Andrews v Andrews
[2020] VSC 31
•11 February 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
MORTGAGE RECOVERY LIST
S ECI 2019 4634
| GARY PETER ANDREWS 1964 PTY LTD | Plaintiffs |
| v | |
| KATHLEEN PHILOMENA ANDREWS NORMAN SAME | Defendants |
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JUDGE: | NICHOLS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 December 2019 |
DATE OF RULING: | 11 February 2020 |
CASE MAY BE CITED AS: | Andrews & Anor v Andrews & Anor |
MEDIUM NEUTRAL CITATION: | [2020] VSC 31 |
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EQUITY – Interlocutory injunction – Whether a serious question to be tried – Whether balance of convenience favours granting injunction – ABC v O’Neill (2006) 227 CLR 57 – Bradto Pty Ltd v State of Victoria (2006) 15 VR 65 – Guardianship and Administration Act1986 (Vic) – Guardianship and Administration Act2019 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr M A Robins QC | Nathan Kuperholz |
| For the Defendants | Mr D V Aghion | SLF Lawyers |
HER HONOUR:
Overview – Issues and outcome
Kathleen Andrews and Gary Andrews are mother and son. In 2014 and 2015 Kathleen advanced some $4.5m to Gary and a company controlled by him (1964 Pty Ltd) by way of loans to each of them secured against Gary’s home in Hampton (the Hampton Property[1]).
[1]The land situated at 7 Mills Street, Hampton (as described in certificate of title volume 3943 folio 450).
During 2018 Kathleen’s health deteriorated and she entered permanent residential aged care. She is now 82 years of age. On 30 January 2019 Kathleen executed an enduring power of attorney (the 2019 EPA) in favour of Norman Same, who is an accountant (Same). In July 2019 Same issued written demands to Gary and 1964 for the repayment of the loans, followed in September 2019 by notices default and demand under s 76 of the Transfer of Land Act 1958 (Vic) (Notices).
In this proceeding Gary and 1964 (the plaintiffs) challenge the entitlement of Kathleen and Same (the first and second defendants) to call up the Loans, on various grounds including in reliance on an oral collateral agreement said to affect the enforceability of the loan agreements.
Gary (and Kathleen’s former solicitor Anthony Burke (Burke)) are challenging the validity of the 2019 EPA in proceedings currently before VCAT. They contend that Kathleen did not have decision making capacity when she appointed Same as her attorney.[2] They have also made application for the appointment of an independent administrator for Kathleen’s legal and financial affairs under s 43(1) of the Guardianship and Administration Act1986 (Vic). In this proceeding Same accepted that Kathleen has a disability[3] but otherwise rested on the presumption that Kathleen has decision-making capacity unless proven otherwise,[4] and on the May 2019 determination by VCAT affirming her capacity (as to which, see below). The VCAT proceedings are being managed and heard together and a final hearing of all extant matters is fixed for 27 - 28 April 2020.
[2]The application will be determined under Division 4 of Part 8 of the Powers of Attorney Act 2014 (Vic).
[3]Affidavit of Same sworn 13 November 2019, [18].
[4]Powers of Attorney Act 2014 (Vic) s 4(2).
In this proceeding Gary and 1964 seek interlocutory injunctive relief to restrain Kathleen and Same from acting on the Notices, serving further demands or seeking orders for the possession or sale of the Hampton Property.
On 17 October 2019 the defendants gave undertakings on an interim basis in the form of the injunction that the plaintiffs now seek until further order. The plaintiffs wish to preserve the status quo. The defendants say that they are entitled to act on the Notices and, if the moneys are not repaid, to seek orders for possession and sale of the Hampton Property.
For the reasons that follow, weighing all considerations together, it is my view that the grant of an injunction invites a lesser risk of injustice than to allow the defendants to call in the Loans. There are undoubtedly serious questions to tried. Those questions go to Same’s entitlement to have issued the Notices. The foundational question of Kathleen’s capacity will be determined by VCAT relatively soon. Otherwise, the interests of the parties are fairly evenly balanced. Accordingly, I will grant the plaintiffs’ application.
Principles
In order to establish an entitlement to interlocutory relief an applicant must show that there is a serious question to be tried. The applicant must make out a prime facie case in the sense of demonstrating that there is a sufficient likelihood of success at trial to justify the preservations of the status quo pending the determination of the parties’ rights at trial, in the circumstances. This does not mean that the applicant has to establish that it is more likely than not that she will succeed at trial. How strong the probability needs to be depends upon the nature of the rights asserted and the practical consequences likely to flow from the relief sought.[5]
[5] ABC v O’Neill (2006) 227 CLR 57 (O’Neill) at 68 [19], 82 [65].
The applicant must also establish that the balance of convenience favours the granting of an injunction. The Court should take whichever course appears to carry the lowest risk of injustice, should it turn out to have been wrong in the sense of granting an injunction to a party who fails to establish its right at trial or failing to grant an injunction to a party who succeeds at trial.[6]
[6]Bradto Pty Ltd v State of Victoria (2006) 15 VR 65.
Incorporated within the consideration of “balance of convenience” or sometimes considered as a separate matter, is the question whether damages would be an inadequate remedy, meaning that unless the injunction is granted the plaintiffs will suffer irreparable injury for which damages will not be adequate compensation.[7]
[7]Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148, 153.
Importantly, the organising principles are not to be applied in isolation from one another, but must be considered together. In considering where the lower risk of injustice lies all relevant factors are to be weighed in the balance. The strength of the applicant’s case and their chances of success may be a relevant matter when assessing the balance of convenience.[8]
[8]O’Neill at [65]; Kellog Brown & Root Pty Ltd v Australian Aerospace Ltd [2007] VSC 200, [48].
Background Facts
During the late 1980’s and mid 1990’s Gary, his mother and his now deceased father worked together in a family business – an engineering machine tool trading company of which they were directors. After his father’s death in 2009 Gary and his mother worked together on the residential development of a property at 652 High Street, Prahran, owned by Kathleen. According to Gary’s evidence, he supplied the funds and obtained finance for the development, which was completed in 2014.
In 2014 and 2015 Kathleen made the loans that are the subject of this proceeding. Gary describes the funds loaned as comprising at least in part, the proceeds that he had generated for Kathleen by the development of 652 High Street.
In particular, by a written agreement made on 14 January 2014 Gary agreed to borrow and Kathleen agreed to lend the sum of $1,614,696 (Personal Loan Agreement).[9] The loan was interest free and to be repaid on the termination date, being the earlier of the settlement of any sale of the Hampton Property or within 90 days of a written demand from the Lender but no earlier than 90 days from Kathleen’s death.[10] The loan was secured by first mortgage registered over the Hampton Property, of which Gary is the registered proprietor.[11]
[9]Affidavit of Norman Ralph Same (13 November 2019), exhibit NRS-3: Personal Loan Agreement between Kathleen and Gary (14 January 2014) (Personal Loan Agreement).
