Bale v Kimberley Developments Pty Ltd

[2022] NSWSC 820

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Bale v Kimberley Developments Pty Ltd [2022] NSWSC 820

Hearing dates:

3 – 9 September 2021; 6 December 2021

Date of orders:

23 June 2022

Decision date:

23 June 2022

Jurisdiction:

Equity

Before:

Ward P

Decision:

1.   Set aside the transfer dated 21 February 2011 in relation to the property referred to in these reasons as the Forest Lodge Property.

2.   Direct the first defendant (Kimberley Developments) within 28 days to transfer the title to the Forest Lodge Property, unencumbered, to the plaintiff (Ms Françoise Bale) as executor of the estate of the late Michel Schein.

3.   Subject to order (11), order the plaintiff, as executor of the estate of the late Michel Schein, following transfer of the title to the Forest Lodge Property, to pay the sum of $288,242.63 to the sixth defendant (Super Start Batteries Pty Ltd) or at the direction of its director, the fifth defendant (Mr Theofanis Trigas), being the sum paid to discharge the Suncorp mortgage, plus interest calculated at the rate specified in the Suncorp mortgage.

4.   Order that the sum payable pursuant to order (3) be charged on the Forest Lodge Property after its transfer to the plaintiff as executor of the estate of the deceased.

5.   Declare that the first defendant as from 21 February 2011 held, and holds, the Forest Lodge Property on constructive trust for the deceased (and since his death, for the benefit of the deceased’s estate).

6.   Declare that the first defendant breached the trust on which the Forest Lodge Property was held by encumbering the property with the mortgage to NAB in 2012 and transferring the funds so borrowed to the sixth defendant (Super Start Batteries Pty Ltd) (and/or at the direction of the fifth defendant, Mr Theofanis Trigas) and not used for the purposes or benefit of the trust.

7.   Declare that the fifth and sixth defendants had constructive notice of the matters giving rise to the constructive trust and of the breach of that trust and are liable for being knowingly concerned in the breach of that trust or in knowing receipt of trust property in breach of trust.

8.   Order the fifth and sixth defendants to repay to Kimberley Developments, as constructive trustee of the deceased’s estate’s interest in the Forest Lodge Property, the funds received by the sixth defendant out of the facility secured by the NAB mortgage over the Forest Lodge Property and any interest thereon that is required in order to discharge the NAB mortgage (such amounts to be paid within 21 days in order to make good the trust funds transferred in breach of trust).

9.   Order the plaintiff, as executor of the estate of the late Michel Schein, to pay to the first defendant such amounts as are determined by the Court appointed referee (to be appointed pursuant to order (12) below) to be properly referable to expenses reasonably incurred in the maintenance of the Forest Lodge Property since 2011.

10. Order the first defendant to account to the plaintiff, as executor of the estate of the late Michel Schein, for all amounts received by way of rent or other income in respect of the Forest Lodge Property since 21 February 2011 to date, and interest thereon pursuant to s 100 of the Civil Procedure Act 2005 (NSW).

11.   Order that the sums payable in orders (3), (9) and (10) be offset against each other with the sum remaining to be paid to the relevant party within 21 days of determination by the Court appointed referee of that amount.

12.   Order that the matter be referred to a Court appointed referee (at the cost of the parties to be borne proportionately) for determination of the amounts to be paid, and the offset amount, pursuant to the above orders.

13.   Declare that the fourth defendant (Ms Chyna Schein, nee Richardson) is liable to the deceased’s estate for breach of fiduciary duty in relation to entry into the sale transaction in respect of the Forest Lodge Property.

14.   Order the fourth defendant to indemnify the deceased’s estate for any loss sustained as a result of entry into the sale transaction in respect of the Forest Lodge Property.

15.   Give liberty to the plaintiff to apply on reasonable notice for orders in relation to the implementation of the above orders.

16.    Reserve the question of costs and direct the parties to file brief written submissions on costs within 21 days, with a view to determining the issue of costs on the papers.

17.   Direct the parties within 7 days to forward to Ward P’s associate the name of an agreed and suitably qualified person to be appointed as referee or, failing agreement, to submit three proposed names, with a view to the Court determining the identity of the person to be appointed as Court appointed referee in the absence of any such agreement.

Catchwords:

CONTRACTS – Formation – Intention to create legal relations – Whether agreement signed by the plaintiff constituted a binding contract – Whether unjust contract under the Contracts Review Act 1980 (NSW)

EQUITY – Unconscionable conduct – Special disability or disadvantage – Independent advice – Inequality of bargaining power – Whether unconscientious advantage taken – Whether defences of laches and acquiescence applied – Whether Limitation Act 1969 (NSW) applied by analogy – Whether transaction ought to be set aside

EQUITY – Trusts and trustees – Constructive trusts – Remedial – Breaches of trust – Whether a constructive trust arises – Whether knowing receipt of trust property – Whether encumbrance of trust property constitutes a breach of trust

EQUITY – Fiduciary duties – Breach – Agent and principal – Whether donee of power of attorney acted in best interests of the plaintiff

Legislation Cited:

Australian Consumer Law, ss 20, 21, 22, 236 and 237

Competition and Consumer Act 2010 (Cth), ss 20, 21, 22 of Sch 2

Contracts Review Act 1980 (NSW), ss 7, 9

Conveyancing Act 1919 (NSW), s 54A

Corporations Act 2001 (Cth), s 461

Evidence Act 1995 (NSW), ss 59, 69, 76-79, 80, 81, 82, 91, 135, 136

Limitation Act 1969 (NSW), ss 14, 16, 23, 36, 52

Powers of Attorney Act 2003 (NSW)

Powers of Attorney Regulation 2016 (NSW), cl 7, Sch 2

Real Property Act 1900 (NSW), s 36

Cases Cited:

400 George Street (Qld) Pty Ltd v BG International Ltd [2010] 2 Qd R 302; [2010] QCA 245

ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301; [2002] FCA 62

Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499

Albrighton v Royal Prince Alfred Hospital & Ors (1980) 2 NSWLR 542

Amit Laundry v Jain [2017] NSWSC 1495

Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43

Antov v Bokan [2018] NSWSC 1474

Australian Securities and Investment Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17

Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18

Baden Delvaux & Lecuit v Société Générale Pour Favoriser le Developpement du Commerce et de L’Industrie en France SA [1993] 1 WLR 509

Bank of Credit and Commerce International (Overseas) Ltd (in liq) v Akindele [2001] Ch 437

Barnes v Addy (1874) LR 9 Ch App 244

Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59

Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59

Beatty v Guggenheim Exploration Co (1919) 122 NE 378

Blatch v Archer (1774) 1 Cowp 63

Blomley v Ryan (1956) 99 CLR 362; [1956] HCA 81

Breskvar v Wall (1971) 126 CLR 376; [1971] HCA 70

Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66

Brogden and Ors v The Directors of the Metropolitan Railway Company (1877) 2 App Cas 66

Burnside v Mulgrew; Re the Estate of Grabrovaz [2007] NSWSC 550

Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26

Chase v Chase [2020] NSWSC 1689

Chen v Gu; Chen v Nguyen [2011] NSWSC 1622

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14

Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389

Consul Development Pty Ltd v DPC Estate Pty Ltd (1975) 132 CLR 373; [1975] HCA 8

Cubillo v Commonwealth (2000) 103 FCR 1; [2000] FCA 1084

Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21

De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253; [2011] FCA 645

Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84

Edna May Collins by her next friend Glenys Lesley Laraine Poletti v May [2000] WASC 29

Elkofairi v Permanent Trustee Company Limited (2002) 11 BPR 20,841; [2002] NSWCA 413

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22

Fodare Pty Ltd v Shearn [2010] NSWSC 737

Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321

Francis v Francis [1952] VLR 231

Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48

Geyer v Redeland Pty Limited [2013] NSWCA 338

Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10

Gray v Coles Supermarkets Australia Pty Ltd; Coles Supermarkets Australia Pty Ltd v Chandler Macleod Group Ltd [2020] NSWCA 209

Gregg v Tasmanian Trustees Ltd (1997) 143 ALR 328; [1997] FCA 128

Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6

Guthrie v Spence (2009) 78 NSWLR 225; [2009] NSWCA 369

Halifax Building Society v Thomas [1996] Ch 217

Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64

Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21

In Re Sirrah Pty Ltd (In Provisional Liquidation) [2021] NSWSC 413

John Alexander’s Clubs Pty Ltd v White City Tennis Club Pty Ltd (2010) 241 CLR 1; [2010] HCA 19

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Kakavas v Crown Melbourne Limited (2013) 250 CLR 392; [2012] HCA 25

Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191

Kaye v Strandbags Group [2006] NSWSC 1015

KQ International Trading Pty Ltd v Yang [2016] VSC 146

Lancaster v The Queen (2014) 44 VR 820; [2014] VSCA 333

Lee v Sankey (1873) LR 15 Eq 204

Lithgow City Council v Jackson (2011) 244 CLR 352; [2011] HCA 36

Lopwell Pty Ltd v Clarke [2009] NSWCA 165

Lorretta Kistmah Craig and Ors v Kia Silverbrook and Ors [2013] NSWSC 1687

Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61

Mackowik v Kansas City St J & C B R Co 94 SW 256 (1906)

Maguire v Makaronis (1997) 188 CLR 449; [1997] HCA 23

Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305

Manly Council v Byrne [2004] NSWCA 123

Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361

Mclaughlin v Burrows [2021] NSWCA 170

McNab v Graham (2017) 53 VR 311; [2017] VSCA 352

Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710

Neilson v Letch (No 2) [2006] NSWCA 254

Organ v Sandwell [1921] VLR 622 (FC)

Owen v Homan (1853) 4 HL Cas 997 at 1035; 10 ER 752

Owners of the Ship, Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404; [1994] HCA 54

Pavlis v Pavlis [2021] NSWSC 1117

Payne v Parker [1976] 1 NSWLR 191

Perpetual Trustee Co Ltd v Gibson [2013] NSWSC 276

Perpetual Trustee Limited v Khoshaba [2006] NSWCA 41

Phung v Phung [2019] NSWSC 117

Pipikos v Trayans (2018) 265 CLR 522; [2018] HCA 39

Quach v MLC Limited (No 6) [2021] FCA 271

Queensland v Masson (2020) 94 ALJR 785; [2020] HCA 28

R v Heyde (1990) 20 NSWLR 234

Re Cummings Engineering Holdings Pty Ltd [2014] NSWSC 250

Realm Resources Ltd v Aurora Place Investments Pty Ltd [2019] NSWSC 379

Rochefoucauld v Boustead [1897] 1 Ch 196

Rodriguez and Sons Pty Ltd v Queensland Bulk Water Supply Authority trading as Seqwater (No 13) [2018] NSWSC 565

RPS v R (2000) 199 CLR 620; [2000] HCA 3

Sergei Sergienko v AXL Financial Pty Limited [2021] NSWSC 297

Shafston Avenue Construction Pty Ltd, in the matter of CRCG-Rimfire Pty Ltd (subject to a deed of company arrangement) v McCann (No 3) [2021] FCA 938

Spence v Crawford [1939] SC (HL) 52

Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640; [1975] HCA 63

Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2022] NSWSC 144

Stubbings v Jams 2 Pty Ltd (2022) 399 ALR 409; [2022] HCA 6

Sybil Dawne Hintze v Ratna Tsering & Anor [2018] NSWSC 1190

Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462

Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209

Talevski v Talevski & Anor [2007] NSWSC 945

The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239

Trigas v Owners of Strata Plan [2019] NSWDC 473

Turner v O’Bryan-Turner (2022) 398 ALR 711; [2022] NSWCA 23

Turner v Windever [2003] NSWSC 1147

Turner v Windever [2005] NSWCA 73

Twigg v Twigg [2022] NSWCA 68

Urjraso v NRMA Insurance Ltd (unreported, Court of Appeal, NSW, CA 40353 of 1990, Mahoney CJ, Priestley and Handley JJA, 14 December 1992)

Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102; [1995] HCA 14

Ward v Ward (No 2) [2011] NSWSC 1292

Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18

Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669

Texts Cited:

B Edgeworth, Butt’s Land Law (7th ed, 2017, Lawbook Co)

E Sykes, “The Doctrine of Constructive Trusts” (1941) 15 Australian Law Journal 171

Elder Law New South Wales (2015, LexisNexis)

GE Dal Pont, Law of Agency (2020, 4th ed, LexisNexis)

J McGhee, Snell’s Equity (32nd edition, 2010, Sweet & Maxwell)

J W Carter, Greg Tolhurst and Keith Mason, Mason & Carter’s Restitution Law in Australia (2021, 4th ed, LexisNexis)

JD Heydon, Cross on Evidence (2021, 13th ed, LexisNexis)

Jeannie Marie Paterson, Corones’ Australian Consumer Law (2019, 4th ed, Thomson Reuters)

Michael Liu, ‘Application of Limitation by Analogy: Equity Exceptions’ (2016) 25 Australian Property Law Journal 150

P Butt, Land Law (6th ed, 2010, Thomson Reuters)

P Young, C Croft, ML Smith, On Equity (2009, Thomson Reuters)

Paul Finn, ‘Equitable Doctrine and Discretion in Remedies’ in William Cornish, Richard C Nolan, Janet O’Sullivan and G J Virgo, eds, Restitution: Past, Present and Future (1998, Hart Publishing)

RP Meagher, J D Heydon and M J Leeming, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (2002, 4th ed, LexisNexis)

Category:

Principal judgment

Parties:

Françoise Bale (Plaintiff)
Kimberley Developments Pty Ltd (First Defendant)
Albert Darwiche (Second Defendant)
Martin Churchill (Third Defendant)
Chyna Schein (Fourth Defendant)
Theofanis Trigas (Fifth Defendant)
Super Start Batteries Pty Ltd (Sixth Defendant)

Representation:

Counsel:
DP O’Connor with J McEnaney (Plaintiff)
R Perla (1st, 2nd, 5th, 6th Defendants)

Solicitors:
SCB Legal (Plaintiff)
Weinberger Lawyers (1st, 2nd, 5th, 6th Defendants)

File Number(s):

2018/00237019

Publication restriction:

Nil

Judgment

1. HER HONOUR: This matter relates to the transfer on 21 February 2011, by the late Michel Schein (the deceased), of a commercial property at Forest Lodge, New South Wales (the Forest Lodge Property) to the first defendant, Kimberley Developments Pty Ltd (Kimberley Developments).

2. The proceeding was initially commenced in 2018 in the name of the deceased by his daughter, Ms Françoise Bale, as his tutor. Ms Bale held an enduring power of attorney on behalf of the deceased from 11 August 2016 (following a proceeding in the NSW Civil and Administrative Tribunal (NCAT) to which I will refer in due course). Ms Bale commenced the proceeding as the deceased’s tutor on the basis that the deceased was suffering from cognitive impairment and incapable of commencing or conducting the proceeding in his own right. The deceased subsequently died on 9 April 2021, aged 90 years.

3. It does not appear to be disputed that, at the time of the deceased’s death, the deceased had advanced Alzheimer’s disease. The deceased was described as being in a catatonic state. There is, however, an issue as to when the deceased’s cognitive impairment first began to manifest itself (and the extent of that impairment), which is relevant to the question of the deceased’s capacity (though a claim of incapacity is not now pressed as such) or vulnerability to exploitation; and to the claim based on unconscionable conduct by reference to the defendants’ alleged knowledge of the deceased’s special disadvantage in his dealings with the various defendants.

4. Ms Bale points to medical records and other like documents in which reference is made to the deceased suffering from cognitive decline since at least 2007, and to the evidence of lay witnesses (including herself) as to their observations of the deceased in the period from various dates through to 2015 (after the impugned transaction). The defendants maintain their objection to the admissibility of representations contained in those medical records insofar as they are relied upon by Ms Bale for the truth of what was there recorded (which I address in due course).

5. As adverted to above, the claim of incapacity was not ultimately pressed by Ms Bale; rather, the case was put, in effect, on the basis of the deceased’s vulnerability to exploitation (as I explain later in these reasons), with an alternative claim for breach of contract.

6. After the deceased’s death, the proceeding has been continued by Ms Bale in her capacity as the executor of the deceased’s estate. Principally, what Ms Bale seeks in this proceeding is an order setting aside the transfer of the Forest Lodge Property to Kimberley Developments. There are, however, additional and alternative claims (which I explain in due course).

The parties

7. The plaintiff, Ms Bale, is the only child of the deceased and his first wife (the late Mrs Denise Schein). Ms Bale is the sole executor of the deceased’s estate.

8. The first defendant, Kimberley Developments, which was incorporated in early 2011 shortly prior to the impugned transaction, is the entity to which the Forest Lodge Property was transferred.

9. The second defendant, Mr Albert Darwiche, was at the relevant time (i.e., at the time of transfer of the Forest Lodge Property) the sole director (and, on the face of the ASIC records, its controlling mind) of Kimberley Developments and conducts a waste recycling business (known as ABS Recycling & Services). Prior to the sale of the Forest Lodge Property, Mr Darwiche had performed some demolition and “cleaning up” work at the Forest Lodge Property for the deceased.

10. The third defendant, Mr Martin Churchill, was the solicitor who acted (it seems for all parties) on the transfer of the Forest Lodge Property to Kimberley Developments (and who it is said introduced Mr Darwiche to the deceased). Mr Churchill had apparently been a friend or associate of Mr Darwiche for some twenty years (see Mr Darwiche’s evidence at T 253.5). (Mr Churchill also seems to have had an association with the deceased’s second wife and/or her associate, Mr Max Mohr, to whom I refer below.) At the time of the hearing of the present proceeding, Mr Churchill was on remand in gaol awaiting trial in relation to charges of commercial drug supply unrelated to the present matter. At that stage, Mr Churchill had been incarcerated since August 2020. Mr Churchill took no active role in the hearing before me; the claims against Mr Churchill having been resolved by settlement between the parties in November 2020, with the ensuing dismissal of the claim against Mr Churchill.

11. The fourth defendant, Ms Chyna Schein (whose first name was variously spelt as “China”), was the deceased’s wife at the time of the impugned transaction (she being his second wife; not Ms Bale’s mother). Ms Chyna Schein has taken no role in the proceeding; indeed, as I understand it, Ms Chyna Schein’s whereabouts are presently unknown. Ms Chyna Schein was, however, served with the statement of claim filed on 24 July 2018. Ms Chyna Schein appears to have left her then residence in Woolgoolga (with no forwarding address) after being informed of the institution of this proceeding (see T 181.26-181.38) and the plaintiffs’ process server was unable to locate her to serve the notice of motion for default judgment (see the affidavit of Ms Bale’s solicitor, Ms Sionea Breust, sworn on 7 September 2021). Ms Bale seeks default judgment against Ms Chyna Schein with damages to be assessed at the conclusion of the hearing.

7. The fifth defendant, Mr Theofanis Trigas (known as Theo) is now the director of Kimberley Developments and of the sixth defendant, Super Start Batteries Pty Ltd (Super Start). Mr Darwiche and Mr Theo Trigas are longstanding friends. (Mr Darwiche is also a longstanding friend of Mr Theo Trigas’ brother, Mr Arthur Trigas, who gave evidence in the proceeding but is not himself a party to the proceeding.)

8. The sixth defendant, as noted above, is Super Start. Its involvement in the proceeding arises out of the fact that, after the transfer of the Forest Lodge Property to Kimberley Developments, a loan facility was obtained (on 3 May 2012) secured by a mortgage granted by Kimberley Developments over the Forest Lodge Property (securing borrowings in an amount totalling $700,000, in two tranches), those funds then having been transferred to Super Start (according to Mr Theo Trigas, for the purpose of or connected with the company’s “stock levels” – see T 315.34).

9. Each of Kimberley Developments, Mr Darwiche, Mr Theo Trigas and Super Start was represented at the hearing by Mr Perla of Counsel; and in these reasons I refer to those (active) defendants collectively as the defendants. Ms Bale was represented at the hearing by Mr O’Connor and Mr McEnaney of Counsel.

The proceeding

Further amended statement of claim

15. I have referred above to the commencement of the proceeding in 2018 in the deceased’s name by Ms Bale as his tutor; and to its subsequent continuation by Ms Bale on behalf of the deceased’s estate.

16. By the time of the hearing, the relevant iteration of the pleading was the further amended statement of claim dated 31 May 2019 and filed on 10 June 2019. As adverted to above, at the hearing, various causes of action and claims for relief were not pressed by Ms Bale (including claims for lack of capacity, undue influence and misleading or deceptive conduct claims). The remaining claims against the defendants are as follows.

17. As against Kimberley Developments and Mr Darwiche: claims pursuant to s 7 of the Contracts Review Act1980 (NSW) (Contracts Review Act) (see [26]-[32]); claims for unconscionable conduct for the purposes of ss 20, 21 and 22 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law) (see [35]-[46]); in the alternative to the statutory relief, a claim for unconscionable conduct under the general law (see [46A]); in the alternative, claims for breach of contract (see [62]-[68]).

18. As against Kimberley Developments, Mr Theo Trigas and Super Start: claims under the heading in the pleading “claims for breach of trust” (but, more precisely in the context of the claims against Mr Theo Trigas and Super Start, claims for knowing involvement in the alleged breach of trust or knowing receipt of trust property). The pleading requires careful analysis in this respect. The various claims under this heading are premised on the existence of a constructive trust – the allegation being (at [69]) that Kimberley Developments held the deceased’s interest in the Forest Lodge Property on constructive trust. It is alleged that Mr Theo Trigas, as sole director of Kimberley Developments (which he became after the transfer of the land to Kimberley Developments), had knowledge of the fact that Kimberley Developments held the deceased’s interest in the property on constructive trust (see [69B]). It is then alleged that, in breach of trust, Kimberley Developments and Mr Theo Trigas: first, encumbered the trust property (i.e., the Forest Lodge Property) with the NAB mortgage (see at [70]) and second, disbursed those “trust” funds (to Super Start – see at [72]) and did not use those funds to develop the Forest Lodge Property ([71]). It is alleged that Super Start was aware (in the particulars it is clear that this knowledge is imputed from Mr Theo Trigas’ position as sole director of both entities) that those funds were held on constructive trust for the deceased and that their transfer to it was in breach of that trust (see at [73]); and that Mr Theo Trigas was “knowingly concerned” in the breach of trust of Kimberley Developments (referring back to the matters pleaded at [69]).

19. Thus, when analysed, the allegation is that Kimberley Developments held the deceased’s interest in the Forest Lodge Property on constructive trust for the deceased; Kimberley Developments was in breach of that constructive trust by encumbering the property with the NAB mortgage and not using the funds for the purposes of the development of the property; Mr Theo Trigas (who is not the constructive trustee) was “knowingly concerned” in the breach of trust by Kimberley Developments (by virtue of the circumstances pleaded in which the consideration for the transfer was not paid – although I interpose to note that those circumstances are part of the conduct that gives rise to the unconscionable conduct and hence the constructive trust itself); and that the funds were transferred to Super Start, which was aware that the funds were held on constructive trust for the deceased and the transfer was in breach of that trust (i.e., a cause of action for knowing receipt of trust property transferred in breach of trust).

20. Therefore, within the umbrella of “claims for breach of trust” there seem to be claims for breach of the constructive trust, for knowing assistance (or knowing concern) by Mr Theo Trigas in that breach of trust, and for knowing receipt (by Super Start) of trust funds transferred in breach of trust. In respect of those claims, Ms Bale seeks “damages” as against Kimberley Developments and Super Start for breach of trust (though the heading to this section of the pleading and the prayers for relief that follow the declarations sought as to Mr Theo Trigas as well as Super Start – prayers 16D and 16C – also suggest a claim for “damages” as against Mr Theo Trigas in this regard) and the return of the moneys that formed part of the alleged constructive trust “so as to make the trust whole” (see at [75]).

21. The relief claimed as against Kimberley Developments and Mr Darwiche (see the heading to this section of the pleading, although it also encompasses relief sought against Mr Theo Trigas and Super Start – see below) includes a raft of declaratory relief: that the alleged 21 February 2011 contract is an unjust contract within the meaning of s 7 of the Contracts Review Act or under the general law (prayer 1); that the alleged 21 February 2011 contract and the subsequent transfer of the Forest Lodge Property was unconscionable (prayer 2) or alternatively is void for uncertainty (prayer 3); that the alleged 21 February 2011 contract was entered into for no consideration to the plaintiff or alternatively inadequate consideration (prayer 4); alternatively, that the said defendants, in procuring the deceased’s entry into the contract engaged in unconscionable conduct within the meaning of ss 20, 21 and 22 of the Australian Consumer Law (prayer 5); that Kimberley Developments holds the Forest Lodge Property on trust for the plaintiff (prayer 11); that the transfer of property dated 21 February 2011 be declared void and of no effect (prayer 16); alternatively, that Kimberley Developments holds the Forest Lodge Property on constructive trust for the plaintiff (prayer 16B); that Kimberley Developments and Mr Theo Trigas were knowingly concerned in a breach of trust by mortgaging the Forest Lodge Property to the National Australia Bank (NAB) in the amount of $700,000 (prayer 16D); and that Super Start was knowingly concerned in Mr Theo Trigas’ breach of trust and took funds derived from the property held on trust by Kimberley Developments with knowledge of Mr Theo Trigas’ breach of trust (prayer 16C). There is a broad claim for “damages for the breaches of trust in the alternative” at prayer 16B (where second occurring).

22. As against Kimberley Developments and Mr Darwiche, orders are sought: that the contract (i.e., the alleged 21 February 2011 contract) be declared void pursuant to s 7 of the Contracts Review Act (prayer 7); alternatively, pursuant to the same provision, that the contract not be enforced (prayer 8) (cf the submission made in opening written submissions as to specific performance at [128] and [132]-[133], in which the plaintiff seeks specific performance of the alleged 21 February 2011 agreement, being the receipt of 60% of the shares in Kimberley Developments promised under the terms of the alleged agreement, or alternatively the amount of $302,000); an order that Kimberley Developments execute an instrument and do all things necessary to convey the Forest Lodge Property back to the plaintiff (prayer 12); an order for an account of moneys derived from the Forest Lodge Property from the date of the transfer of the property to Kimberley Developments (prayer 13); that all executed copies of the contract be cancelled (prayer 15); alternatively, damages for breach of contract (prayer 16A); and (though this in context must encompass claims also against Mr Theo Trigas and Super Start) “[d]amages for breaches of trust in the alternative” (prayer 16B, where second occurring).

23. As against Ms Chyna Schein, the claim is that she owed the deceased a fiduciary obligation in all transactions that she purported to enter on his behalf (particularised by reference to the power of attorney held by her and the Powers of Attorney Act 2003 (NSW)) (see at [58]) and that she was in breach of that fiduciary obligation in purporting to enter into the contract on behalf of the deceased (see at [59]) and by purporting to execute a transfer of the Forest Lodge Property to Kimberley Developments (see at [60]), as a result of which it is alleged that the plaintiff has suffered damage and loss (see [61]). The relief claimed against Ms Chyna Schein is for declarations that she was in breach of her fiduciary duties to the plaintiff by the execution of the alleged 21 February 2011 contract and by executing a transfer of the property in favour of Kimberley Developments and Mr Darwiche (prayers 22 and 23); and for damages for breach of fiduciary obligation (prayer 24).

24. In the alternative to the above relief, the plaintiff seeks a declaration that the plaintiff’s caveat lodged in connection with the Forest Lodge Property is a valid caveat (see prayer 25) and an order that Kimberley Developments be wound up on the just and equitable basis pursuant to s 461 of the Corporations Act 2001 (Cth) (see prayer 26) (this latter order seemingly premised on the deceased having an interest as shareholder in the company).

25. Further, a declaration is sought that “generally” the plaintiff (i.e., the deceased) was under a relevant disability at the time of entering into the agreement for the purposes of s 52 of the Limitation Act 1969 (NSW) (Limitation Act) (prayer 27).

Defences

26. The defendants rely upon their respective (and largely identical) second further amended defences that were filed with leave during the course of the hearing on 6 September 2021. The amendments for which leave was granted relate, first, to the pleading of statutory limitation defences (relying upon s 14 and s 23 of the Limitation Act – at [76]). These amendments were not opposed.

27. Leave was also sought (and opposed) to plead defences of laches and acquiescence (in respect of which there had been no previous pleading or particularisation), the question at that stage being whether it would expand the evidentiary ambit of the proceeding. After debate (and on the basis of the defendants’ contention that there would be no foreshadowed expansion of the hearing or the evidentiary ambit of the claim), I permitted the defendants to plead reliance on the doctrine of laches and acquiescence (see [76] of the respective defences – in the case of Mr Theo Trigas and Super Start’s defences, [76] where second appearing), allowing the proposed amendments at [77B], [77C] and [77E] of the draft pleadings (but not those at what were then [77A] and [77D] of the proposed amended defences).

28. In the further amended defences filed by each of Mr Theo Trigas, Super Start, Kimberley Developments and Mr Darwiche (with some variation in the paragraph numbering) the laches and acquiescence defences that are pleaded (see [76] or [77]-[79]) are based on the allegation that Ms Bale had been aware since at least August 2016 that the subject property had been sold or transferred to Kimberley Developments ([77](a) or [78](a)); that, after the property was transferred to Kimberley Developments on 21 February 2011, neither the vendor (the deceased) (nor anyone on his behalf) communicated to the defendants or anyone on their behalf that: no consideration or no adequate consideration had been paid for the transfer of the subject property or that there was any failure to perform any obligation pursuant to the agreement for the sale of the subject property (at [77](c) or [78](c)); and, further, that Ms Bale had waited until 24 July 2018 to commence the proceeding.

29. Further, and in answer to the whole of the statement of claim, reliance was placed on s 54A of the Conveyancing Act 1919 (NSW), to which allegation the particulars are that the contract dated 21 February 2011 relied upon by Ms Bale was not signed by anyone on behalf of the defendants (at [78] or [80]).

Conduct of the hearing

30. The hearing commenced on 3 September 2021. At the conclusion of the hearing, Counsel for Ms Bale sought further time to prepare written closing submissions (to which request, with some reluctance given the delay to which it would inevitably give rise in light of other hearings, already listed before me in the interim, I acceded). The hearing thus did not conclude until the completion of oral closing submissions on 6 December 2021.

Chronology of events

Background

31. The deceased was an engineer who had operated a plating and manufacturing business (through a company known as British Franco Electric Pty Ltd, of which he was sole director) from the Forest Lodge Property for a number of years prior to the events in question (see Ms Bale’s evidence at T 39.32-39.39; see also at [2] of her first affidavit sworn 23 November 2018), there being some reference also to another company associated with the deceased, Schein Industries. The deceased was the registered proprietor of the Forest Lodge Property (which was located at Kimber Lane and was a battleaxe block with right of way access to Junction Road in Forest Lodge).

32. The deceased and his first wife had one child (the plaintiff, Ms Bale). It was evident from Ms Bale’s cross-examination that she is very proud of her late father’s achievements (see at T 36.30-37.30) and that the two were close (at least apart from a period after the deceased’s remarriage from around 2008 to 2015).

33. Prior to his first wife’s death, the deceased and his first wife were living in a house in Gordon (which Ms Bale described in her statement to the NSW Civil and Administrative Tribunal (NCAT) at the 2016 hearing as her parents’ dream home – see below). The deceased also owned property at Summer Hill (in which Ms Bale and her husband, Gavin, lived for a time) that was the subject of a development application in around 2001 and which caused considerable financial difficulty for the deceased in the period around 2007/2008 (see below) (the Summer Hill Property).

Summer Hill Property development

34. In around 2001, an order was made in the Land and Environment Court in relation to the Summer Hill development (see T 40.20ff), that being a proposed development of two detached Torrens title dwellings and eight attached strata townhouses. The deceased had obtained a loan (of a not insubstantial amount) from NAB to cover construction costs in relation to the Summer Hill development.

Suncorp loan facility

35. In February 2005, the deceased obtained a loan facility with Suncorp-Metway Ltd (Suncorp) in connection with the development of the Summer Hill Property. The Suncorp loan facility secured a cash advance of $4.4 million to refinance the NAB loan. The Suncorp facility was secured over both the Summer Hill Property and the Forest Lodge Property. In connection with the application for the loan secured by a first registered mortgage over the Forest Lodge Property in 2005, the deceased obtained a valuation from Colliers International in respect of the Forest Lodge Property on 4 February 2005 (the property there being valued at $1,200,000).

36. At the time of the Suncorp loan facility, construction work was to commence in March 2005 and the work was due to be completed in October 2005. The original completion date for the sale of the Summer Hill development properties was 23 February 2006 (allowing for an eight month construction period and a four month selling period).

37. Ms Bale’s evidence was that she and her husband were not part of the Summer Hill development nor privy to its details (T 39.10-39.24). However, as I explain below, in due course (in 2007/2008) Ms Bale did assume a role or responsibility in relation to that development (she says, and I accept, in order to assist her father).

Death of deceased’s first wife

38. Mrs Denise Schein died on 19 August 2006, after 56 years of marriage. Ms Bale has deposed that the death of the deceased’s wife marked an obvious acceleration in the deceased’s mental decline (see [3]-[4] Ms Bale’s first affidavit). Indeed, Ms Bale says that, by February 2011, the deceased had declined from a mentally astute and savvy businessman to someone no longer having the capacity for complex conversation or business decision making. (The defendants argue, with no little force, that this is no more than assertion.)

39. Ms Bale’s evidence is that, in late 2006, the deceased began unintentionally neglecting to pay his Optus phone account, which Ms Bale says was entirely out of character since the deceased had always been the one to advise his late wife of when to pay the bills (see her first affidavit at [8]-[9]). From this time, Ms Bale says that she and her husband began paying the deceased’s bills.

Suncorp arrears as at September 2006

40. As at 12 September 2006, the interest in arrears in respect of the Suncorp loan facility was in excess of $170,000 secured against the Summer Hill and Forest Lodge Properties. (Ms Bale’s evidence was that she did not know much of the detail of this – see T 42-44.)

41. The Suncorp loan facility was due to expire in October 2006. Enforcement action was apparently deferred initially from 9 September 2006 to 20 October 2006. It is not clear exactly what happened then; although it is obvious from later events that no enforcement action was taken at that time.

Discussions with Easy Choice Home Loans

42. Ms Bale gives evidence that in around February or March 2007, she attended a meeting with the deceased, his friend Nathan Elali (from Easy Choice Home Loans) and Mr Elali’s solicitor, Mr Michael Douehi; after which Ms Bale says she received a telephone call from Mr Elali and Mr Douehi (from which conversation Ms Bale seems to have become concerned that the deceased was not managing his own affairs – see her first affidavit at [13]-[15]). Ms Bale gave evidence in cross-examination that Mr Elali or his solicitor suggested that she should assist the deceased in relation to the Summer Hill development (and that she did so).

43. It appears that there was a discussion in early 2007 (I note that Ms Bale says she did not meet Mr Elali until February – see T 43.11) as to refinance being obtained with Challenger Finance. Given the timing, it appears likely that this was to refinance the Suncorp facility.

Deceased’s health as at March 2007

44. The deceased had a fall on 4 March 2007, following which the deceased underwent surgery at Prince of Wales Hospital to have a pacemaker inserted (see Ms Bale’s first affidavit at [10]). The deceased was discharged from hospital on 10 March 2007 (according to the note of his general practitioner of over 30 years, Dr P Sawrikiar) (see annexure “A” to Ms Bale’s first affidavit).

44. At that time, i.e., in March 2007, according to Dr Sawrikiar’s undated letter addressed to Ms Bale’s solicitor (to which objection was taken in relation to the observations of the deceased’s mental condition) (see below), the deceased was suffering from aortic stenosis with enlarged heart, chronic obstructive pulmonary disease, and cervical spondylosis. The letter also stated that the deceased suffered from “early onset of dementia, this being exacerbated by the recent death of his wife”. (As noted, there was an objection to this evidence, which I address below. For present purposes I simply note that it must have been written sometime after the deceased’s discharge from hospital on 10 March 2007 and yet close enough to August 2006 for the death of the deceased’s wife to be referred to as recent and I do not rely on it as more than indicating a potential issue as to the deceased’s cognitive ability at that stage.)

45. Ms Bale’s evidence is that the letter from Dr Sawrikiar was obtained to confirm the deceased’s state of health as he had been required to attend Court with his solicitor but was unable to do so as he was in hospital (see [10] of her first affidavit). The dispute in question was said to be one involving the builder for the Summer Hill development (see below).

Difficulties with development of the Summer Hill Property

47. In a statement provided by Ms Bale to NCAT in connection with an application in 2016 to review an enduring power of attorney that the deceased had given to his second wife (Ms Chyna Schein) in June 2008, Ms Bale has recounted various difficulties experienced in relation to the development of the Summer Hill Property being undertaken by the deceased (see annexure “S” to Ms Bale’s first affidavit), including that on 7 March 2007 there was a meeting with a solicitor (Mr David Creais) at the development site “due to trouble with builder for non-completion of works on development”.

48. Ms Bale there recounted that the Court proceeding with the builder continued “in May, September through to 2008” (and that the deceased was unsuccessful in the proceeding and had no funds to continue paying the lawyer). Ms Bale stated that court costs and the builder’s cost could only be paid when the development was sold. I refer in due course to the ongoing difficulties described by Ms Bale in relation to the development.

49. At this stage, however, it is relevant to note that, on 16 March 2007, Suncorp issued a letter of default to the deceased, demanding payment as to a total debt of $5,214,048.59 (see Ex 1 at p 969).

Power of attorney in favour of Ms Bale

50. In May 2007, the deceased executed a power of attorney in favour of Ms Bale. This was prior to the deceased undergoing open heart surgery on 30 May 2007 (see Ms Bale’s first affidavit at [16]; and T 42.49-43.4).

51. Ms Bale’s evidence is that at this time the deceased had become more “fragile” and that his demeanour changed. Ms Bale said that he was far more blunt and abrupt in his dealings with her and that the deceased began discussing his physical and sexual needs with her, which she found confronting and said was out of character (see at [20]-[21] of her first affidavit).

August 2007

52. In August 2007, Ms Bale arranged for a community services organisation (Mercy Community Services) to provide a nurse to attend the deceased’s residence on weekdays to assist with his care (see her first affidavit at [22]-[23]). (There is corroboration of such an arrangement in later hospital records referring to a nurse who had discovered the deceased with decreased consciousness in his bed in 2007 – see below.)

September 2007 incident

53. Ms Bale has deposed that, on 10 September 2007, the deceased was found slumped over in his car, with urine incontinence, across a median strip near Mona Vale Hospital. Ms Bale has deposed that the deceased informed her that he was confused, did not know where he was, and that he had “got lost” (see [26]-[27] of her first affidavit; see also annexure “B” to her first affidavit).

54. There is in evidence a copy of a hospital discharge summary dated 17 September 2007 which corroborates Ms Bale’s evidence as to the deceased’s admission to hospital (see annexure “B” to her first affidavit) – recording the deceased’s admission on 10 September 2007 to Mona Vale Hospital and including the following notes:

76 yrs old male. From home presented to MVH after found slumped in his car with urine incontinence and confused.

…

Pt [patient] reviewed by psychiatrist – normal grieving after losing wife

55. The notes recorded the principal diagnosis as “Syncope ?cause [sic]”.

56. A Northern Sydney Health Admission Summary document also recorded admission on 10 September 2007 with a discharge date of 18 September 2007, and noted the reason for admission as “Confusion ? Syncope” (see annexure “B” to Ms Bale’s first affidavit).

13 November 2007 admission to hospital

57. On 13 November 2007, the deceased was admitted to Royal North Shore Hospital. According to the hospital records, this was after the deceased was found (by a Mercy Community Services nurse) in bed with decreased consciousness and slurred speech (see annexure “C” to Ms Bale’s first affidavit). Ms Bale has deposed that the nurse informed her (see [29] of her first affidavit, this being read for the fact of communication not its truth) that there was a female there (at the deceased’s house) who had informed the nurse that the deceased had drunk a bottle of scotch the night before and she thought that he was just drunk. Ms Bale believes, and it seems likely that this female was Ms Chyna Schein (see below). The Northern Sydney Central Coast Health records note that the principal diagnosis was “Collapse ? cause” and state that:

76 year old man BIBA after found at home in bed with decreased consciousness and slurred speech. Patient had GSC of 15 by the time he arrived in emergency. B/G of recent similar episode 2 months ago, investigated at Mona Vale hospital.

58. Ms Bale has deposed that she was concerned and asked the hospital to conduct tests to confirm her father’s blood alcohol level (and Ms Bale has deposed that the tests showed very little alcohol in the blood) but it is not clear from the hospital records that this was there recorded and I can draw little, if anything, from this, other than to note that it is evident that there was some kind of health issue afflicting the deceased at this stage (since there is no dispute as to the fact of his successive hospitalisations).

59. Ms Bale says that this was the first time that she became aware of Ms Chyna Schein, deposing at [30] that the deceased continually asked for “Chyna” but that the deceased could not remember how he had met her.

60. On 6 December 2007, the deceased was reviewed by Dr Dent at Royal North Shore Hospital, who referred the deceased to a geriatrician (Dr Veitch) at Royal North Shore Hospital (see at [31] of Ms Bale’s first affidavit).

Summer Hill development

61. Ms Bale’s evidence is that she became involved in the Summer Hill development (to assist the deceased) between 2007 and 2008 (see T 40.29). Ms Bale explained her role as relating to obtaining Council approval of the development so as to permit the sale of the properties to be completed (see T 40.34). Ms Bale said that she was dealing with Suncorp in relation to the facility. Ms Bale’s evidence in cross-examination (see at T 41.30) was that at this time, Ms Bale knew that money was owed (to Suncorp) and that there was a sense of urgency to sell the properties, in the context of which there was some urgency in obtaining Council approval for the development (so that the sales of the properties could be completed). Ms Bale also knew that there was a delay in relation to the Council approval and that this was costing a lot of money.

62. In her statement to NCAT in 2016, after referring to the Court proceeding with the first builder that had been unsuccessful (to which I have referred above) Ms Bale went on to recount that:

2-   Council approval for development registration delayed until certain details were completed. Builder no longer working on development. I worked with council to complete. New builder used.

Survey and flood management redone for council approval. Funds needed.

No council approval, no sales of development properties. This delay cost hundreds of thousand of dollars in interest alone. Constant negotiating and reporting to lenders, Suncorp, Challenger, Perpetual Mutual to delay payment until development was sold, to repay loans and accruing expenses

3-   Second builder garnished [sic; garnisheed] rental income from development. Most properties rented and those funds were being used to complete works to meet council approval, but now stopped as builder had garnished [sic; garnisheed] rent.

Second Builder also put a writ on Michel Schein’s house. This was my father and mother’s dream house. It took 3 ½ year[s] to find. [This is a reference to the Gordon house as confirmed in cross-examination by Ms Bale at T 48.48]

4-   My father and I were advised by long time solicitor, Ken Hancock, that my father would have to sell house to pay debts. My father decided to refinance. I contacted finance person recommended by my father, Antoni[a] Romeo. She was working on refinancing my father’s situation but it was complex, it took time. Additional pressure.

5-   Properties were auctioned but contracts and funds could not be exchanged due to council delays to register development.

6-   Properties previously sold withdrew from contacts [sic; contracts] due to Sunset clause and registration delays.

63. The picture there painted (in 2016) was thus of pressing financial difficulties in 2007 and going into 2008.

Closure of deceased’s business

64. On 25 January 2008, the deceased’s business (conducted through either British Franco Electric or Schein Industries and, as noted, a plating and manufacturing business) which had operated out of the Forest Lodge Property, closed down (see Ms Bale’s first affidavit at [32]). Ms Bale accepted in cross-examination that the deceased was very upset about this (T 52.40). Indeed, in her statement to NCAT in 2016, Ms Bale recounted that the deceased had said, when told of the decision to close the business, that “[y]ou killed my baby”; and Ms Bale explained that the business was “just breaking even” but not making money; that the business could not compete with imports due to increased costs; and that the decision to be made was to close down the business rather than lose money. Ms Bale has also deposed that the deceased did not pay her husband (who had worked for the deceased’s business for some years) his holiday, long service or termination pay (see her first affidavit at [32]). Ms Bale also said in cross-examination that in 2008 the deceased decided to refinance so that he would not have to sell the house (at Gordon) (see T 49.36-49.46). The precise timing of this was unclear.

Retainer of Mr Andreacchio in relation to the sale of the Summer Hill Property

65. At some point in around 2008, the deceased engaged Mr Anthony Andreacchio (a real estate agent from Raine & Horne in Ashfield) to sell the property at Summer Hill (see Mr Andreacchio’s affidavit sworn 11 February 2019 at [5]).

Deceased’s bank account as at February 2008

66. Ms Bale has deposed that she attended a bank in Gordon with the deceased in February 2008 to see how much money he had available and that there was about $24,000 in the account which (on her calculation) was enough to cover the deceased’s personal expenses (including the mortgage on the house at Gordon) for the next six months (see her first affidavit at [33]). It appears from Ms Bale’s evidence in cross-examination that this calculation assumed that the Summer Hill development properties were sold and that the debt in that regard was met out of the sales of the properties.

March 2008 further accident

67. Ms Bale has deposed that, on 18 March 2008, the deceased was involved in another car accident, his car being located at Mount Kuring-gai, but that the deceased did not remember anything about the accident (see her first affidavit at [35]).

Contact in relation to Mr Mohr

68. Ms Bale has deposed that, at the end of March 2008, she received a telephone call from the deceased, asking her to meet a friend of his (Mr Max Mohr) to explain the deceased’s financial affairs to him. Ms Bale has deposed that she had not heard of Mr Mohr prior to this (see her first affidavit at [36]). Ms Bale has also deposed that when she attended the deceased’s home in Gordon the next day, upon her arrival, Mr Mohr greeted her (and that the deceased was still in bed). Ms Bale said that she did not discuss the deceased’s affairs with Mr Mohr as her father was not there; that Ms Chyna Schein came a little later and did not join them to discuss business; and that the deceased later joined them and Ms Bale noticed that his speech was slightly slurred and he needed to sit down as he was not feeling well (see her first affidavit at [37]). Ms Bale has deposed that there was little discussion about the deceased’s financial affairs. It appeared to Ms Bale that Mr Mohr was living in the Gordon house with the deceased and Ms Chyna Schein.

Withdrawal of $10,000 from the deceased’s bank account

69. Ms Bale has deposed that she discovered in April 2008 that $10,000 had disappeared from the deceased’s bank account since February 2008. Ms Bale’s evidence is that the deceased could only recall going to the bank with Ms Chyna Schein and nothing more (see her first affidavit at [34]). (Ms Bale’s evidence was that at the subsequent 2008 NCAT hearing Ms Chyna Schein said that this amount was withdrawn for the couple’s honeymoon – T 91.44.)

Marriage application

70. Ms Bale’s evidence is that, a few days after the meeting with Mr Mohr, she was at the deceased’s house and noticed a person place a notice on the property stating that a writ had been placed on the vacant part of the property. Ms Bale has deposed that the deceased did not know why and that she contacted his solicitor, Mr Ken Hancock, who advised her to locate the paperwork. Ms Bale has deposed that, when looking through a very large box that Mr Mohr told her was “rubbish”, she located the paperwork and a marriage application for the deceased and Ms Chyna Schein (see her first affidavit at [38]). Ms Bale has deposed that (when she asked the deceased about this) the deceased told her that the marriage was in about two and a half weeks and said that “Max and Chyna told me not to tell you” (see her first affidavit at [38]).

ACAT assessment

71. Ms Bale has deposed that on 2 April 2008 she was in attendance during an ACAT assessment of the deceased (see her first affidavit at [40]; see also annexure “F” to her first affidavit) by a registered nurse from Hornsby Kuring-gai Community Health Services (Trish Price RN). The assessment (to which objection was taken) included reference to the deceased grieving for his wife and being depressed, but recorded that his memory had not been formally assessed. On the self-care functional assessment, the deceased was assessed at 20 (independent); on the domestic functioning assessment 27 out of 30 (within the mild dependence range). The notes make reference to a “lady friend” (presumably Ms Chyna Schein who, according to Ms Bale, appeared by then to have been living at the Gordon Property).

72. The outpatient notes completed by RN Price also record concerns by Ms Bale as to the deceased’s “increasing memory impairment” and that it was of grave concern to Ms Bale that a “female friend” who had been temporarily residing with the deceased had introduced a “male friend” (presumably, Mr Mohr) to the deceased and that Ms Bale had discovered the “male friend” had been involved in “sorting out” all of the deceased’s documents. Objection is taken to these notes. For present purposes, I simply note that the recording of these concerns corroborates the timing of Ms Bale’s concerns as to the deceased’s memory and vulnerability to exploitation. The notes also recorded that a dementia monitoring programme had been suggested (consistent with Ms Bale’s apparent concern) (see annexure “F” to Ms Bale’s first affidavit); though it is not clear if that was implemented.

73. On 24 April 2008, Dr Veitch reported on his review of the deceased in his clinic that day with Ms Bale (see annexure “G” to Ms Bale’s first affidavit). It is clear that the letter records a number of matters that Ms Bale had conveyed to Dr Veitch (and hence can only be as reliable in that context as Ms Bale’s account is shown to have been) (such as Ms Bale’s concern that the “new girlfriend maybe [sic] after her father’s assets”); and Dr Veitch also noted that some of the history that the deceased gave was different from that given by Ms Bale. The letter stated that from a functional point of view, the deceased is “otherwise pretty good”; examination revealed a “well looking but somewhat belligerent elderly man”; Dr Veitch had some concern about the deceased’s insight even though the deceased “gave plausible explanations” for many of his questions; the deceased was reasonably orientated in place, though not able to name the hospital and not sure of the date or day of the week; and the deceased “probably has some cognitive impairment although not severe, which may be affecting his decision-making, and I believe he is at risk of being taken advantage of”. (As noted, objection is taken to this evidence.)

Evidence regarding the placement of an advertisement for a companion

74. Ms Bale’s evidence (see her first affidavit at [42]) is that on 2 May 2008 (the day before the wedding to Ms Chyna Schein was to take place), the deceased told Ms Bale how important it was for him to have a companion and asked her to place an advertisement for a companion. Ms Bale says that, together, they wrote an advertisement and placed it in a newspaper that day. Ms Bale relies on this as evidence that the deceased had apparently forgotten that he was to be married the next day. (It is certainly bizarre, to say the least, that someone would wish to advertise for a companion on the eve of that person’s marriage, but so might it be said is the seemingly unquestioning acceptance by Ms Bale of such a request.)

Wedding of the deceased to Ms Chyna Schein

75. On 3 May 2008, Ms Bale (with her husband and son) attended the wedding of the deceased and Ms Chyna Schein. Ms Bale has deposed that she noticed that the deceased smelt of alcohol and that she had never known the deceased to drink to the point of having the alcohol emanate from him (see her first affidavit at [43]). (One would hope that the celebrant would not have officiated at the wedding if objectively there was concern as to the deceased’s capacity, but ultimately this is no more than speculation.)

76. Ms Bale has deposed that the following day she and her son attended the deceased’s home; and that the deceased removed his wedding ring and said that “I’ve made a mistake” and that he thought if he married Ms Chyna Schein she would be like Ms Bale’s mother (see her first affidavit at [44]).

77. After the marriage, Ms Bale appears to have had little involvement with the couple (as Ms Bale readily conceded in cross-examination), although at that stage Ms Bale was still involved in the Summer Hill development. Ms Bale’s evidence was that she did not know what had happened (with the deceased) in the period from 3 May 2008 (when her father married Ms Chyna Schein) and 13 June 2008, when she received a copy of the revocation of her power of attorney (see T 88.13-88.19).

Lodgment of Strata Management Statement or strata plans

78. Ms Bale gave emphatic evidence that on 2 or 3 June 2008 the strata plan for the Summer Hill development was finally able to be registered. Ms Bale graphically (and with evident emotion) described the “blood, sweat and tears” that had been involved in achieving this (T 50.28). Ms Bale also said (at T 50.30) that she delivered it personally to the Council, to Suncorp, and to the office of the solicitor (Mr Ken Hancock). Ms Bale emphasised the importance of the registration of the strata plan (see T 57.39). Pressed on this (and see the communication from Mr Hancock on 13 June 2008 below), Ms Bale retreated somewhat to saying “well I thought I’d attended to that, but obviously I haven’t” (see T 58.9-58.21).

78. Pausing here, I note that the date stamp for registration of the Strata Management Statement is 15 August 2008 (see also T 82). The document seems to have been signed with the deceased’s signature on 11 June 2008 (see T 83.9) but bears the handwritten words “Françoise Bale on behalf of Michel Schein pursuant to power of attorney”. Ms Bale said that the handwritten words did not look like her signature (T 84.27) but that the signature did look like the deceased’s signature. At T 85.18, Ms Bale said that “perhaps I didn’t sign the Strata Management Statement but I certainly did deliver [it]”. At T 85ff, Ms Bale gave the following evidence:

Q.   Just so I understand your evidence, Ms Bale, is now your evidence that you didn’t sign this document?

A.   Well, I can’t see my signature. But on behalf of my father, I went to - I got the letter, I got all the information required to register the development, and gave it to Ken Hancock. Because - I’m going back a long time now, okay. And there was a considerable amount of pressure there. I was to get everything so that Ken Hancock could register the development, and that - and that meant the plans, getting the, you know, this paperwork to the - so that the surveyor could sign it, and take it to Suncorp, and then I took it back to Ken Hancock, who was in Padstow at the time. Yeah. So perhaps it didn’t require my signature per se, but it required my taking everything, getting everything, and then bringing it back to Ken Hancock, so that he could do as quickly as possible what he needed to to register the property. [set out]

…

Q.   Were you present when your father signed this document on 11 June 2008?

A.   No. He was living with his wife.

Q.    I think your evidence was that the signature that appears to the left of the words “Francoise Bale”--

A.   Yeah.

Q.    --looks like your father’s signature. Was that your evidence?

A.    It does - it is. That’s what I said. That’s what it looks like to me.

…

Q.    Ms Bale, you know, don’t you, that if your father signed documents, there’s no need to refer to a power of attorney, is there?

A.    Well, if that was the case, then why was he with - why did my power of attorney continue after - you know, for 12 months afterwards because he was with me, but he wasn’t well.

80. Pausing here, arguably there would be no logic to the reference to a power of attorney on the Strata Management Statement if it was intended to be signed by the deceased himself but it might well be the case that the words were written on the document in anticipation that it would be signed by Ms Bale under her (then) power of attorney (and that, by the time it came to be signed that power of attorney had been revoked so that Ms Bale was no longer able to sign). In any event, it seems apparent that the document was simply signed by the deceased himself. This precludes any suggestion that Ms Bale was improperly signing as the deceased’s attorney (and there is moreover doubt as to when she was notified of revocation of the power of attorney). However, it makes it unlikely that Ms Bale physically delivered the documents on 2 or 3 June 2008.

