Nattrass v Nattrass
[1999] WASC 77
•25 JUNE 1999
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: NATTRASS -v- NATTRASS [1999] WASC 77
CORAM: COMMISSIONER BUSS QC
HEARD: 22-26 MARCH 1999
DELIVERED : 25 JUNE 1999
FILE NO/S: CIV 2045 of 1994
BETWEEN: HAZEL ELLEN NATTRASS (by her next friend LLOYD JOHN NATTRASS)
Plaintiff
AND
KERRY ANNE NATTRASS
Defendant
Catchwords:
Equity - Undue influence - Whether a presumption of undue influence arose - Unconscionable dealing - Independent advice - Compound interest
Legislation:
Evidence Act 1906 (as amended) s 79C
Supreme Court Act 1935 (as amended) s32
Result:
Judgment for the plaintiff
Representation:
Counsel:
Plaintiff: Mr M E Herron
Defendant: Mr G C Barrow
Solicitors:
Plaintiff: Gibson & Gibson
Defendant: Chalmers & Partners
Case(s) referred to in judgment(s):
Allcard v Skinner (1887) 36 Ch D 145
Antony v Weerasekera [1953] 1 WLR 1007
Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923
Bank of New South Wales v Rogers (1941) 65 CLR 42
Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30
Biala Pty Ltd v Mallina Holdings Limited (No 4) (1994) 13 WAR 11
Blomley v Ryan (1956) 99 CLR 362
Bridgewater v Leahy (1998) 72 ALJR 1525
Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447
Commonwealth of Australia v Chessell (1991) 30 FCR 154
Goldsworthy v Brickell [1987] Ch 378
Harris v Jenkins (1922) 31 CLR 341
Huguenin v Baseley (1807) 33 ER 526
Hungerfords v Walker (1989) 171 CLR 125
Johnson v Buttress (1936) 56 CLR 113
Ledger v Petagna Nominees Pty Ltd (1989) 1 WAR 300
Louth v Diprose (1992) 175 CLR 621
McNamara v Commonwealth Trading Bank of Australia Ltd (1984) 37 SASR 232
Micarone v Perpetual Trustees Australia Ltd (Supreme Court of South Australia unreported, delivered 19 November 1997)
Powell v Powell [1900] 1 Ch 243
Quek v Beggs (1990) 5 BPR 97405
Southern Cross Commodities Pty Ltd (In Liquidation) v Ewing (1988) 91 FLR 271
Spong v Spong (1914) 18 CLR 544
Teachers Health Investments Pty Ltd v Wynne (1996) Australian Consumer Sales and Credit Law Reporter 56,356
The Commonwealth v Verwayen (1990) 170 CLR 394
Union Fidelity Trustee Co of Australia v Gibson [1971] VR 573
Wallersteiner v Moir (No. 2) [1975] QB 373
West v Public Trustee [1942] SASR 109
Wright v Carter [1903] 1 Ch 27
Case(s) also cited:
Nil
COMMISSIONER BUSS QC:
Introduction: The Critical Issues In The Litigation
The plaintiff, Hazel Ellen Nattrass ("Hazel"), was born on 7 July 1908 and sues by her next friend, Lloyd John Nattrass ("Lloyd").
On 4 October 1994 Lloyd was appointed as limited administrator of Hazel’s estate pursuant to the Guardianship and Administration Act 1990. By that order, Lloyd was granted the power to bring actions, suits and other legal proceedings in Hazel’s name.
Hazel has two sons one of whom is Lloyd.
On 5 December 1970 Lloyd married the defendant, Kerry Anne Nattrass ("Kerry"). They separated in 1974 and in 1978 they were divorced.
On 3 June 1992, 17 July 1992 and 14 January 1993 Hazel, with Kerry’s assistance, withdrew amounts from Hazel’s passbook savings account at the Mount Hawthorn branch of the Commonwealth Bank. On 3 June 1992 an amount of $3000 in cash was withdrawn and on 17 July 1992 $2923 was withdrawn. On 17 July 1992 $923 of the $2923 was used to purchase a bank cheque from the Commonwealth Bank. It was made payable to Budget Storage Shop. On 14 January 1993 an amount was withdrawn from the passbook savings account to purchase two bank cheques from the Commonwealth Bank. One bank cheque was for $53,000 made payable to the Town & Country Bank. The other was for $2309.56 made payable to the Deputy Commissioner of Taxation.
The plaintiff alleges that Kerry received the cash withdrawals of $3000 and $2000 and applied them to her own use. Kerry denies having received any of the cash and asserts that the cash was received and retained by Hazel.
The bank cheque for $923 was received by Kerry and used by her to pay for a built-in wardrobe which was installed in her home at 78A Solomon Street, Palmyra. Kerry asserts that she gave Hazel $923 in cash in exchange for the bank cheque. This is denied by the plaintiff.
The bank cheque for $53,000 was received by Kerry and used to repay a loan owing by her to the Town & Country Bank and to discharge a registered mortgage which the Bank held over her property at 78A Solomon Street. Kerry maintains that the $53,000 was a gift.
The bank cheque for $2309.56 was received by Kerry and delivered by her on behalf of Hazel to the Deputy Commissioner of Taxation in payment of income tax owing by Hazel.
On 1 October 1993 Hazel was admitted to Sir Charles Gairdner Hospital after sustaining a fall at her home at 8 Kalgoorlie Street, Mount Hawthorn. Hazel suffered a fractured neck femur in consequence of the fall. Upon admission to the hospital, she was also diagnosed as suffering from dementia. On or about 26 October 1993 Hazel was admitted to Carinya Nursing Home where she currently resides. Since her admission to the nursing home, Hazel has required nursing care and assistance with all aspects of her life including eating, drinking, toileting, positioning and movement.
In these proceedings, the plaintiff asserts that Kerry procured Hazel to deliver the cash amounts of $3000 and $2000 and the bank cheques for $923 and $53,000 in consequence of Kerry’s undue influence over Hazel. Particulars of the alleged undue influence are set out in par 15 of the amended statement of claim, as follows:
"(i)At the relevant time Mrs Hazel Nattrass was of advanced years.
(ii)The defendant had a close personal relationship with the plaintiff knowing that the plaintiff looked to her for support and comfort in her old age particularly in the absence out of the State of WA of her two sons Lloyd and Bruce.
(iii)The defendant knew that Mrs Hazel Nattrass regarded her as a "member of the family".
(iv)Mrs Hazel Nattrass had been experiencing dementia related problems arising from her Alzheimer’s condition for approximately 5-6 years previous to the withdrawal transactions of mid 1992 and early 1993.
(v)No legal consideration was provided by the defendant for the amounts received by her or used to her benefit, as a result of the withdrawal transactions.
(vi)The plaintiff was a widow who lived alone and by reason of her advancing years required assistance with the daily aspects of life including her cleaning, shopping and banking transactions.
(vii)By reason of the premises set out above a presumption of undue influence tainting each of the withdrawal transactions is relied upon."
In par 9 of her amended defence, Kerry denies the allegation of undue influence.
The plaintiff also asserts, further or alternatively, that Kerry obtained the benefit of the impugned transactions in consequence of unconscionable dealing by her. Particulars of the alleged unconscionable dealing are set out in par 16 of the amended statement of claim, as follows:
"The plaintiff refers to and repeats the particulars referred to in paragraph 15 above and in addition refers to:
(a)the defendant’s knowledge as a mature woman at the relevant times of the obvious frailty and vulnerability of the plaintiff;
(b)further, it should have been obvious to the defendant that the plaintiff suffered from a special disability by reason of age and infirmity of mind;
(c)the withdrawal transactions occurred in circumstances where Mrs Hazel Nattrass lacked any independent assistance or explanation in relation to the adverse financial consequences to her of signing the withdrawal forms presented to her by the defendant and thereby enabling the withdrawal transactions to proceed to the benefit of the defendant."
In par 9 of her amended defence, Kerry denies the allegation of unconscionable dealing.
In par 10 of her amended defence, Kerry pleads affirmatively, in relation to the bank cheque of $53,000, as follows:
"10.1the defendant had been a close friend of Hazel and had provided Hazel over many years with extensive services and support and was closer to Hazel than any other of Hazel’s friends and relatives;
10.2Hazel held the defendant in high regard;
10.3Hazel controlled funds amounting to approximately $200,000 comprising the moneys in the said Commonwealth Bank passbook savings account, approximately $110,000 in a term deposit with the Commonwealth Bank and further funds in an account with the Home Building Society, and wished to show her regard for the defendant by making a gift of $53,000 to the defendant to enable the defendant to pay off her home loan and discharge the mortgage over the defendant’s home and considered that she could afford to make such gift;
10.4on Hazel advising the defendant of Hazel’s wish to make the said gift the defendant referred Hazel to one Mark Regan for advice as to the effect of the said proposal. Hazel duly consulted the said Mark Regan prior to making the said gift. Mark Regan prepared and Hazel subsequently executed a document confirming her intention to make a gift to the defendant on or about 31 March, 1993."
In the prayer for relief, the plaintiff claims, amongst other things, repayment of $58,923 (being the total of the cash withdrawals of $3000 and $2000 and the bank cheques of $923 and $53,000) together with interest.
Hazel, Kerry and the Nattrass Family
As I have mentioned, Hazel was born on 7 July 1908. On 14 September 1935 she married William John Nattrass. There were two children of the marriage, Bruce Alister Nattrass ("Bruce") now aged 56 and Lloyd now aged 54. In about 1958 Hazel and her husband, who had been living in Augusta, separated. Hazel moved to Perth with Bruce and Lloyd. In February 1960 Hazel and her husband purchased the property at 8 Kalgoorlie Street, as joint tenants. In about 1974 Hazel and her husband were divorced and the property at 8 Kalgoorlie Street was transferred to Hazel as sole proprietor.
Hazel was a relatively unsophisticated woman with limited knowledge of business and financial matters. She did not work outside the home except for a period when she assisted her husband in managing a country store in Augusta. Hazel’s involvement was limited to serving customers. Her husband was responsible for financial and accounting matters. After Hazel separated from her husband she lived alone. She was a private person who mixed socially with only a few people. Hazel lived a simple and relatively frugal life. It appears that prior to the gifts which are in issue in these proceedings, Hazel had not made any substantial or valuable gifts.
Since January 1969 Bruce has resided in Victoria. Between January 1969 and 1 October 1993 (when Hazel was admitted to Sir Charles Gairdner Hospital) the principal contact between Bruce and Hazel was by letter or telephone. They corresponded regularly; each would write to the other at intervals of approximately 6 to 8 weeks. In the mid 1970’s Hazel had a telephone connected to her home and thereafter she and Bruce telephoned each other regularly. Between January 1969 and 1 October 1993 Hazel visited Bruce in Melbourne on two occasions and stayed with him for about 6 to 8 weeks each time. The last visit was in about 1983 or 1984. In January 1989 Bruce visited Hazel in Perth and stayed with her for 3 weeks. Accordingly, between January 1969 and 1 October 1993 the total person to person contact between Bruce and Hazel comprised about 17 weeks.
In about 1970 Lloyd moved from Perth to Victoria. As I have mentioned, on 5 December 1970 he married Kerry. As I have also mentioned, in 1974 they separated and in 1978 they were divorced. Since about 1987 Lloyd has resided in Queensland. Between about 1970 and about 1985 Lloyd and Hazel corresponded at approximately monthly intervals. Thereafter their principal contact was by telephone. Lloyd visited his mother in 1977 for about 2 weeks and in late 1991/early 1992 for about 10 days. In 1980 Hazel and her sister, Beryl Livie, had a short holiday in Cairns with Lloyd. Between about 1970 and 1 October 1993 these three occasions comprised their sole person to person contact.
