Cohen v Cohen

1. [1]

   HIS HONOUR: This is a very unfortunate case between the Plaintiff, who is a person under a legal incapacity (a protected person within the meaning of that term in the NSW Trustee and Guardian Act 2009 (NSW)), who sues by her tutor, the NSW Trustee and Guardian, and the Defendant, her son, who has not appeared, or played any part, at any time, in the proceedings.

2. [2]

   Although there were several claims for relief made in the Statement of Claim, at the hearing, Mr C M Zucker, solicitor, who appeared for the Plaintiff, only pressed the claim for a declaration regarding title to, and an order that the Defendant transfer to the Plaintiff, the whole of certain real estate situated at Burns Bay Road, Lane Cove (“the Lane Cove property”), consequential relief, as well as an order that the Defendant pay the costs of the proceedings.

3. [3]

   The matter was called outside the Court several times during the course of the hearing, between 10:00 a.m. and 10:40 a.m., and then again, at 12:10 p.m., immediately prior to the Court delivering this ex tempore judgment. On no occasion the matter was called, was there an appearance by, or on behalf of, the Defendant.

Background Facts

1. [4]

   The following facts appear to me to be uncontroversial. I have taken them, principally, from the affidavit of Maree Rice, a legal officer with the NSW Trustee and Guardian with the conduct of the matter in the interests of the Plaintiff, and the exhibit to that affidavit (Ex. A).

2. [5]

   The Plaintiff was born in the Czechoslovak Republic (as it then was) in August 1923. She is currently aged 92 years and resides in an aged care facility in Chatswood, Sydney. She has been a resident of that facility since about June 2012. She is now a high care resident. (The Plaintiff’s solicitor confirmed, from the bar table, that a telephone call to the aged care facility this morning confirmed that the Plaintiff is still alive.)

3. [6]

   The Defendant was born in Tel Aviv, Israel, in February 1955, and is currently aged 61 years.

4. [7]

   The Plaintiff made a Will dated 15 October 1974 in which she appointed her husband, Naftali Cohen, as executor and sole beneficiary of her estate, but in the event that he did not survive her by one calendar month, then the Defendant was appointed as executor and sole beneficiary of her estate in his stead. (It is not known whether this is the last Will of the Plaintiff, but there is no evidence of any later Will advanced on behalf of the Plaintiff.)

5. [8]

   The Plaintiff’s husband died in December 1994 (Ex. B).

6. [9]

   On 6 October 2000, the Plaintiff granted to the Defendant an Enduring Power of Attorney in the form prescribed in Schedule VII of the Conveyancing Act 1919 (NSW), to which reference is made in s 163B of that Act. (Section 163B of the Conveyancing Act was repealed in 2004, but was given continued operation by s 6(3) and Schedule 1 of the Powers of Attorney Act 2003 (NSW).)

7. [10]

   The Power of Attorney, which appears to have been prepared by a firm of solicitors, expressly stated that authority was conferred on the attorney to do, on the Plaintiff’s behalf, anything that she may lawfully authorise an attorney to do, subject to the conditions and limitations specified in Part 2 of the Power of Attorney. There were no conditions and limitations specified.

8. [11]

   In Clause 2 of the Power of Attorney, the attorney was given authority “to execute any assurance or other document, or do any other act, whereby a benefit is conferred on him”. The inclusion of Clause 2 attracts s 163B(2)(B) of the Conveyancing Act.

9. [12]

   Finally, the Power of Attorney was expressed to be given with the intention that it continue to be effective even if the Plaintiff suffered a loss of capacity through unsoundness of mind after its execution.

10. [13]

    The Power of Attorney was registered on 12 September 2001. Section 163(2) of the Conveyancing Act is generally to the effect that most conveyances and deeds, if executed by power of attorney, only have “force or validity” if the instrument creating the power has been registered: Taheri v Vitek [2014] NSWCA 209 at [42] (Leeming JA).

11. [14]

    The Plaintiff purchased the Lane Cove property in November 2001 for $245,000. It is a one bedroom residential apartment with an area of 45 square metres, comprising an open lounge/dining room, a kitchen, bathroom and laundry, and a very small balcony. It has an open single car space with an area of 13 square metres.