Appointment of Ms Chyna Schein as power of attorney and revocation of Ms Bale’s power of attorney

81. There is in evidence a copy of a General Power of Attorney executed in favour of Ms Chyna Schein (see annexure “I” to Ms Bale’s first affidavit) which is purportedly witnessed by Mr Churchill and dated 3 June 2008 (and signed by “China Schein”). Clause 2 of the document provided that the deceased gave this power of attorney “with the intention that it will continue to be effective if I lack capacity through loss of mental capacity after its execution”; accordingly, although the title of the document is a “General Power of Attorney”, it appears that the document is in fact an Enduring Power of Attorney. On that document, Mr Churchill certified that he had explained the effect of the power of attorney to the principal before it was signed and that the principal appeared to understand the effect of the power of attorney.

82. There is also in evidence a document headed Notification of Revocation of Powers of Attorney (see annexure “I” to Ms Bale’s first affidavit) bearing a signature which Ms Bale thought looked like her father’s signature. The document is undated but refers to the grant of a power of attorney to “China Schein” dated 3 June 2008.

83. Ms Bale’s evidence is that she received these documents on 13 June 2008 (see below).

11 June 2008 letter to Suncorp

84. On 11 June 2008, Ms Bale wrote to Suncorp advising that the deceased had remarried in May 2008, that she would no longer be acting on his behalf; and that all correspondence was to be sent to the deceased or his wife.

85. At T 89.7-89.24, Ms Bale accepted that there was concern at that time as to the “debts” and that Suncorp wanted her and the deceased to sell the Forest Lodge property.

13 June 2008 letter from Mr Hancock to the deceased

86. By letter dated 13 June 2008 from Mr Hancock to the deceased, Mr Hancock referred to the deceased attending Mr Hancock’s office and giving him instructions on 11 June 2008 to proceed with the lodgment of the plans concerning the Summer Hill Property (see T 57.46-58.3; see also annexure “H” to Ms Bale’s first affidavit). (This makes it unlikely that the plans had already been delivered by Ms Bale to the Council by then, assuming that this is a reference to the same plans. It also suggests that Mr Hancock had no concerns about the deceased’s capacity to give those instructions at that stage.)

87. The letter dated 13 June 2008, in terms responding to a facsimile from 12 June 2008 apparently received from the deceased, relevantly states:

I was surprised to receive your facsimile of 12 June, 2008. You state that I have not been fully accounting to you and suggest that there have been activities and dealings that have been occurring without your knowledge. This is not true.

You are aware that I have been regularly speaking with you on the telephone and in my office over the past year and a half concerning your property matters and your finance arrangements. In addition, you have made it very clear to me that I am to consult with your previous attorney, your daughter Françoise, in regard to all of your matters and that you were relying on her to assist you. You made this clear to me on a number of occasions.

I therefore had numerous attendances both by telephone and in person on Françoise dealing with your matters. In all respects, I can state that notwithstanding the difficulties encountered, everything was attended to with the best of our ability. In addition, I can confirm that your daughter Françoise has spent a considerable amount of time and energy in regard to looking after your affairs. You acknowledged to me on many occasions that you appreciated the efforts of Françoise. In addition, you are aware that I have forwarded to you recently a copy of a letter sent to your attorney at the time, Françoise, enclosing a number of accounts. At that time, these accounts totalled $28,814.29. These accounts represented work done up to that time and as you know, we have not received any payment in regard to those accounts.

I now acknowledge that you have revoked your appointment of Françoise as your attorney and that you have appointed your wife China as your attorney and that you have authorised us to deal with China in regard to all of your matters. We accept these instructions and will abide by them. This does not mean that we should not have communication directly with you be telephone and in view of the terms of your facsimile of 12 June, we require you to telephone us to discuss the matters referred to therein.

In addition, if you have concerns regarding the actions of Françoise, then you should take these matters up directly with her,

When you attended at our office on 11 June last [i.e., 2008], you gave clear instructions that we would proceed with the lodgment of the plans concerning the Summer Hill property. I can report that the plan of subdivision has been accepted and requires payment of the fee of $2,280.00. We are arranging to pay this from the funds held in the Estate of your previous wife in accordance with your instructions in that regard. We understand that the fees that will be payable on the strata plan will be a further $2,180.00, making a total of $4,460.00. The strata plan is in order except that the Strata Management Statement requires the signature of your mortgagee, Suncorp and we are making arrangements for this to be attended to as a matter of urgency.

…

88. The letter recorded that various of the properties had been sold (Townhouses 6, 7 and 9 and House 29) and that contracts for Townhouse 3 had been exchanged that day. The letter advised that the debts were as follows: owing to Suncorp (as at 23 May 2008) $6,183,384.54 and; to Commonwealth Bank $1,251,185.68. (In the witness box, Ms Bale thought that the Commonwealth Bank loan might have been referable to the Gordon Property. This is seemingly inconsistent with the November affidavit in which Ms Bale said that $24,000 in the bank account would be enough to cover personal expenses for the deceased including the mortgage on the house at Gordon. However, Ms Bale’s evidence was that her understanding was that once the development was sorted out, there would be sufficient funds to pay the deceased’s debts (see T 62.11).)

89. The letter concluded that:

When you saw us on the 11 June last, amongst other things you gave me very clear instructions that you wanted to have Mr Max Mohr leave your premises at Gordon. You specifically instructed me to write to him requiring him to vacate. We were therefore surprised to receive your telephone call thereafter countermanding those instructions. In view of our long association with you and the terms of your facsimile of 12 June, we ask that you telephone our Mr Ken Hancock to discuss the terms of your letter.

90. Pausing here, while the letter is clearly expressing concerns on the part of Mr Hancock as to the deceased’s instructions (consistent with, say, a concern as to the possibility of exploitation or undue influence being exerted over the deceased), it does not appear that Mr Hancock had any concern at that stage about the deceased’s capacity to give him instructions on 11 June 2008 in relation to the lodgment for registration of the strata plans.

91. As appears from Mr Hancock’s 13 June 2008 letter, it appears that at that stage (i.e., 13 June 2008) the Strata Management Statement had not been signed by anyone on behalf of Suncorp (T 58.16). It is consistent, however, with the deceased himself having signed the document on 11 June 2008.

Revocation of Ms Bale’s power of attorney

92. Ms Bale’s evidence (see her first affidavit at [49]) is that, shortly after the deceased’s marriage to Ms Chyna Schein, she received a telephone call from Mr Hancock telling her that the deceased had said he did not want Mr Mohr to live at his property any longer and that he had instructed Mr Hancock to send a letter but had received a call one hour later from the deceased asking him not to send the request. (This is consistent with the letter extracted above and would place any such telephone call as being not before 11 June 2008.) Ms Bale has deposed that Mr Hancock sent her a copy of the 13 June 2008 letter (which is extracted above) and advised her to contact the Guardianship Tribunal (see her first affidavit at [50]).

93. The time at which Ms Bale received notification of the revocation of her power of attorney was an issue that arose in the course of her cross-examination. Mr Hancock’s letter clearly refers to Ms Bale as being the deceased’s “previous attorney”.

94. Ms Bale’s evidence (as noted above) is that she discovered the power of attorney had been revoked before receiving the letter as to revocation of the power of attorney (see T 60.2-60.35); and she discussed this with Mr Hancock, who expressed concern for the deceased’s wellbeing and advised Ms Bale to contact the Guardianship Tribunal (T 64.11). At [51] in her first affidavit, Ms Bale deposed that she received a copy of the power of attorney appointing Ms Chyna Schein and the document confirming her power of attorney had been revoked on 13 June 2008. Ms Bale was adamant in the witness box that she made a telephone call in the course of doing business for her father to an unidentified person, who disclosed that her power of attorney was revoked, and that this occurred before she received the letter (saying that she was not surprised when she received notification of the revocation) (T 59.12-60.45). Ms Bale said she still had the envelope in which the letter had been sent.

95. Ms Bale also gave evidence of a telephone conversation with the deceased around this time in which she says the deceased told her that he had been in a car and that Ms Chyna Schein and Mr Mohr had stopped the car on the side of the road and would not drive home until he called Mr Hancock and cancelled the request for Mr Mohr to vacate the property (see her first affidavit at [49]).

96. On 13 June 2008, as noted above, Ms Bale received a copy of an enduring power of attorney by which the deceased appointed Ms Chyna Schein as his attorney. The document was witnessed by Mr Churchill. (Thus indicating that Ms Chyna Schein was acquainted with Mr Churchill at least in his professional capacity by then.)

Financial position in mid-June 2008

97. The defendants say that, by mid-June 2008, the deceased was in serious financial difficulty. It is noted that, prior to 13 June 2008, the deceased had been in communication with Mr Hancock because the 13 June 2008 letter referred to non-payment of legal fees of $28,800 (T 56.9-56.43).

First NCAT Guardianship Division proceeding

98. In June 2008, Ms Bale commenced proceedings in the Guardianship Division of NCAT, this being an application to review the revocation of Ms Bale’s power of attorney. Ms Bale says that the proceeding was commenced on Mr Hancock’s recommendation (T 64.11). The matter was heard between 13 June 2008 and 25 July 2008. Ms Bale’s evidence is that the first time that she met Mr Churchill was when Ms Chyna Schein and the deceased were at NCAT in 2008.

99. In evidence before NCAT there seems to have been a letter dated 10 July 2008, addressed to the deceased’s general practitioner (Dr Sawrikiar) in which Dr Veitch stated that he had reviewed the deceased in his clinic that day in the presence of the deceased’s wife Chyna (incorrectly stating that their marriage was in March that year). The letter stated that “I gather the family situation is somewhat of a mess with Mr Schein’s daughter, Francois [sic], applying to become his financial manager through the Guardianship Board leaving her at loggerheads with her father and step-mother”. The letter stated that the deceased looked well and that Ms Chyna Schein said that his memory had improved since the recent medication changes. The letter stated that overall the deceased scored 27/30 on a Folstein MMSE and that:

Mr Schein has mild cognitive impairment affecting memory and probably executive functions. Whilst he is at risk of being taken advantage of, he is probably competent to make his own decisions. I have not formally tested him for testamentary capacity.

100. Objection is taken by the defendant to the first part of that extract and I limited it to the fact that this is what had been reported by Dr Veitch to Dr Sawrikiar.

101. More significantly, for present purposes, on 25 July 2008, NCAT determined that the deceased was capable of making his own decisions.

Lease of the Forest Lodge Property

102. On 2 February 2009, Mr Moore leased the Forest Lodge Property (see his affidavit sworn 13 February 2019 at [3]). There was in evidence the front page of a commercial lease between the deceased as landlord and Mr Moore as tenant (see annexure “A” to Mr Andreacchio’s first affidavit) commencing on 2 February 2009 for the term of one year at a monthly rent of $1,520. (The coversheet of that lease does not include any option to purchase, cf Mr Moore’s evidence below.)

