Winefield v Clarke

PARTIES : Joyce Winefield by her Tutor the Protectrive Commissioner of New South Wales - Plaintiff Kim Louise Clarke - Defendant

COUNSEL : Mr A J McInerney - Plaintiff Mr P Folino-Gallo - Defendant

SOLICITORS : Lee & Lyons - Plaintiff Cutlers The Law Firm - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1162/07 JOYCE WINEFIELD BY HER TUTOR THE PROTECTIVE COMMISSIONER OF NEW SOUTH WALES v KIM LOUISE CLARKE JUDGMENT 1 The plaintiff and the defendant are mother and daughter. The plaintiff sues the defendant with a view to recovering an interest in real property transferred by the plaintiff to the defendant in June 2004. The property concerned is a residential property at Bateau Bay of which the plaintiff was formerly the sole registered proprietor. By a transfer dated 31 May 2004 (which is admitted not to be the date of its execution), the plaintiff transferred the property to herself and the defendant as joint tenants. 2 The plaintiff, born on 31 January 1921, is 87 years old. She is a person under legal incapacity within the meaning of s 74(1) of the Civil Procedure Act 2005. She sues by her tutor the Protective Commissioner of New South Wales, by whom her estate is managed pursuant to an order made by the Guardianship Tribunal on 29 July 2004 pursuant to the Protected Estates Act 1993. 3 The plaintiff had four children: Anthony Walker, Peter Walker and Gail Tyler (now deceased) to her first husband; and the defendant, Kim Louise Clarke, the only child of her second marriage. 4 The plaintiff and her second husband acquired the Bateau Bay property in 1971. The defendant lived there until 1981 when she left shortly before her marriage. Upon the dissolution of her marriage in 1999, the defendant returned to the family home and lived there with the plaintiff thereafter, except for a period of three months in 2004 when she was travelling in the United States. During the defendant's absence, the plaintiff's daughter Gail called regularly at the plaintiff's house to assist her mother. 5 In April 2004 when the defendant was in the United States, one or more of the plaintiff's other children arranged the plaintiff's admission to Ashmore Lodge, an aged care facility in Queensland. On her return from the United States, the defendant found that the plaintiff had been taken to Ashmore Lodge and the Bateau Bay property had been listed for sale. 6 On 20 April 2004, the defendant went to Queensland and brought the plaintiff back to the Bateau Bay home. Thereafter, they resumed their former lifestyle, with the defendant being the plaintiff's carer and attending to her daily needs, ensuring that she took her medication, helping her around the house, taking her shopping and on other outings and generally being attentive to her well-being. 7 The day after the return to Bateau Bay (that is, on 21 April 2004), the plaintiff and defendant attended at the office of Mr Steer, a local solicitor. They went there in the morning, saw Mr Steer, left the office and went back in the afternoon. During the afternoon visit, the plaintiff executed a new will under which the defendant was the principal beneficiary, a power of attorney in favour of the defendant and an appointment of enduring guardian, also in favour of the defendant. 8 Mr Steer recorded the conference in a typed file note which reads in part as follows: "I then conferred with Mrs Winefield in the presence of my Secretary [Sandra Heenan]. I first asked her if she knew what day it was. She answered "Tuesday" (It was Wednesday).

