Connor-Sraj, Suite 6, 532 Hampton Street, Hampton in the State of Victoria. 4. The applicant shall sign forthwith all necessary documents and take all necessary steps to disclaim and or revoke an Enduring Power of Attorney from Samuel Francis Malherbe bearing the date 23rd December 1998. 5. The applicant shall forthwith deliver to the offices of Sherrill O'Connor-Sraj, Barrister and Solicitor, at Suite 6 532 Hampton Street, Hampton in the State of Victoria all bank documents including bank statements, pass books and cheque books in relation to any account in the name of Samuel Francis Malherbe including the bank account with the Commonwealth Bank of Australia number 7631 365 005 760."

If I may say so, a fitting end to two totally spurious and vexatious applications.

On 28 May 1999 Kliger Partners filed a "Notice that solicitor has ceased to act" in this court. The notice was addressed to Mr Malherbe. The relevant paragraph in the notice reads:

"Take Notice that we, Kliger Partners, who have hitherto acted as solicitors for your putative litigation guardian Paul Francis Malherbe in this proceeding have ceased to act as practitioners for you as from 28 May 1999."

Later that day Mrs Malherbe's originating motion came before Master Wheeler. Master Wheeler was informed by senior counsel for Mrs Malherbe that the plaintiff did not wish to proceed with her action against Mr Malherbe and asked for the action against him to be dismissed.

Senior counsel for Mrs Malherbe further informed the Master that Mrs Malherbe did not intend to pursue any claim for compensation pursuant to s.118 of the Transfer of Land Act 1958 (the Act) and only sought an order that the caveat be removed and that Mr Silver pay the plaintiff's costs of the action on a solicitor-own client basis. The Master declined to entertain the application and proceeded to make the orders in the proceeding which are the subject of the appeal now before me.

Before setting out the Master's orders it is appropriate that I first refer to the matters the Master noted under "Other Matters" in his order. They read:

"1. In my view pleadings are necessary. 2. Further as the Secondnamed Defendant is apparently under a disability, and a litigation guardian must be appointed to look after his interests which is apparently realised by Klinger Partners Solicitors who have filed a 'notice of appearance' for the 'putative' litigation guardian (which has now been withdrawn). 3. I note that McGrath Carey Katz had filed an appearance for the Secondnamed Defendant (but has now withdrawn). 4. The Plaintiff now asks the Secondnamed Defendant be dismissed from the proceeding. 5. The Thirdnamed Defendant (Registrar of Titles) does not intend to appear (see letter of 5 May 1999)."

"1. The proceeding against the Secondnamed Defendant is dismissed. 2. Pursuant to Rule 4.07 of the Supreme Court Rules, this proceeding continue as if commenced by writ. 3. By 4 June 1999 the Plaintiff file and serve her statement of claim. 4. Defences be filed and served by 25 June 1999. 5. A reply be filed and served by 9 July 1999. 6. Subject to the trial Judge's directions, the trial be by affidavit (subject to the parties right to require deponents to attend for cross-examination). 7. This proceeding is referred to the Listing Master after 10.30 a.m. on 27 July 1999 to be given such priority as she deems fit. 8. There is liberty to apply. 9. The costs are costs in the proceeding."

And so if those orders are left to stand, Mrs Malherbe is now faced with the prospect of a full-blown piece of litigation and the expense and emotional trauma involved in such litigation, when all she really seeks now is an order that the caveat lodged by Mr Silver be removed and that her costs of the proceeding be paid not by Mr Malherbe, who can bear no responsibility for what has taken place in his name, but by Mr Silver.

There is no doubt but that an order must be made directing the Registrar of Titles to remove the caveat from the title to Mrs Malherbe's property. That much was not disputed by counsel for Mr Silver.

But for a number of reasons counsel for Mr Silver contends that the orders of Master Wheeler should stand and that the appeal should be dismissed. Those reasons may be enumerated as follows:

1. The plaintiff's notice of appeal does not specify which of the Master's orders are the subject of appeal.

2. The plaintiff cannot appeal against order No.1 because that order was made upon the application of the plaintiff's own counsel.

3. The jurisdiction conferred by s.90(3) of the Act cannot be exercised because the caveator is no longer a party to the proceeding.

4. The lodging party (of the caveat) was not Mr Silver but the firm McGrath Carey Katz. Any application for compensation pursuant to s.118 of the Act can only be made against the firm. It is not a party to the proceeding and in any event there is no evidence of any loss or damage suffered by the plaintiff as a consequence of the lodging and registration of the caveat. As the firm is not a party to the proceeding no order for costs can be made against it.

5. The plaintiff has never sought an order that Mr Silver remove the caveat.

6. The plaintiff has no cause of action against Mr Silver and no costs order therefore can be made against him.

7. The plaintiff should have taken the more inexpensive course of attempting to remove the caveat by adopting the procedure laid down in s.89A of the Act. If she had, the caveat may simply have been allowed to lapse.

8. The plaintiff and/or Mr Silver should be given the opportunity to join Michael and/or Paul Malherbe as parties to the proceeding because the ultimate liability for costs may lie with one or other or both of them.

