Ash v Ash
[2016] VSC 577
•27 September 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S CI 2016 01190
| GRAHAM BARRY ASH (who sues by his administrator Suzanne Lyttleton) | Plaintiff |
| - and - | |
| VANESSA MARIA ASH & ORS (in accordance with the schedule hereto) | Defendants |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 24 August 2016 |
DATE OF JUDGMENT: | 27 September 2016 |
CASE MAY BE CITED AS: | Ash v Ash |
MEDIUM NEUTRAL CITATION: | [2016] VSC 577 |
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FIDUCIARY DUTIES — Where plaintiff alleges breach of fiduciary duties against defendants — Barnes v Addy (1874) LR 9 Ch App 244
PRACTICE AND PROCEDURE — Where plaintiff seeks summary judgment — Whether defendants have no real prospect of success — Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 — Mandie v Memart Nominees Pty Ltd [2016] VSCA 4 – Civil Procedure Act 2010, s 63(1)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J L Smith | Bardoel & Associates |
| For the Defendants | Mr P W Lithgow | Neill Ogge Lawyers |
SCHEDULE
| GRAHAM BARRY ASH (who sues by his administration Suzanne Lyttleton) | Plaintiff |
| - and - | |
| VANESSA MARIA ASH | First defendant |
| - and - | |
| BRADLEY GRIMM | Second defendant |
| - and - | |
| G. B. ASH & CO PTY LTD (sued as trustee of the Eighth Gombak Nominees Pty Ltd Superannuation Fund and G. B. Ash Family Trust) | Third defendant |
HER HONOUR:
Introduction
The plaintiff, by his administrator, seeks relief arising from alleged breaches of fiduciary duty by his daughter (‘the first defendant’) in her capacity as his attorney, and against his son-in-law and the first defendant’s husband (‘the second defendant’) and the third defendant (the corporate trustee of a family trust and superannuation fund established by the plaintiff). The first defendant was appointed the plaintiff’s attorney under an enduring power of attorney (financial) dated on or about 1 December 2012 (‘the power of attorney’).
By amended statement of claim filed 30 June 2016, the plaintiff, by his administrator, seeks relief arising from alleged breaches of fiduciary duty by the first defendant in her capacity as his attorney, and against the second defendant and the third defendant based on the principles espoused in Barnes v Addy.[1] The plaintiff claims that the conduct of the first defendant pleaded gave rise to breaches by her of her duties to avoid conflict and not to profit from her position.
[1](1874) LR 9 Ch App 244 (‘Barnes v Addy’).
On 30 May 2016, the first and second defendants filed a defence to the plaintiff’s statement of claim dated 1 April 2016.[2] Counsel for the defendants informed the Court that it was unlikely that the first and second defendants would file a further amended defence in response to the plaintiff’s amended statement of claim.
[2]First and second defendants, ‘Defence of the defendants to the plaintiff’s statement of claim’, 1 April 2016 (‘the first and second defendants’ defence’).
The third defendant filed a defence to the plaintiff’s amended statement of claim on 23 August 2016.[3]
[3]Third defendant, ‘Defence’, 23 August 2016 (‘the third defendant’s defence’).
Plaintiff’s application
Pursuant to ss 61 and 63 of the Civil Procedure Act 2010 (‘CP Act’), the plaintiff seeks summary judgment on the basis that the defendants’ defences, which are responsive to the relevant parts of the plaintiff’s amended statement of claim, have no real prospect of success. Alternatively, the plaintiff seeks interlocutory relief against the three defendants in respect of certain parts of the plaintiff’s amended statement of claim.[4]
[4]Those parts of the amended statement of claim were set out in the plaintiff’s amended summons filed 30 June 2016, along with other consequential relief.
The issue to be determined is whether the defendants have ‘no real prospect of success’ in defending the plaintiff’s claims of breach of fiduciary duty, in the case of the first defendant, giving rise to liability under the principles in Barnes v Addy in the case of the second and third defendants.
The plaintiff contends that the first defendant executed or respectively caused the execution of a purported lease in respect of the plaintiff’s family home in Kew, a deed removing the appointor of the plaintiff’s family trust and the issue of further shares in a trustee company controlled by the plaintiff in her capacity as the plaintiff’s attorney in breach of her fiduciary duties to the plaintiff. On the plaintiff’s case, informed consent is the only defence to the alleged conduct by the defendants, and the plaintiff says he could not and did not give such consent.
The defendant’s prospects of success in defending the plaintiff’s claims depend to a significant extent on whether they can demonstrate the plaintiff’s informed consent to the impugned conduct. It was not in dispute that the defendants would bear the onus of proving that consent. On the defendants’ case, the actions of the defendants were a ‘natural consequence’ or ‘natural corollary’[5] of the decisions made by the plaintiff to involve the first defendant in his affairs prior to his incapacity and that their actions fulfil his wishes as expressed by him prior to his incapacity.
[5]Transcript of proceedings, 57.
Factual background
Most of the facts giving rise to the plaintiff’s claims against the defendants are not contested.
The plaintiff is now aged 76. He has two daughters, being the first defendant, and Tania Ash (‘Tania Ash’). The first defendant is a solicitor and principal of the firm Vanessa Ash & Associates.
In October 2013, the plaintiff sustained injuries in a fall that incapacitated him and he was unable to manage his affairs at least from that time. The plaintiff has, since that time, resided in an aged care facility.
The plaintiff has been, and remains, the subject of an administration order made on 23 January 2015 by the Victorian Civil and Administrative Tribunal, pursuant to the Guardianship and Administration Act 1986, by which Ms Suzanne Lyttleton was appointed as an independent administrator to manage his affairs.
The background to the claims commenced in 1978 when the plaintiff and his late wife, Anna, purchased the family home at 4 Rockingham Close, Kew (‘the Kew property’). The plaintiff is now the sole proprietor of the Kew property.
Between 1978 and 1994, the plaintiff made arrangements to establish a family trust and superannuation fund.
For that purpose, in 1978, the plaintiff incorporated the third defendant, which was at that time registered under the name Eighth Gombak Nominees Pty Ltd (‘the trustee company’). Prior to late 2014, the issued capital of the trustee company comprised two shares held by the plaintiff.
Also in 1978, the GB Ash Family Trust (‘the Ash Family Trust’) was established by a trust deed dated 20 September 1978. The trustee company is the trustee of the Ash Family Trust. The plaintiff was the appointor under the trust deed of the Ash Family Trust. The primary beneficiaries were the plaintiff and his late wife and the general beneficiaries were the plaintiff’s two daughters and their spouses.
