Miller v Begeda

[2009] QDC 122

DISTRICT COURT OF QUEENSLAND

CITATION:	Miller v Begeda [2009] QDC 122
PARTIES:	DOROTHY MAY MILLER
Planitiff
and BETTINA FAYE BEGEDA
Defendant
FILE NO:	136 of 2008
DIVISION:	Civil
PROCEEDING:	Trial
ORIGINATING
District Court at Maroochydore
COURT:
DELIVERED ON:	19 May 2009
DELIVERED AT:	Maroochydore
HEARING DATE:	7 and 8 May 2009
JUDGE:	K S Dodds, DCJ
ORDER:	Judgment for the plaintiff against the defendant for $153,827.30 together with interest thereon at 10% from 1 May 2007 to judgment
CATCHWORDS:	EQUITY – GENERAL PRINCIPLES – FIDUCIARY OBLIGATIONS – PARTICULAR CASES – where plaintiff elderly mother of defendant – where defendant in a fiduciary relationship with plaintiff – where defendant operated bank account of plaintiff – whether breach of fiduciary duty – whether there was failure to account by the defendant
Cases cited: Chan v Zacharia (1983) 154 CLR 178
Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41
Maguire v Makaronis (1997) 188 CLR 449
Harrison & Anor v Schipp; Cameron & Anor v Schipp [2001] NSWCA 13
COUNSEL:	P White for the plaintiff The defendant appeared on her own behalf
SOLICITORS:	ABA Lawyers for the plaintiff The defendant appeared on her own behalf

1. This is a claim for equitable damages, alternatively for money had and received by the defendant to the use of the plaintiff.

2. At trial the defendant acted on her own behalf assisted by her defacto partner, one Neil Koplick. Before the claim was issued and during the interlocutory stages of the proceeding, she was represented by a firm of solicitors, Welsh and Welsh. In early January 2009 the matter was set down for trial on 7 and 8 May 2009. On 20 March 2009 Welsh and Welsh upon their application, were given leave to withdraw as the defendant’s solicitors. On the morning of the trial the defendant made an application for an adjournment of the trial. She said she wished to retain legal assistance, that she had approached a solicitor the previous day. The application for adjournment was refused. The plaintiff is an 88 year old woman who does not appear to be in particularly robust health. There was delay in any apparent attempt to obtain legal assistance, until the day before trial.

3. The defendant is the daughter of the elderly plaintiff. In February 2006 the plaintiff sold her home and moved in with the defendant. The net funds she had received from the sale of her home - $267,895.45 was deposited to Maleny and District Community Credit Union Limited (the Credit Union) as follows: $100,000 of it was put in a fixed term deposit for 12 months and $167,895.45 in an account with the Credit Union. The plaintiff authorised the defendant to operate the Credit Union account. By 15 August 2007, $88,000 remained in the fixed term deposit, $12,000 having been redeemed on 1 March 2007 and interest earned on the deposit totalling $7801, having been withdrawn. $1069.15 remained in the other account.

4. In the defendant’s defence, allegations in the statement of claim that “at all material times, the plaintiff was in a relationship of intimate trust and dependency upon the defendant” and that “the defendant was the plaintiff’s carer” and “owed the plaintiff fiduciary duties in the circumstances of their relationship” were admitted.

5. After considering the evidence, these admissions are borne out. The plaintiff was elderly. By arrangement with the defendant, she had sold her home and was to be accommodated by the defendant. By arrangement with the defendant her bank account with the ANZ bank was closed and an account opened with the Credit Union into which the money she had received for her home was placed. The defendant was authorised to operate the account on her behalf.

6. Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41 is a judgment on appeal to the High Court. Mason J said that “the critical feature” (of fiduciary relationships) “is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will effect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of its position.” [1]

   [1] At page 96.