March 2009 letter from Dr Veitch to Dr Kluger

103. On 5 March 2009, Dr Veitch wrote to a Dr Kluger (another general practitioner), enclosing copies of his letters dated 24 April and 10 July 2008 in relation to the deceased and referring to having reviewed the deceased in the presence of his wife; there noting that Ms Chyna Schein “remains at loggerheads with Mr Schein’s daughter over financial issues” and that Ms Chyna Schein reported that the deceased was becoming more forgetful and was unsettled whenever she was not with him. The letter noted that the deceased and Ms Chyna Schein were considering moving to Woolgoolga, where it was said that the deceased owned some land (there is no evidence that the deceased in fact owned any property at Woolgoolga). The letter noted that the deceased had scored 24/30 on the Folstein MMSE (as opposed to 27/30 nine months ago) and went on to say (and objection is again taken to this) that:

My impression was that Mr Schein is declining cognitively (and maybe having some sundowning). As it is likely Mr Schein has early Alzheimer’s disease …

Move to Woolgoolga

104. At some point in 2009, the deceased and Ms Chyna Schein moved to a rental property in Woolgoolga (some hours drive from Sydney). Ms Bale accepted in cross-examination that she effectively lost close contact with the deceased between 2008 and 2015 (T 100.19) but said that she regularly visited him in Woolgoolga (see T 97.26.)

Instructions regarding the marketing of the Forest Lodge Property for sale by auction in 2009

105. Mr Andreacchio, of Raine & Horne, received instructions from the deceased in 2009 to place the Forest Lodge Property on the market for sale by auction. Mr Andreacchio prepared a contract for sale of land in respect of the Forest Lodge Property (T 119.37). Mr Andreacchio says that he had first met the deceased in 2008 (see T 121.46).

106. On 3 April 2009, a Mr Edward Fotosong sent an email offering to purchase the Forest Lodge Property for $650,000 (see T 127.25; see also annexure “C” to the second affidavit of Mr Andreacchio affirmed 19 September 2020). The offer was declined by the deceased.

107. A marketing campaign for the sale of the Forest Lodge Property was conducted in April 2009. Mr Andreacchio’s evidence was that the normal time for such a campaign would be around four weeks. (See advertisement for auction on-site on 18 April at 11am, marked as annexure “B” to Mr Andreacchio’s first affidavit sworn 11 February 2019.)

108. An on-site auction was held on 18 April 2009, which was unsuccessful. The highest non-vendor bid was from the incumbent tenant, Mr Moore, who offered $650,000 (which was below the property’s reserve price of $1,000,000). Mr Moore’s evidence was that he had a lease in 2009 that gave him an option to purchase the property; but it does not appear that he invoked this right (see T 172.48-173.15). Mr Moore confirmed that he had made the highest (non-vendor) bid for the property (at the auction) at $650,000.

109. In cross-examination, Mr Andreacchio did not recall the auction. However, by email sent on 19 April 2009 at 11.39am, Mr Andreacchio reported that the property had been passed in at auction at $850,000 (which was a vendor’s bid). Mr Andreacchio confirmed (at T 136.17) that Mr Moore had been the highest (non-vendor) bidder at the auction. Mr Andreacchio also said that the reserve was set in discussions with Ms Chyna Schein and Mr Mohr at close to $1 million (T 136.35). (From this, it may confidently be inferred that the principal instructions as to the sale of the property were also coming from Ms Chyna Schein and Mr Mohr, rather than the deceased himself; or at the very least that they were a driving force behind the instructions for sale. Ms Chyna Schein, it will be remembered, held the deceased’s power of attorney by this stage.)

110. On 8 May 2009, Mr Andreacchio referred to the Forest Lodge Property in a Raine & Horne property update, which is consistent with it remaining on the market at that stage.

648. In this regard, the distinction between institutional and remedial constructive trusts should be noted. There has been much debate in academic and judicial circles as to the merits or legitimacy of the so-called remedial constructive trust, as opposed to the institutional constructive trust (see J McGhee, Snell’s Equity (32^nd ed, 2010, Sweet & Maxwell), [26-015]; and, for comment by the English appellate courts upon the difference between the institutional constructive trust and the remedial constructive trust, see, in the context of mistaken payments, Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (Westdeutsche) at 714-715; and, in the context of profit derived from fraud, Halifax Building Society v Thomas [1996] Ch 217 at 228-229). The significance of the distinction lies in the time at which the trust is said to come into existence and whether it exists independently of any court order.

649. In Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 (Giumelli) at [4] per Gleeson CJ, McHugh, Gummow and Callinan JJ, it was said that:

The term “constructive trust” is used in various senses when identifying a remedy provided by a court of equity. The trust institution usually involves both the holding of property by the trustee and a personal liability to account in a suit for breach of trust for the discharge of the trustee's duties. However, some constructive trusts create or recognise no proprietary interest. Rather there is the imposition of a personal liability to account in the same manner as that of an express trustee. An example of a constructive trust in this sense is the imposition of personal liability upon one “who dishonestly procures or assists in a breach of trust or fiduciary obligation” by a trustee or other fiduciary. [citations omitted]

655. The distinction was considered at length by Gleeson JA, with whom Meagher and Barrett JJA agreed, in Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 at [149]-[152]). The scope of the remedial trust was outlined by Deane J in Muschinski v Dodds at 614, where his Honour observed that “the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle”. An institutional constructive trust, broadly speaking, arises by operation of law as from the date of the circumstances which give rise to the trust, whereas a remedial constructive trust is an enforceable equitable obligation that is retrospective in nature (see, for example, Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59). In Westdeutsche at 714 Lord Browne-Wilkinson (with whom Lords Glynn and Lloyd agreed) said the following of the distinction between institutional and constructive trusts:

… Under an institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past. The consequences that flow from such trust having arisen (including the possibly unfair consequences to third parties who in the interim have received the trust property) are also determined by rules of law, not under a discretion. A remedial constructive trust, as I understand it, is different. It is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court. …

656. However, the distinction may not be apposite or useful in certain contexts, for example in cases concerning proprietary estoppel (see McNab v Graham (2017) 53 VR 311; [2017] VSCA 352 (McNab v Graham) at [107]-[112]; [115]-[124] per Tate JA, with whom Santamaria JA and Keough AJA agreed). In McNab v Graham (at [102]; [107]; [108]) albeit in the context of an estoppel case, it was said by Tate JA that, generally speaking and subject to consideration of all the relevant circumstances (as to which, see the discussion in Giumelli and Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84)):

… where detrimental reliance upon a promise gives rise to a constructive trust, in the context of an estoppel, the constructive trust comes into the existence before a court makes any order. It comes into existence at the time of the conduct which gives rise to the trust. …

… The relevant time is the time at which there is reliance on a promise giving rise to the estoppel, that is, the time of the reliance which would render departure from the fulfilment of the promise unconscionable. …

This approach also resolves the apparent paradox that it is a matter for the court whether to make an order declaring a constructive trust or grant a lesser form of relief where there are relevant third parties who may be prejudiced by such an order, for example, by giving rise to an unfair priority to the beneficiaries of a constructive trust against general creditors. This may give a sense that the court is ‘creating’ the trust and that it has no existence independently of the order … But the apparent paradox is no more than that associated with the maxim nunc pro tunc, that is, that equity regards as done that which ought to be done. While it is for a court to determine whether to declare a constructive trust, the date the trust comes into existence is the date from which the equitable interest, the interest in land, arises. That date is, as mentioned, when the conduct occurs that gives rise to the trust; the date when the detrimental reliance renders it unconscionable to depart from the promise.

[my emphasis; citations omitted]

657. Finally, I note that in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43, Gageler J, having considered what a defendant must demonstrate in order to establish that it is inequitable to order an account of the value of the whole of the identified benefit or gain (see at [92]) went on to caution (at [94]) that, “[t]he judgment to be made [i.e., as to relief] must accommodate the stringency of the equitable obligation to be vindicated to the need to ensure that the remedy is not ‘transformed into a vehicle for the unjust enrichment of the plaintiff’” (quoting Warman at 561).

658. I have concluded that, in the circumstances, the unconscionable dealings were such that in equity a constructive trust should be imposed from the time of the relevant transaction. I also consider that Mr Theo Trigas (as was, through him, Super Start) was on notice of the facts that would have indicated to an honest and reasonable man that Kimberley Developments held the Forest Lodge Property for the benefit of (i.e., on trust for) the deceased, in circumstances where Kimberley Developments had acquired the property without payment of any cash consideration (and without any intention to adhere to the arrangements put forward to the deceased under the 21 February Agreement). That Mr Darwiche and Mr Theo Trigas had no intention to adhere to the arrangements outlined in that document was made abundantly clear by their evidence in cross-examination.

659. In those circumstances the claim for damages for breach of trust does not arise. I note that Ms Bale concedes that Mr Theo Trigas discharged the Suncorp mortgage on the Forest Lodge Property and would be entitled to receive the return of the mortgage sum if the transfer of the property were to be set aside.

660. I consider that Mr Theo Trigas, having knowingly assisted in the unconscionable conduct and breach of the constructive trust in the encumbering of the property with the NAB mortgage, and Super Start, having received the funds from the NAB mortgage with the knowledge (through Mr Theo Trigas) of the circumstances in which the sale transaction had occurred and of the encumbering of the Forest Lodge Property, should make good to Kimberley Developments the amounts transferred to Super Start in breach of trust (i.e., the sum of around $700,000) and should reimburse Kimberley Developments for the interest paid by it under the NAB mortgage (that was obtained in breach of trust). That would have the effect that Kimberley Developments will then be in the position to discharge the mortgage to NAB and comply with the order to transfer the Forest Lodge Property can be transferred unencumbered to the deceased’s estate).

Claim against Ms Chyna Schein

661. As noted earlier, the claim against Ms Chyna Schein is that she breached the fiduciary obligations owed to the deceased as his attorney (in purporting to enter into the 21 February Agreement on behalf of the deceased and by purporting to execute a transfer of the Forest Lodge Property to Kimberley Developments, as a result of which it is alleged that the plaintiff has suffered damages and loss (see [61]; and the prayers for declaratory relief at [22] and [23]; and for damages for breach of fiduciary obligation at [24]).

Determination

662. In Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209, Leeming JA (with whom Bathurst CJ agreed at [1]) stated (at [115]-[116]) that:

115.    As between principal and agent, the agent is a fiduciary, and speaking generally is required not to place himself or herself in a position of conflict, nor to obtain a profit or benefit from the position, without first obtaining fully informed consent: see most recently Howard v Commissioner of Taxation [2014] HCA 21 at [33] and [56]. Those fiduciary obligations inform the decisions on which reliance has been placed in the decisions dealing with s 163B, particularly the way in which instruments conferring authority have been construed. However, the obligations imposed by equity are ordinarily subject to the terms of the contractual arrangement between principal and agent; each of those fiduciary obligations “must then accommodate itself to the relationship between the parties created by their contractual arrangements”: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 99.

