McFarlane v McFarlane
[2021] VSC 197
•23 April 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2018 02530
| JUDITH ANN McFARLANE (by her Administrator STATE TRUSTEES LIMITED (ACN 064 593 148)) | Plaintiff |
| v | |
| MARK EDWARD McFARLANE | Defendant |
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JUDGE: | Richards J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 March 2021 |
DATE OF JUDGMENT: | 23 April 2021 |
CASE MAY BE CITED AS: | McFarlane v McFarlane |
MEDIUM NEUTRAL CITATION: | [2021] VSC 197 |
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EQUITY – Undue influence – Transfer of land by mother to son for ‘natural love and affection’ – Whether transfer vitiated by undue influence – Presumption of undue influence established on evidence – Presumption not rebutted.
EQUITY – Unconscionable conduct – Whether transfer vitiated by unconscionable conduct of son – Mother in a position of special disadvantage – Son took unfair advantage – Transfer not shown to be fair, just and reasonable.
EQUITY – Remedies – Transfer set aside – Orders to reinstate mother as registered proprietor of land – Equitable compensation – Transfer of Land Act 1958 (Vic), s 103.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr DJ Sanders | State Trustees Limited Legal Branch |
| For the Defendant | In person |
HER HONOUR:
On 26 November 2015, Judith McFarlane signed a transfer of land, gifting her home at 139 Warby Range Road, Glenrowan (the Glenrowan property) to her son, Mark McFarlane. The consideration for the transfer was recorded as ‘natural love and affection’. At the time of the transfer, Mr McFarlane was living with his mother at the Glenrowan property. He became the registered proprietor of the property on 4 January 2016. In November that year, Mrs McFarlane moved from the house in Glenrowan to St John’s Village, an aged care home in Wangaratta.
In August 2017, the Victorian Civil and Administrative Tribunal appointed State Trustees Limited as Mrs McFarlane’s administrator, under Part 5 of the Guardianship and Administration Act 1986 (Vic). In its capacity as her administrator, State Trustees inquired into the circumstances surrounding the transfer of the Glenrowan property to Mr McFarlane. It commenced this proceeding on Mrs McFarlane’s behalf in November 2018, claiming that the transfer was procured by undue influence and was unconscionable. The relief sought includes an order that the transfer be set aside, or alternatively a declaration that Mr McFarlane holds the Glenrowan property on constructive trust for the benefit of Mrs McFarlane.
Mr McFarlane’s defence asserts that he and his mother have always had a ‘long term loving relationship’ and that his mother gifted the Glenrowan property to him ‘out of natural love and affection for all I was doing for her’. Mr McFarlane represented himself throughout the proceeding. Although he appeared at directions hearings on 29 March 2019, 19 July 2019, and 29 November 2019, he did not file any material in support of his defence, and did not appear at the directions hearing held on 15 May 2020.
He appeared briefly at the trial, to raise an objection to the Court’s jurisdiction. I heard his objection, and then indicated that it had no basis, and that I would give written reasons for that conclusion at a later time. I then began to outline the way in which the trial would proceed. At that point, Mr McFarlane then purported to arrest me for misprision (concealment) of treason. He said that a trial would be unconstitutional and that he did not want to be part of a treason. I persisted in outlining the trial process. After some interruptions and angry shouting, Mr McFarlane left the courtroom and did not participate further in the trial.
During the trial, I heard evidence from Mrs McFarlane, from her daughter, Nicole Bodinnar, from her former general practitioner Dr Sima Radaei, and from Nicholas Smith of State Trustees. I was assisted by a written outline of submissions filed on Mrs McFarlane’s behalf before trial, and by further written submissions received on 16 April 2021.
For the reasons that follow, I have concluded that the transfer was procured by undue influence and was unconscionable. I will make orders for the reinstatement of Mrs McFarlane as the registered proprietor of the Glenrowan property, and for Mr McFarlane to pay equitable compensation to his mother for the loss she has suffered because of the transfer.
Objection to jurisdiction
I understood Mr McFarlane’s objection to the Court’s jurisdiction to be that a past Attorney-General had removed the Queen’s commission from the Supreme Court of Victoria and that, since then, the operation of the Court had been unconstitutional and illegal. He supported this argument by reading from a media release issued in 2009 by the then Attorney-General for Victoria, Rob Hulls, to the effect that criminal proceedings would in future be issued in the name of the Director of Public Prosecutions, rather than ‘the Crown’ or ‘Regina’. Mr McFarlane had earlier provided my chambers with an extract from the Acts Amendment and Repeal (Courts and Legal Practice) Act 2003 (WA), which amended various Western Australian statutes by substituting ‘State’ for ‘Crown’. On that basis, he asserted that Mr Hulls had removed the Queen from her position and that the Court was operating illegally. He added that the concealment of that fact was misprision of treason.
The objection was misconceived. Mr Hulls’ media release did not remove the Queen as the constitutional head of the State of Victoria. It does not reflect the current naming convention in criminal proceedings in this Court, in which the prosecution is usually referred to as ‘R’ for Regina, the Queen. It had no effect at all on the Supreme Court’s equitable jurisdiction, which is invoked by Mrs McFarlane in this proceeding.