7. The defendant occupied a fiduciary position viz a viz the plaintiff and in particular with respect to the use of the plaintiff’s money in the credit union. As such, she could not “use that position to gain a profit or advantage” for herself or any other third party nor “obtain a benefit by entering into a transaction in conflict with (her) fiduciary duty without the informed consent” of the plaintiff.[2]

   [2] Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41 at 67 per

8. In his judgment in the Hospital Products case Mason J said that the fiduciary “is under an obligation not to promote his personal interests by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the person whom he is bound to protect---” that “proposition, in accordance with the authorities (a) excludes the relevance of an enquiry into the actual motives of the fiduciary; and (b) excludes restitutionary relief when the interest of the fiduciary is remote or insubstantial.”[3] His Honour also said “the fiduciary cannot be permitted to retain a profit or benefit which he has obtained by reason of his breach of fiduciary duty---. A fiduciary is liable to account for a profit or benefit if it was obtained (1) in circumstances where there was a conflict or possible conflict of interest in duty, or (2) by reason of the fiduciary taking advantage of opportunity or knowledge which he derived in consequence of his occupation of the fiduciary position.”4

   [3] At page 103. 4 At page 107.

9. In Chan v Zacharia (1983) 154 CLR 178 another judgment on appeal to the High Court Deane J said of a fiduciary’s liability to account for personal benefit or gain “the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or a significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee”.[5]

   [5] At page 199.

10. The plaintiff left the defendant’s home in late June 2007 and has not returned. On 24 July 2007 solicitors acting for her wrote to the defendant at her property at 111 Tamlin Road, Kenilworth. The letter advised the solicitors were acting on behalf of the plaintiff. It continued “You recently encouraged our client to sell her property located at 23 North Maleny Road, Maleny, on the basis you indicated you and your husband would construct for Ms Miller a home on your own property located at Tamlin Road, Kenilworth---. The sale proceeds derived upon the settlement of the sale of that property were deposited to a Maleny and District Community Credit Union Limited account or accounts. Ms Miller is currently checking as to whether the whole of the sale proceeds remain in that account or accounts has been withdrawn for purposes that Ms Miller cannot recall. In that regard could you please clarify, as we understand you were assisting your mother in respect of the sale of her property, as to whether (to the best of your knowledge) the whole of the sale of the proceeds remain in Ms Miller’s Credit Union account or if there has been withdrawals to your knowledge and if so, the purpose of those withdrawals. We are in any event clarifying that issue directly with the Credit Union itself---.” The defendant did not respond to that letter.

11. By claim filed on 22 May 2008 the plaintiff commenced the present proceeding.

12. The defendant’s defence was filed on 1 August 2008. In it she asserted that she was authorised by the plaintiff to operate the “bank account” with the Credit Union “for day to day banking activities as and when required or requested, for the purpose of attending to medical expenses, personal needs, and costs associated with construction of the dwelling on property where the defendant resided” and for the “plaintiff’s needs in relation to food and groceries”. Regarding the withdrawal of $12,000 from the fixed term deposit by way of early redemption, the defence asserted the defendant withdrew that sum with the authority, knowledge and consent of the plaintiff “to facilitate the construction of a dwelling for the plaintiff on the defendant’s property”. The defence further asserted that the defendant had made some withdrawals from the account, which withdrawals were all directed towards the benefit, care and wellbeing of the plaintiff or for the construction of a dwelling for the plaintiff on the defendant’s property.

13. On 15 October 2008 the plaintiff’s solicitors wrote to Welsh and Welsh seeking particulars of aspects of the defence. The letter sought particulars of how funds withdrawn to facilitate the construction of a dwelling for the plaintiff were applied, for what purpose, the amount and the date. Similar particulars were requested for withdrawals which were allegedly for the benefit, care and wellbeing of the plaintiff. Particulars were requested of each and every withdrawal by the defendant from the plaintiff’s account, the purpose, the date and the amount. Documentary evidence supporting the expenditures was requested. A number of specific withdrawals evidenced by withdrawal slips were listed and answers were sought from the defendant with respect to each of them.[6]

    [6] See Exhibit 1.

14. Welsh and Welsh responded by letter dated 5 November 2008. Regarding the $12,000 withdrawn as an early redemption from the fixed term deposit on 1 March 2007, the letter advised that the defendant’s defacto partner (Neil Koplick) had paid $12,000 for the purchase of a portable timber mill from Lucas Mills Victoria for the purpose of milling timber for the construction of the plaintiff’s residence on the defendant’s property. It further set out details of the purpose of specific withdrawals that had been specified in the plaintiff’s solicitor’s letter. Those specific withdrawals are evidenced in the bank statements from the Credit Union for the period between 28 February 2006 and 15 August 2007[7] and in withdrawal slips signed by the defendant.[8]

    [7] Exhibit 2.

    [8] Exhibit 3.

15. In the plaintiff’s case the plaintiff herself gave evidence. She is 88 years old. Her mobility was poor, her mental state seemed fairly intact. She said that she had been living in the house that was sold. Members of her family, including the defendant, would visit to see if she was alright. It had been suggested she’d be better off going to live with the defendant. She conceded some expenditure which had been particularised by the defendant in Exhibit 1, the letter from Welsh and Welsh to the plaintiff’s solicitors dated 5 November 2008, were expenditures authorised by her. They were, 6 March 2006 - $9500; 17 March 2006 - $500; 21 March 2006 $18,500; 22 March 2006 - $500; 13 December 2006 - $1700; 18 December 2006 - $500. These amounts were to be deducted from her claim. Except for about $100 per month for food and/or necessities, she did not authorise any other expenditure from the account.

16. The plaintiff could not recall any arrangement made with Centrelink in 2001 for payment of a pension, secured over her home to be repaid when her home was sold. According to the defendant, such an arrangement and loan with Centrelink existed and the plaintiff was paid a pension. The arrangement was made because the plaintiff’s assets at that time precluded her qualifying for a pension. On sale of her home the amount owing to Centrelink, $37,369 was paid to Centrelink from the account by the defendant. No documentary support was evidenced by the defendant. She said she had sought it from Centrelink but her entitlement to act as a nominated person for her mother with Centrelink had been blocked. Counsel for the plaintiff informed me his instructions were to concede the amount was a payment in the plaintiff’s interest.

17. The other witness in the plaintiff’s case was a private investigator, Mr Adams. The solicitors for the plaintiff had requested of the defendant to inspect the defendant’s property. They wished to view items claimed to have been acquired using the plaintiff’s money for the benefit of the plaintiff. Permission was refused. Mr Adams had gone to the vicinity of the defendant’s acreage property and taken photographs from the road on 30 November 2008. He had gone there again on 12 April 2009.

18. The contract price for the sale of the plaintiff’s home was $315,000.[9] Settlement date was 27 February 2006. The settlement statement[10] disclosed a balance at settlement of $312,302.59. On disbursement, $267,895.45 was paid to the plaintiff and $37,369.64 to Centrelink (there were some other disbursements which for present purposes are irrelevant). On 28 February 2006 the account was opened with the Credit Union and $267,895.45 was deposited. On the same date $100,000 was transferred to the term deposit for 12 months. The opening of the account with the Credit Union (and the closing of the plaintiff’s account with the ANZ bank) was done at the suggestion of the defendant.[11] The defendant assisted in these transactions and was authorised by the plaintiff to operate the plaintiff’s new account on her behalf. Thereafter the plaintiff resided at the defendant’s dwelling until late June 2007. During that period the defendant withdrew money from both the term deposit and the account, evidenced by the withdrawal slips which the defendant signed.[12]

    [9] See Exhibit 10.

    [10] Exhibit 9.

    [11] Paragraph 5(a)(i) and (ii) of the defendant’s defence.

    [12] See Exhibit 3.

19. Some withdrawals were cash withdrawals – see Exhibit 2, the bank statements for the account and the term deposit. Others, according to the withdrawal slips were for instance: direct payments to a G Twitt on 6 and 9 March 2006, $6000 on each occasion. According to Exhibit 1, the letter from Welsh and Welsh, these payments were for hire of a bulldozer (in her final address, the defendant said it was in fact for the purchase of a bulldozer); to Lucas Mills Victoria - $12,000 on 2 March 2007 for a portable timber mill. This payment coincides with the partial early redemption from the term deposit on 1 March 2007. All other withdrawals, which went as direct transfers, were into the account of the defendant’s defacto partner, Mr Koplick. The defendant said this was because he had a cheque facility with his account which could be used to pay bills. According to the letter from Welsh and Welsh, these were for a variety of expenditures which the defendant contended were all for the ultimate benefit of the plaintiff and were authorised by her.

20. No cheque butts or bank statements for Mr Koplick’s account were produced. Mr Koplick did not give evidence.

21. The defendant herself gave evidence. She called three other witnesses, her son, one of her sisters and a friend. The defendant’s witnesses all gave evidence that the defendant had assisted the plaintiff for years, taking her out, helping her maintain her residence, helping her with her shopping and so on. Her son said that the plaintiff from time to time gave him small amounts of money. The female friend said that she was aware that windows and other items to be installed in a house for the plaintiff had been purchased by the defendant. The defendant said for years she had assisted and looked after the plaintiff and had been prepared to continue to do so. When cross-examined about any documentation to support the claimed expenditures of money taken from the plaintiff’s account the defendant was unable to produce any, except Exhibit 14. The reason advanced was that receipts, invoices, etc. except for Exhibit 14, were not kept.