By a trust deed dated 1 July 1994 the plaintiff settled the Eighth Gombak Nominees Pty Ltd Superannuation Fund (‘the superannuation fund’). The trust deed states that the date of inception of the superannuation fund is 20 September 1978. On or around 30 September 2013 the trustee company purported to replace the superannuation trust fund deed with a substitute deed executed by the first defendant.[6] However, there was no issue between the parties as to the relevance of the terms of the substitute trust deed in connection with the transfer of the superannuation fund balance that the plaintiff seeks in this proceeding.
[6]Affidavit of Suzanne Lyttleton sworn 16 June 2016 (‘first Lyttleton affidavit’); exhibit SML-8 (‘the substitute trust deed’).
The third defendant, under its previous name, was named as the trustee of the superannuation fund. The plaintiff was initially the sole member and beneficiary of the fund.
In 2007, the plaintiff was diagnosed with Parkinson’s disease. In 2008, his wife died.
In 2012, the plaintiff appointed the first defendant his attorney pursuant to the power of attorney.
In around April 2013, it appears that the plaintiff appointed Tania Ash as his power of attorney under a power of attorney (medical treatment).[7]
[7]Ibid; exhibit SML-29.
On 29 July 2013, the plaintiff appointed the first defendant as a director of the trustee company and a member of the superannuation fund.
On 12 December 2013, after the plaintiff’s fall in October 2013, the first defendant then appointed the second defendant as a director of the trustee company and a member of the superannuation fund.
Although not in issue for the purposes of this summary judgment application, the plaintiff’s amended statement of claim alleges that, between December 2013 and March 2014, the first defendant exercised her powers as the plaintiff’s attorney to cause some $832,013 to be paid from the superannuation fund, purportedly as a pension benefit payment (‘the pension transfers’) to the Ostrava Group of companies controlled by the first and second defendants, which are now in provisional liquidation. The plaintiff alleges that the pension transfers were among a series of transactions effected by the trustee company from the superannuation fund to the Ostrava group in that period which totalled $1,011,498.98.
The pension transfers included an amount of approximately $585,000 that was invested in a unit trust connected with the Ostrava Group (‘the Ostrava Equities Unit Trust’). In evidence given in a related proceeding in the VCAT, the second defendant estimated that the value of those units has diminished by some 70 per cent, in part, because the fund has been the subject of ASIC litigation.[8]
[8]Ibid; exhibit SML-44, 95–96.
The first and second defendants do not expressly deny the allegation that $832,013 was moved into accounts controlled by the Ostrava Group, although they deny that the first defendant took that action in her capacity as the plaintiff’s attorney.[9] As discussed further below at [51]–[53], the defendants depose that the transfers to the Ostrava Group were investments made on behalf the plaintiff in accordance with instructions he gave in 2013.
[9]First and second defendants’ defence, [17].
In or around January 2014, the first and second defendants moved into the Kew property with their children and in March 2014 commenced paying rent of $459 per week to the plaintiff. The amount of rent later increased following settlement discussions relating to a VCAT proceeding brought by Tania Ash.
In March 2014, Tania Ash applied to the VCAT for the revocation of the power of attorney and appointment of a guardian and an independent administrator for the plaintiff (‘the VCAT proceeding’). As a result of the VCAT proceeding, the first defendant resigned as attorney. The first defendant decided to resign some time prior to mid-January 2015.[10]
[10]In an affidavit sworn 16 January 2015 in the VCAT proceeding the first defendant deposed that it was her intention to resign as attorney and agrees that an independent administrator would be appointed: First Lyttleton affidavit; SML-23.
The timing of the first defendant’s decision to resign is relevant given the events that transpired on 24 December 2014. The transactions of that date formed the main part of the allegations the subject of this application.
Prior to her resignation as attorney, on or around 24 December 2014, the first defendant executed the following documents apparently on behalf of the plaintiff as his attorney:
(a) a residential tenancy agreement between the plaintiff and the second defendant, by which the second defendant purportedly leased the Kew property for a period of five years (‘the purported lease’);[11] and
(b) a deed, witnessed by the second defendant, to remove the plaintiff as appointor of the Ash Family Trust and appoint the first defendant as appointor (‘the appointor removal deed’).[12]
[11]First Lyttleton affidavit; SML-26.
[12]Affidavit of Suzanne Lyttleton sworn 23 August 2016 (‘second Lyttleton affidavit’); SML-47.
On 9 February 2015, the second defendant lodged with ASIC a ‘Change to company details’ form[13], revealing that the first defendant also purported to issue four further shares in the trustee company to herself on 24 December 2014, giving her a controlling interest in that company (‘the share issue’). Although there is no documentary evidence, the inference arises that the first defendant acted pursuant to the power attorney in bringing about the share issue on behalf of the plaintiff, who had been the trustee company’s sole shareholder up to that point.
[13]First Lyttleton affidavit; SML-28.
On 23 January 2015, the first defendant resigned as the plaintiff’s attorney.[14]
[14]First and second defendants’ defence, [42(a)].
An order made in the VCAT proceeding appointed Ms Lyttleton as the plaintiff’s administrator and suspended the powers of attorney held by the first defendant and Tania Ash.
Since her appointment as administrator, Ms Lyttleton has made requests for accounts and documents relating to the plaintiff, the Ash Family Trust and the superannuation fund from the defendants and she has deposed that the defendants have not complied with her requests.
On 21 September 2015 Ms Lyttleton obtained an order from the VCAT authorising the sale of the Kew property.[15] In October 2015 she issued notices to the first and second defendant to vacate the property under the Residential Tenancies Act 1997.[16] Ms Lyttleton issued fresh notices to vacate the Kew property on 23 December 2015.[17] The first and second defendants have not complied with these notices and remain living in the Kew property.
[15]First Lyttleton affidavit; SML-40.
[16]Ibid; SML-42.
[17]Ibid; SML-45.
In mid-2015 Ms Lyttleton signed a deed to remove the trustee company as trustee of the Ash Family Trust and appoint Graham Ash Pty Ltd (‘the new trustee’) as the trustee.[18] Ms Lyttleton also took steps to establish a new superannuation fund, the Graham Ash Superannuation Fund (‘the new fund’) with the new trustee as trustee of the new fund.[19]
[18]Ibid; SML-34.
[19]Ibid; SML-33.
By a letter dated 6 August 2015 to the trustee company,[20] Ms Lyttleton requested a rollover of the balance of the superannuation fund to the new fund pursuant to clause 6.3 in the substitute trust deed, as follows:[21]
[20]Ibid; SML-38.
[21]Ibid; SML-8 and SML-38.