During Kerry’s marriage to Lloyd she had a very good relationship with Hazel. After she separated from Lloyd, Kerry returned to Western Australia. She remained on friendly terms with Hazel. In about late 1989/early 1990 Beryl contacted Kerry and inquired whether Kerry was willing to visit Hazel more regularly. Beryl told Kerry that Hazel remained very fond of her (Kerry) and wanted to see more of her. Kerry decided that she would visit Hazel. Thereafter Kerry visited Hazel very regularly; on average, once or twice a week. A close personal friendship developed between them. Kerry provided Hazel with extensive services and support. She assisted Hazel with her washing, helped Hazel tidy her house, and performed the more physically demanding house work including cleaning the floors and the bathroom, and changing the linen on her bed. Kerry also accompanied Hazel on shopping trips at least once a week, took her to the hairdresser and assisted her with her banking. When Kerry visited Hazel at her home, Kerry would often prepare a meal. Kerry also assisted Hazel to maintain her personal appearance. After late 1989/1990 Kerry was closer to Hazel than any other of Hazel’s friends and relatives. Hazel held Kerry in high regard.
Hazel’s Assets and Bank Accounts
As at 1 June 1992 Hazel held assets, as follows:
(a)the passbook savings account with the Commonwealth Bank at its Mount Hawthorn branch which was in credit in the amount of $69,333.62;
(b)a Commonwealth Bank term deposit in the amount of $110,000;
(c)a cash management account with the Home Building Society at its Mount Hawthorn branch in the amount of $44,262.18 ("the HBS account");
(d)the property at 8 Kalgoorlie Street, which had a value of $140,000; and
(e)furniture, a motor vehicle and personal belongings, the total value of which is not apparent from the evidence.
At all material times regular deposits were made into the passbook savings account from interest which accrued on the term deposit.
The passbook savings account was operated by the presentation of a withdrawal form signed by the customer. The HBS account was operated in the same manner.
After about 1991 Kerry assisted Hazel with her banking; in particular, Kerry regularly completed withdrawal forms in relation to the HBS account which Hazel signed. These withdrawals were used for Hazel’s day-to-day living expenses.
The withdrawals which are the subject of these proceedings were made from the passbook savings account. On each occasion, Kerry accompanied Hazel to the Mount Hawthorn branch of the Commonwealth Bank where withdrawal slips signed by Hazel were presented. Between 3 June 1992 and 14 January 1993 no other withdrawals were made from the passbook savings account.
Hazel’s Health and Mental Capacity: The Expert Evidence
On 31 March 1993 Dr Edward Fethers, a general medical practitioner, examined Hazel at Kerry’s home. Dr Fethers formed the opinion that Hazel was confused and needed assessment. He could not, however, recall in evidence what led him to that conclusion. Dr Fethers examined Hazel again the following day, 1 April 1993, at his rooms. His notes of the second examination reveal that he formed the opinion that Hazel was disorientated in time, place and person. Dr Fethers also noted that she was suffering from Alzheimer’s disease. He based this diagnosis upon Hazel’s disorientation. Dr Fethers’ evidence in relation to Hazel’s condition was derived solely from his notes. It appears that the duration of the consultation on 1 April 1993 was approximately fifteen minutes, and that during the consultation Dr Fethers also examined Hazel’s heart, lungs and abdomen, and took a brief medical history.
I accept Dr Fethers’ evidence that Hazel was confused and disoriented when he examined her on 31 March and 1 April 1993. However, for reasons which I will explain later, I find that Dr Fethers’ examinations on those days could not determine reliably whether Hazel was suffering from Alzheimer’s disease or not.
In May 1993 Dr Fethers referred Hazel to Dr Stephen Ho, a consulting physician who specialises in geriatric medicine. On 17 May 1993 Dr Ho examined Hazel at her home. Kerry, who was present when Dr Ho visited, gave Dr Ho information in relation to Hazel, which he recorded in a report dated 20 May 1993 to Dr Fethers, as follows:
"The daughter-in-law told me that Mrs Nattrass, though intermittently confused, was still fairly independent with her ability of self-caring, including toileting. However, there could be a suggestion of occasional dress apraxia. Mrs Nattrass had an aversion to having showers. She was capable of making a cup of tea by herself. She received Meals on Wheels three times weekly, which she usually left in the fridge instead of heating them up for consumption as intended. On alternate days, she survived on sandwiches prepared by her daughter-in-law who visited almost alternate days. There had been one occasion previously, that she had left the gas on, but apparently there was no recurrence since she was told not to use the gas stove altogether. She stayed indoors virtually all the time, except during her shopping together with the daughter-in-law and had never ventured outdoors or got lost in the neighbourhood."
Dr Ho also noted in his report:
"During the interview, I found Mrs Nattrass [that is, Hazel] appropriately attired and the house was clean and tidy with no evidence of neglect or suggestion of incontinence. Mrs Nattrass was very deaf, thereby precluding a meaningful examination of her higher mental state. Nevertheless, I had the impression that she was weak, perhaps not overtly confused. Her gait was safe and steady. She was able to show me around the house appropriately.
Subsequent discussion with the daughter-in-law confirmed that she was quite happy to continue supporting Mrs Nattrass and at the moment there was no serious concern about her safety or any fire or gas hazard. The only area of concern was her not eating or showering. After some discussion, it was concluded that I shall request Silver Chain to provide home visits daily to supervise her meals at this moment, to be followed at a later stage when Silver Chain has established rapport with the old lady, by introduction of showering supervision or assistance. No other services were considered necessary at this stage."
I accept Dr Ho’s report as an accurate account of what Kerry told him and of his own observations.
Dr David Watson, a consultant physician, was called by the plaintiff to give expert evidence. He was an impressive witness with outstanding qualifications and very substantial experience as a general physician. I accept his evidence.
According to Dr Watson, Alzheimer’s disease is a progressive dementia whose incidence increases with age. It is caused by a progressive loss of nerve cells in discrete areas of the brain. Clinically, Alzheimer’s disease is characterised by a progressive loss of spontaneous behaviour, a fall in initiative, gradual withdrawal from outside activities, memory lapses which become steadily worse both for short and medium term, difficulty assimilating new information, and the gradual disintegration of those behaviours which form part of being human and civilised. Eventually, activities of daily living such as dressing, grooming and personal hygiene become neglected. Patients have difficulty caring for themselves. They become disoriented in space and easily upset in unfamiliar surroundings, and moods may swing from apathy to irritability or aggression in certain circumstances. Speech commences to fail, patients become restless and wander, often at night, and become lost easily, even in very familiar surroundings. There may be some changes in posture and some difficulties with motor tasks, and eventually patients become less and less active.
Dr Watson gave evidence (in a report dated 17 October 1995) that the decline in mental function and physical and other capabilities of people with Alzheimer’s disease or other forms of dementia is gradual but steady. It may be subject to sudden fluctuations; for example, when a patient is admitted to hospital, particularly if acutely ill. A patient’s memory, mental capacity and behaviour may become worse in consequence of the patient being put into respite care or staying with friends or relatives in an unfamiliar environment. Although there is a gradual decline in memory and mental function, the course is variable from individual to individual, and may be influenced by the presence of intercurrent illness, particularly if acute or serious, and by changed circumstances and surroundings.
In a report dated 6 December 1995 Dr Watson said:
"In general terms, the processes that underlie [Alzheimer’s disease and other forms of dementia] are inexorably progressive and the rate varies from individual to individual but the clinical expression of those processes may be quite variable in rate of progression. Patients that are kept within familiar surroundings, will frequently not show overt signs of mental failure until either put into strange surroundings or required to do tasks and activities of an unusual nature. Their conversation and the content of that conversation may not be overtly abnormal at other times whilst activities of daily living, their surroundings and any mental activity required do not tax their dwindling resources. The consequence of this is that thought can appear to be rational in normal circumstances until the process is well advanced. The other consequence is that the problem may be unmasked by a sudden event such as a fire at home or a fall with a fractured hip necessitating hospitalisation."
Dr Watson said that, in general, many individuals with dementia will tend to cling to people and things which are familiar in order to stabilise their environment. He also said that in the early stages of dementia the behavioural changes in an individual are very gradual and in consequence will tend to be more readily noticed by friends and relatives who have not seen the individual for several months.
Dr Watson examined medical records at Sir Charles Gairdner Hospital in relation to Hazel for the purposes of obtaining some insight into her mental condition between mid 1992 and 31 March 1993. He expressed his conclusion in his report dated 6 December 1995, as follows:
"Given that Mrs Nattrass has shown slow progression of her condition in the 2‑1/2 years since the diagnosis of dementia was made, it seems probable that she had been affected for some time prior to [Dr Fethers’ diagnosis on 31 March 1993]. I am not able to say whether the effect would have been evident 9 to 12 months earlier or on the information before me, what effect the mental changes might have had on her ability to reason, to take and accept advice and to manage her affairs."
Dr Roger Clarnette, a consultant physician, was called by the defendant to give expert evidence. Dr Clarnette agreed with Dr Watson’s account of the characteristics and progress of Alzheimer’s disease and other forms of dementia, and that the rate of progression is variable as between different individuals, and is variable within an individual depending upon the circumstances and the environment to which he or she is exposed.
Dr Clarnette, whose evidence I accept, said that an elderly person who has mild dementia may be capable of dealing well with some tasks or activities, but less well or not at all with other tasks or activities. Anxiety is a very common psychiatric symptom in people with dementia. It usually occurs in the middle stages, but dementia can occur with anxiety followed by the onset of memory disorder.
Dr Clarnette’s experience with people suffering from dementia is that many of them are quite incapable in various ways, but they nevertheless have firm beliefs about what they want done. For example, he has seen many people who would be incapable of giving informed consent for medical treatment, have clear and consistent wishes as to who should manage their affairs or be beneficiaries of their estate.
Dr Clarnette examined the medical records at Sir Charles Gairdner Hospital in relation to Hazel and other medical records relating to her condition. On the basis of this examination Dr Clarnette concluded, in a report dated 23 February 1998, as follows:
"Despite the fact that the medical notes of early 1993 do not satisfy the requirements for a diagnosis of dementia syndrome and Alzheimer’s disease, I believe that it is probable that [Hazel] had an early dementia syndrome during this time. However, the assumption that the presence of a dementia syndrome automatically makes her incapable of any personal decision is false."
As I have mentioned previously, I find that Dr Fethers’ examination of Hazel on 31 March and 1 April 1993 could not determine reliably whether Hazel was suffering from Alzheimer’s disease or not. As Dr Watson said in evidence, Alzheimer’s disease is a class of a much broader range of illnesses known generally as dementia. The term "dementia" refers in essence to any illness that is characterised by a progressive loss of cognitive function. Dr Watson said:
"[Alzheimer’s disease] has come to be almost synonymous with the more general term of dementia, but dementia occurs in conditions like Parkinson’s disease, Huntington’s chorea, and a number of other conditions including repeated strokes, head injury and so on. So Alzheimer’s disease, by convention, has incorrectly come to be almost synonymous with dementia, but is in fact only one of a number."
In his report dated 23 February 1998, Dr Clarnette noted that:
"Examination findings of disorientation in time, place and person do not constitute diagnostic criteria for dementia syndrome. This appears to be the basis for the clinical diagnosis of Alzheimer’s disease by [Dr Fethers] when seen on 31 March 1993."
Dr Clarnette also noted:
"As to the cause of the dementia syndrome [in Hazel] the medical notes presume that this is due to Alzheimer’s disease. Alzheimer’s disease can only be confirmed by examination of brain tissue by an experienced neuropathologist. The clinical diagnosis of probable Alzheimer’s disease requires consideration of the NINCDS/ADRDA Criteria.