I then asked her if she remembered being in my office before lunch given that it was now 3.30pm. She did not recall being in my office before lunch". 9 Mr Steer also contacted the plaintiff's general practitioner, Dr Kalra, by telephone on 21 April 2004. The file note just mentioned says: "I specifically sought his opinion as to Mrs Winefield's capacity to make decisions and understand matters. He indicated that he hadn't seen her for some four months, and before he could give an opinion, he would need to see her again . … He doubts mental capacity. Family dispute - Protective Commissioner. Last seen 4 months ago. Believes she has mental problems - will need to see her again to reassess." 10 As the file note makes clear, Mr Steer spent some time with the plaintiff on 21 April 2004 in the presence of his secretary, Ms Heenan, but in the absence of the defendant. He asked the plaintiff if she understood what a will was and what the plaintiff wanted to happen to her property. When asked the question, "What do you want to happen with your will?" the plaintiff replied, "I want the house to go to Kim"; and when Mr Steer indicated to her that he was hesitant about her signing the new will, she stated, "I want to make sure that Kim gets my house". Mr Steer asked why and she replied, "Because she lives with me and cares for me". 11 The defendant deposes that the following conversation also took place on 21 April 2004: "Plaintiff: What's going to happen if they try to sell the house again? Defendant: Is there anything we can do to prevent this from happening again? Mr Steer: You may wish to consider organising for your mother to transfer a half share of the Bateau Bay property to you." 12 Mr Steer's file note does not record this part of the conversation but there is no reason to doubt that it occurred. Nothing was done about the house on 21 April 2004.

13 The defendant deposes that, on 23 April 2004, the plaintiff said to her: "I am worried that they are going to take me to the nursing home again and sell the house. I want to stay here in the house with you. Don't let them take me to the nursing home Kim. What can we do to try to stop them from selling the house again?" 14 The defendant also says that on that day she called Ms Heenan, Mr Steer's secretary, and said words to the effect: "Mum has asked me to call. We have talked about how we can stop Mum's other children from selling the house. Mum has decided to transfer a half share of the house to me." 15 On 3 May 2004 the plaintiff and defendant again went to Mr Steer's office. It is the defendant's evidence that on that day the following conversation took place: "Defendant: Mum is worried about Peter and Tony trying to sell the house again. She wants to know how we can insure against that happening again.

Mr Steer: You could have the property transferred to yourself and your mother as joint tenants.

Plaintiff: Would that stop them from being able to sell the property?

Mr Steer: It means Kim would have to sign the documents before the property can be sold. [Then Mr Steer to the defendant]

Mr Steer: I'll just see your mother by herself and explain what these transactions mean." 16 After that conversation, the defendant left the plaintiff in the office with Mr Steer. Mr Steer gave affidavit evidence as follows: " I recall asking Mrs Winefield to accompany me to my office alone on 21 April 2004 and 3 May 2004, so that I could speak with her alone, and in the absence of her daughter, Kim Louise Clarke, so that I could independently assess for myself her capacity to make a Will, Power of Attorney and Enduring Guardianship documents, and secondly to avoid any undue influence by her daughter Kim Louise Clarke…" 17 Mr Steer does not actually say here what he said to the plaintiff. No insight is given into the advice he gave her on either day. In particular, nothing is said about advice he gave her regarding transfer of the property by the plaintiff to the plaintiff and the defendant as joint tenants, a matter apparently discussed face-to-face at Mr Steer's office on 3 May 2004 after being raised initially at the meeting of 21 April 2004 and later in the telephone conversation that the defendant had with Ms Heenan on 23 April 2004. Mr Steer's handwritten file note of 3 May 2004 adds very little. It reads: " Transfer ½ property Mum to Kim as joint tenants"

