Brown v The NSW Trustee & Guardian
[2011] NSWSC 1203
•23 September 2011
Supreme Court
New South Wales
Medium Neutral Citation: Brown v The NSW Trustee & Guardian & Anor [2011] NSWSC 1203 Hearing dates: Thursday, 22 September 2011 Decision date: 23 September 2011 Jurisdiction: Equity Division Before: Brereton J Decision: Application dismissed with costs.
Catchwords: TRUSTS - Deceased son said to have held real property purchased from proceeds of sale of deceased's father's cottage on trust - trust said to arise by way of express trust or resulting trust with presumption of advancement rebutted - express trust said to arise from terms on which proceeds provided to son - only evidence supporting existence of trust is solicitor's file note - note evidences only one element of circumstances pertaining to transaction - assessed in context of surrounding and subsequent circumstances note cannot be said to contain terms upon which son held proceeds of sale - evidence rebuts resulting trust - presumption of advancement -property vested absolutely in son.
FIDUCIARY DUTIES - Agent and principal - son said to be father's agent - son father's agent in sale of father's house - no obligation in circumstances to act in father's best interests in dealing with proceeds of sale - father in fact authorised and consented to payment of proceeds to son - principal consented to agent's actions.
UNCONSCIONABLE DEALING - Relationship of 'special disadvantage' said to arise by father being 'semi conscious' and in hospital subsequent to an operation at time of impugned transaction - no suggestion father lacked mental capacity - contemporaneous arrangement entered into with son illustrates ability to conserve own interests - father not at sufficient disadvantage to constitute 'special disadvantage' - son cannot be said to have taken unfair advantage.
UNDUE INFLUENCE - Proved relationships of influence - no evidence that son exerted dominion, authority or superiority over father - no relationship of presumed influence - no evidence of actual undue influence.
ESTOPPEL AND CONFIRMATION - Father fails to impugn transaction for period of approximately five years prior to his death - equity aids the vigilant not the tardy - father in fact considered his position and decided not to pursue claim - parties conducted affairs on basis of this decision - not fair or right for claim to be maintained.Cases Cited: Allcard v Skinner (1887) 36 Ch D 145
Anderson (formerly Lauridsen) v Lauridsen [2011] NSWSC 849
Bank of New South Wales v Rogers (1941) 65 CLR 42
Blomley v Ryan (1956) 99 CLR 362
Boardman v Phipps [1967] 2 AC 46
Brown v Brown (1993) 31 NSWLR 582
Calverley v Green (1984) 155 CLR 242
Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Johnson v Buttress (1936) 56 CLR 113
Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342
Napier v Public Trustee (WA) (1980) ALR 153
National Westminister Bank plc v Morgan [1985] AC 686
Nelson v Nelson (1994) 33 NSWLR 740
Tillett v Varnell Holdings Pty Ltd & Ors [2009] NSWSC 1040
Whereat v Duff [1972] 2 NSWLR 147
Winfield v Clarke [2008] NSWSC 882Texts Cited: Cope, Duress Undue Influence and Unconscientious Bargain, 1985 Category: Principal judgment Parties: Felicity Anne Brown (plaintiff)
NSW Trustee & Guardian (first defendant)
State of New South Wales (second defendant)Representation: Counsel:
Mr Ash (plaintiff)
Mr Hill and Ms Pringle (first defendant)
Solicitors:
Burt & Allen Lawyers (plaintiff)
NSW Trustee & Guardian (first defendant)
File Number(s): 2010/313444
Judgment (ex tempore)
HIS HONOUR: The late Ian Gammidge sold his cottage in Surrey England in October 2000. The proceeds from the sale were paid into the bank account of his son, the late John Gammidge, who in about April 2001 applied them to purchase a property in his own name in Countess Street, Mosman. Ian's executor and heir, the plaintiff Felicity Anne Brown, claims that the Mosman property is beneficially owned by Ian's estate, by reason of an express or resulting trust arising from the circumstances in which it was purchased and/or breach on the part of John of a fiduciary obligation as owed by John to Ian, or as a result of the operation of the equitable doctrines of unconscionable dealing or undue inference. Without intending any disrespect, throughout the course of these reasons, I will refer to the central protagonists by their first names.
John's legal personal representative, the first defendant NSW Trustee & Guardian, as well as disputing the plaintiff's claims, contends that conduct of Ian - by himself and by his attorney Felicity - after 2000 precludes Ian's executor from now disputing the transaction. The second defendant is the State of New South Wales, which is the sole beneficiary of John's New South Wales estate, he having died intestate, with no next-of-kin entitled to take upon intestacy.
The evidence
It is necessary to bear in mind when it comes to considering the facts of the December 2000 transaction, that both principals are deceased. Thus the two people who could best inform the Court of what happened are unavailable. While Felicity has some knowledge of the circumstances, she was on the periphery of the transaction then. Her knowledge is plainly incomplete and much of it, derived subsequently, appears to be of a hearsay character. The solicitor who acted on the transaction was not called, although the contents of his file were available. They are, themselves, relatively sparse. The relevant evidence falls into two categories. The first is such direct evidence as is available pertaining to the December 2000 transaction, and the second is evidence emanating from subsequent inquiries into it, largely as a result of proceedings in the NSW Guardianship Tribunal concerning John.
In or about October 2000, Ian, John and Felicity had a conversation, which is related by Felicity in her affidavit in the following terms:
Ian asked John and myself to look after the sale of his house, West Heath Cottage, also in Pirbright. Ian said to us words to the effect "I know I am never going to be able to move back home again so I would like you two to get an estate agent in and get the house sold. Split the money between you. I don't need it. My pension easily covers all my outgoings here". He also said to us words to the effect: "I want you to sort out the house contents for me. There are a lot of things that have been in the family for years and I don't want them sold. You can share them out between you two and Patrick. I know there are some things that he would like to have".
I observed and understood that John took exception to Ian's request to me that I be involved in the sale and distribution.
Subsequently, John, on his own (that is to say, without Felicity's involvement), retained a solicitor, Mr Murphy, to act on the sale of the Surrey cottage. An attendance note dated 23 October 2000 made by the solicitor records a telephone call from John advising that his father had gone into a retirement home and that they had secured a buyer for the cottage. A further handwritten file note of the solicitor, apparently dated 5 December 2000, is in the following terms:
Telephoned John Gammidge when I confirmed to him that his letter/contract etc was ready for collection.
He asked if it was possible for the net proceeds to be paid to him into his a/c in Australia as his father wants to buy a house out there which he will do in his name. (His father doesn't want to leave the country yet while wife is still alive).
I said we would need written instructions from his father and his a/c details and that this could be arranged.
He asked if we could draw up letter for father just to sign - I said this would be okay.
Engaged 4 mins.
Mr Murphy duly prepared such a letter, which was signed by Ian, in the following terms:
Dear Mr Murphy,
Re: MY SALE OF WEST HEATH COTTAGE
Please accept this letter of my formal instructions for you to pay the net proceeds of sale to my son John Gammidge directly into his account in Australia.
It is a reasonable inference - from a letter from Mr Murphy to John of 13 December 2000, confirming that contracts were exchanged on 8 December, with completion to take place on 20 December - that those instructions were probably signed prior to 13 December. The sale was completed on 19 December 2000 and the proceeds, amounting to 462,446, were paid by cheque to John that day.
John remained in England until about September 2002. In January 2001, Ian instructed his stockbrokers to transfer his valuable share portfolio, worth in the order of 350,000 (equivalent to about $1 million (AUD) at the time), to John, but upon terms that Ian would remain entitled to the income during his life time. As will appear from evidence to which I shall come, Ian pursued this transaction notwithstanding advice from stockbrokers that there were more efficacious ways of implementing it, and the arrangement that he would remain entitled to the income appears to have been an oral one between him and John. (These matters emerge not from contemporaneous documents, but from information elicited by inquiry in 2002 and 2003, as I shall describe).
There is effectively no other direct or contemporaneous evidence illuminating the circumstances of the December 2000 transaction.
Following his return to Australia in about September 2002, John, who was mentally unwell and appears to have been affected by alcoholism, was the subject of an application, made by his then de facto wife Janette McClellan, to the Guardianship Tribunal for orders for financial management and guardianship. In connection with that application, Ian, on 2 December 2002 authorised Burt & Allen Solicitors in New South Wales to act on his behalf. On 10 December 2002, a request to be joined as a party to the proceedings was made on behalf of Ian; it was signed and presumably completed by his New South Wales solicitor, Mr Burt. It included the following statement:
I am the father. Am 86 years of age and have no financial interest in the matter other to ensure my son's best interests are protected.
On 11 December 2002 an officer of the Guardianship Tribunal spoke to Ian, who said that he did not recall signing and sending a letter to Mr Burt authorising him to act and that Felicity was dealing with the issues regarding his son's finances, but also that he had no objection to Ms McClellan's application, though requesting that Felicity be contacted regarding it.
Having been informed of that conversation - including a statement attributed to Ian to the effect "I'm a bit senile" (when saying he had no recollection of signing the authority to Mr Burt) - Felicity responded on 18 December that she had spoken to Ian's GP, who was writing a letter stating that he was definitely not senile. On 17 December 2002, Doctor Bishop in Surrey certified:
In my opinion the above named [Ian Gammidge] is of sound mind and does not suffer from senile dementia. He suffers from a normal degree of forgetfulness only to be expected in an 80 year old, particularly when woken from sleep by a telephone call in the middle of the night.
That certificate was forwarded by Felicity to Burt & Allen. On 19 December, Felicity informed an officer of the Guardianship Tribunal that the shares owned by Ian were put into John's name for safe keeping when Ian had been very ill some time ago; that Ian needed the income from the shares for his day-to-day needs and was currently receiving the income from the portfolio; and that Ian was considering taking legal action in the United Kingdom courts to have the share portfolio returned to his own name, but they would await the Tribunal's decision before deciding what course to take. It does not appear that any doubt was then raised concerning the ownership of the Mosman property.
Also on 19 December 2002, Ian made a will in Surrey appointing Felicity and Mr Murphy as his executors and trustees and providing for the residue of his estate (after payment of executorship expenses and inheritance tax) to be paid to Felicity, and if she predeceased him, to her children. Although the evidence does not disclose precisely when, it seems that by about this time, Ian had also appointed Felicity his Attorney under Power.