116.    Questions of... fiduciary obligation focus upon the internal relations between principal and agent...

663. It is noted that in HowardvFederal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21, the High Court restated some of the essential obligations and liabilities of a fiduciary: a fiduciary relationship imposes upon a fiduciary obligations to the principal not to obtain any unauthorised benefit from the fiduciary relationship and not to be in a position of conflict; these fiduciary duties are proscriptive obligations; fiduciaries must exercise their powers honestly for the purposes for which they are given; the content of the fiduciary duty is moulded by the particular instrument under which that duty is created; and a fiduciary, in equity, has a liability to account for a breach of these fiduciary duties.

664. Powers of attorney are a form of agency that is subject to a fiduciary overlay as well as statutory obligations (see Ward v Ward (No 2) [2011] NSWSC 1292 at [3] per Brereton J, as his Honour then was). The attorney has an obligation to act in the best interests of the principal, which binds the attorney on the prescribed form and as part of the attorney’s fiduciary obligations in equity and at common law (see cl 7, Sch 2 of the Powers of Attorney Regulation 2016 (NSW); GE Dal Pont, Law of Agency (2020, 4^th ed, LexisNexis) at [10.10]; Elder Law New South Wales (2015, LexisNexis) at [2-10450]). I note that in the present case, there is no argument (or evidence) that the power of attorney meets the statutory requirements of irrevocability (i.e., that it is expressed to be irrevocable and given for valuable consideration), and as such there is no reason to doubt that the usual fiduciary obligations of an agent fasten upon the donee, Ms Chyna Schein.

665. I find that Ms Chyna Schein acted in breach of her fiduciary duties as the deceased’s attorney, by facilitating the deceased’s entry into a grossly improvident or improper transaction and by failing to obtain independent legal advice (in circumstances where knew that Mr Churchill was acting for Kimberley Developments in the transaction – and was associated with Mr Darwiche, and she did not seek advice from the deceased’s own lawyer, Mr Hancock) or to take any steps to understand the legal effect of the transaction. (I note, for example, that in the NCAT proceeding, Ms Chyna Schein is recorded to have said she was “not an accountant” and got Mr Churchill to “take care of everything” – see Ex C at p 40. Even reading this for the fact that it was evidence of what was said – and hence of her understanding or professed understanding – and not the truth of it, it is consistent with there being no involvement by any other lawyer for the deceased acting in the transaction.) While Ms Chyna Schein purportedly signed the transfer instrument in the capacity of a witness, it appears that the parties contemplated that Ms Chyna Schein’s signature on the 21 February Agreement should be taken to be in her capacity as donee of the deceased’s enduring power of attorney (see cl 31 of the agreement, as noted above) and there is no reason to think that her involvement in the execution of the transfer was other than as part of her exercise of functions as the deceased’s power of attorney.

666. I consider that on the balance of probabilities Ms Chyna Schein was acting as the deceased’s representative in the course of the transaction (since I consider it unlikely that the deceased independently understood the nature or effect of the transaction and it is most likely that, by February 2011, he was dependent upon Ms Chyna Schein to manage his financial affairs at the time of the transaction).

667. The obligation of a defaulting fiduciary is essentially one of effecting restitution (see Perpetual Trustee Co Ltd v Gibson [2013] NSWSC 276 at [35] per Rein J), in my opinion the appropriate remedy is for Ms Chyna Schein to compensate the deceased’s estate for any loss occasioned by her failure to honour her obligation to act in the deceased’s best interests. What that compensation sounds in will depend on whether the defendants comply with the orders that I propose to make against them. If the Forest Lodge Property is transferred, unencumbered, to the deceased’s estate, then the only loss that will have been suffered would relate to any irrecoverable costs of the proceeding. Therefore, I consider that it is appropriate simply to order that Ms Chyna Schein indemnify the deceased’s estate for any loss suffered as a consequence of entry into the sale transaction (such loss to be quantified in due course) and to grant Ms Bale liberty to apply in that regard if and when that necessity arises.

Miscellaneous claims for relief

Declaration sought as to validity of caveat

668. In the alternative to the above relief, in her claim as pleaded Ms Bale seeks a declaration that the caveat lodged in connection with the Forest Lodge Property is a valid caveat (see prayer 25). No submissions were addressed to this relief. It follows from the above that the caveat was validly lodged. No declaration to that effect is necessary.

Claim for winding up of Kimberley Developments

669. As noted above, the pleading also seeks an order that Kimberley Developments be wound up on the just and equitable ground pursuant to s 461 of the Corporations Act 2010 (Cth). No submissions were addressed to his particular issue (and it seems to me to be dependent in any event on it being established that the deceased’s estate is entitled to a shareholding in the company – which I have not held is the case).

Conclusion

670. For the reasons set out above, I have concluded that the claim made against Kimberley Developments and Mr Darwiche that the underlying transaction effected by the 21 February Agreement (which I do not consider to be binding) was unconscionable has been made good and that, from the time of the sale transaction in respect of the Forest Lodge Property, that property was held on constructive trust for the deceased (and since his death, the deceased’s estate). I have concluded that Kimberley Developments breached that trust by encumbering the property and then transferring the funds so borrowed to Super Start (not for any purpose associated with the trust property). I find that Mr Theo Trigas had constructive notice of the matters giving rise to the trust and breach of trust; and hence that he, and Super Start, are liable for knowing receipt of property transferred in breach of trust. In light of the relief granted, it is not necessary to consider the claims of unconscionable conduct insofar as they arise from the Australian Consumer Law (noting also that these claims are statute-barred subject to a finding of a relevant disability pursuant to s 52 of the Limitation Act).

671. I have dismissed the alternative claims for breach of contract and those claims arising out of the Contracts Review Act, on the basis that I do not consider the 21 February 2011 Agreement to be a binding contract (and in any case I accept the defendants’ submissions that these claims are statute-barred subject to the application of s 52 of the Limitation Act). I further decline to make the declaration sought that the deceased was under a disability at the time of entering into the transaction (i.e., in 2011) on the basis that it was conceded the evidence does not go so far as to establish incapacity and no expert evidence was tendered on this issue. However, I note that had the issue arisen I would have found that the deceased was under a relevant disability from January 2016 onwards for the purposes of the Limitation Act which would have had the effect of bringing the contract and statutory unconscionable conduct claims within the limitations period.

672. Ms Bale’s claim for breach of fiduciary duty against Ms Chyna Schein has also been upheld.

673. In light of my conclusions, it is not necessary to make the declaration sought as to the validity of the caveat (although I consider that the caveat was validly lodged); and the claim for an order that Kimberley Developments be wound up pursuant to s 461 of the Corporations Act does not arise.

674. I have concluded that the defendants’ defences of laches and acquiescence fail. There was no unreasonable delay or acquiescence by the deceased in all the circumstances; and it would be unconscionable to bar the equitable remedy for unconscionable conduct in circumstances where Ms Bale only discovered the purported terms of the sale transaction when she again became the deceased’s attorney during NCAT proceedings in 2016.

Costs

675. As to costs, these would ordinarily follow the event. However, the costs of the defendants’ amended notice of motion filed on 20 August 2021 (by which the defendants sought security for their costs and which I dismissed, subject to the direction that the plaintiff provide copies of invoices and receipts in respect of the disbursements of funds paid under the Deed of Settlement and Release to the defendants) were reserved. Neither party provided evidence or submissions on that issue prior to 6 December 2021. As the parties may seek to make submissions as to costs (including those reserved costs), I will make directions to permit any further submissions on the issue of costs within a short time frame and to be dealt with on the papers.

Orders

676. For the above reasons I make the following orders:

1. Set aside the transfer dated 21 February 2011 in relation to the property referred to in these reasons as the Forest Lodge Property.

2. Direct the first defendant (Kimberley Developments) within 28 days to transfer the title to the Forest Lodge Property, unencumbered, to the plaintiff (Ms Françoise Bale) as executor of the estate of the late Michel Schein.

3. Subject to order (11), order the plaintiff, as executor of the estate of the late Michel Schein, following transfer of the title to the Forest Lodge Property, to pay the sum of $288,242.63 to the sixth defendant (Super Start Batteries Pty Ltd) or at the direction of its director, the fifth defendant (Mr Theofanis Trigas), being the sum paid to discharge the Suncorp mortgage, plus interest calculated at the rate specified in the Suncorp mortgage.

1. Order that the sum payable pursuant to order (3) be charged on the Forest Lodge Property after its transfer to the plaintiff as executor of the estate of the deceased.

2. Declare that the first defendant as from 21 February 2011 held, and holds, the Forest Lodge Property on constructive trust for the deceased (and since his death, for the benefit of the deceased’s estate).

3. Declare that the first defendant breached the trust on which the Forest Lodge Property was held by encumbering the property with the mortgage to NAB in 2012 and transferring the funds so borrowed to the sixth defendant (Super Start Batteries Pty Ltd) (and/or at the direction of the fifth defendant, Mr Theofanis Trigas) and not used for the purposes or benefit of the trust.

4. Declare that the fifth and sixth defendants had constructive notice of the matters giving rise to the constructive trust and of the breach of that trust and are liable for being knowingly concerned in the breach of that trust or in knowing receipt of trust property in breach of trust.

5. Order the fifth and sixth defendants to repay to Kimberley Developments, as constructive trustee of the deceased’s estate’s interest in the Forest Lodge Property, the funds received by the sixth defendant out of the facility secured by the NAB mortgage over the Forest Lodge Property and any interest thereon that is required in order to discharge the NAB mortgage (such amounts to be paid within 21 days in order to make good the trust funds transferred in breach of trust).

6. Order the plaintiff, as executor of the estate of the late Michel Schein, to pay to the first defendant such amounts as are determined by the Court appointed referee (to be appointed pursuant to order (12) below) to be properly referable to expenses reasonably incurred in the maintenance of the Forest Lodge Property since 2011.

7. Order the first defendant to account to the plaintiff, as executor of the estate of the late Michel Schein, for all amounts received by way of rent or other income in respect of the Forest Lodge Property since 21 February 2011 to date, and interest thereon pursuant to s 100 of the Civil Procedure Act 2005 (NSW).

8. Order that the sums payable in orders (3), (9) and (10) be offset against each other with the sum remaining to be paid to the relevant party within 21 days of determination by the Court appointed referee of that amount.

9. Order that the matter be referred to a Court appointed referee (at the cost of the parties to be borne proportionately) for determination of the amounts to be paid, and the offset amount, pursuant to the above orders.

10. Declare that the fourth defendant (Ms Chyna Schein, nee Richardson) is liable to the deceased’s estate for breach of fiduciary duty in relation to entry into the sale transaction in respect of the Forest Lodge Property.

11. Order the fourth defendant to indemnify the deceased’s estate for any loss sustained as a result of entry into the sale transaction in respect of the Forest Lodge Property.

12. Give liberty to the plaintiff to apply on reasonable notice for orders in relation to the implementation of the above orders.

13. Reserve the question of costs and direct the parties to file brief written submissions on costs within 21 days, with a view to determining the issue of costs on the papers.

14. Direct the parties within 7 days to forward to Ward P’s associate the name of an agreed and suitably qualified person to be appointed as referee or, failing agreement, to submit three proposed names, with a view to the Court determining the identity of the person to be appointed as Court appointed referee in the absence of any such agreement.

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Amendments

09 February 2023 - [33] 'Criminal' to 'Civil'

Decision last updated: 09 February 2023