Alzheimer’s disease is by far the commonest cause of dementia syndrome in Australia. On statistical grounds it is likely that [Hazel’s] dementia is due to Alzheimer’s disease, however this formal assessment is not documented in the medical notes available to me. A clinical diagnosis of probable Alzheimer’s disease is confirmed by a normal cranial CT, i.e. absence of stroke disease, tumour or hydrocephalus. There is no evidence in the information available to me that a brain CT was undertaken [in relation to Hazel]."
Hazel’s Health and Mental Capacity: Non-Expert Observations
I will deal first with the evidence in relation to Hazel’s capacity independently to carry out and give instructions in relation to ordinary financial and business matters.
By mid to late 1992 Hazel had ceased giving instructions to her accountant, Roger Smith, in relation to her financial affairs and the preparation of her income tax return. On 19 October 1992 Mr Smith attended at Hazel’s home and Kerry on behalf of Hazel gave him all of the information he required to prepare her income tax return for the year of income ending 30 June 1992. On this occasion Hazel was present but, according to Mr Smith, whose evidence I accept, she did not participate in the discussions. By contrast, in 1990 and 1991 Hazel gave instructions to Mr Smith herself and answered any questions he had in relation to the preparation of her income tax returns.
Valerie Hunt was employed between October 1987 and 17 November 1997 as a customer service officer at the Mount Hawthorn branch of the Home Building Society. She served and assisted Hazel on a regular basis between about late 1987 and about mid 1993. She said in her witness statement:
"Over time I noticed some changes in [Hazel]. Unlike previously when she would watch her money she would now receive her money and stare at it blankly. It was like she was in another world and had no idea what the money was. Because she appeared confused I began to divide up her money and put elastic bands around the bundles. I would explain to her, "… this bundle is your $5 notes, this bundle is your $10 notes …". I would then put her money in her bag and then zip the bag telling her her money was in there. I am not sure of the exact date when this began however it was when Beryl Livie was still accompanying [Hazel] to the bank.
Sometime later Beryl Livie ceased to accompany [Hazel] to the bank. [Hazel] never came to the bank alone however. She was always accompanied by either her son, Lloyd Nattrass, Beryl Livie or Kerry Nattrass.
Not long before Kerry Nattrass began assisting [Hazel], I began filling in [Hazel’s] withdrawal slips for her. She would then sign the slips. She did not attempt to fill out the withdrawal slips as she had previously done, and this is why I filled them in for her. She would come to me and say that she wanted to take money out. I would ask whether she wanted $600 and she would look to Beryl for confirmation. Beryl would nod to her.
At this stage I noticed some changes in [Hazel]. Previously when she had come into the bank she was always very clean. She took pride in her appearance and was well groomed. After some time she began to come into the bank and she was unclean, and was sometimes in her slippers.
Later, I am unsure of the exact date, Kerry Nattrass began bringing [Hazel] to the bank and helping her with her banking. …
By this time [Hazel] did not know me or recognise me at all. I would say "Hello Mrs Nattrass" and she would not respond but would stare at me blankly and without recognition, whereas before she would return my greetings. She stood back and Kerry did all her banking."
Mrs Hunt said in evidence that she was requested to make a statement, for the purposes of these proceedings, "a couple of weeks" before the trial; that is, in about early March 1999. She admitted in cross-examination that she was unable to identify when the changes in Hazel’s behaviour, as described in her witness statement, occurred. Mrs Hunt said in cross-examination that the basis for her evidence-in-chief that, at some stage, Hazel did not know or recognise her at all, was that Hazel ceased to smile at her and ceased to respond to any greeting. It was apparent from Mrs Hunt’s evidence that she was antagonistic towards Kerry and had formed an adverse view of her in relation to her dealings with Hazel’s bank accounts. The substantial period of time between Mrs Hunt making her statement and the occurrence of the events which it describes, and Mrs Hunt’s antagonism towards Kerry, diminish to some extent the weight of her evidence. I do not accept that, when Hazel attended the Home Building Society with Kerry, she was unclean or wearing slippers. I do accept, however, that between about late 1987 and about mid 1993 Mrs Hunt observed a significant decline in Hazel’s capacity independently to carry out ordinary and basic banking transactions. I also find, on the basis of Mrs Hunt’s evidence, that by about mid 1992 Kerry attended to these ordinary and basic banking transactions on Hazel’s behalf, and that Hazel had ceased to interact socially with Mrs Hunt.
Since December 1991 Camillo Conte has been the owner of the Mount Hawthorn Wine Bins. Between about December 1991 and about mid 1993 Mr Conte made regular deliveries of beer to Hazel and her sister, Beryl. Hazel placed her orders by telephone. Typically, Hazel would order 4 or 5 cartons of Emu Export 750ml bottles. The orders and deliveries would be made at intervals of approximately 1 month. I find that during the period Mr Conte was delivering beer to Hazel, she was usually consuming about two 750ml bottles each day. Mr Conte said in his witness statement:
"Towards the end of the period in which I made deliveries to Hazel Nattrass, there were a few occasions on which she would pay me extra money for the delivery. I would tell her the amount of the order and she would give me a folded bundle of money which might be $10, $15 or $20 too much. I would count the money, however she did not watch as I counted it. When I told her that she had given me too much money and returned the excess, she would simply murmur. She did not appear surprised or concerned. This may have happened two or three times."
In cross-examination, Mr Conte said he had a vivid recollection that Hazel had given him too much money on one occasion and he thought that it may have occurred another time. As best Mr Conte could recall, the two incidents occurred in 1992 or 1993. Mr Conte also noticed during his visits that Hazel’s kitchen was disorganised and required cleaning. I accept his evidence.
Bruce gave evidence, which I accept, that during his three week visit to Hazel in January 1989 he noticed that she had difficulty with ordinary and basic banking transactions. He said in his witness statement:
"She seemed to get flustered when it came to things like banking. I took her to the Commonwealth Bank in Mount Hawthorn on two occasions and to the Home Building Society on one other occasion. The first time at the Commonwealth Bank I observed my mother fill out a withdrawal form but [she] was very shaky and flustered and she took a long time to complete it. The week after when we went back to the Commonwealth Bank I filled out the form for her and she signed it. On both occasions she gave the forms to the teller herself.
When we went to the Home Building Society I can’t recall her having to complete any forms. She just walked up to the counter."
According to Kerry, she commenced assisting Hazel with her banking in about 1991. Hazel had a tremor in her hand and Kerry assisted Hazel, at Hazel’s request, to complete withdrawal forms which Hazel then signed. Kerry said that Hazel never asked her for assistance in handling her money. Also, Kerry said that Hazel did not have any difficulty, in her presence, handling money. According to Kerry, if Hazel did not want to present the withdrawal form at the Home Building Society then Kerry would accompany her to the counter or would present the form on her behalf. In her witness statement, Kerry said:
"Up until July 1993, Hazel was a competent and independent person. She readily accepted help with things she could not do, or found difficult to do, but at the same time, she had her own mind and if she took it into her head that she would not do something then she could not be made to do it."
I do not accept that between about mid 1992 and July 1993 Hazel could accurately be described as a competent and independent person.
In cross-examination, Kerry disagreed with Mr Smith’s evidence that during his attendance at Hazel’s home on 19 October 1992, Hazel did not take any active part in the meeting. Mr Smith was an independent witness. He was not associated with any of the protagonists in the litigation. I prefer his evidence.
I turn now to deal with other aspects of Hazel’s daily life and her interaction with others.
Lloyd said in evidence that during the holiday in Cairns in 1980 he noticed that Hazel was "very aggressive and short with people". He said that this was a marked contrast from the manner in which he had observed her relating to others in 1977. According to Lloyd, by the late 1980’s he observed that, in telephone conversations with his mother, "everything became a drama - from shopping, to what her sister was doing, to the garden". Lloyd said that by the late 1980’s his mother had difficulty using the telephone. He recalled a statement by Hazel that "Telecom kept blasting her when she dialled the wrong number". He also said that during some telephone conversations with Hazel she would speak into the ear piece of the telephone and would "hang up muttering".
Lloyd gave evidence of various incidents during his visit of about 10 days during late 1991/early 1992. He said that after assisting Hazel by organising the installation of a new gas hot water system his mother had invited him to withdraw $95,000 from one of her bank accounts, an invitation which Lloyd did not accept. Lloyd noticed that his mother was not as adept in the kitchen as she had previously been, and on one or two occasions he found "pots boiling dry" on the stove. He found mouldy and spoiled food in the kitchen cupboards. Lloyd also noticed that his mother’s hearing and eyesight had deteriorated since 1980, when he last saw her. In about September 1992 Lloyd spoke to Kerry by telephone. According to Lloyd:
"She told me my mother did not want to re-insure the house and I asked her to talk to my mother about this as I thought the house should be insured. [Kerry] said to me 'don’t worry' and 'I will get her to sign as she will sign anything' or words to that effect."
Lloyd recalled another telephone conversation, in March 1993, with Kerry. He said:
"[Kerry] told me that my mother had had a fire in her kitchen. My mother must have put the fire out by herself. [Kerry] told me that she had gone over a few days after and when my mother answered the door she was still black from the smoke. She [Hazel] would never admit to anyone that there had been a fire.
…
[Kerry] further told me that my mother used to light the gas to light her cigarettes. One day she turned on all the burners on top of the stove but could not light them and walked away. Luckily the neighbour, Mrs Halliday, arrived from over the road and could smell the gas and raised the alarm (Kerry had the gas cut off from the stove). My mother had to buy a small electric oven. This happened some time in late 1992/early 1993."
The fire occurred in about mid March 1993. I accept the evidence of Lloyd which I have recounted.
Bruce’s evidence in relation to his three week visit in January 1989 corroborated Lloyd’s evidence in relation to Hazel’s diminished ability to manage day-to-day domestic affairs. He said:
"She used to be a good cook but she seemed too distracted to cook. She would put something on the stove and then leave it to boil dry. I also found plates of left over food sitting in the kitchen cupboard that had gone off."
Bruce also said in evidence:
"In late 1992/early 1993 my telephone calls to my mother were more difficult because her mind would wander between subjects; I couldn’t get any details of the family from her. When her mind had wandered before, I would say something to direct her back to the point. I found I was less able to do this as time progressed. She used to ask after her granddaughter when I spoke to her over the telephone. Tracey, my daughter, is her only grandchild. Tracey is now 29 years old. Around about 12-18 months before she went to Sir Charles Gairdner Hospital she stopped asking about her. Our conversation began to narrow down to talking about Lloyd and I only."
I accept the evidence of Bruce which I have recounted.
Valma Green, Beryl’s daughter and Hazel’s niece, gave evidence in relation to an incident in about 1990 when Mrs Green, her husband and Beryl went to Hazel’s home at about 8.30 pm and found her without clothing and in an empty bath. Mrs Green said:
"My mother and I put a robe around her and then my husband came in and helped us lift her out of the bath.
Hazel then accused my husband of breaking and entering. When she was asked how long she had been in the bath she appeared confused and was unable to say."
Mrs Green also gave evidence of another incident on a later occasion, as follows:
"As [my husband], my mother and I arrived [at Hazel’s home] we heard Hazel calling out faintly. We realised she was either in the laundry or the toilet. We went in and found her on the floor with her head between the wall and the toilet bowl. I had no idea how long she had been there on the floor. Hazel seemed unnaturally calm when we found her lying in the toilet and also confused. As she was lying there, she pointed to the knob on the toilet door and said "what is that thing on the kitchen table".
We then proceeded to try and pick her up and we put a blanket under her and pulled her half way out of the toilet. We then tried to lift her up but she kept crying and we were worried that she might have injured herself.
My husband then called an ambulance. The ambulance drivers talked to Hazel and stood her up. She appeared to be alright. We then made a cup of tea and talked for a while.
After the officers left, Hazel abused my husband and said he could pay the ambulance bill."
Mrs Green said that in about 1991 she noticed that Hazel was not eating properly and that her eyesight was poor. She said:
"Up until 1991 when my mother, Beryl Livie, would visit Hazel every weekend, it was always up to my mother to cook their meals. Later when my main contact with Hazel was by means of telephone calls, I would ask her what she had had for lunch, and her answer would be bread and jam or chocolate biscuits."
I accept the evidence of Mrs Green which I have recounted.
Beryl died prior to the trial. However, on 15 February 1995 she signed a written statement in relation to these proceedings. At that time Beryl was 84 years of age. The statement was tendered on behalf of the plaintiff under s 79C of the Evidence Act 1906 as amended and I admitted the statement under that provision. In the statement, Beryl gave evidence of bizarre conversations with Hazel. I am not prepared to make any findings in relation to the accuracy of the assertions contained in Beryl’s statement and I do not accord any weight to her evidence. It would be unfair to Kerry to take into account Beryl’s statement in circumstances where Beryl’s evidence as to the specific incidents she describes has not been directly corroborated by any other person or by documentary evidence, and where her evidence has not been tested by cross-examination.
Kerry’s mother, Irene Patricia Bowra, and her step-father, Clifford Bowra, gave evidence in relation to their observations of Hazel. Mrs Bowra spoke by telephone with Hazel approximately once a fortnight between about 1989 and about October 1993. Mr and Mrs Bowra visited Hazel at intervals of about 3 or 4 weeks. On these occasions Mr Bowra would drive his wife, Hazel and Kerry to a shopping centre to enable them to purchase groceries. During the visits to Hazel’s house, Mr and Mrs Bowra would assist Kerry in performing housework. According to Mr Bowra, up until August 1993 Hazel was lucid and reasonably articulate. He said in his witness statement:
"Hazel used to carry on with me a normal conversation and she could do so on a wide range of topics. She was a friendly person and for most of the time that I was with her she was bright and cheerful. She certainly seemed to enjoy company.
If Hazel and I talked about certain things on one particular visit and the same topic came up in subsequent visits, she would recall what had been discussed. Hazel, in my presence, did not constantly repeat herself nor did she ramble in her discussions."
Mr Bowra said that after Hazel was admitted to Sir Charles Gairdner Hospital in October 1993, her condition deteriorated rapidly. Mrs Bowra gave evidence to similar effect. She said that until about August 1993, Hazel, like most older people, would sometimes forget things. However, Hazel would carry on a conversation and she appeared to understand what was being said to her. Mrs Bowra said that after Hazel was admitted to hospital "she was quite a different person". After Hazel’s operation it was apparent to Mrs Bowra that Hazel did not recognise her. I accept the evidence of Mr and Mrs Bowra.
Ada Bosich has operated a ladies hairdressing business for more than 24 years. She provided hairdressing services for Hazel on a regular basis for many years prior to October 1993. Mrs Bosich, whose evidence I accept, said in her witness statement:
"During the times I would talk with Hazel she spoke sensibly and clearly and I had no trouble understanding what she was saying. Hazel would talk about things she had heard about from other people, things she had read about and things she had seen on TV. She expressed opinions on the subjects we would talk about and if she did not agree with something she would say so.
In her conversations with me Hazel did not ramble on or repeat herself.
When her hair was done Hazel would always pay without any assistance from me or anyone else and if Kerry Nattrass was not there to pick her up Hazel would simply sit there and wait.
There was nothing in Hazel’s behaviour that led me to think there was anything wrong with her other than as time went on she obviously became physically weaker. This was particularly noticeable towards the end of the time that I used to do Hazel’s hair."
As at 1 January 1993 Hazel was able to carry on a lucid conversation with Deborah Joyce Robertson, a friend of Kerry. Ms Robertson, whose evidence I accept, said that Hazel asked intelligent and sensible questions of her and, from the way Hazel reacted to her answers and the response Hazel made to her answers, Ms Robertson gained the impression that Hazel fully understood the conversation.
Kerry said that when she first started visiting Hazel regularly, Hazel seemed lonely and was occasionally depressed, but her mood changed over time. Thereafter, up until about July 1993, Hazel was usually bright and cheerful. According to Kerry:
"Until July 1993, I did not notice anything at all unusual with respect to Hazel’s mental capability. She was occasionally forgetful but no worse than anyone else. If you told her something during one visit she would remember it during the next. She did not, in my presence, show any signs of forgetfulness, confusion or erratic behaviour which I would regard as out of the ordinary or which would give cause for concern. …
The first time that I had any concern about Hazel’s health was toward the end of March 1993. Hazel had come to my house for a short stay while her kitchen was being repainted following a fire in her kitchen. Hazel enjoyed a cigarette and the fire had been caused, according to her, by a lighted butt she had inadvertently left in the kitchen. She put the fire out herself. When I picked Hazel up to bring her home on this occasion, round about the middle of March, I was concerned. Hazel did not look very well, she was pale and she was not eating properly. My concern was that she had suffered no ill-effects from the fire and so, without telling her, I arranged an appointment with Dr Fethers for her to be seen on 31 March. I did not tell Hazel about arranging the doctor’s appointment because she was particularly anti doctors and I was concerned that if I told her she would refuse to co-operate.
By the time Dr Fethers did see her at my home on 31 March, she seemed to have gotten over the episode of the fire but I nevertheless thought it a good idea that she keep the appointment with the doctor if only for a check up. I was present when Dr Fethers examined Hazel at my home on 31 March 1993. The visit lasted 15 minutes or so. As I had expected, Hazel was not too keen or happy to see the doctor but she did co-operate."
Kerry said that from September 1993 to October 1993 "Hazel would have good days and bad days". She added:
"In October 1993, Hazel had a fall and was admitted to Sir Charles Gairdner Hospital. … Before the operation, when I visited Hazel at the hospital, I often did so with my mother. Hazel knew us and could carry on a reasonable conversation but she was in terrible pain and very distressed.
After the operation I continued to visit Hazel in hospital and I do not think she even knew who I was."
The extent of Hazel’s dependence upon Kerry is reflected in answer number 7 of Kerry’s further and better particulars of defence, where Kerry states:
"Between or about the late 1980’s and January, 1993 as Hazel became physically frail, the defendant progressively came to visit Hazel once or twice a week in Hazel’s own home, providing companionship, a daily telephone conversation and services including:
(a)cooking;
(b)bathing and washing Hazel;
(c)cleaning, vacuuming and gardening at Hazel’s premises;
(d)changing the linen on Hazel’s bed;
(e)taking Hazel shopping, to the hairdresser, her bank, her doctor and other errands and outings;
(f)writing out letters and other documents at Hazel’s request.
The defendant had Hazel to stay not less than once a fortnight and invariably had Hazel to spend mother’s day with the defendant."
The necessity for the provision of these substantial services is to be found not only in Hazel’s increasing physical frailty, but also, at least after about late 1992, in the on-set of mild dementia and the gradual decline in her mental functioning.
Doris Maud Davids is a nurse who has worked at Carinya Nursing Home for about 27 years. She gave evidence, which I accept, that when Hazel was admitted to the nursing home in October 1993:
"She would smile and laugh and she would have disjointed conversations that did not make much sense. At that time she would change temperament quite quickly and would slap someone if she was unhappy about something."
Hazel’s Health and Mental Capacity: Findings
I find that by about late 1992 Hazel was suffering from mild dementia and that her condition declined gradually until 1 October 1993. Thereafter, her condition deteriorated significantly.
I find that after about mid 1992 Hazel could not accurately be described as a competent and independent person in relation to ordinary financial and business matters. By about mid 1992 and thereafter Hazel was significantly dependent upon Kerry in relation to the management of her day-to-day financial affairs. Kerry’s involvement is not to be explained merely on the basis that Hazel had a tremor in her hand and from time to time did not want to present a signed withdrawal form at the Home Building Society. By about mid 1992 Hazel relied upon Kerry to attend on her behalf to basic banking transactions; in particular, the withdrawal of money from her bank and building society accounts. To the extent that Kerry’s evidence was inconsistent with these findings, I do not accept it.
It will be apparent that the evidence of the non-expert witnesses differed to some extent in their perception, at material times, of Hazel’s ability to care for herself and her capacity to interact with others. The existence of these differing perceptions is not, of itself, surprising. Indeed, it reflects the evidence of Dr Watson and Dr Clarnette that in the early stages of dementia the decline in mental function and physical and other capabilities is very gradual, and the rate of progression is variable within an individual depending upon the circumstances and the environment to which he or she is exposed.
I find that between about late 1989/early 1990 and 1 October 1993 Hazel’s ability to care for herself and to interact with others declined gradually, and that she became increasingly reliant upon Kerry for assistance. To the extent that Kerry’s evidence was inconsistent with this finding, I do not accept it. Although the gradual decline in Hazel’s independence was not uniform in relation to all aspects of daily life and her interaction with others, I have no doubt that by about mid 1992 Hazel was significantly dependent upon Kerry for companionship, and for substantial assistance in relation to ordinary, day-to-day personal and domestic requirements.
The $3000 and $2000 Cash and the $923 Bank Cheque
As I have mentioned, the plaintiff alleges that Kerry received the cash amounts of $3000 and $2000 and applied them to her own use. Kerry denies having received any of the cash and asserts that the cash was received and retained by Hazel. Also, as I have mentioned, the bank cheque for $923 was received by Kerry and used by her to pay for a built-in wardrobe which was installed in her home at 78A Solomon Street. Kerry asserts that she gave Hazel $923 in cash in exchange for the bank cheque. This is denied by the plaintiff.
In her witness statement, Kerry’s evidence in relation to the $3000 cash withdrawal was as follows:
"I know it is alleged by the plaintiff that on 3 June 1992 an amount of $3000 was withdrawn from Hazel’s account and I applied that amount to my own use. I deny that I did this.
I did go to the bank with Hazel and Helen MacAngus on 3 June 1992 and as usual I filled in a withdrawal slip at Hazel’s request. The withdrawal was for $3000 which Hazel said she wanted so as to be able to give the money to Lloyd. Hazel signed the withdrawal slip, I withdrew the money and I gave the money to Hazel.
I was not concerned about the amount withdrawn on 3 June 1992 or the fact that it was in cash because Hazel had told me that Lloyd was planning a visit in either June or July and she wanted to give it to him to assist with expenses and travel. I knew that what Hazel was telling me was correct because I had spoken to Lloyd about this time and he also had said to me that he was coming to Perth for a visit in either June or July. What Hazel did with the money I do not know and I did not ask."
In her witness statement, Kerry’s evidence in relation to the $2000 cash and the $923 bank cheque was as follows:
"I am also aware of an allegation that on 17 July 1992 an amount of $2000 in cash and a bank cheque in the amount of $923 in favour of Budget Storage Shop was withdrawn from Hazel’s account and applied to my own use. I deny this.
Just before 17 July Hazel had told me in a telephone conversation that as she was giving money to Lloyd she wanted to give the same amount to Bruce. Hazel went on to say that she would give the money for Bruce to Lloyd and Lloyd could hand it on to Bruce upon his return home via Melbourne. Hazel told me that she had been told by Lloyd that he may stop in Melbourne to see his brother as they had not previously been in touch with each other for some years. It so happened at about this time that I had received the account from Budget Storage Shop for installation of built-in robes and there was a balance owing of $923. I had the cash to pay the account. I did not have a cheque account but I decided that I would pay the account by bank cheque.
