Smilevska v Smilevska

Supreme Court of NSW|2015-11-12|Before: Slattery J

Judgment

The first defendant in these proceedings gave evidence at a nursing home in Figtree, just south of Wollongong, on the morning of the second day of the hearing. Upon hearing her evidence, counsel for the plaintiff contended that the first defendant was "a person under legal incapacity" within the meaning of Civil Procedure Act 2005, s 3 and Uniform Civil Procedure Rules ("UCPR") Part 7, Division 4.
In doing so, counsel for the plaintiff reactivated a general submission he had made earlier in the proceedings: that the first defendant's capacity to conduct the proceedings was doubtful. Counsel for the first defendant contended that his client was of sufficient capacity to give instructions to conduct proceedings. But in the alternative, he contended that if the first defendant was not capable of giving instructions directly, nevertheless sufficient instructions could be obtained from her through her appointed attorneys (her daughter and son-in-law), who it was claimed had the power to conduct the proceedings under an existing enduring Power of Attorney created pursuant to the Powers of Attorney Act 2003, and without the need for the appointment of a tutor.
In these reasons, the Court concludes that the first defendant is "a person under legal incapacity" and requires a tutor to be appointed for her in the proceedings, notwithstanding that she can otherwise act through her attorney. Directions are made to facilitate the appointment of a tutor.

The Principal Issues in the Proceedings

The issues in the proceedings may be shortly stated. The plaintiff, Temjana Smilevska seeks a declaration that the first defendant, her 95-year-old mother-in-law Blaguna Smilevska, holds a Port Kembla, residential property ("the Property") on constructive trust for Temjana and her husband, Blagoja Smilevski, as tenants in common in equal shares. In the alternative she seeks an order that Blaguna pay her equitable compensation or damages.
As all the parties to these proceedings are from the one family, the Court will, for convenience and without intending any disrespect to any person, refer to them by their first names. All the parties and witnesses on the proceedings are Macedonian and required interpreters when giving evidence. In Macedonian tradition a common surname stem is adapted differently for women and men, so Smilevska and Smilevski are respectively the feminine and masculine versions of the same surname.
Temjana puts her claim against Blaguna on three bases: first, in contract; secondly, as a claim in promissory estoppel; and thirdly, in terms of a constructive trust that is said to arise from the parties' common intentions.
As to her contract claim, Temjana contends that in about April 1970, when she emigrated to Australia from Macedonia to marry Blagoja, she and Blagoja moved into the household of her parents-in-law, Ivan and Blaguna, at the Property. She alleges she and Blagoja agreed at that time to make contributions to household expenses and to the welfare of Ivan and Blaguna. She further alleges that in exchange for these promises Ivan and Blaguna undertook that upon the death of the survivor of the couple, that survivor would leave the Property to Temjana and Blagoja. In her case Temjana says that she has upheld that bargain but contends that in August 2014 Blaguna advised her that she intended to sell the Property and requested Temjana to vacate it, thereby breaching this contract. Temjana has since then sought to protect her claimed interest in the Property by caveat, which has been extended until further order by the Court.
As to the promissory estoppel claim, Temjana relies on essentially the same facts, saying in addition that she performed household duties, paid for household bills, borrowed and mostly repaid a $40,000 loan to pay for renovations to the Property, and nursed Ivan during the ill health of his later years, all in reliance on Blaguna's promises or alternatively on an expectation knowingly created by Blaguna in her, that she would one day inherit the house or enjoy the benefit of Blagoja inheriting it. Temjana contends that it would be unconscionable for Blaguna now to renege on that alleged promise, or expectation so created.
As to the constructive trust claim, Temjana contends that she, Blagoja and Blaguna together contributed to a joint enterprise (the maintenance of the Property) which has now failed not due to the fault of any party, and in the circumstances it would be unconscionable for Blaguna to retain the benefit of her contributions to that failed joint venture. Temjana alleges that a constructive trust thereby arises for Temjana's benefit.
Blaguna's lawyers meet these various claims in a number of ways. First they deny that Blaguna made any such promises or that she created any such expectations as it is alleged were made in support of Temjana's contract and proprietary estoppel claims. Next, they argue that Temjana relies upon an oral contract for the disposition of an interest in land, which is not evidenced in writing in conformity with Conveyancing Act 1919, s 54A. Temjana in turn counters this with a contention that she has partly performed the contract that she alleges. Blaguna's lawyers also contend that even if an equitable claim were available against Ivan as a result of the making of these promises that the promises do not bind Blaguna's conscience and that upon the transmission of the property to her after Ivan's death she is protected from such claims by Real Property Act, s 42 even if she had notice of them before then. Finally, in answer to the constructive trust claim, they allege that no joint enterprise of the kind contended for existed.