18 Counsel for the plaintiff submitted that Mr Steer's use of the words "Mum to Kim" may warrant an inference that it was the defendant who spoke to Mr Steer and gave the instructions recorded in his handwritten note. It may be accepted that the defendant referred to the plaintiff as "Mum". When Mr Steer wrote "Mum", he may have been writing something that the defendant said. But it is also possible that Mr Steer, aware of the relationship, used the word "Mum" to refer to the plaintiff even though nothing had been said by the defendant. I do not think that the suggested inference can safely be drawn. 19 After the visit to Mr Steer's office on 3 May 2004, the defendant took a number of steps. On 10 May 2004, she had the property valued by Robertson and Robertson valuers. The property was valued at $420,000. The defendant also paid about $6,500 to Westpac to obtain discharges of two mortgages over the property. The discharges of mortgage and the certificate of title must then have been given to Mr Steer since he sent them to a law stationer in Sydney on 9 June 2004 with instructions to attend to registration of the discharges (registration occurred on 23 June 2004). 20 Also on 9 June 2004, Mr Steer wrote to the plaintiff informing her that the documents had been sent to Sydney for lodgement and saying: "We will advise you as soon as we have received the Title back from our agents, following which we will make arrangements for you and Kim to execute the relevant transfer". 21 On 25 June 2004, Ms Heenan made the following note of a conversation with the defendant: "Advised her we now have CT from LPI - mortgages have been discharged. Have prepared Transfer for her mother's signature. Kim advised she will bring her mother in this afternoon to sign the Transfer. I advised her once Transfer is signed, we will arrange the stamping of the valuation and transfer, and will then send CT, Transfer, and Valuation to Kanes to have title registered in both names." 22 The transfer between the plaintiff as transferor and the plaintiff and the defendant as transferees bears the date 31 May 2004. But it is admitted by the defendant on the pleadings that the transfer was actually signed on or after 25 June 2005. This is consistent with Mr Steer's letter of 9 June 2004, Ms Heenan's file note of 25 June 2004 and billing records kept by Ms Heenan: " 25/06/04 SJH Prepare Transfer 25/06/04 SJH letter to client 30/06/04 SJH Peruse stamped Transfer 30/06/04 SJH Photocopy CT and Transfer 30/06/04 SJH Letter to Kanes 30/06/04 SJH Letter to client 30/06/04 SJH Prepare notice of sale 16/07/04 SJH Peruse Certificate of Title from Kanes 16/07/04 SJH letter to clients re title 16/07/04 SJH Photocopy Certificate of Title and prepare letter to clients 02/08/04 SJH Letter and account to client" 23 Ms Heenan's file note and billing record tend to suggest that the plaintiff and the defendant went to Mr Steer's office on 25 June 2004 and that the the transfer was executed on that day. There is, however, no evidence from any of the witnesses about a visit on that day or of what transpired during any visit that did occur.

24 On 30 June 2004, Mr Steer wrote to the plaintiff informing her that he had sent the certificate of title, transfer and notice of sale to the law stationers in Sydney for lodgement at the Land Titles Office. 25 It is necessary now to mention some features of the transfer. It records a consideration of $210,000 paid by the transferee (that is, the plaintiff and the defendant) to the transferor (the plaintiff alone). It is, however, common ground that, despite the express acknowledgement of receipt in the document, no money changed hands; nor was it intended that any payment be made. The defendant admits that she paid no consideration to her mother. The plaintiff's signature appears on the transfer in the space reserved for the signature of the transferor. It is witnessed by Ms Heenan. Neither the plaintiff nor the defendant signed as a transferee. Mr Steer accepted the transfer, describing himself as "Solicitor for the Transferee". The defendant paid the stamp duty of $5,840 attracted by the transfer. She also paid Mr Steer's costs and disbursements. The transaction was not evidenced by any document other than the transfer itself. 26 In attacking the transfer, the plaintiff advances her case on three alternative bases: undue influence, unconscionable conduct and the Contracts Review Act 1984. In the alternative, she claims payment of a debt payable on demand in the amount of $210,000 or an order under s 66G of the Conveyancing Act 1919 for the appointment of trustees for the sale of the property. It is convenient to deal first with the undue influence claim. 27 Presumed undue influence may arise from the existence of a relationship where one person has assumed a position of ascendancy or influence over the other person or the other person has reposed trust and confidence in the former, and the former has used that relationship to achieve a transaction in which the first person benefits. In the alternative, actual undue influence may be affirmatively proved based on the circumstances and evidence available. In the case of presumed undue influence the onus will rest on the ascendant or trusted party to rebut the presumption and prove that the transaction was voluntary and a result of a free exercise of will or a well understood decision-making process: Johnson v Buttress (1936) 56 CLR 113.