[10]Personal Loan Agreement, sch 1, item 6.
[11]Personal Loan Agreement, sch 2.
On 27 February 2014 Kathleen executed a will which, save for specific bequests to her grandchildren and to her son, Michael James Andrews (known as James), bequeathed the whole of her residual estate to Gary (2014 Will).
On 17 December 2015 three further written agreements were made (collectively, the Loan Agreements).
The first was to vary the Personal Loan Agreement by deed (Deed of Variation).[12] By that agreement the advance to Gary was increased to $2,636,216.47 and remained interest free. The loan was made repayable on the settlement of any sale of the Hampton Property, or within 90 days of a written demand from Kathleen, or within 90 days of Kathleen’s death (whichever was the earlier). Accordingly, by this variation the loan became repayable within 90 days of demand within Kathleen’s lifetime, whereas previously repayment could not be required during Kathleen’s lifetime unless the Hampton Property was sold.
[12]Affidavit of Norman Ralph Same (13 November 2019), exhibit NRS-4: Deed of Variation to Loan Agreement (17 December 2015) (Deed of Variation).
The second was a loan agreement between Kathleen as lender, 1964 as borrower and Gary as guarantor (1964 Loan Agreement).[13] The sum of $1,903,026.54 was advanced, repayment of which Gary guaranteed. Like the Deed of Variation, the 1964 Loan was secured by an additional mortgage registered over the Hampton Property.[14] It was interest free and was not be repayable by Gary until the earlier of the settlement of the sale of the Hampton Property, or within 90 days of a written demand from Kathleen, or within 90 days of Kathleen’s death.[15] By the third agreement (called a “general security agreement”) Gary and 1964 gave undertakings to Kathleen that are not material on this application.
[13]Affidavit of Norman Ralph Same (13 November 2019), exhibit NRS-5: Loan Agreement between Kathleen and 1964 (1964 Loan Agreement).
[14]1964 Loan Agreement, sch 2.
[15]1964 Loan Agreement, sch 1, item 7.
Consequently Kathleen registered two mortgages over the Hampton Property.
Gary says that the agreements of 17 December 2015 were made subject to a collateral agreement (partly oral and partly to be implied) between Gary and Kathleen (Loans Collateral Agreement) by which it was agreed that Kathleen would never serve a demand under any of the written agreements unless Gary’s financial position and claims by his creditors necessitated she do so, and that if service of such a demand were necessary, Kathleen would make other provision for Gary equal to the total sum on the loans. Implicitly, it is contended that terms requiring the loans to be repayable by Gary and by 1964 within 90 days of demand, were intended to afford protection against potential demands by creditors of Gary or 1964 and that in substance, Gary’s overall position would be no worse than it was before the Loan Agreements were made. Gary says that but for Kathleen’s assurances he would not have agreed to vary the Personal Loan or caused 1964 to agree to the terms of the 1964 Loan Agreement and would instead have obtained commercial finance.
The defendants deny that the Loans Collateral Agreement was made and say that even if it were made it would be of no legal effect.
On 25 November 2016 Kathleen made an enduring power of attorney in favour of Gary and his brother James jointly as alternative attorneys. James resigned the power on 23 October 2018, at which time Burke became the alternative attorney.
Kathleen lived alone in her family home until 13 August 2019 when she was admitted to Cabrini Hospital. Since her discharge on 24 August 2019, Kathleen has lived in residential care at Arcare Parkview Aged Care, Malvern East.
Gary’s evidence was that in and after early January 2019 he observed what appeared to him to be a “marked and inexplicable change” in Kathleen’s attitude towards him.
On 16 January 2019 Dr Peter Drysdale (whose report is discussed below) attended Parkview Aged Care and interviewed Kathleen, at the request of SLF Lawyers, who act for Same and Kathleen in this proceeding. His report records that her elder son James was present with Kathleen when Dr Drysdale arrived.
On 23 January SLF Lawyers visited Kathleen at Parkview Aged care. There was no evidence about what prompted that visit.
On 30 January 2019 Kathleen executed the 2019 EPA in favour of Same.[16] The 2019 EPA authorises Same, as attorney, to do anything on Kathleen’s behalf that can be done by an attorney for both personal matters and financial matters, immediately on the making of the EPA.
[16]Exhibit GPA-1 to Gary’s affidavit (10 October 2019) (2019 EPA).
According to Gary’s evidence, neither Same nor SLF were known to Kathleen before January 2019.
On 26 February 2019, Gary and Burke applied to VCAT under the Powers of Attorney Act2014 (Vic) for a declaration that the 2019 EPA was invalid and that the 2016 EPA remained in force. Kathleen sought orders to the opposite effect. The application was heard on 30 April 2019 and orders were made (with written reasons) on 20 May 2019. VCAT found that Kathleen did have capacity to make the 2019 EPA and declared it to be valid, with effect that the 2016 EPA had lapsed on 30 January 2019.
It appears that on 16 April 2019 Kathleen made a new will (the 2019 Will). A document that Same identifies as a copy of Kathleen’s new will was produced by Same on this application, as an exhibit to an affidavit affirmed by him on 21 November 2019. It was not previously disclosed to Gary. By the 2019 Will James is appointed as executor and trustee. Save for specific bequests to her grandchildren, Kathleen bequeaths the whole of her residuary estate to James. No provision is made for Gary. That fact is made the subject of specific declarations in the Will to the effect that Kathleen believes that Gary has benefited inappropriately from her assets and is in no need of provision under the will.
Returning to the loans in issue, on 24 June 2019, Same, as Kathleen’s attorney, issued two demands for payment, to be met by 5 July 2019. One demand was issued under the Personal Loan Agreement for the repayment of $2,836,216. The other demand was issued under the 1964 Loan on 1964 for repayment of $1,903,027. On 1 July 2019 Kathleen’s lawyers sent a letter to the lawyers for Gary and 1964 that repeated the demands sent on 24 June 2019. In this proceeding the plaintiffs contend that the Notices were defective.
On 24 September 2019, SLF lawyers served two Notices of default and demand under s 76 of the Transfer of Land Act1958 (Vic) one in respect of each of the Personal Loan Agreement and the 1964 Loan. By this application the plaintiffs seek to restrain the defendants from taking any steps to enforce or act on those demands or on the Notices issued between 24 June and 24 September 2019.
Gary and Burke have (by an application issued in June 2019) applied for a rehearing on the question of the validity of the 2019 EPA. On the rehearing VCAT is entitled to affirm, vary or set aside the original order and make another order in substitution.[17] The re-hearing is to be conducted on the evidence as it stands at the date of the re-hearing.[18] It will be necessary for Gary and Burke to obtain an extension of time, their application having been submitted some six hours late. It was not seriously contended that the extension would likely be refused.
