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Judgment 1REIN J: The late Marjorie Emily Gibson ("the Testatrix") died on 13 July 2006. Probate of her last will and testament was granted on 11 January 2010 to Mr Gavin Gibson ("Gavin") and Mr Malcolm Gibson ("Malcolm"). 2Gavin and Malcolm, together with their brother Ian, were named as the residual beneficiaries of the Marjorie Emily Gibson's estate ("the Estate"). 3The only substantive asset of the Testatrix was her property at Kyle Bay ("the Property") at which she resided until 2003. 4The Property was mortgaged in circumstances I describe below and after the Testatrix's death it was sold by the mortgagee Perpetual Trustee Company Ltd ("Perpetual"). The net proceeds of approximately $50K after repayment of the Perpetual loan were paid to the Estate. However, the remaining $50K has been expended on administration including the costs of these proceedings. 5Malcolm claims that Gavin has deprived the Estate of the Property, or wasted that asset, for reasons I will outline. By reason of the conflict between Malcolm and Gavin, a third person, Mr Daniel Haydon, was appointed as administrator ad litem for the conduct of these proceedings against Gavin and his wife Louise. 6Mr Haydon is represented by Mr P. O'Loughlin of counsel. Gavin represents himself. Louise, the second cross defendant, has decided to take no active role in the proceedings leaving it to her husband to represent her interests. 7The following facts are established from the documents (including the affidavits) forming Exhibit A1, A2 and A3 and Exhibit B. (1)On 6 March 2003 (see Exhibit A1, p 55) the Testatrix was transferred from the St George Hospital to the Macquarie Lodge Nursing Home. According to the admission form the Testatrix was suffering from Parkinson's disease, Lewy Body Dementia, Depression, Molecular Degeneration and "unable to self care". These reports were accompanied by "Medical Admission" notes completed by an attending Medical Officer which notes, although hard to read, appear to confirm what is on the admission sheet. Admission Data recorded on the same date described the Testatrix as suffering from hallucinations, in addition to the matters mentioned on the admission form, and a nursing assessment included the following observations about the Testatrix (see Exhibit A1 pp 62-63): "Can not recall, concentrate or calculate well." "Has Lewy Body Disease" "Decision making skills are limited." "Lack of insight." "Extremely hard to assess - some of these answers may be incorrect -?? could not be bothered, depression - just told me anything - For MMSE needs Psychologist to assess." "Poor attention span." "Impaired abstract thought" (2)On 7 May 2003 the Testatrix executed a power of attorney in favour of Gavin and Malcolm severally. It contained no restrictions, and it contained the following provision: In the exercise of the authority conferred on them by Section 163B of the Conveyancing Act, 1919, my Attornies are authorised to execute an assurance or other document, or do any other act, whereby a benefit is conferred on them. (3)Until August 2005 the Testatrix was the sole registered proprietor of the Property and, it appears, she had the Property transferred to her some years earlier following her late husband's death. (4)In August 2005 the Testatrix transferred to Gavin and his wife Louise each a 5/1000 share the Property. (5)The transfer in August 2005 occurred at precisely the time that Gavin and Louise (and ostensibly the Testatrix) applied for a loan of $500K from Perpetual. The great bulk of the loan funds were applied as follows: (i)$438, 591.05 by cheque to Gavin and Louise and the Testatrix (ii)$51, 572.08 to St George Bank Limited (iii)$4, 591.34 to St George Bank Limited, and (iv)the balance of the smaller items such as stamp duty totalled $5, 245.53 (6)Gavin and Louise paid an amount of $320K to Mark Hill trading as Australian Mortgage Investors ("AMI") on a short term loan with a stated interest rate of 2% per month, awaiting the purchase of a property in Queensland in the name of Gavin and Louise. (7)The $4591.34 paid to St George paid off a loan in Louise's name. (8)The amount of $51, 572.08 was money paid by way of a deposit for a property in Queensland in the name of Gavin and Louise. (9)The $320K investment with AMI was lost and Mr Hill was made bankrupt. 8Gavin does not dispute that the Testatrix's equity in the Property has been lost to the Estate but he contends: (1)It was always his mother's intention to divide the Estate three ways between her three sons. (2)The mortgage was his mother's way of giving him one third of her Estate. It is, he says, unfortunate that he has lost that one third share but he says that is his concern and not the concern of the Estate or his brothers. (3)The sale of the Property was wrongly delayed and not enough was achieved by Perpetual when it sold the Property. This contention involves criticism and complaint not only of, and against, Perpetual but also against Malcolm. 9So far as Gavin's third assertion is concerned no case of this kind has been pleaded and I pay no further regard to it. 10Malcolm gave evidence of events between 2003 and 2005: (1)That in early May 2003 he and Gavin had a conversation as follows: Gavin: "I want to sell Mum's house and invest in properties in Brisbane on Mum's behalf. We will end up being millionaires!" Me: "That's not the type of investment that Mum should be going into. It's not stable, it's not guaranteed and it's very speculative. It may also impact on Mum's tax and pension." Gavin: "But there's the opportunity to earn a lot of money and we've got to do it now." Me: "I will do some investigations." (2)Following that conversation Malcolm became aware of the contract for sale of the Property and in June 2003 Malcolm said to Gavin: Gavin I don't think that Mum should invest in properties in Brisbane. The investment is not guaranteed and very speculative. It also impacts on her tax and pension. A term deposit would be better for mum to invest her money. I don't agree that mum should sell her own home either. If we rent mum's house, the rental income should cover the nursing home fees. (3)In October 2003 whilst at the Macquarie Lodge Nursing Home Gavin and he had the following conversation: Gavin: "I have put Mum's house on the market for sale." Me: "How did that happen? You don't have any authority to sell Mum's house." Gavin: "Mum agreed." and Me: "Did you know that Gavin has put your house up for sale?" Mum: "I don't know". Me: "Have you entered into an exclusive agreement with an agent or have a few agents been involved?" Mum: "I don't know. I don't know what I have done". (4)In late October 2003 Malcolm had the following conversation with his mother: Me: "Mum, it's not right that you sell your property. Gavin wants you to invest the money in properties in Brisbane which is a risky investment and you could lose everything. I don't agree with the sale of your home and I think we should stop the auction." Mum: "I agree with you, but I am not sure what to do or what has been done" Me: "I can stop the sale if you enter into a contract. Did you want me to do that? Mum: "Yes." (5)Following the conversation referred to in (4) Malcolm did in fact thwart the sale. (6)Subsequently, however, the Perpetual loan was organised and obtained by Gavin. (7)On learning of the loan agreement with Perpetual and the mortgage Malcolm confronted Gavin saying: You entered into the Loan Agreement and mortgaged her property without her knowledge, didn't you? to which accusation Gavin did not respond. (8)That in a conversation in 2008 (between May and September) Gavin said he was intending to pay off the mortgage (para 18 of Malcolm's first affidavit, Exhibit A1, p 34). 11Malcolm was cross examined but in a very limited and ineffective way (hardly surprising given Gavin's lack of professional qualifications). Additionally, none of the conversations to which Malcolm deposed were challenged in Gavin's affidavit. I accept Malcolm's evidence of his conversations with Gavin. Although the notes from the nursing home are not comprehensive they do raise considerable doubt as to the capacity of the Testatrix at and from the time of admission and no evidence to contradict that material has been led by Gavin. 12Mr O'Loughlin submitted that the Testatrix had never intended to take a loan from Perpetual and that she had no knowledge or understanding that the Property had been mortgaged to that end. 13Malcolm's evidence, the documentary material and the absence of any evidence from Gavin rebutting Malcolm's evidence as to how he and his wife came to obtain the 1% share, and as to how he came to sign the bank documents in his mother's name and Gavin's concession that he did not treat the loan monies as money to which the Testatrix had any entitlement and did not intend to account for it to her for her benefit, lead me to conclude, on the balance of probabilities, that Gavin and Louise have sought to obtain for themselves the benefit of the Property by mortgaging it to Perpetual for their own interests and not the interests of the Testatrix. It is quite unclear how Gavin and Louise were able to obtain for themselves, to the exclusion of the Testatrix, the benefit of the $438, 591.05 given that the cheque was made out to all three of them (see Exhibit A2, p 442) but it is clear that (subject to one matter to which I shall return) that is what they have done. I am not satisfied, on the balance of probabilities, that the Testatrix had a proper understanding or even knowledge that a mortgage was given over the Property or of the purpose to which the proceeds of the loan were being put. 14Gavin's claimed from the Bar table that his mother