28 The plaintiff contends that this was a case of presumed undue influence in which the defendant had assumed a position of ascendancy or influence over the plaintiff or the plaintiff reposed trust and confidence in the defendant. Counsel for the plaintiff submitted that, by no later than 20 April 2004, the defendant occupied or assumed towards her mother a position naturally involving an ascendancy or influence over her, or a dependence or trust on her mother's part. The defendant admits on the pleadings that the plaintiff was reliant on her, and reposed trust and confidence in her. The defendant also deposed that after her return from Queensland the plaintiff's health had noticeably deteriorated, extra care and attention were needed and the plaintiff was afraid of being removed again from her home. 29 It is necessary, at this point, to review the evidence about the plaintiff's health and mental state. 30 The plaintiff had had various health problems before mid-2004. She had a total hip replacement in 1987 and a coronary bypass graft in 1993. In the months leading up to the relevant events, objective evidence confirms that the mental health and general capacity of the plaintiff were noticeably deteriorating. 31 On 2 December 2003 the plaintiff was admitted to Gosford Hospital and observations were made by staff that she was suffering from dementia. 32 On 15 December 2003, Dr Paul Caska, a general and laproscopic surgeon wrote to the plaintiff's general practitioner, Dr Kalra, and noted the plaintiff's need to have certain medical procedures carried out, and that those procedures "will at least minimise her time in hospital, as [other procedures] would be a real problem in her, especially given her dementia". 33 On 31 January 2004 a nephrologist wrote to the plaintiff's general practitioner, noting that "…since her discharge from hospital she has been well apart from her underlying dementia". 34 On 5 February 2004, the Aged Care Assessment Team ("ACAT") from Central Coast Health assessed the plaintiff and noted that she would "greatly benefit from involvement in a Dementia Care Group" and would require assistance with self care, communication, health care tasks, transport, activities involved in social and community participation, domestic assistance, meals and home maintenance. It was further noted that the plaintiff suffered from hypertension, kidney failure, bowel obstruction and an unstable gait. 35 On 27 February 2004, while the defendant was still in the United States, Dr Kalra wrote to the geriatrician at Wyong Shire Hospital and noted that: "patient has moderate dementia. Her geriatric mini-mental state examination ("MMSE") is 22/30. It was 28/30 last year". 36 The defendant gave evidence that the plaintiff's mental state was markedly worse after the return to Bateau Bay from Queensland. The defendant's evidence includes observations that her mother was disoriented, forgetful to the extent that she would forget what day it was and what she had been doing earlier in the same day 37 Mr Steer gave evidence that, when the plaintiff signed the will, power of attorney and guardian appointment on 21 April 2001, she was lucid. He recorded in his file note that he "was satisfied that she understood the nature of the three documents that she signed". Yet at the same time Mr Steer observed that the plaintiff was forgetful and could not recall what day it was or that she had met with him earlier in the same day (see paragraph [8] above). 38 On 24 April 2004, Dr Kalra wrote a letter concerning then pending Guardianship Tribunal proceedings in respect of the plaintiff. He said: "She suffers from cognitive impairment (moderate dementia)… There are occasions where she is unable to make decisions regarding ongoing medical therapy and domestic services. She would eventually require residential care of a permanent nature. I would support an appointment of a guardian for her…" 39 On 28 June 2004, Dr Minogue also wrote a letter for purposes of the Guardianship Tribunal proceedings in which he stated that the plaintiff needed assistance in most facets of her life and that she was not capable of making decisions alone. Dr Minogue started by observing that: "She presents now as an alert, cheerful elderly woman. On questioning however, she is disoriented in time, possibly place but seems to be oriented in person. She is well aware of her surroundings and in my opinion, she is well able to make decisions." 40 However he went on to say that: "…she is suffering from a moderate degree of Alzheimer's disease in addition to her physical condition…it is my opinion that she is very easily manipulated and is very susceptible to other people's ideas. It is my opinion that he capacity to manage her life decisions and financial affairs is indeed moderately impaired and I support the proposition that she has a Guardian and financial manager". 41 This letter was written just days after the earliest date on which the transfer could have been signed, being 25 June 2004. 42 It is quite clear on the evidence that, on 25 June 2004 and for at least six months beforehand, the plaintiff suffered from dementia and that her capacity to make decisions was appreciably impaired. There is abundant evidence - including from Mr Steer as to the answers given to his questions when she went back to the office on 21 April 2004 - that the plaintiff was disoriented and unaware of important matters of context. 43 The circumstances in the period April to June 2004 were such that the plaintiff's incapacity in these respects, combined with the gratitude that she bore towards the defendant for having brought her home from Queensland and restored her to her home environment, consolidated both dependence and trust on the plaintiff's part and ascendancy and influence on the part of the defendant. This situation was a natural one in the circumstances. An old lady with failing mental powers and in deteriorating health was cared for diligently and with affection by her daughter. The defendant is to be commended for the way in which she looked after her mother. But the fact that the defendant acted towards her mother as she did out of respect and affection does not change the legal conclusion that the defendant stood in a position of undue influence towards the plaintiff. 44 That being so, the law requires that the defendant positively justify the retention of the benefit conferred upon her by the plaintiff. To do this, she must, in the words of Dixon J in Johnson v Buttress (above), show that "the gift was the independent and well-understood act of a man [here, woman] in a position to exercise a free judgment based on information as full as that of the donee". 45 A matter to be addressed at one in that context is the legal advice that the plaintiff received concerning the transfer. 46 The plaintiff introduced into evidence without objection an opinion of Mr Peter Cornelius, a solicitor experienced in matters of property and conveyancing. Mr Cornelius addressed the steps that would be taken by a prudent solicitor retained to advise an intending donor of land to a family member. His evidence was accurately summarised in submissions of counsel for the plaintiff as follows: " The evidence of Mr Cornelius is to the effect that a solicitor acting for Mrs Winefield, in accordance with common practice would have: a) obtained clear instructions from Mrs Winefield as to her wishes and intentions; b) had reason to question whether or not Mrs Winefield had the capacity herself to give instructions or to fully understand the nature of the transaction and would be likely to consider as an appropriate follow up the obtaining of an opinion from Dr Kalra or other suitable health professional; c) would have sought instructions directly from Mrs Winefield and to confirm with Mrs Winefield that it was her wish to transfer the property to herself and Ms Clark and would discuss the arrangements to accompany that Transfer; d) included in the matters that would be discussed and confirmed with Mrs Winefield: i. Mrs Winefield's understanding of the transaction including the purposes as understood by Mrs Winefield for effecting the transaction, its providence and the viable alternative options; ii. the consideration to be paid by Ms Clark for the Transfer and how it would be determined; iii. whether or not consideration was to be paid at the time of the Transfer or otherwise; iv. if the consideration was not to be paid at the time of the Transfer whether it was to be secured or otherwise; v. documentation of the arrangements for payment of the consideration if it was not be paid at settlement, including payment of interest (if any), and the terms as to payment of the consideration, including the date or dates for repayment of principal and (if applicable) interest; vi. the details and documentation thereof of the co-ownership. e) explained to the client the difference between a joint tenancy and a tenancy in common and would then need to be satisfied that the client understood that in a joint tenancy the property would pass on the death of a joint owner to the other; f) have taken considerable care to understand the wishes of Mrs Winefield in relation to the payment of the consideration recorded in the Transfer, and would: i. if it was intended that no consideration was to be paid then the solicitor would not draw the Transfer showing the consideration of $210,000.00 but would simply refer to a consideration of $1.00. To express a consideration of $210,000.00, even if accompanied by an acknowledgement of payment would lead doubt as to whether there had been an agreement to make this payment which remained undischarged and would have the potential to give rise to later uncertainty and possible disputes; and ii. if instructions had been received and Mrs Winefield required payment in the sum of $210,000.00, then the solicitor, who had been previously retained to prepare a Will in terms of the Will dated 21 April 2004, would confirm that Mrs Winefield understood that the estate would be entitled to claim that sum from Ms Clark if it had not been paid prior to her death, and the solicitor would seek instructions as to whether Mrs Winefield would, in those circumstances, wish to include a release in her Will of any outstanding portion of the consideration. Further, the solicitor would explain that if the debt was left as a debt repayment on demand it would become statute barred after six years."

47 The matter of the transfer by the plaintiff to the plaintiff and the defendant together as joint tenants was the subject of conversations between Mr Steer and the plaintiff on both 21 April 2004 and 3 May 2004. Mr Steer's evidence about those conversations is referred to above: see paragraphs [11] and [15] above). In cross-examination, Mr Steer acknowledged that his affidavit sworn in July 2008 was flawed. He put this down to the lapse of time since the events in question. For example, in his affidavit Mr Steer said that:

"…my secretary Miss Sandra Heenan made an appointment for Mrs Winefield and her daughter Kim Louise Clark to confer with me on 3 May 2004 for the purposes of executing Power of Attorney and Enduring Guardianship documents". 48 It is clearly established that the signing of those documents occurred on 21 April 2004, not 3 May 2004 and Mr Steer accepted in cross-examination that the account in his affidavit is mistaken in this respect. He also accepted more generally that the contemporaneous documents are more reliable than his recollections. 49 The position really is that the court has no evidence of what passed between Mr Steer and the plaintiff in the course of any one-on-one meeting or meetings at which the proposed transfer of the house was discussed. There is accordingly no basis for a finding that Mr Steer canvassed with the plaintiff the several matters referred to in Mr Cornelius' description of the common practice of solicitors in cases of the relevant kind. The court cannot find that the plaintiff gave Mr Steer clear and unambiguous instructions as to what she wanted, that Mr Steer explained to the plaintiff the nature and effect of the transaction (including as to the effect of joint tenancy, as opposed to tenancy in common) or that Mr Steer formed a view that the plaintiff understood the nature and effect of the transaction. Nor is it possible to know what, if anything, was explained by Mr Steer and understood by the plaintiff on the matter of the consideration for the transfer: the instrument itself, as signed, provided for a consideration of $210,000, referring to receipt of that sum by the transferor (plaintiff) from the transferee (plaintiff and defendant together), whereas, in reality, no consideration was paid and none was intended. 50 In the circumstances, it is not possible to conclude that the transfer was the independent and well-understood act of a woman in a position to exercise a free judgment based on information as full as that of the donee. The freedom of the plaintiff's will, her understanding and her decision-making were affected by the dependence on her daughter that was, in part at least, the product of her mental deterioration. And the evidence provides no basis for concluding that the defendant has positively justified the retention of the benefit conferred on her. 51 The plaintiff is accordingly entitled to relief on the basis of undue influence and there is no need for the alternative bases of claim or alternative relief to be addressed. There are, however, two matters that seem to me to call for further submissions. 52 The first concerns the form of the relief that should be ordered in order to restore the property fully to the plaintiff. The relief the plaintiff seeks is, first, a declaration that the transfer was obtained by undue influence, second, an order that the transfer be set aside and, third, orders for delivery up of the certificate of title by the defendant to the Registrar General and for cancellation of that certificate of title. 53 A case has been made out for the grant of the declaratory relief but I am by no means certain that the balance of the relief will achieve the appropriate result. The effect of an order that the transfer be "set aside" must be regarded as uncertain where the transfer has been registered under the Real Property Act. The order concerning delivery up of the certificate of title seems to presuppose that one of the two joint tenants alone holds the certificate. An order that the certificate of title be cancelled does not seem to me to do anything unless something is also done to the relevant folio of the register. 54 Second, I am conscious of the fact that the defendant paid (apparently from her own pocket) the mortgage debt of about $6,500 secured on the property in May 2004, being a debt of the plaintiff. Although there is no cross claim in that connection, the just result may be that the defendant should be recognised as having a charge or lien upon the property for that sum, but on a basis that ensures that the charge cannot be enforced except out of the proceeds of a voluntary sale of the property by the plaintiff or her legal personal representative. 55 I shall stand the matter over so that there may be an opportunity for submissions on these two matters. In the meantime, there will be an order that the defendant be restrained from dealing with the property or her interest in it until further order. **********

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