Supreme Court
New South Wales
Medium Neutral Citation: Perochinsky v Kirschner & Anor [2013] NSWSC 400 Hearing dates: 20-24 and 28-29 August 2012 Decision date: 24 April 2013 Jurisdiction: Equity Division Before: White J Decision: 1. Direct entry of judgment for the plaintiff against the first defendant in the sum of $553,152.73 plus interest at the rates prescribed for the purposes of s 100 of the Civil Procedure Act 2005 from 21 August 2009.
2. Order that the plaintiff's claims be otherwise dismissed.
Catchwords: GIFTS - gifts inter vivos - gifts made under power of attorney - construction of s 163B of the Conveyancing Act 1919 - whether donee of power of attorney able to make gift to self - fiduciary obligations of attorney - meaning of attorney acting "on behalf of" donor of power - relationship between scope of attorney's authority and whether acts constitute a breach of attorney's obligations
GIFTS - gifts inter vivos - capacity of donor to make gift - effect of lack of capacity to make gift where donee unaware of lack of capacity
EQUITY - trusts and trustees - presumption of resulting trust where co-owners of property contribute to purchase price in proportions different from that in which legal title held - rebuttal of presumption
BANKING AND FINANCE - instruments - cheques - conversion of chequeLegislation Cited: Conveyancing Act 1919 (NSW)
Powers of Attorney Act 1971 (UK)
Civil Procedure Act 2005Cases Cited: Spina v Conran Associates Pty Ltd [2008] NSWSC 326
Spina v Permanent Custodians Ltd [2008] NSWSC 561
Hambro v Burnand [1904] 2 KB 10
Reckitt v Barnett, Pembroke & Slater Limited [1928] 2 KB 244
Re R [2000] NSWSC 886
Hughes v Hughes [2011] NSWSC 729
Ward v Ward (No. 2) [2011] NSWSC 1292
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No. 4) [2007] FCA 963; (2007) 160 FCR 35
Tobin v Broadbent (1947) 75 CLR 378
Chan v Zacharia (1984) 154 CLR 178 at 199; Breen v Williams (1996) 186 CLR 71
Hambro v Burnand [1904] 2 KB 10
Bryant, Powis & Bryant Limited v Quebec Bank [1893] AC 170
Lloyd v Grace, Smith & Co [1912] AC 716
Reckitt v Barnett, Pembroke & Slater Limited [1929] AC 176
Sweeney v Howard [2007] NSWSC 852
Crago v McIntyre [1976] 1 NSWLR 729
Beverley v Watson (Owen J, Supreme Court of Western Australia, 14 September 1994, unreported, BC9401884)
Collins v May [2000] WASC 29
Stone v Registrar of Titles [2012] WASC 21
Gibbons v Wright (1954) 91 CLR 423
Elliot v Ince (1857) 7 De G.M. & G. 475; 44 ER 186
Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 75 NSWLR 42
Collins v May [2000] WASC 29
Plunkett v Bull (1915) 19 CLR 544
Watson v Foxman (1995) 49 NSWLR 315
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9Texts Cited: Halsbury's Laws of Australia in Title 15 on Agency, Chapter 2 Category: Principal judgment Parties: Antonina Perochinsky (Plaintiff)
Sandra Kirschner (1st Defendant)
Bernhard Kirschner (2nd Defendant)Representation: Counsel:
N O Obrart (Plaintiff)
N C Hutley SC with P Silver (Defendants)
Solicitors:
Brown Wright Stein (Plaintiff)
Milne Berry Berger Freedman (Defendants)
File Number(s): 2010/362138
Judgment
HIS HONOUR: This case concerns alleged gifts by the plaintiff and her deceased husband ("Mr and Mrs Perochinsky") to the defendants ("Mr and Mrs Kirschner") of shares, or the proceeds of sale of shares, and of the right to receive a refund of an accommodation bond paid to a nursing home. Mrs Kirschner held a power of attorney from Mr and Mrs Perochinsky that was used to effectuate the alleged gift of the shares. If the words of gift were spoken, there is a question whether the gifts were effective. There is a question whether Mr Perochinsky had capacity to make the alleged gifts and if he did not, whether that is relevant, where, it is said, Mr and Mrs Kirschner did not have knowledge of his alleged incapacity. There is a question concerning the construction of s 163B of the Conveyancing Act 1919 (NSW) and the form of power of attorney prescribed in Schedule 7 of the Conveyancing Act that provided that the attorney could exercise the power for his or her own benefit. Mr and Mrs Kirschner say that even if Mr and Mrs Perochinsky did not say that they were giving property to the Kirschners, Mrs Kirschner was entitled to use the powers of attorney to transfer Mr and Mrs Perochinsky's assets to her and her husband. Mrs Kirschner and Mrs Perochinsky are registered as joint tenants of a property at Woollahra. There is a question whether Mrs Kirschner holds her interest on a resulting trust for Mrs Perochinsky. Issues of estoppel and a defence based on change of position also arise.
Principal facts and claims
The parties are related by marriage. The plaintiff (Antonina or Tonia Perochinsky) is 90. She was married to Haim Perochinsky (also called Michael or Mischa) from 1948 until his death on 8 July 2009. They had no children. The first defendant (Sandra Kirschner) is Mr Perochinsky's niece. The second defendant, Bernhard Kirschner, is her husband.
Mr and Mrs Perochinsky were born in Russian families who lived in China. They were married in 1948 and emigrated to Australia in 1953. In about 1961 Mr Perochinsky started his own business and by 2007 he and his wife had acquired significant wealth. They lived in a property at Balgowlah Heights. They jointly owned a number of investment properties. They jointly owned a share portfolio of mostly blue-chip shares that in early to mid-2007 had a value of approximately $1.4 million.
Mr and Mrs Perochinsky had both made wills on 1 September 1997. Mr Perochinsky appointed his wife as his executor, but if she were unable to act, he appointed Mr and Mrs Kirschner as his executors. He gave the whole of his estate to his wife if she survived him by not less than 30 days. If she did not survive him, he made a specific gift to a niece, Margarette Nelson (Mrs Kirschner's sister) of property at Bondi, and a specific gift of a property in Taranto Road, Marsfield to a Galina Chadskaia, resident in Russia (a niece of Mrs Perochinsky). He left the residue of his estate as to one-third to Galina Chadskaia and as to two-thirds to Mrs Kirschner.
Mrs Perochinsky made a will in mirror terms. That is to say, she appointed her husband as her executor if he survived her, but otherwise appointed Mr and Mrs Kirschner as executors. She left her estate to her husband if he survived her by not less than 30 days. If not, her estate was to be given to Margarette Nelson, Galina Chadskaia and Sandra Kirschner in the same way as Mr Perochinsky had provided in his will.
In her evidence in cross-examination Mrs Perochinsky denied that the will of 1 September 1997 that she admitted she had signed was in fact her will. This was the result of confusion on her part. She was confused because the will gave as the address for Mr and Mrs Kirschner an address in Bronte Road, Waverley. Mrs Perochinsky believed when she gave evidence that in 1997 Mr and Mrs Kirschner were not living at the Waverley address. Although she was dogmatic in her evidence, it is clear that she was wrong and that she made a will on 1 September 1997 in mirror terms to that of her husband.
There was uncontradicted evidence that Mrs Kirschner was close to her uncle and aunt. So much might be inferred from the terms of their wills.
By the beginning of 2007 Mr Perochinsky was 88 or 89. He had various physical ailments. He also suffered from at least the early stages of vascular dementia. The extent of his physical problems and his dementia at that time is dealt with in more detail later in these reasons.
By January 2007, Mr and Mrs Perochinsky and Mr and Mrs Kirschner had discussed Mr Perochinsky's going into a nursing home. The Sir Moses Montefiore nursing home at Randwick had been identified as an appropriate facility. Mr Perochinsky had agreed to go into that residential care facility on a trial basis. If he decided after six weeks that he did not wish to stay, then he would come back home. Arrangements were put in place for this to be done. On 25 January 2007, an ACAT assessment was carried out that approved Mr Perochinsky for either low-level respite care or low-level permanent residential care.
On or about 10 February 2007 there was a long meeting between Mr and Mrs Perochinsky and Mr and Mrs Kirschner at the Perochinsky's home in Balgowlah Heights. Mr Kirschner had ascertained that if Mr Perochinsky was admitted to permanent care and an accommodation bond was required, the amount of the bond that would attract what he described as the "maximum amount of rebate" would be $550,000. At the meeting on 10 February 2007 there was discussion about the fact that the accommodation bond would be $550,000.
At the meeting on 10 February 2007 Mr Perochinsky told Mr and Mrs Kirschner that he had gold hidden in the garage which could be used to make sure there was sufficient cash in the bank for Mrs Perochinsky and him to use to pay some of the bond before he moved into the Montefiore home. Gold bars were brought out. Mr Perochinsky said that their value was about $132,000.
Mr Kirschner gave evidence of the following conversation:
"I said: 'This is amazing but you will need more to pay all of the Montefiore bond. The sooner you pay the bond money, the cheaper your fees at the home will be. The home pays 8% on the bond money which is tax free. How are we going to pay the bond money?'
Misha said: 'I have plenty to pay the Montefiore bond. Not only gold, if they really give back the bond money it must go directly to Sandra and you. I don't want to pay death duty and so we must also make sure that the tax man does not grab it. You are our family.'
I then said: 'But Misha, I do not think that there are still death duties.'
Misha said: 'Doesn't matter. I want to make sure that the money from the gold and the bond goes directly to you as the government can always change the taxes to take our money.'
Misha and I then discussed several ways to ensure that the bond money plus the gold would eventually come back to Sandra and I [sic]. I do not recall every detail of that discussion. At the end of it Misha said:
'I will give the gold to you. You can then sell it and lend the money back to me, so I will owe you the money.'
Misha then said to me in front of Tonia:
'These gold bars are now yours. Go sell them in your name.
I said: 'When I have the money, I will lend it back to you. I will give you cheques to the value of the Gold that is sold'.
Misha said: 'When I am ready I will give you more money that you will use for the Montefiore bond. The total loan will then be $682,000.00'.
I said: 'I am worried about you storing gold at the house here - it is not safe. Is there any more?'
Misha said: 'Don't worry, I have plenty to give you, and I will give you more to lend me. You and Sandra are my family and all we have goes to you anyway.'
'You must make an agreement that the gold I give plus the bond are repaid to you. This way you will be sure to get the money.'"
Mrs Kirschner gave evidence to similar effect. Neither was seriously challenged on this evidence. I accept it. Mrs Perochinsky denied this evidence, but she said that she left it to her husband and Mr and Mrs Kirschner to discuss the matter between themselves. It was her understanding that the gold that was produced would pay for all of the accommodation bond, but that was not correct.
Mr Kirschner prepared a loan agreement. It bears what appears to be the signature of the deceased. Mrs Perochinsky denied that her husband had signed the agreement. Handwriting evidence was inconclusive. Mr and Mrs Kirschner say that Mr Perochinsky did sign the document. Having regard to other evidence referred to below that corroborates the evidence given by Mr and Mrs Kirschner of the discussions that took place on 10 February 2007, I think it probable that Mr Perochinsky did sign the document. In the document he was called "Haim", Mr Kirschner was called "Bernhard". The agreement relevantly provided:
"1. The parties hereby acknowledge and agree that Bernhard has loaned Haim $682,000 on 19 February 2007.
2. This loan will not be subject to any interest charges.
3. This loan will be repaid when no longer required by Haim.
4. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New South Wales."
Mr Kirschner had not lent Mr Perochinsky $682,000 on 19 February 2007, nor at all. Mr and Mrs Kirschner do not seek to enforce the loan agreement. Counsel for Mr and Mrs Kirschner accepted that there was no intent to create legal relations "in any sensible sense". Mr Kirschner said that he drafted the document as a layman to give effect to what Mr Perochinsky wanted. So far as he was concerned the thing was an absolute nonsense, but he prepared the document to give effect to Mr Perochinsky's wishes.
Mr Kirschner sold the gold. It fetched $146,709. On 19 February 2007 $54,481 was deposited to the joint account of Mr and Mrs Perochinsky with the ANZ Bank. On 23 February 2007 $92,228 was credited to that account. Mr Perochinsky completed the deposit slip for the deposit of $92,228 and described the deposit as "loan by Bernhard Kirschner". The evidence of a handwriting expert confirms that the deposit slip was written by Mr Perochinsky. The fact that he so described the deposit corroborates the evidence of Mr and Mrs Kirschner as to the effect of the conversation on 10 February 2007.