Payment to another fund
6.3 If a person entitled to a benefit request in writing, the Trustee must pay all or part of it to another fund.
Despite the steps taken by Ms Lyttleton she has been unable to secure the transfer of the balance of the Ash Family Trust or the superannuation fund from the control of the defendants.
These matters and the documents and transactions entered into on 24 December 2014 by the defendants, being the purported lease, the appointor removal deed and the share issue, are the subject of the plaintiff’s summary judgment application.
The evidence
The plaintiff’s evidence as contained in the affidavits of Ms Lyttleton sworn 16 June 2016 (‘the first Lyttleton affidavit’) and 23 August 2016 (‘the second Lyttleton affidavit’) established the uncontested facts concerning the series of transactions or events giving rise to the defendants’ alleged breaches.
The defendants relied on the first defendant’s affidavit sworn 19 July 2016, and the affidavit of the second defendant sworn 19 July 2016.
There does not appear to be any major controversy that after the plaintiff fell and hit his head in October 2013, he was incapacitated and unable to manage his affairs.[22]
[22]The first and second defendants admit that the plaintiff lacked capacity at 24 December 2014 (first and second defendants’ defence [33]). The plaintiff’s submissions note that the defendants do not plead to, and are taken to admit (pursuant to Supreme Court (General Civil Procedure) Rules 2015, r 13.12(1)) the allegations in paragraph [13] of the amended statement of claim that on 3 October 2013, the plaintiff fell and struck his head, causing acute brain injury, psychosis, severely reduced intellectual capacity and inability to manage his affairs. See also transcript of proceedings, pp 4 and 57. The first defendant’s affidavit filed with VCAT also describes the consequences of the fall: first Lyttleton affidavit; SML-23 [29, 31]. See also medical reports of Dr Kotler and Dr L Vowels which describe the plaintiff’s condition in 2014: first Lyttleton affidavit; SML-5.
The plaintiff’s evidence established that the plaintiff plainly lacked capacity after his accident in October 2013.[23] Further, it established the facts relating to the purported lease, the appointor removal deed, the pension transfers and the share issue, as well as events that have followed Ms Lyttleton’s appointment as the plaintiff’s administrator. The plaintiff also relied on evidence, without objection from the defendants, given by the first defendant in the VCAT proceeding as to the timing of her decision to resign as attorney.
[23]See medical reports relating to examinations from February 2014: first Lyttleton affidavit; SML-5.
The first defendant resigned on 23 January 2015 at the hearing of the VCAT proceeding. In her affidavit filed in this proceeding, the first defendant deposes that:
After discussions with Bradley in early January 2015 I decided that it would be better if I resigned my power of attorney.[24]
[24]Affidavit of first defendant sworn 19 July 2016, [27].
On this evidence, the decision to resign followed the entry into the purported lease, the appointor removal deed and the share issue.
In her affidavit sworn 16 January 2015 and filed in the VCAT proceeding number VCAT G71440/00,[25] the first defendant deposed:
At the direction hearing before Senior Member Scott on 1 September 2014, terms were agreed with Tania which were approved by Senior Member Scott and which provided for my ongoing appointment as attorney with audited accounts. After the hearing my Counsel, James Isles, submitted a proposed form of Orders which I believe reflected the agreed terms … Tania did not approve those terms. Subsequently, Tania’s solicitors proposed various forms of Orders with increasingly onerous terms. The final version proposed by Tania is contained in an email from Hartwell Legal dated 17 December 2014 … I believe that the time and cost burden entailed in the supervision subsequently proposed by Tania was so unreasonable as to make it unworkable. My decision to resign as attorney under power and to seek an independent administrator is notwithstanding the agreement made at the hearing before Senior Member Scott. [26]
[25]First Lyttleton affidavit; SML-23.
[26]Ibid [48].
The plaintiff submits that this extract from the first defendant’s earlier affidavit, in contrast to her evidence in this proceeding, reads as if she had made the decision to resign as the plaintiff’s attorney in mid-December, and then executed the impugned documents on 24 December 2014.
However, the defendants say that the decision to resign was not made until after the events of 24 December 2014. In her affidavit in this proceeding, the first defendant deposes:
In relation to paragraph 57 [of the amended statement of claim] I say that I had not decided to resign as Power of Attorney until January 2015. In December 2014 I believed that a hearing was the only way to resolve the issue and to that end I commenced drafting my Affidavit in support of my position. It was after the 2014/2015 Christmas / New Year break that I reconsidered that decision to go to trial on the basis that I was increasingly tired of being in dispute with my sister regarding my father’s affairs. It was in January 2015 that I determined that in the best interests of myself I needed to bring an end to the dispute even if this meant effectively giving in to my sister’s demands.[27]
[27]Affidavit of the first defendant sworn 19 July 2016, [31].
The plaintiff submits that the defendant did not disclose the purported lease, the appointor removal deed or the share issue at the time that the VCAT proceeding. It was Ms Lyttleton’s evidence that she became aware of the purported lease only after serving notices to vacate on the defendants in late 2015.
The first defendant denies that she has failed to act in the plaintiff’s best interests. She deposes that, in conducting herself in the manner alleged by the plaintiff, she has taken steps to implement his wishes prior to his accident in October 2013. The first and second defendants depose that the plaintiff lived independently until his fall in October 2013.
The defendants’ evidence sought to establish the plaintiff’s wishes prior to October 2013 in respect of the investment in the Ostrava Group of companies, including the Ostrava Equities Unit Trust, the share issue, and the purported lease. The first and second defendants depose that the plaintiff expressed an intention to invest in the Ostrava Group of companies. The first defendant says that the second defendant was the ‘principal advisor to [her] father regarding the proposed investments of the proceeds of the term deposit’,[28] which comprised the majority of the superannuation fund.
[28]Affidavit of first defendant sworn 19 July 2016, [20].
The first defendant says that it was the plaintiff’s intention to invest the term deposit into the Ostrava Group of companies upon its maturity, including an investment in the Ostrava Equities Unit Trust.[29]
[29]Ibid [18].
In contrast, the second defendant says that the instructions from the plaintiff were simply to transfer funds from the superannuation fund to the Ash Family Trust, and that the issue of units in the Ostrava Equities Unit Trust to the Ash Family Trust was ‘done on the basis of advice from the superannuation fund’s accountant’[30] rather than on the plaintiff’s express instructions.
[30]Affidavit of the second defendant sworn 19 July 2016, [14(vi)].
In relation to the purported lease, the first defendant deposes that her family moved into the Kew property in 2014 and continues to reside there. She deposes that it ‘had long’ been her father’s wish that her family would move into the Kew property.[31] Notwithstanding her assertion that the plaintiff managed his affairs effectively prior to his accident in October 2013, the first defendant says that he had expressed a wish from early 2013 that her family would move in with him at his Kew property to assist him ‘on a more full time basis’[32] and that she had concerns about his physical health.[33] The first defendant says that the plaintiff’s view was, and remains, that he would like to return to live in the Kew property with the support of the first defendant and her family.[34]
[31]Affidavit of the first defendant sworn 19 July 2016, [33].
[32]Ibid.
[33]Ibid [34].
[34]Ibid [15].
The first defendant deposes that the amount of rent that was initially paid under the purported lease was arranged after discussions with her solicitor as to an appropriate rate of rent. However, it was conceded by her counsel that the rate of rent was not referable to any assessment of the market value of the rent, but rather reflected the value of rent received from the defendant’s Prahran property that the family had been living in prior to moving to the Kew property.[35] In any event, the plaintiff does not take issue in this application with the amount of rent paid pursuant to the purported lease but instead seeks to have it set aside on the basis that it arose from the defendants’ breaches of duty.
[35]Transcript of proceedings, 17–18.
The first defendant deposes that the first notices to vacate the Kew property issued by Ms Lyttleton in October 2015 were short served.[36] The defendants do not address the fresh notices to vacate issued in December 2015 in their affidavits. Counsel for the defendants explained that it was the defendants’ view that they are not obliged to vacate the Kew property in circumstances where the second defendant has a valid tenancy agreement with the plaintiff.
[36]Affidavit of the first defendant sworn 19 July 2016, [59].
The affidavits of the first and second defendants do not address the appointor removal deed in any detail, although in their defence they deny the allegation that the removal constituted a breach of duty and say that on or about 24 December 2014, the plaintiff no longer had the capacity to act as appointor.[37]
[37]First and second defendants’ defence, [33].
The first defendant deposes that the share issue was undertaken on the advice of the second defendant and an unnamed accountant in order to comply with superannuation legislation and in accordance with her father’s wishes expressed prior to October 2013.[38]
[38]Affidavit of the first defendant sworn 19 July 2016, [36].
The defendants’ evidence did not reveal any specific disclosures made to the plaintiff before his incapacity in connection with the terms of the purported lease, the appointer removal deed or the share issue.
In relation to the superannuation issue, the first defendant agrees that the balance of the superannuation fund has not been transferred to the new fund but deposes to her ‘opinion’ that Ms Lyttleton does not have the power to conduct a rollover from the superannuation fund to the new fund, change the trustee of the superannuation fund, nor the power to act as appointor of the Ash Family trust.[39]
[39]Ibid [43] and [53].
The affidavits contained a bare assertion of that opinion with no elaboration by the defendants. The defendants submit that they were concerned in relation to the proposed rollover as it is uncertain as to whether Ms Lyttleton as an administrator falls within the definition of ‘legal personal representative’ (‘LPR’) under the Superannuation Industry (Supervision) Act 1993 (‘SIS Act’). An LPR is entitled to be appointed a trustee in place of a disabled member.
The second Lyttleton affidavit established that the defendants sought and received advice from counsel on the issue of whether Ms Lyttleton as administrator is entitled to deal with the superannuation fund on behalf of the plaintiff under relevant superannuation legislation. The following extract from that advice was set out in the second Lyttleton affidavit:
I am of the opinion that an Administrator, as the legal personal representative of a Member under a legal disability, can not only be appointed as a trustee in place of a Member, but can also be appointed as a director of a corporate trustee of a SMSF in place of the Member. There is no material difference for present purposes between an Administrator being appointed as a trustee directly in place of a disabled Member and being appointed in place of the disabled Member as a director of a corporate trustee.
Given the matters which I have previously discussed in relation to the prior directorship history of GB Ash & CO Pty Ltd (formerly Eighth Gombak Nominees Pty Ltd) it is an eminently sensible proposal for the Administrator to incorporate a new sole director company of which she is the only director and Barry is the only shareholder, to act as the new Trustee of the Super Fund.[40]
[40]Second Lyttleton affidavit; SML-46.
The plaintiff submits that the defendants did not disclose this advice yet it bears on their assertion that Ms Lyttleton is not entitled to seek to rollover the fund. The plaintiff conceded that the factual scenario dealt with in the advice differs from the present circumstances where Ms Lyttleton was not proposing to become a new trustee but rather to incorporate a new trustee and seek a rollover.
Counsel for the plaintiff took the Court, without objection from the defendants, to evidence from the first defendant in the VCAT proceeding in which the first defendant was cross-examined on this issue:
Q: You understand that your father as a beneficiary of the super fund is able to nominate a fund to which his account balance must be transferred if he so directs. Are you aware of him having that right?
A: Yes, I believe it is with member approval.
Q: So he has the power to direct GB Ash & Co Pty Ltd to transfer his account balance to another superannuation fund if he so wishes, is that right?
A: I believe it is with member approval.
Q: If you can turn to No8B, you’ll see there a letter from Ms Lyttleton dated 6 August 2015. Do you see that?
A: Yes.
Q: In that letter, Ms Lyttleton has asked the directors of GB Ash & Co Pty Ltd, to transfer the account balance to a new superannuation fund which she has established, the trustee of which is Graham Ash Pty Ltd. Do you understand that’s what she has requested?
A: Yes.
Q: And you understand that she made that request in your [sic] capacity as your father’s administrator?
A: As the administrator, yes.
Q: Notwithstanding you having received that request, you have refused to transfer the fund balance to the new superannuation account, haven’t you?
A: Well, the members haven’t approved it.
Q: I beg your pardon?
A: It hasn’t been approved by the members.
Q: The members of what?
A: The super fund.
Q: Who are the member of the super fund?
A: Barry Ash, myself and Brad.
Q: There’s two propositions there. I suggest to you that in fact a superannuation fund member does not need the approval of other members to request a transfer of his funds. Do you agree?
A: It’s my understanding this is a legal argument.
Q: I’m asking you whether you agree that he doesn’t in fact need the agreement of the other members of the fund?
A: I’m not sure.
Q: You’re not sure?
A: I recall there is some legal argument.
Q: Have you sought some advice on this?
A: There was some – there was some advice provided.
Q: By whom?
A: I believe it was Peter Pascoe but it never really clarified the situation.[41]
[41]First Lyttleton affidavit; SML-44, 39–40.
The plaintiff submits that this extract of the evidence reveals that the first defendant is misrepresenting the advice she has received.[42]
[42]Transcript of proceedings, 33.
Counsel for the defendants submitted that the advice of counsel did not relate to a multi-member fund, and also said it relied on an interpretative ruling of the Australian Taxation Office which did not have the status of a binding interpretation of the relevant law, although it may be noted that the brief to counsel prepared on behalf of the defendants specifically sought advice on that interpretive ruling.