The Constitution Act 1975 (Vic) still provides that the legislative power of the State of Victoria is vested in the Parliament of Victoria, comprising Her Majesty, the Legislative Council, and the Legislative Assembly.[1] The Crown is represented in Victoria by the Governor, who is appointed by the Queen.[2] The Supreme Court of Victoria consists of judges who are appointed by the Governor on the advice of the Executive Council.[3] The Court has jurisdiction in or in relation to Victoria ‘in all cases whatsoever’ and is ‘the superior Court of Victoria with unlimited jurisdiction’.[4] Immediately before I took the affirmation of office as a judge, I affirmed my allegiance to Her Majesty Queen Elizabeth the Second and Her Majesty’s heirs and successors according to law.
[1]Constitution Act 1975 (Vic), s 15.
[2]Constitution Act, s 6.
[3]Constitution Act, ss 75, 75B(2).
[4]Constitution Act, s 85.
For completeness, the Acts Amendment and Repeal (Courts and Legal Practice) Act 2003 (WA) did not amend the Constitution Act 1889 (WA) and the Queen, by her Governor, remains the head of government in Western Australia.[5] The Parliament of Western Australia has no power to amend the Constitution of the State of Victoria, and did not purport to do so by enacting the Acts Amendment and Repeal (Courts and Legal Practice) Act 2003 (WA).
[5]Constitution Act 1889 (WA), ss 2, 50, 51.
Before the transfer
Mrs McFarlane was born on 18 June 1944, and is now 76 years old. She left school when she was 14 and went to secretarial college. She worked for a number of years as a secretary and typist, and in child care.
Her son, Mark, is a child of her first marriage, which began when Mrs McFarlane was 21 and ended with a divorce about seven years later. She married her second husband, Robert McFarlane, in the 1970s, when she was 29, and they had a daughter, Nicole. Mrs McFarlane described Robert as ‘wonderful’; they were together until his untimely death in April 2011.
In about 1976, after Nicole’s birth, Mrs McFarlane suffered severe post-natal depression, experienced her first psychotic episode, and spent a long period of time in hospital. She was diagnosed with schizophrenia in 1979. For the most part, her illness has been managed in the community, with medication. However, she had a number of psychotic episodes and was hospitalised at times when she was acutely unwell. She had a serious relapse in June 2011, following her second husband’s death.
After this episode, Mrs McFarlane decided to move to the country. She sold her home in Lilydale, bought the Glenrowan property, and moved there in early 2012. Ms Bodinnar lived with her at Glenrowan on and off between 2012 and 2014, although she had health problems of her own and there were long periods when she was not living there. In 2014, Ms Bodinnar moved to Albury, married, and had a child.
In the meantime, Mr McFarlane had moved to Glenrowan from Sydney and was living with his mother. He remained living at the Glenrowan property after Ms Bodinnar moved to Albury. Mrs McFarlane said that he did not pay rent while he lived in her house, and that she paid most of the bills. His only financial contribution was towards food. She said that they both cooked and cleaned, although she did most of it.
Mrs McFarlane has not driven since two accidents about 20 years ago, and she relied on her children to drive her. After Ms Bodinnar moved to Albury, it was Mr McFarlane who drove her to the shops and to her appointments.
From 2012, Mrs McFarlane attended the Docker Street General Medical Centre in Wangaratta. Initially her regular doctor was Dr Dev Hewawithana. When he left the clinic in about 2014, she began seeing Dr Sima Radaei. Dr Radaei said that Mrs McFarlane was accompanied to appointments by Mr McFarlane, and she never saw Mrs McFarlane alone.
In November 2014, Dr Radaei prepared a GP Mental Health Treatment Plan for Mrs McFarlane. It noted that Mrs McFarlane suffered from mixed anxiety and depression, and chronic psychotic disorders. It listed seven medications that were being prescribed for her, including citalopram for anxiety/depression, olanzapine and Largactil for schizophrenia, and sodium valproate for mood disorder. Dr Radaei thought that these medications were prescribed at fairly high doses, and was concerned about possible side effects and interactions between drugs. She asked the clinic’s pharmacist to conduct a medication review at Mrs McFarlane’s home, which she was unable to arrange during 2014 or 2015 because telephone calls to the house were not answered. Dr Radaei also recommended that Mrs McFarlane see a psychologist and a psychiatrist for confirmation and assessment, but this was refused by Mr McFarlane.[6]
[6]Exhibit P6 – Letter from Dr Sima Radaei to Victorian Civil and Administrative Tribunal dated 19 June 2017.
Mrs McFarlane gave evidence that during this period Mr McFarlane wanted her to stop or reduce her medication, and that he said that to her all the time. Mrs McFarlane resisted, telling him ‘no way, I need it’,[7] and she continued to take her medication herself. This was confirmed by Ms Bodinnar, who said that, while she was living at Glenrowan, her mother told her ‘I haven’t had my medication and Mark hasn’t given it to me’.[8] Ms Bodinnar said that her mother used to take her own medication, but that Mark used to withhold it sometimes.
[7]Transcript 53:31.
[8]Transcript 32:7–8.