Mr Perochinsky entered the Montefiore home on 26 February 2007. He entered a low-care dementia unit known as Monte Terrace. Two hundred and fifty thousand dollars was paid towards the accommodation bond on 28 May 2007.
Mr Kirschner deposed that after Mr Perochinsky had moved into the Montefiore home he commenced assisting Mr Perochinsky with his paperwork and accounts. Mr Kirschner deposed that on an unspecified date, Mr Perochinsky said to him and to Mrs Kirschner in the presence of Mrs Perochinsky that:
"Tonia and I have decided that you and Sandra should take over and manage all our affairs including our shares and our properties."
Mr Kirschner said that he agreed to help and that Mr Perochinsky said to Mrs Perochinsky:
"Go to the bank to the safe deposit box and get out power of attorneys [sic] and give them to Sandra. Sandra has always been like a daughter and I know that she will always look after us. Bernhard is like my son and understands business and can help."
Mr Kirschner said that Mrs Perochinsky agreed. According to Mrs Kirschner this conversation took place in about April 2007. She said that about a week later Mrs Perochinsky handed her the powers of attorney signed by Mr and Mrs Perochinsky.
In her affidavit Mrs Perochinsky agreed that she handed over the powers of attorney, but she denied it in her oral evidence. I do not accept that denial.
Both Mr Perochinsky and Mrs Perochinsky had executed powers of attorney on 18 September 1997, the same day as they made their wills. Mr Perochinsky appointed his wife and Mrs Kirschner to be his attorneys. Mrs Perochinsky appointed her husband and Mrs Kirschner to be her attorneys. Both powers were expressed to be several powers. They were in the form of Schedule 7 to the Conveyancing Act. It is sufficient to quote Mr Perochinsky's power of attorney. He appointed his wife and Mrs Kirschner:
" ... to be my attorney(s) (where more than one jointly and/or severally) to exercise, subject to any conditions and limitations specified in part 2 of this Instrument, the authority conferred on him/her/them by section 163B of the Conveyancing Act, 1919, to do on my behalf anything I may lawfully authorise an attorney to do.
2. In the exercise of the authority conferred on him/her/them by section 163B of the Conveyancing Act, 1919, my attorney(s) is/are authorised to execute an assurance or other document, or do any other act, whereby benefit is conferred on him/her/them.
3. This general power of attorney is given with the intention that it will continue to be effective notwithstanding that after its execution I suffer loss of capacity through unsoundness of mind."
Part 2 of the power of attorney headed Conditions and Limitations was ruled through, except for a word "nil". There was a certificate accompanying each power given under s 163F(2) of the Conveyancing Act by a Mr Kelly, whom I infer was a solicitor. He certified that he had explained the effect of the power of attorney to the grantor before it was executed.
Mr Kirschner deposed that in about late April or May 2007 on a further visit to Mr Perochinsky, Mr Perochinsky said to them in Mrs Perochinsky's presence words to the following effect:
"Everything is eventually going to Sandra and you.
'You should have some benefit from some of our estate now. The shares are yours. Sell them as you need them. Let the dividends go to us until you sell them.
I know that you will continue to take good care of Tonia and manage everything well. There will still be plenty left besides the shares, we still have our properties and other assets.'
'Pay the rest of the bond from the shares as we discussed before I came here which will eventually be yours like the agreement says.
Tonia is travelling too much. You should buy a unit yourselves for Tonia to live in for her to move closer. I have discussed this with Tonia and she agrees with me.'
To which Sandra replied:
'Why Misha?'
Misha said: 'Why wait till I die before something goes to you? We know that Bernhard's new business needs capital, that you have a mortgage, so make us happy by making yourselves secure. Keep me informed on what you decide to do.'
Sandra or I said: 'Thank you Misha and Tonia. I hope that you both live to 120'.
To which Misha who had a good sense of humour replied: 'Of course we will, but there is plenty and we know you need it now. Isn't that so Tonia?'
Tonia replied: 'Of Course Misha'. (Addressing Misha)
I said: 'We will ensure that both of you want for nothing.'"
Mrs Kirschner gave evidence to similar effect. She said:
"In or about late April or early May 2007, when Misha, Tonia, Bernhard and I were together at Montefiore a conversation took place as follows:
Misha:
'Everything is eventually going to you and Bernhard. I would like you to benefit from some of our estate now. All of our shares are yours. Sell them as you wish and let the dividends go to us until you sell the shares. I know that you will keep on taking good care of Tonia and manage our affairs properly. We still have our properties and other assets and there will be plenty left if I die first. We know that Bernhard's new business needs capital, that you have a mortgage, so make yourselves secure. Keep me informed on what you decide to do.'
'You can sell some of the shares to pay the balance of the Montefiore bond. When I die it will all go to you. If Tonia wants to move closer sell some shares to buy something. When we die it will all go to you.'
I said: 'Thank you Misha and Tonia. I hope that you both live to 120'
Misha said: 'Of course we will, there is plenty and we know you need it now. Isn't that so Tonia?'
Tonia said: 'Of course'
Bernhard said: 'We will ensure that both of you want for nothing'.
Misha said: 'Mr Opit has all the details about the shares, speak to him. Mr Hattersley at Ord Minnett knows me well, as we have done lots of business together. Tell him that you are managing our affairs.'"
In May 2007 Mr Kirschner contacted Mr Perochinsky's accountant, Mr Phillip Opit. He was told that the then value of Mr and Mrs Perochinsky's shares was in the order of $1.45 million.
Mr Kirschner deposed that on or about 6 August 2007 Mrs Kirschner in his presence said to Mr and Mrs Perochinsky that the balance of the bond for the Montefiore home needed to be paid by the end of the month and that Mr Perochinsky said "of course you must sell some shares", and told Mr Kirschner that he would leave it to him as to which shares to sell.
Mrs Kirschner gave evidence to the same effect. She said:
"On or about 6 August 2007 I had a conversation with Bernhard, Misha and Tonia during which the following was said:
Bernhard said: 'We need to pay the balance of the Montefiore bond of $300,000.00 by the end of August otherwise we might lose our tax exempt privilege.'
Tonia said: 'What does that mean?'
Bernhard said: 'According to the government rules if we do not pay the bond within 6 months, then we cannot get the 8% interest tax free on the bond moneys.'
Misha said: 'Of course you must sell some shares. I will leave it to you which ones to sell'.
I then discussed with Bernhard which shares to sell, and Bernhard suggested we sell 15,000 Westpac shares."
On 7 August 2007, using the powers of attorney, Mrs Kirschner sold 15,000 Westpac shares. The proceeds of sale totalled $383,956.93. On 14 August 2007, the funds were deposited to Mrs Kirschner's Westpac account. On 22 August 2007 Mrs Kirschner paid $300,000 to the Montefiore home to complete the payment of the accommodation bond of $550,000.
Mrs Perochinsky said that neither Mr nor Mrs Kirschner had mentioned the sale of the Westpac shares. They gave evidence that the sale had been discussed and that Mrs Perochinsky received from Ord Minnett a copy of the sale note. I accept their evidence in this respect. Mrs Kirschner gave evidence, which I accept, that she told Mrs Perochinsky the money had gone into her bank account and that they could now pay the rest of the bond and Mrs Perochinsky agreed.
Between 6 September 2007 and 8 July 2009 Mrs Kirschner used the proceeds of the sale of shares to pay nursing home fees. These totalled $66,200.13.
In about August 2007 Mr and Mrs Kirschner and Mrs Perochinsky looked for a property in which Mrs Perochinsky could live closer to the Montefiore home at Randwick. At that time Mrs Perochinsky was still living in the Balgowlah Heights property. Ultimately Mrs Perochinsky agreed to buy a unit at Emanuel Gardens in Wallis Street, Woollahra. This was a unit in a retirement village. Mrs Perochinsky said that she was not told and did not appreciate that the unit was part of a retirement village and she would not have bought it had she known, because she had no need to move into a unit in a retirement village. This is disputed by Mr and Mrs Kirschner who say that it was explained to Mrs Perochinsky that the unit was part of a retirement village and that only those over 55 could move in. It had a 24-hour caretaker and a common dining room. On or about 28 August 2007, Mr and Mrs Kirschner and Mrs Perochinsky attended on a solicitor, Mr Henry Frydman to arrange for the purchase of the unit. The unit was purchased in the names of Mrs Perochinsky and Mrs Kirschner as joint tenants.
Mrs Perochinsky deposed that she thought she was buying the property for herself and that she was the only owner. She did not recall Mr Frydman or Mrs Kirschner saying that Mrs Kirschner would also be an owner. Mrs Perochinsky deposed that she would not have agreed to Mrs Kirschner's being a co-owner of the property as she had more than enough money to buy the unit herself and did not want to buy the unit with Mrs Kirschner.
Mrs Kirschner gave evidence that she said to Mr Frydman that she would give half of the deposit and Mrs Perochinsky would give half the deposit because they wanted the contract in both their names and Mr Frydman asked whether they wanted to be tenants in common or joint tenants. According to Mrs Kirschner, Mr Frydman explained the difference and said that joint tenancy was where if one owner died, the property passed directly to the surviving owner. This evidence was corroborated by Mr Frydman. He said that in accordance with his usual practice he would have explained that when two people buy as joint tenants, if one of them passes away, the other automatically takes the share of the deceased person. He was not sure what language he used, but did recall there being such a discussion. The reason for that is that he recalled that after Mrs Kirschner and Mrs Perochinsky had spoken in Russian, Mrs Kirschner said in English to Mrs Perochinsky that Mrs Perochinsky would outlive her and they had a laugh about it.
The contract was signed by both Mrs Kirschner and Mrs Perochinsky. It named them both as purchasers. The purchase price was $650,000. Mrs Perochinsky provided a cheque for $32,500. Mrs Kirschner provided her cheque for $32,500.
Mrs Kirschner's evidence is in accordance with the objective probabilities. Mrs Perochinsky's evidence on this topic was unsatisfactory and confused. She asserted that she saw Mr Frydman once. Initially she said that she produced cash for the payment of the full purchase price. She amended this evidence to say that she provided to Mr Frydman a combination of cash and a cheque she had received on the sale of some Kruger Rands. Mrs Perochinsky later said that she could not remember exactly, but after she had made the payment to Mr Frydman, he wrote out a receipt which he gave her that she had paid in full. She said that she understood from the receipt that she alone had bought the property. This evidence was not credible. The deposit was paid by two cheques of $32,500 provided by Mrs Kirschner and Mrs Perochinsky.
The balance of the purchase price was paid by way of a bank cheque arranged by Mrs Kirschner. She gave instructions to Ord Minnett to sell 15,000 BHP shares. The proceeds of sale amounted to $578,305.27. Mrs Kirschner used these moneys together with funds from the proceeds of other shares that had been sold to draw a bank cheque for $585,587.76 to settle the purchase. She gave instructions for the sale of 1,500 shares in News Corp which realised $35,153.90. From those proceeds she arranged a bank cheque for $24,750 to pay the stamp duty on the transfer.
The cheque drawn by Mrs Kirschner for $32,500 was substantially funded from the proceeds of the first sale of 15,000 Westpac shares.
Between 18 February 2008 and 6 August 2008 Mrs Kirschner arranged for the sale of further shares. Shares were sold on four separate occasions on 18 February 2008, 21 April 2008, 18 June 2008 and 6 August 2008. The proceeds of the sales amounted to $224,178.40. Mr and Mrs Kirschner say that they discussed the sales before they were made with Mr and Mrs Perochinsky and that Mr Perochinsky, in Mrs Perochinsky's presence, said that Mr Kirschner's advice that shares be sold should be followed. Mrs Kirschner deposed that on 6 August 2008 Mr Perochinsky repeated that "the shares are yours anyway and if you need to sell them, sell them" and that Mrs Perochinsky said "that's right".
The last parcel of shares, namely 5,000 Westpac shares, were sold after Mr Perochinsky's death. They were sold on 10 September 2009. The proceeds amounted to $119,961.66. All told the shares were sold for $1,401,029.44.
Mr and Mrs Kirschner used $212,300 to pay off a mortgage on an investment property in Mr Kirschner's name in North Sydney. Mr and Mrs Kirschner made gifts to their daughters totalling $60,000. Some cash amounts were used for day-to-day expenses. Eighty-five thousand dollars was paid to Mr Kirschner.