12. [15]

    The Transfer, pursuant to which the Plaintiff was registered as the sole proprietor, was dated 7 November 2001. The title was unencumbered.

13. [16]

    On 26 August 2008, the Plaintiff appointed the Defendant as her enduring guardian “if because of disability I am partially or totally incapable of managing my person”.

14. [17]

    A copy of Transfer of the Lane Cove property, which is undated but which was executed about 31 July 2013, shows the transferor as the Plaintiff and the transferee as the Defendant. The Transfer was made for an expressed consideration of $1.00.

15. [18]

    It appears that the Transfer was signed by the Defendant as the Attorney for the transferor and by him as the transferee.

16. [19]

    It is apparent that stamp duty of $5,490 was paid as there is a stamp from the Office of State Revenue NSW Treasury, for that amount, on the Transfer. The Duties Statement (which provides a summary of the transaction submitted to the Office of State Revenue through Electronic Duties Return) obtained from the Office of State Revenue, reveals that the transaction was assessed on a “dutiable amount” of $200,000.

17. [20]

    The Transfer appears to have been registered in early August 2013. On 9 August 2013, a Certificate of Title to the Lane Cove property was issued under the Real Property Act 1900 (NSW), identifying the Defendant as the registered proprietor. He remains the registered proprietor of the Lane Cove property and title to the property remains free of any registered encumbrance.

18. [21]

    In a document, apparently signed by the Defendant in front of Mr G P Meakin, solicitor, and dated 18 November 2013, the Defendant resigned his appointment as the Plaintiff’s Attorney and Guardian.

19. [22]

    As at 1 August 2013, the amount said to be owing to the aged care facility by the Plaintiff was $8,130.19. By late November 2013, it had increased by about $100.

20. [23]

    There is no evidence that the Plaintiff had any other property, real or personal, of any value as at the date of the transfer of the Lane Cove property to the Defendant. (The suggestion made by the Defendant’s then solicitor that the Plaintiff held funds in a bank account have not been able to be verified by the NSW Trustee and Guardian.)

21. [24]

    In a health professional report dated 29 January 2014, the Plaintiff’s general medical practitioner advised that the Plaintiff had blindness and poor hearing to a moderate degree, as well as mild dementia. He noted that on a mini-mental state examination, she had scored 21/30.

22. [25]

    An earlier medical report in June 2012 revealed that she suffered from macular degeneration and had short term memory loss.

23. [26]

    On 31 January 2014, Ms Pilar Uzabeaga, the Manager of the aged care facility, lodged an application with the NSW Civil and Administrative Tribunal, for the appointment of a manager for the Plaintiff.

24. [27]

    By order dated 16 April 2014, the Tribunal was satisfied that the estate of the Plaintiff should be committed to the NSW Trustee and Guardian. The Defendant was not a party to the hearing. His then solicitor, Mr Meakin, in a letter dated 13 April 2014, informed the Tribunal that he “was not instructed to appear at the Hearing of this matter appointed for 16 April 2014 nor is my client, Mr Cohen who is, himself, too ill to participate”.

25. [28]

    The following passage also appears in the letter from Mr Meakin to the Tribunal:

26. [29]

    Following the appointment of the NSW Trustee and Guardian as the manager of the Plaintiff’s estate, by letter dated 27 August 2014, the solicitor for the NSW Trustee and Guardian wrote to Rickard Lawyers, a firm then understood to have acted on behalf of the Defendant on the conveyancing transaction, in the following terms:

27. [30]

    In a letter dated 16 July 2014, but not sent until a copy of the file of Rickard Lawyers was provided to the NSW Trustee and Guardian under cover of a letter dated 25 September 2014, Mr J Rickard responded as follows:

28. [31]

    The NSW Trustee and Guardian subsequently caused a caveat to be registered on title to the Lane Cove property.