[17]Powers of Attorney Act 2014 (Vic), s 127.
[18]Guardianship & Administration Act 1986 (Vic), s 60C(1).
As noted above, Gary and Burke have also made application (filed in July 2019) for the appointment of an independent administrator of Kathleen’s legal and financial affairs under s 43(1) of the Guardianship and Administration Act1986 (Vic).
Same has made an application in VCAT for accounts and production of documents by Gary and Burke.
At a directions hearing on 27 November 2019, orders were made for an independent assessment of Kathleen by Dr Ramon Mocellin, who is a neuropsychiatrist and psycho-geriatrician. The report of this assessment is to have been filed and served by 20 January 2020. The independent assessment of Kathleen and her capacity, and the consequent outcome of the rehearing application, is critical to all extant proceedings.
Mediation is ordered to take place as soon as possible after this date. If mediation is unsuccessful, Gary’s application for an extension of time in which to apply for a rehearing will be heard on 19 February 2020. Further directions in the matters that remain extant will be fixed in late March and, as noted, a final hearing will occur on 27 and 28 April 2020.
Serious Question to be Tried
Issue 1 – Kathleen’s capacity
The plaintiffs contend that the issue of Kathleen’s decision making capacity gives rise to a question of sufficient merit to justify the preservation of the status quo until that question can be resolved (albeit by VCAT rather than this court). I agree, for the reasons now expressed.
The issue of Kathleen’s decision making capacity as at 30 January 2019 directly bears on the validity of the Notices of default and demand. It was not disputed that if in fact Kathleen did not have capacity on 30 January 2019 when she appointed Same as her attorney, that appointment was invalid from its commencement[19] and the acts of Same undertaken pursuant to the power (including the issue of the Notices) are a nullity. The question before me is whether Same and Kathleen should be restrained from acting on those Notices. The issue of capacity is, prima facie, foundational to the issue in contest in these proceedings, provided it is sufficiently contestable.
[19]See Powers of Attorney Act 2014 (Vic), ss 119, 125(2).
In my view the issue is sufficiently contestable.
VCAT did not consider that there was sufficient evidence to displace the presumption that Kathleen had capacity at the relevant date.[20] It is not necessary for me to decide whether the Tribunal was correct, or to determine that Gary and Burke are more likely that not to succeed on the re-hearing. It sufficient that the plaintiffs make out a prima facie case in the sense discussed above. The plaintiffs have satisfied their burden in this respect.
[20]JXJ (Guardianship) [2019] VCAT 735 (VCAT Reasons), [35]-[39].
That conclusion may be drawn, first, from the substance of presently available medical material.
Four medical reports were in evidence before VCAT. The first report was a neuropsychological assessment performed Dr R. Anne Howell[21] on 21 November 2018, while Kathleen was an inpatient at Cabrini. Relevantly, Dr Howell supported the activation of enduring powers of attorney and would have supported an application to VCAT for the appointment of a guardian, as a consequence of her observations of Kathleen’s cognitive capacity. She found that at the time of the assessment Kathleen was unable to make reasoned and informed decisions regarding her lifestyle, by virtue of executive dysfunction, poor memory and diminished insight.
[21]Referred to in the VCAT Reasons as the report of Dr Anna Masik who, along with Associate Professor Michael Rose, was the referring geriatrician at Cabrini.
The second report was made by Associate Professor Mark Rose, a consultant physician and geriatrician of Cabrini Hospital, on 6 February 2019. Dr Rose also opined that during interviews with Kathleen she was unable to demonstrate capacity to make reasoned and informed decisions regarding her lifestyle by reason of executive dysfunction, poor memory and diminished insight.
The third report, dated 20 February 2019, was prepared at the request of SLF Lawyers by Dr Peter Drysdale, a consultant specialist psychiatrist, who interviewed Kathleen on 16 February 2019. Dr Drysdale found that Kathleen had a basic understanding of the purpose of a power of attorney and, despite observations regarding limitations on Kathleen’s cognitive capacity due to mild dementia, compromises in her short-term memory and executive functioning, that Kathleen was able to understand the nature and purpose of a power of attorney.
The fourth report was prepared also at the request of SLF Lawyers by Dr Leonie Simpson, a clinical neuropsychologist, on 10 April 2019, following an assessment of Kathleen on 4 April 2019. Dr Simpson identified cognitive impairment with results consistent with mild dementia and found that Kathleen had a very vague understanding of an enduring power of attorney and, because of her cognitive impairment, could not understand and retain information relevant to and the effect of making an enduring power of attorney. In Dr Simpson’s view Kathleen did not have decision making capacity at the date of the assessment.
Of the four medical reports relied upon, the Tribunal was most persuaded by the report of Dr Drysdale, placing particular weight on the near-contemporaneity of his assessment (on 16 February 2019) to the making of the 2019 EPA (on 30 January 2019), compared with the other assessments made either months beforehand or months after, as the Tribunal put it.[22]
[22]VCAT Reasons, [45].
At the request of Gary’s solicitors, a retrospective report on Kathleen’s capacity was prepared by clinical neuropsychologist Sophe Kimonides. The report was prepared on 10 August 2019, on the papers, with reference to all the material before VCAT. Dr Kimonides describes her task – of performing a retrospective analysis as to Kathleen’s capacity on 31 January 2019 – as difficult and unusual. Therefore, she said, her opinion can only be stated to a degree of possibility or likelihood as to Kathleen’s capacity. Within that limitation, Dr Kimonides concluded that it is highly unlikely that Kathleen would have had an adequate understanding of an enduring power of attorney as at 30 January 2019.
That the issue is contestable is also evident from the fact that on the re-hearing of this question presently fixed for April 2020 VCAT will consider an independent neuropsychological assessment of Kathleen’s decision making capacity.
In making its decision the Tribunal also took into account lay opinion about Kathleen’s capacity based on the observations of two SLF Lawyers and of Same (who the Tribunal described as an “independent accountant”).[23] Written submissions filed by Gary and Burke on the rehearing application were before me on this application. Gary and Burke will submit that the preponderance of the existing evidence establishes Kathleen’s lack of capacity on 30 January 2019.
[23]VCAT reasons at [47].
They will also contend (among other things) that the original decision was undermined by a lack of procedural fairness because the Tribunal made a decision without hearing argument, allowing witnesses to be examined or properly considering relevant the material, and that Same and SLF solicitors cannot be considered independent witnesses of fact.
The defendants’ primary case is that Kathleen is presumed to have capacity unless proven otherwise[24] and that the issuing of the Notices of demand and default were acts of a validly appointed attorney. The defendants go on to say, however, that the prospect that Kathleen might be found not to have had capacity as at 30 January 2019 or subsequently, is not dispositive of the issue.