At the time of the alleged gift of the shares, Mr and Mrs Perochinsky's other assets substantially comprised a joint account with the ANZ Bank which was in credit to the extent of about $340,000 (prior to the payment of $250,000 towards the accommodation bond), two jointly owned investment properties in Taranto Street, Marsfield, and their house at Balgowlah Heights. The two investment properties were townhouses. One of the townhouses was sold in October 2007 for $480,000. The sale was completed on 26 November 2007. Mrs Perochinsky signed the transfer and her signature was witnessed by Mr Frydman. She also signed the agency agreement with the real estate agent who acted on the sale, an authority to the agent to exchange contracts, and the contract of sale. The proceeds of sale of the Taranto Street, Marsfield property were deposited to her and her husband's joint account with the ANZ Bank. The deposit was made on 3 December 2007.
The significance of these events is that Mrs Perochinsky deposed that she was not sure how the Taranto Street, Marsfield property had come to be sold. However, it is clear that she participated in the sale. She attended at Mr Frydman's office to execute the transfer. The contract and the transfer were executed for Mr Perochinsky by Mrs Kirschner's using the power of attorney, and by Mrs Perochinsky. Mr Frydman advised Mrs Perochinsky and Mrs Kirschner that the power of attorney would have to be registered and he attended to registration of the power. He took instructions from Mrs Perochinsky in relation to the sale.
On 3 December 2007 Mrs Perochinsky drew a cheque for $41,579 in favour of Mrs Kirschner. Mrs Kirschner completed the stub on the chequebook identifying the expenses for which the cheque was a reimbursement. The principal expense was described as a reimbursement of $32,500 for the deposit paid by Mrs Kirschner on the Woollahra unit. This was curious as Mrs Kirschner had obtained the funds from which she drew her cheque for the deposit from the sale of the shares. In the end I think little turns on this transaction because Mrs Kirschner was not cross-examined about it.
On 20 December 2007 Mrs Perochinsky moved into the Woollahra unit. She subsequently rented out the Balgowlah Heights property. Mr Kirschner organised the leasing. It was an agreed fact that the rent from the leasing of the Balgowlah Heights property was paid into Mr and Mrs Perochinsky's ANZ Bank account.
Mrs Perochinsky says that it was only in about February 2008 that she became aware that the Woollahra unit was in two names.
Mr Perochinsky died on 8 July 2009. According to Mrs Kirschner, from the day after he died Mrs Perochinsky started behaving strangely. In cross-examination Mrs Kirschner said that from the time her uncle died, Mrs Perochinsky became distrustful of her. Mrs Kirschner said that Mrs Perochinsky started accusing her of stealing magnums of wine and stealing gold from her house and finding them and putting them back behind her back (T298-299).
In about mid-July 2009 Mrs Perochinsky and Mrs Kirschner again attended on Mr Frydman to discuss Mr Perochinsky's estate. Mr Frydman was advised that Mr Perochinsky did not hold any assets in his own right, but held assets jointly with his wife. He said:
"... the major asset which Mrs Perochinsky advised was an accommodation bond for the Montefiore home which she advised me she paid in herself so in those circumstances I advised them there wouldn't be any need to apply for a grant of probate because the two properties could be transferred to her pursuant to the survivorship rules and the accommodation bond should be returned to the person who lodged it if that person claims they lodged it himself, so I wrote to the Montefiore home and provided them with a copy of the death certificate and provided them with a copy of the will, I think, of Mr Perochinsky to satisfy them that (a) she claims that she lodged the funds herself and (b) that she was the sole beneficiary, and they then proceeded to forward a cheque for the accommodation bond ... plus I think some interest to me and I lodged it in the trust account."
Mr Frydman did not recall whether Mrs Kirschner said anything about the accommodation bond. According to Mrs Kirschner she asked Mr Frydman to make out the cheque to Mrs Perochinsky.
Mr Frydman drew a cheque on his trust account in favour of Mrs Perochinsky for $553,152.73. The cheque was crossed. The words "or bearer" were crossed out so that the cheque was described as neither an order nor a bearer cheque. It was dated 18 August 2009. Mr Frydman left the cheque out at the front desk of his office for collection. Mrs Kirschner collected the cheque. She did not endorse the cheque as attorney for Mrs Perochinsky. Mrs Kirschner paid the cheque into her own account. She did not recall precisely how she dealt with the cheque or whether she presented the power of attorney to the bank.
Mrs Kirschner deposed:
"On about 20 August 2009 I had a telephone conversation with Tonia in words to the following effect:
I said: 'I have received the return of the Montefiore bond. As you know you and Misha gave this money to Bernhard for us. I just want to make sure you are okay with me depositing the money into my bank account tomorrow.'
Tonia said: 'Of course'."
She deposited the cheque into her Westpac account the following day. Mrs Perochinsky denied the conversation.
Mrs Perochinsky arranged for the sale of the Balgowlah Heights property to a neighbour without the intervention of an agent. Mrs Perochinsky, in the company of Mr and Mrs Kirschner, attended on Mr Frydman in the first week of August 2009. At some time after 20 August 2009 (being the date on which the purchaser's solicitor forwarded a transfer to Mr Frydman), Mr Frydman spoke to either Mr or Mrs Kirschner who collected the transfer. It was returned to him some time close to 14 September 2009 (being the date of completion of the sale). Mr Frydman recalled telephoning Mrs Kirschner and asking her to have the transfer returned to him. She indicated that there was some problems in her relationship with Mrs Perochinsky. The precise time of that conversation is not clear, but it was within the timeframe between 20 August and 14 September 2009. It is likely that it was towards the end of that period.
After the sale was completed Mrs Perochinsky attended on Mr Frydman and collected the cheques. She opened a new account with the Commonwealth Bank and deposited the cheques into that account. She also transferred the money in the ANZ Bank account (about $280,000) to the Commonwealth Bank account. She said that she opened a new account because she did not trust Mrs Kirschner. Mrs Perochinsky said in cross-examination that the reason for her distrust was that she suspected that Mr and Mrs Kirschner had taken the rent money earned on the Balgowlah Heights property. She said that she asked her solicitor and accountant to find out where the rent had gone. She said that her accountant, Mr Peter Sheldon, told her that the money had gone into the ANZ Bank account. She did not accept this explanation because she thought the money should have gone to the Commonwealth Bank account. However, the Commonwealth Bank account was opened as a new account when the Balgowlah Heights property was sold. Her suspicion that Mr and Mrs Kirschner had not accounted for the rent because the rent had not been paid into the Commonwealth Bank account was irrational.
On 21 October 2009 Mrs Kirschner applied to the Guardianship Tribunal for an order appointing her as Mrs Perochinsky's guardian and for an order appointing Mr Kirschner as Mrs Perochinsky's financial manager. That application was withdrawn on 23 April 2010. Mrs Kirschner said that the reason it was withdrawn was because Mrs Perochinsky was then being advised by solicitors and by an accountant and had conferred with medical professionals, some of whom were of the view that she did not need a guardian. Counsel for Mrs Perochinsky put to Mrs Kirschner in cross-examination that she commenced the Tribunal proceedings to bring Mrs Perochinsky and her money back under her control. It was put to her that she was seeking to put an end to Mrs Perochinsky's attempt to establish herself as being financially independent and so that it would be less likely that her dealings with the shares would be investigated by any other person. Mrs Kirschner denied this. I accept her denial.
In correspondence to the Guardianship Tribunal received by the Tribunal on 6 January 2010 Mrs Kirschner wrote:
"We advised Tonia to sell shares before the stock market crash, as my husband felt that the market was dangerously high, and used the money to buy her unit in Woollahra, as she was becoming exhausted travelling from Balgowlah to visit Misha".
Mrs Kirschner admitted that in proceedings before the Tribunal she told the Tribunal that all of the purchase price for the Woollahra unit was paid using Mrs Perochinsky's money. She acknowledged that she believed the statement was true, but explained that she perceived that it was all Mrs Perochinsky's money originally, but she believed the shares had become hers and they had been used to buy the unit (T288-289). Mrs Kirschner admitted that she told the Tribunal that the purchase money used to buy the Woollahra property was obtained from selling Mrs Perochinsky's shares.
Counsel for Mr and Mrs Kirschner submitted that their evidence should be accepted and that Mr and Mrs Perochinsky made effective gifts of the shares to the Kirschners and also authorised Mrs Kirschner to deposit the refund of the accommodation bond to her own account. Counsel also submitted that even if Mr and Mrs Kirschner's evidence as to the making of gifts was rejected, the powers of attorney expressly entitled Mrs Kirschner to enter into contracts and do acts that were to her own benefit. They submitted that this was so whether or not it was found that Mr and Mrs Perochinsky had made a gift of the shares or had given a mandate authorising Mr and Mrs Kirschner to apply the proceeds of sale of the shares for their own benefit.
Counsel for Mrs Perochinsky submitted that it was not open to Mr and Mrs Kirschner to rely upon the terms of the powers of attorney because such reliance was not pleaded in the defence. It is convenient to deal first with the substance of the argument that relies on the terms of the power of attorney, whether or not there were words of gift.
The Powers of Attorney
The terms of the powers of attorney have been set out at para [22] above. They were in the form of Schedule 7 to the Conveyancing Act. Section 163B of the Conveyancing Act provided:
"163B Power conferred by prescribed form of instrument
(1) Subject to this section, an instrument (whether or not under seal) in or to the effect of the form in Schedule 7 confers on the attorney thereby appointed authority to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do.
(2) The authority conferred by an instrument referred to in subsection (1) does not include:
(a) authority to exercise or perform any power, authority, duty or function as a trustee conferred or imposed on the person executing the instrument, or
(b) unless it is expressly conferred by the instrument-authority to execute an assurance or other document, or do any other act, as a result of which a benefit would be conferred on the attorney appointed by the instrument.
(3) Where an instrument referred to in subsection (1) specifies any conditions or limitations to which the authority conferred by the instrument is to be subject, the authority is so conferred subject to compliance with those conditions or limitations."
The scope of the authority conferred on an attorney pursuant to the form of the power of attorney in Schedule 7 to the Conveyancing Act where clause 2 is included and there are no conditions and limitations expressed in Part 2 of the form is the subject of conflicting decisions in this Court. In Spina v Conran Associates Pty Ltd [2008] NSWSC 326 Austin J held that although s 163B(2) permits a power of attorney, by express language, to authorise acts that result in a benefit to the attorney, that authority is subject to a limitation in subs (1) that the attorney's authority is to act on behalf of the person giving the power, which requires that the attorney act as a fiduciary in the interests of, that is for the benefit of, the principal (at [76]-[83]). Austin J held that the power of attorney in the form of Schedule 7 did not authorise the attorney in that case to execute a mortgage on behalf of his principal of the principal's property to secure the attorney's debt where that was to the principal's detriment.
In Spina v Permanent Custodians Ltd [2008] NSWSC 561 Hammerschlag J declined to follow the earlier decision of Austin J in Spina v Conran Associates Pty Ltd. In essence Hammerschlag J held that a person will act as an "attorney" and "on behalf of" the principal where the attorney acts so as to bind the principal in a dealing with a third party. His Honour said that a person may lawfully authorise another to do something "on his or her behalf" which is entirely inimical to first person's interests or entirely in the second person's interests (at [149]). The fact that the person on whom the authority was conferred was called an "attorney" did not imply any limitation on the attorney's authority and the expression "on behalf of" did not necessarily import any notion of benefit, but merely connoted the relationship where one person's actions bound another (at [151]).
Hammerschlag J concluded that Austin J's reasoning blurred a distinction between the extent or lack of authority and the abuse of authority (at [120], [155] and [181]).
Other cases have drawn the same distinction as drawn by Hammerschlag J in Spina v Permanent Custodians Ltd between the width of the power of a fiduciary to bind his or her principal to contracts with third parties and the abuse of that power (Hambro v Burnand [1904] 2 KB 10 at 23, 25; Reckitt v Barnett, Pembroke & Slater Limited [1928] 2 KB 244 per Scrutton LJ at 257-258; Re R [2000] NSWSC 886 at [41]; Hughes v Hughes [2011] NSWSC 729 at [36]-[39]; Ward v Ward (No. 2) [2011] NSWSC 1292 at [3]). Counsel for Mr and Mrs Kirschner anticipated an argument that whatever might be the scope of Mrs Kirschner's authority under the power of attorney to bind her principals to a transaction which was for her benefit, and not for their benefit, it did not affect her duty as a fiduciary to act in the interests of her principal. In rebuttal of that argument, counsel submitted that the existence and scope of a fiduciary obligation between principal and agent depends upon the terms of the contract of agency. In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Mason J said (at 97) (in a passage quoted by Hammerschlag J in Spina v Permanent Custodians Ltd at [116]):
"The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction."
Hammerschlag J went on to say (at [117]):
"Accordingly where fiduciary obligations arise because of a contractual relationship the terms of the contract will affect the scope and extent of the fiduciary obligations between the parties, not the other way round."
(Jacobsen J made the same point in Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No. 4) [2007] FCA 963; (2007) 160 FCR 35 at [276]-[281], [323]).
Counsel for Mr and Mrs Kirschner submitted that "It is difficult to formulate logically how a breach of fiduciary obligation can arise when the act said to constitute the breach is expressly authorised by the instrument." Counsel submitted that those authorities that found a breach of fiduciary obligation by reason of an agent's having acted in his or her own interests where the power of attorney granted an express power for the agent to do so failed to address the question of how there could be a breach of fiduciary duty in those circumstances. Counsel accepted that an agent who was expressly authorised to deal with the principal's property for the agent's own benefit might be held to account, or a transaction for the agent's own benefit might be set aside, if the agent took unconscientious advantage of the principal's position of special disadvantage. But such a case depends upon different principles. There was no such pleading in this case.
The first question is the extent of the authority conferred on Mrs Kirschner by the powers of attorney. That partly depends upon the construction of s 163B(1) and partly on the terms of the power of attorney itself. In my view the critical consideration is not the description of Mrs Kirschner as the Perochinskys' "attorney" (compare Spina v Conran Associates Pty Ltd per Austin J at [77]). The critical matter is that the authority conferred by subs 163B(1) is authority "to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do". Likewise the power of attorney itself describes the authority conferred on the attorney as one "to do on my behalf anything I may lawfully authorise an attorney to do".
In Spina v Permanent Custodians Ltd Hammerschlag J said (at [145]-[151]):
"[145] The Oxford English Dictionary, 2nd ed, defines 'on behalf of' (cf 'in behalf of') in the following terms, as relevant:
I. 1. on behalf of ...
c. On the part of (another), in the name of, as the agent or representative of, on account of, for, instead of. (With the notion of official agency.) ...
[146] It defines "attorney" as follows:
2. (attorney in fact, private attorney.) One duly appointed or constituted (by letter or power of attorney) to act for another in business and legal matters, either generally, as in payment, receipt, and investment of money, in suing and being sued, etc, or in some specific act, which the principal, by reason of absence, is unable to perform in person. Hence the contrast between 'in person' and 'by attorney,' frequent also in fig. senses ...
[147] The term 'attorney' signifies anyone who acts in the turn or place of another; Halsbury's Laws of England, 4th ed, vol 44(1) (reissue) at [1]. It has no necessary connotation that the actor acts for the benefit of another.
[148] 'Attorney' and 'on behalf of' in the present context connote no more than a relationship which results in the actions of one person binding another. They are 'concerned with the standing of one person as auxiliary to or representative of another person or thing'; R v Toohey; Ex parte A-G for Northern Territory (1979) 145 CLR 374 at 386, per Stephen, Mason, Murphy and Aickin JJ.
[149] As a matter of language a person may lawfully authorise another to do something on his or her behalf which is entirely inimical to the first person's interests or entirely in the second's.
[150] Likewise an attorney may, if authorised, act entirely inimically to his or her appointer's interest.
[151] In my view as a matter of language neither the term 'attorney' nor the term 'on behalf of' necessarily imports any notion of benefit. The words merely connote the relationship where one person's actions bind another."
This construction gives the words "on behalf of the person executing the instrument" no work to do. On his Honour's construction, the section provides that the instrument in the form in Schedule 7 "confers on the attorney thereby appointed authority to do ... anything the person executing the instrument may lawfully authorise an attorney to do". Likewise clause 1 of the power on his Honour's construction confers on the attorney "the authority conferred on her by s 163B of the Conveyancing Act 1919 to do ... anything I may lawfully authorise an attorney to do."
In my view, the words "on behalf of the person executing the instrument" and "on my behalf" in s 163B(1) and in para 1 of the power should not be treated as mere surplusage if there is another meaning to those words that is reasonably open and is consistent with the context and purpose of the section and the instrument.
Hammerschlag J noted (at [145]) a distinction between the phrase "on behalf of" and "in behalf of" in the Oxford English Dictionary. The Oxford English Dictionary notes that "in recent use we often find 'on behalf' in the sense of 'in behalf', to the loss of an important distinction." The meaning of "in behalf" is given as:
"In the interest of, as a friend or defender of, for the benefit of."
The important point is not a lexicographer's lament about the changing use of language, but the fact that the words "on behalf of" are often used in the sense of acting in the interest of or for the benefit of another. It is in that sense that Austin J construed those words in Spina v Conran Associates Pty Ltd. As Austin J observed there is good authority for so understanding that phrase in the context of powers of attorney.
In Tobin v Broadbent (1947) 75 CLR 378 Dr Tobin had given a power of attorney to a stockbroker, Mr Hodgetts, in comprehensive terms. The power was for the attorney to act as he might think fit in relation to Dr Tobin's affairs generally, including the exercise of "the fullest powers in relation to real and personal property and my affairs and the conduct and management thereof". There was no express provision permitting the attorney to exercise the power for his own benefit. Of this power of attorney Starke J observed (at 397-398):
"Comprehensive as are these terms the only actual authority given to Hodgetts is to act for and on behalf of his principals; nowhere is any authority given to him to use the appellant's shares and investments for his own private purposes".
Starke J here distinguished between the exercise of the power on behalf of the principal and its exercise for the agent's own purposes.
Dixon J said (at 401):
"But the cardinal fact of the transaction which it is sought to bring within the power is that the loan was made to Hodgetts, the donee of the power, and not to either of the Tobins, the principals. Hodgetts was the borrower, the loan was for himself, he did not contract it as an agent but he gave the lender his principals' property as security. The question is, therefore, whether the power of attorney extended to authorizing Hodgetts to give a security over his constituents' shares for his own debt, not simply whether it authorized him to give a security. You cannot sever the giving of the security from the indebtedness secured. A transaction of security is unintelligible without an identification of the obligation secured. This is not the case of an agent misapplying moneys borrowed in his principal's name on the security of his assets pursuant to an authority covering the borrowing of money on the principal's behalf. If a transaction is ostensibly on the principal's behalf and is of a description that falls within the authority, it is nothing to the point that the agent's purpose was to act for his own benefit and to defraud the principal, that is, unless the opposite party to the transaction had notice.
But here the transaction was the attorney's own, both in form and substance, and the only incident of it concerning the constituents was when the latter's property was drawn in as a support for the loan. Prima facie, a power, however widely its general words may be expressed, should not be construed as authorizing the attorney to deal with the property of his principal for the attorney's own benefit. Something more specific and quite unambiguous is needed to justify such an interpretation. 'The primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property.' Per Russell J, Rickitt v Barnett Pembroke and Slater Ltd (1928) 2 KB 244, at p 268 a judgment approved in the House of Lords (1929) AC 176, at p 183 and p 195. In my opinion, the words of the powers of attorney do not in themselves suffice to confer authority upon Hodgetts to secure a borrowing of his own by a deposit of the plaintiffs' scrip. Such a transaction is in itself beyond the limits of the power."
The most important part of this passage for present purposes is the concluding sentence of the first quoted paragraph. There, Dixon J referred to a transaction "ostensibly on the principal's behalf" as falling within the power. This referred to the transaction as being ostensibly for the principal's benefit.
Russell J's dissenting judgment in Reckitt v Barnett, Pembroke & Slater Ltd at 268 was approved in the House of Lords and endorsed by Dixon J in Tobin v Broadbent. Russell J said (at 268) in reference to a submission that "the power given to an attorney to draw cheques without restriction authorised the attorney to do what he liked with the principal's moneys, even to the extent of applying them in payment of his own personal debts"
"It would need words unambiguous and irresistible to enable me to attribute such a meaning and intention to a power of attorney. The primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property."
The present question is whether clause 2 of the power is a clear power for an attorney to make presents to herself of her principal's property. I see no reason not to apply his Lordship's words to the construction of the power of attorney conferred by clause 1. Section 163B, which describes the extent of the authority conferred by a power of attorney executed in accordance with schedule 7, should be construed in accordance with that principle, given its endorsement by the High Court in Tobin v Broadbent.
It is not every benefit conferred on an attorney that amounts to the giving of a present. It is possible for an attorney to act to benefit his or her principal, although at the same time the attorney obtains a benefit for himself or herself. An example would be taking up an investment opportunity where neither the attorney's own funds, nor those of the principal would be sufficient to take up the opportunity, but their combined funds would be sufficient. In the absence of clause 2 of the power of attorney, the attorney would be required to account to his or her principal for a gain derived by the attorney from use of his fiduciary position (Chan v Zacharia (1984) 154 CLR 178 at 199; Breen v Williams (1996) 186 CLR 71 at 135). If the investment showed a loss, in the absence of clause 2 of the power of attorney, the attorney would be required to account to his principal for the loss (Breen v Williams at 136). In Spina v Conran Associates Pty Ltd, Austin J (at [73]) cited other examples where clause 2 would have sensible work to do even though it did not extend to the attorney's power making presents to himself or herself.
In Spina v Permanent Custodians Ltd, Hammerschlag J supported his construction of s 163B by the Law Commission Report of 7 August 1970 (UK) which led to the enactment of s 10 of the Powers of Attorney Act 1971 (UK). Section 10 of that Act provided that a general power of attorney in the form set out in a schedule to the Act conferred on the donee authority to do on behalf of the donor anything which the donor could lawfully do by an attorney. The Law Commission Report said that the legislation it proposed was intended to avoid any argument as to the extent of the authority conferred.
The Law Commission Report did not address the issue of an attorney acting for his or her own benefit. The legislation enacted in New South Wales by s 163B of the Conveyancing Act did not follow s 10 of the UK Powers of Attorney Act 1971. The provision that the attorney act on behalf of the principal was included in the New South Wales Act, but not in the UK Act.
The reports of the New South Wales Law Reform Commission (LRC 18 and LRC 20) that preceded the introduction of s 163B of the Conveyancing Act did not address the present issue. Hammerschlag J referred (at [165]) to the second reading speech where the Minister said:
"'[It] will provide for the operation of a statutory short form power of attorney conferring on the attorney authority to do on behalf of the principal anything the principal may lawfully authorise an attorney to do. The principal would, of course, be able to impose whatever conditions or limitations on the authority he desires. However, the bill specifically provides that the power does not authorise an attorney to execute any dealing in favour of himself unless this is expressly allowed by the principal.' (emphasis added)"
The Minister's speech was not a substitute for the section. In any event, it did not take the matter further, because the Minister said that the statutory short form power would confer authority on the attorney to do "on behalf of the principal" anything the principal could lawfully authorise the attorney to do. Hammerschlag J said (at [167]) that the plain meaning of s 163B(1) was that "the agent is vested with power to do anything which the principal himself could do." But that construction leaves out the words "on my behalf".
If a person holds out his or her agent as having authority to act in a particular class of transactions, the principal will be bound if the agent acts in accordance with his or her ostensible authority, whether or not the agent acts in accordance with his or her actual authority. But the relevant authorities, in particular Hambro v Burnand [1904] 2 KB 10, are not cases of ostensible authority.
In Hambro v Burnand the principals gave to the agent, who was a member of Lloyd's, an authority to write policies of insurance in the ordinary business of an underwriter at Lloyd's on their behalf. The agent purportedly bound the principals to policies of insurance by which the principals agreed to indemnify the acceptors of bills of exchange if the drawer of the bills failed to meet its obligation to indemnify the acceptors. The drawer of the bills was a company, Henry Gaze & Sons Limited. The agent was a director of the company and had personal financial dealings with it. The drawer did not pay the premiums under the policy and the agent did not enter the policies in his books. The agent intercepted letters to his principals for the purpose of preventing them from becoming aware of the existence of the policies (at 12). The Court of Appeal held unanimously that the underwriting of the policies was within the terms of the authority given by the principals and the insureds (the acceptors of the bills). This was not affected by the fact that the agent may have "abused [his] authority or betrayed his trust" (per Romer LJ at 23). The case was decided on the basis that the writing of the policies was within the actual authority of the agent (at 19, 21, 23, 25 and 26 citing Bryant, Powis & Bryant Limited v Quebec Bank [1893] AC 170). Contrary to what was said by Austin J in Spina v Conran Associates Pty Ltd at [86] the case was not decided on the basis that the attorney had been clothed with ostensible authority to enter into the underwriting transactions, even though he had no actual authority to do so for his own benefit. Counsel for the principals had argued that the only question was whether the agent was acting in the course of his actual authority because there had been no holding out by his principals of him as an agent (at 16). Nothing was decided to the contrary of that.
