Matouk v Matouk (No. 2)

[2015] NSWSC 748

Supreme Court

New South Wales

Medium Neutral Citation:	Matouk v Matouk (No. 2) [2015] NSWSC 748
Hearing dates:	29 May 2015
Date of orders:	29 May 2015
Decision date:	29 May 2015
Before:	Slattery J
Decision:	Set aside the transfer of the subject property to the first defendant. The second defendant’s caveats are to be withdrawn. Title to the property is to be registered with the plaintiff.
Catchwords:	EQUITY – application to set aside transfer of title to real property based on equitable grounds – whether transfer effected by undue influence – whether transfer effected by unconscionable conduct – where the donor did not speak and could not read or write English and did not receive independent legal advice. REAL PROPERTY – application to order the withdrawal of caveats – where caveator was deceased and no representative had been appointed – whether onus of proving a seriously arguable caveatable interest met
Legislation Cited:	Civil Procedure Act 2005, s 94 Duties Act 1997, s 304 Real Property Act 1900, s 74MA
Cases Cited:	EQUITY – application to set aside transfer of title to real property based on equitable grounds – whether transfer effected by undue influence – whether transfer effected by unconscionable conduct – where the donor did not speak and could not read or write English and did not receive independent legal advice. REAL PROPERTY – application to order the withdrawal of caveats – where caveator was deceased and no representative had been appointed – whether onus of proving a seriously arguable caveatable interest met
Category:	Procedural and other rulings
Parties:	Plaintiff: Nadia Matouk Defendant: Samia Matouk
Representation:	Counsel: Plaintiffs: P.M.Lane Defendants: n/a Solicitors: Plaintiffs: Cheryl Williams, CA Williams Legal Defendants: n/a
File Number(s):	2013/249518
Publication restriction:	No

Judgment

1. This is the Court’s second judgment in these proceedings. The first judgment was a procedural decision of Rein J on 31 October 2014 allowing the plaintiff to continue this action in the absence of a representative of the estate of the deceased second defendant: Matouk v Matouk [2014] NSWSC 1552.

2. The plaintiff complains in these proceedings that two of her children fraudulently procured the transfer from her to them of her sole asset, her home. Those who feature in the narrative of these proceedings mostly have the same surname, so these reasons will use their first names for convenience and without intending disrespect to any family member.

3. The plaintiff, Nadia Matouk (“Nadia”) was born in Lebanon and is now a 75-year-old widow. On 21 September 2011 Nadia signed what she believed to be a power of attorney to enable her daughter, the first defendant, Samia Matouk (“Samia”), to act as her carer. In fact, Nadia had signed a document transferring the title in her Mt Pritchard home (“the Property”) to Samia. In early 2012 Samia declared a trust over the Property in favour of her eldest brother, the named second defendant, Pierre Matouk (“Pierre”). Pierre later lodged two caveats over the Property.

4. Pierre died after these proceedings were commenced but no one has since taken out either probate or administration of his estate. Rein J’s orders were necessary to enable these proceedings to continue against his estate. Nadia now seeks to recover ownership of the Property free from any encumbrances.

5. The proceedings were undefended. As is explained in more detail below about the procedural history of this action, the Court is satisfied that proper notice of these proceedings was given to Samia and to Pierre and to persons associated with Pierre after his death.

6. Ms P. Lane of counsel, appeared for Nadia and read Nadia’s principal affidavit dated 13 August 2013. I accept all of Nadia’s evidence set out in that affidavit. The Court’s findings in these reasons are based on her evidence.

7. These proceedings were heard in the Equity Division, Applications List on 29 May 2015, when the Court made orders and indicated that it would later publish reasons for those orders. This judgment contains those reasons.

Background

8. In 1967 Nadia arrived in Australia from her native Lebanon with her husband, Anis, and their five children. Their sixth and last child, Joseph, was born in Australia in 1972. After owning other properties, in 1993 Nadia and her husband purchased the Property, without a mortgage. Anis, passed away in 2007. In order to assist in repaying her son Elias’ debt arising from the expenses of her husband’s funeral, in early 2008 Nadia took out a loan from Westpac Bank of $28,000 secured by a mortgage over the Property.

9. Nadia relies upon others for day-to-day assistance. Nadia was involved in a car accident in April 2006, injuring both her knees, which required reconstruction. Her compensation for this accident was Nadia’s only substantial asset apart from the Property. She suffers from limited mobility, and requires assistance to travel. Nadia speaks Arabic, but cannot read or write in any language. She does not speak or understand English beyond being able to write her own name and recognise some simple words. She therefore relies heavily on others to provide assistance in undertaking everyday activities such as shopping and banking.