always intended that the brothers should receive an equal share of the Property. The scheme which Gavin put in place (with Louise's assistance and to her benefit) made it impossible for the Estate to provide his brothers with a third share of the Property and it is one with which his mother would have been most unlikely to agree. Gavin, as I have mentioned, seeks to justify the "one third" approach by claiming that the Property was worth far more than the "price" for which it was sold but, quite apart from the other difficulties to which I have referred, he has offered no evidence that the Property did not have a value at the time of sale equivalent to the price for which it was sold by Perpetual. I am satisfied that the Testatrix did not know that Gavin was using the power of attorney to obtain a loan for his and Louise's own purpose and that by means of the power of attorney, the Testatrix was made a borrower of the bank with security given by her over her Property. 15An attorney exercising a power of attorney owes fiduciary duties to his or her principal. A short statement of the position can be found in Dal Pont, Law of Agency, 2nd ed, 2008, Lexis Nexis Butterworths at [10.10]: Donees of powers of attorney, as fiduciary agents, must not exercise their authority in a way contrary to the interests of their principals. So, like other agents, a donee of a power of attorney is, in the absence of a clear power to do so, prohibited from utilising that authority to pay personal debts, or to make presents to himself or herself or to others of the principal's property. Apart from any liability at common law, the donee becomes a constructive trustee of the misapplied property. Some jurisdictions give statutory effect to this fiduciary proscription by providing that a power of attorney confers no authority to do any act by which a benefit would be conferred on the donee, except as expressly permitted by its terms, and prohibiting a donee of a power of attorney from entering into a transaction giving rise to a conflict of interest and duty. (footnotes omitted) 16In Saad v Doumeny Holdings Pty Ltd [2005] NSWSC 893 it was held that the donee of a power of attorney was led to have departed from his "undivided loyalty to his principal's interests" by disposing of half of the value of his principal's shareholding in a company to another person. 17Gavin did not articulate a response to the cross-claimant's claim other than asserting from the Bar table that his mother had wanted to give him, in effect, a one third interest in the Property. I accept it is likely that the Testatrix wanted her three sons to have an equal share of the Property because that is what she provided in her will but there is no evidence that the Property was worth $1.5M or even $1M. There is some evidence that as at October 2003 the Property was worth $850K (see Exhibit A1, p 210) which would mean each son would have a maximum share of approximately $283K (there would have been costs of sale and there were some small special bequests). The Property was sold for $781K in late 2011: see Exhibit A1, p 162. 18There is however an issue, which it was open to Gavin to raise, and which in my view needs to be addressed as part of the Court's consideration as to whether Gavin is liable to the Estate. It relates to the inclusion in the power of attorney of the words set out in 7which I shall refer to as "the expanded power". Does the inclusion in the power of attorney of the expanded power permit the attorney to do anything he wishes even if it is to the detriment of the principal? This is connected to the question of whether such wording precludes or ousts the fiduciary obligations which are normally owed by the attorney to the principal. 19The power of attorney is dated 7 May 2003 and is therefore governed by s 163B of the Conveyancing Act 1919 (NSW) (see s 6(3) Powers of Attorney Act 2003 (NSW) for the transitional provisions) which provides: 163B Power conferred by prescribed form of instrument (1) Subject to this section, an instrument (whether or not under seal) in or to the effect of the form in Schedule 7 confers on the attorney thereby appointed authority to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do. (2) The authority conferred by an instrument referred to in subsection does not include: (a) authority to exercise or perform any power, authority, duty or function as a trustee conferred or imposed on the person executing the instrument, or (b) unless it is expressly conferred by the instrument-authority to execute an assurance or other document, or do any other act, as a result of which a benefit would be conferred on the attorney appointed by the instrument. (3) Where an instrument referred to in subsection (1) specifies any conditions or limitations to which the authority conferred by the instrument is to be subject, the authority is so conferred