Lincolne v Williams

[2008] TASSC 41

[2008] TASSC 41

CITATION:              Lincolne v Williams [2008] TASSC 41

PARTIES:  LINCOLNE, Pamela Marjorie
  v
  WILLIAMS, Marjorie Lillie

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  607/2007

612/2007

DELIVERED ON:  14 August 2008
DELIVERED AT:  Hobart
HEARING DATE:  7 August 2008
JUDGMENT OF:  Blow J

CATCHWORDS:

Contracts – General contractual principles – Offer and acceptance – Matters not giving rise to binding contract – Agreements not intended to create legal relations – Domestic, social and other agreements – Enduring power of attorney – Whether contract with implied terms as to remuneration and reimbursement of expenses.

Powers of Attorney Act 1934 (Tas), ss11A, 11C(1).
Chatenay v Brazilian Submarine Telegraph Co Limited [1891] 1 QB 79 at 85; Dolphin v Harrison, San Miguel Pty Ltd (1911) 13 CLR 271, referred to.
Aust Dig Contracts [17]

REPRESENTATION:

Counsel:
             Applicant/Defendant:  C J Gunson
             Respondent/Plaintiff:  P A Griffits
Solicitors:
             Applicant/Defendant:  Public Trustee
             Respondent/Plaintiff:  Griffits & Griffits

Judgment Number:  [2008] TASSC 41
Number of paragraphs:  22

Serial No 41/2008
File Nos 607/2007

612/2007

PAMELA MARJORIE LINCOLNE v MARJORIE LILLIE WILLIAMS

REASONS FOR JUDGMENT  BLOW J

14 August 2008

1. This is an application for the striking out of an amended statement of claim pursuant to the Supreme Court Rules 2000, r259. The defendant contends that the pleading does not disclose a reasonable cause of action. If that is so, and the pleading is struck out, it will be necessary to decide whether the plaintiff should be permitted to replead some or all of her claims.

1. The action relates to an enduring power of attorney given by the defendant to the plaintiff, who is her niece.  The power of attorney was executed on 17 September 1993 and accepted by the plaintiff pursuant to the Powers of Attorney Act 1934 ("the 1934 Act"), s11A(2)(b).  It was revoked by the defendant on 29 June 2006.  All of those facts are admitted on the pleadings.

1. In the amended statement of claim, the plaintiff makes three claims:

·A claim for the sum of $266,000 by way of reimbursement of expenses said to have been incurred by her "in the carrying out of her obligations and authority under the Power".

·A claim for remuneration for "managing the Defendant's properties, preparing her financial records and tax returns, and attending to her affairs".

·A claim for interest on the sum of $266,000, but not in respect of the claimed remuneration, at the rate of 10 per cent per annum from 11 September 2007 until payment.

The reimbursement claim

1. The giving and acceptance of the power of attorney created a relationship of principal and agent between the parties.  At common law an agent has a right of indemnity against his or her principal in respect of expenses incurred in performing that role: John D Hope and Co v Glendinning [1911] AC 419 at 431; Davis v Hueber (1923) 31 CLR 583 at 588; Re Clune (1988) 7 ACLC 1 at 6. However the plaintiff's claim for reimbursement, as pleaded, is not based on any such common law right but on three other bases, namely an implied term in the power of attorney, an implied term in a contract, and an entitlement in equity to "restitution or recoupment".

1. There are many reported cases about powers of attorney in which courts have held that an express grant of authority to do one thing has resulted in the agent having implied authority to do another thing.  For example, in International Harvester Co of Australia Limited v Bowerman (1913) 9 Tas SR 43 at 45, Nicholls J held that, when an attorney was given power to pay "with cash or with property or with both", the attorney had the implied power to execute instruments to transfer property. However I have not been able to find any reported case in which a power of attorney has been held to confer by implication any non-contractual right other than a right to do some act as the agent of the donor. There is no need to construe the power of attorney as containing any such implied term when the attorney has a common law right to be indemnified in respect of expenditure incurred in carrying out his or her role. In the law of contract, a term will not be implied unless it is "necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it": BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. Since the power of attorney was effective without the suggested implied term, it clearly did not contain such a term.