[24]Powers of Attorney Act 2014 (Vic) s 4(2).
It was accepted for the purposes of this application that if Kathleen did not have capacity to appoint Same as her attorney, or if Kathleen does not presently have capacity, a reasonably likely outcome will be the appointment of an independent administrator of Kathleen’s legal and financial affairs.
Gary and Burke are seeking orders from VCAT for the appointment of an administrator, irrespective of the validity of the 2019 EPA. They say in substance that Same is acting contrary to his obligations and that SLF, who are acting for Kathleen and Same, are conflicted because they previously acted for Gary and 1964 in an acrimonious dispute with his former business partner and continue to act for the former partner, without Gary’s consent. In order to determine this application it is not necessary for me to consider the prospect of those claims being established.
The essential point is that on the defendants’ case an independent administrator would be bound to call the loans and, if they are not repaid, to exercise powers of sale in reliance on the existing Notices of default, or by issuing fresh notices. The defendants’ proposition is that properly assessed, Kathleen’s best interests would be served only by seeking repayment of interest-free loans repayable on demand. Accordingly, it matters not whether the 2019 EPA was valid.
In my view the question whether an independent administrator would act to call in the Loans is sufficiently contestable for present purposes.
Decision-making in terms of the “best interests” of the represented person is one of the objects[25] or three core principles[26] of the Guardianship and Administration Act 1986 (Vic), together with the use of means least restrictive to the person’s freedom and giving effect to the represented person’s wishes wherever possible. Counsel for Kathleen and Same properly acknowledged that the meaning of “best interests” in this context cannot, as a matter of principle, be strictly equated to financial or commercial interests, and that it must comprehend, for example, the ability to a represented person to “look after” members of their family.[27]
[25]Guardianship and Administration Act1986 (Vic) (G&A Act 1986), s 4(2).
[26]PJB v Melbourne Health (2011) 39 VR 373 (Patrick’s Case) at 378 [13].
[27]See for example, EBG (Guardianship) [2019] VCAT 760, [54]-[56].
I note that while the Guardianship and Administration Act1986 is currently in force, it has been repealed and replaced by the Guardianship and Administration Act2019 (Vic) which comes into effect on 1 March 2020.[28] Gary’s application for an independent administrator to be appointed to manage Kathleen’s financial affairs will be determined, by orders of VCAT made on 29 November 2019, in late April 2020. That application will, therefore, be subject to the provisions of the new Act.[29]
[28]Guardianship and Administration Act2019 (Vic) (G&A Act 2019), s 2.
[29]G&A Act2019, s 201(2).
While it re-enacts many provisions relevant to the question whether, if an independent administrator were appointed by VCAT, they would exercise that power as Same has done under the 2019 EPA by calling on the Loans, the new Act moves away from “best interests” as an object and obligation upon an administrator.[30]
[30]G&A Act 2019, ss 7, 8, 9. See also Victoria, Parliamentary Debates, Legislative Assembly, 19 December 2018, 63 (Jill Hennessey, Attorney General); Victorian Law Reform Commission, Guardianship (Report No 24, January 2012), [6.93]-[6.96].
Under the 1986 Act it was possible to separate out the represented person’s wishes (to the extent they could be expressed) and their capacity from their best interests. Indeed, the 1986 Act has been interpreted as giving primacy to an external view of “best interests”.[31]
[31]OFS (Guardianship) [2014] VCAT 1598, [32]; see also Patrick’s Case at 422 [224].
Under the new legislation the “best interests” object is replaced with an obligation to act “in a manner which promotes the represented person’s personal and social wellbeing”.[32] Section 55 of the 2019 Act relevantly provides that an administrator must act in accordance with sections 8 and 9. Those provisions emphasise the will and preferences of the person with a disability.[33] Sub-section 9(1)(c) provides that if the person making a decision for the person with a disability is not able to determine the represented person’s likely will and preferences, they should act in manner which promotes the represented persons “personal and social wellbeing”.
[32]G&A Act2019, s 9(1)(c).
[33]See G&A Act 2019, ss 8, 9.
I need not express a view as to whether the new Act will result in a different outcome to that which would have resulted under the 1986 Act in this case (and nor could I do so on the present evidence). It may be observed, however, that it will be incumbent upon an administrator to assist Kathleen to express her will and preferences so that, as far as practicable, her wishes direct the decisions made for her. If it is not possible to determine her will and preferences, the administrator must give effect, as far as practicable in the circumstances, to what he or she believes Kathleen’s will and preferences would be, including by consulting her close friends and carers.[34]
[34]G&A Act 2019, ss 8, 9.
It has not been established on the evidence before me that an administrator, seeking to give effect to Kathleen’s wishes in accordance the statutory obligations imposed on the administrator and on the evidence available to him or her at the time, would, come what may, determine that the loans should be called in, replicating Same’s actions.[35]
[35]including by obtaining specification from VCAT of the power to collect, receive and recover moneys due, and if necessary, issue legal proceedings – see G&A Act 2019 ss 51, 52.
There is limited and equivocal evidence of Kathleen’s wishes before me. Specifically, there is no direct evidence that Kathleen wishes for the loans to be called up.
The defendants rely on the evidence referred to in the VCAT reasons. There, Kathleen did not give sworn evidence, but was, according to the Tribunal, “adamant at the hearing that she made the 2019 EPA because she did not want [Gary] involved in her financial affairs”,[36] and “clearly expressed her views that she signed the 2019 EPA because ‘[Gary] is only in this for his own greedy purposes. I wanted that changed’.”[37] The VCAT reasons make reference to Same’s affidavit evidence that Kathleen was concerned to have access to and use of her personal funds.[38]
[36]VCAT reasons, [10].
[37]VCAT reasons, [18].
[38]VCAT reasons, [28].
As noted above, Kathleen made a new will on 6 April 2109, leaving her residuary estate to her son James, and making no provision for Gary.
In this proceeding Same deposes to Kathleen informing him that she does not wish Gary or Burke to have any decision making role in her life.[39] Same also deposes to a direct statement he attributes to Kathleen having made over the telephone on 30 September 2019, that Same should, “hold off selling Gary’s home if we can, but if we have to, we have to. … You have to do what is best for me and if that is selling his home then you have to do it. Do what you think is best for me”. That statement is equivocal.
[39]First Same affidavit (13 November 2019), [20].
The present uncertainty about the likely actions of an independent administrator speaks in favour of an injunction restraining action on the Notices and in relation to the Hampton Property, not against it.
The plaintiffs contend that there are additional serious questions to be tried. I will consider these in turn.