When I met up with Hazel at her home to go to the bank on 17 July, I explained to her that I needed a bank cheque and that I would give her the cash I had and she would only need to withdraw $2000 from her account. Hazel agreed and I gave her cash of $923. I saw Hazel put the cash in her bedroom but I do not know where in the bedroom.
I went to the bank with Hazel, I drew out the $2000 she wanted and I drew out sufficient for the bank cheque that I wanted. I handed her the $2000 I had withdrawn. Helen MacAngus was present when I handed the money to Hazel. Again I do not know what Hazel did with the money and I did not ask her.
It was convenient for me to use Hazel’s bank account to get my bank cheque because Hazel’s account was exempt from fees so I could get the cheque for nothing. Hazel said that she would make up the difference to $3000 from her housekeeping account."
As I have mentioned, the cash withdrawals were made from Hazel’s passbook savings account with the Commonwealth Bank. Prior to 3 June 1992 Kerry had never assisted Hazel to withdraw money from that account. The transactions in respect of the Commonwealth Bank account which were effected on 3 June 1992, 17 July 1992 and 14 January 1993 and are the subject of these proceedings, were the only occasions upon which Kerry assisted Hazel to withdraw moneys from the Commonwealth Bank account. All other cash withdrawals by Kerry on Hazel’s behalf were made from the Home Building Society account.
Immediately after the $2923 was withdrawn from the Commonwealth Bank on 17 July 1992, Kerry, Hazel and Mrs MacAngus went to the Home Building Society (a distance of about 200 metres) and Kerry withdrew $600 cash from that account on behalf of Hazel. The $600 was the amount which was regularly withdrawn from the Home Building Society for Hazel’s day-to-day living expenses. In addition to withdrawing the $600 on 17 July 1992, Kerry obtained two cheques from the Home Building Society, one for $78.40 and the other for $309.15, to pay amounts owing by Hazel to creditors.
In cross-examination, Kerry was unable to offer a satisfactory explanation as to why all of the transactions on 17 July 1992 were not carried out at the Home Building Society. As at 17 July 1992, Hazel’s account with the Home Building Society was in credit to the extent of $43,662.24, so there were ample funds to enable all of the transactions to be carried out at the Society. Hazel and Kerry were well known at the Home Building Society, especially to Mrs Hunt, but were not well known at the Commonwealth Bank. I find that Kerry decided that the $3000 and $2923 should be withdrawn from the Commonwealth Bank (rather than the Home Building Society) so as to avoid any embarrassing enquiries from staff of the Society in relation to the transactions.
Kerry said in cross-examination that in June or July 1992, while at Hazel’s home, she had spoken to Lloyd by telephone and he told her that "he was hoping his milk round would be sold and settled and he would be able to come back" in June or July 1992. Lloyd denied that he had such a conversation with Kerry. He said in cross-examination that at the conclusion of his two week visit to Hazel in late 1991/early 1992 he had told Hazel:
"As soon as I can get rid of the milk-run and I can get cleaned up over there, I’ll be back as soon as I can."
It was Lloyd’s evidence that this was all he ever said to Hazel about returning to Perth after his visit in late 1991/early 1992. In particular, he denied ever telling Hazel that he would or might return to Perth by June/July 1992. I accept Lloyd’s evidence.
In the event, Lloyd returned to Perth in about March 1994. Shortly thereafter he asked Kerry for Hazel’s bank books and other papers. In his witness statement, Lloyd asserted:
"When I got the Commonwealth Bank passbook from [Kerry], I noted two significant withdrawals on 3 June 1992 for $3000 and 17 July 1992 for $2923. At that time, approximately the second week of April 1994, I asked [Kerry] what these amounts were for. She told me she had withdrawn both amounts for my mother in cash, so she could send it to Bruce and I.
I asked [Kerry] how my mother was going to send cash in the mail and how she would address the envelopes (as my mother could not see to write).
[Kerry] just looked blank, didn’t answer me and walked off.
I did not receive any money from my mother in or about July 1992 or after that time.
I told her [Kerry] to return all the money within 14 days or I would see a solicitor. She said nothing."
I accept Lloyd’s account of this conversation and the other evidence I have just quoted.
I would have expected Kerry to have referred in this conversation to her alleged telephone discussion with Lloyd when he allegedly told her:
(a)that he was coming to Perth for a visit in either June or July 1992 (see Kerry’s witness statement);
(b)in June or July 1992 that "he was hoping his milk round would be sold and settled and he would be able to come back" in June or July 1992 (see Kerry’s cross-examination).
I find that there was no such telephone discussion.
Bruce said in his witness statement, and I accept, that he did not receive any money from Hazel between 1 June 1992 and 1 October 1993.
Kerry admitted in cross-examination that in about April 1994 she had a conversation with Lloyd in relation to the cash withdrawals made in June and July 1992. According to Kerry, she told Lloyd about the cash which Hazel was going to give to him and Bruce. Kerry’s evidence in cross-examination was that Lloyd did not ask any questions and there was no discussion between them about the withdrawal of these amounts. I do not accept this evidence. I prefer Lloyd’s account.
Kerry was cross-examined in relation to transactions on her own bank account between April 1992 and July 1992. During this period Kerry was employed on a casual, part-time basis with the Royal Automobile Club of Western Australia. Her wages were credited to her bank account. During this period she intermittently received unemployment benefits, which were also credited to her bank account. The amount of the unemployment benefits depended upon the extent of her earnings at the Royal Automobile Club. The evidence reveals that in April 1992 Kerry withdrew a total of $1370 from her account, in May 1992 a total of $2005.89, in June 1992 a total of $1250, in July 1992 a total of $950 and in August 1992 a total of $1411.92. During this period Kerry had a monthly mortgage repayment of $600. It was put to Kerry in cross‑examination that the reason why she withdrew less money from her account in June and (especially) July 1992 compared with other months was that she had in fact received from Hazel the cash withdrawals of $3000 and $2000 and that she had not given Hazel the $923 in cash. Kerry rejected this suggestion. She could not explain in cross-examination why she had withdrawn less money from her account in June and July 1992 compared with other months. In re-examination, however, Kerry said that during the period from April to August 1992 she was employed from time to time on a casual basis in the catering industry. She was paid in cash. On occasions she earned up to $200 or $300 per week from this work; on average, she earned about $400 per month.
I do not accept Kerry’s denial that she did not receive the cash amounts of $3000 and $2000. Nor do I accept her assertion that she gave Hazel $923 in cash in exchange for the bank cheque in that amount. I find by inference that Kerry did receive the cash amounts of $3000 and $2000 and that she did not give Hazel $923 in cash. My reasons for this inference are as follows:
(a)My acceptance of Lloyd’s evidence that he did not tell Kerry by telephone:
(i)that he was coming to Perth for a visit in either June or July 1992;
(ii)in June or July 1992 that he was hoping his milk-run business would be sold and settled and he would be able to return to Perth in June or July 1992.
(b)Kerry’s inability to offer a satisfactory explanation as to why all of the transactions on 17 July 1992 were not carried out at the Home Building Society, where Hazel and Kerry were well known, especially to Mrs Hunt, and my finding as to the reason why all the transactions were not carried out at the Society.
(c)My acceptance of the evidence of Lloyd and Bruce that between about mid 1992 and 1 October 1993 they did not receive any money from Hazel.
(d)The inherent unlikelihood that Hazel would have disposed of such a large amount of cash without Kerry’s knowledge, especially having regard to the close relationship between them, the ongoing assistance and services which Kerry provided for Hazel, and the extent of Hazel’s dependence on Kerry in relation to financial matters.
(e)My acceptance of Lloyd’s evidence in relation to his conversation with Kerry in approximately the second week of April 1994 in connection with the cash withdrawals.
(f)My observation of Lloyd and Kerry in the witness box.
As I have mentioned, it was Kerry’s evidence that when she and Hazel went to the Commonwealth Bank on 3 June 1992 and 17 July 1992, they were accompanied by Mrs MacAngus. Mrs MacAngus and Kerry have been friends for more than thirty years. In her witness statement Mrs MacAngus said:
"In about June 1992 I went with Kerry and Hazel to Hazel’s bank which was the Commonwealth Bank in Mount Hawthorn as she said in my presence she wanted to withdraw $3000 to give to her son Lloyd when he came to Perth.
Kerry helped her write out the withdrawal form which was signed by Hazel Nattrass. Kerry went to the teller and collected the money and Hazel took the money from her. I did not see Kerry take any cash from Hazel nor did Hazel give her any cash. I only know that there was $3000 involved in the withdrawal as that was the amount that Hazel mentioned to Kerry but I did not actually look at the withdrawal form. I saw Kerry writing it out and Hazel signing it and Kerry went to the counter, to the teller, with Hazel and the money was handed over to Hazel.
There was an occasion about a month later when Kerry, Hazel and I went to the Commonwealth Bank branch in Mount Hawthorn. Kerry needed a bank cheque and I saw her give Hazel a large sum of money. From the discussion I heard between Hazel and Kerry I know the reason was that Hazel was organising a bank cheque for her and Kerry actually gave her her own money. I am not sure what Kerry used the money for but a withdrawal was made and Hazel kept the balance of the moneys from the withdrawal after Kerry received the bank cheque. I believe Kerry did write out the withdrawal on that occasion and I did see Hazel sign it."
In cross-examination the following exchange occurred between counsel for the plaintiff and Mrs MacAngus:
"… I think you had accompanied Kerry and Hazel to the Commonwealth Bank in June of 1992. Is that correct? --- Yes.
Was that the first occasion on which you had accompanied Kerry and Hazel to the Commonwealth Bank? --- No. We often called in.
…
This is at the Commonwealth Bank. Are you sure it’s the Commonwealth Bank? --- Yes, I’m positive, yes.
Not the Home Building Society? --- No, it was the Commonwealth Bank I’m sure.
I would suggest to you that you’re wrong about that, that this is the first time yourself, Kerry and Hazel had gone to the Commonwealth Bank? --- No."
Plainly, this evidence was incorrect. The documentary evidence establishes (and Kerry said in evidence) that Kerry, Hazel and Mrs MacAngus had not previously been to the Commonwealth Bank. Mrs MacAngus was clearly mistaken, notwithstanding the emphatic nature of her evidence. Subsequently, in cross-examination, she acknowledged the error.
As I have mentioned, Mrs MacAngus said in her witness statement that in about July 1992 she again accompanied Kerry and Hazel to the Commonwealth Bank and that "a withdrawal was made and Hazel kept the balance of the moneys from the withdrawal after Kerry received the bank cheque". However, in cross-examination the following exchange occurred between counsel for the plaintiff and Mrs MacAngus:
"Again, did you see moneys withdrawn on that occasion? --- No. I saw - we went to the Commonwealth Bank to organise a bank cheque. Hazel had gone to the bedroom - or gone to the other part of the house to put her money away as far as I know.
But in any event, on this occasion again Kerry completed the withdrawal form? --- No, it was a bank cheque. Are you still ---
17 July 1992 we’re talking about? --- Sorry, are we talking about the 900 now?
Still the same day, yes? --- Yes. No, that was - they went to the bank to organise a bank cheque.
Right. And at that same time some other cash was withdrawn too, wasn’t it? --- Not to my knowledge.
You are not aware of any other cash being withdrawn? --- No, no.
You were at the bank at the time? --- Mm.
What, you stood away, or waited out of the way? --- I wasn’t up with them but I’m not sure whether I was sitting at the back of the bank or whether I was outside, out the door.
So except for this exchange of cash from Kerry to Hazel and the bank cheque of Kerry, you never saw any other cash involved on that occasion? --- No, I did not; no."