29. [32]

    Mr Meakin, in a letter dated 31 August 2015, wrote to the NSW Trustee and Guardian in the following terms:

30. [33]

    The NSW Trustee and Guardian responded in a letter dated 8 September 2015 in the following terms:

31. [34]

    An offer to resolve the contemplated proceedings was made on behalf of the Defendant, but not accepted by the NSW Trustee and Guardian, on behalf of the Plaintiff.

32. [35]

    As at 29 February 2016, the total amount said to be outstanding by the Plaintiff to the aged care facility is $26,524.91.

33. [36]

    Ms Rice, in her affidavit affirmed 18 February 2016, discloses that the Plaintiff receives Centrelink benefits, but that “Centrelink ‘deems’ the Plaintiff to have gifted the Lane Cove property to her son. Accordingly, her aged care costs will continue to exceed her pension and the nursing home fee arrears continue to accumulate. In addition to the increasing debt to the nursing home, [the Plaintiff] has no funds to provide for comforts or other necessary expenses for her welfare”.

Service of Documents on the Defendant

1. [37]

   The Statement of Claim was filed on 16 September 2015. A request was made to Mr Meakin to accept service but he responded that he would no longer be acting, but that the Defendant would be instructing Ms S Nash of Sally Nash & Co, Solicitors, to handle the matter.

2. [38]

   The evidence reveals that the Plaintiff’s solicitors filed a notice of motion on 17 November 2015 seeking substituted service of the Statement of Claim.

3. [39]

   The court made an order for substituted service, pursuant to Uniform Civil Procedure Rules (“UCPR”) rule 10.14, on 4 December 2015. That order provided for service of the Statement of Claim by Express Post to Mr Meakin; by facsimile transmission to Mr Meakin; by letter sent to the Defendant at the Lane Cove property; and by email transmission to an email address (which appears to have been that of a person by the name of Alexandra. (I should mention that there are several references to “Alexandra” in the evidence as “the partner” of the Defendant.)

4. [40]

   In addition, it appears that there was correspondence between Ms Nash and the Plaintiff’s solicitors, in which she stated that the Defendant had not attended a scheduled meeting with her, but that her firm “have advised him of the listing on 15 December 2015”.

5. [41]

   There is evidence, subsequently filed, demonstrating the steps that have been taken, by the Plaintiff’s solicitors, since December 2015, to have the Defendant informed of the hearing date. For example, there is a letter dated 17 December 2015, addressed to the Defendant at the Lane Cove property; there is a letter sent to the email address referred to earlier; and there are a number of letters that were sent to Mr Meakin.

6. [42]

   No response to any of the correspondence has been received from the Defendant. However, in a letter dated 15 March 2016, Mr Meakin responded in the following terms:

7. [43]

   I am satisfied that reasonable efforts have been made to bring the commencement, and the nature, of the proceedings, as well as the contents of the Statement of Claim, and finally the date the matter has been listed for hearing, to the attention of the Defendant. In light of all of the evidence, I am also satisfied that the Defendant has, for some time, continued to ignore contact made with him, or others on his behalf, by the solicitors acting for the Plaintiff. He has chosen to not engage at all in the litigation.

The Hearing

1. [44]

   As stated, the Defendant has not filed an Appearance or played any part in the proceedings at any time. I have earlier referred to the matter being called several times outside the Court today.

2. [45]

   UCPR rule 6.9(1) provides that a defendant may enter an appearance in proceedings by filing a notice of appearance. The time for filing the appearance is provided in UCPR rule 6.10(1)(a), in the case of proceedings commenced by statement of claim, being 28 days after service on the defendant of the statement of claim or such other time as the Court directs for the filing of a defence. The Court has not directed any other time.

3. [46]

   Following the first call of the matter outside the Court, a call which was not answered by the Defendant or any person representing him, Mr Zucker made an application for the matter to proceed in the absence of the Defendant. In support of that application, he referred to NSW Trustee & Guardian as Executor of Will of Walsh (decd) v Gregory [2012] NSWSC 681; (2012) 18 BPR 35,153 at [17]–[22], in which I had written:

4. [47]

   More recently, in Lezaja v Hannover Life Re of Australasia Ltd (No 2) [2016] NSWSC 167 (a case in which a Plaintiff had failed to appear at the hearing), after referring to some of the passages quoted above, I added, at [37] and at [40]:

5. [48]

   I have considered whether the Court should adjourn the proceedings to give the Defendant a further opportunity to appear. However, it seems to me that there would be no utility in doing so, in the absence of an explanation why he has not appeared at any time during the proceedings. There is simply no reason to believe that he would be more likely to appear on the next occasion than on this occasion.

6. [49]

   It is important that the matter be heard in order that NSW Trustee and Guardian can properly manage the affairs of the Plaintiff, which affairs include paying her proper debts at the aged care facility where she resides and having sufficient funds for her continued residence, care and support. The proceedings have been driven by these facts and they have been on foot for some time. Prior to their commencement, attempts were made to engage with the Defendant and his lawyers without any real success.

7. [50]

   There will be no irreparable prejudice to the Defendant since the stated intention of the NSW Trustee and Guardian, as manager, is to sell the Lane Cove property and use the proceeds of sale during the Plaintiff’s lifetime in her interests. After her death, any amount that remains will be for the Defendant pursuant to the Plaintiff’s Will (assuming it is her last Will). It can thus be said that the damage to him is not irreparable because he will receive the proceeds of sale, less such amounts as are properly spent in the interests of the Plaintiff and in which regard her manager is bound by its statute.

8. [51]

   As to hardship, the Defendant should not be permitted to frustrate the determination of the proceedings by his non-attendance without explanation. If, as has been stated, he is not living in the Lane Cove property, and it is, in fact, untenanted because of its condition, then the Defendant will not suffer any hardship by its sale.

9. [52]

   In my view, there is no ground on which it would be appropriate for the court to adjourn the hearing, of its own motion. Accordingly, I determined to proceed with the trial generally, and so far as it concerns any claim for relief in the proceedings.

10. [53]

    Having decided to proceed to a hearing, the Plaintiff is entitled to prove her claim so far as the burden of proof lies upon her and, if she can establish that she is entitled to the relief claimed, and such other relief as is consistent with what is sought, the Court should proceed to make final orders: Ritchie’s Uniform Civil Procedure (NSW) [29.7.2], referring to Stone v Smith (1887) 35 Ch D 188 and Kingdon v Kirk (1887) 37 Ch D 141; see also, Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365 at [64].

11. [54]

    Of course, because the Defendant did not file an Appearance or a Defence within 28 days after service of the Statement of Claim, he is regarded as being “in default”: UCPR rule 16.2(a). In addition, by his failure to file a defence traversing the allegations of fact in the Statement of Claim, each of those allegations of fact is taken to be admitted as against him: UCPR rule 14.26(1): Ward v Ward [2011] NSWSC 107 at [28]; Konica Minolta Business Solutions Australia Pty Ltd v Vongkeneta [2013] NSWSC 486 at [31].

12. [55]

    Finally, UCPR rule 16.3, which deals with the case where a Defendant is in default, allows the Plaintiff to apply for judgment under UCPR Part 16 “according to the nature of his or her claim for relief”. Unless the Court otherwise orders, such an application for judgment must be accompanied by an affidavit of service of the statement of claim and an affidavit in support of the application. In this case, the Plaintiff has complied with this requirement.

13. [56]

    The Plaintiff has, in support of the application, read affidavit evidence and tendered documentary evidence in support of her claim.

DETERMINATION

1. [57]

   Relevantly, Part 16 of the Conveyancing Act dealt with powers of attorney. Part 16 included ss 158–163H. Section 159(1) relevantly provided that an attorney under a power may, in the exercise of the power, execute any instrument with his own signature and, where sealing is required, with his own seal, or do any other thing in his own name. In this case, the Defendant signed the Transfer of the Lane Cove property to himself on behalf of the Plaintiff as transferor.