subject to compliance with those conditions or limitations. (Emphasis added) 20The effect of an expanded power, which was in similar terms to that contained in the power of attorney under consideration here, was considered in Spina v Conran Associates Pty Ltd; Spina v M & V Endurance Pty Ltd [2008] NSWSC 326; (2008) 13 BPR 25,435; (2008) NSW ConvR ¶ 56-218 and Spina v Permanent Custodians Ltd [2008] NSWSC 561; (2008) 13 BPR 25, 463; (2008) NSW ConvR ¶ 56-225 (which was the subject of an appeal on other points in Spina v Permanent Custodians Limited [2009] NSWCA 206, (2009) 14 BPR 26,923). Both cases concerned the identical power of attorney used by Mrs Spina's son to enter into a mortgage which was for the benefit of the son and not Mrs Spina. In Spina v Permanent Custodians Ltd it was held that the power of attorney governed by s 163B of the Conveyancing Act was not effective to establish authority for the plaintiff's son to enter into the two mortgages with the two different lenders who were parties to that case. 21This conclusion was reached by Austin J on a matter of construction of the power of attorney which included the following clause: *2. In the exercise of the authority conferred on him/her/them by Section 163B of the Conveyancing Act, 1919, my attorney(s) is/are authorised to execute an assurance or other document, or do any other act, whereby a benefit is conferred on him/her/them. and of consideration of s 163B of the Conveyancing Act 1919. 22Austin J was of the view that the words "whereby a benefit is conferred on my attorney" seemed to envisage conduct on the part of the attorney undertaken in the interests of the grantor but which also confers a benefit on the attorney (see [73]). His Honour held that the absence of the words "whether or not also to the detriment of the grantor" after the words "benefit is conferred on him/her/them" encouraged the view that the language of clause 2 was not clear enough to permit the attorney to use a general power to enter into a transaction that was solely for the attorney's benefit. His Honour was of the view that clause 1 reinforced the conclusion that the power of attorney was not so wide because: By no conceivable stretch of the English language could the use of a general power of attorney for the execution of a mortgage over the grantor's land to secure a borrowing solely for the benefit of the attorney be regarded as a use "on behalf of" the grantor, or as something that "an attorney" might do. 23His Honour drew support from Tobin v Broadbent (1947) 75 CLR 378; [1948] 1 ALR 25; (1947) 21 ALJR 478; [1947] HCA 46 and in particular the judgment of Dixon J (as his Honour was then) at 401: But the cardinal fact of the transaction which it is sought to bring within the power is that the loan was made to Hodgetts, the donee of the power, and not to either of the Tobins, the principals. Hodgetts was the borrower, the loan was for himself, he did not contract it as an agent but he gave the lender his principals' property as security. The question is, therefore, whether the power of attorney extended to authorizing Hodgetts to give a security over his constituents' shares for his own debt, not simply whether it authorized him to give a security. You cannot sever the giving of the security from the indebtedness secured. A transaction of security is unintelligible without an identification of the obligation secured. This is not the case of an agent misapplying moneys borrowed in his principal's name on the security of his assets pursuant to an authority covering the borrowing of money on the principal's behalf. If a transaction is ostensibly on the principal's behalf and is of a description that falls within the authority, it is nothing to the point that the agent's purpose was to act for his own benefit and to defraud the principal, that is, unless the opposite party to the transaction had notice. But here the transaction was the attorney's own, both in form and substance, and the only incident of it concerning the constituents was when the latter's property was drawn in as a support for the loan. Prima facie, a power, however widely its general words may be expressed, should not be construed as authorizing the attorney to deal with the property of his principal for the attorney's own benefit. Something more specific and quite unambiguous is needed to justify such an interpretation. "The primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property." Per Russell J, Reckitt v Barnett Pembroke and Slater Ltd (1928) 2 KB 244, at p 268 a judgment approved in the House of Lords (1929) AC 176, at p 183 and p 195. In my opinion, the words of the powers of attorney do not in themselves suffice to confer authority upon Hodgetts to secure a borrowing of his own by a deposit of the plaintiffs' scrip. Such a transaction is in itself beyond the limits of the power. 