Issue 2 - Loans Collateral Agreement and Estoppel
The defendants say that there is no serious question to be tried in respect of the Loans Collateral Agreement or the claimed estoppel and equitable remedies, in particular that:
(a) Reliance on the Loans Collateral Agreement is precluded because it relies upon Kathleen’s intention expressed in her 2014 Will, and the law is that while a testator remains alive a beneficiary under a will obtains no right or interest from the will (the mere expectation point);
(b) Because the Loans Collateral Agreement is not in writing its enforcement is precluded by s 53 of Property Law Act 1958 (Vic) (the statute of frauds point);
(c) The elements of the estoppel claim cannot be made out and a remedial constructive trust is not available (the estoppel points);
(d) The Loans Collateral Agreement is inconsistent with the “no waiver” and “complete agreement” clauses in the Personal Loan Agreement and the 1964 Loan Agreement (the inconsistency point).
For the foregoing reasons, in my view the matters raised by the defendants do not establish that the plaintiffs have an insufficiently plausible case for the granting of final relief. Rather, the competing contentions of the parties demonstrate that the claims relating to the Loans Collateral Agreement must be determined at trial. The plaintiffs’ case raises serious questions to be tried, and clearly so.
Was the Loans Collateral Agreement made?
The defendants submit that there are real questions as to whether the Loans Collateral Agreement is sufficiently certain to be capable of enforcement. I agree. However, that fact is not sufficient to preclude the plaintiffs proceeding at this stage.
On this application Gary gave evidence of the conversation between him and Kathleen by which the Loans Collateral Agreement and related representations were said to have been made, and that but for the assurances he received he would not have agreed to vary the existing loan arrangements. The evidence was expressed at a high level of generality. Kathleen did not give evidence. Same’s evidence (hearsay, and also sparsely elaborated) was to the effect that Kathleen told him in November 2019 (shortly before this application was heard) that she does not remember saying to Gary that he would not have to repay the loans she had made to him and does not think that she would have said this; she does not remember, but he “tricked” her. Difficult issues may arise when the time comes to determine what was said between Kathleen and Gary. However, that time is not now. The existence and terms of the Loans Collateral Agreement are matters for trial.
The mere expectation point
The defendants’ submission accurately states the established proposition expressed in cases including Klewer v Official Trustee in Bankruptcy (No 2).[40] During the life of a testator a beneficiary under a will obtains no legal or equitable interest in the testator’s property; he has no more than a hope or expectation of succeeding to the property. This is not, however, as the defendants at least initially submitted, a “complete answer” to the plaintiffs’ claim.
[40]Klewer v Official Trustee in Bankruptcy (No 2) [2008] FCA 1788 and the authorities there cited.
It is true that the alleged Loans Collateral Agreement refers to the intention expressed by Kathleen in her 2014 Will. The Agreement as alleged has two principal provisions. First, Kathleen agrees never to call in the Loans prior to her death unless Gary’s financial position necessities such a course. Second, the Agreement contemplates an adjustment to Gary’s position in that event, so as to ensure that the bequests to him as contemplated in the will were effectively implemented.
As the defendants put it, the Agreement not to call in the loans was conditioned upon Gary having the entire residuary beneficial interest in Kathleen’s estate. That contention is plainly open. Whether it would be possible to sever what I have called the first and second parts of the Agreement was not explored on this application.
The defendants characterise the Agreement as expressing a promise made by a testator while alive which is said not to be enforceable until death, and enforceable in circumstance where what is promised comes out of the bequest provided in the will. The substance of the Agreement, they contend, is the attempted enforcement of a beneficiary’s expectation, contrary to established principle.
The proper characterisation of the meaning and effect of the Loans Collateral Agreement and whether in truth it engages that principle is a matter for trial.
The plaintiffs say that the Loans Collateral Agreement was intended to impose a condition precedent on the service of demands by Kathleen during her life-time and that by restraining the calling in of the loans, or alternatively seeking the imposition of a remedial constructive trust, they are not seeking an ante-mortem testamentary trust over Kathleen’s assets. On their case the principle stated in the cases discussed in Klewer has no application.
The plaintiffs’ characterisation is sufficiently arguable to meet the threshold required for the granting of interlocutory relief to preserve the status quo. The disposition of this issue will require, at least, an exercise of construction and a consideration of the application of the principle discussed in cases such as Klewer to these facts which, as the defendants’ counsel quite properly volunteered in argument, were likely not addressed squarely in existing authority on sufficiently similar facts.
The statute of frauds point
The parties are in dispute as to whether the Loans Collateral Agreement deals with an interest in land. In order to attract s 53 of the Property Law Act 1958 (Vic) the Agreement must be capable of being characterised as creating or disposing of an interest in land.
The plaintiffs contend that the mortgage over the Hampton property incorporates the Loan Agreements by reference, and that it further incorporates the Loans Collateral Agreement because that agreement modifies the written Loan Agreements. The question whether the Loans Collateral Agreement is properly characterised in that way depends upon the construction of the Agreements and is in my view a contestable matter for trial. The plaintiffs contend that the Loans Collateral Agreement simply does not deal with an interest in land. That characterisation is sufficiently contestable in my view.
Furthermore, as the defendants point out, s 53 of the Property Law Act expressly does not affect the creation or operation of resulting, implied or constructive trusts. This question was considered in Bahr v Nicolay,[41] where Brennan J (as His Honour then was) said that it might be thought that if the undertaking from which a constructive trust originates is an oral collateral agreement, the statue of frauds would preclude its enforcement; but in fact, it is no bar to the imposition of a constructive trust that it is sourced in an oral agreement. Brennan J went on to say that, “if a statute enacted to prevent fraud could be raised by a purchaser as a cloak for unconscionable conduct, the statute would be put to a purpose for which it was not intended.”[42] This latter point is engaged by the plaintiffs’ estoppel claim. The contention that the statute of frauds has application here is insufficiently potent to extinguish the plaintiffs’ claim.
The inconsistency point
[41]Bahr & Anor v Nicolay & Ors (1987) 164 CLR 604 (Bahr v Nicolay).
[42]Bahr v Nicolay, 655-656.
The defendants contend that the alleged Loans Collateral Agreement is inconsistent with express terms of the Personal Loan Agreement and the 1964 Loan Agreement.
Clause 11.8(a) of the Personal Loan Agreement (as varied by the Deed of Variation) provides that:
Neither this Agreement nor any provision of this Agreement may be amended, modified, waived, discharged or terminated orally.
Clause 12.9(a) of the 1964 Loan Agreement was to the same effect.