22. Reference to Exhibit 2 and 3 and to the letter from Welsh and Welsh in Exhibit 1 reveal that on 1 March 2006 $30,000 was withdrawn from the account. It was transferred to the account of Mr Koplick and was said to be for “labour for a house building and support and caring of the plaintiff”. On 6 March 2006 $500 was transferred to Mr Koplick’s account said to be a deposit on a building paid to Titan Sheds at Yandina. On 8 March 2006, $15,000 was withdrawn and transferred to Mr Koplick’s account said to be for the purpose of “purchase Maleny Towing business to allow Neil Koplick more time to work on building the house”. On 9 March 2006 the two amounts of $6000, said to be for hire of bulldozer were transferred to a G Twitt. On 9 May 2006, $5000 was withdrawn, transferred to Mr Koplick’s account said to be “deposit on a tow truck in relation to the towing business purchased by our client’s husband”. On 1 June 2006 $1200 was withdrawn and transferred to Mr Koplick’s account, said to be for “the provision of house drawings by Jason Lindsay consulting”. A number of other payments particularised were said to be to Titan Sheds for house construction, 15 August 2006 - $5000; 4 September 2006 - $6000. Others were said to be for concrete, road base, building materials. Two payments were said to be to reduce the overdraft of the account used to pay for work on the house and associated works (Mr Koplick’s account), 3 May 2006 - $2000; 28 September 2006 - $1000. There was the transfer of $12,000 to Lucas Sawmills on 2 March 2007, said to be for the purchase of a portable sawmill. Exhibit 2, the bank statements for the account and term deposit reveal that whenever interest accrued at three monthly intervals on the term deposit it was promptly withdrawn. There were five such occasions between 29 May 2006 and 28 May 2007.

23. House drawings were admitted into evidence as Exhibit 13, said to be the drawings the subject of $1200 for provision of house drawings by Jason Lindsay Consulting, although they do not appear on their face to be by Jason Lindsay Consulting. The defendant said it was the house that was to be built for the plaintiff. She agreed nothing had been done to commence construction of that house, nor had plans been submitted to the local authority.

24. A large zincalum or galvanised iron shed has been partially constructed on a hillside on the defendant’s land. It can be seen in Exhibits 7 and 8 – photographs taken by Mr Adams. One long side and one short side at right angles to each other are sheeted with zincalum or galvanised iron with no openings in them. Another short side shows studs without any sheeting applied. The far side, which appears to be the uphill side, appears to have nothing in it although the view is very restricted. The defendant said that side was to be fitted with sliding doors and windows which had been purchased.

25. What seemed to emerge from the evidence was that the shed I have referred to was to provide a place for the plaintiff to live until a house was built for her. Money from her account was spent preparing for and erecting the shed, money spent for the sawmill was so that her partner could mill timber for the house, money spent purchasing the towing business was so that her partner would not need to work for somebody else in a fulltime job and have time to spend in constructing accommodation for the plaintiff.