Some Further Background to the Proceedings

Temjana was born in what was then the State of Macedonia in the former Republic of Yugoslavia. In around 1969, at the age of 21, she first met Blaguna Smilevska and her son Blagoja Smilevski. Around three weeks after they met, their older relatives made arrangements for Temjana and Blagoja to marry and to migrate to Australia from Macedonia and then to live with Blagoja's family in this country. Blagoja arrived in Australia with Blaguna and his sister, Gorica Saraforoska in around 1969. Temjana arrived shortly afterwards on 13 April 1970. She immediately began to live in the home of the Smilevski family, the Property at Port Kembla that Ivan had purchased in January 1969.
Temjana and Blagoja's marriage was registered in a civil ceremony at the Wollongong Court House on 11 June 1971. But their marriage was not happy. By about 2005 Temjana and Blagoja ceased to live as husband and wife. On 5 August 2014 a notice was served on Temjana demanding that she vacate the Property in which she had lived as family for some 43 years. On 14 October 2014 Blagoja filed an application for divorce from Temjana.
Temjana worked full-time in Australia as a sewing machinist, until her retirement in 2002. She and Blagoja had two children together: Robert Smilevski, in June 1971, and Jaklina Smilevska, in December 1972. Temjana took a break of several years from her work to raise Robert and Jaklina. Temjana provides Jaklina with special care and support as she suffers from a disability. Blagoja worked in a variety of jobs over the years, until a back injury in 2000 prevented him working any longer.
Ivan died in June 1993 and title in the Property then passed to Blaguna under his will.
Temjana initially brought her claim against only Blaguna. She did not join her former husband Blagoja into the proceedings. At a pre-trial directions hearing on 23 October 2015 the Court raised the issue of UCPR, r 6.24, as it appeared that each of Temjana's claims, if successful, would also entitle Blagoja to an interest in the Property, along with Temjana. Before the trial commenced the Court ordered Temjana to file an amended statement of claim joining Blagoja as a second defendant. In response, Blagoja filed a submitting appearance. He gave evidence in Blaguna's case and attended the hearing but consistent with his submitting appearance, he took no active role in the proceedings as a party.

An issue arises about Blaguna's capacity

Counsel for the plaintiff applied to stay the proceedings on 10 November 2015. The Court was in the second day of a four-day hearing, for which the Court had specially travelled to the nursing home south of Wollongong in which the first defendant was a resident in order to hear her evidence. Even if the Court were then of the view that the first defendant was a person under legal incapacity, it was quite impractical to stay the proceedings at that time. Such a stay would have meant that the purpose of travelling to hear her evidence would not be achieved. It was likely that the first defendant's evidence would have to be taken at some time. The subject matter of the proceedings, the Property, is only of a relatively modest value, so the Court proceeded on the basis that risking expenditure upon a second trip to Figtree would not be a justifiable use of the parties' resources.
The Court declined to deal with the application immediately. To the extent that it might have been necessary, in circumstances where the first defendant's legal capacity was at least in doubt, the Court made temporary orders under Civil Procedure Act s 63, treating the absence of a tutor as an irregularity and waiving the requirement for a tutor, until such time as the Court could conveniently deal with the capacity issue raised.
The Court returned to Sydney and sat in the Queen's Square Law Courts Building complex that same afternoon. As the Court was then attempting (unsuccessfully as it turned out) to finish the case within three rather than four days, the Court decided that rather than holding argument mid-hearing on the question of whether the first defendant needed a tutor, the question could be dealt with in the course of final submissions. In the events that occurred, final submissions, including argument about whether a tutor was required, took place on the fourth day of the hearing.
The Court indicated to the parties in the course of those final submissions that the Court would give its judgment on the issue of whether a tutor was required for the first defendant as soon as possible and before its judgment on the substantive issues in the proceedings.
The plaintiff's application raises the following questions for decision. 1. Is the first defendant, a person under legal incapacity, or is her capacity to give instructions doubtful? 2. If the first defendant is either under a legal incapacity, or if her capacity to give instructions is doubtful, must the Court appoint a tutor for her, or may the Court accept the giving of instructions to her lawyers through her attorney? 3. If the tutor is required for the first defendant, who should now be appointed?
The Court will now deal with each of these in turn.