The defendants submitted that the Loans Collateral Agreement amounted to a purported oral variation of the existing Loan Agreements and accordingly, being inconsistent with the primary contracts, it could not stand as a collateral contract. In my view it is sufficiently open for present purposes to contend that one could read the alleged oral agreement as sitting consistently with the written agreements, such that the existing Loan Agreements afforded Kathleen a right (to all call on the loans in her lifetime, on notice); that right remained, but by the Loans Collateral Agreement she bound herself not to exercise it. That is not to say that that is the correct reading of the Loans Collateral Agreement; merely that it is open, and sufficiently open in my view. The question is one of construction, on which the defendants did not submit that theirs was the only available construction.
Clause 11.8(b) of the Personal Loan Agreement (as varied by the Deed of Variation) provides that:
No variation, modification or waiver of any provision of this Agreement nor consent to any departure by a party there from, shall in any event by of any force or effect unless the same shall be confirmed in writing, signed by the parties and then such variation, modification, waiver or consent shall be effective only to the extent for which it may be made or given.
Clause 12.9(b) of the 1964 Loan Agreement was to the same effect.
The defendants submitted that the Loans Collateral Agreement amounted to waiver or modification or a departure from the terms of the existing Loan Agreements and, because it was not in writing as required by clauses 11.8(b) and 12.9(b) respectively, was of no effect. Again, whether or not the Loans Collateral Agreement should be so characterised is a matter of construction, of both the written and alleged oral agreements. The plaintiffs’ contention, that the “no waiver” clauses do not preclude any collateral agreement, is sufficiently open for present purposes.
In any event, even were the defendants’ construction arguments ultimately accepted, that result would not of necessity entail the rejection of the plaintiffs’ estoppel claim. Whether the estoppel claim raises a serious question has therefore to be considered separately.
The estoppel points
The plaintiffs contend that Kathleen is estopped from enforcing her legal right to call in Loans because it would be unconscionable for her to depart from representations said to have been made by her, on the basis of which Gary says he relied as constituting the foundation of the dealings between him and Kathleen on the issue of the Loans. As the plaintiffs submitted, they, like the claimants in Waltons Stores v Maher,[43] invoke promissory estoppel to enjoin the defendants’ denial of an effective contractual relationship.
[43]Waltons Stores (Interstate) Limited v Maher & Anor (1987) 164 CLR 387 (Waltons Stores v Maher).
I accept the defendants’ submissions that there are a number of hurdles that the plaintiffs’ claim must clear, including the foundational issue of whether there was any unconscionability in Kathleen’s resiling from statements (if made) about how she would financially benefit Gary in the future. That notwithstanding, I accept the plaintiffs’ submission that their estoppel claim is a paradigm example of an issue that should be determined at trial.
The defendants submitted first, that the estoppel claim fails because the plaintiffs seek to impose a constructive a trust which is a remedy, not a cause of action. That issue cannot be determinative of the application. The plaintiffs’ position is that they invoke promissory estoppel in aid of their cause of action in contract – seeking the equitable enforcement of a promise which, it is well recognised, may be the most appropriate way to satisfy the equity arising from a promissory estoppel.[44] Moreover, the plaintiffs say, they are using estoppel defensively in that they seek to restrain the defendants from acting on the service of the Notices of demand and the assertion of the right to so act.
[44]See Waltons Stores v Maher at 400-401 (per Mason CJ and Wilson J); at 419 and 426-427 (per Brennan J).
The plaintiffs’ characterisations of their claim are in my view prime facie reasonable. So too, is the plaintiffs’ contention that the legal question whether or not promissory estoppel creates positive rights may well be a moot point on these facts. Even if that legal question does arise, it is presently unsettled.[45] The proper characterisation of the estoppel claim and whether it is open are matters for trial.
[45]See F.J. Curran Pty Ltd v Almond Investors Land Pty Ltd [2019] VSCA 236 at [251]-[262].
Second, the defendants contended that there was no basis for Gary to assume that there would be a legally binding relationship between him and Kathleen to the effect alleged, because that relationship could never exist – Kathleen could never be bound to fulfil Gary’s expectations about the disposition of her estate. For the reasons discussed above, the nature and effect of the Loans Collateral Agreement and the cognate representations is sufficiently contestable.
Third, the defendants contend that the plaintiffs have not suffered any detriment because if the Loans are repaid on demand, the plaintiffs simply lose a benefit that they have long enjoyed – the gratuitous use of Kathleen’s money.
It is the fact (and it was not contested) that if the Loans are called in the plaintiffs’ financial position will be significantly changed. The defendants evidently wish to contend at trial that such a change did not constitute a relevant detriment. However, it was not submitted that, as a matter of law, a change in a plaintiffs’ position of that kind could not be so characterised. On this application Gary gave evidence (albeit expressed in general terms and not tested by cross-examination) that but for Kathleen’s representations he would have arranged his financial affairs differently. In these circumstances, the plaintiffs’ estoppel claim is not answered by the “lack of detriment” contention.
Fourth, the defendants submitted that it was unlikely to be open to the Court to impose a constructive trust over the Hampton property in Gary’s favour, because Gary was at all times the registered proprietor of the land. For the purposes of this application it is sufficient to observe that the defendants do accept that alternative relief – namely a permanent injunction restraining a demand upon the loans until Kathleen’s death – would be available, assuming the foundation for it were established. In any case, I consider that the plaintiffs’ classification of the relief sought – a constructive trust as to the proceeds of any premature demand made by Kathleen unconscionably or breach of the Loans Collateral Agreement, as opposed to a constructive trust “over the land” – is likely correct.
Issue 3 validity of the notices
As noted above, on 24 June 2019 Same issued demands under the Personal Loan Agreement and the 1964 Loan Agreement. The demands relevantly stated that,
As Kathleen’s attorney I am now making demand that the Loan be repaid. Please: (1) confirm by no later than 4.00pm on Friday 28th June 2019 that the Loan will be repaid by 5th July 2019; and (2) make arrangements to pay the amount of $2,836,216 into [the bank account specified]. … Should [you] fail to repay the Loan in accordance with the above, I will take necessary steps as Kathleen’s attorney, including instructing solicitors to issue proceedings seeking repayment of the Loan, without further notice to you.
By letter to Gary’s solicitors dated 1 July 2019 SLF lawyers stated that,
On 24 June 2019, in his capacity as Mrs Andrews’ attorney and on the understanding that the loan is an ‘at call’ loan, Mr Same made formal demand on Mr Andrews that (1) he confirm by no later than 4.00pm on 28 June 2019 that the loan will be repaid by 5 July 2019; and (2) he make arrangements that the loan be repaid into the specified account of Ms Andrews (Demand). Despite the Demand, Mr Andrews has failed, refused or neglected to provide the confirmation sought at (1) … or indeed to respond at all.
By a letter to the solicitors for Gary and 1964 dated 19 July 2019, SLF lawyers stated that pursuant to the relevant clause of each agreement, Gary and 1964 respectively,
… must pay the money owing in full by Monday 23 September 2019 (the demand being made on 24 June 2019 and the 90th day falling on Sunday 22 September 2019).