24Austin J also drew support form Sweeney v Howard [2007] NSWSC 852, (2007) 13 BPR 24,381; (2007) NSW ConvR 56-182 a decision of Windeyer J who has taken a similar approach although in that case the power of attorney was poorly drafted: see [11] and [47]-[49], [56]-[60] of Sweeney v Howard and [88] of Spina v Conran Associates Pty Ltd; Spina v M & V Endurance Pty Ltd. 25In Spina v Permanent Custodians Ltd Hammerschlag J refused to follow Spina v Conran Associates Pty Ltd; Spina v M & V Endurance Pty Ltd. His Honour was of the view that the extent of the power was not a matter of construction of the terms of the power of attorney but rather of s163B of the Conveyancing Act and he held that: [N]either the term "attorney" nor the term "on behalf of" [in s163B of the Conveyancing Act] necessarily imports any notion of benefit. The words merely connote the relationship where one person's actions bind another. Consequently, his Honour found that the donor of the power may authorise, by the power of attorney, an action entirely inimical to the donee's interest. His Honour held that the plain meaning of s 163B(1) is that the agent is vested with the power to do anything which the principal may do whether it was against the interest of the donor or not. His Honour said: The only limitation which s 163B(1) imposes on the agent's authority is that the principal cannot authorise the agent to do what the principal could not lawfully do or what the law would restrict the principal from authorising the agent to do on the principal's behalf. 26In the course of his comments Hammerschlag J made the point at [153]: Whether a particular action by the agent under a general power of attorney on the principal's behalf involves a breach of fiduciary duty is a different matter. The principal may have redress against his agent and a third party who participates in the breach with requisite knowledge. Such a case would have to be pleaded. No such assertion is made in these proceedings against the defendant. There is thus a very clear divergence of viewpoint concerning power of attorney which included provisions expressly conferring power on the donee in terms of s 163B(2)(b) of the Conveyancing Act. If the approach taken by Austin J is correct it would preclude any reliance by Gavin on the power of attorney. If the approach of Hammerschlag J is correct it would not answer the question of whether Gavin could rely on the expanded power as an answer to the claim that he breached the power of attorney. 27In Hughes v Hughes [2011] NSWSC 729 Gzell J noted the divergence of opinion between Austin J and Hammerschlag J, and referred to Sweeney v Howard [2007] (supra), [56] as a case in which Windeyer J "took the view that a power of attorney executed under s 163B did not confer authority on the attorney to pay his or her own debt with the principal's cheque" (see Hughes v Hughes, [28]). 28Gzell J also made reference to Re R [2000] NSWSC 886 at [41] where Young J (as his Honour then was) had pointed out: ...one has to distinguish carefully between two questions; (a) is the donee of the power of attorney authorised so that as between the donee and a third party the donor would be bound by a transaction? and (b) as between the donor and the donee, is the donee accountable for what he or she has done? Gzell J held that Dr Hughes was in breach of his fiduciary duty under the power of attorney. Although Gzell J did not need to determine which of the decisions in Spina v Conran Associates Pty Ltd; Spina v M & V Endurance Pty Ltd and Spina v Permanent Custodians Ltd he should follow he expressed a preference for the approach of Austin J. 29I have already mentioned that Hammerschlag J made it clear that he was not expressing a view that the son in Spina v Permanent Custodians Ltd was not liable for the breach of a fiduciary duty. 30As in Hughes v Hughes (and unlike Spina v Conran Associates Pty Ltd; Spina v M & V Endurance Pty Ltd, Spina v Permanent Custodians Ltd and Sweeney v Howard) the question here is not whether the use of the power of attorney was ineffective as against a third party but, rather, whether the agent breached his fiduciary duty. In my view, for an attorney to utilise the power of attorney to bestow a benefit on himself (and his wife), and to thereby deprive his principal of her interest, or most of her interest, in the Property owned by her in favour of himself and his wife is antithetical to the purpose of the power of attorney, and could only be permitted as between donor and donee where the power to use the property of the donor for such purpose is expressly and unambiguously bestowed. 