Iskandar v Mahbur & Ors

In these proceedings, the NSW Trustee and Guardian (the NSW Trustee) seeks orders revoking financial management and other orders the Court made on 15 February 2012 in respect of the actual or contingent assets of the third defendant (who is referred to only as “T” in these reasons for publication) arising out of these proceedings.

The Court's reasons for making those orders are set out in my judgment of 15 February 2012, Iskandar v Mahbur & Ors (No. 6) (Slattery J, 15 February 2012, unreported).

Since the Court made those orders much has happened. The principal proceedings that the plaintiff brought for relief were resolved before Bergin CJ in Equity in a hearing on 11, 12, 13, 14, 15, 18 and 27 February 2013; 6 March 2013. Her Honour gave judgment on 26 March 2013: Iskandar v Mahbur & Ors [2013] NSWSC 239. In her Honour's judgment the plaintiff's statement of claim was dismissed. The second and third defendants were successful. Formal orders were entered on 23 May 2013.

The underlying proceedings were for the specific performance of an agreement concerning the sale of a taxi which was said to have been sold by the plaintiff to the second defendant to the plaintiff pursuant to a deed of agreement dated 5 May 2010. The second defendant is the spouse or de facto partner of the third defendant. Mr Mahbur is the plaintiff's brother.

The motion before the Court seeks orders:

Represented by Mr C.M. Zucker, the NSW Trustee reads in support of the motion an affidavit of John Albert Franklin of 11 February 2015. On the motion is Mr Lawrence who also appears today on behalf of the former solicitors and counsel for the plaintiff, in these and other proceedings, lawyers who claim a charge over certain funds in Court.

The plaintiff has funds in Court of approximately $175,000. This amount represents the purchase price of the taxi which was paid by the second defendant to the plaintiff, on the transaction the subject of Bergin CJ in Equity's judgment. Two motions for the payment out of the Court of those funds are listed before me on 25 February this year.

However, the solicitors that Mr Lawrence represents say that their charge, together with the assessed and certified costs orders in favour of the second defendant, well exceed the plaintiff’s funds in Court.

The first thing to consider is the question of service. Mr T, the third defendant, is not here today. Mr Zucker has tendered Exhibit A, which shows: (1) the motion; (2) the affidavit of Mr Franklin; (3) Mr Zucker's submissions; and (4) references to the authorities in which he has relied today have all been served on Mr T. Mr T has written to both Mr Zucker and the Court as Exhibit A shows, seeking an adjournment of the proceedings today.

Mr T seeks an adjournment on the basis that he is very unwell today and will not be able to attend Court. He asks that the matter be adjourned. It is also evident from this letter that Mr T seeks that no orders be made today. I considered the medical certificate which he has supplied from Dr Janus of 11 February 2015, part of Exhibit A:

Dr Janus' medical certificate is very similar to a number of medical certificates which were supplied on behalf of Mr T from three years ago when in this case. Mr T continues under the care of a consultant psychiatrist, Dr Large, and remains on daily oral anti-psychotic medication.

Mr T wants the NSW Trustee to continue to represent him. The logic for that was very strong three years ago before the hearing took place. But it is clear from the motions of the plaintiff's solicitors and of the second defendant that these proceedings, one way or another, are about to come to an end. Much of the logic of my original appointment of the NSW Trustee as the financial manager of Mr T three years ago was so that stress to him could be reduced, since the proceedings had so far to go. That logic has now largely disappeared. All that matters for present purposes is that I am satisfied that Mr T had adequate notice of this motion and that I can proceed in his absence. I am so satisfied.

The starting point is my judgment appointing the NSW Trustee on 15 February 2012. I made that appointment under the NSW Trustee and Guardian Act 2009 (“the Act”), s 41 which, in substance, provides that if the Supreme Court is satisfied that a person is incapable of managing his or her affairs the Court may declare the person to be so incapable and may appoint "a suitable person as manager of the estate of the person or commit the manager of the estate of the person to the NSW Trustee". It was the latter course that was taken.

My 15 February 2012 judgment makes clear that this order was made after many appearances before the Court in which the Court's processes were becoming bogged down by the incapacity of Mr T to engage with the real issues in the proceedings for the then anticipated hearing.

There was evidence before the Court then from Dr Large and Dr Janus that Mr T suffered from a chronic psychosis (schizophrenia) and had a degree of thought disorder as a result of that illness; a diagnosis which had remained unchanged over a considerable period leading up to the Court's orders.

The Court also observed as it pointed out in that judgment that much of Mr T's behaviour in court was quite consistent with what the medical evidence indicated about his psychosis. The Court had regard to the provisions of s 39 of the Act and ultimately made orders under s 41.

Section 39 of the Act is of considerable importance not only in February 2012 at the time of appointment of the financial manager but throughout the period of financial management, and now, when it is contemplated that a financial management order might come to an end. It provides as follows:-

The NSW Trustee managed Mr T’s affairs in a slightly unusual way, because of the unusual circumstances of this case. The NSW Trustee normally has funds under management, which are paid to the NSW Trustee and administered through its trust accounts. But the only funds to which Mr T might become contingently entitled here are the benefit of a cost order in his favour at the conclusion of the proceedings. There was no money available for his benefit to the NSW Trustee during the conduct of the proceedings. So the NSW Trustee advanced monies from its own consolidated funds to fund his role in the litigation.

I am told a sum of less than $106,263.17 was expended on the NSW Trustee’s costs of the conduct of the proceedings before Bergin CJ in Equity. From what I see and know of those proceedings, if I may say so, these are very reasonable solicitor-client costs.

