Huang v Kotsias
[2022] VCC 470
•13 April 2022
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-22-01036
| GRACE CHIU-MING HUANG | First Plaintiff |
| and | |
| JUDITH CHIUTZE HUANG | Second Plaintiff |
| v | |
| THEODORE KOTSIAS (AS ATTORNEY FOR WILLIAM KOTSIAS | First Defendant |
| and | |
| THEODORE KOTSIAS | Second Defendant |
| and | |
| REGISTRAR OF TITLES, VICTORIA | Third Defendant |
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JUDGE: | HER HONOUR JUDGE TRAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 April 2022 | |
DATE OF JUDGMENT: | 13 April 2022 | |
CASE MAY BE CITED AS: | Huang & Anor v Kotsias & Ors | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 470 | |
REASONS FOR DECISION
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Subject:REAL PROPERTY
Catchwords: Enduring power of attorney – whether permits severance of joint title to benefit estate of donor of power – whether validly made – where does not contain undertaking to avoid conflict of interest – where purports to authorise conflict of interest – substantial compliance – interlocutory injunction – serious question to be tried – balance of convenience
Legislation Cited: Instruments Act 1958; Powers of Attorney Act 2014; Transfer of Land Act 1958
Cases Cited:Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98; Tymbook Pty Ltd v State of Victoria; Bradto Pty Ltd v State of Victoria (2006) 14 VR 65; Wilson, Re [2019] VSC 211; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; Orr v Slender (2005) 64 NSWLR 671; McCoy v Caelli [2010] NSWSC 1233; Corin v Patton (1990) 169 CLR 540; Freed v Taffel [1984] 2 NSWLR 322; Lyko v Derkatch [2018] SADC 90; McCoy v Estate Peter Anthony Caelli [2008] NSWSC 986; PropertyShares Holdings Pty Ltd v 8 Hopetoun Rd Pty Ltd (2020) 61 VR 194; Saafin Constructions Pty Ltd (In Liq) v MAG Financial and Investment Ventures Pty Ltd [2021] VSC 489, Saafin Constructions Pty Ltd (in liq) v MAG Financial and Investment Ventures Pty Ltd (Costs and Orders) [2021] VSC 702; Mc Farlane v McFarlane [2021] VSC 197; Official Trustee in Bankruptcy v Registrar of Titles [2015] VSC 563
Judgment: Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | - | Francis Lim Barristers & Solicitors |
| For the Defendants | N Elias | GPZ Legal |
HER HONOUR:
1The two properties the subject of this proceeding are owned by the plaintiffs (“Grace” and “Judith”) as joint tenants with their godfather, William Kotsias (“Bill”). Bill is elderly and suffers from dementia. He no longer has capacity to manage his own affairs. The second defendant (“Theo”) is Bill’s brother. Theo claims he has authority to act as attorney for Bill under an enduring power of attorney signed by Bill on 17 April 2012. Theo claims that he can use the power granted to him under the Enduring Power of Attorney to sever the two joint tenancies with Grace and Judith. Theo claims this accords with Bill’s wishes to include these properties in his estate; and also best preserves Bill’s assets for his estate.
2Bill is now in end-of-life care and is incapable of communicating his wishes. He does not appear to have made a formal will. It is common ground that he no longer has any capacity to make one.
3Grace and Judith have applied for an interlocutory injunction, restraining the Registrar of Titles from registering two transfers of land lodged by Theo (purportedly on behalf of Bill) which would have the effect of severing the joint tenancies in these two properties. The plaintiffs claim that Theo ought not be permitted to rely upon the Enduring Power of Attorney to sever the joint tenancy because:
(a) the Enduring Power of Attorney is not a valid enduring power of attorney under Part XIA of the Instruments Act 1958 as in force on 17 April 2012 (“IA”), as:
(i)it was not in the prescribed form, as required by s123 of the IA;
(ii)it did not contain an undertaking to “avoid acting where there is any conflict of interest between the interests of the donor and the attorney’s interests” as required by s125B(5) of the IA;
(iii)it purported to contain an “exclusion” to the obligation on Theo to act on all financial and legal matters “for [Bill’s] best financial and legal interest” which permitted Theo and his son to “develop/construct buildings at the read of my property at 84 Parer St Burwood, Vic 3125 for their own benefit, as it is my intention to bequeath this property upon my passing to, in the first instance Theodore Kotsias or his estate” (“the 5(b)(viii) exclusion”); and
(iv)the undertaking in fact given by Theo was “to act fairly if there is any conflict of interest between the Financial and Legal Interests of the donor and my interests except where authorised in [the 5(b)(viii) exclusion]”.