During 2015, Ms Bodinnar visited her mother at Glenrowan as often as she could, and when she was there she saw something of the relationship between her mother and Mr McFarlane. She said that they did not have a very good relationship, that Mark treated her mother ‘like dirt’ — it was ‘like he didn’t like her, like he didn’t love her’.[9] Ms Bodinnar described seeing her brother push her mother down onto the couch. She said ‘when she didn’t do exactly what he wanted he’d push her and then other times he’d throw water at her and then one night he slammed the door and I didn’t know what happened in that room’.[10] She said that she saw Mr McFarlane push her mother and swear at her: ‘Every time I visited he used to get upset with her and swear at her and make her sit up and … eat her food up or otherwise he’d take it off her’.[11] There were also times when he did not give Mrs McFarlane food because he believed that, as a Christian, she should be fasting.
[9]Transcript 38:9–10.
[10]Transcript 29:12–15.
[11]Transcript 29:31–30:3.
Transfer of Glenrowan property
On 19 November 2015, Mr McFarlane attended an appointment with Janeen Milne of Milne Lawyers in Wangaratta. He instructed her that:[12]
… he had been living with his mother for approximately 4 years having returned from Sydney to do so after a marriage breakdown and primarily for the purpose of being able to care for his mother who suffered from anxiety. I was also advised that whilst living with his mother, Mr McFarlane paid the majority of the household expenses and that his mother wished to ensure that in the event that anything happened to her Mr McFarlane would be in a position to remain at the property. I was also advised by Mr McFarlane that he had a stepsister who did not reside at the family home.
[12]Exhibit P12 – Letter from Janeen Milne, Milne Lawyers to Nick Smith, State Trustees dated 9 May 2018.
Milne Lawyers prepared documents to enable the transfer of the Glenrowan property to Mr McFarlane. Both Mrs McFarlane and Mr McFarlane attended at the office of Milne Lawyers on either 25 or 26 November 2015 to sign the documents. Ms Milne later wrote:[13]
At that time Mrs McFarlane confirmed that it was her wish that if anything happened to her that her son could continue living at the Glenrowan property and that she wished to transfer the property to him to guarantee that he was able to do so. Mrs McFarlane at no time appeared to me to be confused or under any duress.
[13]Exhibit P12 – Letter from Janeen Milne, Milne Lawyers to Nick Smith, State Trustees dated 9 May 2018.
The transfer was witnessed by a trainee lawyer with Milne Lawyers, and was dated 26 November 2015. It transferred the fee simple in the land at 139 Warby Range Road, Glenrowan to Mr McFarlane, in consideration of natural love and affection.
No-one from Milne Lawyers met separately with Mrs McFarlane to take her instructions or provide her with advice in relation to the transfer. There was no correspondence between the firm and Mrs McFarlane.
Milne Lawyers arranged for the stamping and registration of the transfer. The transfer was registered on 4 January 2016, and a title search for the Glenrowan property produced on 4 April 2018 records Mr McFarlane as the registered proprietor.
Mrs McFarlane and Mr McFarlane had different accounts of the circumstances surrounding the transfer.
While Mr McFarlane did not give evidence at the trial, he set out his version of events in a letter to State Trustees dated 19 June 2018. He maintained that he had always had a loving relationship with his mother, and that they had remained close after he left home in 1981. He said that his mother told him she had purchased the Glenrowan property to be closer to him, as he was living in Sydney at the time. He continued:[14]
[14]Exhibit P10 – Letter from Mark McFarlane to Nick Smith, State Trustees dated 19 June 2018.
Out of a duty of love and care for my Mum and after discussion and agreement between all three of us (Judy, Nicole and myself) it was decided for me to move into the house at 139 Warby Range Road, Glenrowan. So in March 2012, I subsequently chose to leave my work and life in Sydney to join them in Glenrowan.
…
Nicole, my step-sister, no longer wanted to care for our mother by January 2013, and she soon moved out of the family home.
…
I was left as the sole full time carer for Judy from then on. There was no one else left who was willing, committed, or able to undertake the care of my mother. So I became the person responsible as Judy’s only Son and oldest child.
We had three (3) great years of life together after my sister chose to leave.
As my mother’s sole carer, I helped her with eating healthy, exercising, staying correctly medicated as prescribed, taking her to social outings and appointments. I also ensured the household bills were paid.
I maintained the property through maintenance, extra building works, painting, gardening and property improvements.
These all contributed to my mum’s increased happiness and wellbeing. So much so that she saw fit to transfer the property into my name out of love and affection for my sacrifice for her. The property was transferred to me of her own free will by January 2016. She did this knowing I was there for support, and I still am today.
From time to time my mother would have anxiety attacks and self-harm episodes: usually once every six (6) months on average. Through all this I continued to provide care, support and a place of safety.
We consulted with her Doctor to change her medication, but the anxiety attacks would still occur from time to time.
I was the only one who was there for my mother and supported her until November 2016 at our Glenrowan address. That was when we were torn apart.
…
Long before you knew my mother’s name, I loved her and cared about her. You weren’t there. You weren’t even in her life then. I was!
My mother wanted to bless me with the ownership of the family property, as I have always put my heart and soul into it and her. This is what families do.
In no way was my mother unduly influenced to give me the property. My mother and I discussed, as a family, every move towards making this a reality, I continue to provide support in every way, (care, financial support, and a safe home) for my Mother).