Consistently with Hambro v Burnand the Court of Appeal decided in Reckitt v Barnett, Pembroke & Slater Limited that a principal was bound to honour a cheque drawn by his agent in payment of a Rolls Royce motor vehicle of which the agent took possession. Again, the case was decided as one of the agent's actual authority, not his ostensible authority. Sir Harold Reckitt had given a power of attorney to his solicitor to do various things on his behalf. The list did not expressly include drawing cheques on the principal's account, but he wrote to his bank advising that the power of attorney was to include the power to cover the drawing of cheques by his attorney without restriction.
The solicitor bought a Rolls Royce car in his own name from the defendants and in payment provided a cheque that he signed in the name of Sir Harold by himself as his attorney. The defendants, who sold the vehicle to the solicitor were sued for conversion of the cheque. They had not noticed the form of signature. They did not rely on Sir Harold Reckitts' having held out the solicitor as his attorney. In the Court of Appeal Scrutton and Sankey LJJ held that the principal had conferred authority on his solicitor to draw the cheque on his behalf and it was no answer to say that the solicitor had abused that authority, it not being suggested that the defendants had notice of such an abuse. This was consistent with Hambro v Burnand. It was also said to be consistent with Lloyd v Grace, Smith & Co [1912] AC 716. Russell J dissented. It was his dissenting judgment that was approved in the House of Lords. Russell J held (at 269):
"Powers of attorney are to be construed strictly; and where authority to do an act purporting to be done under a power of attorney is challenged, it is necessary to show that on a fair construction of the whole instrument the authority in question is to be found within the four corners of the instrument either in express terms or by necessary implication: Bryant's case ([1893] A. C. 170, 177)."
The House of Lords held that the solicitor did not have authority to use his principal's money to pay his private debts (Reckitt v Barnett, Pembroke & Slater Limited [1929] AC 176 per Lord Hailsham LC at 182; per Viscount Dunedin at 184; per Viscount Sumner at 189; per Lord Warrington at 193).
Similarly, the High Court held in Tobin v Broadbent that notwithstanding the wide terms of the power of attorney given in that case to the stockbroker Hodgetts, the power did not confer actual authority on the attorney to pledge his principal's property to secure his own debts. In neither Reckitt's case in the House of Lords, nor in Tobin v Broadbent was the case decided on the ground that the third party was affected by notice that the agent was acting in abuse of an authority conferred on him. Both cases decided that the agent's authority did not extend to acting solely in the attorney's interest.
The authorities were reviewed by Windeyer J in Sweeney v Howard [2007] NSWSC 852. His Honour noted that earlier editions of Bowstead on Agency had included an article 74 that read as follows: "An act of an agent within the scope of his actual or apparent authority does not cease to bind his principal merely because the agent was acting fraudulently and in furtherance of his own interests", but that the 17th and 18th editions of Bowstead omitted the words "actual or" so that the article reads "An act of an agent within the scope of his apparent authority does not cease to bind the principal merely because the agent was acting fraudulently and in furtherance of his own interests." Windeyer J observed that in the 17th and 18th editions of Bowstead a new article 23 has been included that provides "Unless otherwise agreed, authority to act as agent includes only authority to act for the benefit of the principal". His Honour referred to Halsbury's Laws of Australia in Title 15 on Agency, Chapter 2 para 15.75 where it is said:
"The language of a power of attorney, however widely expressed, will not prima facie be construed as authorising the agent to deal with his principal's property for his or her own purposes, or otherwise to act in his or her own interests to the exclusion of those of the donor."
Windeyer J considered that those passages are supported by the authorities he reviewed, in particular, Tobin v Broadbent and the House of Lords' decision in Reckitt's case (at [55]-[58]).
As counsel for Mr and Mrs Kirschner submitted, if the power of attorney is construed so as to confer actual authority on the agent to act for his or her own benefit, even though that is contrary to the interests of the donor of the power, it is not easy to see how the attorney would abuse the authority he or she was given by acting for his or her own benefit and contrary to the interests of the principal. In Spina v Permanent Custodians Ltd Hammerschlag J assumed that the attorney could abuse his fiduciary position by so acting, but did not, with respect, explain why that would be so.
For these reasons I prefer the views of Austin J in Spina v Conran Associates Pty Ltd as to the proper construction of s 163B of the Conveyancing Act to those of Hammerschlag J in Spina v Permanent Custodians Ltd. In Hughes v Hughes, Gzell J expressed a preference for the views of Austin J without expounding his reasons.
Counsel for Mr and Mrs Kirschner submitted that a construction of the section that permitted an attorney to act for his or her own benefit only if that was also for the benefit of the principal would defeat the purpose of the provision which was to confer wide powers on the attorney, unless they were expressly limited by conditions or limitations included in part 2 of the form. Otherwise, it was said, if a husband gave his wife an enduring power of attorney and she exercised it to spend his money to buy clothes or groceries for herself, she would be acting beyond the power conferred.
I do not think this necessarily follows. The question in each case would be whether the attorney, although deriving a benefit for himself or herself was acting on behalf of the principal. In my view, in the hypothetical case posed by counsel, it could well be said that the wife was acting on her husband's behalf if she exercised the power of attorney to spend money on herself if she was thereby only doing what the husband would do himself if he were present and capable. In such a case, the wife would be discharging what would be at least a moral obligation of the husband to provide support.
In the same way, in the present case, I accept that if Mr and Mrs Perochinsky did express their intention to make gifts of their property to Mr and Mrs Kirschner, Mrs Kirschner would be acting on their behalf if she exercised the powers of attorney to complete the gifts. In such a case Mrs Kirschner would be acting in the interests of Mr and Mrs Perochinsky and acting on their behalf, by effectuating their intention. With the express authority in the power to act for her own benefit, Mrs Kirschner could complete the gifts. But the position would be otherwise if Mr and Mrs Perochinsky did not say that they wanted to give their property to Mr and Mrs Kirschner. If that were the position, Mrs Kirschner would not be acting on their behalf when she used the powers of attorney to confer benefits on herself and her husband. Accordingly, the critical question is whether or not I accept Mr and Mrs Kirschner's evidence of Mr and Mrs Perochinsky's statements of their intention to make gifts. (I deal below with the issues arising from the alleged incapacity of Mr Perochinsky to make such gifts.)
This conclusion as to the proper construction of the powers of attorney answers the pleading issue. The defendants pleaded that Mr and Mrs Perochinsky gave their shareholding to them. They are entitled to rely on the terms of the powers of attorney, if necessary, in order to make good that contention. Had I accepted the submissions of counsel for Mr and Mrs Kirschner that the powers of attorney were effective to enable Mrs Kirschner to transfer the shares, or the proceeds of sale of the shares, or the refund of the accommodation bond, for her benefit and that of her husband, irrespective of whether or not the Perochinsky's had expressed their intention to make gifts, then I would have accepted the plaintiff's submission that that was a matter that needed to be pleaded. Had Mr and Mrs Kirschner sought leave to amend I would have refused leave because Mrs Perochinsky might have sought to address that contention by pleading an alternative cause of action, as she unsuccessfully sought to do at the commencement of the hearing.
Mandates
If Mr and Mrs Perochinsky orally conveyed authority to Mr and Mrs Kirschner to sell their shares and keep the proceeds for themselves, then even if the powers of attorney did not authorise those transactions, Mr and Mrs Kirschner had a mandate which, although revocable, authorised them to deal with the property. The gift of the proceeds of the sale of the sale of the shares would be effective if the transactions were completed before the mandate was revoked.
Mr Perochinsky's capacity to make gifts
Only Mr Perochinsky's capacity to make gifts was in issue. There was no dispute that the test for testamentary capacity was applicable by analogy to determine his capacity to make gifts of his interests in the shares and the accommodation bond (Crago v McIntyre [1976] 1 NSWLR 729 at 740-741; Beverley v Watson (Owen J, Supreme Court of Western Australia, 14 September 1994, unreported, BC9401884 at [15]); Collins v May [2000] WASC 29 at [59]; Stone v Registrar of Titles [2012] WASC 21 at [151]). For Mr Perochinsky to have had the capacity to make the gifts he would have to have been capable of understanding the nature and effect of the transaction, that is, that he was giving away his, or his and his wife's, shares and accommodation bond. Secondly, he would have to have had the capacity to understand generally the extent of his property, or at least the extent of the property that was the subject of the transaction. Thirdly, he would have to have had the capacity to assess the persons who would have a moral claim on him who would be affected by the decision and the capacity to weigh the claims of such persons so as to make a balanced judgment as to whether or not it was proper to make the gift.
Mr Perochinsky suffered from various physical ailments in 2005 and 2006 including incontinence and degenerative arthritis. On 7 December 2006 a cardiologist, Dr Sammel, stated that "in view of the fact that he appears to have some degree of dementia, I discussed the findings in the presence of his wife and niece". By late 2006 and early 2007 Mrs Perochinsky was becoming unable to cope. Mr Perochinsky was falling frequently and Mrs Perochinsky was unable to pick him up and care for him. Mr Perochinsky had admitted to Dr Sammel that he had problems with his memory. An experienced geriatrician, Associate Professor Rosenfeld, considered that by February 2007 Mr Perochinsky was suffering from moderately severe vascular dementia that would have significantly affected his thinking and reasoning. Dr Rosenfeld considered that the recurrent falls were characteristic of an individual's suffering from higher-level cognitive problems because he lacked the insight to be able to avoid situations that led to the falls. It was Mrs Perochinsky who raised her problems in caring for her husband with Mrs Kirschner. Associate Professor Rosenfeld considered that the fact that she, and not Mr Perochinsky, had to raise the issue with Mrs Kirschner was also indicative of Mr Perochinsky's suffering from significant cognitive impairment.
Mr Perochinsky was persuaded to go into the Sir Moses Montefiore Nursing Home initially on a trial basis. A medical assessment by a doctor associated with that facility was carried out on 24 January 2007. One of the doctor's diagnoses was that Mr Perochinsky was suffering from cerebral arterio sclerosis and was in need of psychiatric assessment. However, no psychiatric assessment was carried out.
An ACAT assessment carried out between 25 January and 9 February 2007 recorded occasional short-term memory problems, depressive symptoms and disorientation as to time and noted lapses of concentration at times. Otherwise, the ACAT form did not record any adverse observations in respect of "Cognitive Behaviour/Psychological Aspects". The ACAT form was completed by a social worker, not a medical practitioner.
A social worker's "Psycho Social Assessment" made on about 28 February 2007 recorded Mr Perochinsky as suffering from dementia as well as various physical ailments, and noted that he was verbally disruptive and noisy and engaged in attention-seeking and demanding behaviour. A social worker completed a mini mental assessment on 13 February 2007. Mr Perochinsky recorded a score of 19 out of 30. Associate Professor Rosenfeld considered that this score was consistent with Mr Perochinsky's suffering from moderately severe dementia from this time. Whilst recognising the limitations of the mini mental state examination and that it is essentially a screening tool, Associate Professor Rosenfeld noted that Mr Perochinsky was apparently unable to retain over a short period the memory of four objects (book, apple, table and flower) that he had been required to identify and learn.
Associate Professor Rosenfeld examined Mr Perochinsky on 20 June 2008. A CT scan in May 2008 had shown significant cerebral atrophy of the temporal lobe along with deep white matter ischaemia.
Mr Perochinsky suffered from vascular dementia, not dementia of the Alzheimer's type. This reduces the advantage that Associate Professor Rosenfeld had in making an assessment of Mr Perochinsky's cognition as at February to June 2007 based on his examination of Mr Perochinsky in June 2008. Whereas Alzheimer's disease typically shows a steady rate of progression, that is not so in the case of vascular dementia where the patient can plateau and then deteriorate in steps, particularly if there are other medical interventions, such as a general anaesthetic that Mr Perochinsky did undergo between June 2007 and June 2008. Nonetheless, Associate Professor Rosenfeld was able to draw inferences from the CT scan taken in May 2008 and his observation of Mr Perochinsky in June 2008 as to his cognitive state 12-15 months earlier. He considered that the CT scan showing blood vessel disease of the brain implied that the disease process that caused the dementia had been present for five to ten years, or perhaps longer, so that there had been significant blood vessel changes by early 2007.