(b) Bill lacked capacity to make the Enduring Power of Attorney on 17 April 2012;
(c) Bill executed the Enduring Power of Attorney under the undue influence of Theo;
(d) the Enduring Power of Attorney did not give Theo the power to sever a joint tenancy, as:
(i)an enduring power of attorney under the IA does not give an attorney the power to sever joint title;
(ii)Theo is in a position of conflict of interest, as he stands to benefit from the severance of the joint tenancy as a likely taker-in-intestacy from Bill’s estate;
(iii)severing the joint tenancy is contrary to the wishes Bill expressed prior to his incapacity; and
(iv)the only benefit of the severance is to Bill’s intestate estate – increasing the size of an intestate estate is not a valid “financial and legal interest” for the purposes of an enduring power of attorney; and
(e) Theo has applied to VCAT for an order to sever the joint tenancy in the two properties (and a third property jointly owned by Grace and Bill). The application is currently listed for directions on 3 June 2022 and points of claim are yet to be filed. It is possible that, in considering this application, VCAT will exercise its power to declare the Enduring Power of Attorney invalid, either under s125Y of the IA or under s116(c) of the Powers of Attorney Act 2014. The severance of joint title should not be permitted until the VCAT proceeding is concluded.
Legal principles application to an application for interlocutory injunction
4The principles applicable to an application for an interlocutory injunction were not in dispute. To succeed in obtaining an interlocutory injunction, Grace and Judith must demonstrate:0F[1]
(a) that there is a serious question to be tried as to their entitlement to relief at trial, sufficient to justify the preservation of the status quo pending trial;
(b) if interlocutory relief is not granted, damages would not be an adequate remedy; and
(c) the balance of convenience favours the grant of an injunction, in the sense that the lowest risk of injustice1F[2] lies with the order sought.
[1] Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98 at paragraph [108]
[2] Tymbook Pty Ltd v State of Victoria; Bradto Pty Ltd v State of Victoria (2006) 14 VR 65 at paragraph [35]
Bill’s relationship with Grace and Judith
5In 1987 Grace and Judith emigrated to Australia from Taiwan with their parents. At the time, Grace was 15 years old and Judith was 13 years old. Later that year, their ESL teacher, Marianne, introduced them to her brother Bill. Bill became like a father to Grace and Judith. He introduced them to Christianity and adopted them as his godchildren. He taught them about property investment and encouraged them to invest in real estate. Ultimately, he purchased four properties as co-owner with either or both of Grace and Judith:
(a) a property in Mont Albert North purchased in 1996, which is held by Bill, Grace and Judith as tenants-in-common;
(b) a property in Glen Waverley purchased in 2001 which is held by Bill, Grace and Judith as joint proprietors (the “Glen Waverley property” and one of the properties the subject of this proceeding);
(c) a property in Clayton purchased in 2002 which is held by Bill, Grace and Judith as joint proprietors (the “Clayton property” and one of the properties the subject of this proceeding); and
(d) a property in Mount Waverley purchased in 2008, which is held by Bill and Grace as joint proprietors (the “Mount Waverley property”).
6Grace and Judith moved out of their family home in 1998 into a house in Clayton. At the time, Bill lived with his parents, but stayed with Grace and Judith occasionally. After Bill’s father died and his mother was admitted to a nursing home, Bill moved in to live with Grace and Judith full time. Grace and Judith looked after him like their own father.
7Bill and Grace moved into the Mount Waverley property after settlement in August 2008. In 2010, Grace got married. She moved out of the Mount Waverley property. Bill found being separated from Grace hard. Grace says that Bill was showing signs of anxiety, paranoia and memory loss. Grace says Bill would ring her on her mobile phone every hour.
8It is not in dispute that Grace and Judith have had very little contact with Bill since 2012.
9Grace says that this is because Theo completely took over the care of Bill and stopped Grace and Judith, and any of Bill’s friends, from contacting or visiting Bill. Grace says that they wanted to visit Bill, but on one occasion Theo threatened to call the police on Judith if she did not leave Bill’s house.
10Theo, on the other hand, says that he never stopped Grace and Judith from seeing Bill. He says that he actually attempted to facilitate Bill’s relationship with Grace and Judith and reached out to them from time to time to arrange visits. He denies ever threatening to call the police on Judith. He says Grace and Judith moved on with their lives with their families and stopped visiting Bill.
Theo’s attempts to sever the joint tenancies
11On 10 February 2016, Theo sent a text message to Grace stating:
“I am arranging the change from the ‘joint ownership’ of two of the properties you Judy and Bill own to ‘tenants in common’. The third property is already owned in ‘tennants in common’. Obviously this does not change the ownership share each of you own. I would like to get the paperwork to you and Judy for your signature and finalise this matter. Please get back to me with your address and email details”.
Theo says that he did not receive a response to this text message and did not follow it up.
12On 3 December 2019, Theo’s lawyers sent a letter to Grace and Judith, purportedly on behalf of Bill, which stated:
“Please treat this letter as a formal notification and as a declaration by our client that he severs the joint tenancy with you in respect to the above properties.
We enclose herewith a copy of a Transfer of Land with respect to each of the above properties which has the effect of severing the joint tenancy so that our client, William Kotsias, now holds his interest in the property as a tenant in common with you and not as joint proprietors.
We are of the view that by virtue of this documentation, the joint tenancy has been severed.
Notwithstanding, our client also wishes that the severance of the joint tenancy is notified upon the Title in the appropriate fashion and we seek that in due course you execute the original of the copy Transfers of Land enclosed herewith.”
13In November 2020, there was an exchange of emails between Grace and Theo about the joint properties. Grace expressed a wish to talk about the sale of the joint properties.
14In October 2021, Theo’s lawyers contacted the financial institutions which held mortgages over the three jointly-owned properties and requested that they release the Certificates of Title. Each institution refused to do so without the consent of all registered proprietors.
15On 17 September 2021, Theo’s lawyers sent a letter to Grace and Judith, purportedly on behalf of Bill, which stated:
“We note that you do not wish to execute the appropriate documents to effect the severance of the joint tenancies or the titles to be produced. As such, we intend issuing proceedings at VCAT.
We urge you to reconsider your position with respect to the severance of the joint tenancies in an attempt to avoid the costs of a hearing at the Tribunal.
VCAT will likely order the joint tenancies to be severed … .”
16On 20 October 2021, Theo commenced proceedings in VCAT seeking an order requiring Grace and Judith to do all things necessary to sever the joint tenancies in the three jointly-owned properties. Those proceedings are currently listed for directions on 3 June 2022.
17On 21 December 2021, Theo’s lawyers wrote to the financial institutions which held mortgages over the three jointly-owned properties, threatening to apply to the Supreme Court if the titles were not made available.
18On 13 January 2022, Grace and Judith lodged caveats over the three jointly-owned properties, claiming to be “Registered Proprietor(s) being entitled to possession of the certificate of title for the land and to prevent improper dealings”.
19The title for the Clayton property was released to Theo’s lawyers on 21 January 2022. On 24 January 2022, a Transfer of Land document severing the joint tenancy was lodged with the Land Titles Office with respect to this property. The title to the Glen Waverley property was released to Theo’s lawyers on 8 February 2022. On 9 February 2022, a Transfer of Land document severing the joint tenancy was lodged with the Land Titles Office with respect to this property. If not restrained, it is common ground that these transfers will be registered on title and have the effect of severing the legal joint tenancy in the two properties.
Is there a serious question to be tried?
20For the reasons which follow, Grace and Judith have satisfied me that there is a serious question to be tried in relation to whether Theo has the power to sever the joint tenancies in the Clayton property and the Glen Waverley property.
Claim that enduring power of attorney is not a valid enduring power of attorney under the IA
21Section 125B(1) of the IA states that an enduring power of attorney is effective only if the attorney has accepted the appointment in accordance with that section. Section 125B(2) requires the attorney to sign and date a statement of acceptance. Section 125B(3) requires the Statement of Acceptance be in the approved form. Section 125B(5)(b) states that the Statement of Acceptance must include an undertaking to “avoid acting where there is any conflict of interest between the interests of the donor and the attorney’s interests”.
22An approved form for a statement of acceptance was prescribed under s125ZL of the IA. That approved form required the statement of acceptance to include the following words (insofar as is relevant):
“I,________________....accept appointment as an attorney under….this enduring power of attorney….and undertake….to avoid acting where there is any conflict of interest between the interests of the donor and my interests…”
23A statement of acceptance was signed by Theo and is dated 17 April 2012. However, the Statement of Acceptance signed by Theo relevantly states that he undertakes “to act fairly if there is any conflict of interest between the Financial and Legal interests of the donor and my interests except where authorised in [the 5(b)(viii) exclusion]”. This does not comply with the requirements of s125B(5)(b). It is not in the approved form or to the “like effect” of the approved form.2F[3] It is not an undertaking to avoid acting where there is any conflict of interest – to the contrary it expressly contemplates that conflicts of interest may arise and that Theo may continue to act, so long as he acts “fairly”.
[3] Section 125ZL(3) of the IA
24An approved form for the Enduring Power of Attorney was also prescribed. The Enduring Power of Attorney made by Bill contains a clause 5 headed “Expectations and authority of my attorney”. This is not contained in the form prescribed for an enduring power of attorney. Clause 5 contains the 5(b)(viii) exclusion which permits Theo to act in his own interests with respect to the development and construction of the Parer Street property. This directly contradicts the undertaking required by s125B(5)(b) of the IA (but not given by Theo).
25At common law, there is no power to grant a power of attorney which continues to operate once the donor of the power lacks capacity. An enduring power of attorney can only be valid if authorised by statute. The IA is unusual in that it does not impose an express duty directly upon an attorney to avoid acting when in a position of conflict of interest.3F[4] Rather, it requires the attorney to undertake to avoid acting where there is a conflict of interest. The purpose of requiring this undertaking must be to protect the interests of a donor who, by definition, may be unable to protect their own interests through lack of capacity.
[4]Although an attorney would be under a fiduciary duty to the donor of the Enduring Power of Attorney - Re Wilson [2019] VSC 211 at paragraph [68]
26In the circumstances, it is plainly arguable that Parliament intended that a breach of the provisions of the IA of the kind which has occurred in this case would render the Enduring Power of Attorney invalid.4F[5] This suffices to raise a serious question to be tried that the Enduring Power of Attorney is invalid.
[5] Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
27Counsel for the first and second defendants submitted that VCAT had exclusive jurisdiction to determine whether the Enduring Power of Attorney was valid under s116(1)(c) of the Powers of Attorney Act 2014. That section provides (relevantly) that: “VCAT may make an order about any one or more of the following matters in relation to an enduring power of attorney…the validity of the enduring power of attorney”. Section 118 of the Powers of Attorney Act further provides that:
“Under section 116(1)(c) VCAT must not make an order declaring that an enduring power of attorney is invalid unless VCAT is satisfied that—
(a) the principal did not have decision making capacity in relation to making the enduring power of attorney at the time the enduring power of attorney was made; or
(b) at the time the enduring power of attorney was made it did not comply with the requirements of the Act; or
(c) dishonesty or undue influence was used on the principal to make the enduring power of attorney; or
(d) the enduring power of attorney was legally invalid when entered into.”
28Counsel for the first and second defendants submitted that this section demonstrated that Parliament intended to confer a discretion upon VCAT to declare an enduring power of attorney invalid; and that it was not Parliament’s intention that enduring powers of attorney be invalid for non-compliance with the statutory requirements unless and until VCAT exercised that discretion.
29There are three key difficulties with this submission. First, the transitional provisions in the Powers of Attorney Act do not apply s116(1)(c) and s118 to enduring powers of attorney made under the IA.5F[6] The powers of VCAT with respect to declarations of invalidity remain to be dealt with under the IA. Section 125Y of the IA contains a provision conferring power upon VCAT to declare an enduring power of attorney invalid if it is satisfied that the Enduring Power of Attorney does not comply with the requirements of the Act. The IA does not contain an equivalent of s118 of the Powers of Attorney Act.
[6] See s142 of the Powers of Attorney Act 2014
30Second, in their terms, both s116(1)(c) of the Powers of Attorney Act and s125Y of the IA, merely provide a power to VCAT. They do not exclude the jurisdiction of the Courts. Further, s125S(b) of the IA expressly contemplates that an enduring power of attorney may be “declared invalid by a court” and s118(d) of the Powers of Attorney Act contemplates that an enduring power of attorney may be “legally invalid”.
31Third, the question before the Court is whether there is a serious question to be tried that the Enduring Power of Attorney is invalid. The fact that invalidity may result from a discretionary decision of VCAT under s116(1)(c) of the Power of Attorney Act, or s125Y of the IA, does not negate the serious question to be tried.
Claim that Bill lacked capacity to make the Enduring Power of Attorney
32Theo relies upon:
(a) the presumption of capacity;
(b) the Certificate of Witnesses attached to the Enduring Power of Attorney by Dr Lynette Allinson and Merrin McComber which state that the witnesses:
“(a)Believe that the donor William Kotsias in making this enduring power of attorney (Financial and Legal) is of sound mind and understands the importance of this document.
(b) Certify that at the time of signing, the donor appeared to me to have the capacity necessary to make the enduring power of attorney (Financial and Legal).
(c) Certify that the donor has signed this enduring power of attorney (Financial and Legal) freely and voluntarily in my presence.”; and
(c) a report of Associate Professor David Fonda dated 14 January 2013, in which Associate Professor Fonda concluded that Bill understood the significance of an enduring power of attorney and the inherent risks associated in giving this; had capacity to change his enduring power of attorney; and had capacity to make a will.
33Grace and Judith rely upon Grace’s evidence of Theo’s anxiety, confusion and paranoia between 2010 and 2012 and inability to complete a bank withdrawal slip. They submit that the report of Associate Professor Fonda is not unequivocal and raises concerns that it is surprising that Bill did not wish to leave anything to them. It also recommends that Bill seeks legal advice. As it happened, Bill did not make a will and no explanation is given as to why not.
34The onus will plainly be upon Grace and Judith to prove that Bill lacked capacity to make the Enduring Power of Attorney in April 2012. This will be very difficult in the face the presumption of capacity and the evidence of Dr Allinson and Associate Professor Fonda. However, I accept that Grace and Judith knew Bill very well at the time. A doctor’s assessment of capacity is necessarily an opinion based upon the patient’s appearance during an assessment which is but a snapshot in time. It is possible that under cross-examination, if Grace and Judith’s observations are put to Dr Allinson and Associate Professor Fonda, they will change their views as to Bill’s capacity. The Court has also not been provided with the benefit of the complete history of contacts between Associate Professor Fonda and Bill, or any explanation of why, having been found to have capacity to make a will, Bill did not in fact make a will. Although on the current material the case that Bill lacked capacity to make the Enduring Power of Attorney appears weak, I accept that there is at least a serious question to be tried.
Claim that enduring power of attorney was made under undue influence by Theo
35The onus will be upon Grace and Judith to establish that Theo was in a relationship of influence over Bill. They rely upon the evidence of Grace and also the evidence of Noah Pilarinos, who says that he is a friend of Grace and Judith, and also a friend of Bill.
36The evidence of both Grace and Bill contains a number of general assertions that Theo was domineering or controlled Bill’s finances. I do not accept that conclusory assertions of this nature are admissible evidence of undue influence. I also do not accept that assertions as to the suspected motivations of Theo is probative evidence of undue influence.
37However, the affidavit of Noah Pilarinos, filed on behalf of Grace and Judith, gives specific evidence of conversations with Bill which, if accepted, may lead to a finding that Bill felt pressured by Theo; that Bill’s access to money was controlled by Theo; and that Bill’s contacts with Noah were controlled and limited by Theo. This is sufficient to raise a serious question to be tried that the Enduring Power of Attorney was made under the effects of a relationship of undue influence.
Claim that Enduring Power of Attorney did not give Theo the power to sever the joint tenancy
38It was submitted on behalf of Grace and Judith that because the IA did not expressly state that an enduring power of attorney could be used to sever a joint tenancy, there was no such power. Indeed, it was submitted that enduring powers of attorney under the IA were not effective to empower an attorney to act at all once the donor no longer had capacity. This submission is contrary to the plain intention of Parliament to create a mechanism for enduring powers of attorney. There may be cases in which it would be in the interests of a donor to sever the joint title (for example to sell or encumber only one co-owner’s title). I do not accept that this aspect of Grace and Judith’s submissions gives rise to a serious question to be tried.
39It was further submitted on behalf of Grace and Theo that Theo cannot rely upon the Enduring Power of Attorney to sever the joint title in circumstances where:
(a) Theo stands to benefit as a likely taker-in-intestacy after Bill’s death;
(b) there is no evidence of any benefit to Bill’s financial and legal interests prior to his death;
(c) it appears that Bill has not made a will; and
(d) the interest relied upon is Bill’s interest in his wishes that his properties form part of his estate be respected.
40Counsel for the first and second defendants submitted that there was no such conflict because:
(a) the joint tenancy was always inherently capable of destruction;
(b) severance of the joint tenancy gave effect to Bill’s expressed intentions that his share of the properties should form part of his estate;
(c) a severance does not inherently advantage (or disadvantage) one proprietor over another – the severance may or may not benefit Bill and, by extension, may or may not benefit Theo as a taker-in-intestacy; and
(d) in any event, the interest of a taker-in-intestacy is too remote to give rise to a conflict of interest.6F[7]
[7]Orr v Slender (2005) 64 NSWLR 671 at paragraphs [28]-[33]
41In my view, there is a serious question to be tried as to whether Theo can validly exercise the power of attorney in the circumstances.
42First, it is at least arguable that Theo is acting in a position of conflict of interest, given his is a likely taker-in-intestacy.
43The first and second defendants relied upon Orr v Slender,7F[8] in which it was held that a beneficiary under a will had validly exercised an enduring power of attorney to sell a property, even though the sale resulted in a benefit to him under the terms of the Will. However, in that case, Nicholson J was considering s163B of the Conveyancing Act 1919 (NSW), which is in different terms to the relevant provisions of the IA and the Powers of Attorney Act. It was common ground that the sale was for the purpose of providing for the needs of the testator during his lifetime. In any event, Nicholson J held that s163B(5) (which effectively prevented an attorney using an enduring power of attorney to do an act which would confer a benefit on the attorney) “was limited to a consideration of whether the attorney’s act was, or would be, as a matter of practical reality and commonsense, a direct cause of a benefit to him”.8F[9] It is arguable in the present case that severing the joint tenancy for the purpose of ensuring that Bill’s share of the properties forms part of his estate is, as a matter of practical reality and commonsense, a direct cause of a benefit to Theo as a likely taker-in-intestacy.
[8] Orr v Slender (2005) 64 NSWLR 671 at paragraph [28]-[33]
[9] Orr v Slender (2005) 64 NSWLR 671 at paragraph [31]
44The first and second defendants also relied upon in Re Wilson.9F[10] In that case, the Court held that a husband had validly exercised an enduring power of attorney granted to him by his wife to sever their joint tenancy. However, at the time that the joint tenancy was severed, it was more likely that the wife would predecease the husband. Accordingly, the attorney husband stood to gain more by maintaining the joint tenancy than from severing it. There was held to be no conflict of interest.
[10] Re Wilson [2019] VSC 211 at paragraph [72]
45The facts of Re Wilson are quite different to the present case, where Theo is not a co-owner and it is far more likely that Bill (who is in end-of-life care) will predecease both Grace and Judith. By severing the joint tenancy, Bill will lose the right to survivorship in the (admittedly unlikely) circumstances that either Grace or Judith predecease him. On the other hand, if Bill predeceases Grace and Judith, the takers-in-intestacy of Bill’s estate, which will most likely include Theo, will retain a share in the properties. Theo stands to gain a significant benefit from the severance, without a clear benefit to Bill (at least during his lifetime).
46Second, it is arguable that Bill’s “interests” for the purposes of the Enduring Power of Attorney means Bill’s financial and legal interests while he is alive and do not include:
(a) his personal (as opposed to financial or legal) interest in having his wishes respected;10F[11] or
(b) the financial interests of his intestate estate.
[11] cf Re Wilson [2019] VSC 211
47Finally, there is a factual dispute as to Bill’s wishes which, insofar as it is relevant, could only be resolved at a trial.
Should position be preserved pending determination of VCAT proceeding?
48By the time the VCAT proceedings are determined, Bill may no longer be alive. Theo’s claim to be entitled to use the Enduring Power of Attorney to sever the joint title does not depend upon the determination of the VCAT proceedings. I do not consider that the existence of the VCAT proceedings provides a good reason to grant the interlocutory injunction, should the balance of convenience favour the refusal of an interlocutory injunction.
Balance of convenience
49Assessing where the balance of convenience lies requires an assessment of where the “lowest risk of injustice” lies. This requires the Court to assess the likely consequence if:
(a) Grace and Judith are granted the interlocutory injunction they seek, but it is ultimately established that Theo had the power to sever the joint tenancy on behalf of Bill; or
(b) Grace and Judith are not granted the interlocutory injunction they seek, but are ultimately successful in establishing that Theo could not validly sever the joint tenancy under the Enduring Power of Attorney.
If the interlocutory injunction is granted
50Counsel for the first and second defendants submitted that if the interlocutory injunction is granted, the transfers of land severing the joint tenancy will not be registered. There will be no legal severance of the joint title. If, as seems likely, Bill dies before there is a final determination on whether Theo has the right to sever the joint title, it was submitted that Grace and Judith would obtain full legal ownership of the properties by survivorship. It was further submitted that once Bill died, Theo would lose standing as Bill’s attorney under the Enduring Power of Attorney. Accordingly, he may lack capacity to make further submissions to the Court or to provide instructions to the Registrar on behalf of Bill.
51Grace and Judith submit that the transfer of land severing the joint title could nevertheless be registered after Bill’s death, as Theo had lodged all the documents required to register the transfer of land (and therefore severance), including the certificates of title. It was submitted that the cases holding that an attempt to sever joint title had not been effective were all cases in which the required documents had not all been lodged with the Land Titles Office prior to death.11F[12]
[12]eg: Corin v Patton (1990) 169 CLR 540 at 548; Freed v Taffel [1984] 2 NSWLR 322 at 325; Lyko v Derkatch [2018] SADC 90 at [347]-[375]; McCoy v Caelli [2010] NSWSC 1233; (2010) 4 ASTLR 1321; McCoy v Estate Peter Anthony Caelli [2008] NSWSC 986
52Neither party drew my attention to any case concerning the effect of an instrument severing the joint tenancy which had been lodged with the Registrar, along with all other documents required for registration, prior to death but not registered before death. On one view, under s45 of the Transfer of Land Act 1958, a transfer has effect upon registration.12F[13] After Bill’s death, Grace and Judith will take through survivorship and Bill’s interest will cease to exist. Bill’s estate will not hold any property upon which the transfer of land can operate. On the other hand, s34 of the Transfer of Land Act 1958 provides that every instrument lodged for registration shall be registered in the order in which and as from the time at which it is lodged. It is arguable that, if and when any interlocutory injunction is lifted, the Registrar will be obliged to register the transfer of land severing the joint title as from the time at which it is lodged – even if Bill has subsequently died.