If anyone took the time to ask her, they would know that.
His defence filed in this proceeding on 8 March 2019 was to similar effect:
I, Mark Edward McFarlane, have always had a long term loving relationship with my mother, Judith (Judy) Ann McFarlane. She has always wanted me in her life, up until Wednesday the 6th of February 2019 due to outside influences, both corporate and personal.
In February of 2012 we decided I should return to live with my mother. This was at a time when my sister was not coping with our mother due to her own mental illness. They had moved to Glenrowan to be closer to me. I subsequently left my life in Sydney to live with them both. I took care of both my mother’s needs and her property maintenance issues.
I was approved by Centrelink (Department of Human Services) to be my mother’s primary carer by 2014, and started as a Carer Pensioner. My sister Nicole Georgette McFarlane had left, and eventually married.
My mother was free to socialise in activity groups, church outings, with local friends and family, while in my care.
My mother was never under any Order, Power of Attorney or assigned Administrator that said she wasn’t capable of dealing with her own finances during my care of her.
In November of 2015, my mother decided to gift the property to me out of natural love and affection for all I was doing for her. The gifting was complete by February 2016. At the time, and as Christians, we (Judy and I) would never employ Lawyers to decide our own family business. We are warned in the Bible to not take our dealings through the courts and its mechanisms.
Judy is in the enviable position of a double pension (both Aged Pension and Defence Force Retirement & Death Benefits Scheme Pension), so my mother and I knew her financial future would be fine.
My mother had one whole year to communicate that she had made any kind of mistake in gifting me the property. She did not until St. Johns Retirement Village and State Trustees Limited set their sights on my property.
Mrs McFarlane’s evidence painted a rather different picture. She said:[15]
He forced me into it. He got so angry I thought he was going to hit me if I didn’t write that he was in charge of my residence. He was so angry.
She described feeling sorry for Mark because he ‘didn’t have a father’,[16] and said that whatever he wanted she would give. She did not say ‘no’ when Mark said he was going to put the house in his name ‘because he was in the family’: ‘I felt so sorry that he was mean and nasty to me’.[17]
[15]Transcript 44:28–30.
[16]Transcript 45:16–18.
[17]Transcript 46:3–7.
Mrs McFarlane remembered going to see the lawyer, she said that her son ‘had it all booked in’.[18] She did not see the lawyer on her own, without her son present. She received no advice about how the gift would affect her pension.
[18]Transcript 46:10–11.
Mrs McFarlane confirmed that she had told the lawyer that the transfer was a gift. Her evidence was that she said that because she was frightened of Mark. Later in her evidence, she explained that she was frightened of him because he was very angry and he had two guns and might shoot someone. She said:[19]
He had the most angry face in the world. His eyes were … glaring, his mouth was awful, he was a bad man. But … I was sorry for him, I’d do anything he wanted ‘cos I was sorry for him ‘cos … my husband left him.
[19]Transcript 53:6–10.
Where there is conflict between Mrs McFarlane’s evidence and the account given by Mr McFarlane to State Trustees and in his defence, I prefer Mrs McFarlane’s evidence. I consider Mr McFarlane’s account to be self-serving and unreliable. My reasons for forming that view are:
(a) Mrs McFarlane gave sworn evidence at the trial, which Mr McFarlane chose not to do.
(b) Mrs McFarlane impressed me as a disarmingly frank witness. There was nothing contrived or artificial about her evidence. She gave a particularly clear explanation of her mixed emotions when her son asked her to sign the transfer, and why she did so.
(c) Mrs McFarlane’s statement that she was frightened of Mr McFarlane was consistent with Ms Bodinnar’s evidence about the way Mr McFarlane treated their mother. Ms Bodinnar was a guileless witness who appeared to me to give an honest account of what she had seen and heard take place between her mother and Mr McFarlane while they lived together at Glenrowan.
(d) Mr McFarlane’s account of how he came to be living with his mother at Glenrowan conflicted with his instructions to Milne Lawyers, that he had moved there from Sydney after a marriage breakdown.
(e) Mr McFarlane’s claim that they had consulted his mother’s doctor to change her medication was not supported by Dr Radaei’s evidence or by the clinic’s records for the relevant period. To the contrary, the recommendations made by Dr Radaei in the mental health plan prepared in November 2014 were not acted on by Mr McFarlane. The home medication review did not take place and Mrs McFarlane did not see a psychologist or psychiatrist.
(f) There was no indication in Mrs McFarlane’s medical records, her mental health treatment plan, or Dr Radaei’s evidence of a history of self-harm, despite her longstanding mental illness.
(g) Mr McFarlane’s departure from the courtroom early in the trial was accompanied by an angry display of shouting and thumping of books. In light of his behaviour in court, I had no difficulty believing that his behaviour towards his mother was sometimes angry, even violent, and had caused her to be frightened of him.
After the transfer
In January 2016, Mrs McFarlane was admitted to the Wangaratta Hospital after a fall. Ms Bodinnar recalled that she was bruised and battered, on her face, her arms, and her legs. She said that her mother told her, ‘Mark hit me, he hurt me’.[20] Ms Bodinnar was shocked by what she saw that night.
[20]Transcript 33:28.
