Allregal Enterprises Pty Ltd v Carpaolo Nominees Pty Ltd - [2009] WASCA 33

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: ALLREGAL ENTERPRISES PTY LTD -v- CARPAOLO NOMINEES PTY LTD [2009] WASCA 33

CORAM: PULLIN JA

HEARD: 22 JANUARY 2009

DELIVERED : 22 JANUARY 2009

PUBLISHED : 5 FEBRUARY 2009

FILE NO/S: CACV 101 of 2008

BETWEEN: ALLREGAL ENTERPRISES PTY LTD (ACN 071 642 683)
First Appellant
CAROL ELIZABETH FARRELL
Second Appellant
AND
CARPAOLO NOMINEES PTY LTD (ACN 009 608 093)
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
File No  :CIV 2250 of 2007

Catchwords:

Practice and procedure - Whether appellant is a person under a disability - Whether next friend should be appointed - Presumption that person is capable of managing own affairs - Whether presumption applies in face of evidence to the contrary

Legislation:

Nil

Result:

Application for stay adjourned

Category: A

Representation:

Counsel:

First Appellant               :     No appearance
Second Appellant          :     In person
Respondent:     Mr C S Williams

Solicitors:

First Appellant               :     No appearance
Second Appellant          :     In person
Respondent:     Solomon Brothers

Case(s) referred to in judgment(s):

Farrell (by her next friend Ronald Charles Waugh) v Allum [2007] WASC 265
Farrell v Allregal Enterprises Pty Ltd [2008] WASCA 264
Farrell v Royal Kings Park Tennis Club Inc (No 2) [2007] WASCA 193
Murphy v Doman (2003) 58 NSWLR 51
Secretary, Department of Health and Community Services v JWB and SMB (1992) 175 CLR 218

PULLIN JA: The appellant, Ms Carol Farrell, who is attempting to represent herself, has applied for an order that:
•an urgent interim order to stop sine die [sic] the respondent from selling or trying to sell the property at 6 Muston Grove Churchlands Western Australia being Lot 240 of Diagram 84869 in Volume 1980, Folio 63 ('Muston')
•an interim order to stop sine die [sic] the respondent from communicating with or trying to collect rent from the tenants of Muston
•an adjournment sine die [sic] whilst Mr Gavin Wells for the appellants recovers from unplanned heart surgery performed on him on 10 January 2009
The parties informed me that Mrs Farrell is the registered proprietor of the land at 6 Muston Grove, Churchlands.
I have treated this as an application for a stay of Master Sanderson's orders which are the subject of appeal. Those orders were that:
1.The time for the Plaintiff to apply for summary judgment be extended to 22 July 2008.
2.Judgment be entered for the Plaintiff against the Defendants pursuant to Order 14 Rule 1 of the Rules of the Supreme Court 1971 in the sum of $1,027,967.72, being the Judgment sum of $947,238.42 plus period of pre‑judgment interest from March to 23 September 2008 (inclusive) being 202 days at the daily rate of interest of $399.65 being $80,729.30.
3.The Defendant's counterclaim be and hereby is dismissed.
4.Within 28 days after service of judgment on her, the Second Defendant deliver up to the Plaintiff possession of all that piece of land being Lot 240 on Diagram 84869 and being the whole of the land comprised in certificate of title Volume 1980 Folio 69, situate at and known as 6 Muston Grove, Churchlands, Western Australia.
5.Within 28 days after service of judgment on her, the Second Defendant deliver up to the Plaintiff possession of all and singular all the furniture, motor vehicles, goods, chattels, articles, effects, personal items and things of every description which belong to her as at the date of the judgment.
6.The Defendants to pay the Plaintiff's costs of the action, including the application to be taxed, on a solicitor and own client basis, if not agreed.
I adjourned the application for a stay granting the parties liberty to apply generally on 24 hours notice and reserved the question of costs. The reasons for doing so are as follows.
I have previously published reasons in another matter (see Farrell v Allregal Enterprises Pty Ltd [2008] WASCA 264) which recorded my concerns about Mrs Farrell's ability to represent herself. I need not repeat all that I said in those reasons, save to mention that I asked for those reasons to be referred to the Public Advocate so that the Public Advocate might investigate and then report as to whether Mrs Farrell has the ability to make reasonable judgments about the conduct of that appeal and this appeal, which on the face of both, relate to her estate and as to whether or not the Public Advocate should make an application under the Act to appoint an administrator.
In Murphy v Doman (2003) 58 NSWLR 51, the Court of Appeal in New South Wales set aside a judgment made by a single judge in circumstances where a person under a disability represented himself. Handley JA, with whom Tobias JA agreed, noted the presumption that a person is capable of managing his or her own affairs unless and until the contrary is proved [36], but observed that the judge at first instance had evidence before him that the plaintiff was 'probably an incompetent person' [32]. The Court of Appeal held that the proceedings were irregular and set them aside pursuant to a provision similar to O 2 r 1 of the Western Australian rules.
Order 70 is a rule which concerns the court's parens patriae jurisdiction. In Secretary, Department of Health and Community Services v JWB and SMB (1992) 175 CLR 218 (Marion's case) Mason CJ, Dawson, Toohey and Gaudron JJ (259) said that the 'parens patriae jurisdiction springs from the direct responsibility of the Crown for those who cannot look after themselves'.
As I have said above, the court will in the absence of evidence to the contrary, deal with proceedings on the basis of the presumption that parties have the capacity to conduct the litigation. However, if the court is put on notice by evidence that a person may not have the capacity to manage his or her own affairs, then in my opinion, the court is duty bound to decide whether the person does have capacity. To proceed without determining the issue means that the court is participating in what may be irregular proceedings. As Murphy's case reveals, if a next friend or guardian ad litem is not appointed when one is required (that is, in breach of O 70) then the proceedings will be irregular. This will not make the proceedings null or void but, if a person under a disability is not adequately represented, then it would be open to the court on appeal to set aside any decision made by reason of the irregularity. It is arguable that the court in granting relief when there has been a breach of O 70 will err because the party will have been 'denied the substance of a proper hearing … because he was then incapable of managing his own affairs'. See Murphy v Doman [49]. The appeal court may then set aside the orders below, exercising powers under O 2 r 1.
In the case of Mrs Farrell there is information which puts the court on inquiry. I referred to some of that information in my earlier reasons. Thus, as mentioned in my earlier reasons, the State Administrative Tribunal made guardianship orders in 2002 and 2007 which means that the tribunal must have been satisfied that Mrs Farrell was either incapable of looking after her own health and safety, unable to make reasonable judgments in respect of matters relating to her person, or in need of oversight, care, or control in the interests of her own health and safety or for the protection of others. A person who is unable to make reasonable judgments in respect of matters relating to her person, might therefore be incapable of understanding his or her affairs and conducting litigation concerning his or her estate.
In addition, there have been other proceedings in this court where Mrs Farrell has conducted litigation by a next friend. See for example Farrell (by her next friend Ronald Charles Waugh) v Allum [2007] WASC 265 (Inheritance Act proceedings) and Farrell v Royal Kings Park Tennis Club Inc (No 2) [2007] WASCA 193.
Furthermore, in other proceedings which relates to the Muston Grove property, namely Allregal Enterprises Pty Ltd (Mortgagee in Possession: Perpetual Ltd) v Allregal Enterprises Pty Ltd and Carol Elizabeth Farrell and Registrar of Titles CIV 2271 of 2008, the Chief Justice at a hearing on 12 December 2008 informed a practitioner, Mr G G Wells, who attempted to appear for Mrs Farrell that he was not able to do so because Mrs Farrell did not have a guardian ad litem. The Chief Justice criticised Mr Wells and said that Mr Wells had entered an appearance for 'somebody who is under a disability'. The Chief Justice suggested that the Public Trustee be appointed as guardian ad litem for Mrs Farrell. The Chief Justice stated further that he was disposed 'to sort this out by 19 December come what may'. Counsel for the plaintiff pointed out that a judgment entered in circumstances where a guardian ad litem was required was a judgment 'which is irregular and may be set aside at the discretion of the court'. The Chief Justice said that it might be 'necessary to appoint … a guardian [for] Mrs Farrell and [to give] that guardian liberty to apply to set aside by a specified date'.
The transcript reveals that Mr Waugh, who had previously acted as next friend for Mrs Farrell, was not able to act as next friend in the proceedings before the Chief Justice because of a conflict of interest. The Chief Justice adjourned and on 16 December 2008 made orders removing caveats, one of which had been lodged by Mrs Farrell over the Muston Grove property by the plaintiff exercising powers under a mortgage. The orders were made to allow the sale of that property. The Chief Justice's solution to the question concerning Mrs Farrell's capacity was to order liberty to apply to Mrs Farrell to move to set aside the orders. These proceedings reveal that the Chief Justice regarded Mrs Farrell as a person under a disability. This is further relevant material prompting me to consider and decide upon Mrs Farrell's capacity.
I should also record that, as I informed the parties, Mr Waugh wrote by email dated 21 January 2009 to the acting supervisor at the Court of Appeal registry stating that he was 'unable and unprepared to accept any appointment by the court for me to act as Mrs Farrell's guardian ad litem or next friend'. He said that his reasons were the same as those previously given to the Chief Justice in a letter dated 15 December 2008.
Attached to the email was a document dated 15 December 2008 addressed to the Chief Justice which read:
Dear Chief Justice Martin
RE:Guardianship of Ms Carol Farrell
Perpetual Limited -v- Allregal Enterprises Pty Ltd & Carol Farrell & The Registrar of Titles (CIV 2271 of 2008)
I currently hold a limited State Administrative Tribunal of Western Australian ('SAT') guardianship order over Ms Carol Farrell who is currently before your court in the above matter.
I wish to advise the Supreme Court of Western Australia that I am unable to act as Ms Farrell's litigation guardian in the above matter (whether it be as her guardian ad litem or her next friend).
My Reasons:
1.My guardianship order explicitly precludes me from acting in matters of Ms Farrell's estate (as is the case here).
2.I foresee a potential conflict of interest between Ms Farrell and me in this particular case.
3.I have in the past sought the court's permission to act as litigation guardian for Ms Farrell against the same plaintiff in her role as director of Allregal Enterprises Pty Ltd but was denied.
4.I cannot afford to suffer any liability for costs.
5.I have never knowingly accepted a formal court appointment to act as Ms Farrell's litigation guardian in matters of her estate. I have on some occasions appeared in her absence simply to monitor proceedings or to assist the court with its questions passively rather than proactively. On one occasion I represented my son Michael Waugh after he had filed an application and then was unable to attend the hearing on the given day.
6.I have never knowingly acted by a solicitor in matters of Ms Farrell's estate.
7.Although I have prepared many court documents for Ms Farrell and others in matters of her estate I have never knowingly added the words 'by her litigation guardian' to Ms Farrell's title. I simply know the subject matter and have the computing skills to research and produce documents relatively easily.
8.I live and work in Canberra and have insufficient funds and time to commit to courtroom attendance in Perth.
9.My SAT guardianship order was not granted lightly, it came after extensive medical and family consultations by the Public Advocate in 2002. It has stood for more than 6 years and has been reviewed and extended. I am very protective of the privilege that SAT has afforded me over Ms Farrell and would not condone its use for procedural convenience in the courtroom especially if I felt that the consequences were potentially adverse in any way to Ms Farrell's position.
10.I have found the transcript and reasons for judgment handed down by the Honourable Pullin JA on 4 December 2008 very informative and I draw your attention to them. See [Farrell and Allregal CACV 70 of 2008] and [Allregal and Carpaolo CACV 101 of 2008] heard together by Justice Pullin.
The document was signed by Mr Waugh.
Finally, I observe that in the proceedings before the master which led to the orders under appeal, Mrs Farrell mentioned in submissions to the master that she was seeing a psychiatrist on a regular basis.
All of this information leads me to the conclusion that I must make proper inquiry to allow me to determine whether or not a next friend should be appointed to represent Mrs Farrell's interests on this appeal. There is also the question about whether, merely because of the existence of the guardianship order made by SAT, O 70 requires Mrs Farrell to be represented by a next friend in the conduct of this appeal.
I am not prepared to proceed further without making further inquiry concerning Mrs Farrell's capacity. To proceed without resolving the issue may have implications for both parties. The respondent is claiming approximately $1 million and seeks to recover this by exercising powers in security documents. Its interests are not served by gaining judgment or orders which may be set aside as irregular. On the other hand Mrs Farrell claims that the Muston Grove property is her home even though it is let to tenants at the moment. Mrs Farrell's interests are not served by pressing on with the appeal without considering the capacity issue. I know nothing about the merits of the dispute between the parties, but if Mrs Farrell is a person not capable of understanding or conducting the litigation then she may be unable to determine what the true issues are or might be or whether there are any issues to be litigated.
If the result of my inquiry is that Mrs Farrell has capacity, then Mr Wells is permitted to represent her without the appointment of a next friend.
The Public Advocate was good enough to send an investigator to the hearing on 22 January 2009 and I understand from that investigator (Ms Turner) that the matter will be considered with some urgency in the Public Advocate's office. If the conclusion of this court is, after hearing from the Public Advocate that Mrs Farrell is capable of managing her own affairs or that an application to SAT is not warranted, then there is still the question about the effect of O 70 in circumstances where there is a guardianship order in force.
There are clearly many difficulties associated with the present circumstances. This will often be the case. In Murphy v Doman, Handley JA said that the application of the rules relating to an incompetent person in New South Wales 'will involve practical difficulties' [52]. He continued [52]:
There may be no‑one who is willing to accept appointment as tutor. A professional person might have no prospects of being remunerated for his or her work. In any event, he or she may be unwilling to accept the risk of being ordered to pay the costs of the other party. In some cases the protective commissioner may be willing to accept the appointment. However, whatever the practical difficulties may be, the court cannot ignore the prohibition in [the rules] when it knows that a litigant in person is not capable of managing his own affairs.
Finally, in the event of some emergency occurring which requires the court to act to prevent the proceedings becoming nugatory, I note that Handley JA said in Murphy v Doman:
The court may have to stay the proceedings until the litigant recovers or a tutor can be appointed. [52]
If a stay of proceedings may be ordered, then the court might also have the power to grant a stay of the orders under appeal if the question of capacity is not resolved at a time when some event occurs which may threaten the integrity of the subject matter of the litigation. That point has not yet been reached but if the respondent seeks to accept an offer of a third party to buy the Muston Grove property that point may be reached. As a result I gave general liberty to both parties to apply for any necessary interim orders.