Since the conclusion of the hearing before Bergin CJ in Equity Mr T has pressed the NSW Trustee to join in an application to have his costs assessed and paid out of the money presently held in Court.

The NSW Trustee has declined to do so for reasons that are understandable. The NSW Trustee says that were Mr T's costs to be assessed, followed by him joining in the application to have the monies presently held in Court paid out to him, two things would probably happen. First, on payment out the monies will be repayable to the NSW Trustee to reimburse its common fund. But the greater problem is that, as all parties at the Bar table acknowledge, the claim under a charge by the former solicitor for the plaintiff is likely to have priority over any of Mr T's claims to the funds in Court, which only arose upon the making of the costs orders in the proceedings before Bergin CJ in Equity. The charge in favour of the former solicitors for the plaintiff was taken out to fund the plaintiff's unsuccessful defence of the murder charges against him.

I do not have to decide this priorities issue now on the basis of the precise circumstances, or the relative priority of that charge. But, if the NSW Trustee were persuaded that it should do what Mr T requests and to pursue payment out of the plaintiffs funds in Court, it would only be expending further costs out of its own pocket, which will probably not be recoverable if it is unsuccessful in claiming priority over the other claimants to the fund. But even if the NSW Trustee were to be successful and were to obtain a costs order, these costs would only go back to it and not to Mr T.

The logic for the NSW Trustee not proceeding further is overwhelming. It remains for the Court to consider the Court’s power to revoke the orders made on 15 February 2012 and to attend to the discretionary considerations associated with the revocation being requested.

The Act provides in s 86 for the revocation of orders made under s 41. The Act, s 86 is as follows:

Section 86 is only engaged if the Court is satisfied that the protected person is capable of managing his or her affairs. If the Court is so satisfied then it may revoke the declaration that the person is incapable of managing his or her affairs. Then it can revoke the order that the person's estate be subject to management under the Act.

It is clear on all sides in the case, and not least because of Dr Janus' recent medical report, that the Court could not be satisfied that Mr T is capable of managing his own affairs. Section 86 cannot be used as a source of power for the orders that the NSW Trustee seeks to have made.

In his helpful submissions, Mr Zucker on behalf the NSW Trustee has referred the Court to a decision of Lindsay J, Re W and L [2014] NSWSC 1106, where his Honour was confronted with a similar problem. In Re W and L a person who had been the subject of an order under s 41 undoubtedly had a continuing incapacity to manage his affairs. A party applied for revocation of the s 41 order but without seeking to have the Court make a finding that the person concerned was capable of managing his own affairs.

Lindsay J concluded that section 86 was unavailable. He then drew upon Re Q (Young J, 29 May 1985, unreported) and Re C [2012] NSWSC 1097 and found that the Court was able to rely on its own inherent jurisdiction and plenary jurisdiction under section 23 of the Supreme Court Act 1970 (NSW) to make orders revoking the s 41 orders, provided the Court was satisfied that the orders were in the Court's protective jurisdiction.

In Re W and L [2014] NSWSC 1106 at [73] to [82] Lindsay J affirmed that Supreme Court Act, ss 22 and 23 jurisdiction was available to justify revocation of the s 41 order, by the following analysis:

Lindsay J considered other unreported instances where the Court’s inherent jurisdiction and the jurisdiction under s 23 had been utilised to revoke financial management orders which were of no continuing practical utility, as follows:

The NSW Trustee argues that this too is a case where a financial management order should be revoked without finding that Mr T is capable of managing his own affairs. Mr T's written contentions take a different view.

But for the following reasons I am persuaded that the orders should be made. Firstly, I should attend to the principles set out above in s 39 of the Act. This is a slightly unusual case in which, as is evident from my earlier judgment, Mr T did not want to have the NSW Trustee and Guardian appointed in the first place because he wanted to try express his own views to the Court. He has continued through correspondence to express his own views to the Court despite the NSW Trustee’s appointment.

The Court must have regard to the welfare and interests of Mr T: s 39. Although he opposes the making of this order, it will permit him to communicate directly with the Court and will, in that sense, be in his “interests”. A concern is whether that is for his “welfare”. But the answer to that seems also to me to be clear. It was for his welfare for his relevant financial affairs to be managed by NSW Trustee when these proceedings were likely to stretch ahead some years. That is not the case now. The hearing on 25 February should bring these proceedings to an end.

The other principles set out in s 39 support the making of the orders. The orders will support the freedom of decision and freedom of action of Mr T and create as little restriction upon him as possible. He will be free to put submissions to the Court. Everything he has said in correspondence before the Court on this application can be repeated to the Court when the application comes on hearing on 25 February.

The other consideration in favour of making of the revocation orders is that the structure of the orders in February 2012 was only to manage the proceedings and obtain a costs order in Mr T’s favour. Although a costs order has been made in his favour, the only party who could gain any practical benefit from it, the NSW Trustee, does not wish on reasonable grounds to pursue enforcement any further. It seems to me that the whole point of the financial management order is now spent.

For those reasons, I will make the orders sought in Mr Zucker's motion. As I do so, I will make clear what Lindsay J did in Re W and L: that when making order 1 the Court is not finding positively that the third defendant, Mr T, is a person capable of managing his affairs. He plainly, on the evidence I have seen, is not such a person.

I make orders 1, 2, 3, 4, 5 and 6 of the orders sought in the notice of motion of 11 February 2015: