Allregal Enterprises Pty Ltd v Carpaolo Nominees Pty Ltd [No 2] - [2009] WASCA 55

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: ALLREGAL ENTERPRISES PTY LTD -v- CARPAOLO NOMINEES PTY LTD [No 2] [2009] WASCA 55

CORAM: PULLIN JA

HEARD: 24 FEBRUARY 2009

DELIVERED : 27 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 - Application for stay of judgment pending appeal - Person under disability by reason of guardianship order - No person willing to act as next friend

Legislation:

Civil Judgments Enforcement Act 2004 (WA)
Guardianship and Administration Act 1990 (WA)
Inheritance (Family and Dependants Provision) Act 1972 (WA)
Public Trustee Act 1941 (WA)
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Supreme Court (Court of Appeal) Rules 2005 (WA)

Result:

Application dismissed

Category: B

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):

Allregal Enterprises Pty Ltd v Carpaolo Nominees Pty Ltd [2009] WASCA 33
Cadwallender v The Public Trustee [2003] WASC 72
Doyle v The Commonwealth (1985) 156 CLR 510
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307
Farrell (by her next friend Ronald Charles Waugh) v Allum (as Executor of the will of Murray Keith Allum (Dec)) [2007] WASC 265
Farrell v Allregal Enterprises Pty Ltd [2008] WASCA 264
Farrell v CSL Ltd [2004] VSC 308
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2008] WASCA 222
Weinert v Clark [2006] WASCA 253
Willoughby v Clayton Utz [2005] WASC 47

PULLIN JA: The second appellant (Mrs Farrell) made an application for a stay of the judgment of Master Sanderson pending the hearing of the appellants' appeal against that judgment which I dismissed on 24 February 2009. Master Sanderson made orders, inter alia, granting summary judgment against the appellants of a sum in excess of $1 million and ordered Mrs Farrell to deliver up possession of the property known as 6 Muston Grove, Churchlands (Muston Grove property). The respondent to this appeal holds a mortgage over the Muston Grove property.
The respondent has entered into a contract to sell the Muston Grove property which is subject to a condition that the court approve the sale before the night on 24 February 2009. The respondent is concerned that in the presently falling real estate market if this contract does not proceed, the property might be sold for a lower price. As a result, the respondent has applied for an order that:
The respondent's acceptance of the offer to purchase the property known as 6 Muston Grove … is approved.
The respondent has not attempted to argue that the court has any power to make such an order. I was informed by counsel for the respondent that in effect, by that application the respondent seeks to have the second appellant's application for a stay dismissed.
The second appellant's application for a stay has been adjourned on several occasions. My reasons in Allregal Enterprises Pty Ltd v Carpaolo Nominees Pty Ltd [2009] WASCA 33 explain the problem. In short, questions arise as to whether or not Mrs Farrell is a person incapable of managing her affairs in respect of the present proceedings, and (if Mrs Farrell does not suffer from such incapacity) whether or not, in view of the existence of a limited guardianship order made by the State Administrative Tribunal (SAT) and the terms of O 70 of the Rules of the Supreme Court 1971 (WA), Mrs Farrell can represent herself or must conduct the proceedings only through a next friend represented by a solicitor.
These questions have caused problems for the parties, the court and the lawyer, Mr Wells, who appeared to assist the court.
The state of Mrs Farrell's mental health, her capacity to understand the nature of the litigation and to make decisions concerning it, is not something which I have been able to ascertain merely by observation, although she has, in her appearances before me, appeared strained and emotional and has at times displayed physical signs of distress.
As mentioned in earlier proceedings and above, Mrs Farrell is the subject of a guardianship order. Mr Waugh is the guardian. She does have a grip on at least some of the details of the history of the case but she has not articulated or not been able to articulate what error the master made in this case.
Despite my best endeavours to gain medical evidence about Mrs Farrell which might help me to decide whether she has capacity or not, medical evidence has not been forthcoming for a variety of reasons.
I note that in a case decided by McKechnie J in Farrell (by her next friend Ronald Charles Waugh) v Allum (as Executor of the will of Murray Keith Allum (Dec)) [2007] WASC 265, his Honour concluded, based largely on findings made in Farrell v CSL Ltd [2004] VSC 308 that Mrs Farrell did not suffer any medical condition (with one minor exception) and as a result had not established need, for the purposes of bringing an application under the Inheritance (Family and Dependants Provision) Act 1972 (WA). I cannot ignore the fact however, that in the year before Justice McKechnie made his decision, the State Administrative Tribunal made a guardianship order which was amended by SAT in 2007. The content of that order is set out in [4] of my reasons in Farrell v Allregal Enterprises Pty Ltd [2008] WASCA 264. These orders revoked an earlier guardianship order made in 2002.
I have been assisted by information received from the Public Advocate (an office created under s 91 of the Guardianship and Administration Act 1990 (WA)) who has provided a report concerning Mrs Farrell dated 19 February 2009. In that report the point is made that:
For the State Administrative Tribunal to make orders Mrs Farrell's presumption of competence to make her own decisions must first be overturned. Section 43 of the Guardianship and Administration Act 1990 … states that the Tribunal can make a guardianship order if Mrs Farrell is
•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 and control in the interests of his own health and safety or for the protection of others.
The report continues:
When the guardianship order was made in 2002 the Board appeared to have medical or psychological information which indicated Ms Farrell met at least one of the three criteria in s 43 of the Act. At the review hearing in 2006 the Public Advocate was aware that Ms Farrell's GP Dr Papaelias, had provided medical information indicating his opinion Ms Farrell had capacity to manage her own affairs. This office is not aware of any other medical evidence the Tribunal had before it when it made its order.
The Public Advocate's report indicates that in order to seek an updated medical evidence regarding Mrs Farrell's capacity, the Office of the Public Advocate has recently contacted Mrs Farrell's general practitioner and requested Mrs Farrell be referred for a specialist capacity assessment. The report indicates that to date there had been no response to this request. Mrs Farrell informed my Research Associate that she had been in contact with a psychiatric unit known as the Osborne Clinic. A senior officer from the Office of the Public Advocate ascertained that Mrs Farrell had an appointment with Dr Gordon Wang at the Osborne Clinic on Friday 20 February 2009. On 25 February 2009 in an email from the Office of the Public Advocate to my Research Associate, my Associate was advised that Dr Wang had only seen Mrs Farrell once. A psychiatrist from the Osborne Clinic indicated that Mrs Farrell was being treated for a depressive disorder with possible psychotic features but in effect was not in a position to express any opinion or comment on competency at this early stage of contact with Mrs Farrell.
The result of this history is that I am not able to form any opinion about whether Mrs Farrell is suffering from incapacity, but there is certainly sufficient material before me to indicate that the matter has to be further investigated.
I now turn to O 70 of the Rules of the Supreme Court 1971 (WA) which raises its own problem, in the event that the medical evidence eventually suggests that Mrs Farrell does have capacity. Order 70 r 2(1) of the Rules of the Supreme Court provides that:
A person under disability may not bring, or make a claim in, any proceedings except by his next friend and may not defend, make a counterclaim or intervene in any proceedings, or appear in any proceedings under a judgment or order, notice of which has been served on him, except by his guardian ad litem.
Order 70 r 2(2) of the Rules of the Supreme Court also provides that:
[A]nything which in the ordinary conduct of any proceedings is required or authorised by a provision of these Rules to be done by a party in the proceedings, shall … if the person is a person under disability, be done by his next friend or guardian ad litem.
The State Solicitor has appeared before me on behalf of the Public Advocate as amicus curiae and made submissions through counsel concerning the effect of O 70 of the Rules of the Supreme Court. I will not set out all of the submissions, but the written submission acknowledge the authority of the court under s 16(1)(d)(ii) of the Supreme Court Act 1935 (WA) to make inquiry in the exercise of the parens patriae jurisdiction of the Supreme Court. The State Solicitor submits, and I agree, that because of the 2007 guardianship order, Mrs Farrell is a represented person and therefore a 'person under disability' The State Solicitor also submits, and I agree, that the prohibition in O 70 r 2 of the Rules of the Supreme Court cannot be dispensed with unless the rules give the court power to do so. See Doyle v The Commonwealth (1985) 156 CLR 510, 518.
The State Solicitor identified possible ways to dispense with O 70 of the Rules of the Supreme Court or to otherwise deal with the circumstances. Two of them were:
(a)to exercise the power conferred by r 47(2) and (3) of the Supreme Court (Court of Appeal) Rules 2005 (WA) read with r 5(1)(b) which confers a power in certain circumstances to dispense with or modify a requirement of the Court of Appeal Rules or the Rules of the Supreme Court;
(b)to make a declaration that Mrs Farrell is no longer a person under a disability for the purposes of O 70 of the Rules of the Supreme Court. See Cadwallender v The Public Trustee [2003] WASC 72 [24], [41] and [51] ‑ [52].
Counsel appearing for the State Solicitor however, conceded in effect that these arguments were of doubtful validity. In my opinion, neither can be relied upon to dispense with O 70 for the following reasons:
(a)Rule 47 of the Court of Appeal Rules only permits the dispensation with rules or the modification of rules for case management purposes. The problem here is not one concerned with case management. It concerns the fundamental issue of Mrs Farrell's capacity to conduct the litigation.
(b)As to the second suggestion made by the State Solicitor, it is true that a declaration may be made by the court that Mrs Farrell is not a 'person under disability' but that would only be so in circumstances where the litigant was not a 'person under a disability' by reason of being a 'represented person' within the meaning of the Guardianship and Administration Act.
Order 70 r 3(3) of the Rules of the Supreme Court provides that the guardian (Mr Waugh) 'shall' act as next friend unless the court appoints some other person. However, there is a tension between that provision, the combined effect of s 46 of the Guardianship and Administration Act and the guardianship order. Section 46 of the Guardianship and Administration Act provides that a person appointed as a limited guardian has such functions as SAT vests in him in the guardianship order. The guardianship order in favour of Mr Waugh states that he has functions 'as the next friend' of Mrs Farrell to conduct legal proceedings 'except proceedings relating to the estate' of Mrs Farrell.
Further, Mrs Farrell says that that there is a potential conflict between Mr Waugh and Mrs Farrell which would perhaps make it undesirable to appoint him. Furthermore, Mr Waugh has informed the court that he does not wish to be appointed as next friend.
Finally, Mrs Farrell has not been able to identify anyone else who would be prepared to accept appointment as a next friend.
The only solution seems to be to exercise the court's power under s 7 of the Public Trustee Act 1941 (WA) and to appoint the Public Trustee as next friend. However, before doing so, I will hear submissions from the State Solicitor about whether I should appoint the Public Trustee or whether I should consider appointing the Public Advocate.

The bankruptcy of Mrs Farrell

On 18 February 2009, an affidavit was filed by Ms Minoshi De Silva, a solicitor employed by Solomon Brothers, the solicitors for the respondent. Annexed to the affidavit is a letter sent by Solomon Brothers to the Insolvency and Trustee Service Australia dated 4 April 2008. It stated that the solicitors had recently become aware that Mrs Farrell was declared bankrupt on 23 January 1998 by way of debtor's petition and that the bankruptcy was subsequently discharged by law on 24 January 2001. Their letter notes that Mrs Farrell was registered as the proprietor of the Muston Grove property on 12 September 1996 and remained as the current registered proprietor despite the bankruptcy. The letter noted that the Official Trustee in Bankruptcy lodged a caveat over the title to that property on 13 February 1998 and that it still remains recorded on the title. The letter asked the Official Trustee why the Muston Grove property was not sold; whether the Official Trustee formally disclaimed the Muston Grove property; why the Official Trustee had not withdrawn its caveat and whether the Official Trustee wished to be heard or joined as a party to the proceedings.
The affidavit also exhibited a letter dated 8 April 2008 from the Australian Government Insolvency and Trustee Service Australia, Western Australian branch. The letter states:
(a)that the Official Trustee had not sold the Muston Grove property because there was insufficient equity to enable the property to be sold on its own and that if that property was sold the Official Trustee may have a right of subrogation to make a claim against the recipient of any surplus funds;
(b)for those and the other reasons mentioned in the letter, the Official Trustee did not disclaim the Muston Grove property;
(c)the property did not revest automatically in the bankrupt upon discharge and that:
[T]here are limits on the time that the Official Trustee has to deal with property which was disclosed by the bankrupt, and in order to deal with an asset after this time the Official Trustee must serve a revesting notice on the bankrupt. However, in this instance the bankrupt did not disclose the property when she declared herself bankrupt;
(d)the Official Trustee did not wish to be heard or joined as a party to the proceedings but wished to be kept informed.
In view of this information the question arises as to whether Mrs Farrell has standing, represented via a next friend or not to conduct the appeal concerning the Muston Grove property. See generally Willoughby v Clayton Utz [2005] WASC 47. The answer is not clear but it is necessary to observe that Mrs Farrell was, in the proceedings before the master, resisting a money claim and a claim for possession. The fact that she was bankrupt would not prevent her from resisting judgment for a money sum or resisting giving up possession, depending on her reasons for doing so. Once again these are matters which may require resolution after submissions from Mrs Farrell; however this firstly requires resolution of the problem concerning Mrs Farrell's capacity.
At present, the fact is that I have had no submissions made to me concerning the merits of the appeal, although Mrs Farrell has filed three affidavits raising points which do not address the judgment appealed against in an endeavour to show error in the master's decision. In my reasons in Allregal v Carpaolo, I referred to New South Wales authority indicating that the court may have to stay proceedings until the issue of capacity is resolved. Such an order may be made in the court's implied power. The principles governing the exercise of the power would be similar to those applied when a party applies for a stay under s 15(1) of the Civil Judgments Enforcement Act 2004 (WA). This is also so in the case of an application for a stay of execution under the rules. See Weinert v Clark [2006] WASCA 253; Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2008] WASCA 222 and Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307. An important relevant consideration in deciding whether to grant a stay is whether the appeal might be rendered nugatory if the stay is not granted. The affidavit evidence before me reveals that the respondent has received an offer from a third party to purchase the Muston Grove property. The respondent informed the court that it proposed to accept that offer. If the offer is accepted, the existence of a sale agreement between the respondent and a third party will not immediately render the appeal nugatory. However, if settlement occurs and the third party becomes the registered proprietor and therefore gains an indefeasible title that would arguably render the appeal nugatory. Under the offer which would form the basis of a contract between the respondent and the third party, settlement would be 'within 90 days of acceptance (or earlier by mutual agreement)'.
The respondent has undertaken to give seven days' notice of an agreement with the purchaser to settle the sale of 6 Muston Grove with any purchaser. In those circumstances, there is nothing at the moment which justifies the grant of a stay.
I cannot entertain Mrs Farrell's application because she is prohibited from making any application by reason of O 70 of the Rules of the Supreme Court. Mrs Farrell's application had to be dismissed and I made that order on 24 February 2009. However, I also considered whether the court, exercising its implied power, should stay the judgment Mrs Farrell seeks to appeal against, pending the resolution of the problem caused by O 70 of the Rules of the Supreme Court. I decided I would not make an order staying the judgment for the reasons set out above, but it is clear that the appellant may make a further application (or Mrs Farrell may ask the court to exercise its implied power) via a next friend, if circumstances change in any respect, or if notice of a proposed settlement is given.