The documentary evidence establishes (and Kerry said in evidence) that on 17 July 1992 there were three transactions carried out on Hazel’s account at the Home Building Society, in addition to the transactions at the Commonwealth Bank. Kerry said that she, Hazel and Mrs MacAngus went to the Home Building Society immediately after they had been to the Commonwealth Bank and that the two branches were located about 200 metres from each other. In cross-examination the following exchange occurred between counsel for the plaintiff and Mrs MacAngus:
"On that same day, 17 July 1992, can you recall whether the three of you also went to the Home Building Society? --- No.
You can’t recall going to the Home Building Society and doing any banking that day? --- No, I can’t.
The Home Building Society and the Commonwealth Bank are very close to each other in Mount Hawthorn, aren’t they; a couple of hundred metres away? --- No, I can’t picture where the building society is at the moment."
I find that the evidence of Mrs MacAngus in relation to the cash withdrawals is unreliable and I do not accept it. I base this finding upon the errors and inconsistencies in her evidence to which I have just referred and also upon my observation of her in the witness box.
Undue Influence: Legal Principles
As McLelland J observed in Quek v Beggs (1990) 5 BPR 97405 at 11,764:
"Generally speaking, the law permits a person of full age and capacity to dispose of his or her property by gift or otherwise in such manner as he or she may choose. However, in certain recognised categories of case, principles of equity intervene to render such a gift liable to be set aside by the court. One of those categories is where the donor makes the gift as a result of "undue influence" of the donee. In this context "influence" means a psychological ascendancy by the donee over the donor, and "undue influence" means the donee’s taking improper advantage of such ascendancy: Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 at 720. It is not necessary that the ascendancy amount to domination: Goldsworthy v Brickell [1987] Ch 378 at 402-6."
A donor or his legal personal representative will prima facie be entitled to have a gift set aside on the ground of undue influence upon proof of:
(a)facts establishing that the gift was made by the donor as a result of the donee’s undue influence; or
(b)facts that give rise to a presumption that the gift was so made, unless the donee rebuts the presumption.
See Quek at 11,764.
A presumption of undue influence will arise where it is proved that:
(a)at the time the gift was made there existed a relationship between the donor and the donee of such a nature as to involve reliance, dependence or trust on the donor’s part which created an ascendancy on the donee’s part; and
(b)the gift is so substantial, or so improvident, as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary persons act.
See Johnson v Buttress (1936) 56 CLR 113 at 134-5; Goldsworthy v Brickell [1987] Ch 378 at 400-1; Quek at 11,764.
Where the presumption arises, "the Court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused": Allcard v Skinner (1887) 36 Ch D 145 at 185. Also see Bank of New South Wales v Rogers (1941) 65 CLR 42 at 85; Antony v Weerasekera [1953] 1 WLR 1007 at 1011; Quek at 11,764. As Dixon J observed in Johnson at 135:
"[The donee] has chosen to accept a benefit which may well proceed from an abuse of [his position of ascendancy] and the relations between him and the donor are so close as to make it difficult to disentangle the inducements which led to the transaction. These considerations combine with reasons of policy to supply a firm foundation for the presumption against a voluntary disposition in his favour."
When certain well-established relationships, such as solicitor and client, trustee and beneficiary, parent and young child, and doctor and patient are proved, the presumption will arise. But the classes of relationship which will give rise to the presumption are not closed. The presumption will arise wherever one party occupies or assumes a position naturally involving influence over another. See Johnson at 134-5; Goldsworthy at 401; Quek at 11,764. As Dixon J said in Johnson at 136-8:
"The decision of the present appeal depends, I think, altogether on the question whether, before the transfer, Mrs Johnson, or possibly the Johnson family collectively, stood in a special relation of influence to Buttress. The suggested relation has not its exact counterpart in any decided case. But this is of little weight. The rule must not be narrowed; the risk must not be run of fettering the exercise of the jurisdiction by an enumeration of persons against whom it should be exercised; the relief stands upon a general principle applying to all the variety of relations in which dominion may be exercised by one person over another. … I think that when the circumstances of the case are considered with the character and capacity of Buttress they lead to the conclusion that an antecedent relation of influence existed which throws upon Mrs Johnson the burden of justifying the transfer by showing that it was the result of the free exercise of the donor’s independent will. This, in my opinion, she has quite failed to do."
Where the presumption of undue influence arises the donee may rebut the presumption by proving that the donor:
(a)knew and understood what he was doing; and
(b)was acting independently of any influence arising from the donee’s ascendancy.
See West v Public Trustee [1942] SASR 109 at 119; Quek at 11,765. It is not sufficient to prove only the first condition. As Lord Eldon observed in Huguenin v Baseley (1807) 33 ER 526 at 536:
"The question is, not, whether she knew what she was doing … but how the intention was produced."
Also see Harris v Jenkins (1922) 31 CLR 341 at 368; Rogers at 54, 85; Quek at 11,765.
As to the second condition, it is not necessarily sufficient to prove that the proposal to make the gift originated with the donor (Spong v Spong (1914) 18 CLR 544 at 549) or that no active steps were taken by the donee to procure the gift (Allcard v Skinner (1887) 36 Ch D 145 at 183-4, 185-6; Wright v Carter [1903] 1 Ch 27 at 52-3). In Quek McLelland J said at 11,765:
"The matters which in a particular case will need to be proved in order to rebut the presumption will depend upon the nature and incidents of the relationship on which the presumption is founded, since the influence which arises from different kinds of relationships varies in kind and degree: Johnson at 134."
The significance of the donor obtaining independent advice in relation to the gift was explained by Gillard J in Union Fidelity Trustee Co of Australia v Gibson [1971] VR 573 at 577-8, as follows:
"Although there is no rule of law that where such a relationship exists the donor should have independent advice at the time of making the gift in order to rebut the presumption … and, particularly if the court is of opinion that independent advice would not have had any effect on the transaction … or that the gift was trifling or of a simple character … nevertheless independent advice is an important factor in determining whether the gift is the pure voluntary and well-understood act of the donor. This is particularly so if the gift should be of a large sum of money … or the circumstances of the relationship, however proper the court may regard them, strongly suggest that the donor was in a position of grave inequality in relation to the donee … or where the transaction may be of a complicated character … But it is undoubtedly true that in many authorities the presence or absence of independent advice has had a great influence on the court’s decision on this vital question. If the donor, however, should receive independent advice, and either misunderstands the advice or is given possibly erroneous advice whereby he fails to appreciate or realise the financial implications and the detriment to himself involved in the gift, a court of equity will not set aside the gift if the donor otherwise understood the nature of the transaction and acted therein in the full exercise of his will …"
Undue Influence: Findings and Conclusions
I am satisfied that as at mid 1992 (including as at 3 June 1992 and 17 July 1992) and at all material times thereafter Hazel and Kerry were in a relationship of reliance/ascendancy in respect of ordinary financial and business matters, and also in respect of the provision of substantial assistance in relation to ordinary, day-to-day personal and domestic requirements.
Their relationship was underpinned by a close friendship. Kerry genuinely cared for Hazel. No doubt, Hazel appreciated and valued Kerry’s companionship, assistance and support, especially as her two sons had resided for many years outside Western Australia and direct personal contact with them during those years had been rare. Hazel had every reason to be grateful to Kerry.
I find that as at mid 1992 (including as at 3 June 1992 and 17 July 1992) and at all material times thereafter there existed a relationship between Hazel and Kerry of such a nature as to involve reliance, dependence and trust on the part of Hazel resulting in an ascendancy on the part of Kerry. Accordingly, the first element which is necessary to give rise to a presumption of undue influence, namely the existence of the necessary relationship, has been established in respect of the amounts withdrawn on 3 June 1992, 17 July 1992 and 14 January 1993.
However, I find that the second element which is necessary to give rise to a presumption of undue influence, namely that the gift is so substantial or so improvident as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary persons act, has not been established in relation to the cash amounts of $3000 and $2000 and the bank cheque for $923. In the circumstances, I consider that, having regard to the companionship, assistance and support which Kerry had provided and was continuing to provide, gifts of these amounts could reasonably be accounted for by reference to ordinary motives of friendship and gratitude. Accordingly, in respect of the cash amounts of $3000 and $2000 and the bank cheque for $923, no presumption of undue influence arises. It is therefore necessary, in relation to these payments, for the plaintiff to establish affirmatively the existence of undue influence.
The plaintiff must prove facts which show that the payments on 3 June 1992 and 17 July 1992 were the outcome of such an actual influence over Hazel’s mind that they cannot be considered a free act. See Johnson at 134. In particular, to make out a plea of actual undue influence it must be demonstrated that:
"(a) the other party to the transaction (or someone who induced the transaction for his own benefit) had the capacity to influence the complainant; (b) the influence was exercised; (c) its influence was undue; (d) its exercise brought about the transaction."
See Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923 at 967.
Although there is some basis in the evidence for suspicion as to whether Kerry exerted undue influence on Hazel in relation to the transactions entered into on 3 June 1992 and 17 July 1992, I am not satisfied that the plaintiff has affirmatively established the existence of undue influence. Accordingly, the cause of action based upon alleged undue influence fails in relation to the cash amounts of $3000 and $2000 and the bank cheque for $923.
In my opinion, the position as regards a presumption of undue influence is different in relation to the payment of $53,000. I consider that, in the context of Kerry having received the cash amounts of $3000 and $2000 and the bank cheque for $923 on 3 June 1992 and 17 July 1992, and having regard to Hazel’s overall financial position, a gift of $53,000 on 14 January 1993 could not reasonably be accounted for by reference to ordinary motives of friendship and gratitude. Accordingly, a presumption of undue influence arises in relation to this payment. It is therefore necessary, in relation to this payment, to determine whether or not Kerry has rebutted the presumption.
In her witness statement, Kerry explained the background circumstances to the making of the $53,000 gift, as follows:
"Hazel knew I was paying off my house at this time and she knew I was having a difficult time. We did not discuss such things often but in the normal course of conversation they were occasionally raised.
In about July or August 1992, quite unexpectedly, Hazel said she wanted to pay off my house. … I was surprised and taken aback and I said to Hazel 'No, you can’t do that'. After that Hazel raised the topic on a number of occasions but I just either changed the subject or brushed it off. On one occasion after visiting Hazel with Helen MacAngus in about August 1992 and on the way home with Helen, she told me that Hazel had also raised the subject with her and had asked her to talk to me about it.
When Helen MacAngus raised this with me in the car on the way home from Hazel’s, I told her that I did not feel comfortable about it but I would think about it. I did not feel comfortable because I felt that Hazel was not my mother and it was a lot of money. …
On a number of occasions afterwards, Hazel raised the subject but I was still reluctant. I did not know exactly what my mortgage was but I did tell Hazel that she was talking about something in the region of $50,000. Hazel was not put off by that. She said it was something she wanted to do. Eventually I agreed to accept the money."
It appears that Kerry agreed in about mid December 1992 to accept the money. I accept her evidence in relation to the background circumstances leading up to the making of the $53,000 gift. In particular, I find that Kerry discussed her financial affairs with Hazel and told her that she was experiencing difficulty in making the payments on her mortgage, that Hazel subsequently offered to repay the mortgage, and that, after initial reluctance, Kerry agreed to accept the gift. Kerry’s evidence in relation to the background circumstances was corroborated by Mrs MacAngus.
In about mid December 1992 Kerry sought and obtained advice from Mark James Regan, a barrister and solicitor admitted to practise in this Court in December 1977, in connection with the procedure for the discharge of her mortgage.
In her witness statement, Kerry said that the $53,000 payment was made as follows:
"On or just before 14 January 1993, Hazel, myself and Helen MacAngus had planned a shopping trip. Hazel told me that she wanted to go to the bank because she had a tax bill to pay and at the same time she wanted to get from the bank the cheque to pay out my home.