There was conflicting medical evidence as to the likely extent of Mr Perochinsky's cognitive deficits from early 2007. As I have said, Associate Professor Rosenfeld considered that by that time Mr Perochinsky was suffering from moderately severe dementia that would have significantly affected higher level brain functioning that includes reasoning, judgment and abstraction which functions are exercised through the frontal lobe. Associate Professor Rosenfeld is a consultant geriatrician and physician. Dr Lana Kosoff is a consultant old age psychiatrist. Both she and Associate Professor Rosenfeld are well qualified. Dr Kosoff reviewed the available medical and nursing home records. It was her opinion that Mr Perochinsky's mental state deteriorated significantly in about November 2007 and that prior to that time, he suffered only from mild dementia which would not have affected his ability to understand the nature and consequences of the decisions he made in his financial dealings with Mr and Mrs Kirschner.
In my view Associate Professor Rosenfeld's opinions carry greater weight because he had the advantage of examining Mr Perochinsky, albeit not until June 2008. He was also a consultant to and familiar with the nursing home in which Mr Perochinsky lived.
Mr Perochinsky was admitted in February 2007 to a part of the nursing home called the Monte Terrace which was a low care dementia specific unit. Dr Kosoff reported that the Director of Care at the nursing home informed her that:
"Patients in the Monte Terrace could converse with staff and recall staff's names and did not require the acuity of a high care environment as their cognitive impairment was not of sufficient severity to preclude them from undertaking a number of activities of daily living. ... residents in the Monte Terrace did need some encouragement and direction at times and ... were unable to leave the ward unaccompanied."
This does not suggest that any conclusion can be drawn in favour of a finding of capacity in 2007 from the fact that Mr Perochinsky was admitted to a low care unit.
Dr Kosoff placed weight on the fact that the ACAT assessment did not include a diagnosis of dementia. She said that in her experience most ACAT assessments carefully looked for that condition and would comment on it if it were obvious. She noted that the ACAT assessment listed things as never having occurred that included long-term memory problems, at risk behaviour, aggressive behaviour, confusion and disorientation as to place and other people. However, I do not consider that the ACAT assessment form carries any significant weight given that it does not appear that it was completed by a person with medical expertise. Particularly is that so given other references prior to February 2007 to Mr Perochinsky's suffering from dementia and being in need of a psychiatric assessment. While it is correct that the assessed need for a psychiatric assessment is not necessarily indicative of a diagnosis of dementia, Mr Perochinsky's circumstances at the time are such that it is likely that it was Mr Perochinsky's dementia (from which both Associate Professor Rosenfeld and Dr Kosoff acknowledge he suffered as at February 2007) that led to that assessment. The fact that a psychiatric assessment was not carried out is not a safe reason for concluding that the symptoms of dementia were only mild.
I accept Dr Kosoff's comments as to the limitations of the mini mental state examination. The test was essentially a screening tool. English was not Mr Perochinsky's first language and his inability to complete some tasks accurately (such as spelling "world" backwards) is understandable. However, his inability to recall after a short time any of four specified objects is indicative of a significant cognitive deficit. Dr Kosoff opined that this may have been due to a lack of attention or resistance to carrying out the test. Whilst this is possible, no mention was made on the form that Mr Perochinsky was resistive to the test.
A significant point made by Dr Kosoff was that it appears from the nursing home records that Mr Perochinsky had initial difficulties in adapting to his new surroundings, but had settled by about May 2007. In about April 2007, Mr Perochinsky told Mrs Perochinsky to get out the powers of attorney from a safe deposit box in the bank (paras [19] and [20] above). Dr Kosoff said that this indicated that Mr Perochinsky was aware that he had made a power of attorney ten years earlier and appears to have made a considered decision in handing over the powers of attorney to Mr and Mrs Kirschner. He appeared to comprehend the purpose of a power of attorney as well as remembering that the powers of attorney had been made, although it was almost ten years since they had been made. However, Associate Professor Rosenfeld did not consider this to significantly affect his opinion as to the stage the dementia had reached. He said that even in people with significant cognitive impairment and dementia, autobiographical details can stay in the memory until very late in the progression of the disease. This can include details such as who are the people to whom a power of attorney was given. He also said that the ability to understand the nature of a power of attorney, that is that it authorises somebody to carry out the business affairs for another, is something that is retained quite often even in advanced cognitive impairment (T260).
For Mr Perochinsky to have had the capacity to make significant gifts he needed to have the capacity to weigh the claims of those who would be affected by the gifts. The people who would be affected would be his wife and himself and the residuary beneficiaries of his and his wife's estate. Mr and Mrs Perochinsky had made their wills in September 1997. There is no evidence that prior to Mr Perochinsky's death either of them had any specific plan to change their wills. No solicitor was ever consulted for that purpose. They did not speak to Mr or Mrs Kirschner about changing their wills. The residuary beneficiaries under the will of the survivor of Mr and Mrs Perochinsky were Mrs Kirschner and Galina Chadskaia. Although neither Associate Professor Rosenfeld nor Dr Kosoff commented on it in their reports, the question of Mr Perochinsky's capacity to make the gifts must be assessed by asking whether he had the capacity to bring to mind the claims of his wife, his own needs, the claims of Mr and Mrs Kirschner to immediate access to property, and also the claims of Galina Chadskaia to the residue of their estate.
It does not appear that Mr Perochinsky gave any attention to such claims. Of course the question is not whether he did weigh the claims of those who would be affected by the making of the substantial gifts, but whether he was capable of doing so. I infer that he was not. The evidence of both Mr and Mrs Kirschner was that in April or May 2007, Mr Perochinsky said to them in Mrs Perochinsky's presence that they would inherit everything eventually. As it does not appear that Mr Perochinsky intended to change his will, this statement was wrong. It indicates that Mr Perochinsky was not capable of bringing to mind the claims of all those who would be affected by the making of substantial gifts.
For these reasons I accept Associate Professor Rosenfeld's opinion that from early 2007 Mr Perochinsky was suffering from moderately severe dementia that rendered him incapable of making gifts of his interests in the shares and the accommodation bond.
It does not follow that Mr or Mrs Kirschner were or should have been aware of that incapacity. Associate Professor Rosenfeld said in his report:
"Mr Perochinsky was a capable businessman who ran his business and was likely to interact with others in an effective manner. Those background abilities would have persisted and characterised his interactions with others even later in his illness, even while his understanding and reasoning, initiative and insight deteriorated. To lay people, his family and carers, his ability to interact, talk and socialise with them would be likely to have obscured underlying problems with reasoning, memory and thinking."
Both Mr and Mrs Kirschner denied being aware prior to about November 2007 that Mr Perochinsky's mental faculties might have been compromised. I accept that denial. Counsel for Mr and Mrs Kirschner submitted that without knowledge of Mr Perochinsky's inability to fully comprehend the ramifications of the gifts, the gifts cannot be impugned.
A gift made by a donor without the mental capacity to undertake the transaction is not void but voidable. Likewise, a contract (other than a power of attorney) entered into by a person lacking the requisite mental capacity is voidable and not void. Such a contract cannot be avoided if the other contracting party neither knew nor ought to have known of the incapacity. In Gibbons v Wright (1954) 91 CLR 423, the High Court left open the question whether to avoid a deed of conveyance where the conveyor was incapable of understanding what he was doing it is necessary to prove in addition to the conveyor's incapacity, knowledge on the part of the conveyee that the incapacity exists or whether other circumstances making the transaction less than fair to the conveyor would suffice (at 444). In Crago v McIntyre, Holland J said (at 740):
"If there is no difference between a voluntary settlement and a transaction for consideration as to mental capacity, and the sole test is a capacity to know and understand the nature and effect of the transaction, then the plaintiff's deed of settlement must be valid, because he knew and understood the effect of it. There is possibly one difference between the two which may be mentioned in order to put it aside, and that is that it may be that a transaction for value will not be set aside in equity if the party dealing with the person of unsound mind dealt fairly and in ignorance of his condition: but note Gibbons v. Wright (1954) 91 C.L.R. 423, at p. 444, where doubt is thrown on the existence of such a rule. That rule, if it exists, does not apply in the case of a voluntary settlement of his own property by a person lacking mental capacity: Elliot v. Ince (1857) 7 De G.M. & G. 475; 44 E.R. 186. Is there any other difference?"
In Elliot v Ince (1857) 7 De G.M. & G. 475; 44 ER 186 the person in question had been found by an inquisition to be a lunatic. She was a tenant in tail of copyhold estates and purportedly gave powers of attorney pursuant to which her attorney executed deeds and did other acts to bar the entail. The Lord Chancellor (Lord Cranworth) was of the view that acts of a lunatic so found could be binding if done in a lucid interval and directed an inquiry as to whether the powers of attorney were executed when the lady was of sound mind. His Lordship dealt with an argument that the recovery, that is, the steps taken to convert the estate tail to an estate of fee simple, was for the benefit of the lunatic and so not void. His Lordship said (at 486-487; 190):
"This cannot be sustained, for in the first place, the act in this case was not necessarily for her benefit; and, secondly, assuming it to have been for her benefit, I can find no such doctrine established by the authorities. The case of Molton v. Camroux (2 Exch. 487, and, in error, 4 Exch. 77), which has been so much relied on, went on no such ground. The principle of that case was very sound, namely, that an executed contract, where parties have been dealing fairly and in ignorance of the lunacy, shall not afterwards be set aside. That was a decision of necessity, and a contrary doctrine would render all ordinary dealings between man and man unsafe. How is a shopkeeper who sells his goods to know whether a customer is or not of sound mind? Perhaps the same principle may apply to sales of land or mortgages. Lord Truro seems to have thought it would; so at least I collect from what he says in Price v. Berrington (3 M. & G. 498). But it is obvious that no such question can arise when there is no contract for value- when in fact there has been merely a dealing by the lunatic with his own property without any consideration passing from others."
His Lordship concluded (at 488, 191):
"The result of the authorities seems to be, that dealing of sale and purchase by a person apparently sane, though subsequently found to be insane, will not be set aside against those who have dealt with him on the faith of his being a person of competent understanding. But this does not touch the present case, where the question is, whether the deed of a lunatic, altering the provisions of a settlement, is valid. I am of opinion that there is no principle or authority which warrants the affirmative of that proposition, ..."
Elliot v Ince was referred to in Gibbons v Wright, but only as an illustration of the rule that a lunatic cannot appoint an agent (at 445). Lord Cranworth did not directly address the question of whether a voluntary disposition by a person lacking mental capacity (not being a lunatic so found, or the modern equivalent, namely a person whose estate is subject to a financial management order and is therefore incapable of dealing with his or her assets) is voidable against the donee even if the donee dealt fairly and in ignorance of the lack of capacity. However, Elliot v Ince does provide some support for the view of Holland J in Crago v McIntyre that a voluntary settlement by a person lacking mental capacity will be set aside even if the recipient of the gift behaved fairly and in ignorance of his condition.
Contrary to the submission of counsel for Mr and Mrs Kirschner, the Court of Appeal in Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 75 NSWLR 42 did not deal with this part of Holland J's decision in Crago v McIntyre. Nothing in Ford v Perpetual Trustees Victoria Ltd addresses the present issue.
However, the question was considered by Owen J in Collins v May [2000] WASC 29. His Honour declined to follow the views of Holland J in Crago v McIntyre that in the case of a voluntary disposition it is not necessary to establish that the other party was aware, or should have been aware, of the mental disability affecting the donor (at [57], [68]). His Honour was of the view that a voluntary disposition of a person lacking capacity would only be set aside on the grounds on which equity will set aside improvident transactions entered into by a person suffering from a special disability of which the donee takes unconscientious advantage. His Honour said that such transactions will be set aside not on the grounds of mental disability, but by reason of issues such as fraud, undue influence or unconscionability (at [57]). In such a case it is necessary to show that the person dealing with the party suffering from a disability knows of the situation of special disadvantage, or is aware of the possibility that such a situation may exist, or is aware of the facts that would raise that possibility in the mind of a reasonable person (Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 467). Collins v May was applied by Simmonds J in Stone v Registrar of Titles [2012] WASC 21 at [151] where his Honour said that:
"A voluntary disposition is liable to be set aside for lack of capacity if and only if it can be shown that the disponor lacked the mental capacity required by law for that disposition and that the disponee knew that the disponor lacked that capacity or to have been aware of that lack."
In my view, Mr and Mrs Kirschner neither knew nor ought to have known that Mr Perochinsky lacked the capacity to make gifts of the shares or the proceeds of the accommodation bond.
Owen J gave no reason for his conclusion that principles relating to the avoidance of a voluntary disposition by a person lacking the requisite capacity to make the gift should be assimilated to the principles on which equity sets aside an improvident transaction on the grounds of unconscionable dealing. The reason for so assimilating the principles is not obvious. If the donee does not have a defence based upon alteration of his or her position, it is not obvious why the donee should not be required to disgorge gifts made by a person who lacked the capacity to make the gift, even if the donee acted fairly and was ignorant of the lack of capacity. If I had to decide the question I would follow the observations of Holland J in Crago v McIntyre at 740.
However, the issue in the present case arises in the context of the exercise by Mrs Kirschner of her powers under the powers of attorney given by Mr and Mrs Perochinsky authorising her to do anything on their behalf that they could lawfully authorise an attorney to do, notwithstanding that a benefit was thereby conferred on her. The powers of attorney were enduring powers. Notwithstanding that Mr Perochinsky lacked the capacity to make gifts of his property to Mr and Mrs Kirschner, Mrs Kirschner still had authority to do acts for her own benefit and that of her husband if they were done on Mr Perochinsky's behalf. For the reasons previously given, this would extend to giving effect to Mr Perochinsky's expressed intention to make gifts to Mr and Mrs Kirschner. Whether an act was done "on behalf of" the principal should be determined from the attorney's perspective. If, acting honestly and reasonably, it appeared to the attorney that the act was on the principal's behalf, the act would be within the power. In the context of an enduring power of attorney, Mrs Kirschner would be acting "on behalf of" Mr Perochinsky and Mrs Perochinsky if she gave effect to their expressed wishes to give their shares to her and her husband, even if Mr Perochinsky lacked the capacity to make an effective gift of the shares, provided that the lack of capacity was not known, and should not have been known, to her. I have concluded that Mrs Kirschner did not know, and it cannot be said that she ought to have known, that Mr Perochinsky lacked the capacity to make a gift of his interest in the shares. It follows that Mrs Kirschner had the power to give effect to the gifts.
Mrs Perochinsky's credit
Mrs Perochinsky denied that she or her husband had or expressed the intention to give their shares or the refund of the accommodation bond to the Kirschners. Mrs Perochinsky was 90 when she gave evidence. She was not a reliable witness. As indicated earlier in these reasons, a great deal of her evidence was irrational. I do not conclude that she was lying. Mrs Perochinsky has fixed ideas, many of which are irrational, but I think she has come to believe them. Many of the difficulties with her evidence have been referred to above. Of particular significance are the following matters.
Mrs Perochinsky exhibited her husband's will of 1 September 1997 to her affidavit of 4 October 2011. She deposed that "In 1997 my husband and I both made new wills. ... Appearing at pages 1-3 of the exhibit is a copy of Haim's will". She obtained probate of that will on 26 March 2012. Yet in her oral evidence Mrs Perochinsky said that she had not seen that document until the last week before court (T34-35). When shown her own will of 1 September 1997 she acknowledged her signature but then denied that it was her will. Her reason for denying the authenticity of the documents was because the will gave an address for Mr and Mrs Kirschner at Bronte Road, Waverley, and Mrs Perochinsky said that in 1997 they were still resident in South Africa. In fact, they migrated to Australia in about April 1997. Mrs Perochinsky was asked whether she thought that Mr and Mrs Kirschner had created false documents and said "It looks like. How can I understand otherwise?" She repeatedly said that she had not seen her will dated 1 September 1997 before, although she had previously acknowledged her signature to it.
A similar issue arose in relation to the powers of attorney. As noted earlier in these reasons, in her affidavit of 31 January 2012 Mrs Perochinsky accepted that she gave Mrs Kirschner the powers of attorney. In her oral evidence she denied it. In her oral evidence Mrs Perochinsky said that the first time she saw her husband's power of attorney was after proceedings had been brought in the Guardianship Tribunal (T37). The reason for this appears to be that Mrs Perochinsky thought that the powers of attorney she and her husband executed provided that if something happened to him, she should have his power of attorney, and nobody else, and if something happened to her, her husband should have her power of attorney, and it would only be if she were losing her mind that Mrs Kirschner and her family would come to have the power of attorney (T38-39). From this misunderstanding of the terms of the power Mrs Perochinsky seems to have reasoned to herself that she could not have given the powers of attorney to Mrs Kirschner in 2007 (as she had sworn to having done) and then reasoned to herself that she first saw the powers of attorney in the course of proceedings in the Guardianship Tribunal in 2010. When Mrs Perochinsky was taken to her affidavit she said that she could not have given the powers of attorney to Mrs Kirschner because she did not want her to have power of attorney at all (T43). She then said that the powers of attorney were to be given to Mrs Kirschner only after she and her husband were both dead (T45). This bespeaks a great deal of confusion.
Then there was Mrs Perochinsky's evidence about her dealings with Mr Frydman. She said that Mr Frydman was Mr and Mrs Kirschner's solicitor. She said that she only met him once. This was a fixed idea that Mrs Perochinsky referred to even where it was irrelevant to the question she was being asked. Thus, on being cross-examined about her denial of the authenticity of the two 1997 wills, Mrs Perochinsky gave the following evidence:
"Q. Do you think Sandra and Bernhard created false documents?
A. WITNESS: It's look like. How can I understand otherwise?
Q. And how long have you thought - have you thought that they created these false documents, being these wills; for a while?
A. WITNESS: You should ask her, not me.
Q. I'm asking you. Do you think Mr and Mrs Kirschner have been creating false documents, being what purport to be wills of yourself and your husband, is that what you think's occurring?
A. INTERPRETER: What else can I say if I have never seen these documents before; and that solicitor, Mr Frydman, I only met him when I was buying my unit."
Her desire to disassociate herself from Mr Frydman probably arose from the fact that she knew that Mr Frydman would give evidence (as he had stated in a letter) that he had discussed with her the purchase of the Woollahra unit in the joint names of her and Mrs Kirschner. But, Mrs Perochinsky saw Mr Frydman not only in relation to the purchase of the Woollahra unit, but also in relation to the sale of the Marsfield townhouse, the sale of her Balgowlah Heights property, her late husband's estate, and the obtaining of a refund of the accommodation bond.
Mrs Perochinsky gave quite remarkable evidence of having paid for the purchase of the Woollahra unit in cash, or as she later amended her evidence, in cash and with a cheque obtained from the sale of Kruger Rands. That simply did not happen. Mrs Perochinsky said that the full price of the accommodation bond was paid in one go from the proceeds of the sale of the gold. She was absolutely sure about that (T97). She gave that evidence notwithstanding having been shown her signature on a cheque made out to the Montefiore home for $250,000 which was in part payment of the bond.
Mrs Perochinsky denied knowing anything about the sale of the Marsfield property until after the sale had been completed. That evidence was not credible given that her signature appears on the sales inspection report, the marketing program, on the authority to the agent to exchange contracts, and on the contract of sale.
I do not accept Mrs Perochinsky as a reliable witness.
Mr and Mrs Kirschner's credit
Mr and Mrs Kirschner were unshaken in cross-examination, and there was nothing in their demeanour to reflect adversely on their credit. They answered questions responsively. Nonetheless, as Mr Perochinsky is dead and Mrs Perochinsky was unable to give reliable evidence, Mr and Mrs Kirschner's evidence as to the gifts they claim were made to them is to be scrutinised with care (Plunkett v Bull (1915) 19 CLR 544 at 548-549). The observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 as to the fallibility of human memory and the risk of subconscious reconstruction are also relevant.
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Intention to make a gift of the shares
I do not conclude that Mr and Mrs Perochinsky told Mr and Mrs Kirschner that the shares should be theirs merely because their credit was not effectively challenged, whereas Mrs Perochinsky's credit was. I consider that Mr Perochinsky's death and Mrs Perochinsky's inability to give reliable evidence means that their claims that Mr and Mrs Perochinsky promised them gifts should be scrutinised carefully. The fact that Mrs Perochinsky's evidence lacked credibility does not strengthen the credibility of the evidence of Mr and Mrs Kirschner.
There is corroboration of Mr and Mrs Kirschner's evidence of the gift of the shares from the fact that the broker through whom Mrs Kirschner sold the shares sent a copy of the sale notes confirming what shares were sold, on what date they were sold, and for what price, by letters addressed to Mr and Mrs Perochinsky at Mrs Perochinsky's residence as well as to Mrs Kirschner's residence. A copy of the first sale note for the sale of 15,000 Westpac shares which yielded net proceeds of $383,956.93 was sent to Mrs Perochinsky's address at Balgowlah Heights. A copy of the sale note for the sale of 1,500 shares in News Corporation in November 2007 was also sent to Mrs Perochinsky's Balgowlah Heights residence. Later sale notes were sent to Mr and Mrs Perochinsky in the following style:
"Mr H A and Mrs A I Perochinsky
c/- Sandra Kirschner
Emmanuel Gardens
118 Wallace Street
Woollahra NSW 2025"
There is no "Wallace Street" in Woollahra. Mrs Perochinsky lived at Emmanuel Gardens in Wallis Street, Woollahra. Ord Minnett, the broker, was subpoenaed to produce its records. It did not produce any documents recording that the sale notes had been returned to sender. I infer, contrary to her denials, that the sale notes were delivered to Mrs Perochinsky at Emmanuel Gardens. This was confirmed by Mr Kirschner who gave evidence that Mrs Perochinsky provided him with copies of the sale notes that she had received as part of the papers she supplied for the purpose of his preparing Mrs Perochinsky's tax return. I accept Mr Kirschner's evidence in this regard.
I am satisfied that Mrs Perochinsky was aware that Mrs Kirschner had used the powers of attorney to sell the various parcels of shares. The fact that she made no complaint at the time is corroborative of Mr and Mrs Kirschner's evidence that Mr Perochinsky told Mr and Mrs Kirschner that the shares were theirs, and they could sell them as they needed them, in Mrs Perochinsky's presence and with her acquiescence.
Counsel for Mrs Perochinsky submitted that it was objectively unlikely that Mr and Mrs Perochinsky would have made such statements because they were both very frugal and therefore unlikely to be prepared to give substantial assets away. However, given Mr and Mrs Perochinsky's age, and the fact that Mr and Mrs Kirschner were very close to them, this is not objectively improbable. Nor do I consider it a reason to reject Mr and Mrs Kirschner's evidence that they did not tell their accountant of the gift.
Mrs Kirschner was cross-examined on her correspondence and statements to the Guardianship Tribunal referred to in para [56] above in which she made no mention that Mr and Mrs Perochinsky had told her and Mr Kirschner that they could have the shares and sell them as they needed to. As noted at para [56] Mrs Kirschner admitted that she told the Tribunal that the purchase money used to buy the Woollahra property was obtained from selling Mrs Perochinsky's shares. I do not think that this is materially inconsistent with Mr and Mrs Kirschner's case. It was not suggested that in her statements to the Guardianship Tribunal Mrs Kirschner had attempted to set out the detail of the financial dealings between the Perochinskys and the Kirschners. What Mrs Kirschner told the Tribunal was substantially true. The purchase moneys used to buy the Woollahra property were obtained from selling the shares that were legally owned by Mr and Mrs Perochinsky. Mrs Kirschner omitted to say that Mr Perochinsky had told her and her husband that all of the shares were theirs. However, there was no cross-examination directed to seeking to establish that this was material information that ought to have been disclosed to the Tribunal, but was not.
For these reasons I accept the evidence of Mr and Mrs Kirschner that Mr Perochinsky in the presence of his wife and with her acquiescence told them that the shares were theirs and that although the dividends should remain with Mr and Mrs Perochinsky until the shares were sold, they could sell the shares as they needed to.
Because Mr and Mrs Perochinsky were to keep the dividends until the shares were sold, there was no immediate gift of the shares (assuming that words of gift could be sufficient to complete the gift where one of the donees had it in her power to complete the gift using the powers of attorney). Nonetheless, Mrs Kirschner was empowered by the powers of attorney to sell the shares and either to provide funds to pay the accommodation bond at the Sir Moses Montefiore Nursing Home, or to provide the purchase moneys for the Woollahra property, or for the purposes of her and Mr Kirschner, because in doing so she was acting "on behalf of" Mr and Mrs Perochinsky by giving effect to their wishes as expressed to her.