26. I am prepared to accept that the defendant has provided assistance to the plaintiff over the years, was prepared to have her live with her and provide the necessities of life for her. I do not accept however that after that arrangement commenced, that the plaintiff’s money withdrawn from the Credit Union account was used solely for the benefit of the plaintiff, or with the informed authority of the plaintiff. At best, money was withdrawn to benefit the defendant and/or her defacto partner, the justification being that she was providing and would continue to provide a place for the plaintiff to live and provide her with the necessaries of life and at some indeterminable future time build a house for her to live. Over a period of 16 months, putting to one side the conceded amounts, $155,427.30 was withdrawn. Of that, according to Exhibit 2, in excess of $23,000 was withdrawn as cash withdrawals. Not all, but many of these cash withdrawals totalling $14,500 were the subject of the plaintiff’s solicitor’s request for particulars.[13] The defendant’s solicitor’s response was that they were for the plaintiff. Further, $24,000 went by direct deposit to G Twitt and Lucas Mills. The rest of the $155,427.30 apparently was transferred to the account of the defendant’s defacto partner, Mr Koplick. No house has been built. The plans I have referred to have not been submitted to Council. There is a partly completed shed. The particulars provided by the defendant in Exhibit 1 suggest that $11,500 was paid to Titan Sheds at Yandina for deposit on building or house construction, $5000 to various suppliers for building materials, $15,000 for supply of concrete by a Michael Koplick, a relative of the defendant’s partner, $3000 for house materials or house construction materials, $2500 for supply of glass and windows, $1000 for the supply of materials, downpipes etc and $1000 for purchase of hardware for awnings and patio; a total of $38,000. Mr Koplick was paid $30,000, said to be for house building and support and caring for the plaintiff on 1 March 2006 the day after the account was opened. Putting to one side the bank statements and withdrawal slips the only documentary support for any of these expenditures is Exhibit 14, two delivery dockets for concrete from Rightmix Concrete of a total value of perhaps about $2000, both of which post date what is said in the particulars supplied (Exhibit 1), to be the date of the final payment of $5000 for supply of concrete by Michael Koplick.

    [13] Exhibit 1.

1. Even if it were to be accepted, that the plaintiff, in the early days of going to live with the defendant, in expectation a house was to be built for her on the defendant’s property, agreed to, for instance, $30,000 being transferred to Mr Koplick on 1 March 2006, there is no accounting for its use for that purpose. There has been no adequate accounting with respect to the use of the bulk of the money. Plainly much of it was used for purposes which would benefit the defendant and/or Mr Koplick. I do not accept this was done with the full informed consent of the elderly plaintiff.

2. The conclusion I have come to after considering the evidence is that the defendant has not accounted for the expenditure of $153,827.30 of the plaintiff’s money. Some of the cash withdrawn may have gone to her. It is not possible to say with any precision. The plaintiff said that she had, in effect, authorised withdrawal of about $100 per month from the account for food and necessities and it is conceded that $1600 should be deducted from $155,427.30. There is no house for the plaintiff. There is a partly constructed shed on a concrete slab on the defendant’s property. Some other improvements may have been done to the property.

3. When breach of fiduciary duty by a person in a fiduciary relationship with another, causes loss to that other, equitable compensation may be awarded to make good the loss. Interest representing what a plaintiff could have obtained by use of the money may also be awarded. Here the plaintiff seeks only simple interest on the amount of compensation.

4. In Harrison & Anor v Schipp; Cameron & Anor v Schipp [2001] NSWCA 13 Giles JA with the concurrence of Handley JA in the New South Wales Court of Appeal said that a fiduciary “whose breach of equitable obligation has deprived the plaintiff of money must make restitution by payment of not only the money, but interest representing what the plaintiff could have obtained from use of the money---” the fiduciary “is liable because he deprived the plaintiff of the money, not because he obtained the money for himself and so a fiduciary whose breach of equitable obligation causes loss to the plaintiff must make good the loss with interest even though he did not obtain the money”.[14]

   [14] At paragraph 130.

5. In Maguire v Makaronis (1997) 188 CLR 449 in the High Court, Brennan CJ, Gaudron, McHugh & Gummow JJ in a joint judgment said “The obligation of a defaulting trustee is essentially one of effecting restitution to the trust estate. In Target Holdings Ltd v Redferns [1996] 1 AC 421 at 434, Lord Browne- Wilkinson said:

   ‘The equitable rules of compensation for breach of trust have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries' rights can be protected is to restore to the trust fund what ought to be there. In such a case the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss. Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee to restore the trust estate.’

   His Lordship continued----

   ‘If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed ... Even if the immediate cause of the loss is the dishonesty or failure of a third party, the trustee is liable to make good that loss to the trust estate if, but for the breach, such loss would not have occurred.’"[15]

   [15] At pages 469-70.

6. In view of the conclusion I have reached it is superflous to deal with the alternative claim for money had and received to the use of the plaintiff. It is perhaps sufficient to say that in the existing circumstances, viz a viz the Credit Union account, the defendant was the agent of the plaintiff and under a duty to avoid any conflict between her duty to the plaintiff and her own interests, absent the fully informed consent of the plaintiff.

7. I give judgment for the plaintiff against the defendant for $153,827.30 together with interest thereon at 10% from 1 May 2007 to judgment.

Gibbs CJ.