The Personal Loan Agreement, as varied by the Deed of Variation, provided that,
The borrower must repay and discharge in full all of the money owing … on the Termination Date or any earlier date.
“Termination Date” was defined as the earlier of:
(a) a settlement on the sale of the land; or
(b) whilst the lender is alive, within 90 days of a written demand from the lender;
(c) within 90 days of the death of the lender.
The plaintiffs contend that the demands were invalid because they did not allow a 90 day period for payment, contrary to the terms of the Loan Agreements. On the plaintiffs’ case the defect in the demands was not rectified by the later granting of an extended time for payment, by the letter of 19 July. Same did not issue a fresh demand or purport to do so, and did not calculate the effluxion of time from 19 July but rather from the date of the demand, namely 24 June 2019. Accordingly, the Notices of default and demand issued under s 76 of the Transfer of Land Act, proceeding as they did on a default having occurred on 24 September 2019, were ineffective.
The defendants’ response is that neither of the Loan Agreements requires a period of 90 days to be specified in the demand itself. The Loan Agreements require repayments within 90 days of a written demand and the demands of 24 June are, properly considered, written demands within the meaning of the each of the Loan Agreements notwithstanding that they sought payment within less than 90 days.
The submissions of the parties raise a contestable issue to be resolved by the construction of the Loan Agreements and the demands. The defendants’ counsel put the contention that the documents can only be read one way (I infer, as instructed), only “relatively vaguely” and properly accepted that it was difficult contend that a question of construction of this kind did not give rise to a serious question.
Issue 4 - exercise of power of sale in bad faith
The plaintiffs identified certain circumstances comprising or connected with the conduct by Same of his role as attorney, including in connection with the service of the Notices of default and demand, that they submitted evidenced bad faith. Among those circumstances were the lack of explanation by Same as to the circumstances in which he came to be appointed as attorney; the role of SLF Lawyers in the appointment of Same, in circumstances in which they have acted in an acrimonious dispute between Gary and his former business partner and continue to act for the business partner; and the calling in of the entirety of the moneys owed under the Loan Agreements where it has not been demonstrated that Kathleen has need of that money.
Gary expressed concern, incredulity and distress about these matters in his affidavits. Same did not, in his affidavits, provide any substantial description of the circumstances in which he came to be appointed as attorney. He did convey in various ways, the point that Kathleen does not wish Gary or Burke to retain any decision making role in his life. Same denies any impropriety.
Although these circumstances were raised pointedly by the plaintiffs, their submissions did not crystallise a claim of bad faith as a basis on which the notices of demand and default might be set aside. For the purposes of identifying a serious question to be tried the plaintiffs’ submissions focused on the issues I have addressed earlier. They did not put that the alleged indicators ought be assessed at this point as giving rise to a serious question on a stand-alone basis. In those circumstances and in view of the conclusions I have already reached, as set out above, it is unnecessary for me to further consider these issues.
Balance of Convenience
The effect of either granting or refusing an injunction can be stated briefly.
If the injunction is refused:
(a)Same (as indicated by his counsel during the course of the hearing) intends to exercise the power of sale if the Loans, in their entirety, are not paid on time – that is, effectively forthwith.
(b)If that occurs Gary and 1964 will not be in a position to repay the Loans from liquid funds. Gary says that he will be forced to sell the Hampton Property, his family home (as to which, see below).
(c)Kathleen will have the benefit of the returned loan funds. It not possible to conclude when that will occur. Repayment will require a sale of one or more properties. Kathleen says that she would apply part of the repaid funds to meet her legal costs of these proceedings and the VCAT proceedings. There is no evidence that she has any need of the funds save in respect of meeting her legal costs. Her need of funds for legal costs is discussed below.
(d)Relative to the alternative course (where an injunction lies until further order) the consequences will be relatively more permanent in the sense that even if it is ultimately found that the Loans should not have been called in, events will have taken their course as though Same and Kathleen had been entitled to do so.
If an injunction is granted:
(a)The Loans will not be called in until the status quo is disturbed. The parties agree that if an injunction is ordered it should lie until further order. On the state of the evidence it is not possible to do more than speculate about the course that events might take subsequently and when any further order might be warranted.
(b)There will be no risk that Gary will have to sell his home.
(c)Kathleen says that she will be deprived of funds that she needs in order to meet her legal costs. There is a risk that she will have to sell her former home in Malvern (which she still owns and in which she no longer lives) in order to meet legal costs. That risk is discussed below.
The evidence of both parties concerning their financial position was unsatisfactory. The parties did not supply documentary or other evidence that was adequate to allow the proper interrogation of their claims. Valuations, financial statements, detailed costs assessments and detailed explanations by the parties were absent.
As to Kathleen’s position:
(a)Same has demanded the payment of the Loans in full. Same’s evidence expressly addressed Kathleen’s need of the loaned funds. That need is limited to the requirement to meet her legal fees. Same’s evidence was that he did not have all of Kathleen’s financial records but that on the available material Kathleen does not have “sufficient liquid funds to meet her present liabilities and to resist the proceedings [brought by Gary], without realising some of her assets”.
(b)As to Kathleen’s legal fees, Same’s evidence was that if this proceeding and the VCAT proceedings should all run to final hearings, Kathleen could anticipate incurring at least $200,000 + GST in legal fees, and that she also had outstanding legal fees of an unspecified amount. There was no breakdown of the fees attributable to these proceedings and the VCAT proceedings respectively. There was no direct evidence in relation to legal fees from Kathleen’s solicitors, who are acting in this proceeding, nor any information as to the likely costs should the proceedings be resolved prior to final hearing (for example, at the time of the mediation expected to take place shortly, in which both parties expressed a willingness to participate).
(c)Kathleen is said to have rental income from her commercial properties and her home of “in excess of” $5,000 a month, allowing for mortgage payments on the commercial properties. There was no evidence of their being any other call on those funds, apart from legal fees. Gary submitted that Kathleen is likely to have accrued something in the order of $80,000-$100,000 that would be available for the payment of legal fees. It was put against that proposition that Kathleen’s accrued liquid funds may have been eroded by expenses associated with her accommodation, but no details nor any estimate of those expenses were provided. No financial statements or bank statements were in evidence. Kathleen and Same accepted that there was an evidentiary gap on their side in relation to Kathleen’s capacity to pay her legal fees.
(d)Kathleen’s evidence did not address the possibility of her selling one or more of the commercial properties in order to fund her legal costs.