Plaintiff’s submissions
The purported lease
The plaintiff says that the defendant executed the purported lease in her capacity as attorney and that the execution of that document delivered a benefit to her and/or her family. The plaintiff submits that that benefit infringes the proscriptions against fiduciaries placing themselves in a position of conflict (‘the conflict rule’) and deriving a benefit from their position (‘the profit rule’).
The plaintiff also says that the defendants’ plea that the purported lease benefited the plaintiff[43] is irrelevant and that the only relevant issue for determining a breach of the fiduciary duty is whether the fiduciary received a benefit.[44]
[43]First and second defendants’ defence, [28].
[44]Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384.
There is no power under the power of attorney authorising the proscribed conduct. The plaintiff contends that in the absence of such a power under the appointing instrument, the only defence to the allegations by the plaintiff is informed consent.
The plaintiff submits that the defendants bear the onus of proving that the plaintiff gave informed consent and the defendants have no real prospect of demonstrating that informed consent.
The plaintiff refers to the first and second defendants’ pleading that the plaintiff lacked capacity as at 24 December 2014[45] and says, on the defendants’ own case, the plaintiff could not have provided informed consent to the arrangements that were entered into by the defendants on that date, including the purported lease.
[45]First and second defendants’ defence, [33].
The plaintiff submits that, in accordance with the authorities, informed consent required the defendants to furnish all relevant facts concerning the purported lease and that the defendants offer no evidence that those details were consented to by the plaintiff; for example, there was no evidence that the plaintiff was given details of, or consented to, the term of the purported lease. The plaintiff says that the most the first defendant can say is that she was carrying out her father’s wishes that her family would move into the Kew property.[46]
[46]Affidavit of first defendant sworn 19 July 2016, [33].
The plaintiff contends that the purported lease was entered into in breach of duty and is voidable at the option of the principal.[47] In circumstances where the plaintiff has exercised that option, there is no valid lease and the lease should be set aside. Accordingly, pursuant to the notices to vacate served on the first and second defendants on 23 December 2015, which is admitted,[48] the plaintiff is entitled to possession of the Kew property.
The appointor removal deed
[47]Or, alternatively, any benefit under the lease is held on trust for the plaintiff and must be dealt with at the direction of Ms Lyttleton as his administrator; and, further, the defendants are estopped from pleading the lease against the plaintiff.
[48]First and second defendants’ defence, [56].
The plaintiff submits that the execution of that deed delivered a benefit to the first defendant insofar as it gave her control of the Ash Family Trust by enabling her to appoint the trustee, which benefit infringes the conflict rule and the profit rule. The trustee company was described by counsel for the plaintiff as being ‘forever out of reach’[49] and unable, or perhaps unlikely, for example, to bring a claim against its directors for the conduct of the company’s affairs.
[49]Transcript of proceedings, [35].
The plaintiff submits that the defendants’ only defence is informed consent and that the defendants have failed to demonstrate the plaintiff’s consent to his removal as appointor. The plaintiff refers to the defendant’s pleading which denies that the entry into the deed represented a breach because on 24 December 2014, the plaintiff no longer had capacity to act as appointor.[50] The plaintiff submits that this provides no defence to the allegation but demonstrates that, on the defendants’ own case, the plaintiff could not have provided informed consent to the entry into the appointor removal deed. The plaintiff says that the first defendant does not otherwise explain why she executed the deed.
[50]First and second defendants’ defence, [33].
Accordingly, the plaintiff submits that the appointor removal deed was executed in breach of the first defendant’s fiduciary duty and is null and void. The plaintiff seeks declarations that the deed executed by Ms Lyttleton appointing a new trustee is valid, that the new trustee has been duly appointed, and that the assets of the Ash Family Trust and the superannuation fund should vest in the new trustee.
The share issue
The share issue delivered control of the trustee company to the first defendant. The plaintiff submits that the share issue caused a conflict between the first defendant’s interests and her duty as attorney and was entered into in breach of the conflict rule.
The plaintiff submits that the only possible defence to the alleged breach arising from the share issue is informed consent and that, for the reasons outlined above, the defendants cannot demonstrate informed consent.
Transfer of the balance of the superannuation fund to the new trustee
In relation to the refusal by the defendants, including the third defendant, to transfer to the new trustee the plaintiff’s superannuation balance, the plaintiff says:
(a) clause 2.7 of the superannuation fund deed empowers the trustee to transfer assets to another fund;
(b) clause 6.3 obliges the trustee to transfer benefits to another fund upon request by a member;[51]
(c) on 6 August 2015, Ms Lyttleton wrote to the defendants asking them to transfer the balance “in accordance with clause 6.3 of the superannuation fund deed, which is admitted;
(d) the defendants have refused to do so, which is admitted.
[51]First Lyttleton affidavit; SML-8.
In response, the defendants have pleaded that they were under no obligation to comply with the request but they do not elaborate otherwise in their pleading.[52] In her affidavit, the first defendant deposes that it is her opinion that Ms Lyttleton ‘does not have the power to conduct a rollover or change the trustee’.[53]
[52]First and second defendants’ defence, [51].
[53]Affidavit of the first defendant sworn 19 July 2016, [53]. See also affidavit of the second defendant, [38].
The plaintiff submits that the new trustee was validly appointed and that the defendants misrepresented the advice they received on the issue concerning the interpretation of the superannuation legislation.
Accordingly, the plaintiff submits that he is entitled to an order that the third defendant should transfer the balance of the superannuation fund to the new trustee, in accordance with clause 6.3 of the substitute trust deed.
Defendants’ failure to provide documents, information and accounts
The plaintiff submits that the defendants have variously failed to provide documents, information and prepare accounts verified by affidavit in relation to the plaintiff, the Ash Family Trust and the superannuation fund.
Other relevant matters
The plaintiff submits there is urgency surrounding the issues that are the subject of the application because the plaintiff has low cash reserves of around $42,000 at the date of the hearing.[54] Ms Lyttleton has concerns as to the plaintiff’s ability to continue to meet his future accommodation expenses in circumstances where she has been unable to take possession of the Kew property and sell it or to access the remaining assets of the Ash Family Trust or the balance of the superannuation fund.
[54]Transcript of proceedings, 39.
Defendants’ submissions
The defendants did not contest the factual background outlined above in respect of the purported lease, appointor removal deed or the share issue. They deny that the conduct gave rise to a breach by the first defendant of her fiduciary duties, or that the second and third defendants are liable in respect of those breaches. They also deny that Ms Lyttleton is entitled to roll over the superannuation fund to the new trustee and that they are under any obligation to comply with her requests for the transfer of the assets.