I contacted my bank to find out what the pay out figure on my mortgage was and I was told that it was approximately $53,000 and that was the figure I passed on to Hazel. The actual pay out figure on the mortgage I later learned was $51,800 and I eventually received a cheque from Town & Country for $1,200. I gave the cheque to Hazel but she refused to take it and handed it back.
On 14 January 1993, Hazel and I went to the bank and Helen MacAngus was with us.
At the bank, we followed the same procedure as we had done on many occasions. I filled out the withdrawal forms and Hazel signed them. …
The withdrawal was for $55,309.56 of which two bank cheques were drawn. One was for Town & Country to discharge my mortgage and one was payable to the Deputy Commissioner of Taxation in the amount of $2,309.56."
In par 10.4 of her defence Kerry pleaded that:
"On Hazel advising the defendant of Hazel’s wish to make the said gift [of $53,000] the defendant referred Hazel to one Mark Regan for advice as to the effect of the said proposal. Hazel duly consulted the said Mark Regan prior to making the said gift. Mark Regan prepared and Hazel subsequently executed a document confirming her intention to make a gift to the defendant on or about 31 March, 1993."
In answer number 8 of Kerry’s further and better particulars of defence, Kerry states:
"The relevant advice was given orally in the course of a conversation between Hazel and the said Mark Regan at the defendant’s residence on two occasions, firstly on the date prior to Hazel making the said gift and secondly on the date of execution of the said document on or about 31 March 1993. The substance of the conversation on both occasions was that Mr Regan asked Hazel if she understood that she was giving away a large sum of money. Hazel stated that she wished to make and subsequently had made a gift to the defendant and could afford to do so as she had funds in excess of her needs. Mr Regan asked Hazel if the defendant had influenced Hazel in making the proposed or said gift and Hazel said that was not the case."
Mr Regan gave evidence that he had a telephone conversation with Kerry in about mid December 1992 in connection with the $53,000 payment. In his witness statement, Mr Regan said:
"In mid December 1992 I had a telephone call from my uncle … who advised me that he had a friend who wanted to discharge her house mortgage. He said that the friend was a woman and she wanted to have it handled properly and needed legal advice in relation to the matter. He asked me if I would speak to her and she was apparently there at that time and so I then spoke to Kerry Nattrass, with whom I had not previously been acquainted. … She told me she wanted to discharge the first mortgage to the Town & Country Bank against her property at 78A Solomon Street, Palmyra and she asked me how she would go about this. She was concerned that it be done properly and legally and asked me as to the formalities as how she could get a discharge of mortgage prepared. I said Town & Country’s documents are done by McCusker & Harmer, Barristers and Solicitors and they would send her a letter and an account for the discharge costs and they would attend to the preparation of the form of discharge of the mortgage. … At this stage she had not mentioned any specific figure to me.
During this same conversation Kerry Nattrass told me that she wanted to pay off her mortgage to Town & Country and her mother-in-law was going to assist her with a gift of funds to help pay off the mortgage, but she did not at this stage say how much the gift would be and I do not recall her telling me that her mother-in-law’s name was Hazel Nattrass. Kerry Nattrass asked me if there was any legal requirement with respect to the gift.
I said there is no necessity to have any legal document prepared for the gift unless there were other reasons that would require such a document being prepared."
Mr Regan also said in his witness statement:
"Sometime later, I think it would have been late December or so, I received a telephone call from Kerry Nattrass. She introduced herself and said that she was ringing from her home and that Mrs Nattrass senior was with her and could I have a chat to her. Kerry said nothing more and then her mother-in-law came on the phone and we exchanged introductions. …
Mrs Hazel Nattrass told me that she wanted to make a gift to Kerry to help her with her mortgage but she did not say what the amount was. Hazel Nattrass said 'I want to help Kerry with her mortgage and I don’t want there to be any problems for Kerry'.
I advised Hazel Nattrass that there was no legal requirement that a formal document in relation to the gift had to be prepared and I was not requested to do so."
In about mid January 1993 Kerry telephoned Mr Regan. She told him that she had a cheque payable to Town & Country Bank and she asked him how to pay it to them. Mr Regan told her that the cheque could be paid at any Town & Country branch upon provision of the relevant account details. Mr Regan then arranged with Kerry to collect the cheque from her home and to make payment on her behalf to Town & Country. Mr Regan collected the cheque that evening from Kerry’s son.
In mid to late February 1993 Kerry again telephoned Mr Regan. She told him that Hazel was concerned that "her son may try and cause trouble for her [Kerry]". She also said that Hazel was concerned about the gift and asked Mr Regan to "talk to Hazel" and, if he thought it was necessary, prepare a document in relation to the gift. Mr Regan then spoke to Hazel. According to Mr Regan, Hazel said:
"I am just worried that none of the family cause trouble for Kerry over the money I have given her."
Mr Regan said he told Hazel she could document the gift. He also told her that the making of the gift could be acknowledged by Hazel in her will. According to Mr Regan, Hazel then requested him to prepare a document acknowledging the gift. Mr Regan advised Hazel to go and see her solicitor, but added that if Hazel had any more concerns or wanted to talk to him again about the matter he would willingly discuss it. Mr Regan then spoke to Kerry and repeated to her the substance of the advice he had given Hazel.
In about mid March 1993 Kerry telephoned Mr Regan. According to Mr Regan, Kerry told him that she had spoken to Hazel and they wanted him to prepare a document, to be signed by Hazel, which would record the gift. Kerry also told Mr Regan that the amount of the gift was $53,000.
Mr Regan then prepared a document in the following form:
"31 March 1993
To whom it may concern
I, Hazel Ellen Nattrass, of 8 Kalgoorlie Street, Mount Hawthorn, confirm and acknowledge that I have gifted and paid to my daughter-in-law, Kerry Anne Nattrass, of 78A Solomon Street, Palmyra, an amount of $53,000.00 to assist in the reduction of her mortgage debt to Town & Country Bank registered against her property.
This amount was gifted to Kerry absolutely in consideration of the natural love and affection that I hold for her, in acknowledgment of the consideration that she has always shown to me and for the help and assistance that she has given me."
I note that the document refers, erroneously, to the $53,000 assisting "in the reduction" of Kerry’s mortgage rather than, of itself, discharging the mortgage.
On 31 March 1993 Mr Regan took the document to Kerry’s home at 78A Solomon Street. Kerry introduced Mr Regan to Hazel in the lounge room. Kerry then left the room and Mr Regan and Hazel sat together at a table in the lounge room. According to Mr Regan, Hazel appeared to be alert and in good health. He did not consider it necessary to inquire as to her health. In his witness statement, Mr Regan said:
"I handed the document to her and said this is a short form of acknowledgment of your gift to Kerry, that is the amount of $53,000 for payment of the mortgage. I said do you want to go through it now or would you like me to leave it here with you and you can discuss it with other people. I did say to a solicitor and I did give her the option to discuss it with her financial or legal advisers. She was quite well dressed about 6.00 pm in the evening. She appeared quite lucid and completely cognisant of what was taking place. I actually read it aloud to her and then asked her if she had any questions on it. She said 'no, do I need to sign it now or what?'. I told Hazel Nattrass at this stage that she did not have to sign the document at all if she did not want to or after she saw her financial or legal adviser if she had any concerns she could sign it then [sic]. She said 'I would prefer to leave it' and I said 'that’s fine you can go and discuss it with who you would like to and then sign it before a witness if you are satisfied or happy with it'. She said 'OK then that’s fine I’ll leave it for now' and I said 'OK then thank you I will go now'. She was happy with it and acknowledged that she had already given the money to Kerry and she was happy about the matter but it was my impression that she was going to talk to either her banker or solicitor or somebody other than me before she signed it. I was entirely confident she understood what the paper was and that she was under no obligation to sign the document if she did not wish to do so. I then said goodbye to her and then on the way out said to Kerry 'I have left the document with her'. I said 'I have explained to her that she can have her legal adviser or financial adviser go through it with her if she wants and she has elected to not sign it yet and to go through it with somebody else'. I had no further conversation with either Kerry or her mother-in-law after I left Kerry’s home that evening at about 6.15 pm."
Mr Regan said in evidence that during his discussions with Hazel on the telephone and during his visit on 31 March 1993 she did not say or do anything which he regarded as irrational or unusual. Her questions to him were intelligent. She remained focused on the conversation and did not ramble.
In cross-examination Mr Regan said that he was unaware that Dr Fethers had examined Hazel earlier on 31 March 1993. It will be recalled that, during his examination of Hazel, Dr Fethers formed the opinion that she was confused and needed assessment. Mr Regan said that Hazel appeared to him to be clear and lucid.
Mr Regan acknowledged in cross-examination that the two telephone conversations he had had with Hazel prior to 31 March 1993 were very brief. He added that the duration of his conference with Hazel on 31 March 1993 was between 5 to 8 minutes. He attended on Hazel on one occasion only. Mr Regan said that during the conference on 31 March 1993 he did not ask Hazel whether she understood that she was giving away a large sum of money and he did not ask Hazel whether Kerry had influenced her in relation to the making of the gift of $53,000. Accordingly, Mr Regan’s evidence did not establish (indeed, it is contrary to) the assertions in answer number 8 of Kerry’s further and better particulars of defence.
I accept that during their telephone conversations and during their conference Mr Regan did not observe anything unusual in Hazel’s behaviour. I also accept that Hazel appeared to him to be lucid and rational. However, it is plain that Mr Regan’s interaction with Hazel was very brief. I find that Mr Regan did not approach his interaction with Hazel with a view to assessing the nature and extent of her understanding of the consequences of making the gift of $53,000 to Kerry or whether Kerry may have influenced Hazel in relation to the gift.
It is plain that Mr Regan, in his dealings with Kerry and Hazel, gave advice to each of them. Accordingly, the advice he gave Hazel cannot be regarded as "independent" for the purposes of the law relating to undue influence. See Powell v Powell [1900] 1 Ch 243; McNamara v Commonwealth Trading Bank of Australia Ltd (1984) 37 SASR 232 at 241; Micarone v Perpetual Trustees Australia Ltd (Supreme Court of South Australia unreported, delivered 19 November 1997)) per Duggan J at pp 90-92. Further and in any event, the advice which Mr Regan gave Hazel was inadequate. Independent advice, for the purposes of the law relating to undue influence, should not only ensure that the disponor understands the transaction, but should also be directed to whether the transaction is in the disponor’s best interests. See Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 at 35. When Mr Regan conferred with Hazel on 31 March 1993 Mr Regan knew that Hazel was an elderly lady (she was then 84 years old), that there was a close relationship between Hazel and Kerry, that Hazel was concerned that members of her family might challenge the efficacy of the gift, that the conference was occurring in Kerry’s home, and that the gift of $53,000 had already been made. In the circumstances, it was of fundamental importance, if Mr Regan was to provide adequate independent advice to Hazel in connection with her acknowledging and ratifying in writing the $53,000 gift, for Mr Regan to make proper enquiries and take reasonable steps to establish that Hazel understood she was giving away a large sum of money, the transaction was not improvident from her point of view, and she had not been unduly influenced in relation to the making of the gift. This he failed to do.
Mrs MacAngus was at Kerry’s home on 31 March 1993 during Mr Regan’s visit. After Mr Regan left, Hazel signed, in the presence of Mrs MacAngus, the document which Mr Regan had prepared, and Mrs MacAngus witnessed her signature. Mrs MacAngus said in cross‑examination, and I accept, that she read aloud the document to Hazel before it was signed. She did this because she wanted to confirm that Hazel understood the document.
I find that Kerry has not rebutted the presumption of undue influence in relation to the $53,000 payment. I consider that the presumption remains unrebutted for these reasons:
(a)As at about late 1992 and thereafter, Hazel was suffering from mild dementia and her condition was gradually deteriorating.
