Hrycenko (by his litigation guardian Michael Kornitschuk) v Hrycenko

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST

S CI 2017 04965

GEORGE HRYCENKO (BY HIS LITIGATION GUARDIAN MICHAEL KORNITSCHUK)	Plaintiff
v
VICTOR HRYCENKO	Defendant

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JUDGE:	LYONS J
WHERE HELD:	Melbourne
DATES OF HEARING:	1, 3–5, 8–11 October 2018; 12, 13, 20, 21, 25 February 2019 and 19 March 2019
DATE OF JUDGMENT:	23 October 2019
CASE MAY BE CITED AS:	Hrycenko (by his Litigation Guardian Michael Kornitschuk) v Hrycenko
MEDIUM NEUTRAL CITATION:	[2019] VSC 700

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EQUITY – Powers of attorney – Instruments Act 1958 (Vic) – Duty to account – Onus on attorney to establish payments for benefit of donor – Onus not met – Informed consent – Whether attorney established fully informed consent – Fully informed consent not established

EQUITY – Undue influence – Son attorney of aged father – Trust and confidence placed in son by father – Emotional and financial reliance on son – Father estranged from other family members – Gifts totalling $2,250,000 given in 10 months by father to son – Presumption of undue influence conceded – Whether presumption rebutted – Alleged plan of father to distribute assets to son during lifetime not established – No independent legal advice on gifts or alleged plan – Consequence of gifts on asset position unappreciated by father or solicitor – Presumption not rebutted

EQUITY – Unconscionable conduct – Son attorney of aged father – Trust and confidence placed in son by father – Emotional and financial reliance on son – Father estranged from other family members – Gifts totalling $2,250,000 given in 10 months from father to son – Special disadvantage established – Knowledge of special disadvantage established – Son unconscientiously took advantage of father’s special disability to procure gifts – Prima facie gifts not fair – Alleged plan of father to distribute assets to son during lifetime not established – No independent legal advice on gifts or alleged plan

ELECTION – Waiver – Estoppel – Whether defences established if father received independent legal advice on transactions subject to claims for breach of duty, undue influence and/or unconscionable conduct – No independent legal advice received – Defences not established

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APPEARANCES:

Counsel

Solicitors

For the Plaintiff

Mr T Bevan

Kennedy Guy

For the Defendant

Until 11 October 2018:
Mr M W Wise SC with
Ms N Papaleo

From 12 February 2019:
Mr D Connors

Until 27 November 2018:
Keypoint Law

From 27 November 2018:
Mornington Peninsula Legal Service

TABLE OF CONTENTS

1... Introduction.................................................................................................................................. 1

1.1.... Summary............................................................................................................................... 1
1.2.... Issues for determination..................................................................................................... 3
1.3.... Amounts claimed in Schedules A and B.......................................................................... 6

2... The witnesses................................................................................................................................ 8

2.1.... George................................................................................................................................... 8
2.2.... Victor................................................................................................................................... 10
2.3.... Nick...................................................................................................................................... 11
2.4.... Jacob Okno.......................................................................................................................... 12

3... Hrycenko family......................................................................................................................... 13

3.1.... The family and assets........................................................................................................ 13
3.2.... Family assistance and relationships............................................................................... 15
3.3.... The houseboat.................................................................................................................... 19
3.4.... Richardson Street unit....................................................................................................... 21

4... Late 2014 and early 2015............................................................................................................ 22

4.1.... Sale of the family home.................................................................................................... 22
4.2.... Change in control of the family trust.............................................................................. 22
4.3.... Attempts to resolve family dispute................................................................................. 23

5... Mid to late 2015........................................................................................................................... 26

5.1.... Power of Attorney............................................................................................................. 26
5.2.... First proceeding................................................................................................................. 27
5.3.... November 2015 wills......................................................................................................... 29
5.4.... The death of Ludmilla and the 23 December 2015 Will............................................... 32

6... Early 2016..................................................................................................................................... 33

6.1.... George moves to The Elms............................................................................................... 33
6.2.... Financial reliance............................................................................................................... 36

7... Legal proceedings...................................................................................................................... 39

7.1.... Second proceeding............................................................................................................ 39
7.2.... Applications in the first proceeding............................................................................... 40
7.3.... Affidavits in the first proceeding.................................................................................... 42
7.4.... Additional benefits to Nick.............................................................................................. 47
7.5.... 5 April 2016 Will................................................................................................................ 50

8... Withdrawals from April to August 2016............................................................................... 52

8.1.... Stanton Grant fees............................................................................................................. 52
8.2.... George’s expenses............................................................................................................. 53
8.3.... Gift of $290,000 on 2 June 2016........................................................................................ 53

9... August 2016................................................................................................................................. 55

9.1.... Legal proceedings resolved.............................................................................................. 55
9.2.... 25 August 2016 Will.......................................................................................................... 56
9.3.... Gift of $1 million on 26 August 2016.............................................................................. 57

10. October and December 2016 withdrawals............................................................................ 59

10.1.. 17 October 2016 withdrawal............................................................................................ 59
10.2.. December 2016 withdrawals............................................................................................ 59

11. Early 2017..................................................................................................................................... 60

11.1.. Distribution of family assets............................................................................................ 60
11.2.. 19 January 2017 Will.......................................................................................................... 62
11.3.. Gift of $950,000 on 1 February 2017................................................................................ 65

12. Mid 2017....................................................................................................................................... 67

12.1.. Further family trust distribution..................................................................................... 67
12.2.. 5 May 2017 withdrawal.................................................................................................... 68
12.3.. 19 July 2017 withdrawal................................................................................................... 69

13. August to October 2017............................................................................................................. 69

13.1.. Gift of $1 million on 10 August 2017.............................................................................. 69
13.2.. 10 October 2017.................................................................................................................. 73

14. November 2017........................................................................................................................... 78

15. Events in 2018.............................................................................................................................. 82

16. The relevant law......................................................................................................................... 85

16.1.. Powers of Attorney............................................................................................................ 85
16.2.. Undue influence................................................................................................................. 88
16.3.. Unconscionable conduct................................................................................................... 92

17. Issues relating to the Power of Attorney............................................................................... 94

17.1.. The issues............................................................................................................................ 94
17.2.. Issue 1.................................................................................................................................. 95
17.3.. Issues 2 and 3...................................................................................................................... 95
17.4.. Issue 4.................................................................................................................................. 97
17.5.. Issue 5................................................................................................................................ 101

18. Issues relating to undue influence....................................................................................... 101

18.1.. The issues.......................................................................................................................... 101
18.2.. Issue 7................................................................................................................................ 102
18.2.1 The submissions.................................................................................................... 102
18.2.2 Analysis of the Schedule B payments................................................................ 105

18.3.. Issue 8................................................................................................................................ 112
18.4.. Issue 9................................................................................................................................ 114

19. Issues relating to unconscionable conduct......................................................................... 114

19.1.. The issues.......................................................................................................................... 114
19.2.. Issue 10.............................................................................................................................. 114
19.3.. Issue 11.............................................................................................................................. 117
19.4.. Issue 12.............................................................................................................................. 117
19.5.. Issue 13.............................................................................................................................. 119

20. Issue 14....................................................................................................................................... 119

21. Issue 15....................................................................................................................................... 121

22. Conclusion................................................................................................................................. 123

HIS HONOUR:

1. Introduction
1.1 Summary

The plaintiff, George Hrycenko, is 96 years old. He has two surviving sons, Nick and Victor. There has been a progressive breakdown of the relationship between Nick and Victor since the early 2000s which has had a significant impact on George.

That breakdown came to a head in late 2014 or early 2015 when Nick was concerned that Victor was making or influencing decisions about family assets (including those held in a family trust). These included the decision to sell the family home in late 2014.

In late 2015, Nick issued proceedings seeking orders that George and his wife Ludmilla held half of the family home on trust for Nick (the ‘first proceeding’). In early 2016, Nick issued proceedings against the trustee company of the family trust, its director Victor, and against George (the ‘second proceeding’).

As a result, George was practically estranged from Nick from mid-2015 until late 2017, and George relied very much on Victor. On 30 July 2015, George appointed Victor as his enduring power of attorney (the ‘power of attorney’). In early 2016, George went to live in a nursing home near Victor’s home in Mount Martha. Victor spent much time with George and he looked after him. Victor also managed George’s financial affairs.

The way in which Victor looked after George’s financial affairs and exercised his power of attorney is in issue in this proceeding. This is because between April 2016 and October 2017 (the ‘relevant period’), Victor received over $3.5 million from George as gifts, of which $2,540,000 is claimed in this proceeding. As a result, George was left with a unit in Essendon valued at approximately $1 million, and approximately $800,000 in a bank account. In addition to his continuing living expenses, he had a tax liability of approximately $400,000.

After George became aware of his true financial position in late 2017, George instituted this proceeding, with the assistance of his son Nick, against Victor. Given George’s capacity to conduct this proceeding (which became a concern during the course of his evidence at trial), the Court appointed a litigation guardian to act on behalf of George in December 2018.

George alleges that during the relevant period, when Victor was in charge of his financial affairs, Victor:

(1)breached the fiduciary duties owed as donee of the power of attorney in making payments totalling $396,365.97 listed in Schedule A to the amended statement of claim (the ‘Schedule A payments’);[1] and
(2)engaged in unconscionable conduct and exercised undue influence over George in relation to payments made to Victor totalling $2,250,000 listed in Schedule B to the amended statement of claim (the ‘Schedule B payments’).

[1]The sum of $1.7 million is also claimed in Schedule A. For the reasons set out below, it was paid from Victor’s account into George’s account by mistake and then withdrawn from that account by Victor on 16 November 2017. A further payment in Schedule A of $4,000 withdrawn from George’s account on 17 October 2016 has since been repaid by Victor. As a result, these payments are not now claimed in this proceeding.

In summary, Victor admits making the Schedule A payments but says they were made either for George’s personal expenses or for Victor’s benefit with George’s knowledge and consent. One of those payments was a gift to Victor of $290,000.

Victor also admits receiving the Schedule B payments but says these payments were gifts made by George to Victor.

While Victor acknowledges that a presumption of undue influence arises because of the relationship between George and him during the relevant period, Victor submitted that George made his own judgement and exercised free will in relation to these payments. This is because Victor submitted there was a plan devised by George to give Victor his ‘share’ of George’s estate during George’s lifetime, taking into account the additional benefits that Nick had already received.

Further, Victor asserted that, on 10 October 2017, George received independent legal advice about these payments and withdrawals when a new will was drafted which recorded that George had gifted to Victor his inheritance in advance and left the balance of his estate to Nick. Victor submitted that, as a result of receiving this advice, even if these payments or withdrawals involved a breach of duty, George ratified them, waived any such breach or was estopped from bringing a claim against Victor for them.

For the reasons that follow, I have concluded that:

(1)Victor has not rebutted the presumption of undue influence by establishing that the Schedule B payments were made by George exercising his own free will and judgment (and understanding their effect and significance);
(2)Victor has not established that the Schedule A payments were for George’s expenses or, if they were not for George’s expenses, that they were made with George’s fully informed consent;
(3)the Schedule B payments were procured by Victor in circumstances where he unconscientiously took advantage of George’s special disability arising from George’s reliance on, and trust and confidence in, Victor; and
(4)George did not ratify or waive any breach of duty by Victor relating to these payments, nor is he estopped from bringing a claim against Victor for them.

1.2 Issues for determination

With the assistance of counsel for the parties, a number of issues or questions were agreed to be determined in this proceeding. They relate to the principal allegations made and defences raised in this proceeding. The questions for determination are:

Breach of fiduciary duty
1.Did the defendant make the withdrawals by himself or through the plaintiff set out in Schedule A (the Schedule A payments) made on 17 October 2016 and 19 July 2017 (the defendant having admitted making the other Schedule A payments)?
2.Did the defendant make or permit any of the withdrawals set out in Schedule A, in circumstances:
(a)where he obtained a benefit from any of them; and/or

(b)where he was in a position of conflict?

3.On whom is the onus to prove the matters set out in question 2 above in circumstances where the defendant cannot properly account for one or more of the Schedule A payments?
4.If yes to question 2, did the defendant make the Schedule A payments without the knowledge, authorisation or consent of the plaintiff, whether under s 65(1) of the Powers of Attorney Act 2014 or otherwise?
5.If the answer to question 4 above (or any part thereof) is yes, what remedy is the plaintiff entitled to?[2]
[2]The original form of this question referred to question 3 in error.
Undue influence
6.Does a presumption of undue influence arise during the period April 2016 to October 2017 as between the plaintiff and the defendant:
(a)by reason of the relationship of attorney and donor alone; and/or
(b)in the circumstances particularised under paragraph 10 of the plaintiff’s further amended statement of claim?

7.If the answer to question 6 above is yes, has the defendant rebutted the presumption in respect of any of the withdrawals set out in Schedule B (the Schedule B payments)?
8.Alternatively to questions 6 and 7 above, did the defendant unduly influence the plaintiff into making the Schedule B payments?
9.If the answer to question 7 above is no and/or the answer to question 8 is yes, what remedy is the plaintiff entitled to?
Unconscionable conduct
10.Did the plaintiff suffer from a special disadvantage vis-à-vis the defendant?
11.If the answer to question 10 above is yes, was the defendant aware of the plaintiff’s special disadvantage?
12.If the answer to question 11 above is yes, did the defendant unconscientiously take advantage of the plaintiff’s special disadvantage to procure any of the Schedule B payments?
13.If the answer to question 12 above (or any part thereof) is yes, what remedy is the plaintiff entitled to?
Ratification, waiver, election and estoppel
14.If the Schedule A payments and/or the Schedule B payments were effected or procured as a result of breach of fiduciary duty, unconscionable conduct or undue influence:
(a)did the plaintiff ratify those transactions;
(b)did the plaintiff waive any such breach of fiduciary duty, unconscionable conduct or undue influence;
(c)did the plaintiff elect between inconsistent rights; and/or
(d)is the plaintiff now estopped by conduct from denying the legal efficacy of the transactions
by reason of the plaintiff obtaining legal advice on 10 October 2017?

Does the plaintiff need to do equity to the defendant?
15.In the circumstances alleged in paragraphs 17–19 of the third amended defence, will equity deny the plaintiff a remedy in respect of the payment made to the defendant of $1 million on 10 August 2017?

I note that the questions for determination were prepared before final submissions. As a result, some parts of those questions require modification or do not need to be answered. For example, as set out below, George granted his power of attorney to Victor before the Powers of Attorney Act 2014 (Vic) (the ‘Powers of Attorney Act’) came into force. As a result, questions of knowledge, authorisation or consent are to be determined in accordance with the general law applicable at that time.

Further, in final submissions, counsel for Victor made sensible concessions in respect of some of these issues. In relation to question 1, he conceded that the payments made on 17 October 2016 and 19 July 2017 were also made by Victor. In light of the evidence relating to the control Victor had over George’s financial affairs during the relevant period set out below, that was a proper and appropriate concession.

In relation to question 6, counsel for Victor conceded that the presumption of undue influence arises from the father-son relationship further particularised in paragraph 10 of the amended claim during the relevant period. Counsel for Victor also conceded that George trusted Victor (which was reciprocated) and that George relied upon Victor during the relevant period to assist him with banking, paying bills, taking him on outings, etc. In light of the evidence relating to the relationship between Victor and George during the relevant period set out below, these were also proper and appropriate concessions.

In relation to questions 5, 9 and 13, counsel for Victor conceded that, if the relevant questions were answered in favour of George, then George would be entitled to have any payments repaid to him by way of equitable compensation.

1.3 Amounts claimed in Schedules A and B

The amounts claimed in Schedule A were allegedly withdrawn between April 2016 and November 2017 from George’s bank account under the power of attorney granted by George to Victor on 30 July 2015. I note that there was some dispute at trial as to whether some payments were made under the power of attorney or directly withdrawn by George. However, consistent with the admissions in question 1 and the concession referred to in [15] above, all these Schedule A payments were treated as having been withdrawn by the defendant pursuant to the power of attorney in final submissions.

With one exception, the Schedule A payments are for sums less than $32,000. They fall into six categories.

First, there are withdrawals which Victor asserts were for the payment of George’s expenses (the ‘alleged personal expenses’). These payments were made between June 2016 and December 2016, totalling approximately $57,000, made up as follows:

(1)       a withdrawal on 28 June 2016 of $9,000;
(2)       a withdrawal on 29 June 2016 of $9,500;
(3)       a withdrawal on 5 July 2016 of $8,500;
(4)       a withdrawal on 11 August 2016 of $5,000;[3]
(5)       a withdrawal on 9 December 2016 of $20,000; and
(6)       a withdrawal on 16 December 2016 of $5,000.

[3]Victor gave evidence that the payment on 11 August 2016 was used to pay advertising costs for the sale of the Williamstown shops which were part of the family trust, but I have included this sum in payments that were allegedly for George’s benefit.

Second, there are withdrawals which Victor asserts were for the payment of his legal fees relating to the second proceeding which George agreed to pay (the ‘Stanton Grant legal fees’). These total approximately $22,000 made up as follows:

(1) a withdrawal on 10 April 2016 of $10,000;
(2)a withdrawal on 26 July 2016 of $8,800; and
(3)a withdrawal on 19 July 2017 in the sum of $3,025.

Third, there are two withdrawals that Victor alleges were loans from George, being the withdrawal of $4,000 on 17 October 2016 (which George admits Victor has repaid) and the withdrawal of $25,000 on 23 December 2016 (the ‘alleged loans’).

Fourth, there is the withdrawal of $30,348 on 5 May 2017. Victor asserts this withdrawal was pursuant to an agreement with George whereby George would reimburse Victor for any payments which Victor had to make to Nick resulting from the fact that Victor could not justify certain expenses paid from funds of the family trust (the ‘family trust reimbursement’).

Fifth, there was the withdrawal of $290,000 on 2 June 2016 which Victor asserts was paid to him as a gift like the other gifts alleged in Schedule B given to Victor by George during his lifetime.

Sixth, there is the withdrawal of $1,700,000 on 16 November 2017 which George admits was repaid on that day. Victor says this was an accident. He was intending to transfer funds between his own accounts and, by mistake, deposited the sum of $1,749,000 into George’s account. Victor then withdrew the sum of $1,700,000 from George’s account. I accept that evidence and will not further address this payment in these reasons.

The amounts claimed in Schedule B are withdrawals paid directly to Victor. Like the payment of $290,000 on 2 June 2016, Victor submits that these were gifts made to him by George during his lifetime. They consist of the following withdrawals:

(1)       1 February 2017 - $950,000;
(2)       10 August 2017 - $1 million; and
(3)       10 October 2017 - $300,000.

I will refer to these three payments and the payment of $290,000 on 2 June 2016 as the ‘major withdrawals’. Until the commencement of the trial, all the major withdrawals were in fact listed in Schedule B. When it became apparent that sum was withdrawn using the power of attorney, it was transferred to Schedule A. However given the nature of the 2 June 2016 payment, being a substantial gift, at trial as it was often treated together with the other Schedule B payments.[4]

2. The witnesses

[4]See, eg, Transcript of Proceedings, Hrycenko (by his Litigation Guardian Michael Kornitschuk) v Hrycenko (Supreme Court of Victoria, S CI 2017 04965, Lyons J, 1, 3–5, 8–11 October 2018; 12, 13, 20, 21, 25 February 2019 and 19 March 2019) (‘Transcript’) 123:11–21 and George’s closing submissions: ‘Closing Submissions’, Submissions in Hrycenko (by his Litigation Guardian Michael Kornitschuk) v Hrycenko, S CI 2017 04965, 7 March 2019, 189.

Before turning to the relevant facts, it is appropriate to say something about the principal witnesses in this proceeding.

2.1 George

As I set out below, George and Ludmilla were hardworking, successful immigrants who acquired substantial assets during their lifetime.

George was born in the Ukraine and, while he speaks some English, he gave his evidence through an interpreter. He was 95 years old when he gave his evidence. As a result, arrangements were made for him to give evidence between 9:00 am and 11:00 am each day. He gave evidence on 3, 5 and 8–10 October 2018. In the course of his evidence on 10 October 2018, I observed that George seemed less able to give sensible or responsive answers to questions. As a result, I determined to investigate his capacity to conduct the litigation. After a hearing in camera with counsel for George, I ordered that George undergo a neuropsychological assessment to determine whether he had the capacity to continue to conduct the proceeding himself as a party.

As a result of that assessment, I formed the view that George did not have capacity to continue to conduct the proceeding himself as a party. After consultation between the parties, Mr Michael Kornitschuk was appointed George’s litigation guardian on 30 November 2018. However, I formed the view that George should continue with his evidence and I would determine the weight to be given to that evidence after it had been given. As a result, George gave further evidence on 12 and 13 February 2019.

I closely observed George give his evidence in October 2018 and in February 2019. I formed the view that George was a hardworking, decent, honourable and honest man. George’s evidence had some limitations given his age and mental state. He had little recollection of the detail of events which were the subject of his evidence. His answer did not always address the question asked. He sometimes had difficulty with more complex questions. From time to time, he confused one event with another. This is all understandable given his age and mental state. As a result, I relied very much upon the contemporaneous documents in assessing his evidence.

However, on matters that were important to George, I found that his evidence was clear and consistent. For example, George maintained throughout his evidence that he only wished his sons to get along. It caused him great distress that his sons were fighting and that this proceeding was necessary at all. George also maintained that he did not lend money to his family: if a family member needed or wanted money and George had it, he gave it to that person. I accept that evidence.

In my view, George is a man who is keen to get along with his sons. As a result, I formed the view that George has the capacity to be influenced by each of his sons at different times. For example, as I set out below, at the request of Nick, he signed a document for the transfer of the houseboat owned by the family trust to Nick in February 2013. When Victor found out about this transfer in 2014, George signed a document at the request of Victor stating that he had been pressured into the signing the document for the transfer to Nick.

George also maintained that he generally wanted the assets which he and Ludmilla had accumulated to be split 50/50 between Nick and Victor after his death. I accept that evidence. It is true that the proceedings issued by Nick resulted in changes to George’s will from time to time during the relevant period which favoured Victor. There seemed to be two reasons for this. First, George was very disappointed that Nick instituted the first proceeding and the second proceeding. Second, the effect of these proceedings issued by Nick (or the threat of them) was that George became estranged from Nick and grew much closer to Victor from mid to late 2015.

From this time until late 2017, George was heavily reliant upon Victor: by contrast, he saw little or nothing of Nick. It is during this period that the payments which are now the subject of this proceeding were made. George’s clear and consistent evidence was that during the relevant period he trusted Victor with his power of attorney and left Victor in control of his financial affairs.

2.2 Victor

Victor is a qualified carpenter and has worked in the building industry for over 35 years. I formed the view that Victor is a good businessman. He has accumulated significant assets during his lifetime with the result that he now lives off rental income.

Victor looked after George’s physical needs very well during the relevant period. Further, Victor regularly visited George and frequently took him on outings from the nursing home: for lunch, for coffee and for drives. Victor also looked after George’s financial affairs.

In my view, Victor is a particular and precise man. However, as I set out below, I found Victor’s evidence unconvincing on key issues in this proceeding. For example, in oral evidence, Victor stated for the first time that George’s lawyers came up with a plan in mid-2016 to give effect to George’s intention to give Victor his share of George’s estate during George’s lifetime. However, that evidence was not included in Victor’s prior affidavits or witness outline. It was never put to George’s lawyers, Mr Okno and Mr George Bourandanis, when they gave evidence.

Victor has no relationship with Nick: there has been and remains much distrust and animosity between them. This was no doubt contributed to by the legal proceedings which Nick issued and Victor’s belief that Nick had received much more than Victor during George’s lifetime. Indeed, throughout his evidence, Victor was keen to point out the benefits that Nick and his family had obtained from his parents when Victor received no equivalent benefit. He estimated those benefits to be in the order of $1.2 million. I will deal with this issue of the benefits Nick received further below.

2.3 Nick

Nick also gave evidence. Nick went to Essendon Grammar School, finishing the equivalent of year 11. He did one year of engineering at Footscray Institute of Technology and a second year at RMIT. However, he did not obtain any tertiary qualifications. Since that time, for the most part, Nick has worked for members of his family: either his parents or his brother, John who died in 2000. He has also undertaken some property development of his own as well as freelance drafting and the like. He is now retired.

In his evidence, Nick was determined to convey his view of his relationship with his parents and his brother and the reasons for the deterioration of those relationships. He considered that Victor and the decisions that Victor made were the reasons why there was a breakdown of the relationship between Nick and his parents.

While Victor was keen to point out the benefits that Nick and his family received from their parents, Nick was equally keen to point out the benefits obtained by Victor. In my view, his animosity towards Victor became evident in the way he answered questions. In short, he was argumentative and always keen when giving evidence to ‘put the boot’ into Victor.

However, it is important to note that it is not Nick’s conduct that is the subject of this proceeding. Nick’s evidence was most relevant to Victor’s defence that George’s plan or intention as set out in [10] above involved the adjustments which were alleged to reflect the substantial benefits Nick had received over and above the benefits obtained by Victor.

2.4 Jacob Okno

For the last 40 years, George and Ludmilla relied upon their solicitor Jacob Okno of Alan Wainwright J Okno & Co Lawyers (‘Mr Okno’). George was a client of Mr Okno’s late father. Mr Okno was an experienced and trusted legal adviser. He mainly acted for George and Ludmilla in property related transactions, acquisitions, sales, leases and in drafting wills. He also acted as an ‘honest broker’ in disputes between the children of George and Ludmilla.

As set out below, Mr Okno prepared a number of wills for George between late 2015 and October 2017 and met with him for this purpose. Nearly all of his meetings with George were recorded in detailed typed file notes.

Mr Okno was aware of the close relationship between George and Victor during the relevant period brought about, for the most part, by the legal proceedings which Nick had issued. Mr Okno drafted the power of attorney executed by George in favour of Victor.

From about mid-2015 and during the relevant period, it was Victor who would usually call Mr Okno on George’s behalf to arrange meetings. During these calls, sometimes Victor would convey George’s instructions, usually in relation to amendments to George’s will. Victor usually accompanied George to Mr Okno’s office for meetings. Sometimes Victor would stay while matters were discussed with George. From sometime in 2016, Mr Okno usually asked Victor to leave the room while he spoke to George about his instructions.

Mr Okno said that George’s ‘guiding principle always [was] that … he wanted his sons to share things fifty-fifty’[5] both during his lifetime and after his death. He acknowledged that some of the wills reflected George’s disappointment and anger at Nick as a result of the legal proceedings brought by him.
[5]Transcript 428:19–20.

Mr Okno maintained in his evidence that he was not informed of the major withdrawals at or about the time they were made. They were certainly not referred to in his detailed file notes and Mr Okno had no recollection of being told about them. Mr Okno was asked what he would have done if he had felt that any of George’s transactions during the relevant period were improvident. He replied that that would depend upon the particular transaction. For example, he said that if he had been aware of large transfers of money to Victor during the relevant period, he would have raised those transfers and any concerns he might have had with George directly. I accept that evidence.

3. Hrycenko family
3.1 The family and assets

George was born in Ukraine in 1923. He met his wife, Ludmilla, in Ukraine when he was 20 and she was 17. They got married in 1943. They moved to Germany after the war and then came to Australia in 1949. They were married for more than 42 years. Ludmilla died on 8 December 2015.

George and Ludmilla had three children:

(1)John, born in 1947 in Germany, who died in 2000 following a serious illness. He had two sons, Andre and Mark;
(2)Nick, born in 1958. He and his wife Danka have two daughters, Cassie and Melanie; and
(3)Victor, born in 1965.

George and Ludmilla worked hard in Australia. George started off working at the Essendon Aerodrome. Eventually, they saved enough money to purchase a mixed business in Elwood. They later operated a grocery and liquor store. They managed to accumulate significant wealth by investing in property over the years. George and Ludmilla bought and sold something in the order of 26 properties during their life together. They lived much of their later years around Essendon. They had a long-standing connection with the Orthodox Church of Ukraine nearby: they donated pews and Ludmilla painted some icons for the Church.

George and Ludmilla set up the Hrycenko family trust (the ‘family trust’). The purpose of the family trust was to hold property on behalf of the Hrycenko family. Over time, the family trust bought and sold many properties. Aniva Nominees Pty Ltd (‘Aniva’) was the trustee of the family trust.

By early 2014, the family trust held the following properties:

(1)shops located at 5, 7 and 9 Ferguson Street, Williamstown (the ‘Williamstown shops’); and
(2)a unit located at 3/82 Glass Street, Essendon (the ‘Glass Street unit’).

In addition to the properties held by the family trust, George and Ludmilla personally owned:

(1) the family home at 82 Richardson Street, Essendon; and
(2)a unit located at 2/72 Richardson Street, Essendon (the ‘Richardson Street unit’).

George and Ludmilla moved into the renovated family home in about 2002. In about 2012, they moved into the Richardson Street unit. In late 2013, George and Ludmilla went to live in the Windermere Aged Care Facility (‘Windermere’). At that time, Ludmilla was suffering from dementia. Windermere was only about two kilometres from the Richardson Street unit. George and Ludmilla lived there until Ludmilla moved into a high care nursing home in Fletcher Street, Essendon, shortly before she died in December 2015.

As to their children, John went on to become a successful businessman who developed a lottery business called ‘TMS’.

After studying, Nick went to work in his parents’ shop for about nine years. During this time, he also worked in another shop that was acquired by his parents with his brother John. After that, he worked on the development of nine townhouses in Tasman Avenue, Strathmore Heights, which was owned by his parents (the ‘Tasman Avenue development’). On this development, he did labouring, fit-out work, carpentry and supervision.

Nick then worked with John for about seven years at TMS doing fit-outs for lottery stores. His wife Danka also worked for TMS. At the same time, he attended to the maintenance of some of the properties owned by his parents and/or the family trust including the units in the Tasman Avenue development. After John’s death, Nick ceased working at TMS.

At about that time, George and Ludmilla bought the large property at 82 Richardson Street, Essendon, which was renovated to become the family home. It was an old house on a large corner block which George thought would be good to redevelop later into units. Nick said that the original intention was for Victor and him to undertake the renovation works. However, after a short time, Victor did not undertake further work at the family home. As a result, George and Ludmilla agreed to pay Nick $600 a week to complete the renovations which took 12 to 18 months.

After that time, Nick also undertook some property development on his own, as well as freelance drafting. He is now retired.

As noted above, Victor left school at the age of 16 and undertook an apprenticeship as a carpenter. He worked in a number of carpentry firms after that time. He ended up working as a carpenter in residential property. He was financially successful. Victor has been in a de facto relationship since 2008; his partner has two teenage children. Victor supports his partner and her children.

3.2 Family assistance and relationships

Over the years, George and Ludmilla provided substantial financial assistance to their children and their families. As I set out below, this included distributing assets and making large cash payments to them from time to time.

George agreed that he and Ludmilla were generous to their sons: if they could afford it, they would give them some of the proceeds of sale when a property was sold. The assistance provided to Nick and Victor was one of the principal issues in dispute in this proceeding.

John died in 2000. George considered that he had already provided for John adequately over the years so decided not to make any further provision for John’s family after John died. George said that, from that time, all of his property, including assets of the family trust, would be divided equally between Nick and Victor.

This is consistent with George’s will dated 19 May 2000 drafted by Mr Okno (the ‘2000 Will’). It gave his estate to Ludmilla but, in the event she predeceased him, it gave his estate to Nick and Victor in equal shares. It is also consistent with a deed dated 6 June 2000 executed in respect of the family trust (the ‘Deed of Appointment’) which provided that, on the death of George and Ludmilla, the family trust would vest in and be distributed to Nick and Victor in equal shares.

After John died, the relationship between Nick and Victor deteriorated. This was reflected in, if not caused by, disputes about the financial assistance each of them had received, or which each of them thought he was entitled to receive, from George and Ludmilla. In particular, Victor considered that Nick and his family had received more financial assistance from his parents than he had.

The nature of the relationship between Nick and Victor is evident by the dispute in relation to the two units in the Tasman Avenue development undertaken by George and Ludmilla. At the time the units were built, Victor was given Unit 4 and Nick was given Unit 5. However, Victor considered that Unit 4 was inferior to Unit 5, and that, therefore, Nick had received an additional benefit. This resulted in a disagreement between Nick and Victor.

As a result, Mr Okno wrote to Victor on 30 March 2005 on behalf of George, Ludmilla and Nick (the ’30 March 2005 letter’). That letter recorded that Victor sold Unit 4 for $292,000 in about 2005 and that Nick had obtained two estimates of the value of Unit 5 in February 2005 of between $290,000 and $310,000. That letter contained an offer for Nick to pay Victor $15,000 on the basis that Unit 5 was of greater value than Unit 4. Victor did not accept that offer. It was later withdrawn. In this proceeding, over a decade later, Victor maintains that Nick received a benefit of $45,000 by being given Unit 5, over and above the benefit that Victor received by being given Unit 4. Nick disputes that Unit 4 was inferior or that he had obtained a relative benefit of $45,000.

I note in passing that the 30 March 2005 letter also refers to a family beach house at 12 Elgan Avenue, Rye (the ‘Rye property’). The letter states that the Rye property is ‘currently regarded as belonging’ to Victor and Nick. The evidence before me was that the Rye property was purchased and owned by the family trust. The 30 March 2005 letter contained a proposal for Nick to buy the Rye property for an assumed value of $750,000 with the proceeds to be split between Nick and Victor. That offer was not accepted by Victor. However, Victor received $300,000 from George in relation to this property. Nick later received $300,000 from George on the sale of the Rye property. This is an example of George and Ludmilla treating Nick and Victor equally and assisting their sons where they could.

As noted above, if George and Ludmilla could afford it, they would give Nick and Victor equal shares of the proceeds of sale of a property when it was sold. By way of example, when one of the assets of the family trust, a shop in Glenroy, was sold in 2012 or 2013, Victor and Nick each received $100,000. George was clear about what he thought he had always done. He said, ‘Whenever I was giving to Nicholas, at the same time I was giving straightaway to Victor’.

Each of Victor and Nick was asked about the nature of the assistance given to them by their parents. Victor agreed that his father was generous to Victor and Nick throughout their lifetime and that they both received benefits. He acknowledged that, if there was a sale of an asset, George would distribute money equally between them. As to individual gifts, Victor said he could not keep a record. However, he stated that, as Nick is married and has children, Nick received much more assistance.

In this context, I found some of Victor’s evidence unconvincing. For example, Victor did not recall getting assistance from his father for his first home: he said George ‘may have paid the deposit’ but he does not now recall.[6] In my view, Victor is a particular man who would remember such matters. I consider this was an attempt to minimise the benefits he received from his parents. It did him no credit.
[6]Transcript 1047:13.

Nick also agreed that he and Victor had received substantial assistance from their parents including assistance in the purchase of a first home for each of them. He appeared to concede that he may have received more assistance than his brother at times, noting that the family members were at different stages, had different interests and different needs. However, he considered that he and Victor were treated ‘fairly equally’. He said that his parents tried to distribute their assets fairly between them.

There is one more matter to raise at this stage. In my view, each of Victor and Nick had a sense of entitlement over the assets of their parents and the family trust. As is evident from the chronology of events (including the Tasman Avenue development and Rye property referred to above), each of Nick and Victor haggled over the assets or the share of those assets that each considered belonged to him, or that each considered should belong to him. This is notwithstanding that the assets belonged to George and Ludmilla and/or had been acquired with their money and hard work.

This is particularly so where George indicated an intention for assets to be dealt with in a particular way. For example, it appears that the genesis of the first proceeding was Nick’s belief that George intended the proceeds of the family home to be split equally on his death between Nick and Victor. When the family home was sold before then, Nick believed he had a present entitlement to half of the proceeds of sale and sued for them. So too, Victor maintained that George promised Victor that he would get the Richardson Street unit. I will deal this issue further below. As a result, when George changed his mind about this, Victor nevertheless considered he was entitled to it, or to receive compensation for it. Indeed, in this proceeding, Victor alleges he is entitled to retain $1 million which George agreed to pay him in return for the Richardson Street unit being given to Nick under George’s October 2017 Will.

This sense of entitlement does not reflect well on Victor or on Nick. It is one of the motivating features behind these proceedings, the other proceedings and the ongoing animosity between Victor and Nick.

3.3 The houseboat

During the 1990s, the family built a houseboat at Eildon which was owned by the family trust. It became the subject of much dispute between Nick and Victor which continued in this proceeding. George said that his sons built the houseboat at a cost of about $150,000. He said that the purpose of the houseboat was to go there on holidays rather than Surfers Paradise.

By contrast, Nick said the houseboat was mainly built by himself and John with some help from Victor. He said after John died, over time, he was the only one who used the houseboat. In fact, it appears that George only visited the houseboat once or twice in the last 20 years. After John died, there were also disputes about who was to pay for costs, maintenance and repairs of the houseboat. Nick said that he paid for some repairs but did not undertake sufficient maintenance of the houseboat and it deteriorated.

There was also a dispute about who could purchase the houseboat. Nick was keen to purchase the houseboat for him and his family. As a result, the 30 March 2005 letter also contained an offer by Nick to purchase one half of the houseboat from Victor in accordance with a valuation Nick had obtained of it of between $160,000 to $185,000. Victor did not accept that offer.

In 2012, Victor spoke to Nick about Nick buying Victor’s share in the houseboat. Victor told Nick that he thought the houseboat was worth $480,000 to $500,000. Victor offered to sell his half ‘share’ to Nick for $240,000, or $220,000 if paid within 60 days. Nick did not accept that offer.

In February 2013, Nick arranged with George for the houseboat to be transferred from the family trust to Nick. At that time, the houseboat had fallen into disrepair. It was then insured for a value of $200,000. The terms of the transfer are set out in a document signed by Nick, George and Ludmilla on 11 February 2013. That document provided that:

(1)Nick indicated that he wished to purchase the houseboat from Aniva for $100,000 based upon an ‘agreed’ valuation of $200,000;
(2)a deposit of $1 had been paid; and
(3)the balance of the purchase price would be deducted from Nick’s share of the future sale of the family home.

In oral evidence, George did not remember the document or signing it. He said the houseboat was just an issue between the two brothers. He said that nobody suggested a value of $200,000. The transfer of this houseboat in February 2013 is an example of George being influenced by one of his sons, this time Nick. In my view, George signed the document when Nick presented it to him to keep him happy and avoid any conflict with him. Further, it seems likely that George did not have an appreciation of the value of the houseboat at the time other than what Nick told him.

A further document in relation to the houseboat was signed by George, Ludmilla and Victor on 4 September 2014. This document was prepared after Victor found out that the houseboat had been sold to Nick. It recorded that George and Ludmilla acknowledged that the houseboat was undervalued and that the price still remained $220,000 for a half share. I also find that it is likely that George had little appreciation about the value of the houseboat at this time other than what Victor told him. In my view, this September document is another example of George being influenced by one of his sons, this time Victor, and signing documents when presented to him. When asked about this document, George said: ‘Whatever they put in front of me, I was not interested. I just signed it … I trust everybody’.[7]

3.4 Richardson Street unit

[7]Transcript 172:17–9.

Another dispute related to the Richardson Street unit. As noted above, George and Ludmilla lived there for a short period of time before they moved into Windermere.

Victor gave evidence that George said he was going to give the Glass Street unit to Nick and the Richardson Street unit to Victor. It is unclear when George said this. As I set out below, it appears that the proposed division of assets, which was intended to reflect an equal split between Nick and Victor, changed over time. On the evidence before me, George only decided to leave Victor the Richardson Street unit in his will dated 23 December 2015 and this gift was later removed. Further, the Glass Street unit did not go to Nick. It was an asset of the family trust and was sold in 2016.

Sometime in the second half of 2014, Nick’s daughter, Cassie, asked George if she and her boyfriend could move into the Richardson Street unit. There is some dispute as to whether Cassie agreed to pay rent. In the file notes prepared by Mr Okno and in an affidavit sworn by George in 2016, there is reference to Cassie not paying an agreed amount of rent of $400 per week. George’s oral evidence was not entirely clear. At times he said he did not ask for rent. At others, he said he did not insist on it when it was not paid so that Cassie could save for her own house.

I find that there was an agreement for Cassie and her boyfriend to pay rent and that the non-payment of that rent concerned and annoyed George from time to time during the relevant period. However it seemed to be more of concern for Victor. This is in circumstances where George decided to leave Victor the Richardson Street unit in his will dated 23 December 2015 and Victor said that George agreed to pay him the rent from Cassie. In my view, Cassie’s non-payment of rent was another example to Victor of Nick’s family getting preferential treatment and contributing to the animosity between Victor and Nick.

I will return to the Richardson Street unit later in these reasons. For present purposes, it is important to note three things. First, in January 2017, George changed his will so that the Richardson Street unit was no longer left to Victor. Second, although no rent was paid, Cassie continued to live in the Richardson Street unit during the relevant period. Third, in his October 2017 Will George left the Richardson Street unit to Nick and his daughters.

4. Late 2014 and early 2015
4.1 Sale of the family home

On 11 August 2014, the family home was sold for $2,950,000 on a 12 month settlement. As I set out below, Nick believed the sale of the family home was organised by Victor and was contrary to the wishes of his parents. Nick said George always wanted the property to be sold upon his death and the proceeds to be split between the two boys.

An initial deposit of $290,000 was paid on 11 August 2014. A further instalment of $290,000 was to be paid by 10 July 2015. From these monies, George gave each of Nick and Victor $100,000. It was also intended that each of Nick and Victor would get a further $120,000. Victor got that money but Nick did not. I will return to this later.

4.2 Change in control of the family trust

In August 2014, Victor became aware that the houseboat had been transferred to Nick and that Nick did not pay for it at the time. This angered Victor. As a result, he prepared the document signed by George and Ludmilla dated 14 September 2014 referred to above.

It was at about this time, in August 2014, that Victor became a director of Aniva. In fact, he was appointed the sole director on 26 August 2014. George and Ludmilla resigned on that day.

George was asked about this change in the directorship of Aniva. Although his evidence was not entirely consistent, George said that he appointed Victor as sole director because Ludmilla was becoming unwell and he was looking after her in the retirement home. He said that Victor was collecting money from the shops which were family trust assets at the time. He said he only wanted one director because if there were two directors ‘one would want to sell it … and another won’t want to sell it’.[8] George said that he spoke to Victor and told him that he only wanted one director. He said he did not speak to Mr Okno about this decision and that he did not recall speaking to Nick about it. Mr Okno confirmed he was not informed of this change of directors at the time.

4.3 Attempts to resolve family dispute

[8]Transcript 175:17–19.

The dispute between Nick and Victor escalated after this time. It appears that Nick made a demand for some of the proceeds of sale of the family home. Mr Okno advised Nick to get his own solicitors as he could not act for him in any dispute with his parents. Nick engaged Kennedy Guy Lawyers.

In late March 2015, Mr Okno prepared a document entitled ‘Hrycenko Family–Summary of Agreement’. The background to the agreement recorded the reason for and purpose of it, namely that:

(1)difficulties had arisen over a period of many years in the relationship between Nick and Victor and it was clear that they would not be able to work together to maintain and enhance family assets;
(2)recently Victor had acted to remove George and Ludmilla as directors of Aniva and appoint him in their place without the knowledge of Nick;
(3)George and Ludmilla were both extremely elderly and, in the case of Ludmilla, in failing health;
(4)George had requested Mr Okno to find a solution for the division of the family assets between Nick and Victor which was fair to both of them taking into account the circumstance; and

(5) the objectives of the agreement were:
(a)to provide for the ongoing care and financial support for George and Ludmilla;
(b)subject to paragraph (a), the division of family assets between Nick and Victor; and

(c) that it be the final agreement to resolve these family issues.

Under the proposed agreement drafted by Mr Okno:

(1)all money for the financial support of George and Ludmilla would be paid from the family trust;
(2)the mortgage repayments in respect of the Richardson Street unit and the Glass Street unit would be paid by the family trust;
(3)the mortgage payments of Nick and Danka would be paid by the family trust during the lifetime of George and Ludmilla;
(4)the balance of the sale of the family home would be paid to Nick;
(5)the Richardson Street unit would be transferred to Nick at which time Nick would take responsibility for the mortgage;
(6)Nick and his family would renounce all claims with respect to the family trust to take effect on the death of the survivor of George or Ludmilla. From that time, Victor would have total control of the family trust and the benefit of its assets and income;
(7)in the event that a capital sum is required for George or Ludmilla, Nick and Victor would equally contribute toward that sum provided that, in the case of Victor, such contribution comes from the family trust;
(8)all other assets would be divided equally between Nick and Victor upon the death of the survivor of George and Ludmilla; and
(9)the parties acknowledged that the arrangements were to constitute a final settlement of claims within the family including the family trust and that the provisions of the wills of George and Ludmilla would not operate to change the arrangements.

George said this document was prepared by Mr Okno at George’s request.

I note that the proposed agreement was provided to Kennedy Guy. In their letter dated 2 April 2015, Kennedy Guy suggested a round table discussion between George, Nick, Victor and their respective lawyers to discuss the proposed agreement.

Mr Okno made a file note of conversations he had with each of George and Victor on 16 April 2015. In respect of his conversation with Victor, the file note records that:

(1)Victor was not prepared to attend a round table conference;
(2)Victor was prepared to settle on the basis that he obtain the Williamstown shops plus $1,000,000 in cash from the proceeds of sale of the family home;
(3)Nick could have the Richardson Street unit and the Glass Street unit and the balance of the cash and the houseboat; and
(4)Victor was aware that his father was coming to see Mr Okno that afternoon. Victor asked Mr Okno to raise the issue of a power of attorney with his father: he was concerned about the ongoing care of his parents and the necessity for someone to have authority to make decisions.

In respect of Mr Okno’s subsequent conversation with George, the file note records that:

(1)George thought that Nick had threatened to take court proceedings (in the context of the dispute about the sale of the family home);
(2)Nick had consulted another solicitor because Mr Okno had told Nick that if he and Victor were fighting with each other, Mr Okno could not represent either of them;
(3)George was not prepared to participate in a round table conference suggested by Kennedy Guy;
(4)George did not object to the proposals that Mr Okno had put or that Victor had put: his problem was that Nick and Victor could not agree on anything and ultimately he is going to be put in the position of proposing something and telling them to take it or leave it. In any event, in George’s view, nothing can be done until the settlement of the family home;
(5)George told Mr Okno he wanted approximately $800,000 kept back from the sale of the family home to cover contingencies relating to himself and his wife, in addition to the funds he was already holding;
(6)Mr Okno raised the issue of a power of attorney. George said it was a good idea. However, he said he did not want to appoint either Nick or Victor and he would rather have a third person.

George was asked about this conversation. He had little recollection of it but said he did not want Nick or Victor as his attorney in essence because they disagreed about everything. Mr Okno had little recollection of the conversation beyond his file note.

On 20 April 2015, Mr Okno wrote to Kennedy Guy setting out a summary of these discussions with Victor and with George including Victor’s proposal. It also recorded that he could not take the matter any further at this time.

5. Mid to late 2015
5.1 Power of Attorney

The family dispute worsened when Nick lodged a caveat over the title of the family home on 24 June 2015. The basis of the claim was an implied resulting or constructive trust. In his oral evidence, Nick said he left this to his lawyers. He said his concern was that Victor had organised the sale of the family home without his knowledge or consent. He said his father always wanted the property to be sold on his death and split between the two boys. He said he wanted to protect himself and his parents’ wishes and he was not going to sit back and wait to get his ‘half’.[9]
[9]Transcript 789:15–8.

On 30 July 2015, George granted Victor his power of attorney.[10] In fact, it appears, based on the file note of Mr Okno, that there were discussions about whether to lodge an application to remove Nick’s caveat on that day.
[10]Although headed ‘Enduring Power of Attorney (Financial)’ the document is not limited to George’s financial affairs.

George said that he granted Victor his power of attorney because Nick ‘closed all the finances, money’ and ‘to make sure that [Nick] … would not take the money away’.[11] I understood this to be a reference to Nick’s request to freeze the proceeds of sale of the family home until the proceeding he instituted could be determined.
[11]Transcript 179:8–11.

Victor deposed that the power of attorney was given to him in the context of the caveat lodged by Nick which caused delay in the settlement of the family home and in the context of threats by Nick to issue legal proceedings. Victor deposed in his affidavit sworn 3 May 2018 that he attended the meeting with George when Mr Okno explained the power of attorney. He said that Mr Okno explained to his father that ‘it means that Victor will have full control of everything’ and that George was happy with that. Victor confirmed this in his oral evidence.

Victor said the power of attorney did not change things very much: before that time, he had been looking after his parents and paying bills. However, he agreed that one of the reasons why George granted him the power of attorney was that he was very much depending upon Victor to defend the claim made by Nick.

5.2 First proceeding

On 17 September 2015, Nick commenced the first proceeding, being Supreme Court proceeding number 0492 of 2015 against George and Ludmilla. Nick claimed he was entitled to a share in the proceeds of the sale of the family home, based upon proprietary estoppel, common intention constructive trust or a joint common endeavour constructive trust. Mr Okno declined to act for George and Ludmilla in the proceeding. George and Ludmilla retained Mr Arthur Bourandanis of Frenkel Partners Lawyers (‘Frenkels’).

The first proceeding had a major effect on the relations within the family. Nick gave evidence that copies of the first page of the writ was photocopied and handed to friends of George and Ludmilla and the Ukrainian community. Someone had written on photocopies ‘Here’s a person that’s … pinching money from them.’[12] Nick suggested that Victor was responsible for this. I make no such finding. However, the existence of such a document emphasises the major effect the first proceeding had within the family and the community it was part of. In this regard, I refer to the evidence of Mr Herman below. From the time when the first proceeding was issued, Nick saw very little of his mother or his father. He ultimately agreed this was because his father was angry and disappointed about the first proceeding.
[12]Transcript 689:19–20.

Settlement of the family home took place in October 2015. After adjustments, costs and disbursements, and a payment of $547,000 to George, the sum of $2,361,166 was placed into Mr Okno’s trust account in return for Nick’s caveat being removed. These funds were held pursuant to an undertaking by Mr Okno not to disperse them until the first proceeding had been resolved.

As noted above, each of Nick and Victor was also to get a further $120,000 from the proceeds of sale of the family home. Nick did not receive his $120,000. In his evidence in chief, Victor said that Nick refused to pick up his $120,000 from George because the first proceeding was instituted. Victor said, as a result, George told Victor that he could use that money now and give it back later.

However, in cross–examination, Victor conceded he never spoke to Nick to tell him that the cheque was available for collection. Nick said he did not learn that Victor was holding this money until he read George’s affidavit sworn 1 March 2016 in the first proceeding which referred to it. Nick then arranged a letter to be sent to Victor on 20 May 2016 demanding repayment of that money. Victor said he did not pay the money because his father told him not to. In my view, that evidence is disingenuous. First, Victor should have made plain in his evidence in chief that he did not tell Nick that the cheque was available for collection. Second, as set out in [167] below, George deposed in early 2016 that Victor was holding that sum on trust for Nick. Even if George said not to pay Nick that amount (which I do not accept), it was open for Victor to repay that money when Nick demanded payment of it in May 2016. I find Victor’s conduct in this regard far from satisfactory and consistent with his animosity towards Nick. It does not reflect well on Victor.

5.3 November 2015 wills

George made a series of wills in late 2015: on 11 November, on 24 November and 23 December 2015.

On 30 September 2015, Mr Okno prepared a written file note relating to a new will for George. On its face, it is not clear whether it records a conversation with George or with Victor. It records that George wanted his executors to be Victor, Nick and Mr Okno. It also records that he wanted the estate to go to Ludmilla for her life and then, after her death or if she predeceases him, as follows:

Nick Victor

$100,000 already given $100,000

$120,000 he is holding $120,000

Unit plus (unit?) $800,000 – now

$800,000 – if he gets it now + Williamstown

The meaning of this notation is not entirely clear. It appears to record that Nick and Victor had already received $100,000 each. It also appears to record that Victor has received $120,000 and that $120,000 was being held for Nick.

George was taken to this file note. He had little recollection of it. He denied a conversation with Victor to the effect that, as Nick did not come to collect $120,000, Victor could use the money now and pay it later. Mr Okno recalled the $120,000. He said it was a reference to the fact that a further payment of $120,000 was intended to be made to each of Nick and Victor. He said Victor had received his payment but Nick had not.

A new will was executed on 11 November 2015 (the ‘11 November Will’). It is consistent with the matters recorded in the 30 September 2015 file note. The executors were Nick, Victor and Mr Okno. Under the 11 November 2015 Will, George’s estate was given to Ludmilla for life and, upon her death or if she predeceased him, to Nick and Victor in equal shares.

The 11 November 2015 Will also referred to the assets owned by the family trust and the Deed of Appointment which provided that, upon the death of George and Ludmilla, the assets of the family trust were to be distributed equally between Nick and Victor.

It then recorded George’s wish that the Williamstown shops be given to Victor and the Glass Street unit be given to Nick on the basis that the family trust properties and the Richardson Street unit were to be valued and, to the extent of any difference in the value of the family trust property and in order to equalise the position, the Richardson Street unit was to be transferred to Nick and the balance of the difference in value if any is to be paid to Nick from George’s estate. Mr Okno said this provision was included in an endeavour to equalise the position as between Nick and Victor, taking into account that the family trust properties could not be dealt with in the will.

There is another file note of Mr Okno dated 19 November 2015. On its face, it is not clear whether it records a conversation with George or with Victor. It records that George wished to change his will by deducting from Nick’s share the costs of defending the first proceeding and half the value of the houseboat ($240,000, based on a valuation of $480,000).

Mr Okno was shown this file note. In relation to the houseboat, Mr Okno said he understood that Nick more or less appropriated it and Victor obviously considered there should be some credit for it. Both the file note and the subsequent will Mr Okno prepared refer to the houseboat having a value of $480,000. Mr Okno said that the reference to $480,000 came from George but he believed that the figure would originally have come from Victor. Mr Okno prepared a will in accordance with these instructions. It was executed by George in Mr Okno’s presence on 24 November 2015 (the ‘24 November 2015 Will’).

Mr Okno also prepared a file note of the meeting at which the 24 November 2015 Will was discussed and executed. It records that George attended and that he read through the will and talked about it at some length. It also provides that George advised he was in agreement with what the document contained and that Mr Okno formed the view that George understood what was provided and that it was in accordance with his wishes. The file note records that George was clear about the fact that he wanted Nick to pay for the legal costs that were incurred in relation to the court proceeding. He was also clear that Nick should compensate Victor for one half of the value of the houseboat.

Clause 3(iii) of the 24 November 2015 Will refers to the houseboat. It records that Nick ‘prevailed upon’ George to transfer the houseboat to Nick and his wife. It also records that George agreed to this on the understanding that Nick would pay half the value of the houseboat to Victor and that the value at the relevant time was $480,000.

In oral evidence, George denied he was pressured into signing this document by Nick. He said Nick only wanted to buy the houseboat so that his family could use it. George said Victor always wanted $400,000 for the houseboat but George thought this was too much as there were a lot of repairs to be done by this time.

Clause 3(v) of the 24 November Will mirrored clause 3(iii) of the 19 November Will in relation to the family trust. The 24 November 2015 file note records that Mr Okno explained to George that the will specified the outcome that George wanted: he did not want a situation where there was endless fighting between his two sons. It also records George had a clear understanding of what constitutes his estate and what is held by the family trust.

5.4 The death of Ludmilla and the 23 December 2015 Will

Shortly before her death, Ludmilla moved from the Windermere Nursing Home to a nursing home which had a higher level of care in Fletcher Street, Essendon. On 8 December 2015, Ludmilla died. Nick gave evidence to the effect that he was excluded from the funeral arrangements. Indeed, he said he was not aware of the time and place of his mother’s funeral for some time. He did attend her funeral but was not in the cortege hire cars like George and Victor. I did not understand this to be disputed by Victor. Again, this emphasises the nature of the breakdown of the relationship between Nick and his family.

On 22 December 2015, George and Victor went to see Mr Okno. Mr Okno prepared a file note of that meeting. The file note records that:

(1) George and Victor attended a mediation with Nick which had ‘failed totally’;
(2) George said he wished to change his will; and
(3)George was very upset with Nick and could not understand why he was behaving in this way.

The file note records that, after some discussion, George wanted the new will to be as follows:

(1) Nick was to be removed as executor;
(2) the Richardson Street unit was to go to Victor;
(3)Victor was to be compensated for one half of the value of the houseboat with a valuation at that time of $450,000;
(4)as George was upset about the costs incurred in the first proceeding, provision was to be made for an equal amount of the costs to be paid from the pool to Victor; and
(5)the balance was then to be divided equally between Nick and Victor but Nick had to wait five years to get his share.

The file note records that Victor attended during the whole meeting. Mr Okno was asked if Victor always attended conferences with him and George. He said it became his practice after this time to speak to George alone. Of course, the fact that Victor appeared to convey instructions on behalf of George and then attend conferences with him and Mr Okno indicates the degree of trust and confidence placed by George in Victor.

Mr Okno had little recollection of this meeting. He recalled it was soon after Ludmilla’s death. He also recalled that George was upset with Nick issuing the proceedings in relation to the family home and that he showed it during that meeting. Mr Okno believed that Victor had suggested the value of the houseboat. He thought it was George’s idea to vary his will because of the legal costs incurred by him in defending the proceedings instituted by Nick.

Mr Okno prepared a new will pursuant to these instructions. The file note records that the new will was sent to Victor so that he could arrange for his father to execute it at the aged care accommodation facility. The new will was executed on 23 December 2015 (the ‘23 December 2015 Will’). I note there was no evidence before me about the reason why George decided to leave the Richardson Street unit to Victor in his will at this time. In his affidavit sworn 3 May 2018, Victor deposed that, prior to August 2017, George told Victor he would leave him the Richardson Street unit to compensate Victor for what George had given to Nick and his family. The details of when this was said are not deposed to. Mr Okno’s 22 December 2015 file note does not record a statement to this effect or any intention of George to compensate Victor for what George had given to Nick and his family.

6. Early 2016
6.1 George moves to The Elms

In early 2016, George was admitted to hospital with a urinary tract infection. Victor thought that, given that he was the primary carer for George at that time, George should move to a place near him in Mount Martha. When George was discharged from hospital, Victor arranged for him to live in an aged care accommodation facility called ‘The Elms’ in Safety Beach which was the closest facility to Victor’s home in Mount Martha.

In this proceeding, it was put that it was a deliberate decision by Victor to isolate George from his family and friends in Essendon. Victor denied this. He agreed that The Elms was chosen because it was close to him. He said George had a beautiful room and good friends there. He said he also had visitors come from Essendon. He said he arranged for his parents’ old telephone number to be transferred to The Elms. Nick disputed his parents’ old telephone number was transferred to The Elms.

18.2.2 Analysis of the Schedule B payments

For the reasons that follow, I am of the view that Victor has not rebutted the presumption of undue influence in relation to the Schedule B payments. This is because I am not satisfied that Victor has affirmatively established, consistent with the authorities, that George knew what he was doing when he made these payments in the sense that he understood their effect and significance on his own finances (what was going to each of his sons and what they would ultimately receive) and that these payments were the result of the exercise of George’s free will.

As noted above, approximately $3.5 million was transferred from George to Victor between June 2016 and October 2017 of which $2,250,000 comprises the Schedule B payments claimed in this proceeding. The effect of these payments was that George was left with the Richardson Street unit and approximately $800,000 in a bank account but subject to a tax liability of approximately $400,000 and George’s ongoing living expenses.

As to the circumstances in which each of the Schedule B payments was made, George’s evidence at trial (accepting the limitations of his evidence) did not disclose that he was aware of each amount that was taken in February 2017, in August 2017 and October 2017. As set out in detail in sections 11.3 and 13, I have concluded that Victor’s evidence about the circumstances in which each of the Schedule B payments took place is not convincing. Much of his oral evidence was inconsistent with his defences and affidavit evidence. It certainly did not establish affirmatively that George was aware of each amount withdrawn and the nature and purpose of each payment.

I note that there is some evidence that George may have been aware of the major withdrawal of $1 million on 10 August 2017. I refer to the 13 November 2017 file note of Mr Okno which records that the payment was to ‘apparently be in exchange for Nick and his family getting the [Richardson Street unit]’. However, I do not consider that this file note and the evidence of Victor is sufficient for Victor to establish ‘affirmatively’ that George was aware of this payment at the time it was made.

This is because, as noted in section 13, I have not accepted Victor’s evidence about the events between August and October 2017 as it was unconvincing. In particular, I rejected Victor’s evidence that he informed Mr Okno of the $1 million payment or that that payment was in lieu of Victor getting the Richardson Street unit. Based upon the matters set out in [303], I am also unable to accept his evidence that Mr Okno obtained a valuation of the Richardson Street unit in about August 2017. In light of these findings, the 13 November 2017 file note of Mr Okno is not sufficiently clear for Victor to affirmatively establish that George was aware of the 10 August 2017 payment of $1 million. Nor do I consider that all of this evidence is sufficient for Victor to affirmatively establish that George was aware that the $1 million was paid in lieu of giving Victor the Richardson Street unit.

Further, for the reasons set out in section 6.2, George had little appreciation of his actual financial position during the relevant period. This is confirmed by the response of George and of Mr Okno when each of them discovered his true financial position in November 2017 as set out in section 14. It is important to note that there was not one major payment to Victor, but five of them, over a period of 16 months, with the final three Schedule B payments (totalling over $2,250,000) made over 10 months. In light of my findings that Victor was in control of George’s finances without any meaningful scrutiny and George had little understanding of his actual financial position during the relevant period, I am not satisfied that George was aware of the effect of each of the Schedule B payments on his financial position, let alone of their cumulative effect.

Even on Victor’s own evidence, on 10 October 2017, after the sum of $300,000 had been withdrawn to pay to Victor:

(1) George asked the bank manager how much money he had left in the account; and

(2) George then expressed concern whether he still had sufficient funds to meet his living expenses.

On Victor’s evidence, there was discussion at that time of the possibility of selling assets or the need for Victor to contribute his own funds because George’s assets may not be sufficient to support the rest of his life. This suggests that George was not aware of the effect of this or the other major withdrawals on his asset position. By contrast, Victor was aware of their effect as he was in control of all of George’s financial affairs.

It is important to bear in mind that each of the Schedule B payments was a gift to Victor. These gifts were made in a context where, contrary to the case alleged by Victor, George did not receive independent legal advice in relation to each of the major withdrawals. While I accept that it is not necessary to show that the donor received legal advice in every case where the presumption of undue influence arises, in this case, George was elderly at the time of the major withdrawals and was frequently in contact with Mr Okno as his personal solicitor during the relevant period.

Contrary to Victor’s submissions, as set out above, the evidence of Mr Okno, which I accept, is that:

(1) these major withdrawals[94] were not discussed with him in the course of a series of meetings in 2016 and 2017 prior to November 2017; and

(2) if he was aware of these major withdrawals, he would have raised them with George to ensure that he was adequately protected.

[94]I have included the gift of $290,000 in this analysis, given that Victor alleges that George also received independent legal advice in relation to the Schedule A payments in [10(c)] of the third amended defence.

It is significant that most of the major withdrawals occurred at around the same time as Mr Okno met with George and/or Victor to discuss changes to George’s then current will. Indeed, it was not put to Mr Okno that he was told of any of the transactions prior to August and October 2017: even then, it was put that he was only informed of the $1 million paid on 10 August 2017 and the $300,000 paid on 10 October 2017. In this context, I note that Victor regularly contacted Mr Okno to inform him of George’s instructions. There is no suggestion he informed Mr Okno about the 2 June 2016 and the 1 February 2017 payments. I do not accept his evidence that he informed Mr Okno of the August 2017 and October 2017 payments.

Further, I am unable to accept Victor’s evidence and submission that George conceived a plan to distribute assets to Victor during George’s lifetime which reflected a 50/50 split subject to adjustments for additional benefits Victor asserts Nick had received. As I have set out above, Victor’s evidence of the genesis of that plan and the way in which it was put into action is not consistent. Indeed the suggestion that the plan was authorised or implemented in mid-2016 by Mr Bourandanis and Mr Okno was not even put to them in the course of their evidence.

Further, the evidence from Mr Okno is contrary to Victor’s position. None of his file notes prior to his 10 October 2017 file note refer to any intention on the part of George to distribute his assets to Victor during his lifetime, let alone a distribution to Victor to compensate him for substantial additional benefits Nick had received during his lifetime. Indeed, the 19 January 2017 file note records:

Generally he [i.e. George] wants his assets after he dies to go 50-50 between Nick and Victor. I raised the issue of the provision in the current will leaving the Richardson Street unit to Victor. I spoke to him about the issue of the houseboat which is a very sore point. There is also the question of the fact that his granddaughter Cassie is occupying the unit rent-free and has done so for a substantial period. He felt these matters caused an inequality in favour of Nick and agreed with the suggestion that I made for a bequest to Victor to remedy the position. The amount agreed was $300,000.

It appears that $300,000 was the adjustment which George considered appropriate based upon the advice received from Mr Okno. It is unclear from the file note whether it relates to the removal of the Richardson Street unit from the will, the houseboat issue and/or the non-payment of rent. It seems more likely it was the latter two only.

Three things are clear from this 19 January 2017 file note: first, it did not refer to any plan by George to give Victor his inheritance before George died; second, there is no suggestion of George’s intention to divide his assets subject to adjustments for additional benefits Nick had received save for the gift of $300,000; third, the Richardson Street unit was no longer gifted to Victor but formed but of George’s general estate.