As well as their core submissions, the defendants advance several preliminary arguments in their defence. For example, the first and second defendants deny that the first defendant was acting in her capacity as the plaintiff’s attorney when she entered into certain of the transactions alleged, with the consequent result that she was not burdened by fiduciary duties. In particular, the first and second defendants admit that the share issue diluted the plaintiff’s shareholding[55] but deny that the first defendant was acting in the capacity alleged at the time.[56] The defendants also deny that a benefit was received or that a detriment was suffered by the plaintiff in relation to the purported lease or appointor removal deed.
[55]First and second defendants’ defence, [38].
[56]Ibid [37].
The defendants’ core submission in relation to the entry into the purported lease, the appointor removal deed and the share issue is that the defendants’ actions were designed to fulfil the express wishes of the plaintiff in the case of the purported lease, or arose as a natural consequence of, or in order to give effect to, decisions taken by the plaintiff to involve the first defendant in his affairs and empower her to make decisions prior to his becoming incapacitated in October 2013.
In this regard, the defendants point to the plaintiff’s decisions to appoint the first defendant as his attorney in 2012, to appoint her a signatory to the plaintiff’s Westpac accounts in 2013,[57] and the decision to appoint her a director of the trustee company and member of the superannuation fund in mid-2013. The defendants also faintly relied on the instructions apparently given by the plaintiff to invest his money in the Ostrava Group of companies, although those transactions were not the subject of this application.[58] The defendants submit that those decisions of the plaintiff constituted a plan[59] or a course of action[60] whereby the plaintiff had determined to empower the first defendant and involve the first and second defendants more directly in the management of his financial affairs.
[57]Affidavit of first defendant sworn 19 July 2016, [8]-[9] and defendants’ chronology.
[58]See transcript of proceedings, 45.
[59]Ibid 57.
[60]Defendants’ outline of submissions, 23 August 2016, [7].
Consequently, the defendants submit there is no breach of fiduciary duty in a fiduciary giving effect to previously made decisions of the principal, in this case, the plaintiff.
The purported lease
The first and second defendants deny that the purported lease delivered a benefit to them or that it is detrimental to the plaintiff and they say, in fact, it was to the benefit of the plaintiff and that it merely fulfilled his express wishes.[61] They submit the plaintiff had expressed the wish that the defendants would live in the Kew property, their evidence being that the plaintiff expressed that wish to the first defendant in circumstances where he would also be living at the Kew property. The defendants also submit that with them living at the Kew property, the property will be preserved for the plaintiff in the circumstances where he has a desire to move back to the property. They also submit that it would be impractical to lease the Kew property on the open market as it is furnished and has fence around the swimming pool. The first and second defendants submit they have a valid tenancy agreement and deny that they are obliged to vacate the Kew property.
The appointor removal deed
[61]First and second defendants’ defence, [28].
In relation to the appointor removal deed, the first and second defendants submit that the plaintiff no longer had capacity to act as appointor as at the date of the deed.[62] They contend that the entry into the deed arose from decisions made by the plaintiff prior to his incapacity whereby ‘the plaintiff had determined a course of action involving the First and Second Defendants in the more direct management of his financial affairs’.[63] Counsel for the defendants conceded that there was no direct evidence to suggest that it was discussed that the first defendant would become the appointor,[64] but says that it was a ‘natural corollary’ in order to give effect to the decisions or plan put in place by the plaintiff that she should become the appointor.
The share issue
[62]Ibid [33].
[63]Defendants’ outline of submissions, 23 August 2016, [7]–[8].
[64]Transcript of proceedings, 58.
In relation to the share issue, the defendants submit that their actions arose from decisions made by the plaintiff prior to his incapacity. In her affidavit, the first defendant deposes that the shares were issued to comply with the relevant legislation ‘in accordance with my father’s wishes’ expressed prior to October 2013, and on the advice of the second defendant and an accountant.[65]
[65]Affidavit of the first defendant sworn 19 July 2016, [36].
The first and second defendants admit that the share issue diluted the plaintiff’s shareholding but deny that the first defendant was burdened with fiduciary duties at the time.[66]
[66]First and second defendants’ defence, [37] and [38].
The defendants did not give any detailed evidence or submissions in support of the claim that the share issue was designed to give effect to the plaintiff’s wishes, for example, evidence of discussions with the plaintiff. However, counsel for the defendants suggested at the hearing that the actions taken with respect to the share issue may have resulted from a misreading of the relevant legislation as requiring all members to be shareholders in the trustee company.[67]
Transfer of the balance of the superannuation fund to the new trustee
[67]Transcript of proceedings, 62.
All defendants deny allegations that they are obliged to transfer the balance of the Ash Family Trust and superannuation fund.
In relation to the claim for the transfer of the superannuation fund, the defendants resist the plaintiff’s claim that Ms Lyttleton has, on the plaintiff’s behalf, validly appointed a new trustee. Further, they submit that Ms Lyttleton as an administrator does not fall within the definition of ‘legal personal representative’ under the SIS Act and is not otherwise empowered to appoint a new trustee.
Defendants’ failure to provide documents, information and accounts
In relation to the requests for documents, information and accounts, the defendants say that they have complied with all requests for documents and information in relation to the plaintiff, the Ash Family Trust and the superannuation fund. The defendants say that, if so ordered, they will provide accounts in an appropriate form.
A final matter
Finally, the defendants submit that the Court ought to be wary in entering judgment on a summary basis solely on the basis of affidavit material where there are areas of legitimate dispute. The defendants contend that there is no contrary evidence to the evidence of the defendants as to the plaintiff’s express instructions and actions prior to October 2013 and that actions giving effect to those instructions ought not to be categorised as a breach of trust.
Applicable principles - summary judgment under the CP Act
Pursuant to s 63(1) of the CP Act, the court may give summary judgment in a civil proceeding if satisfied that a claim, defence or counterclaim has no real prospect of success. Recent judicial decisions have provided guidance as to the meaning of the ‘no real prospect of success’ test imposed under s 63(1) and how it differs from the common law test, if at all.
In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd, Warren CJ and Nettle JA (as his Honour then was) explained the meaning of the phrase ‘no real prospect of success’ as follows:
…the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success; that the ‘real chance of success’ test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test; and that, as the law is at present understood, the real chance of success test permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent’s case is not ‘hopeless’ or ‘bound to fail’, it does not have a real prospect of succeeding.[68]
[68]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27, 39 [29] (‘Lysaght’).