Accordingly, Mr and Mrs Kirschner are not liable to account for the proceeds of sale of the shares.
Purchase of the Woollahra property
As I understood it, the principal basis for Mrs Perochinsky's claim that Mrs Kirschner held her one half interest in the Woollahra property on trust for Mrs Perochinsky was that Mrs Perochinsky beneficially owned the moneys used to purchase the property and therefore there was a presumption that Mrs Kirschner held her interest on a resulting trust for Mrs Perochinsky. For the reasons previously given, the premise for this argument, namely that Mrs Perochinsky was the beneficial owner of the moneys used to buy the property, has not been established.
Even if it had been, I do not consider that Mrs Kirschner would have held her interest in the property on a resulting trust for Mrs Perochinsky. Prima facie, the beneficial ownership of the property is in accordance with the legal title. There is a rebuttable presumption that where two persons make contributions to the purchase price which are different from the proportions in which they hold the legal title, they intend their beneficial interests to be in accord with their respective contributions. That presumption will be rebutted by evidence that they intend to enjoy beneficial ownership in accordance with the legal title.
Mrs Perochinsky's evidence as to the circumstances in which the Woollahra property were purchased cannot be accepted. She denied knowing that both she and Mrs Kirschner were the purchasers of the property. For the reasons previously given, her evidence cannot be accepted. It is clear from Mr Frydman's and Mrs Kirschner's evidence that at the time of the purchase Mrs Perochinsky was well aware that Mrs Kirschner was to be a co-owner of the property with her. Mr Frydman explained that if the property was purchased by them as joint tenants that the survivor would automatically take the share of the owner who died first. A joke was made that Mrs Perochinsky would outlive Mrs Kirschner. It is clear that both parties intended that whichever co-owner survived would acquire the whole beneficial interest in the property. Nothing was said to suggest that the parties intended the ownership of the property to be in accordance with the contributions to the purchase price. If Mrs Perochinsky had been the beneficial owner of all the money used to buy the property, the presumption that she and Mrs Kirschner held the legal title on trust for her would have been rebutted.
Accordingly, had Mrs Perochinsky been the beneficial owner of the moneys used to buy the property, I would still have concluded that by including Mrs Kirschner's name on the title she intended that Mrs Kirschner should be a beneficial owner as joint tenant of the property.
Counsel for Mrs Perochinsky submitted that if it were found that the proceeds of the sale of the shares were owned beneficially by Mr and Mrs Kirschner, nonetheless Mrs Kirschner held her interest in the Woollahra unit on a constructive trust in favour of Mrs Perochinsky. Counsel submitted that this was because there was a condition attached to the gift of the shares that the shares be used for the purpose of purchasing a unit for Mrs Perochinsky. As set out at para [25], Mrs Kirschner deposed that Mr Perochinsky had said "If Tonia wants to move closer, sell some shares to buy something", Mr Kirschner deposed that Mr Perochinsky said "Tonia is travelling too much. You should buy a unit yourselves for Tonia to live in for her to move closer."
It was the parties' common intention that shares would be sold to enable a unit to be purchased in which Mrs Perochinsky could live which would be closer to the Montefiore Nursing Home. But nothing was said in the discussions in April and May 2007 about who would be the beneficial owner of the property to be acquired.
Nor do I consider that Mrs Kirschner's statements to the Guardianship Tribunal referred to at para [56] above contain an admission by Mrs Kirschner that Mrs Perochinsky was the sole beneficial owner of the Woollahra unit.
Counsel for Mrs Perochinsky submitted that Mrs Kirschner stood in a fiduciary relationship to Mrs Perochinsky by reason of the grant of the power of attorney, that by selling shares in exercise of that power she placed herself in a position of a conflict between her interest and duty as a result of which the Woollahra unit was purchased in their joint names, and as a consequence, Mrs Kirschner held her interest in the Woollahra unit on constructive trust for Mrs Perochinsky. I do not accept that submission. For the reasons previously given, the scope of Mrs Kirschner's fiduciary duty as Mrs Perochinsky's attorney was governed by the terms of the power of attorney. Under those terms she was entitled to exercise the power for her own benefit. She did not act in breach of her fiduciary duty by using the power to sell shares to obtain the moneys to fund the purchase of the unit in which she was beneficially interested.
In any event, Mrs Perochinsky assented to Mrs Kirschner's exercising the power of attorney to sell the shares to provide benefits to Mrs Kirschner, and she assented to Mrs Kirschner becoming a co-owner of the property that was purchased from the sale of the shares. If the transaction were otherwise in breach of fiduciary duty, Mrs Perochinsky gave informed consent to it.
For these reasons Mrs Kirschner does not hold her interest in the Woollahra unit on trust for Mrs Perochinsky.
Refund of the accommodation bond
In her affidavits Mrs Kirschner gave no evidence that she used the power of attorney to obtain payment of the refund of the accommodation bond. As set out at [50] Mrs Kirschner collected from Mr Frydman's office the cheque representing the amount of the refund that had been made out in favour of Mrs Perochinsky and paid it into her own account. The cheque was not a bearer cheque. She did not endorse the cheque (which in any event was not made out to order). In her oral evidence Mrs Kirschner said that she could not recall precisely how she dealt with the cheque or whether she presented the power of attorney to the bank. There is no evidence that she did so. I do not infer that it is likely that the bank would have required the production of the power of attorney, or a similar document, before it collected the cheque and credited Mrs Kirschner's account with its proceeds. Had there been any such stipulation, it is likely that Mrs Kirschner would have recalled it. Had a bank officer made such a requirement, then Mrs Kirschner could be expected to have led evidence about it from a bank officer concerned, even if she had no recollection.
Counsel for Mrs Kirschner did not submit that the conversation in February 2007 referred to at para [12] amounted to an effective gift of the right to receive a refund of the accommodation bond or of the proceeds of the refund once they came into existence. A voluntary assignment of future property would be ineffective (Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 24). Therefore, a gift in February 2007 of the proceeds of a refund to be received in the future could not be effective. Nor could a gift of the right to receive a refund of the bond be effective. At the time of the relevant conversation, no accommodation bond had been provided and there was no chose in action entitling Mr Perochinsky or anyone else to a refund of the bond. In any event, neither Mr nor Mrs Perochinsky did all that was necessary on their part to effect an assignment of the right to receive a refund of the bond. Counsel for Mrs Kirschner did not contend otherwise.
It follows that Mrs Kirschner's entitlement to deposit the cheque for $553,152.73 to her own account, notwithstanding that the cheque was made out to Mrs Perochinsky, depends upon whether Mrs Perochinsky assented to her doing so. There was no dispute that Mrs Perochinsky was entitled to the refund of the bond from the Montefiore home.
As set out at para [51] above, Mrs Kirschner deposed that Mrs Perochinsky agreed that she could deposit the money for the return of the bond into her bank account. Mrs Perochinsky denied the conversation. Counsel for Mrs Kirschner submitted that it is probable that the conversation occurred as deposed to by Mrs Kirschner because this was consistent with the intentions of both Mrs Perochinsky and Mr Perochinsky as conveyed to Mr and Mrs Kirschner on 10 February 2007 that the bond moneys should go directly to the Kirschners. I accept that that was the intention of Mr and Mrs Perochinsky conveyed at the meeting on 10 February 2007. That is so, even though the loan agreement that Mr Kirschner prepared following that meeting makes no such provision and, if anything, is only consistent with the parties' intending that the accommodation bond would be repaid to Mr Perochinsky's estate to provide the funds from which the loan would be repaid. However, it would be wrong to draw implications from the loan agreement. The document was not thought through and was never intended to have legal effect. I accept that as at 10 February 2007 it was both Mr Perochinsky's and Mrs Perochinsky's intention that the Kirschner's would get back the bond money.
However, Mrs Perochinsky's views changed almost immediately after Mr Perochinsky's death. In cross-examination Mrs Kirschner accepted that as at the date of the conversation Mrs Perochinsky had exhibited severe mistrust of her and was showing signs of paranoia. In her application to the Guardianship Tribunal of 21 October 2009, Mrs Kirschner said that Mrs Perochinsky had turned completely against her and her husband and had suddenly become antagonistic, distrustful and cruel. In cross-examination, Mrs Kirschner said that Mrs Perochinsky had become distrustful from the time Mr Perochinsky had died and had remained so continuously (T298-299).
At the meeting with Mr Frydman in mid July 2009, Mrs Kirschner had not said anything about the bond refund being paid to her. Instead, she asked Mr Frydman to make the cheque payable to Mrs Perochinsky. Mrs Perochinksy had not said anything about paying the refund to Mrs Kirschner.
I am not satisfied that Mrs Perochinsky authorised Mrs Kirschner to deposit the cheque to her own account. Given that Mrs Perochinsky's attitude to Mrs Kirschner had changed following her husband's death, I do not think it likely that she would have agreed to Mrs Kirschner depositing the money into her own bank account.
Without authority from Mrs Perochinsky to deposit the cheque to her own account, Mrs Kirschner committed the tort of conversion of the cheque and is liable for the amount of the cheque.
No other defence is available to Mrs Kirschner. I did not understand counsel for Mr and Mrs Kirschner to rely upon any defence of estoppel or otherwise based on a change of position if I found that Mrs Perochinsky did not assent to Mrs Kirschner's depositing the cheque to her own account. In the absence of confirmation from Mrs Perochinsky that she was entitled to deal with a cheque made out to Mrs Perochinsky, Mrs Kirschner could not reasonably have assumed that she was entitled to do so. Nor did she give evidence of making any such assumption other than the evidence based upon her conversation with Mrs Perochinsky which I have not accepted. Nor is there evidence that Mr and Mrs Kirschner spent the moneys represented by the refund of the accommodation bond prior to becoming aware that Mrs Perochinsky disputed Mrs Kirschner's entitlement to deal with the cheque. The bulk of the moneys received from Mr and Mrs Perochinsky, both the proceeds of the sale of the shares and the refund of the accommodation bond, were expended in legal costs in defending these proceedings. Some money was used to discharge a mortgage debt. Some money was spent on living expenses and some money was given to Mr and Mrs Kirschner's children, but these expenditures would all be satisfied from the proceeds of the sale of the shares. Any moneys spent from the refund of the accommodation bond on legal costs would clearly not have been spent on the assumption that Mrs Perochinsky was content for Mrs Kirschner to have those moneys.
Conclusion
For these reasons, Mrs Kirschner is liable to pay damages of $553,152.73 together with interest from 21 August 2009.
The balance of Mrs Perochinsky's claims, including her claims against Mr Kirschner, should be dismissed. I will hear the parties on costs.
The orders are:
1. Direct entry of judgment for the plaintiff against the first defendant in the sum of $553,152.73 plus interest at the rates prescribed for the purposes of s 100 of the Civil Procedure Act 2005 from 21 August 2009.
2. Order that the plaintiff's claims be otherwise dismissed.
I certify that this and the 62 preceding pages is a true copy of the reasons for judgment herein of the Honourable Justice R W White.
Date: 24 April 2013
Associate
- AGLC
- Perochinsky v Kirschner [2013] NSWSC 400
- Case
- [2013] NSWSC 400
- Decision Date
CaseChat Overview and Summary
The court had to determine whether the attorney acted "on behalf of" the donor when making the gift to themselves, and if the scope of the attorney's authority included the power to make gifts to themselves. The court also examined the effect of the donor's lack of capacity to make the gift, particularly where the donee was unaware of the donor's incapacity. Additionally, the court considered the presumption of a resulting trust where co-owners of property contribute to the purchase price in different proportions than that in which legal title is held, and whether this presumption could be rebutted in the circumstances of the case.
The court found that the donee of a power of attorney could not validly make a gift to themselves while acting under that power, as it would constitute a breach of the attorney's fiduciary obligations. The court held that for an act to be considered as being made "on behalf of" the donor, the attorney must act in the best interests of the donor, and that making a gift to oneself is inherently contrary to this principle. The court also found that the presumption of a resulting trust could be rebutted if there was evidence of an intention to create a different proprietary interest. In this case, the court determined that there was no such evidence, and the presumption of a resulting trust applied. The final orders of the court were that the gift made by the attorney to themselves was invalid, and the property in question was held on resulting trust for the donor.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
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