10. Nadia transferred the Property to Samia in September 2011. On 13 September, Pierre paid Westpac Bank sufficient funds to discharge the existing mortgage over the Property. The effect of the payment between Pierre and Nadia is unclear. Nadia asserts that this was a gift from Pierre. But she also says that she told Pierre at the time of the payment that she would repay the amount to him slowly. But as will be seen below the Court does not have to resolve the differences between these two versions.

11. In September 2011, Samia and her husband Bashir moved into the Property to live with Nadia and Joseph. Samia and Bashir had married in Lebanon and had just returned to Australia. Nadia asked Samia whether she would look after her, as her carer. Samia agreed. Nadia asked Samia to make the necessary arrangements. Samia replied “leave it to me”.

12. Samia appeared quickly to organise care for Nadia. On 20 September 2011, Samia took Nadia to a café in Liverpool to see a solicitor, Mr Steven Stojanovic. Mr Stojanovic was originally the third defendant in these proceedings. Nadia has since settled her claim against him. Mr Stojanovic brought to the café documents for Nadia to sign that he had prepared. I accept that Nadia understood from what Samia had said to her that these documents would allow Samia to take care of her.

13. Only Nadia, Bashir, Samia and Mr Stojanovic were present for the execution of the documents. Mr Stojanovic spoke in English directly to Samia. Nadia did not understand him. Samia then spoke in Arabic to Nadia. She told Nadia to sign the two documents Mr Stojanovic had prepared. After signing the documents, Nadia asked Samia “So the paper I signed is for you to look after me and care for me?” Samia replied in the affirmative and explained to Nadia that she had signed a power of attorney.

14. One of the documents was in fact a standard Transfer of title form for the Land and Property Management Authority. The Transfer was from Nadia to Samia and purported to be for consideration of $280,000.00. But Nadia received nothing from Samia for the transfer. Nadia had generally entrusted her son Joseph to keep her documents safe at the Property. But it appears that either Samia or Pierre managed to find and take from the Property the Certificate of Title to lodge and give effect to this transfer. At no stage did Samia explain to Nadia the true nature of what Nadia was signing that day.

15. Following the transfer, Samia did not look after Nadia, as Nadia had expected. Nadia gave Samia authority to use her bank accounts and cards to allow Samia to manage Nadia’s financial affairs. But in response Samia gave Nadia little or no money. So Nadia ended up relying upon Joseph for her care and support.

16. At some point before the transfer of the Property, the Court can infer that Samia and Pierre devised a scheme to obtain the Property from Nadia. The two acted together to create a document entitled “Deed of Declaration of Trust” dated 22 March 2012 (“the Trust Deed”) purporting to create and recognise an interest in the Property in favour of Pierre. The recitals to the Trust Deed falsely record that Nadia had gifted the Property to Samia. They also note, probably correctly that Pierre discharged the mortgage over the Property, paid the applicable duties and legal fees associated with transfer so that the transfer could be completed, purchased a car worth $10,000 for Samia and gifted Samia $40,000. The Trust Deed then notes that in exchange for that consideration, Samia would hold the Property on trust for Pierre, who would be the beneficial owner of the whole of the Property. The unstamped Trust Deed was apparently executed as a deed in the presence of Mr Stojanovic.

17. In 2012, Nadia offered Pierre a place to stay in the Property. But severe tensions developed between Pierre and Samia’s husband, Bashir. Samia and Bashir then left the Property. Around this time Pierre agreed to be Nadia’s carer, and he received Centrelink payments on that basis. Nadia now gave Pierre authority to use her bank accounts and cards. But despite his commitment to Nadia to be her carer, Pierre began to expect Joseph to pay household bills. During 2012 and 2013 Nadia alleges that Pierre became violent to her and to Joseph on several occasions. The police were called at least twice to resolve family confrontations. Nadia began to feel threatened by Pierre in her own home.

18. During this period, Pierre lodged two caveats in relation to the Property based upon the interest in the Property said to be conferred under the Trust Deed. Pierre took out the first caveat on 6 February 2013, and the second on 23 March 2013.

19. Between 14 June 2012 and December 2012, with access to Nadia’s banking cards, Pierre withdrew $42,450 from Nadia’s bank account, which contained the funds awarded as compensation for her injuries sustained in the 2006 car accident.