(b)As at about mid 1992 and thereafter, Hazel was significantly dependent upon Kerry in relation to the management of her day-to-day financial affairs.
(c)As at about mid 1992 and thereafter, Hazel was significantly dependent upon Kerry for companionship, and for substantial assistance in relation to ordinary, day-to-day personal and domestic requirements.
(d)At no material time did Hazel receive any adequate independent advice (for example, from a solicitor, bank manager or investment adviser) in relation to the making of the gift.
(e)The amount of the gift was significant in the context of Kerry having received the cash amounts of $3000 and $2000 and the bank cheque for $923 on 3 June 1992 and 17 July 1992, and having regard to Hazel’s overall financial position.
(f)The weight to be attached to the circumstances summarised in pars (a) to (e) above substantially exceeds the weight to be attached to anything which Hazel said to Kerry or Mrs MacAngus in relation to the making of the gift or their evidence as to Hazel’s willingness to make the gift.
In my opinion, the payment of $53,000 should be set aside.
Unconscionable Dealing: Legal Principles
The distinction between undue influence and unconscionable dealing was explained by Deane J in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 at 474, as follows:
"Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party … Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with the person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so."
Also see the observations of Mason J in Amadio at 461. And see Bridgewater v Leahy (1998) 72 ALJR 1525.
In Blomley v Ryan (1956) 99 CLR 362 Kitto J said at 415:
"[The Court has power to set aside a transaction]… whenever one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affecting his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands."
In Blomley Fullagar J observed at 405:
"The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other."
In Amadio Mason J held at 462 that the equitable doctrine which entitles a party to seek relief against unconscionable conduct "may be invoked whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created".
His Honour explained the term "special disadvantage" at 462, as follows:
"I qualify the word 'disadvantage' by the adjective 'special' in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties in order to emphasise that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."
In Amadio, Deane J, with whom Wilson J agreed, observed at 474:
"The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it."
Also see Louth v Diprose (1992) 175 CLR 621 at 637 where Deane J repeated these observations.
Louth and Teachers Health Investments Pty Ltd v Wynne (1996) Australian Consumer Sales and Credit Law Reporter 56,356 considered the connection between emotional dependence and special disadvantage.
In Louth a woman was ordered to transfer a house acquired by her as a result of a gift from a solicitor who had become infatuated with her. The trial judge found that the solicitor has been emotionally dependent on the woman who, in consequence, had great influence over his actions and decisions. The woman unconscionably misused her influence to procure, accept and retain the benefit of the gift. The decision in Louth recognised that emotional dependence is a relevant disadvantage which may constitute a ground to set aside a transaction as unconscionable. Also see Teachers Health Investments at 18.
In his article entitled "The Place of Equity" (1994) 110 Law Quarterly Review at 248-9 Sir Anthony Mason said:
"Relief against unconscionable bargains is granted when a transaction, considered in the light of the circumstances in which it was entered, is so unconscionable that it cannot be allowed to stand. The power to grant relief on this ground was in the past largely confined to cases in which the party seeking relief was a person suffering from some special distinct disability or disadvantage, e.g., the expectant heir, or the inebriated plaintiff in Blomley v Ryan who was incapable of forming a rational judgment. But the principle according to which relief is granted is not so limited. What is required is that there should be an unconscientious taking advantage of the disability or disadvantage of the person in the weaker bargaining position by procuring or retaining the benefit in question in a way that is both unreasonable and oppressive. …
Whether a plaintiff is entitled to relief on the ground of unconscionable conduct … is very largely a question of fact and of value judgment. The cases provide little in the way of specific guidance, offering only very wide general expressions. As Fullagar J noted in Blomley v Ryan this is typical of the difference between the common law and equity: the common law looks to 'the reality of the assent of the person resisting enforcement of the contract' whereas equity 'look[s] at the matter from the point of view of the person seeking to enforce the contract and … inquire[s] whether, having regard to all the circumstances, it [is] consistent with equity and good conscience that he should be allowed to enforce it'.
In Australia, at least, the emergence from the shadows of this ground of equitable relief has relegated the doctrine of undue influence to a position of relative unimportance."
In The Commonwealth v Verwayen (1990) 170 CLR 394 at 441 Deane J said in relation to unconscionable behaviour:
"As Lord Scarman pointed out in National Westminster Bank Plc v Morgan [1985] AC 686 at 709, definition 'is a poor instrument when used to determine whether a transaction is or is not unconscionable: this is a question which depends upon the particular facts of the case'. The most that can be said is that 'unconscionable' should be understood in the sense of referring to what one party 'ought not, in conscience, as between [the parties], to be allowed' to do …. In this as in other areas of equity-related doctrine, conduct which is 'unconscionable' will commonly involve the use of or insistence upon legal entitlement to take advantage of another’s special vulnerability or misadventure (cf Stern v McArthur (1988) 165 CLR 489 at 526-527) in a way that is unreasonable and oppressive to an extent that affronts ordinary minimum standards of fair dealing. That being so, the question whether conduct is or is not unconscionable in the circumstances of a particular case involves a 'real process of consideration and a judgment' (cf Harry v Kreutziger (1978) 95 DLR (3d) 231 at 240) in which the ordinary processes of legal reasoning by induction and deduction from settled rules and decided cases are applicable but are likely to be inadequate to exclude an element of value judgment in a borderline case such as the present."
Unconscionable Dealing: Findings and Conclusions
It is necessary, in relation to the cause of action alleging unconscionable dealing, to look to the conduct of Kerry in accepting and retaining the benefit of the payments of $3000, $2923 and $53,000. In particular, by accepting and retaining the benefit of those payments, did Kerry unconscientiously take advantage of Hazel’s disability or disadvantage in a way that is both unreasonable and oppressive?
The plaintiff will not establish unconscionable dealing merely by proving that Hazel, to Kerry’s knowledge, was affected by a disability or special disadvantage at the time of the transactions. Proof of exploitation by Kerry is required. See Louth at 638.
Although there is some basis in the evidence for suspicion in relation to the transactions entered into on 2 June 1992 and 17 July 1992, I am not satisfied that Kerry did unconscientiously take advantage of Hazel’s disability or disadvantage, in a way that is both unreasonable and oppressive, by accepting and retaining the benefit of those transactions.
I consider, however, that by accepting and retaining the benefit of the $53,000 payment, Kerry did unconscientiously take advantage of Hazel’s disability or disadvantage in a way that is both unreasonable and oppressive. Although the equitable doctrines relating to undue influence and unconscionable dealing are distinct, to some extent the doctrines overlap. See Louth at 626-8. I base my finding of unconscionable dealing in relation to the $53,000 payment upon the findings and conclusions I have made in the context of deciding that Kerry has failed to rebut the presumption of undue influence in relation to that payment.
The Appropriate Orders
In the plaintiff’s prayer for relief various orders are sought including the making of a declaration, the repayment of the amounts paid to Kerry, interest, and further or other relief.
In my opinion, it is not necessary, in the circumstances of this case, to grant declaratory relief. It will be sufficient if I make an order that Kerry repay the $53,000 to the plaintiff.
As regards interest, the plaintiff led evidence as to the rate of interest which would have been earned by the plaintiff on the $53,000 between 14 January 1993 and 24 March 1999 if the money had remained on deposit with the Commonwealth Bank. See the plaintiff’s Schedule of Interest dated 26 March 1999. Although it was common cause that Kerry used the $53,000 to discharge her mortgage to the Town & Country Bank, there was no evidence as to the rate of interest that Kerry would have paid under her mortgage if it had not been discharged.
The plaintiff submitted that compound interest should be awarded.
Interest may be awarded on a compound basis in the exercise of the Court’s equitable jurisdiction where a person has improperly profited from his fiduciary position. In Southern Cross Commodities Pty Ltd (In Liquidation) v Ewing (1988) 91 FLR 271, where it was held that one company stood in the relationship of constructive trustee to another, White J said at 285:
"High authority confirms that fraud and serious misconduct by a trustee or fiduciary in a trustee-like position will lead to an award of compound interest where it can be safely presumed that commercial use has been made of the money in the meantime."
In Hungerfords v Walker (1989) 171 CLR 125 at 148 Mason CJ and Wilson J said:
"Equity has adopted a broad approach to the award of interest. It has long been accepted that the equitable right to interest exists independently of statute: Wallersteiner v Moir (No 2) [1975] QB 373. Equity courts have regularly awarded interest, including not only simple interest but also compound interest, when justice so demanded, e.g., money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary."
Also see Wallersteiner v Moir (No. 2) [1975] QB 373 at 388; Ledger v Petagna Nominees Pty Ltd (1989) 1 WAR 300 at 301-3; Biala Pty Ltd v Mallina Holdings Limited (No 4) (1994) 13 WAR 11 at 83-5.
The Court may, of course, order pre-judgment interest under s 32 of the Supreme Court Act 1935 as amended, but the section does not authorise the giving of interest upon interest. See s 32(2)(a).
Damages may be awarded in accordance with the principles enunciated by the High Court in Hungerfords. In that case Brennan and Deane JJ said at 152:
"There is, in our view, a critical distinction between an order that interest be paid upon an award of damages and an actual award of damages which represents compensation for a wrongfully caused loss of the use of money and which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which otherwise would have been unnecessary or retired. On the one hand, there is no common law power to make an order for the payment of interest to compensate for the delay in obtaining payment of what the Court assesses to be the appropriate measure of damages for a wrongful act. If such interest is to be awarded at common law, it must be pursuant to statutory authority. On the other hand, there is no acceptable reason why the ordinary principles governing the recovery of common law damages should not, in an appropriate case, apply to entitle a plaintiff to an actual award of damages as compensation for a wrongfully and foreseeably caused loss of the use of money. To the extent that the reported cases support the proposition that damages cannot be awarded as compensation for the loss of the use of a specific sum of money which the wrongful act of a defendant has caused to be paid away or withheld, they are contrary to principle and commercial reality and should not be followed."
Also see Commonwealth of Australia v Chessell (1991) 30 FCR 154 at 160‑1. The decision in Hungerfords was concerned with claims for interest at common law and the observations of the High Court do not diminish the well-established practice of courts of equity whereby it is presumed that a plaintiff wrongfully deprived of money would have made the most beneficial use of it. See Wallersteiner at 388; Biala at 84.
I am satisfied that if the $53,000 had not been withdrawn on 14 January 1993 then it would have remained on deposit with a bank or financial institution. I am also satisfied that interest would have been earned on the deposit and credited to the account periodically, and would thereafter itself have attracted interest. There was evidence that interest on Hazel's passbook savings account was compounded on a quarterly basis. In my opinion, justice requires that the plaintiff be awarded interest on the $53,000 between 14 January 1993 and 24 March 1999 at the rates set out in the plaintiff’s Schedule of Interest dated 26 March 1999. Further, the plaintiff should be awarded interest between 24 March 1999 and the date of judgment at the rate of 1.5 per cent per annum (being the rate which, according to the plaintiff’s Schedule of Interest, applied as at 24 March 1999). The interest is to be calculated on a daily basis and is to be compounded at three monthly rests, the first rest to be on 1 March 1993.
I make these orders in relation to interest to compensate the plaintiff for actual loss, on the basis that the equitable jurisdiction to allow compound interest extends, in an appropriate case, to amounts awarded on causes of action based upon undue influence and unconscionable dealing (which are, of course, examples of the broader doctrine of equitable fraud). Alternatively, I would make an order by way of an award of compensation in accordance with the principles enunciated by the High Court in Hungerfords which, in my opinion, can be applied by analogy, in appropriate circumstances, to causes of action in equity.
I will hear counsel as to the precise form of the orders and also in relation to costs.
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