2. [58]

   Section 163B(1) relevantly provided that an instrument in, or to the effect of, the form in Sch 7, conferred 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. However, under s 163B(2), that authority did not include authority to execute a document, or do any act, as a result of which a benefit would be conferred on the attorney appointed by the instrument, unless such authority was expressly conferred by the instrument. In this case, the Power of Attorney executed by the Plaintiff did confer such authority.

3. [59]

   In Taheri v Vitek, at [115], Leeming JA noted that

4. [60]

   In relation to what an attorney could do, relying upon the form of the Power of Attorney, Leeming JA wrote, at [111]:

5. [61]

   His Honour added, at [130]:

6. [62]

   The Plaintiff does not submit that the Defendant lacked the power to transfer title of the Lane Cove property to himself. The contention the Plaintiff makes, and which is pleaded, particularly in paragraphs 17 and 22 of the Statement of Claim, is that by reason of the Power of Attorney, the Plaintiff’s then condition and the Defendant’s relationship with her, the Defendant, whilst authorised to transfer the property to himself, should not have done so.

7. [63]

   The Plaintiff submits that the authority given to the Defendant by the Power of Attorney does not exonerate the Defendant, as attorney, from the fiduciary obligations by which an attorney under power is bound. Reliance is placed on Ward v Ward (No 2) [2011] NSWSC 1292 at [3], in which Brereton J wrote:

8. [64]

   In Spina v Permanent Custodians Ltd [2008] NSWSC 561; (2008) 13 BPR 98, 316, Hammerschlag J held that that the plain meaning of s 163B(1) of the Conveyancing Act was that the attorney was vested with the power to do anything which the principal may do whether it was against the interest of the donor or not. He referred to the fiduciary obligation owed to the principal by the attorney stating at [153] that

9. [65]

   On the question of the existence of the fiduciary duty, His Honour wrote at [113]-[121] :

10. [66]

    In this case, I am satisfied that by transferring the Lane Cove property to himself, a transfer which does not appear to have been disclosed to the Plaintiff, and which had the effect of depriving the Plaintiff of her only substantial asset, the Defendant acted in breach of his fiduciary obligations to the Plaintiff.

11. [67]

    There can be no suggestion that the transfer of the Lane Cove property was for the benefit of the Plaintiff; indeed, it is patently clear that it was to her significant disadvantage. In my view, the Defendant abused the power bestowed upon him by the Power of Attorney.

12. [68]

    In addition, the Plaintiff effectively seeks to set aside the transaction as an unconscionable dealing and relies on Ward v Ward [2011] NSWSC 107 at [33]-[36], in which Brereton J wrote:

13. [69]

    In this case, I am satisfied that each of the elements identified by Brereton J has been established. There was a relevant relationship of “special disadvantage” between the Plaintiff and the Defendant. At the relevant time, the Plaintiff was elderly; she was blind; she suffered some cognitive impairment; and she was in an aged care facility. The Defendant understood that the Plaintiff was at a special disadvantage. Certainly, he knew, or ought reasonably to have known, that she was not in a position to look after her own interests. Finally, the Defendant has not attempted to establish that the transaction was fair, just and reasonable. Certainly, there is no evidence that shows either that the Plaintiff received full value or that she was independently advised.

14. [70]

    Although the Statement of Claim does not specifically refer to the transaction being an unconscionable one, all of the elements referred to have been identified in it – see, [16], [19], [20], [21], and the particulars to [23], and [25].

15. [71]

    In my view, the Plaintiff has made out her entitlement to set aside the transaction and a declaration that the Defendant holds the Lane Cove property in trust for her should be made. Since the Defendant remains as the sole registered proprietor of the Lane Cove property, which remains free of any registered encumbrance, there is no reason why the Defendant should not be ordered to transfer it back to her.

16. [72]

    In view of the history of this matter and the possibility that the Defendant will not comply with the orders made, it seems to me, for abundant caution, and to avoid further costs being incurred, that I should make an order under s 94 of the Civil Procedure Act 2005 (NSW) nominating Imelda Margaret Dodds, the Chief Executive Officer of the NSW Trustee and Guardian to execute a Transfer in favour of the Plaintiff in the event that he does not do so.

17. [73]

    The Court: