Hrycenko (by his Litigation Guardian Michael Kornitschuk) v Hrycenko (No 2)

[2019] VSC 746

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
DATE OF HEARING:	1, 3–5, 8–11 October 2018; 12, 13, 20, 21, 25 February 2019 and 19 March 2019
DATE OF JUDGMENT:	29 November 2019
CASE MAY BE CITED AS:	Hrycenko (by his Litigation Guardian Michael Kornitschuk) v Hrycenko (No 2)
MEDIUM NEUTRAL CITATION:	[2019] VSC 746

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EQUITY – Powers of attorney – Instruments Act 1958 (Vic) – Payment made under power of attorney for benefit of attorney – Whether attorney established fully informed consent – Fully informed consent 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

HIS HONOUR:

1. Since delivering my reasons for judgment in this proceeding,[1] it has been drawn to my attention that I have not considered one aspect of George’s claim.  At [417] of Reasons No 1, I stated in error that George did not seek to make a claim for the sum of $21,192.97 used to pay Victor’s legal fees.

   [1]Hrycenko (by his Litigation Guardian Michael Kornitschuk) v Hrycenko [2019] VSC 700 (‘Reasons No 1’).  In these reasons, I will use the terms defined in Reasons No 1.

1. In fact, George did make a claim for this payment in [6] of his further amended statement of claim filed 12 February 2019.  It was alleged in that paragraph that ‘[t]he defendant also used his power of attorney to instruct Frenkels to apply $21,192.97 held on trust for the plaintiff to pay his own legal fees to Stanton Grant’.  That payment was not listed in Schedule A like the other payments made by Victor using the power of attorney granted to him.  The particulars to [6] state that the instruction was contained in an email sent by Victor to Frenkels on or about 26 August 2016 (the ‘26 August 2016 email’).

1. In his third amended defence filed 25 February 2019, Victor admitted that he used the power of attorney to apply the sum of $21,192.97 held on trust for George to pay his own legal bills to Stanton Grant.  However, he alleged that the payment was made pursuant to the agreement with George for George to pay Victor’s legal fees associated with the proceeding brought by Nick.

1. As set out in Reasons No 1:

(1)      if a payment was made using the power of attorney for Victor’s benefit, the onus was on Victor to prove that George had given fully informed consent to that payment;[2]

[2]Reasons No 1 [369]–[371].

(2)       what is required for fully informed consent depends upon all the circumstances of each case;[3]

(3)      at the heart of fully informed consent is the need for Victor to establish that he fully informed George of the nature of the benefit Victor was to receive from each payment, and that George understood and consented to it; [4] and

(4)      the facts which gave rise to the concession of a presumption of undue influence and the findings I made about the relationship between George and Victor during the relevant period set out at [471(1)–(5)] of Reasons No 1 are relevant in determining the nature of the informed consent required.[5]

[3]Reasons No 1 [369]–[371].

[4]Reasons No 1 [369]–[371], [411].

[5]Reasons No 1 [410].

1. I dealt with three payments used to pay Victor’s fees to Stanton Grant in Reasons No 1.[6]  I formed the view that there was not sufficient evidence for me to conclude that Victor fully informed George about each of these payments.[7]  I was not able to conclude that there was any agreement between George and Victor for George to pay Victor’s legal costs or that George directed Victor to pay his own legal costs out of George’s bank accounts thereby providing informed consent.[8]

   [6]Being the payment of $10,000 on 10 April 2016, $8,800 on 26 July 2016 and $3,025 on 19 July 2007, defined collectively in Reasons No 1 as the ‘Stanton Grant legal fees’.

   [7]Reasons No 1 [415]–[420].

   [8]Reasons No 1 [415]­–[420].

1. In the course of my reasons, I referred to the 26 August 2016 email from Victor to Mr Bourandanis.  However I made no specific findings in relation to that email because I considered, in error, that the payment made pursuant to that email was not claimed in the proceeding.

1. I have now reviewed the evidence relating to the payment of $21,192.97 from Frenkels’ trust account to Stanton Grant pursuant to the 26 August 2016 email.  The evidence about this payment and whether George gave informed consent to it is far from clear.