In the recent decision of Mandie v Memart Nominees Pty Ltd, the Court of Appeal referred to various authorities and canvassed the different language used in those authorities to explain what the test ‘no real prospect of success’ means as it appears in s 63 of the CP Act.[69] In short, the concept has been said to apply to claims that are ‘fanciful’[70], ‘futile’[71] or ‘unarguable’.[72] Those descriptions were treated as being synonymous with the ‘no real prospect’ test, and with each other, by the Court of Appeal in Mandie.[73]
[69]Mandie v Memart Nominees Pty Ltd [2016] VSCA 4 (5 February 2016) [43]–[47] (Kyrou, Ferguson and McLeish JJA) (‘Mandie’).
[70]Lysaght (2013) 42 VR 27, 39 [29].
[71]Utility Services Corporation Ltd v SPI Electricity Pty Ltd (2012) 35 VR 628, 641 [48] (John Dixon AJA).
[72]Ibid 629 [1] (Bongiorno JA), 630 [8] (Beach AJA).
[73]Mandie [2016] VSCA 4 (5 February 2016) [47].
Applicable principles - fiduciary duties
The parties agreed on the substantive principles concerning the duties of fiduciaries and third party liability for breaches of trust summarised by the plaintiff as follows:
Fiduciary duties exist where there is a dependency or vulnerability on the part of one party that causes that party to rely on another.[74] It is well understood that an attorney is burdened with fiduciary obligations:
[74]Johnson v Buttress (1936) 56 CLR 113, 135–135.
…. The circumstances surrounding the execution of such a document will involve a fiduciary relationship of some kind and, speaking generally, the words of a power of attorney executed in such circumstances will be interpreted as meaning that the donor consents to the donee exercising the powers recited in the power of attorney but only within the terms of the relationship subsisting between the donor and the done … it may generally be said that the donor consents only to the powers being used for the benefit or purposes of the donor and not for the benefit or purposes of the donee.[75]
Fiduciary duties prohibit a fiduciary from taking a benefit where:
(a)there is a conflict (or a significant possibility thereof) of personal interest and duty; [76] or
(b) a benefit or gain arises by use of the fiduciary position (or of an opportunity or knowledge resulting from it).[77]
[75]R v Kerin (2013) 116 SASR 316 [149].
[76]Or the interest of a third person to whom the fiduciary is obligated.
[77]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 67 (Gibbs CJ).
These fiduciary proscriptions are reflected in s 125B(5) of the Instruments Act 1958 which requires an undertaking to be given by an attorney as follows:
(5) The statement of acceptance must include an undertaking by the person accepting appointment as attorney—
(a) to exercise the powers conferred by the enduring power of attorney with reasonable diligence to protect the interests of the donor; and
(b) to avoid acting where there is any conflict of interest between the interests of the donor and the attorney's interests; and
(c) to exercise the powers conferred by the enduring power of attorney in accordance with this Part.
Counsel for the plaintiff continued his summary of duties of fiduciaries and third party liability for breaches of trust as follows:
A power of attorney, no matter how expansive, will not be interpreted to permit the use of the principal’s own property for the benefit of the attorney unless the words of the instrument specifically authorize it. In Tobin v Broadbent Dixon J said: [78]
[78](1947) 75 CLR 378, 401; see also, 391 (Latham CJ), 398 (Starke J)(citations omitted).
Prima facie, a power, however widely its general words may be expressed, should not be construed as authorising the attorney to deal with the property of his principal for the attorney's own benefit. Something more specific and quite unambiguous is needed to justify such an interpretation. "The primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power to do so, make presents to himself or to others of his principal's property."
These proscriptions can be overcome with informed consent.[79] In Groeneveld Australia Pty Ltd v Wouter Nolten (2010) 80 ACSR 562, Davies J said at [52]:
[79] Chan v Zacharia (1984) 154 CLR 178, 204; Natural Extracts v Stotter (1997) 24 ACSR 110, 140.
However, if a fiduciary wants to enter into a transaction which would amount to a breach of duty, the fiduciary must make full disclosure to the person/entity to whom the duty is owed of all relevant facts known to the fiduciary. That person/entity must consent to the proscribed conduct of the fiduciary, if the fiduciary is to avoid liability. The law does not relieve a fiduciary from breaches of fiduciary duty unless the fiduciary can demonstrate that he or she had the person/entity’s informed consent to the breach.
Whether the breach delivers a benefit to the principal is irrelevant. In Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384, at pp 408-409, Dixon J. said:
Moreover, in considering such a matter it is important to remember that, in the language of James L.J., “the general principle that . . . no agent in the course of his agency, in the matter of his agency, can be allowed to make any profit without the knowledge and consent of his principal . . . is an inflexible rule, and must be applied inexorably by the Court, which is not entitled . . . to receive evidence, or suggestion, or argument as to whether the principal did or did not suffer any injury in fact by reason of the dealing of the agent; for the safety of mankind requires that no agent shall be able to put his principal to the danger of such an inquiry as that.
As to the consequences of a breach:
Consistent with fiduciary law generally, a transaction effected by an attorney in breach of the fiduciary duty owed to the principal is voidable at the principal’s election. For example, where authority under a power is exercised to transfer the principal's property to the attorney, and power does not expressly or by necessary implication authorise this, the principle may elect to set aside the dealing. [80]
The power of removal and appointment reposed in an appointor of a discretionary trust is a fiduciary power to be exercised in the interests of beneficiaries, solely in furtherance of the purpose for which it was conferred.[81] By analogy, the power to remove an appointor must also be a fiduciary power.
Equitable relief may be imposed upon a third party who knowingly receives some benefit from the fiduciary's wrongful conduct or is knowingly involved in that wrongful conduct.[82]
[80]Dal Pont, Powers of Attorney, (LexisNexis Butterworths, 2nd edition, 2015) [8.37].
[81]Wily v Burton (1994) 126 ALR 557, 559.
[82]Barnes v Addy (1874) LR 9 Ch App 244
Consideration
As a threshold issue, the first defendant asserted, albeit faintly, that the share issue was not entered into in her capacity as the plaintiff’s attorney. There was no evidence to substantiate her assertion. Accordingly, the defendants have no real prospect of success in establishing that the share issue was not entered into in her capacity as the plaintiff’s attorney. It follows that the defendants have no real prospect of success in denying that the first defendant was burdened with fiduciary duties in respect of the relevant events and transactions.