20. At Joseph’s suggestion, in December 2012 Nadia contacted an independent solicitor, who advised her that the Property had been registered in Samia’s name and that Nadia no longer owned the Property.

21. In February 2013 Nadia was granted Legal Aid so that she could receive further advice. On 11 June 2013 she lodged a caveat over the Property to protect her interest. On 29 July 2013 Pierre’s lawyer, Mr Stojanovic, filed a lapsing notice in respect of that caveat.

Procedural history

22. On 16 August 2013 Nadia sought interlocutory relief to extend her caveat and to restrain Samia from dealing with the Property. By order of the Court on 19 August 2013 the caveat was extended until the determination of Nadia’s claims or the further order of the Court.

23. Nadia filed her statement of claim on 2 October 2013. It sought relief that went beyond what is now pressed. In essence what Nadia now seeks is the transfer of the title to the Property back to Nadia, the removal of the caveats that Pierre lodged, and Nadia’s costs of the proceedings.

24. Pierre died on 28 January 2014. He had been directed to file and serve a defence, but had not done so before his death.

25. Nadia moved by notice of motion dated 23 July 2014 to appoint Ms Azerina Pihura, Pierre’s de facto spouse at the time of his death, as a representative of Pierre’s estate, pursuant to Uniform Civil Procedure Rules (UCPR), r 7.10, or alternatively pursuant to r 7.6. In the alternative Nadia sought an order “that the proceedings continue against the second defendant without a representative of the estate”.

26. Samia filed a submitting appearance on 30 September 2014.

27. As earlier indicated, on 31 October 2014, Rein J gave leave to Nadia to proceed in the absence of a representative of Pierre’s estate under r 7.10(2)(a): Matouk v Matouk [2014] NSWSC 1552. Nadia received this leave on the basis that the only persons who were identified as potential estate representatives, Samia and Ms Pihura, were either unable or unwilling to be so appointed.

28. On 29 May 2015 Nadia’s solicitor, Ms Cheryl Williams, gave evidence orally at the hearing of these proceedings that she had complied with Rein J’s order to serve a copy of his Honour’s judgment upon Samia, Ms Pihura and Mr Stojanovic.

29. On 9 April 2015 consent orders were entered resolving the proceedings as against Mr Stojanovic, the third defendant.

30. At the hearing before this Court on 29 May 2015 affidavit evidence that Samia had filed earlier in the litigation was not read because Samia had filed a submitting appearance. The matter was called outside the courtroom, but there was, as expected, no appearance from any representative of Pierre’s estate. Ms P Lane of Counsel continued to appear on behalf of Nadia in the proceedings, and the Court has been much assisted by her able submissions.

Nadia’s claims for relief against Samia

31. Nadia claims that Samia procured Nadia’s transfer of the Property by fraudulent misrepresentation, and also that Samia engaged in unconscionable conduct by taking advantage of Nadia’s position of weakness and vulnerability to obtain the transfer. The transfer of the Property from Nadia to Samia is claimed to be voidable in equity on the basis that the transfer was the product of both undue influence and unconscionable conduct, although the application of either doctrine is sufficient for relief. All of these claims are made out.

32. The relevant legal principles may be shortly stated. Mason J (as the Chief Justice then was) described in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 (“Amadio”) at 461 the overlapping boundaries of the equitable doctrines of undue influence and unconscientious bargain, in the following way:

“Historically, courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of “unconscionable conduct” is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, e.g., a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.

There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest.”

Undue Influence

33. Where an inter vivos transaction is procured by influence from one party as to deprive the weaker party of the free use of his or her judgment, equity will rescind the transaction and require restitution of the property which has passed. Undue influence may be presumed in two cases: firstly, where the relationship between the giver and recipient of property falls within a recognised category involving the reposing of confidence, for example, between client and solicitor; and secondly, where the recipient of property is in a position to “exercise dominion over” the giver of property by reason of the trust and confidence the giver reposes in the latter: Johnson v Buttress (1936) 56 CLR 113 at 119 per Latham CJ; Whereat v Duff [1972] 2 NSWLR 147 at 167 per Asprey JA.

34. A parent is not presumed to repose confidence in his or her child such that a relationship of undue influence between the two is presumed where the parent gives the child property. However, the evidence in a particular case may suffice to raise the presumption that a child does exercise dominion over a parent, and so that such a relationship does exist. For example, a parent’s age and ill health may contribute to such a presumption arising: see Spong v Spong (1914) 18 CLR 544.