1. The 26 August 2016 email stated:

Hi Arthur

After yesterday’s meeting we decided to keep all payments together so could you please pay this invoice of balance owing to STANTON GRANT LEGAL asap!

Regards, Victor

1. The 26 August 2016 email does not in its terms provide evidence of such informed consent.  The email itself does not refer to who was at the meeting ‘yesterday’ or who the ‘we’ was.  In oral evidence, Mr Bourandanis said he did not attend that meeting.[9]  He said everything he knew about the payment was contained in the 26 August 2016 email as reported to him by Victor.[10]  He thought that it ‘might be referring to a Wainwright Okno meeting’ i.e. a meeting with Mr Okno.[11]

   [9]Transcript 820:1–2.

   [10]Transcript 820:3–6.

   [11]Transcript 819:25–30.

1. Victor gave evidence to the effect that Mr Okno and George were at a meeting ‘yesterday’.  This is supported by the file note of Mr Okno dated 25 August 2016 which records a meeting between George, Victor and Mr Okno on that day relating to the preparation and execution of the 25 August 2016 Will.  I dealt with this file note and the 25 August 2016 Will in section 9.2 of Reasons No 1.  The 25 August 2016 file records that the provisions in the 5 April 2016 Will relating to the ‘costs of court proceedings’ were to be deleted.  Under the 5 April 2016 Will, an amount equal to the costs expended by George in defending the first proceeding were to be paid to Victor.[12]  That is very different to George agreeing to pay Victor’s legal fees arising from the first and/or second proceeding.

   [12]Reasons No 1 section 7.5.

1. I accept that the topic of legal fees was discussed at the meeting with Mr Okno on 25 August 2016 in the context of George’s will.  However, I am unable to conclude that it was discussed and/or agreed at that meeting that, from that time, George would pay Victor’s legal fees in relation to the first and/or second proceeding or that George agreed to pay the amount of $21,192.97 for Victor’s legal fees.  The file note of Mr Okno does not record any such discussion or agreement.  Mr Okno did not give evidence to this effect when questioned about this file note.  Further, I note the 26 August 2016 email itself states ‘After yesterday’s meeting, we decided to keep …’.  This suggests that any decision made by Victor and/or George in relation to these fees referred to in the 26 August 2016 email was made after the meeting with Mr Okno in any event.

1. I have reviewed again the evidence of Mr Bourandanis in relation to the payment from Frenkels’ trust account of $21,192.97 for Victor’s legal fees.  His evidence was far from clear.  As noted above, he said everything he knew about the payment was contained in the 26 August 2016 email as reported to him by Victor.  He gave evidence that George would ‘often pick up the tab for both of the sons throughout a lot of litigation and that was Victor’s tab’.[13]  He clarified this by stating that there was only one payment of Victor’s legal fees with money paid out of Frenkels’ trust account i.e. as a result of the 26 August 2016 email.[14]  However, he did not did not give evidence about any discussion with George during which George consented to paying Victor’s legal fees or this fee of $21,192.97.

   [13]Transcript 820:11–13.

   [14]Transcript 820:14–22, 821:1-4.

1. Victor’s evidence in relation to this payment was also not clear.  The gist of his evidence was that Mr Bourandanis had originally offered to ‘group together’ the fees to be paid by George and Victor from Frenkels’ trust account.  This was because he said George wanted all fees to be deducted from Nick’s entitlements.  There are two things to note about this.  First, this was not put to Mr Bourandanis in cross-examination.  Second, while George may have said that anything to do with the legal proceedings ‘is going to come out of Nick’s inheritance’ that is different from saying that George would pay Victor’s fees in the meantime.  I refer to my comments in [417]–[420] of Reasons No 1.

1. There was no direct evidence from George in relation to the payment of $21,192.97.  As noted in Reasons No 1, I accept that George was keen for Nick to pay his costs of the first and second proceedings.  Indeed, George’s costs were deducted from Nick’s share of the family trust distributions.  However there is no evidence from him, Mr Bourandanis or Mr Okno that George consented to this payment.   

1. In all these circumstances, on the basis of the evidence before me, Victor has not established that the payment of $21,192.97 for Victor’s legal fees was made with the fully informed consent of George.  As a result, George is entitled to repayment of this sum too.

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