(e)Gary contends that it would be unjust to require him to fund Kathleen’s legal costs because, he says, his role in the extant proceedings is a defensive one. The exercise of characterising the various proceedings as defensive or offensive is a subjective one. In the present circumstances the characterisation is debatable. That said, there is in my view some substance to Gary’s position in respect of this proceeding, because, although he and 1964 are the plaintiffs, they are raising an estoppel against the enforcement of the loans agreement and in circumstances where there has been no explanation for the change of Kathleen’s position, including her desire to call in the full amount of both loans. The characterisation is less appropriate for the VCAT proceedings, in which a power of attorney, made by Kathleen who is presumed to have capacity unless shown otherwise, is being challenged by Gary and Burke, including by rehearing of the original decision. Gary’s concerns include those noted in the context of his “bad faith” arguments. Kathleen, on the other hand, considers that she is entitled to act on the basis of presumed capacity and it is for her, not Gary, to decide how she conducts her financial affairs.
(f)Kathleen’s former home in Malvern is unencumbered and is said to be worth in the order of $1.8m (on Gary’s estimate, with no supporting valuation, but which figure was not challenged by Kathleen). It was not in dispute that there was no real prospect that Kathleen will return to her home.
(g)Same’s evidence was that Kathleen does not want to sell her home because it has sentimental value to her. Gary’s evidence was that at the time Kathleen went into residential care in August 2018, he discussed with her what would happen to the family home. Prior to it being leased Kathleen and Gary went through the house for a “final look” and in that context, Kathleen expressed no opposition or concern about selling the house in the future if the need arose. None of that evidence is capable of establishing to any degree of satisfaction what Kathleen’s present wishes are in respect of the Malvern property. It appears that the property could be made ready for sale within about 60 days. The evidence did not permit an assessment of the risk that Kathleen would be required to sell the Malvern property in order fund legal fees.
As to Gary:
(a)The total value of the loans is $4,539,242.98. It is clear that Gary[46] will have to sell one of more properties in order to repay the loans.
(b)Gary designed and built his home (the Hampton Property) home over a three and a half year period. It is not contested that he has a significant attachment to it, and that an interest of that kind has significance beyond the mere monetary value of the property.
(c)A “kerbside valuation” consisting of a letter from Hodges Real Estate was in evidence, assessing the market value of the Hampton Property as at October 2019, at “in the vicinity of $4m”. The letter is not a formal valuation; it states the opinion of the real estate agent but without supporting reasoning. Kathleen and Same did not contest it.
(d)Gary and companies owned and controlled by him or by him and his wife jointly, have interests in a number of properties in Melbourne which have been or are being developed by Gary.
(e)Gary has a half interest in a property at 9A Mills Street, Hampton. Same estimated its value at between $1.75m and $2.2m. The current amount owing on the loan is $1.724m. On those figures (taking the upper end of the range for the estimated value), Gary’s “equity” in the property is estimated at $238,000 or taking the lower end of the range, $13,000.
(f)Separately, Gary is developing a 5-unit project at Montclair Avenue in Brighton East. One unit has been sold for $1.75m. The remaining three units are for sale, at asking prices of $2.15m, $1.725m, $1.490m and $2.760m respectively (a total combined asking price of $8.125m). The construction and other developments costs are said to be possibly “as high as” $5m. On those figures the remaining “equity” in that development is $4.875m ($1.75m + $8.125m - $5m), assuming the properties were in fact to sell for their asking price.
(g)Gary’s interests in his commercial properties is therefore estimated at between $4.888 - $5.113m.
(h)Gary did not address in evidence, the steps that he would or could take in order to make repayments of the Loans, if they were called in forthwith – whether by achieving the sale of the units comprising the Brighton East development, by re-financing the loans at a commercial interest rate or by selling the Hampton Property. On the estimates provided, it would probably be necessary to for Gary to sell two properties if refinancing was not available within the necessary timeframe.
(i)Whether or not Gary is at real risk of having to sell his family home in the event that the injunction is not granted may reduce to a question of timing. It is conceivable that the Brighton East properties may yield sufficient equity in a reasonable time, but it is not possible for me to form any view about the likely course of events, on the state of the evidence.
[46]It was not suggested that 1964 had assets separate from Gary’s assets that might be called upon to repay the Loans.
In addition to the direct financial impacts of the grant or refusal of an injunction, each of the parties raised additional factors that they contended was relevant to the balance of convenience. The defendants emphasised that Kathleen is presumed to have capacity, the 2019 EPA has been found to be valid, and that she is entitled to have changed her mind about the management of her financial affairs, the disposition of her asserts under the will, and about her relationship with Gary. Her calling on the Loans, through her attorney, is an expression of those choices. Gary, on the other hand, emphasised what he regards as a dramatic and unexplained change of circumstances that will significantly undermine the position he has enjoyed until the appointment of Same, which he says should not be allowed to take effect while the basis of Same’s appointment and the foundational issue of Kathleen’s capacity is being challenged.
Gary has offered undertakings not to encumber or diminish the value of the Hampton property, in addition to the usual undertaking as to damages.
Conclusion
In my view, on the state of the evidence before me, the interests of the parties are fairly evenly balanced, having regard to the factors discussed under the issue of “balance of convenience”. The parties’ respective interests may have been more clearly elucidated on better evidence. There is a risk that Gary will have to sell his family home if the injunction is refused, but I cannot assess the prospect of the risk materialising. Kathleen may lack funds for her legal costs; but by how much and when any shortfall will materialise has not been established.
The broader concerns that each addresses reflect their differing perspectives on a situation that is evidently distressing for both of them.
Weighing all considerations together, however, in view of the conclusions that I have reached that there are undoubtedly serious questions to be tried, and because the foundational question of Kathleen’s decision-making capacity will be determined by VCAT relatively soon, in my view the grant of the injunction invites a lesser risk of injustice.
Accordingly I will allow the plaintiffs’ application.
The plaintiffs will be required to give the usual undertaking as to damages and Gary will be required to give the undertaking he has offered in relation to the Hampton Property.
The principle in Ingliss
The defendants contended that the plaintiffs should pay the amount of the loans into Court as the price of obtaining the injunction. The principle stated in Ingliss v Commonwealth Trading Bank[47] is that a mortgagor seeking to restrain a mortgagee’s power of sale ought generally to come to court with the undisputed sum as the price of the interlocutory injunction. The rule is, however, subject to exceptions. One established exception is where there is a question whether the mortgagee’s power has become exercisable at all; another (perhaps a particular instance of the first) is where the effectiveness of the notice of breach is in issue.[48] For the reasons discussed above, these exceptions are genuinely engaged on the material before me and accordingly, the plaintiffs will not be required to make payment into Court as the price of obtaining the injunction.
[47](1972) 126 CLR 161.
[48] See Swann Road Pty Ltd v Sterling and Freeman Advisory Pty Ltd [2019] VSC 136 at [24]-[25] and the
authorities there discussed.
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