On 24 December 2002, the Guardianship Tribunal appointed the Public Guardian as John's guardian for a period of 12 months and committed his estate to the Protective Commissioner for management. Those orders were subsequently continued.
On 24 February 2003, the Office of the Protective Commissioner wrote to Ian, inter alia :
I understand that you generously provided John with funds to purchase his residence at Mosman almost two years ago. Similarly there is a large portfolio of shares that you settled upon John from which the income remains your property. Who else can we contact in order to obtain fuller details of these arrangements and what other significant persons should we be contacting in order better to manage John's affairs?
By his attorney Felicity, Ian instructed solicitors in London, Calvert Smith & Sutcliffe, to act for him, and they replied to the Office of the Protective Commissioner on 21 July 2003, relevantly as follows:
We have been asked by Mr Ian Gammidge's attorney, Mrs Felicity Brown, to look into the circumstances whereby Mr Ian Gammidge's portfolio of shares were transferred to his son, John, with Ian Gammidge continuing to receive dividend income therefrom. We confess that we are having some difficulty in ascertaining the full facts from the brokers but hope to be able to report to you fully concerning this within the near future.
...
From our point of view as solicitors for Mr Ian Gammidge, we are extremely concerned [about] the purported gift because, as a direct result of this, our client has incurred a significant capital gains tax liability which he is unable to pay...
On 31 July 2003, the Office of the Protective Commissioner responded to Calvert Smith asking if any information relating to the share portfolio could be referred to the Office for consideration, as it had been unable to make any decisions about John's investments in the absence of any details. Calvert Smith replied, on 13 August 2003, that they had now had an opportunity to speak with the brokers regarding the portfolio, and hoped to respond very shortly. They did so by letter of 29 September 2003. This letter is a very important document in the proceedings, and I extract it in full (emphasis added):
We write further to our letter of 13 th August 2003 and are now able to report to you in detail concerning your client's portfolio of shares currently held by J M Finn & Co, brokers.
As you are aware, we are instructed by John Gammidge's father, Ian Gammidge, via his attorney Mrs Felicity Brown. We enclose a certified copy of the enduring power of attorney for noting in your records.
The background to the matter is that around two years ago, when Ian Gammidge was aged 84, he was in the process of selling his home and moving into sheltered accommodation. His assets at that stage comprised his home, valued at 463,300, and the share portfolio in question, at the time held by S G Banking, valued at 255,605,52. His income comprised his State pension, an Occupational pension and the dividend income from the portfolio of shares.
John Gammidge was at that time living in Australia but came to the UK to support his father with the move.
Before turning to the gift of the shareholdings I would like to draw to your attention circumstances regarding the sale of Ian Gammidge's property. The house was sold on 20 th December 2000 and the net proceeds of sale of 462,445.99 were sent to John Gammidge's bank account in Australia. His explanation to the solicitors was that his father wished to purchase a property in Australia. The solicitors prepared a note for Ian Gammidge to sign confirming this and John Gammidge obtained his father's signature to this. Ian Gammidge has no recollection of signing the document. At no time did the solicitors visit Ian Gammidge personally in hospital, or speak with him, and the file suggests that they had no knowledge of the seriousness of his illness at that time.
It is our opinion that the solicitors instructed in the sale of the property were possibly negligent in not obtaining Ian Gammidge's instructions in person. We do not know, as Ian Gammidge has no memory of these events, whether he intended to gift the proceeds of sale of his home to his son John. That said, Ian Gammidge would not wish to pursue any claim for return of the property from his son or any claim for negligence against the solicitors, as his own health is extremely frail and he would be unable to withstand the rigours of a complicated court case. In addition, he would have no desire to bring any action against his son, for whom he cares very much.
At the time the transfer was made, being 7 th February 2001, Ian Gammidge was recovering from the serious illness which had hospitalised him in late 2000. Although Ian Gammidge now has no recollection as to the transfer of shares, there is no suggestion that at the time he was lacking in mental capacity.
As the shares were held in a nominee account, all that was required to process the transfer was a simple note signed by Ian Gammidge. A note was prepared by S G Banking for Ian Gammidge as an example of the type of document they required and Ian Gammidge in fact signed the draft. Michael Mould visited Ian Gammidge before the document was signed and, at that time, formed the opinion that Ian Gammidge had the mental capacity to make the decision to transfer the portfolio. We have examined Mr Gammidge's hospital and GP records for this period, which tend to support this view.
As regards the capital gains tax consequences of the transfer of shares; Mr Mould drew this to Ian Gammidge's attention and Ian Gammidge confirmed that he and his son John had spoken to Ian's accountant regarding this. Mr Mould therefore felt that Ian Gammidge had received separate advice concerning this. We have also spoken with Ian Gammidge's accountant, who confirms that transfer of the entire portfolio was discussed and he advised against this, as the capital gains tax consequences would be severe. The accountant advised a graduated transfer of shares over a period of years from father to son, in order to gain maximum benefit from the annual CGT allowance.
We questioned David Higham regarding the fact that the dividends continued to be paid to Ian, rather than to John, and were advised that this was a verbal understanding at the time between father and son, and another was recorded on paper with S G Investments.
David Higham has advised us that he is willing to write to you directly should you so wish.
In acting on Ian Gammidge's behalf, we have two areas of concern, namely:
1. That the dividend income should continue to be paid to Ian Gammidge in pursuance of their verbal agreement made at the time of the transfer of the shares. The dividend income forms a major part of Ian Gammidge's income, the remainder being made up by his State pension and Occupational pension.
Our original intention had been to try and reverse the gift of shares entirely, as it is possible that Ian Gammidge will need to access the share capital in the future. At present he is in sheltered accommodation and his income is sufficient to pay the fees and to cover his needs. However, if his health deteriorates to such an extent that he needs to move to a nursing home then the fees will be considerably higher and he may have insufficient resources for this. However, we have found nothing to suggest during our investigations that Ian Gammidge was lacking in capacity at the time he made the gift to his son, nor that he was placed under any duress at that time. We do not therefore now feel that it is appropriate to try and reclaim the gift of shares.
There is, however, a very real problem which may occur if Ian Gammidge needs to move into nursing care, as the balance of fees will need to be met by the local authority. At that time the local authority has the right to look back into any gifts made during the five year period prior to the claim on local authority funds. They have power to revoke such gifts in circumstances where they feel the gift was made in order to divest a person of their assets. In other words, they may claim back the entire portfolio, which would, in turn, leave your client financially worse off.
2. The other concern we have is in regard to the CGT bill. As advised, our client has no resources other than the income already stated and this is only enough to meet his immediate needs. We do not at this stage know the size of the capital gains tax bill but will let you have this information as soon as it is to hand. Mrs Brown is instructing Ian Gammidge's accountant to complete the tax return and the accountant will also calculate the capital gains tax liability.
If Ian Gammidge cannot pay the capital gains tax bill the Inland Revenue may accept payment over a number of years in instalments but, in the event of Ian Gammidge's death, there could be insufficient funds in his estate to pay the balance of the bill.
It is therefore possible that Ian Gammidge could either be declared bankrupt by the Inland Revenue or his attorney, Mrs Brown, may file for bankruptcy on his behalf. In these circumstances his trustee in bankruptcy may be able to reverse the gift of the shares from father to son in order to pay the outstanding capital gains tax bill.
We have spoken to Mrs Brown concerning all these possibilities and she, in turn, has spoken with Ian Gammidge; all are anxious to avoid any unpleasantness, or ongoing legal wrangles, while recognising the very real need to deal with payment of the capital gains tax liability and to ensure Ian Gammidge's continued financial security.
We are, however, also aware that the portfolio may be needed to provide an income for John, and that you will be concerned to ensure that this is done.
We feel that John has an obligation to continue providing Ian with an income from the share dividends for the rest of Ian's life, and that any income John needs should be provided by selling the house in Mosman which, by all accounts, is a large detached property in a very expensive area in the city, and buying a smaller, or suitable, property, which would leave a substantial amount of money for John's living expenses.
In respect of Ian Gammidge's capital gains tax liability; we would be grateful if you would consider meeting this liability when it occurs from the sale of some of the investments in order to avoid any likelihood of Ian Gammidge being made bankrupt.
We look forward to hearing from you in the near future.
The relationship between John and his de facto spouse broke down. In July 2005, the Protective Commissioner, on John's behalf, settled Ms McLennan's claim for property adjustment on the basis of a judgment in her favour for $47,500. So far as the evidence goes, John had practically no other assets than the Mosman property and the share portfolio.
Ian died on 9 October 2005. Probate of his 2002 will was granted to Felicity, with liberty to prove reserved to Mr Murphy, on 25 April 2006. The probate was subsequently re-sealed, in this court, on 16 September 2010. Mr Murphy either acted on probate or to obtain an extract of it to facilitate the re-seal, or both.
On 6 March 2006, Felicity and her brother Patrick Gammidge, both of them cousins of John, attended on an officer of the Protective Commissioner. They informed that officer that, in 2000:
... John had come back and obtained a POA [ power of attorney ]. He had sold the family home in Pirbright and the contents and the proceeds had "disappeared'. It was at the time that the Mosman property had been bought.
It was said that the father's shares had been transferred to John and that the father had been left penniless. The father had chosen to do nothing about it. There was no information and no knowledge of any trust.
John died intestate on 29 January 2009. He left his share portfolio situate in England, and the Mosman property situate in New South Wales. Having no relatives closer than cousins, under the law of intestacy applicable at the time of his death, his New South Wales estate is bona vacantia, and thus passes to the Crown.
Felicity filed her Statement of Claim in these proceedings on 21 September 2010. So far as the evidence discloses, that was the first occasion on which it had ever been suggested that the Mosman property was other than John's beneficially.
The express and resulting trust cases
The first way in which it is contended that the property is beneficially an asset of Ian's estate, is put on the related bases: first, that an express trust arose from the terms upon which the proceeds of the Surrey cottage were paid to John, and secondly, that a resulting trust arose from Ian having provided the purchase price in circumstances where (so it is said) any presumption of advancement that would otherwise have applied has been rebutted. Both these arguments depend fundamentally on the 5 December 2000 file note of Mr Murphy.
Taken on its own, this note undoubtedly favours the proposition that it was not intended that John be beneficially entitled to the proceeds and, in particular, to the Australian property that was to be purchased with them. However one reads the note - whether the reference to "his name" is to Ian's name or John's name - it conveys an intention at the time it was written that the house in Australia was beneficially to be Ian's property, regardless of in whose name it was purchased. In the circumstances of the reference to Ian not wishing yet to leave England while his wife was still alive, the better construction, I think, is that the intention was to refer to a purchase in John's name, albeit beneficially for Ian.
However, the 5 December note could only be a very small part of the circumstances informing an analysis of the December transaction. It records what John told the solicitor, at one moment in time. There is, I accept, a reasonable inference that that was sourced in a conversation with Ian, but it does not follow that that was the only, or the last, relevant conversation with Ian. Nor can it be assumed that it spells out the ultimate terms on which the funds were advanced to John. This is so for several reasons. First, the instructions in writing signed by Ian were not limited in any such way; they simply authorised the payment of net sale proceeds "to my son John Gammidge directly into his account in Australia", unconditionally. Secondly, the October conversation deposed to by Felicity, in which she attributes to Ian instructions to her and John to sell his property and divide the proceeds between them, is inconsistent with an intention on Ian's behalf to retain a beneficial interest in the proceeds. Thirdly, the practically contemporaneous transaction concerning his shareholdings in early 2001 confirms that while interested in retaining an income, he was divesting himself of his capital assets. Fourthly, the statement - sourced in either Ian or Felicity in the 12 December 2002 application to be joined to the Guardianship Tribunal proceedings - is inconsistent with any claim or belief on Ian's behalf that the Mosman property, though purchased in John's name, was beneficially Ian's. Fifthly, the letter of September 2003 is equivocal when it comes to Ian's December 2000 state of mind, recording:
Ian Gammidge has no memory of these events, whether he intended to gift the proceeds of sale of his home to his son John.
Sixthly, and to my mind most importantly, it would be a grave mistake to approach analysis of this transaction on the basis that what little is now known of it, is all that there was to it. There must have been further conversations and dealings between John and Ian surrounding, at least, the execution of the December instructions concerning the proceeds of sale. It is apparent, from Felicity's evidence, that John took exception to the proposal that she be involved in the sale and distribution of the property. What further discussions took place between John and Ian on that topic. to which she was not privy, are simply unknown. That does not mean to say that there were none. In my view, it is inescapable that there must have been. While Felicity says that she believes that this is the kind of thing Ian would have mentioned to her, if the result was that she was to be "cut out" of a benefit of which she by then had some expectation, it is not at all unlikely that the benefactor would have remained silent to her on the subject.
It is also important to bear in mind that the September 2003 letter was written in circumstances where Felicity had the conduct of Ian's affairs for relevant purposes and, it might be inferred, was not less than diligent in pursuing the possibility of finding bases on which the 2000 transactions might be vitiated. The 2006 conversation with the Office of the Protective Commission creates the impression that, despite Felicity's best efforts, Ian had chosen to do nothing about the share portfolio. All that supports an inference, which I draw, that for his own reasons and despite at least some encouragement on the part of Felicity, Ian decided that it was best to leave things as they were. This is of significance for reasons to be discussed later in this judgment but, for present purposes, one very good explanation is that the transaction was not other than in accordance with Ian's contemporaneous intention. The fact that he might say in September 2003 that he had no memory of the events could well be a convenient means of avoiding having to explain to Felicity what he had done by way of favouring John over her.
In any event, bearing in mind the contrary indications - particularly the December 2002 statement that he had no financial interest, the December 2000 instructions to pay the proceeds to John unconstrained by any condition, and the October 2000 conversation which evinced no intention to retain a beneficial interest, coupled with the contemporaneous disposition of his share portfolio - I am unpersuaded that the 5 December file note contains the terms upon which Ian ultimately authorised the advance of the proceeds of sale of the Surrey cottage to John.
In Calverley v Green (1984) 155 CLR 242, (at 246), Gibbs CJ explained the circumstances in which a resulting trust will arise, by presumption of law, where a person provides all or some of the purchase moneys for property acquired in the name of another. Generally, a court of equity will presume that a person who contributed the whole of the purchase price for property that is acquired in the name of another is the beneficial owner of the property; and that a person who contributes a proportion of the purchase moneys holds a beneficial interest equivalent to their proportionate contribution to the purchase price. The presumption of a resulting trust may be rebutted by evidence of a contrary intention on behalf of person who provided the purchase moneys. Additionally, in certain recognised categories of relationships, including that of husband and wife, and parent and child. The presumption of advancement is that the property is presumed to be intended to be beneficially given to the wife or child. The presumption of advancement is capable of also being rebutted by evidence of a contrary intention.
In the present case, as the above analysis has demonstrated, there is evidence that it was Ian's intention that he retain no beneficial interest in property purchased by John using the proceeds of sale from the Surrey cottage, and that John hold such property absolutely. Moreover, in the event that a purchase price resulting trust otherwise arose in the instant case, the presumption of advancement would apply, given the father-son relationship, and on balance the evidence does not rebut it.
The argument was put alternatively on the basis of an estoppel, said to arise from a representation made to the solicitor Mr Murphy, by John (Mr Murphy being, for that purpose, Ian's agent). However, I do not see how this further advances the case. It would be so only if, in authorising and approving the release of the proceeds of sale to John, Ian had acted upon the basis that he was to retain the beneficial interest. For the same reasons that I do not accept that the 5 December 2000 file note records the terms upon which Ian agreed to advance the funds to John, it cannot be said that it was established that he did so in reliance upon any such representation as could found an estoppel.
Breach of fiduciary duty
I turn then to the second way in which the case was put, which was by way of breach of fiduciary duty. Undoubtedly the relationship of principal and agent is ordinarily a fiduciary one [ Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342, Dixon CJ, McTiernan and Fullagar JJ (at 350), Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, Mason J (at 96-97)]. But inherent in the concept of a fiduciary obligation is an undertaking by the supposed fiduciary to act in the interests of the principal. Undoubtedly John was, in a sense, Ian's agent for the purposes of selling the Surrey cottage. Whether, however, there was an undertaking in that respect to act in Ian's interests is much less clear. The October conversation, in which Ian asked John and Felicity to sell his property and divide the proceeds amongst themselves, would ordinarily not import any obligation or undertaking to act in Ian's interests; the sale was to be for their, not his, benefit. Save for the 5 December file note, there is no reason to suppose that a subsequent appointment of John alone to do so would have been on any different basis. It is true that the solicitor's file appears to treat Ian throughout as the client, and that the client (trust) account was in Ian's name. One ready explanation for that is simply that Ian was the proprietor of the property and the vendor in the sale, and that close attention to whether ultimately the sale was in his interests or in John's interests was not given. But it seems to me that the decisive factor on this issue is the letter authorising payment of the proceeds to John. Ian consented to the payment of the proceeds to John, so that even if he were otherwise a fiduciary, this was a transaction to which the consent of the principal was given [ Boardman v Phipps [1967] 2 AC 46, 109 (Lord Hodson)]. That conclusion would be flawed if it were accepted that the conditions of the advance were included in the 5 December file note, but, for the reasons I have already given, I am unpersuaded that that was so.
Accordingly, it seems to me that, in circumstances where Ian consented to the payment of the proceeds to John, there is no breach of any fiduciary obligation that John may otherwise have owed to Ian.
Unconscionable Dealing
I turn next to the equitable doctrine of unconscionable dealing. Equity intervenes to avoid a transaction which has been brought about by one party knowingly taking advantage of a special disadvantage to which the other party was subject, which affected that other's ability to safeguard his or her own interests. The doctrine was summarised by Kitto J in Blomley v Ryan (1956) 99 CLR 362 in the following terms (at 415):
It applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his [or her] ability to conserve his [or her] own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.
In Commercial Bank of Australia v Amadio (1983) 151 CLR 447, Mason J, as the later Chief Justice of Australia then was, emphasised the distinction between the equitable doctrines of unconscionable dealing and undue influence. His Honour pointed out that for the purpose of attracting the former, unlike the latter, it was not necessary for the plaintiff's will to have been overborne. His Honour said (at 461):
Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position ... Relief on the ground of unconscientious advantage will be granted when unconscientious advantage ... will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interests.
To impugn a transaction on the ground that it is an unconscionable dealing, the plaintiff must establish that there was a relevant relationship of special disadvantage. The plaintiff must also establish that the defendant understood that the plaintiff was at a special disadvantage. In this respect, actual knowledge of any specific diagnosis or condition is not required, and it suffices that the defendant knew or ought reasonably to have known that the plaintiff was not in a position to look after his or her own interests. But once that is established, the onus is cast on the defendant to establish that the transaction was fair, just and reasonable [ Amadio, per Deane J (at 474)]. This involves showing either that the plaintiff received full value or was independently advised [Cope, Duress Undue Influence and Unconscientious Bargains, 1985 [260]].
In this context, the concept of special disadvantage is usually associated with conditions that make people vulnerable to exploitation and less able to conserve their own interests. At the heart of the doctrine is the prevention of unfair exploitation of a disadvantage or vulnerability. This extends to relationships of emotional dependence that can render a party susceptible to improvidence in favour of the stronger party. But not every case of illness, impairment or emotional dependence is a case of special disadvantage. It is insufficient to attract the doctrine merely that there be an inequality of bargaining power or that the plaintiff be affected by one or more of the relevant conditions. It is critical that the condition be such as to impact on the plaintiff's ability to conserve his or her own interests and to render him or her vulnerable to exploitation. One can be ill or poor - or even affected by delusions - and still perfectly capable of robustly conserving one's own interests [ Tillett v Varnell Holdings Pty Ltd & Ors [2009] NSWSC 1040, at [49]-[54]].
The evidence of disadvantage, so far as it concerns Ian, is principally contained in Felicity's affidavit at paragraph 10. Although it was not objected to, the opinion expressed in paragraph 10(d) was not given by a qualified person and, in my view, carries practically no weight. There is evidence that in early December 2000 Ian was in hospital. Although the dates are not clearly established, it is possible, though not clearly proven, that the time of execution of the December instructions coincided with his hospitalisation.
In her cross-examination, Felicity gave some evidence that Ian was "semi-conscious" for a week after his early December operation. While it may be that the instructions were signed during that period, it is not proved, on the balance of probabilities, by reference to any specific dates, that they were. The fact that his undisputed signature appears on them tells against him being in a state of "semi-consciousness" in any event, at least at the time at which he signed. While Mr Ash, for Felicity, not unfairly described the signature as "somewhat spidery", it contains far greater precision than one would expect of someone who was barely conscious. In any event, that has to be seen in the context of the surrounding circumstances, including Ian's previously stated intention in the October conversation to retain no beneficial interest in the proceeds of the property, and the disposition of his shareholding shortly afterwards.
It is also significant to note that there is no suggestion that he was then lacking in mental capacity (as recorded in the 29 September 2003 letter), nor that there was any element of duress. Again, it would be a mistake to suppose that because little is known about the precise transactions, one should conclude that the limited amount that is known affords a complete picture.
When one looks at Ian's intention in respect of the cottage in October 2000, his intention in respect of his share portfolio and the evidence that he was not lacking in mental capacity (although occasionally forgetful) at the time, it is very difficult to conclude that just because he was very seriously ill, that he was unable to conserve his own interests. To the contrary, the form of the arrangement he entered into with John so far as his share portfolio is concerned, in which he retained an entitlement to the income, demonstrates an ability to conserve his own interests at the salient time.
I am not satisfied that it is established that Ian was at a sufficient disadvantage vis-a-vis John to have been at a "special disadvantage" for the purposes of the doctrine. Moreover, I am not satisfied that even if he was, there was any unfair advantage taken of it by John. In this respect, it is somewhat striking that, when asked by the Court what her response was to the October 2000 offer or proposal on Ian's part that she and John sell the property and divide the proceeds between them, Felicity did not think that there would be anything unfair about her accepting that proposal.
Undue influence
I turn finally to undue influence. Equity avoids dispositions of property procured by the improper or unconscientious use of the influence of one person over another that cannot be explained on the grounds of friendship, charity or other ordinary motives on which people ordinarily act [ National Westminister Bank plc v Morgan [1985] AC 686, 708; Bank of New South Wales v Rogers (1941) 65 CLR 42, 54].
Undue influence may be established by proof that the donor's consent was in fact procured by undue influence (called actual undue influence) [ Johnson v Buttress (1936) 56 CLR 113, 134 (Dixon J)], or by an unrebutted presumption arising from the existence of an antecedent relationship of influence between the parties, where the quantum or improvidence of the transaction is such that it cannot be explained on grounds of friendship, relationship, charity or other ordinary motives (called presumed undue influence) [ Whereat v Duff [1972] 2 NSWLR 147, 167 (Asprey J)].
Some relationships - such as parent and child, guardian and ward, solicitor and client, doctor and patient probably spiritual advisor and follower, and (arguably) fiance and fiancee - are presumed to be relationships of influence [ Tillett v Varnell, at [77]]. In addition, a relationship of influence can be established by showing that it is one which involves ascendancy and influence on the part of the dominant party; or dependence, reliance, trust and confidence on the part of the weaker party [ Winfield v Clarke [2008] NSWSC 882, [27]].
The relationship of parent and child is a presumed relationship of influence, but in the context that the parent is presumed to exercise influence over the child; there is no presumption in the opposite direction. There could only be a relationship of influence, such as could give rise to presumed undue influence, in this case if a special relationship of influence were proven. To establish such a relationship, more than mere confidence and reciprocal influence is required. For a relationship to be brought within the doctrine, it must go beyond one of mere confidence and influence to one involving dominion or ascendancy by one over the will of the other and, correlatively, dependence and subjection on the part of the other. It is not necessary to establish a relationship of actual dominion by one party over another, and it is enough to show that the party in whom trust and confidence is reposed is in a position to exert influence over the party who reposes it. But more is required than the influence that any person might have on another by making a recommendation or giving advice; as a minimum, it is necessary that one have some element of authority or superiority - which may be moral or practical, as distinct from legal - over the other.
In my view, the evidence does not begin to establish a relationship of influence in which this son had dominion or authority or superiority in any form over his father. Nor does the evidence establish actual undue influence. It is simply not known what the circumstances were in which the December 2000 instructions were signed.
The defences of estoppel and/or confirmation
All that said, in my view, the decisive issue in these proceedings is the defence of estoppel - or perhaps more correctly in the context of this case, confirmation - and it is fundamentally on that that I rest my decision.
The evidence establishes no attempt to impugn the transaction for just on ten years from its inception. But there is much more than that. There is, in the 10 December 2002 document, a disavowal, on the part of Ian, of any financial interest in John's estate. There is evidence of a deliberate decision not to take steps to impugn the transaction, notwithstanding knowledge that there might be an entitlement to do so, in the letter of 29 September 2003 and (specifically in relation to the share transaction) in the file note of 6 March 2006.