[13]Section 45, Transfer of Land Act 1958; see also McCoy v Caelli [2010] NSWSC 1233; (2010) 4 ASTLR 1321 at [17].
53In the absence of clear authority on this issue, there is a risk that, if the transfer of land severing the joint title is not registered prior to Bill’s death, the legal title will pass to Grace and Judith by survivorship even if Theo had the capacity to validly sever the joint tenancy on behalf of Bill.
54A joint tenancy may be severed unilaterally “if the title of the party acting unilaterally is transferred or otherwise dealt with or affected in a way which results in a change in the legal or equitable estates in the relevant property.”13F[14]
[14] Corin v Patton (1990) 169 CLR 540 at 548
55A question then arises as to whether Theo (on behalf of Bill) has severed the joint tenancy in equity. If he has, this may be sufficient to protect the interests of Bill, Theo, and Bill’s estate even if the severance is not registered.
56Section 72(3) of the Property Law Act 1958 permits a person to convey land to themselves. Relying upon this provision, a co-owner may unilaterally sever a joint tenancy by registering a transfer of land of their interest in the property to themselves. This is what Theo is seeking to do, on behalf of Bill, in these proceedings. Theo has done everything he can do to give effect to this severance – he has completed transfers of land on behalf of Bill which transfer the properties from Bill to himself; and he has lodged these transfers with the Land Titles Office, together with the relevant Certificates of Title.
57An incomplete gift may be effective in equity if (and only if) the donor of the property has done all that it is necessary to do to effect a transfer of legal title.14F[15] However, equity does not recognise a transfer of property to oneself as a gift.15F[16] In my view, it is unlikely that Theo will be held to have severed the joint title to the properties in equity merely by virtue of the fact that he has done everything necessary to effect a transfer to himself.
[15] Corin v Patton (1990) 169 CLR 540
[16]Freed v Taffel [1984] 2 NSWLR 322 at 325; Lyko v Derkatch [2018] SADC 90 at [347]-[375]; McCoy v Caelli [2010] NSWSC 1233; (2010) 4 ASTLR 1321; McCoy v Estate Peter Anthony Caelli [2008] NSWSC 986
58Another possibility, raised by the decision of Brereton J in McCoy v Estate of Peter Anthony Caelli,16F[17] is that a joint tenancy may be unilaterally severed in equity by incomplete gift to a trustee who holds the property on trust for the transferor. Theo could thus sever the joint tenancy by doing everything required to register a transfer of land of the properties by Bill to a separate trustee, who contemporaneously executes a deed of trust agreeing to hold the properties on trust for Bill. However:
(a) it is very likely that transferring away Bill’s legal title to the properties in this manner would not be in his interests and thus not a proper use of the Enduring Power of Attorney;
(b) in any event, the authorities are not clear – there is a risk such a measure would not be effective to sever the joint tenancy; and
(c) from a practical perspective, Theo would need to identify and appoint a trustee who would agree to hold the properties on trust for Bill.
[17] [2008] NSWSC 986 at [22]
59In conclusion, there is a real possibility that if the injunction is not granted Grace and Judith will become the sole co-owners of the properties by virtue of survivorship upon Theo’s death and Theo’s estate will be left with no proprietary interest at all. The only remedy available to Theo; the administrator of the estate; and any other taker-in-intestacy, will be in damages under Grace and Judith’s undertaking in damages. I accept that, on the evidence before me, it is probable that Grace and Judith would be able to meet any award of damages made by the Court, not least because they will have obtained full ownership of the properties by virtue of survivorship. Even so, an in personam claim for damages against Grace and Judith is not a substitute for an interest in real property. If Grace and Judith are, or become, insolvent, the undertaking as to damages may not adequately compensate for any loss suffered by reason of the injunction.
60There is the added complication that it is not yet known who will be appointed as the administrator of Bill’s estate. Bill will not be the only taker-in-intestacy who will be impacted if the properties are not included in Bill’s estate, because Grace and Judith take the properties by survivorship. It is not clear that Theo (as a taker-in-intestacy) would have the capacity after Bill’s death to seek to enforce the undertaking as to damages, pursue these proceedings or the proceedings in VCAT or instruct the Registrar to register the transfers of land severing the joint tenancy. Determining this issue may require additional proceedings.
If the interlocutory injunction is not granted
61If the interlocutory injunction is not granted, the severance of the joint tenancy for the Clayton and Glen Waverley property will be registered. Grace and Judith will hold their legal title to the properties as tenants-in-common in equal shares with Bill, rather than as joint proprietors.
62However, Counsel for the first and second defendants accepted in submissions that this registration would be susceptible to being set aside under s103 of the Transfer of Land Act if VCAT, or a court, ultimately determined that Theo did not have the power to sever the joint tenancy under the Enduring Power of Attorney. Counsel for the first and second defendant also accepted that Grace and Judith would be entitled to lodge caveats on the two properties on the grounds of a claimed interest as joint proprietors in equity.
63Section 103 of the Transfer of Land Act provides that:
“(1) In any proceeding in a court relating to any land or any instrument or dealing in respect thereof if the court directs the Registrar to make any amendments to the Register or otherwise to do any act or make any recordings necessary to give effect to any judgment decree or order of the court the Registrar shall obey such direction.
(1AA) In any proceeding in VCAT relating to land or any instrument or dealing in respect of land, if VCAT directs the Registrar to make any amendment to the Register or otherwise to do any act or make any recordings necessary to give effect to an order of VCAT, the Registrar must obey that direction.”
64The indefeasibility of registered title does not deny the right of Grace and Judith to bring an in personam claim against Bill, Theo and (after Bill dies) Bill’s estate, claiming that the joint title has not been validly severed. The power under s103 is broad. Although it must be exercised with caution, the cases demonstrate that Courts will use the power pragmatically where necessary to give effect to the determination of the Court.17F[18] If the Court or VCAT accepts Grace and Judith’s claim that the joint tenancy could not be validly severed under the Enduring Power of Attorney, it will have the power under s103 to direct that the register be amended so as to remove the transfers of land severing the joint title. Grace and Judith will then be entitled to be registered as sole co-owners of the properties by virtue of survivorship.
[18]See, eg: PropertyShares Holdings Pty Ltd v 8 Hopetoun Rd Pty Ltd (2020) 61 VR 194; Saafin Constructions Pty Ltd (in liq) v MAG Ginancial and Investment Ventures Pty Ltd [2021] VSC 489, read together with Saafin Constructions Pty Ltd (in liq) v MAG Financial and Investment Ventures Pty Ltd (Costs and Orders) [2021] VSC 702; Mc Farlane v McFarlane [2021] VSC 197; Official Trustee in Bankruptcy v Registrar of Titles [2015] VSC 563
The least risk of injustice
65This is a difficult case, raising complicated legal questions. It has been argued and decided in circumstances of urgency, given Theo is in end-of-life care.
66The Court must determine whether the least risk of injustice will occur if the transfers of land severing the joint title are permitted to be registered, or the transfers of land are not permitted to be registered.
67Neither option is without risk of injustice. The future administrator of Bill’s estate is not a party to this proceeding and not bound by my findings. In any event, my decision is interlocutory and the Court hearing any trial in this proceeding may form a different view as to its powers under s103 of the Transfer of Land Act or the standing of the various people who have, or may obtain, a legal or beneficial interest in the properties.
68However, having considered all of the matters discussed in these reasons, it seems to me that dismissing the application for an injunction, and permitting the severances of the joint tenancies to be registered, carries with it the least risk of injustice. If Grace and Judith are ultimately successful in establishing that Theo lacked the power to sever the joint tenancy under the Enduring Power of Attorney, they can seek an order under s103 under the Transfer of Land Act, removing the transfers of land severing the joint titles from the Register. Assuming the Court or VCAT grants such an order, they will then take full ownership of the properties by survivorship. Their proprietary interest will be preserved. Even if they are not successful in obtaining such an order, they will retain an interest in the properties as tenants-in-common in equal shares with Theo’s estate.
69On the other hand, if the severance is not registered, but Grace and Judith are not successful in establishing that Theo lacked the power to sever the joint tenancy under the Enduring Power of Attorney, there is a risk that Bill’s estate (and if they have standing, the takers-in-intestacy, including Theo) will be left without any interest in the properties at all, but only the prospect of an in personam claim against Grace and Judith for damages pursuant to their undertaking as to damages.
70Grace and Judith, as the moving parties, bear the onus of proving that an interlocutory injunction is in the interests of justice in all the circumstances. I am not satisfied that the injunction sought should be granted.
71The application is dismissed.
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