1. Paragraph 5 of the amended statement of claim also asserts that an implied term as to reimbursement or indemnity was contained in "the contract between the parties constituted by the offer by the Defendant to grant the Power of Attorney and the Plaintiff's acceptance thereof".  For many years, courts have taken the view that the giving of a power of attorney is a unilateral act that does not, of itself, bring a contract into existence: Chatenay v Brazilian Submarine Telegraph Co Limited [1891] 1 QB 79 at 85. However Mr Griffits submitted on behalf of the plaintiff that the position can be different when an enduring power of attorney is executed and accepted.

1. At common law, as a general rule, an agency relationship is terminated by the mental incapacity of the principal: Gibbons v Wright (1954) 91 CLR 423 at 444 – 445; Re Coleman (1929) 24 Tas LR 77 at 79. The Tasmanian Parliament legislated to create a statutory exception to that rule by amending the 1934 Act in 1987 to provide for enduring powers of attorney, to be created "by deed containing words indicating an intention that the authority conferred is to be exercisable notwithstanding the donor's subsequent mental incapacity or in the event of the donor's subsequent mental incapacity": s11A(1). The 1934 Act is relevant since it was in force when the defendant executed the power of attorney in 1993. It has since been repealed and replaced by the Powers of Attorney Act 2000 ("the 2000 Act").

1. Under the 1934 Act, s11A(2)(b), a deed was not effective to create an enduring power of attorney unless the donee executed a statement of acceptance endorsed on the deed.  As a general rule, the giving of a power of attorney, whilst it confers authority on the donee, does not create any positive obligation for the donee to do anything.  However under the 1934 Act, s11C(1), when the donor of an enduring power of attorney became mentally incapacitated, the donee was deemed to be a trustee of the property and affairs of the donor, and was required to exercise his or her powers as attorney to protect the interests of the donor.  Mr Griffits submitted that, because an enduring power of attorney was created by a process of offer and acceptance, and because it gave rise to positive duties on the part of the donee in the event of the donor's mental incapacity, an enduring power of attorney was or could be a contract.

1. There are situations in which powers of attorney are granted by terms in contracts, or pursuant to terms in contracts.  For example, a power of attorney may be granted by a client to his or her solicitor to facilitate the carrying out of services for the client.  However in my view the giving and acceptance of an enduring power of attorney, without more, cannot amount to the making of a contract.  The legislative requirement of written acceptance contained in the 1934 Act, s11A(2)(b), and now to be found in the 2000 Act, s30(2)(c), serves important non-contractual purposes.  It protects the donee of an enduring power against the risk of becoming a trustee without his or her knowledge and consent.  It also protects the donor of the enduring power from the risk that, once it is too late to make alternative arrangements, the donee will turn out to be unwilling to act.  Whilst it is a consequence of the legislation that mental incapacity on the part of the donor will result in a relationship of trustee and beneficiary coming into existence, it by no means follows that there is any contractual relationship between the parties.  There is no reason why the statutory and fiduciary duties of a donee who becomes a trustee should also be contractual duties.  Whilst an enduring power of attorney might have some of the features of a contract, it remains in essence a unilateral instrument.  In my view the bare giving and acceptance of the enduring power of attorney could not have resulted in a contract coming into existence. 

1. From the bar table, Mr Griffits told me that the plaintiff relies not just on the giving and acceptance of the enduring power of attorney, but also on discussions between the parties, discussions with the defendant's solicitor, an offer by the defendant's solicitor with the plaintiff present, and the acceptance of that offer by the plaintiff.  He told me that the plaintiff was "a professional woman, fully engaged in a highly paid job" and that the arrangement with the defendant involved significant sacrifice, and was contemplated to involve significant sacrifice, on her part.  In my view those assertions, if pleaded and proved at trial, would not make the plaintiff's position any stronger.  There is no reason to infer that, in the circumstances alleged, the parties must have intended to enter into contractual relations.  The circumstances described by Mr Griffits do not suggest that there was anything other than a routine grant of a power of attorney by an aunt to her niece.

1. Mr Griffits was unable to refer me to any equity case in which it has been held that an agent had an equitable right to recover an indemnity from his or her principal in respect of expenditure.  I am not aware of any.  There seems no need for any such remedy to have been developed when the common law provided one. 

1. In my view the three bases upon which the reimbursement of expenditure has been claimed — an implied term in the power of attorney, an implied term in a contract, and an equitable right to restitution or recoupment — are all misconceived.  The plaintiff may have perfectly good common law rights to be indemnified in respect of past expenditure, but her claim has not been pleaded on that basis.

1. In its present form, the amended statement of claim asserts only that she expended "approximately $473,000", that the defendant reimbursed amounts totalling "approximately $207,000", and that there is an outstanding balance of $266,000.  In my view the statement of claim is defective because it lacks any detail as to the transactions said to have given rise to an entitlement to reimbursement.  I think the material facts in relation to each item or category of expenditure should have been pleaded.  The plaintiff's obligation is to plead all the material facts: Supreme Court Rules, r227(1)(b). At least the dates, amounts and purposes of the alleged payments should have been pleaded. These are matters for the pleading, not particulars, since a separate right of indemnity arises every time an agent spends money for the benefit of the principal in the course of acting within the scope of his or her authority. The dates are important because the defendant has pleaded limitation defences.

The remuneration claim

1. The plaintiff does not contend that the defendant expressly promised that she would be paid for any work done by her as the defendant's attorney.  The amended statement of claim suggests three possible bases for the claim for remuneration — an implied term in the power of attorney; an implied term in "the contract between the parties constituted by the offer by the Defendant to grant the Power of Attorney and the Plaintiff's acceptance thereof"; and a quantum meruit entitlement.

1. There is authority that, when a power of attorney is granted to a professional adviser, the donee will have an implied right to remuneration: Collier and Lindsay Powers of Attorney in Australia and New Zealand (1992) at 172.  However that entitlement would ordinarily be a contractual one: Bowstead and Reynolds on Agency, 17 ed, par7-010.  As far as I know there are no reported cases in which courts have held that powers of attorney can contain implied terms imposing non-contractual obligations on their donors.

1. It is well established that an agent has no right to receive remuneration from his or her principal unless there is a contract, express or implied, to that effect: Halsbury's Laws of Australia, par15-505; Reeve v Reeve (1858) 1 F & F 280, 175 ER 727; Roberts v Smith (1859) 4 H & N 315; 157 ER 861; Dolphin v Harrison, San Miguel Pty Ltd (1911) 13 CLR 271. For the reasons stated above, I believe there is no prospect of it being held that there was a contract constituted by the giving and acceptance of the power of attorney.

1. Paragraph (c) of the prayer for relief sets out the only relief claimed in respect of the remuneration claim in the following words:

"A reasonable charge for the work carried out by the Plaintiff for the benefit of the Defendant pursuant to the Power of Attorney."

1. The wording of that paragraph suggests that the plaintiff may be making a quantum meruit claim.  However the facts of this case do not bring it within any of the categories of case in which the law recognises a right to payment on a quantum meruit.  This is certainly not a case involving an unenforceable or invalid contract, or work done in the contemplation of the making of a contract that was never made.

1. In my view the claim for remuneration has no hope of success, and the plaintiff should not be allowed to replead it.

The interest claim

1. In the amended statement of claim, interest is mentioned only in the prayer for relief.  Nothing is pleaded as to the basis of the interest claim.  Mr Griffits told me that he thought the claim might have been based on the Supreme Court Civil Procedure Act 1932, s34, but that he was not able to confirm that. It seems likely that that was the basis of the claim, since there seems to be no other basis upon which interest could be claimed. However the rate of interest payable pursuant to s34 is not the claimed rate of 10 per cent per annum. A different rate of interest is prescribed for each calendar year pursuant to the Supreme Court Rules, r5A.

1. If the interest claim is to be pursued, the material facts should be pleaded. If s34(1)(b) is to be relied on, the plaintiff would need to plead the making of a demand for payment in writing, the giving of notice that interest would be claimed, and the date from which it was said that interest would be claimed. Mr Griffits told me that the amount claimed by way of reimbursement needed to be amended following the compiling of an account by the plaintiff. If the amount now to be claimed is not that claimed in a notice intended to be relied upon for the purposes of s34, that fact will need to be considered.

Disposition of the application

1. Because of the defects in the statement of claim that I have referred to, I think it is so defective that it should be struck out.  The claim for remuneration is so hopeless that the plaintiff should not be permitted to replead it, but I will hear counsel as to whether the plaintiff should be permitted to replead both the reimbursement and interest claims and, if so, upon what terms.