The September 2003 letter was the subject of considerable debate. The fifth paragraph was said to be consistent with the plaintiff's claim. I agree that it is, and that is, I think, at least part of the problem: it shows that, as at September 2003, Ian, by his attorney, was aware that there were, or might be, grounds on which the transaction could be impugned, which the following paragraph contains an unequivocal determination not to pursue any such claim.
Mr Ash argued, with considerable conviction, that this should be interpreted as no more than a determination not to bring a claim for the time being, or while Ian and John were alive; but in equity it is not open to a party, knowing that it might have a claim, to sit on its hands until the opposing party dies and is no longer in so strong a position to answer it; vigilantibus non dormientibus aequitas subvenit , that is, equity comes to the aid of the vigilant, not those who sleep.
While Ian and his attorney made no claim for a decade, various detriments were incurred, and parties conducted their affairs, on the basis that the transaction was a valid one. John was disqualified from receipt of various pensions and entitlements, because of the assets which he apparently owned. His de facto spouse's property claim was settled by a payment which almost certainly could not have been made had John not owned the assets comprised by the house and the share portfolio. Ian made the December 2002 will exclusively in favour of Felicity, without any provision for John, a course which it is most unlikely he would have taken had he not been of the view that he had already made substantial provision for his son. Ultimately, John died, depriving his estate of any evidence that he could have given in answer to the claim.
In Anderson (formerly Lauridsen) v Lauridsen [2011] NSWSC 849 , I dealt with similar circumstances, in the context of a discussion of the seminal case of Allcard v Skinner (1887) 36 Ch D 145. In that case, Ms Allcard had sued to recover gifts made by her to a sisterhood of nuns, St Mary of the Cross, which she had joined in 1868. Some time after joining the sisterhood, at the request of the Lady Superior Ms Skinner, Ms Allcard made a will leaving all her property to the sisterhood. She also bestowed a large portion of her fortune, comprising shares in railway stock and other securities and amounting in all to some eight and a half thousand pounds to the sisterhood. After leaving the sisterhood in May 1879, Ms Allcard revoked her will but made no demand for the return of the property she had bestowed on the sisterhood, until 1885. The evidence established that soon after leaving the sisterhood she had a conversation with her brother about getting her money back. He said she did not need the trouble and had better leave it alone. Then, having left the Church of England sisterhood and joined the Roman Catholic Church, she was advised by a Roman Catholic priest not to trouble about it. In February 1880, she consulted a solicitor about making a new will and discussed with him the gifts she had made to the sisterhood. He told her it was too large a sum to leave behind without asking for it back. Despite that advice, she still did not trouble about it. Only in 1884, when she heard that another sister had left the sisterhood, asked for her money back and had it returned to her, did Ms Allcard for the first time make up her mind to try and get her money back.
It was held that the gifts had been voidable for undue influence, but that Ms Allcard's belated claim was defeated by confirmation, estoppel, acquiescence and or laches. Lindley LJ said that the evidence showed that she had considered the matter and had come to the conclusion that it was not worth troubling about. His Lordship said (at 178) that it was not necessary to decide whether or not delay alone would be a sufficient defence, because the case did not rest on mere lapse of time:
There is far more than inactivity and delay on the part of the plaintiff. There is conduct amounting to confirmation of her gift.
His Lordship concluded (at 189):
Whether the plaintiff's conduct amounts in point of law to acquiescence or laches, or whether it amounts to an election not to avoid a voidable transaction, or whether it amounts to a ratification or a confirmation of her gifts, are questions of mere words which it is needless to discuss. In my judgment it would not be fair or right to the defendant to compel her now to restore the money sought to be recovered by this appeal. Nor, in my opinion, would such a result be in conformity with sound common legal or equitable principles.
The other majority judge, Bowmen LJ, concluded:
In my view this appeal ought to be dismissed, and dismissed on the ground that the time which has elapsed, though not a bar in itself, though not accurately to be described as mere laches which disentitles the Plaintiff to relief, is nevertheless, coupled with other facts of the case, a matter from which but one reasonable inference ought to be drawn by men of the world - namely, that the lady considered her position at the time and elected and chose not to disturb the gift which she then at that moment felt, if she had the will, she had the power to disturb.
In my view, the paragraphs to which I have referred in the 29 September 2003 letter accord precisely with this situation. Ian, and/or his attorney, considered their position, thought that there was a possibility that the transaction might be disturbed and considered, but for reasons relevant to them at the time determined not to do so. This was, if anything, confirmed - although in relation principally to the share portfolio - in Felicity's 2006 conversation with the Office of the Protective Commissioner, namely that "the father had chosen to do nothing about it". Particularly having regard to the manner in which a number of people have since conducted their affairs on the basis that the transaction stood, it would, in the words used by Lindley LJ, not be fair or right to permit the present claims to be maintained a decade later.
Conclusion
For all those reasons, in my view, the plaintiff's claim must be dismissed.
As I apprehend the submissions, it is accepted that in that event, costs would follow the event.
My order therefore is that the proceedings be dismissed with costs.
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Decision last updated: 19 October 2011
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