35. Here, Nadia’s age, ill health and illiteracy left her dependent upon others, mainly her children, for assistance in day-to-day tasks. Beyond that, the evidence shows that Nadia reposed trust and confidence in Samia. Nadia asked Samia to be her carer. In this context Nadia signed the document that would have the legal effect of depriving her of the Property. Nadia could not read the document herself, and trusted Samia to convey accurately the effect of the document to her. I infer that the relationship between Samia and Nadia was such that it should be presumed that a relationship of undue influence existed of Samia over Nadia.

36. Where a presumption of undue influence casts doubt over the legitimacy of a disposition of property, equity casts the burden on the recipient of the property to demonstrate that the transaction was the giver’s voluntary and well-understood act. The recipient can discharge that burden by demonstrating that the giver fully understood the transaction and its consequences, and where the transaction is a simple transfer of property independent legal advice may not be necessary, so long as the giver understands the terms of the instrument of gift: Bank of New South Wales v Rogers (1941) 65 CLR 42 at 87.

37. The presumption is not rebutted here. Samia has entered a submitting appearance and so has not sought to contradict Nadia’s case. In any case, the so-called advice that Nadia received came from a solicitor engaged by Samia, and was delivered in a language that Nadia could not understand. On the evidence Nadia clearly did not understand the terms of the Transfer that she signed: she did not understand even that the executed document was for the transfer of property.

38. Additionally, where a transaction is the outcome of such an actual influence over the mind of the giver of property that the disposition cannot be considered to be his or her free act, actual undue influence is made out: Johnson v Buttress (1936) 56 CLR 113 at 134. The evidence here is sufficient to show that Nadia’s execution of the transfer of the Property was not her independent and voluntary act, because her trust in Samia induced her to execute a document provided at Samia’s instructions which she did not understand. I also infer that Samia exercised actual undue influence over Nadia to cause the transfer of the Property.

39. As the transfer of the Property from Nadia to Samia was effected by reason of Samia’s actual and presumed undue influence over Nadia, the transfer must be set aside.

Unconscionable conduct

40. Nadia also alleged that the transfer of the Property to Samia was the result of unconscionable conduct on the part of Samia, and so should be set aside on that basis. Although the Court’s undue influence findings strictly make it unnecessary to decide this issue, I would nevertheless find that Samia’s conduct was unconscionable and that the transfer could therefore not stand. To paraphrase Brennan J’s statement in Louth v Diprose (1992) 175 CLR 621 at 627, unconscionable conduct ordinarily arises when:

(1)   The parties’ relationship places the giver at a special disadvantage in relation to the recipient of property, to the knowledge of the recipient.

(2)   The recipient unconscionably exploits the giver’s disadvantage.

(3)   The recipient consequently overbears the will of the giver so that the giver is unable to judge what is in his or her best interests.

41. Those elements are established here. For the reasons given above in relation to Nadia’s undue influence claim, Samia knew that Nadia was put at a special disadvantage in relation to her, as Nadia’s illiteracy and lack of English meant that Samia well knew that Nadia was relying entirely upon Samia to understand the effect of the document that she was signing. Samia’s conduct, deceiving Nadia to believe that she was signing not a Transfer but a document necessary for her care, fraudulently exploited the trust that Nadia put in Samia’s care. The conduct caused Nadia to enter a plaintly improvident transaction, disposing of her only asset, leaving her without any rights to reside in her family home, and without receiving any consideration in exchange. Samia’s conduct meant that Nadia was unable to judge whether or not signing the document was in her best interests. It clearly was not.

42. In those circumstances, Samia bears the onus of proving that the transaction was not the product of her unconscionable conduct, by proving that the transaction was Nadia’s voluntary and well-understood act: Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 at 133. For the reasons considered above in relation to Nadia’s undue influence claim, Samia has not attempted this task. Nadia can set aside the transaction for Samia’s unconscionable conduct.

Nadia’s claims for relief against Pierre

43. Nadia seeks the removal of the two caveats that Pierre registered over the Property pursuant to Real Property Act 1900, 74MA, so that she may take back unencumbered ownership of the Property.

44. When Pierre died, his estate vested in the NSW Trustee pursuant to Probate and Administration Act 1898, s 61. That vesting meant that no person was competent to take a step in the proceedings for Pierre until his estate vested in his legal personal representative: Byers v Overton Investments (2001) 109 FCR 554; Abu Arab v NSW Trustee and Guardian [2014] NSWSC 954. However, Rein J’s earlier decision in these proceedings permits Nadia to proceed against Pierre in the absence of a representative being appointed.

45. Real Property Act 1900, 74MA provides that a person claiming an interest in the land described in a ss 74B or 74F caveat may apply to the Court for an order that the caveat be withdrawn. The Court may then order the caveator to withdraw the caveat within a specified time, failing which the caveat lapses when an office copy of the Court’s order is lodged with the Registrar-General after that time expires. Brereton J gave the following explanation of the section in Buchanan v Crown & Gleeson Business Finance Pty Ltd [2006] NSWSC 1465 at [6], which I respectfully adopt:

“… the principle to be applied by the Court on such an application is to inquire whether the defendant would in all the circumstances be entitled to an interim injunction, and if not to order that the caveat be withdrawn. If the defendant makes out the necessary prima facie case that it has a caveatable interest, then the further question of the balance of convenience arises. On the balance of convenience, the onus is on the caveator to show that the balance of convenience favours maintenance of the caveat. And it would not be proper to continue the caveat unless the caveator gives the usual undertaking as to damages.” (Citations omitted).

The proper test, on the interlocutory standard, is therefore whether the caveator has a “a seriously arguable claim to a caveatable interest which would entitle the caveator to an injunction prohibiting the proposed dealing”: Chong v Chanell (No 2) [2009] NSWSC 1066 at [4] per Brereton J.

46. In response to Nadia’s s 74MA application, Pierre therefore bears the onus to establish that he has a seriously arguable claim to a caveatable interest that takes priority over Nadia’s interest. Pierre’s arguable caveatable interest relies upon the unstamped Trust Deed under which Samia was said to hold the Property on trust for Pierre. That Trust Deed recites that Pierre paid stamp duty on the conveyance of the Property, the amount to discharge the mortgage and legal costs. Those amounts total around $37,000. The Trust Deed recites that the trust is made in consideration of an amount of $40,000 paid to Samia and a car worth $10,000.

47. Although Nadia admits that Pierre did pay off her mortgage, it is unclear on the evidence whether that payment was in the nature of a gift or a loan to Nadia. But Nadia claims that Pierre later more than fully recouped the amount used to pay off Nadia’s mortgage, by withdrawing amounts from her bank account without authorisation. Any payment by Pierre is fully offset by these payments to Pierre and is therefore insufficient to found Pierre’s claim to a caveatable interest.

48. As Pierre is now deceased, he could not give evidence about the claimed interest that the caveats protect. And no one who could give such evidence has come forward to represent Pierre’s estate. As the trust declaration is unstamped, it could not be enforced, as it is not available for use at law or equity for any purpose and may not be presented in evidence in this Court: Duties Act 1997, s 304. Without affidavit or documentary evidence, there is no possibility that Pierre as caveator could discharge his onus of demonstrating a seriously arguable claim to the caveats. The Court will therefore order their removal.

49. Nadia also initially sought to pursue a money claim against Pierre for cash that she claimed Pierre withdrew from her bank account before his death. Nadia no longer presses that claim. It is therefore unnecessary to make findings in relation to those issues.

50. Nadia seeks her costs of the proceedings against Pierre. Nadia has been wholly successful against Pierre. An order to that effect should be made.

Conclusion

51. In the result, Nadia has been wholly successful. She has established that she is entitled to avoidance of her September 2011 transfer of the Property to Samia and that she should receive unencumbered title to the Property.

52. The Court makes the following orders and directions:

1. The First Defendant deliver up to the Plaintiff’s legal representative CA Williams of Unit 8, 39 John St Camden the Certificate of Title to the Property within 28 days of these orders.

2. The First Defendant do all other acts and things necessary to transfer the title to the Property to the Plaintiff including the execution of a Transfer in registrable form within 28 days of these orders.

3. The Registrar in Equity is authorised, in default of compliance with these orders to execute a transfer of the Property in favour of the Plaintiff pursuant to s 94 Civil Procedure Act.

4. The Second Defendant be ordered pursuant to s 74MA Real Property Act to withdraw caveats AG90087 and AH540209 within 14 days of these orders.

5. The Second Defendant to pay the plaintiff’s costs of the proceedings.

6. Grant liberty to apply in relation to the implementation of these orders.

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Decision last updated: 15 June 2015