Mrs McFarlane was vague about the reasons for her hospital admission in January 2016. She mentioned having a blood nose that would not stop bleeding. She also said that she had been bruised when Mr McFarlane picked her up and threw her onto her bed, although it was not clear to me whether that occurred in January 2016 or at a later time. There was no suggestion that she was in hospital because she had hurt herself.
Mrs McFarlane said that, when she was living with her son, he yelled at her all the time. She said that he called her a ‘hairy bum’ and ‘the old cheese’.[21] She said that he locked her in her room:[22]
Because I was walking up and down the corridor and he couldn’t sleep. But, he could’ve given me a cup of tea and been nice to me, but he was really mean. I thought he was going to hit me. He put his hand up to hit me.
She also said that he had thrown water over her, and grabbed her and thrown her on the bed.
[21]Transcript 47:17–18.
[22]Transcript 47:23–27.
The timing of these events was a little unclear, although Mrs McFarlane said they occurred before she moved to St John’s. She said:[23]
He locked me in my room, he threw water over me and grabbed me and threw me on the bed and I had to leave because I wasn’t happy there.
She reported this to the police, who asked her if she wanted to press charges. She told them she did not, because she did not want Mr McFarlane to go to gaol.
[23]Transcript 47:20–22.
The transfer of the Glenrowan property affected Mrs McFarlane’s age pension. As at 4 January 2016, Centrelink assessed her as having gifted Mr McFarlane $260,000, which it deemed to be an income generating asset. This reduced her pension by $148 per fortnight over a five-year period, a total of $19,240. The deeming period ended in January this year.
Mrs McFarlane moved to St John’s in Wangaratta in November 2016. She is happy there. However, because she no longer owned her home, and had no other assets, she was unable to pay a refundable accommodation deposit when she moved to St John’s. This means that, in addition to the basic daily fee, St John’s charges her a daily accommodation payment of $55.23. Those payments totalled, at the date of the trial, $88,699.38. St John’s has also charged her a means tested fee, based on Centrelink’s assessment of the ‘gift’, a total of $20,913.75 over the five-year deeming period.
The Tribunal appointed State Trustees as Mrs McFarlane’s administrator on 24 August 2017. This order could only have been made if the Tribunal was satisfied that Mrs McFarlane had a disability and was, by reason of the disability, unable to make reasonable judgments in respect of matters relating to her estate, and that the appointment would be in her best interests.[24]
[24]Guardianship and Administration Act 1986 (Vic), s 46(1), (3).
The appointment was reviewed and renewed by the Tribunal on 22 June 2018. That administration order records the Tribunal’s satisfaction that Mrs McFarlane has a disability, is unable by reason of that disability to make reasonable judgments about her estate, and needs an administrator.
State Trustees has prepared an asset and liability statement and a proposed budget for Mrs McFarlane. As at 19 March 2021, she had accrued arrears in her aged care payments to St John’s of nearly $95,000. Even now that her age pension is no longer affected by Centrelink’s deeming of the gift to be an income generating asset, her expenses will exceed her income by about $450 per fortnight. As Mr Smith of State Trustees explained, Mrs McFarlane’s current financial position is not sustainable for any length of time. By contrast, if the transfer were to be set aside, she could sell the property, pay her debts, and pay a partial refundable accommodation deposit, which would reduce the daily accommodation payment charged by St John’s. In those circumstances, Mrs McFarlane would be able to live within her means.
Mr Smith said that, if the Court made orders setting aside the transfer, State Trustees would make a hardship application to Centrelink on Mrs McFarlane’s behalf. He considered it possible that Centrelink would readjust her pension entitlements for the period during which the transfer was deemed to be an income generating asset. Although he could not predict the outcome of the hardship application, it was certainly something that State Trustees would attempt.
Was the transfer procured by undue influence?
Principles
The equitable doctrine of undue influence applies ‘whenever one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his part’.[25] Undue influence can ‘arise from widely different sources’,[26] including abuse of confidence, excessive pressure, and imbalance of power. It is presumed to be a feature of some relationships, such as solicitor and client, or guardian and ward. Outside of those recognised categories, a presumption of undue influence may also be raised ‘by proof that the history of the particular relationship involved one party occupying a similar position of ascendency or influence, and the other a corresponding position of dependency or trust’.[27]
[25]Johnson v Buttress (1936) 56 CLR 113, 134–135 (Dixon J).
[26]Thorne v Kennedy (2019) 263 CLR 85, [30] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
[27]Thorne v Kennedy, [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
In the case of a transaction that benefits the stronger party in a relationship of undue influence, equity may intervene to protect the weaker party, including by setting aside the transaction. A presumption of undue influence may be rebutted if the stronger party proves that ‘the particular transaction or transfer, in its particular circumstances, was nevertheless the result of the weaker party’s free will’.[28] The onus rests on the stronger party to demonstrate that the transaction was the ‘independent and well-understood’ act of the weaker party.[29]
[28]Thorne v Kennedy, [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
[29]Johnson v Buttress, 134 (Dixon J); see also, 123 (Latham CJ), 143 (McTiernan J).
Consideration
The evidence in this case establishes that Mr McFarlane was in a position of ascendancy and influence over his mother, who depended upon and trusted her son. I place particular reliance on the following matters:
(a) Mr McFarlane was living with his mother as her carer. On his own account, he was recognised by Centrelink as her primary carer from 2014, and was receiving a carer payment in recognition of his caring role.
(b) After Ms Bodinnar moved to Albury in 2014, Mrs McFarlane was living alone with her son in the house at Glenrowan. While she was financially independent, she was dependent on him to drive her to the shops and to medical and other appointments.
(c) Mrs McFarlane has a long history of very serious mental illness. A neuropsychological assessment in 2011 found a ‘cognitive profile of primary impairments of executive functioning and attention’ which was ‘consistent with long-standing schizophrenia’.
(d) Before Mrs McFarlane moved to Glenrowan, her mental state had been monitored regularly by her case manager at the Peter James Centre at Eastern Health, which provides mental health services for aged persons. She does not appear to have received the same level of care after the move. The mental health treatment plan prepared by Dr Radaei in November 2014 was rudimentary in comparison to the case closure summary prepared by Eastern Health in January 2012. More importantly, Dr Radaei’s treatment recommendations were not acted on by Mr McFarlane. He did not facilitate the recommended home medication review and did not arrange for his mother to be assessed by a psychologist or a psychiatrist.
(e) On occasion, Mr McFarlane behaved towards his mother in an abusive manner. He shouted at her, called her names, and pushed her around. I am in no doubt that she was frightened of him, and of what he might do to her if she refused to sign the transfer.
(f) At the same time, Mrs McFarlane felt sorry for Mr McFarlane because his father had abandoned him, and so ‘whatever he wanted I’d give’.[30] She conveyed very clearly that this made it difficult for her to say no to him, even though he was ‘mean and nasty’[31] towards her.
[30]Transcript 45:18.
[31]Transcript 46:7.
Mr McFarlane did not attempt to displace the presumption of undue influence. He did not demonstrate that the transfer was his mother’s free, independent, and well-understood act, notwithstanding his influence over her. The evidence is to the contrary. It is significant that Ms Milne, the solicitor engaged by Mr McFarlane, never saw Mrs McFarlane without her son also present, did not obtain instructions separately from her, and did not advise her about the consequences of the transfer or alternative means of providing for Mr McFarlane. It is also significant that Mrs McFarlane did not have the benefit of independent financial or legal advice before signing the transfer. She clearly did not understand that transferring the property to her son would affect her age pension, or her future ability to pay for aged care accommodation.
I find that the transfer of the Glenrowan property by Mrs McFarlane to Mr McFarlane was vitiated by undue influence.
Was the transfer unconscionable?
Principles
The equitable concept of unconscionability is related to, but distinct from, undue influence. Because the two concepts overlap, the same circumstances can give rise to a conclusion that a transaction is the result of both undue influence and unconscionable conduct.[32]
[32]Thorne v Kennedy, [39]–[40] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
The essence of an unconscionable transaction is that the stronger party exploits some special disadvantage affecting the weaker party:[33]
A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring “victimisation”, “unconscientious conduct”, or “exploitation”. Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage.
[33]Thorne v Kennedy, [38] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ) (citations omitted).
Where these circumstances are shown to have existed, the onus is on the stronger party to show that the transaction was ‘fair, just and reasonable’.[34]
[34]Louth v Diprose (1992) 175 CLR 621, 637 (Deane J).
Consideration
I am satisfied that Mrs McFarlane was in a position of special disadvantage in relation to her son, for the reasons discussed at [45] above. Due to her longstanding schizophrenia, she had impaired executive functioning and attention, and was not receiving the treatment for her condition recommended by her general practitioner. In addition, she was emotionally and physically vulnerable to Mr McFarlane. These matters impaired her ability to make independent judgments about her best interests.
As her primary carer, who accompanied her to medical appointments, Mr McFarlane was aware of her history of mental illness and the fact that she was prescribed medication for that illness. He was also aware of Dr Radaei’s treatment recommendations, although he did not act on them. Additionally, his letter to State Trustees[35] and his defence[36] demonstrate that he was aware of his mother’s emotional and physical dependence on him — he described himself as his mother’s sole or primary carer, and ‘the only one who was there for my mother’.
[35]Set out at [27] above.
[36]Set out at [28] above.
I find that Mr McFarlane took unfair advantage of his mother’s vulnerability by arranging for her to transfer the Glenrowan property to him. He instructed a solicitor to prepare the transfer documents without also arranging for his mother to receive independent financial and legal advice. After he became the registered proprietor of the Glenrowan property, he continued his abusive behaviour towards his mother, and has since maintained that he is entitled to the benefit of the transfer. As discussed,[37] he has not demonstrated that the transfer was fair, just and reasonable. I find that the transfer was vitiated by Mr McFarlane’s unconscionable conduct.
[37]See [46] above.
Disposition
State Trustees, on Mrs McFarlane’s behalf, sought orders setting aside the transfer, and equitable compensation for the loss suffered by Mrs McFarlane as a result of the transfer.
I have found that the transfer was vitiated by undue influence and by Mr McFarlane’s unconscionable conduct. I am satisfied that the Court should grant equitable remedies setting aside the transfer from the beginning, and restoring Mrs McFarlane to the position she was in before the transfer. Mr McFarlane did not contend in his defence that equitable relief should be refused on discretionary grounds, and the evidence did not reveal any basis on which I might do so.
Following the hearing, further written submissions were filed for Mrs McFarlane addressing the precise form of the orders sought, and the basis on which she claimed equitable compensation.
Orders setting aside the transfer
The following orders were sought in favour of Mrs McFarlane, to set aside the transfer and restore her as the registered proprietor of the property:
1. Declare that the defendant holds the property known as 139 Warby Range Road, Glenrowan, Victoria and more particularly described in Certificate of Title Vol 8881 Folio 157 on constructive trust in favour of and for the benefit of the plaintiff.
2. Declare that the Transfer of Land dated 26 November 2015 registered in dealing number AM446538N is void ab initio and is set aside.
3. Order the Registrar of Titles for the State of Victoria to cancel Certificate of Title Vol 8881 Folio 157 containing the land in Lot 1 on Plan of Subdivision 091333.
4. Order the Registrar of Titles to create a new folio of the Register and paper Certificate of Title for the land in Lot 1 on Plan of Subdivision 091333.
5. Declare that for the purposes of subsection 27B(6) of the Transfer of Land Act 1958 that State Trustees Limited (as administrator of Judith McFarlane) is the person entitled to delivery of the paper Certificate of Title to be created pursuant to Order 4.
6. Direct the Prothonotary to sign and lodge any instrument, including a transfer of land, on behalf of the defendant to transfer the registered proprietorship in the land in Lot 1 on Plan of Subdivision 091333 to the plaintiff.
Orders were sought in this form following consultation with the Registrar of Titles, who drew attention to the authority of Marchesi v Registrar of Titles.[38] Proposed orders 3 and 4 invoke the Court’s power in s 103 of the Transfer of LandAct 1958 (Vic) to direct the Registrar to do specific acts to give effect to a judgment of the Court. Proposed order 6 recognises the Registrar’s preference that a change in the Register be made based on an instrument of transfer rather than a court order.
[38](2010) 30 VR 397 (Marchesi).
Section 103 of the Transfer of Land Act provides:
General provision as to correction of errors etc.
(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)…
(1AB)The Registrar may only make amendments to the Register under subsections (1) and (1AA) if an application in the appropriate approved form is lodged.
…
A ‘court’ for the purposes of s 103 is a court of competent jurisdiction.[39]
[39]Transfer of Land Act 1958 (Vic), s 4(1) – definition of ‘court’.
The authorities regarding s 103 of the Transfer of Land Act were considered in Marchesi.[40] Ferguson J noted that, in two early decisions, judges of this Court had taken the view that the power under s 103(1) was a measure of last resort, due to the risk of fraud or other improper dealing if there were two duplicate certificates of title for the same land at the same time.[41] Once a solution to this problem was identified, which involved cancelling the existing title and issuing a fresh title, this concern fell away. On that basis:[42]
While caution must be taken in making such orders, I do not think that it is necessary to exhaust every other avenue if doing so would not serve any practical purpose but rather would only serve to delay an inevitable application under the section at a later time. However, if there are other practical steps that can be taken that are likely to result in the production of the title without the need for orders under s 103(1) being made, then that route should be pursued in the first instance.
[40]Dotter v Evans [1969] VR 41; Casella v Casella [1969] VR 49; Rizos v Rizos [1970] VR 150; Marshall v Williams [1974] VR 592; Haslam v Money for Living (No 2) [2007] FCA 1981; Oxley v Boon [2009] VSC 222, discussed in Marchesi at [12]–[18].
[41]Marchesi, [19].
[42]Marchesi, [19].
In this case, I do not consider that any practical purpose would be served by first ordering Mr McFarlane to deliver the existing duplicate certificate of title to the Registrar (or anyone else), as a first step in restoring Mrs McFarlane as the registered proprietor. He made it quite plain that he did not accept the Court’s jurisdiction. Although his objection was misconceived, it was forcefully made, and emphasised by the manner of his departure from the hearing. I consider that there is no real prospect of Mr McFarlane complying with an order that he deliver the existing duplicate certificate of title to the Registrar, to State Trustees, or to the Court. Nor is there any real prospect that he will sign an instrument of transfer in favour of his mother, to give effect to the judgment of the Court.
I will make orders setting aside the transfer in the form proposed on behalf of Mrs McFarlane.
Equitable compensation
It was submitted for Mrs McFarlane that the remedy of equitable compensation is available where a transaction is vitiated by undue influence or unconscionable conduct. I accept that submission. Equitable compensation may be ordered to remedy a wide variety of equitable misbehaviour, beyond cases involving a breach of trust or other fiduciary duty.[43] This is consistent with the principle that equity will intervene where a stronger party has exerted undue influence or has taken unconscientious advantage of a weaker party’s special disadvantage because the stronger party ‘falls under a duty in which fiduciary characteristics may be seen’.[44]
[43]Smith v Glegg [2005] 1 Qd R 561, [64]; Truran v Cortorillo [2011] VSC 488, [46]. See also Hrycenko v Hrycenko [2019] VSC 700, [13], [17], in which it was accepted that equitable compensation was available for both undue influence and unconscionable conduct.
[44]Johnson v Buttress, 135 (Dixon J).
The evidence established that Mrs McFarlane has suffered the following losses as a result of the transfer:
(a) a total reduction in her age pension payments of $19,240, due to Centrelink deeming the gift to be an income generating asset;
(b) payment of a means tested fee to St John’s of $13.75 per day, a total of $20,913.75, also because Centrelink had deemed the gift as an asset; and
(c) because she was unable to pay a refundable accommodation deposit to St John’s, she has had to pay a daily accommodation payment of $55.23 per day, totalling $88,699.38 to 30 March 2021.
Mrs McFarlane’s total loss suffered to 30 March 2021 as a result of the transfer is $128,853.13. I will order Mr McFarlane to pay equitable compensation to his mother in that amount, less any amount that State Trustees is able to recover from Centrelink on her behalf.
State Trustees proffered an undertaking to do all things reasonably required to bring this judgment to the attention of the proper officer of Centrelink, and make an application for the payment of entitlements that, but for the transfer, would have been made to Mrs McFarlane but were not, and to notify Mr McFarlane of the outcome of that application. I accept that undertaking.
In relation to the costs of the proceeding, the usual rule is that the unsuccessful party must pay the successful party’s costs, unless there are special circumstances that justify a departure from that rule. Mrs McFarlane has been wholly successful in this proceeding, and so Mr McFarlane should be ordered to pay her costs of the proceeding unless there is some good reason for making a different order. If Mr McFarlane seeks a different order as to costs, he may file and serve a written submission setting out that order and the reasons why he says it should be made, by 7 May 2021.
Postscript
My associate emailed the parties on 20 April 2021, advising that judgment would be handed down at 9.30 am on 23 April 2021. On 21 April 2021, Mr McFarlane sent the following email to my chambers:[45]
[45]My associate forwarded the email to the solicitor for State Trustees the following day, as Mr McFarlane had not copied the email to him.
Dear Justice Richards,
You have stated that you will be making judgement on Friday morning (23rd April 2021). It is for this reason I have sent you a copy of my Estate “Fee Simple” Title to show you my Land rights under Constitutional Law.
Australia is a Common Law country, and property-owners have rights at law, particularly through the High Court ruling by Mr Justice Kirby in September 1998. Property owners whose land is held under Deeds in Fee Simple have the right to refuse to agree to the takeover of their land for this or any other purpose.
Fee Simple rights, particularly the High Court ruling given by Mr Justice Kirby, in September, 1998, when he made his decision by using an earlier High Court case (1923) when Mr Justice Isaacs settled a dispute by confirming to the property owner in the case the rights conferred on all property-owners under their Freehold Deeds in Fee Simple.
Under the current laws in Australia, both State and Federal, it is absolutely illegal for the Government “to take what it wants”, or indeed to dictate in any way what property-owners must do or not do in regard to their lands held under Deeds in Fee Simple so long as we retain our Common Law status under our legally unchangeable Christian Monarchical Constitutions, which apply both State and Federally.
Property rights are essential to freedom, justice, peace and prosperity. They are basic rights of ownership.
I do note your inability to understand that Oral Evidence is Hearsay, and do hope that you did not act out of the Law with regard this fact.
I also note your inability to understand that The SUPREME COURT of Victoria, is only acting as a Government owned Corporation, and has, in no way, any grant of power under our Australian Commonwealth Constitution, with the Queen removed.
I do not consent to undertaking commerce with your organisation.
Yours in Good Faith,
Mark McFarlane.
Mr McFarlane attached a copy of the certificate of title for the Glenrowan property, which records him as the registered proprietor.
I note the following in relation to the points raised in this communication:
(a) It is not in dispute that Mr McFarlane is, currently, the registered proprietor of the Glenrowan property, and that he holds the unencumbered estate in fee simple in the property. However, as I have found, he became the registered proprietor as a result of a transfer that was vitiated by undue influence and unconscionable conduct on his part. I have determined to grant equitable remedies to Mrs McFarlane, setting aside the transfer from the beginning, restoring her as the registered proprietor, and requiring Mr McFarlane to pay equitable compensation for the loss she has suffered.
(b) The case concerns private property rights, and whether the transfer of the Glenrowan property by Mrs McFarlane to Mr McFarlane should be set aside. There is no question in this case of any government agency acquiring the Glenrowan property or dictating what is to be done with it.
(c) I have applied the common law, including equitable principles, in deciding the case.[46]
[46]See in particular [43]–[44] and [48]–[50] above.
(d) I applied the rules of evidence during the trial.[47] I did not permit Mrs McFarlane to rely on an affidavit of Mr Smith that contained a great deal of hearsay, or to tender file notes of out of court conversations.[48] Some hearsay evidence presented on behalf of Mrs McFarlane was received, on the basis that it came within the business records exception to the hearsay rule.[49]
[47]Transcript 3:21–31, 12:6–10.
[48]Transcript 12:19–21.
[49]Evidence Act 2008 (Vic), s 69; Transcript, 12:25–13:12, 60:22–31; Plaintiff’s further submissions received 16 April 2021, [25]–[33].
(e) As explained,[50] there is no basis for Mr McFarlane’s contention that the Court is unconstitutional, or that the Queen has been removed.
[50]See [7]–[10] above.
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