31There is a difference between a donee selling or using property of the donor for the purpose of the donor and the donee obtaining a benefit and the donee selling or using the property solely in the interest of the donee, and whilst Tobin v Broadbent was not concerned with a power of attorney containing an expanded power of the kind utilised here, and was not concerned with a claim against the donee, the Court's approach offers support for the view that, as between the donor and donee, authority to use the power of attorney for purposes solely for the benefit of the donee would have to be unambiguously stated to relieve the donee of a fiduciary duty to his principal: see Latham CJ at p 390, Starke J at 397-8, Dixon J at p 401 and McTiernan J at p 407. Further support is obtained from the decision of Grefeld v Grefeld [2012] FAMCAFC 71; (2012) FLC ¶93-508 per Finn, Strickland and Austin JJ [67] - [68]. 32In this case the borrowing, on Gavin's own admission, was designed to give him access to funds of his mother, to which he claimed, without justification, he was entitled. 33Initially Mr O'Loughlin contended that the $438K was received in trust for the benefit of the Testatrix, and Gavin and Louise in the shares 9990:5:5 and that Gavin in breach of his obligations under the power of attorney had imprudently lost the asset by investing in a high risk scheme. The only checking which Gavin said he did was to conduct a search of ASIC which he said established that the company had been in existence for a number of years meaning, he contends, that it was "reputable". The monies which were lent were lent to Mr Hill, not the companies, and the fact that the companies referred to on AMI's letter head had been in existence for several years did not establish that they were reputable. It certainly did not establish that Mr Hill was reputable or reliable and the interest rate 24% per annum was a very high rate of interest reflecting at the least, a high level of risk for the loan. Mr O'Loughlin also puts his claim on the basis that Gavin and Louise had misappropriated the funds which they had obtained and should refund the entire $500K or at least the $320K, the $44, 850 and $51, 572.08 (i.e. a total of $416, 422.08). 34I have no doubt that the investment of $320K was imprudent and involved a failure to exercise skill and care that an ordinary man of business would exercise in investing money: see Heydon, J D and Leeming, M J, Jacobs' Law of Trusts in Australia, 7th ed, 2006, Lexis Nexis Butterworths at 17.18. However, given that Gavin and Louise have taken money that did not belong to them and Gavin, by entering into the mortgage, has breached his fiduciary duty owed to his mother, I do not think it is necessary to approach the matter in that way. 35In my view the appropriate remedy is for Gavin and Louise to be required to repay to the Estate the amount which the Estate lost by reason of the mortgage granted by Perpetual to, in reality, Gavin and Louise. This is a remedy to compensate the Estate for the loss of the Testatrix's interest in the Property due to the mortgage which lead to the Estate's loss of the Property, the obligation of a defaulting fiduciary being essentially one of effecting a restitution: see Commonwealth Bank of Australia v Smith (1991) 42 FCR 390; (1991) 102 ALR 453; (1991) ATPR (Digest) 46 - 077 at pp 479 - 480 per Davies, Sheppard and Gummow JJ and see McKenzie v McDonald [1927] VLR 134 at pp 146 - 147 per Dixon AJ. 36In my view, Gavin and Louise should be required to repay all of the money that had to be paid out of the proceeds of sale of the Property obtained from Perpetual arranged by Gavin less, however, any amount which was actually applied to the Testatrix's benefit or received by the Estate. There is no doubt that $438K was paid by cheque to Gavin, Louise and the Testatrix but there is no coherent detail of how that was dealt with by Gavin, although he admits that he intended to use the money to buy a property in Queensland to which end he was persuaded by the real estate agent to lodge on a short term loan the amount of $320K with AMI. 37There is evidence of an amount of $164, 131.72 (see Exhibit A3, p 605) having been paid out on a pre-existing loan in the name of Gavin, Louise and the Testatrix: see Exhibit A3, p 605. That loan was not the subject of challenge in these proceedings. I infer that the difference between the $438, 591.05 and the $320K, i.e. $118, 591.05, was utilised to reduce the pre-existing loan in the three names and it follows that the amount should be treated as a benefit recovered by the Testatrix. Another benefit obtained by the Estate was the sum of $52, 288.69 (see Exhibit A1, p 162) which the bank refunded out of the net proceeds of the sale of the Property (see Exhibit A1, p 162) and credit has to be given for that amount. The sum of $118, 591.05 when added to $52, 288.69 produces a figure of $170, 879.74. When that amount that is deducted from $653, 336.58 (being the amount owing to Perpetual on the loan) the amount produced is $482, 456.84 for which Gavin and Louise are liable to reimburse the Estate.