A second threshold issue is the defendants’ denial that the transactions delivered a benefit to the first defendant and her family or placed her in a position of conflict. The evidence does not support the defendants’ denial on these issues. For example, there is a benefit in the opportunity to have a fixed long term tenancy in the Kew property especially where the rent was for a time not fixed by reference to the market value in that suburb.[83] Similarly, there is a clear conflict of interest and duty in the first defendant’s actions to remove the plaintiff and install herself as appointor of the Ash Family Trust and in issuing shares that delivered control of the trustee company to her. In circumstances where the affairs of the trustee company were mismanaged, having an appointor whose interests conflict with any efforts to probe the affairs of the trustee company would not serve the best interests of the plaintiff.
[83]The value of the Kew property was not the subject of evidence, although an account filed by the first defendant as attorney appeared to estimate the value at approximately $2.2m: first Lyttleton affidavit; SML-25.
The principal submission of the defendants was that they were acting on the plaintiff’s wishes. Accordingly, the key issue against which the defendants’ prospects of success should be measured is that of informed consent.
The primary consideration on the issue of informed consent is the plaintiff’s capacity to consent. There is no dispute that the plaintiff was incapacitated and not capable of giving consent at the time that the transactions were entered into on 24 December 2014, with the defendants’ pleading alleging the plaintiff’s incapacity at that date.[84]
[84]First and second defendants’ defence, [33].
Notwithstanding the plaintiff’s acknowledged incapacity, the defendants say that their actions were designed to fulfil the wishes of the plaintiff and give effect to decisions he made prior to October 2013 when he had capacity to direct his affairs.
There is a marked paucity of evidence that decisions made, or wishes expressed, by the plaintiff before October 2013 specifically related to or authorised the later actions of the defendants.
In relation to the purported lease, the evidence only demonstrated the plaintiff’s desire that the first defendant and her family should reside at the Kew property with the plaintiff, and not that they should reside there on a fixed long term lease in his absence. A present desire by the plaintiff to return to the Kew property, notwithstanding his current lack of decision-making capacity, does not support the defendants’ position. It is well established that informed consent requires that the principal be furnished with all relevant details of the proposed transaction. There is no evidence of disclosures made to the plaintiff before his incapacity in connection with the terms of the purported lease, with no evidence that the defendants disclosed to the plaintiff the salient terms of the five year term of the lease, the rent or that he sought any independent advice about it. There is no evidence of informed consent by the plaintiff and no evidence of the salient details of how the transaction would affect his interests being provided to him.
In contrast to the purported lease, the defendants’ position in relation to the appointor removal deed and the share issue does not rely on direct evidence of the plaintiff’s wishes expressed prior to October 2013. There was no direct evidence that the plaintiff made decisions to remove himself as appointor or to permit a share issue in the trustee company, although the first defendant did depose that the share issue was undertaken as a result of her father’s wishes, without any elaboration by her. Instead, the defendants urge that those decisions are to be inferred from his actions in 2012 and 2013, pointing to various actions by the plaintiff and discussions between him and the defendants in 2012 and 2013. They contend that the plaintiff put in place a plan or course of action whereby he had determined that first and second defendants were to be more involved in managing his financial affairs. The defendants did not contend that these transactions were all expressly contemplated as part of such a plan. Rather, the defendants’ submission required the Court to infer that the appointor removal deed and the share issue arose as a ‘natural corollary’ or ‘natural consequence’ of the course determined by the plaintiff when he had capacity. It is in those circumstances that the defendants say there is no breach of fiduciary duty in a fiduciary giving effect to previously made decisions of the principal, in this case, the plaintiff.
The defendants proffered no authority to support the proposition that, if the Court were to infer that the plaintiff had put in place a plan to involve the defendants in his financial affairs, that would provide a sufficient basis to then infer the plaintiff’s informed consent to a specific series of transactions that were not expressly contemplated in that plan after he had suffered a disabling accident and lacked capacity.
Based on the evidence and the applicable legal principles, there is no real prospect of success in these submissions. Informed consent involves more than inference from an alleged plan of the principal, particularly where that plan is vaguely defined and based on inference itself. There is no evidence of informed consent by the plaintiff, no evidence of the salient details of the transactions affecting his interests being provided to him and no evidence of disclosures made to the plaintiff before his incapacity in connection with the appointor removal deed,[85] or the share issue.
[85]So much was conceded by counsel for the defendants; see transcript of proceedings, 58.
If there had been a plan by the plaintiff to involve the first defendant in his financial affairs, there is no evidence that these transactions were sanctioned as part of any such plan. A plan to involve the defendants is a very different thing to a plan to relinquish control of one’s assets.
These series of transactions delivered control of the plaintiff’s affairs and financial wellbeing to the defendants, notwithstanding Ms Lyttleton’s appointment. Discrete decisions made by the plaintiff in 2012, for example, to appoint the first defendant as his attorney, and as a director and member of the superannuation fund, fall well short of revealing any real prospect of success in demonstrating the plaintiff’s informed consent to the seismic shift in control of his affairs that has occurred.
The defendants do not deny that the plaintiff lacked capacity at the time the series of dealings were entered into on 24 December 2014. They offered no other evidence than events in 2012 and 2013 to explain how they furnished the plaintiff with information sufficient to provide a basis for his informed consent to a series of dealings that delivered the defendants control over his affairs and financial wellbeing.
Although not the subject of this application, the timing of the transactions just prior to the first defendants’ resignation as attorney, the fact that those transactions were apparently not disclosed at the time of the VCAT proceeding or its settlement, and the evidence concerning the investment of the plaintiff’s money in the Ostrava Group of companies do not add any strength to the defendants’ submission that they were acting in the plaintiff’s interests and giving effect to his decisions.
For all these reasons, I am satisfied on the balance of probabilities that the defendants have no real prospect of success in defending the allegations in the amended statement of claim concerning the purported lease, the appointor removal deed and the share issue.
In view of this conclusion, I am satisfied that the new trustee has been validly appointed. I am also satisfied that the defendants have no real prospect of success in resisting the obligation to transfer the superannuation fund to the new trustee established by Ms Lyttleton. In this regard, I do not offer any conclusive view on the issue raised by the defendants as to the interpretation of the relevant superannuation legislation. However, I observe that, based on the material before me, the alleged legal issue raised by the defendants and for which they received advice, does not appear to give rise to a basis upon which a real prospect of success in defending that claim can rest.
It is unnecessary to decide the plaintiff’s alternative claim for injunctive relief, which mirrored the relief sought on the summary judgment application.
Orders
The parties are to forward proposed orders as sought by the plaintiff in his amended summons for summary judgment, plus a further order following discussions at the hearing to the effect that the defendants should be required to provide an affidavit of documents.
Costs of the application
The plaintiff also seeks indemnity costs against the first and second defendants. If after consideration of these reasons, the parties are unable to agree on the costs, they are to file short written submissions on or before 11 October 2016.
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