(1) Is Blaguna a person under legal incapacity?

Blaguna's oral evidence was very difficult to follow. The sentiments that she was able to express through her oral evidence were, at least in general terms, consistent with the very short affidavit that was filed on her behalf and signed by her.
Both in evidence in chief and cross examination she was straining to comprehend what she was being asked and she had even greater difficulty in articulating intelligible answers back to the Court. She could follow some simply expressed questions, spoken slowly to her. She expressed views of strong dislike about the plaintiff. She seemed to think the plaintiff was plotting against her.
Blaguna was quite deaf in her right ear and only had limited hearing in her left ear. Her evidence proceeded with the interpreter sitting next to her and speaking directly into her left ear to try and make himself understood to her. He did manage to make her comprehend what he was saying and she responded in ways that were at times very hard to interpret but to the extent they could be interpreted seemed to be a kind of response to the questions asked.
But the transcript of the morning of 10 November 2015 is accurate. It does show that quite often the first defendant was incapable of following the questions put to her. She occasionally gave startling and inappropriate responses. The Court was able to be satisfied on the day that the defendant could take an oath under Evidence Act 1995, s 20. An oath was ultimately administered.
Whether a person is "under legal incapacity" is defined within Civil Procedure Act, s 3 to mean "any person who is under a legal incapacity in relation to the conduct of legal proceedings" and includes a number of special categories not applicable in the present case. Blaguna is certainly not "an incommunicate person" as she is able to receive communications and to express her will with respect to her property and affairs in a general sense. She was able to make clear that for example she did not wish for Temjana to have the Property.
The relevant principles may be shortly stated. Whether a party to proceedings is under a legal incapacity and requires a tutor depends upon whether he or she is capable of understanding, with the assistance of such proper explanation from legal advisors and experts in other disciplines as the case may require, the issues on which consent or decision is likely to be necessary in the course of the proceedings: Masterman-Lister v Brutton & Co [2003] All ER 162 per Chadwick LJ, and Stokes v McCourt [2014] NSWSC 61 at [31]. Whether a person is under a legal incapacity is always a task, and time, specific matter and it is dependent upon whether a person has the ability to understand and evaluate the particular task in question at the particular time: Guthrie v Spence [2009] NSWCA 369; 78 NSWLR 225 at [174] - [175].
The first defendant is a "person under legal incapacity". She could not in my view comprehend and evaluate the evidence against her in these proceedings. Nor would she be in a position to do so, even with extensive information from her legal advisers. She cannot really understand the issues on which the decision making as a defendant in the proceedings is likely to be needed. She has probably no comprehension of the procedural steps involved in these proceedings and only the most nebulous concept of the substantive issues. Her ideas are no better formed about the litigation than that she knows her daughter-in-law is "trying to take the Property away" from her. She falls well short of being able to fulfil the matters the subject of Kyrou J's discussion in Slaveski v Victoria [2009] VSC 596: I am confident she does not understand the factual framework for the claims, what is or is not relevant to them, nor the basic rules for conducting the case and she would not be able to assess a settlement proposal, if one were offered. I am conscious this conclusion is drawn without expert medical evidence. However the Court had the benefit of observing Blaguna for almost two hours whilst she was interacting with the Court, the lawyers and people around her in the Figtree nursing home. I have no difficulty in drawing this conclusion even without the benefit of medical evidence.

(2) If Blaguna is incapable may she give instructions through her attorney?

UCPR, r 7.17 requires that a plaintiff in proceedings against a defendant "who is a person under legal incapacity" may take no further steps in the proceedings unless a tutor has entered an appearance on behalf of the defendant. As earlier explained Temjana has been absolved from this obligation from the period of time necessary for this question conveniently to be argued. But Blaguna as a person under legal incapacity is not entitled to carry on proceedings except by a tutor: UCPR, r 7.14.
But Mr Parker SC and the solicitors for Blaguna submit that even if she is incapable herself, she can nevertheless give instructions for the conduct of the proceedings through her attorneys. They submit that it has long been accepted that a power of attorney may include a power to conduct litigation in the name and on behalf of the donor: B. Collier and S. Lindsay, Powers of Attorney in Australia and New Zealand (1st ed. 1992, Federation Press) at 40 - 41, and 55 - 56. The same principle is recognised in UCPR, s 7.1(1A) which provides as follows: "7.1 By whom proceedings may be commenced and carried on (1) A natural person may commence and carry on proceedings in any court, either by a solicitor acting on his or her behalf or in person. (1A) Despite subrule (1), but subject to subrule (5), the court may order that proceedings commenced by a natural person acting on behalf of another person pursuant to a power of attorney be carried on, on behalf of that other person, by a solicitor.
Blaguna's legal representatives submit that if a principal who had given an enduring power of attorney under the Powers of Attorney Act could not have litigation conducted on their behalf, then an exception to that effect would need to have been provided for in UCPR, r 7.1(1A).
But authority is against this argument. In Steinecke (bht Robert John Gardos) v Peter Martin Wayne, Diane Lindner, Beate Stricker, Gerhard Levy; Re Estate of Henry Herbert Stricker & Karl Heinz Lindner [2011] NSWSC 428 ("Steinecke") Brereton J considered how UCPR, rr 7.13 and 7.14 stood in relation to the operation of Powers of Attorney Act 2003, s 21 (the provision which validates acts within the scope of the power conferred by an enduring power of attorney, which acts are beyond the understanding of the principal through mental incapacity and which makes those acts of the attorney as valid as they would have been if the principal had understood the nature of the act at the time). The first six paragraphs of his Honour's judgment in Steinecke deal discretely with this issue in the following terms: "[1] The plaintiff Elga Steinecke is shown by the evidence to be incapable of managing her affairs and thus to be a person under legal incapacity within the definition provided by (NSW) Uniform Civil Procedure Rules (2005) r 7.13. In those circumstances, UCPR r 7.14 has the consequence that she is not able to commence or carry on the current proceedings except by her tutor. These proceedings were purportedly instituted on her behalf by Ruth Gardos, Nicholas Gardos and Robert John Gardos, who were appointed by her under an enduring general power of attorney dated 24 January 2010. For the plaintiff, it was submitted that either: (1) in the circumstances it was not necessary for a tutor to be appointed, or (2) the Court should exercise its general dispensing power under the (NSW) Civil Procedure Act (2005), s 14, to dispense with r 7.14. [2] In paragraph 7.14.5 of the commentary in Ritchie's Uniform Civil Procedure New South Wales , it is said that the ordinary rule is that an incapable person cannot conduct proceedings except by a tutor or guardian [ Rudeforth v Crawford [1926] VLR 303] and that this ordinary rule applies unless a contrary statutory or procedural rule otherwise provides [ Myers v Nominal Defendant [1966] 1 NSWR 659]. The headnote to Myers is to the effect that an infant cannot make "any application to a court without the intervention of a next friend, unless there are express procedural rules enabling them to do so". But closer examination of the judgment has not revealed the existence of or reference to the exception mentioned in the headnote, although it might be implicit in the discussion by Isaacs J of the case of McNamara v Bodkin (1960) 1 FLR 351 (at page 667 of Myers ). [3] What Myers does make abundantly clear is that the requirement for a tutor issue is more than a mere procedural matter, but a requirement of substantive law imposed because a child or an incapable