It appears that, in or about August 2017, George agreed to give Victor his inheritance in advance, consistent with Victor’s evidence. For example, Mr Okno’s 10 October 2017 file note and the 10 October 2017 Will refer to, and are consistent with, an intention or plan by George to give Victor his inheritance during George’s lifetime. But, significantly, there is no suggestion in either of them of George’s intention to divide his assets subject to adjustments for additional benefits Nick had received. In this regard I note, as set out in section 15, clause 5 of the July 2018 Will records that George ‘had agreed that Victor could have his share of what he was to inherit before [George’s] death’. However, cl 5 then also records that what Victor had taken ‘was much more than this’.

As to any alleged adjustments for additional benefits Nick had received, in Schedule 1 to the third amended defence, the additional benefits are estimated at approximately $1.2 million excluding the houseboat. Other than by reference to the 18 May 2016 affidavit and Victor’s evidence, there was no attempt to quantify these additional benefits at trial or in final submissions.

For the reasons set out in section 7.4, while I accept it is likely that Nick received financial assistance or benefits above those received by Victor, I am unable to conclude the extent of those benefits or to place a value on them. In these circumstances, Victor has not established that Nick received benefits in excess of $1 million over those received by Victor.

Further, Victor has not established that George believed that Nick had received benefits in excess of $1 million over those received by Victor. Victor relied upon the 18 May 2016 affidavit to support this submission. In oral evidence, George disputed Nick received many of the benefits deposed to in the 18 May 2016 affidavit. For the reasons set out in section 7.3, I have concluded that Victor was primarily responsible for defending the first and second proceeding and provided much of the detail in the affidavits in the first proceeding, including the 18 May 2016 affidavit. I also concluded that, if I am wrong about that, then Victor very much influenced George in how those proceedings were conducted and in preparing the affidavits.

As a result, I am unable to place much weight on the 18 May 2016 affidavit. Further, as I noted in section 7.4, many of those benefits were of the kind I consider that George would not want to take into account in balancing how his estate was to be distributed, for example, the gift of a car to each of Nick’s children.

In all of these circumstances, Victor has not established that Nick received additional benefits to the value of $1.2 million or that George held this belief, with the result that he has not established that Schedule 1 of the third amended defence represented George’s intention or wishes.

I wish to say something further about Schedule 1. The third amended defence alleged that ‘George’s view of the approximately equal distribution of his wealth’ to Victor and Nick was set out in Schedule 1. Other than by reference to the 18 May 2016 affidavit, there was no evidence before me that George accepted or agreed that this was so. Rather, in my view, it reflected the distribution which Victor and/or his lawyers wished to pursue a trial.

For example:

(1) other than the particular payments between June 2016 and October 2017, which were the subject of this proceeding, Schedule 1 did not seek to quantify in any way the benefits which Victor otherwise obtained from his parents during his lifetime;

(2) Schedule 1 valued the houseboat at $700,000. There was no evidence the houseboat was ever valued at this sum. Victor’s highest estimate referred to in the file notes of Mr Okno was $480,000; and

(3) Schedule 1 ignores the negative adjustment made to Nick’s distribution from the sale of the Williamstown shops in early 2017 but does not ignore Victor’s negative adjustments.

Finally, when assessing the remainder of George’s estate at $900,000, it ignores George’s capital gains tax liabilities and does not account for the money he is yet to spend in his lifetime.

As set out above, I have formed the view that George generally wanted his assets to be distributed equally between his sons at his death. It is consistent with the 2000 Will, the 2000 Deed of Appointment, the proposed settlement in early 2015 and the 11 November 2015 Will. It is also consistent with the evidence of Mr Okno and of Mr Herman.

It is true that, particularly during the legal proceedings, George’s wills provided for Victor to receive more than Nick e.g. the gift of the Richardson Street unit to Victor, for Victor to receive some compensation for the houseboat and the unpaid rent and for Nick to reimburse the legal costs paid by George relating to the legal proceedings he instituted. This is first reflected in one or more of the 19 November 2015 Will, the 23 December 2016 Will, the 5 April 2016 Will and the 25 August 2016 Will.

However, from the time of the 19 January 2017 Will, the assets of George were to be split for the most part equally between Nick and Victor. The gift of the Richardson Street unit to Victor was also removed in the 19 January 2017 Will. I refer to the 19 January 2017 file note set out above. All of this is consistent with George’s intention that his assets were generally to be distributed equally between his sons at his death. I note the 19 January 2017 Will was made notwithstanding the legal proceedings which caused George such distress and all of the alleged additional benefits had been received by Nick well before that time.

It is in this context that it is again important to focus on the consequences of the Schedule B payments. Victor received these payments, together with gifts of $290,000 and a further $1 million, from George between June 2016 and October 2017. The effect of these payments was that George was left with the Richardson Street unit and approximately $800,000 in a bank account but subject to a tax liability of approximately $400,000 and the payment of his living expenses. The balance would be available to Nick under the 10 October 2017 Will upon George’s death. That is far from George’s intention that he generally wanted his assets to be distributed equally between his sons.

For these reasons, I have concluded that Victor has not rebutted the presumption of undue influence in relation to the Schedule B payments. As a result, the answer to question 7 is ‘no’.

18.3 Issue 8

For completeness, although it is unnecessary to decide, I have formed the view that Victor unduly influenced George into making the Schedule B payments. As noted in the authorities on undue influence, it is necessary to consider carefully all relevant facts, including the nature of relationships and mental capacities and idiosyncrasies of the parties: questions of degree and evaluative judgments are involved.

I have reached the conclusion that Victor unduly influenced George into making the Schedule B payments during the relevant period in light of the following circumstances:

(1) the relationship of father and son between George and Victor;

(2) the age and physical and mental condition of George during the relevant period;

(3) the degree of emotional reliance on and trust in Victor by George during the relevant period, as set out in section 6.1, including in light of George’s practical isolation from Nick;

(4) the degree of reliance and trust which George placed on Victor in respect of his financial affairs (and Victor’s control of them) during the relevant period, as set out in section 6.2;

(5) the degree of reliance and trust which George placed on Victor in respect of the legal proceedings as set out in section 7.3;

(6) the fact that George always wanted to help his sons when one of them asked for help, and was susceptible to the influence of each of his sons at different times, depending on the nature of his relationship with each of them at those times, as set out in sections 2.1 and 3.3;

(7) the amount of each of the Schedule B payments and the substantial benefit they provided to Victor;

(8) the significance of the impact of them on George’s financial position;

(9) given George’s limited appreciation of his actual financial position, his inability to appreciate the impact of these payments on his financial position as set out in sections 6.2, 13.2 and 14; and

(10) Victor’s knowledge and appreciation of the impact of them on George’s financial position given that he was in control of George’s financial affairs.

In light of these circumstances, I have formed the view that the judgment capacity of George in respect of the transactions was significantly impaired or substandard vis-à-vis Victor during the relevant period.

I have had careful regard to the fact that these were purportedly gifts to George’s son in circumstances where Victor was caring for him. But I have also considered the effect of these withdrawals on George’s financial position and the likely assets available to be distributed on his death to Nick. Based on the evidence before me, that result does not accord with George’s intention to generally achieve a 50/50 split of his assets.

I have also had careful regard to the fact that during the relevant period George gave instructions about new wills to Mr Okno’s satisfaction and that, at times, George did not always agree with and adopt Mr Okno’s suggestions. However, in my view, it is significant that Mr Okno was not informed by George about any of the Schedule B payments at or about the time they were made.

In my view, the nature of the relationship between George and Victor during the relevant period was such that George became dependent upon Victor, and Victor influenced the decisions George made. By way of example, I refer to my comments and conclusions in section 11.2 relating to the instructions George gave to Mr Okno on 19 January 2017 that George would like to move back to the Essendon area and would like his share of the family trust to be deposited into a separate account which he, not Victor, controlled.

As a result, the answer to question 8 is ‘yes’.

18.4 Issue 9

Issue 9 relates to the remedy George is entitled to by reason of my finding in relation to undue influence. Given the answers to questions 6 to 8 and the concession by counsel for Victor referred to in [17] above, George is entitled to repayment of the Schedule B payments.

19. Issues relating to unconscionable conduct
19.1 The issues

Issues 10 to 13 relate to the allegations of unconscionable conduct. Those issues are:

10. Did the plaintiff suffer from a special disadvantage vis-à-vis the defendant?
11.If the answer to question 10 above is yes, was the defendant aware of the plaintiff’s special disadvantage?
12.If the answer to question 11 above is yes, did the defendant unconscientiously take advantage of the plaintiff’s special disadvantage to procure any of the Schedule B payments?

13.If the answer to question 12 above (or any part thereof) is yes, what remedy is the plaintiff entitled to?

Given the conclusions that I have reached in relation to issues of undue influence, including the relief to which George is entitled, it is unnecessary for me to consider the issues relating to unconscionable conduct. However, for completeness, it is appropriate that I do so shortly.

19.2 Issue 10

In summary, counsel for George submitted that George was under a special disadvantage in relation to Victor. Counsel relied upon the same factors which gave rise to actual undue influence, namely, George’s age, his infirmity, the degree of reliance, confidence and trust which George placed in Victor and the lack of independent advice or assistance where assistance was necessary. Counsel for George submitted that George placed unqualified trust in Victor which allowed Victor to act without scrutiny or oversight.

Counsel for Victor disputed that George suffered from any special disadvantage. In summary, he submitted that each of the factors relied upon by counsel for George was not in and of itself a special disadvantage, namely:

(1) George’s age;

(2) George’s physical and mental state;

(3) George’s relationship with Victor during the relevant period; and

(4) George’s estrangement from Nick during the relevant period.

Further, counsel for Victor submitted that these matters, even when considered together, did not create a special disadvantage. He submitted that, during the relevant period, George was still capable of dealing with and handling his own affairs but found it useful, helpful and easier to have the assistance of Victor. He submitted that it was not the case that George was incapable without the help of Victor, but that he was glad for the help from Victor.

I have concluded that George was under a special disadvantage in relation to Victor. In summary, this is based upon the same circumstances as those upon which I formed the view that Victor unduly influenced George in respect of the Schedule B payments during the relevant period, namely:

(1) the age, and physical and mental condition of George during the relevant period;

(2) the degree of emotional reliance on and trust in Victor by George during the relevant period, as set out in section 6.1, including in light of George’s practical isolation from Nick;

(3) the degree of reliance and trust which George placed on Victor in respect of his financial affairs (and Victor’s control of them) during the relevant period, as set out in section 6.2;

(4) the degree of reliance and trust which George placed on Victor in respect of the legal proceedings as set out in section 7.3;

(5) the fact that George always wanted to help his sons when one of them asked for help, and was susceptible to the influence of each of his sons at different times, depending on the nature of his relationship with each of them at those times, as set out in sections 2.1 and 3.3;

(6) given George’s limited appreciation of his actual financial position, his inability to appreciate the impact of these payments on his financial position as set out in sections 6.2, 13.2 and 14;

(7) the absence of legal advice from Mr Okno on these payments where such advice was called for.

In relation to the absence of legal advice, it is true that Victor may not have been aware whether George raised the Schedule B payments and obtained legal advice about them from Mr Okno when Victor was not present. However, Victor was aware George had access to legal advice and in fact often provided instructions on behalf of George to Mr Okno. I have concluded Victor did not inform Mr Okno of these payments at the time they were made in order for George to obtain independent legal advice, as set out in section 18.2.2.

In reaching this conclusion, I have had particular regard to the degree of George’s reliance on, and confidence and trust in, Victor during the relevant period. I have carefully considered the nature of that relationship and the mental capacity and idiosyncrasies of George, in particular, his desire and need to get on with Victor given his practical estrangement from Nick during the relevant period. I have also considered George’s evidence to the effect that, if one of his sons asked for financial assistance and he could give it, he did.

For these reasons, the answer to question 10 is ‘yes’.

19.3 Issue 11

I have concluded that Victor knew or ought to have known of the existence and effect of George’s special disadvantage. I have concluded that Victor knew of the matters referred to in [483(1)–(5)] above. Indeed, much of that knowledge arises because of the relationship that existed between Victor and George during the relevant period, which counsel for Victor conceded during the relevant period.

I have also concluded, contrary to Victor’s evidence, that Victor knew or ought to have known that George had little appreciation of his actual financial position during the relevant period with the result that he did not appreciate the impact of the Schedule B payments. This is in circumstances where Victor was in control of George’s financial affairs and all bank statements were sent to Victor. I refer to my comments in section 6.2. Of course, by reason of his control of George’s financial affairs, Victor was aware of their impact on George’s financial position. I will deal with this further below.

As a result, the answer to question 11 is ‘yes’.

19.4 Issue 12

Counsel for George submitted that Victor took advantage of George’s special disability to procure each of the Schedule B payments. He submitted that, during the relevant period, Victor obtained each of them knowing that he needed to give little, if any, explanation to George, in circumstances where George was not tracking amounts of money that were being withdrawn because Victor was in control of George’s financial accounts and received his bank statements. He submitted that Victor unconscionably took advantage of George’s special disadvantage by ‘taking surreptitious advantage of the weakness, ignorance or necessity of another’, the essence of such weakness being George’s inability to judge for himself his own best interests.

By contrast, counsel for Victor submitted that Victor did not procure any of the Schedule B withdrawals unconscientiously or otherwise unlawfully. Counsel for Victor submitted that the payments were made by George because he formed and executed the plan referred to above by giving Victor his share of his inheritance while George was alive. Counsel for Victor maintained as a result the Schedule B payments were planned and executed by George and were not procured by Victor.

I have concluded that these payments were procured by Victor unconscientiously taking advantage of George’s special disability. This is because:

(1) these payments were asserted by Victor to be gifts for which Victor gave no consideration;

(2) Victor has not established that there was any plan to the effect he alleged, as set out in section 18.2.2;

(3) of the amount of each of the payments and the substantial benefit they provided to Victor;

(4) of the significance of the impact of the payments on the financial position of George;

(5) given George’s limited appreciation of his actual financial position, George was unable to appreciate the impact of these payments on his financial position as set out in sections 6.2, 13.2 and 14;

(6) Victor had both knowledge and an appreciation of the impact of these payments on the financial position of George given that he was in control of George’s financial affairs and information, as set out in section 6.2; and

(7) although Victor was aware George had access to legal advice and in fact often provided instructions on behalf of George to Mr Okno, Victor did not inform Mr Okno of these payments at the time they were made in order for George to obtain independent legal advice, as set out in section 18.2.2.

Each of these matters is significant. However, most significant is the practical effect of these payments during the relevant period, with the result that George was left with only the Richardson Street unit and approximately $800,000 to meet his tax liability and ongoing living expenses. Of course, because Victor was in control of George’s financial affairs, he knew the effect of these payments on George’s financial position.

Further I have concluded that Victor’s knowledge of George’s special disadvantage and of the circumstances of the payments made each of them prima facie unfair and unconscientious so as to cast upon Victor an onus to show that they were in fact ‘fair, just and reasonable’. For the reasons set out in [483]–[484], [487]–[488] and [492] Victor has failed to establish this was so.

For these reasons, the answer to question 12 is ‘yes’.

19.5 Issue 13

Issue 13 relates to the remedy that the plaintiff is entitled to by reason of the unconscionable conduct. Given the answers to questions 10 to 12 and the concession by counsel for Victor referred to in [17] above, George is entitled to repayment of the Schedule B payments.

20. Issue 14

Issue 14 is:

If the Schedule A payments and/or the Schedule B payments were effected or procured as a result of breach of fiduciary duty, unconscionable conduct or undue influence:
(a)did the plaintiff ratify those transactions;
(b)did the plaintiff waive any such breach of fiduciary duty, unconscionable conduct or undue influence;
(c)did the plaintiff elect between inconsistent rights; and/or
(d)is the plaintiff now estopped by conduct from denying the legal efficacy of the transactions
by reason of the plaintiff obtaining legal advice on 10 October 2017?

Counsel for Victor contended that, as all of the payments in Schedule A and Schedule B were made with the contemporaneous knowledge and authority of George, then George ratified them or has waived any breach of duty, any unconscionable conduct or any undue influence in relation to them. In final submissions, counsel for Victor did not rely upon election.

For the reasons set out in section 18.2.2, I have concluded that these payments were made in circumstances where Victor has not rebutted the presumption of undue influence and/or has not established that George gave his informed consent to them. As a result, I cannot conclude that they were made with the contemporaneous knowledge and authority of George for the purposes of a defence of ratification or waiver, as advanced by Counsel for Victor.

Counsel for Victor submitted that George is estopped from denying the efficacy of the Schedule B payments by virtue of the advice received on 10 October 2017 and, in particular, the 10 October 2017 Will, which Mr Okno prepared at that time after George told him that Victor had received his full inheritance and no further provision would be made for him in the new will. Limited submissions were advanced on this issue and no authorities were relied upon to support this estoppel.

For the reasons set out in sections 13.2 and 18.2, I have concluded that:

(1) the Schedule B payments were not discussed with Mr Okno in the course of a series of meetings in 2016 and 2017 including, in particular, at the meeting on 10 October 2017;

(2) Mr Okno was not told before or during the meeting on 10 October 2017 what ‘inheritance’ Victor had received in advance; and

(3) Mr Okno did not discuss with George what assets he had left to gift to Nick in his will at the meeting on 10 October 2017.

In these circumstances, contrary to the submission of counsel for Victor, George never received any independent legal advice in relation to the Schedule B payments. As a result, I can see no basis for the estoppel relied upon to apply to deny George the ability to pursue now the claims made against Victor in respect of the Schedule B payments.

For these reasons, the answer to question 14 is ‘no’.

21. Issue 15

Issue 15 is:

In the circumstances alleged in paragraphs 17–19 of the third amended defence, will equity deny the plaintiff a remedy in respect of the payment made to the defendant of $1 million on 10 August 2017?

Paragraphs 17 to 19 of the third amended defence allege in substance that: [95]
[95]Paragraph 19 of the third amended defence refers to [9(b)(ii)] of that defence. Consequently, I have had regard to it in summarising these allegations.

(1) on 9 March 2018 George transferred the Richardson Street unit to Cassie;

(2) George seeks repayment of the $1 million paid to Victor on 10 August 2017;

(3) that payment was made by George for the purpose of giving effect to George’s wishes to distribute Victor’s share of his inheritance during George’s lifetime. Specifically, George decided to give the Richardson Street unit to Nick through his will and the $1 million payment was made to Victor for the purpose of providing him with an approximately equivalent benefit; and

(4) equity should deny George an order for the repayment of that $1 million.

This issue is premised on the basis that George made a payment to Victor of $1 million on 10 August 2017 in lieu of giving Victor the Richardson Street unit. Counsel for Victor submitted equity would prevent George recovering damages for $1 million paid to Victor in circumstances where George has now disposed of the Richardson Street unit. Further, in final submissions, counsel for Victor submitted that Victor accepted this gift because George advised he wanted to compensate Victor for the fact that he had given Nick in excess of $1 million more than the defendant during George’s lifetime.

No authorities were relied upon by counsel for Victor in support of this defence.

Counsel for George submitted that, while equity has a wide discretion to grant or refuse equitable relief, that discretion must be exercised in a principled way ‘when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles’.[96] He submitted that there was no legitimate process of legal reasoning, by analogy, deduction or otherwise, which would deprive George of the equitable compensation to which he was otherwise entitled.
[96]Muschinski v Dodds (1985) 160 CLR 583, 615 (Deane J) (‘Muschinski’).

At the time Victor’s application to amend his defence to include paragraphs 17 to 19 was made, senior counsel for Victor relied upon Adenan v Buise[97] (‘Adenan’). In that case, the deceased had issued proceedings seeking to set aside a deed procured by undue influence. After his death, his son, as executor, prosecuted the claim. The son and the son’s wife would have benefitted from it as sole beneficiaries of the deceased’s estate. However, the Court concluded that the son played a significant part in the conduct which led to the finding of undue influence.
[97][1984] WAR 61 (‘Adenan’).

Burt CJ and Kennedy J held that, in these circumstances, equity should not come to the son’s aid to set aside the deed. Further, they held that the fact the son sued in his representative capacity should not prevent the maxim of clean hands applying: in reality the action was now for the benefit of the son and his wife.

By contrast, there is no suggestion or allegation that George came to court with unclean hands or was a party to such conduct. Further, I have concluded that the payment of $1 million on 10 August 2017 was made in circumstances where Victor has not rebutted the presumption of undue influence. Indeed, I have concluded that the payment was made in circumstances where there was actual undue influence and unconscionable conduct.

Further, as noted above, Victor’s argument is premised upon the Court accepting not only that the $1 million was paid to Victor in lieu of him receiving the Richardson Street unit, but that Victor originally accepted the Richardson Street unit because George wanted to compensate him for the fact that Nick had been given additional benefits in excess of $1.2 million during his lifetime. For the reasons set out in 18.2.2, I am unable to conclude that Nick received additional benefits of that sum or that George believed this. Further, while there is evidence from both Victor and George that George wanted Victor to receive the Richardson Street unit at least for a period of time, the only evidence that this was as compensation for the additional benefits given to Nick was the evidence of Victor himself. I refer to my comments section 5.4.

In all of these circumstances, I do not consider that it is appropriate for equity to impose any conditions on the form of relief granted to George to deprive him of recovering the full amount of the claim that has been established in this proceeding. As a result, the answer to question 15 is ‘no’.

For completeness, while the fact of the transfer of the Richardson Street unit to Cassie was relevant to this defence, the circumstances in which that transfer took place were not an issue before me. In my view, any challenge to this transfer ought be made in accordance with recognised legal principles.

22. Conclusion

As a result of the reasons set out above, I have concluded that George is entitled to full repayment of the Schedule A and Schedule B payments that have not already been repaid. I will hear from the parties on consequential orders, including in respect of interest and costs.

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Nick	Victor
$100,000 already given	$100,000
$120,000 he is holding	$120,000
Unit plus (unit?)	$800,000 – now
$800,000 – if he gets it now	+ Williamstown

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23 October 2019