In my opinion the following are the answers to those propositions:

1. The appeal is against all of the orders of Master Wheeler made on 28 May 1999. Whilst the plaintiff's notice of appeal uses the words "the orders", it is clear that the plaintiff was seeking a complete re-hearing of the matters dealt with by the Master. That much was made clear by senior counsel for the plaintiff at the outset of the appeal and in my opinion the first defendant's counsel was in no doubt about the matter - hence the detailed written submissions he was able to hand to me during the hearing of the appeal and which I propose to leave on the court file.

2. The appeal is a hearing de novo (Rule 77.05(7)). Whilst the plaintiff's counsel sought the order that the proceeding against the secondnamed defendant be dismissed, I do not consider that that precludes the plaintiff re-ventilating the matter on the hearing of the appeal. All the more so if grave injustice would be caused to the plaintiff in the event she was prevented from doing so.

3. If I set aside the orders of the Master including the one dismissing the proceeding as against the secondnamed defendant, as I intend to, the court has the necessary jurisdiction to order that the caveat be removed.

4. The party who lodged the caveat was Mr Silver, not his firm. He lodged the caveat as agent for Mr Malherbe. That that was the situation is clear on the face of the caveat itself.

As I have already made clear, the plaintiff has abandoned any application for compensation pursuant to s.118 of the Act. That fact was made clear at the hearing before Master Wheeler on 28 May 1999.

5. The plaintiff may not have sought an order that Mr Silver remove the caveat, but he was asked to in the letter of 15 February 1999 from the plaintiff's solicitor to him and he refused to do so.

Nevertheless it is not necessary that the plaintiff seek an order that the lodging party remove the caveat. The appropriate order to be made is an order directing the Registrar of Titles to remove the caveat from the title to the plaintiff's property. If the caveat has not been registered then an order that the Registrar not register it but return it to the lodging party.

6. It is within the inherent power of the court to make an order for costs against the solicitor for a party to a proceeding or against a non-party. See the notes to Rule 63.02 (63.02-40 and 63.02-45) in Williams at p.5604.3 and the cases there referred to.

Such an order will not be made without notice to the party to be affected by such an order as was done in the present case.

7. The attitude expressed by Mr Silver in his letter of 19 February 1999 made it pointless for the plaintiff to proceed pursuant to s.89A of the Act. In my opinion the plaintiff's legal advisers had no choice but to adopt the course they did. That their choice in that regard was correct is borne out by the fact that the Family Court proceedings were then taken against Mrs Malherbe.

8. Mr Silver has been given two opportunities to not only place affidavit material before the court if he was minded to (see the orders of Master Evans of 6 May 1999 and 21 May 1999), but to make application to join any other person as a party to the litigation if he was so minded. In my opinion he can no longer be heard to make such a complaint in the matter.

My conclusion therefore is that the matters sought to be relied upon by counsel for Mr Silver are without substance.

I return then to what I consider is the real matter for me to determine, namely what order, if any, should be made in respect of the plaintiff's costs of this proceeding. In my opinion there is only one answer, and that is an order that Mr Silver pay the plaintiff's costs personally on a solicitor-own client basis.

Mr Silver received no instructions from Mr Malherbe to lodge the caveat. Mr Malherbe was incapable of giving such instructions, in the same way as he was incapable of giving an enduring power of attorney on 23 December 1998.

Whilst in Mr Silver's defence I am prepared to accept that when he was first instructed by Michael or Paul Malherbe to lodge the caveat he may have believed, by virtue of the production of the power of attorney given to Paul, that he was sufficiently authorised to take such action - and again I point to his failure to provide any explanation to the court in relation to the matter - what he did thereafter is in my opinion indefensible.

When told of the true situation concerning Mrs Malherbe's acquisition of the property on 12 February 1999, it was incumbent upon Mr Silver to immediately seek instructions from Paul and/or Michael Malherbe in relation to the matter. Had he done so he should have ascertained at that time that the power of attorney given to Paul was worthless and that there was no basis whatsoever for lodging a caveat on behalf of Mr Malherbe. Being armed with that information he should have then withdrawn the caveat, thereby putting an end to the matter. But he did not do so, and by his actions has caused Mrs Malherbe to become involved in not only this litigation but also the abortive litigation in the Family Court.

The following are the orders I make in the proceeding:

1. The appeal from the orders of Master Wheeler made on 28 May 1999 will be allowed and the orders set aside.

2. Pursuant to the provisions of s.90(3) of the Transfer of Land Act 1958 I order that the Registrar of Titles remove caveat No. V840193E from Certificate of Title Volume 8773 Folio 298. If the said caveat has not been registered I order that the Registrar of Titles not register it but return it to the lodging party.

3. I order that the proceeding otherwise be dismissed.

4. I order that the plaintiff's costs of the proceeding including all reserved costs and the costs of the appeal be taxed on a solicitor-own client basis and paid by the first defendant, Harry Silver.

At a glance

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Judgment (98 paragraphs)

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