person is not capable of binding themselves by the institution of proceedings. This is particularly important, to ensure not only that the proceedings and the conduct of litigation is under the conduct of a responsible person, but also to ensure that the parties to the proceedings are bound by the outcome, and to secure a successful defendant's costs. Because of the importance of that rule and its substantive nature, I do not accept that it would be appropriate to dispense with it. [4] As to whether there is in any event some contrary statutory rule, it might be suggested that (NSW) Powers of Attorney Act 2003, s 21, is such a rule. That section is to the effect that an act done by an attorney within the scope of a power conferred by an enduring power of attorney, which is of such a nature that it is beyond the understanding of the principal as a result of mental incapacity at the time of the act, is as effective as it would have been had the principal understood the nature of the act at that time. [5] While I accept that it is arguable that that provision is inconsistent with UCPR r 7.14, closer reflection persuades me that it was not intended to override well-established rules regarding the conduct of litigation by and on behalf of incapable persons. In this respect, it is significant to observe that even where expressly authorised to do so under a power of attorney, an attorney under power is not entitled to commence proceedings in his or her own name as attorney for the principal; such proceedings, though they may be commenced in a sense by the attorney, must be commenced in the name of the principal [ Campbell v Pye (1954) 54 SRNSW 308; Spellson v George and others (1987) 11 NSWLR 300, 313; Urquhart and Another v Lanham and Others (2002) 11 BPR 20,765, 16]. [6] The principle that appears to underlie this rule is that the attorney has no cause of action, only the principal having a cause of action, and that it must therefore be the principal, and not the attorney, who brings the proceedings on that cause of action. Authority given to an attorney to sue on behalf of the principal means authority to sign the initiating process on behalf of the principal and authority to instruct solicitors to bring proceedings and sign the initiating process without reference to the principal. It is not an authority to sue in the name of the attorney. Thus, the addition of the title of proceedings of the matter "by the plaintiff's attorneys, Ruth Gardos, Nicholas Gardos and Robert John Gardos", achieves nothing in this case. The plaintiff is, and remains, Elga Steinecke. She cannot sue, being an incapable person, without a tutor. It is for that reason that I have insisted on the appointment of a tutor and have declined to dispense with r 7.14. Orders bringing about that result have already been made this morning."
Mr Parker SC argues that Brereton J did not consider the argument based on UCPR, r 7.1(1A) that is now being propounded by the lawyers for Blaguna. But in substance in Steinecke Brereton J did consider the interplay of the Powers of Attorney Act with UCPR, Part 7, Division 4. And with respect I agree with his Honour's reasoning.
And there are other reasons to reach the conclusion that Brereton J did in Steinecke. First, although the Court has general powers under Powers of Attorney Act, s 36 to set aside powers of attorney and require attorneys to give an account of the conduct of the principal's affairs, such a proceeding is hardly an apt substitute for the rapid and flexible power of intervention conferred on the Court to dismiss and appoint tutors under UCPR, r 7.15. Secondly, Civil Procedure Act, s 80 itself creates a special power of advice and supervision between the tutor of a person under legal incapacity and the Supreme Court, which applies outside the review structure of the Powers of Attorney Act and which enables the Supreme Court to give directions with respect to the tutor's conduct of the proceedings. Civil Procedure Act, s 80 provides as follows: "80 Directions to tutor of person under legal incapacity On the application of the tutor for a person under legal incapacity, the Supreme Court may give directions with respect to the tutor's conduct of proceedings, whether before the Supreme Court or any other court, on behalf of that person.
There is no issue in this case that the relevant power of attorney given to Mitre and Gorica would otherwise be adequate to conduct this litigation on behalf of Blaguna. But the Court concludes that despite that power of attorney Blaguna requires a tutor.

(3) Who should be appointed?

Blaguna appointed her daughter Gorica Saraforska and her son-in-law Mitre Sarafoski as her attorneys under an enduring power of attorney dated 5 November 2010, which it is not disputed for the purposes of this application is a valid enduring power of attorney.
Gorica Saraforska and Mitre Sarafoski have been managing Blaguna's affairs pursuant to that power of attorney since 2011. They both consent to being appointed as tutors, either jointly or separately should the Court conclude, as it has, that a tutor is required.
But Temjana submits that Mitre and Gorica should not appointed as tutors. Citing Hallen J's decision in Rappard v Williams [2013] NSWSC 1279 at [62] - [81] Temjana submits that a tutor should not be appointed who has an interest adverse to the person under legal incapacity and who is relevantly connected with any other party to the proceedings, as tutors are not appointed to pursue a personal interest in the proceedings: see R v Registrar of Melbourne County Court; Ex parte Farrington [1927] VLR 406; (1927) 33 ALR 270 and see also UCPR, r 7.15(2)(c).
But in my view neither Mitre nor Gorica are persons who have "an interest in the proceedings adverse to the interests of the person under legal incapacity": UCPR, r 7.15(2)(c). They do not have a claim in the proceedings against Blaguna with respect to the Property. Their interests are generally aligned with Blaguna's in the proceedings. It is not to the point that they may wish ultimately to benefit from Blaguna's estate in the future. But that does not give them interest in these proceedings adverse to Blaguna.
But then Temjana says that Mitre and Gorica are hostile to her and therefore inappropriate appointees as tutors. But the mere fact that Gorica and Mitre may have a disposition to conduct the proceedings adversely to Temjana does not mean that they should not be appointed as tutor, especially where they are relatives of the person under legal incapacity: see Douglas v Douglas [2004] NSWSC 279 and Saravinovska v Saravinovski (No. 5) [2015] NSWSC 128 ("Saravinovski") at [68]. There are cases in which, as Kunc J recognised in Saravinovski, in which the enmity between the parties can be so deep that a person should not be appointed as tutor. But it is not presently obvious on the contest before me that Mitre or Gorica fall into this category.
A short opportunity should now be afforded to the parties to see if Temjana wishes by the filing of any further evidence, and at her own risk as to costs, to contest the appointment of Mitre or Gorica as tutors. And Mitre and Gorica may wish to consider whether or not they both need to be tutors in the proceedings. Mitre and Gorica will by their solicitor need to comply with UCPR, r 7.16. Both parties should indicate their positions to the Court on these matters by 4pm on 4 December 2015. The Court will then proceed to an appointment of a tutor in chambers if satisfied of compliance with UCPR, r 7.16 and if there is no opposition from Temjana.

Conclusion and Orders

In the result therefore the Court has found that the first defendant, Blaguna is a person under legal incapacity within Civil Procedure Act 2005 and UCPR, r 7.13. As such a person, she may not carry on proceedings though her duly-appointed attorney under an enduring power of attorney. The proceedings should now be stayed until a tutor is appointed. But that should perhaps be able to occur over the next few days and orders made in Chambers without a further court appearance being required by any party, unless irreconcilable differences exist about who should now be the first defendant's tutor.
The Court therefore orders: 1. These proceedings are stayed until a tutor is appointed for the first defendant in accordance with Uniform Civil Procedure Rules Part 7 Division 4. 2. Direct that the parties indicate to the Court by 4.00pm on 4 December 2015 whether there is any continuing opposition to the appointment of Mitre Sarafoski and Gorica Sarafoska as the first defendant's tutors in the light of these reasons or whether only one of them or another tutor should be appointed for the first defendant. 3. Grant liberty to apply.

Amendments 01 December 2015 - Coversheet- typographical errors Paragraphs: 2, 4, 6, 8, 9, 11, 16, 17, 25, 30, 31, 33, 35, 39, 41, 43 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 December 2015

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