Pickett v Amin
[2023] VSC 715
•1 December 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PRACTICE COURT
S ECI 2023 05623
BETWEEN:
| MICHAEL JOHN PICKETT (a person under disability who sues by his Litigation Guardian) | Plaintiff |
| -and- | |
| SHAFQUAT AMIN | First Defendant |
| -and- | |
| RAHNA ANWAR AMIN | Second Defendant |
---
JUDGE: | HARRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 November 2023 |
DATE OF JUDGMENT: | 1 December 2023 |
CASE MAY BE CITED AS: | Pickett v Amin & Anor |
MEDIUM NEUTRAL CITATION: | [2023] VSC 715 |
---
PRACTICE AND PROCEDURE – Litigation guardian – Appointment by Court – Application for litigation guardian made in the course of the hearing – Supreme Court (General Civil Procedure) Rules 2015 r 15.03.
INJUNCTIONS – Freezing orders against defendants’ property – Action against first defendant for compensation under the Powers of Attorney Act 2014 or for breach of fiduciary duties.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | B J Murphy | Schembri + McCluskys |
| For the Defendants | No appearance |
HER HONOUR:
Application for freezing order and related relief
The Court has before it an application for freezing orders and ancillary relief, brought on an urgent and ex parte basis.
The application is brought in the Practice Court by summons dated 29 November 2023 and supported by an affidavit affirmed by Wesley Sean Pickett on 29 November 2023, and by solicitor Stephen Ronald Schembri sworn on 30 November 2023.
The plaintiff is Mr Michael Pickett, a man of 80 years of age, and who is the paternal uncle of Wesley Pickett. I will refer to each by their first names for clarity, and do not intend any disrespect to either of them in doing so. Wesley instituted the application on the basis that he is the litigation guardian of Michael,[1] having filed the consent to be a litigation guardian and the solicitors certificate required by r 15.03(6) of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules). However, during the hearing I raised the issue of whether Wesley was entitled to institute the proceeding as litigation guardian. An application for Wesley to be appointed litigation guardian was made in the course of the hearing.
[1]Affidavit of Wesley Sean Pickett affirmed on 29 November 2023 (Pickett Affidavit), [1].
I heard that application for Wesley to be appointed litigation guardian with the application for the freezing orders and ancillary orders at the hearing on 30 November 2023. I made orders on 30 November, and the following are my reasons for those orders.
The issues
The first defendant, Shafquat Amin is described by Wesley in his affidavit as ‘Shak’ and I will refer to him by that name, without intending any disrespect to Mr Amin. The second defendant is Shak’s wife, Rahna Anwar Amin.
The overall effect of Wesley’s evidence was that Shak had been procuring the sale of, and engaging in other dealings with, real properties originally owned by Michael or by a company of which Michael had been the sole director and shareholder. Two properties had been transferred to Shak and his wife the second defendant, without Michael having received any payment for the properties and a third property had been sold to a third party, with the proceeds not being returned to Michael. Michael’s home had also been made subject to a mortgage in circumstances where he did not have any apparent need for funds. Many of these transactions had been made in circumstances in which Michael was in ill health and had deteriorating cognition, and may have lacked capacity to consent to them.[2]
[2]Pickett Affidavit, [40].
The application was brought on an urgent and ex parte basis because of Wesley’s concern that if the defendants are not restrained from dealing with the properties further, there is a real danger that they will be sold or further encumbered, and that if there is no restraint on the defendants transferring money they may transfer money overseas, as he believes that the first defendant has a British passport and a Pakistani passport and may be able to open bank accounts overseas.[3]
[3]Pickett Affidavit, [45].
Factual background
Michael Pickett has no children and his closest living relatives are his brother Max Pickett, his nephew Wesley, and his other nephew Scott Pickett (Wesley’s brother). Max, Scott, and Wesley all live in or near Geelong.
Michael Pickett owns his home at 3 The Avenue, Chelsea. He lived there alone until he fell in September 2023 and was admitted to Frankston Hospital for treatment, and subsequently transferred to the Mornington Centre, a geriatric evaluation and management facility.[4] The expectation of Wesley is that he will be unable to return home and he will need to reside in an aged care facility.[5]
[4]Pickett Affidavit, [6].
[5]Pickett Affidavit, [7], [19].
Michael had formerly run a successful concreting business.[6] He had operated the business through a company called Keleb Pty Ltd which was incorporated in 1986.[7] Michael had been director of Keleb since 15 July 1986.[8] On 13 February 2018, Shak was registered as a second director, and also as the secretary of Keleb.[9] At the time of the hearing Shak was also the owner of one of two shares in Keleb, the other share being held by Michael.[10] The evidence did not establish the shares and the shareholdings of the company from its inception but an ASIC data extract showed that there had been changes to share structure and to shareholdings registered with ASIC as from 16 February 2018.[11]
[6]Pickett Affidavit, [10], [33].
[7]Exhibit WSP-1 to Pickett Affidavit, 68.
[8]Exhibit WSP-1 to Pickett Affidavit, 70.
[9]Exhibit WSP-1 to Pickett Affidavit, 70.
[10]Pickett Affidavit, [32]; Exhibit WSP-1 to Pickett Affidavit, 70-71.
[11]Exhibit WSP-1 to Pickett Affidavit, 72.
In addition to Michael’s home, which he held since 2005 through Keleb,[12] Michael and Keleb owned other properties (the ownership of which had changed over time as addressed further below):
[12]Pickett Affidavit, [21].
(a) 1 The Avenue, Chelsea (The Avenue);
(b) 31 Camp Street, Chelsea (the Camp Street property), in which Michael’s friend James lived;
(c) 10 Bray Street, Hastings (the Hastings property), an industrial development site;
(d) 74 North Hallam Road, Narre Warren North (the Hallam Road property).
Wesley’s evidence was that Shak had introduced himself to Wesley as the bank manager of a Westpac Bank. Wesley’s evidence was that:[13]
In about 2014, Shak and his family moved into the property next door to Michael’s home, namely 1 The Avenue, Chelsea … which Michael also owned. Michael told me that Shak and his family were his new tenants.
From the time that Shak moved into The Avenue, I often saw him when I visited Michael, which was about 5 to 6 times a year. Shak appeared to be a looking out for Michael. Before long, my father, Scott and I started discussing Michael’s health and needs with Shak. We trusted him and appreciated his support.
[13]Pickett Affidavit, [11]-[12].
Wesley’s evidence was that after Michael had experienced a stroke in 2010, was diagnosed with prostate cancer in 2013, and had a further series of strokes in 2016, Michael’s memory, cognition and/or his mental health appeared to decline.[14] Hospital records noted that Michael reported having a worsening memory and difficulty reading.[15] Michael declined the suggestion of his nephews and brother that he could move to Geelong so they could support him. He remained in his home and was supported by a nurse and his close friend James who lived next door in Camp Street. Wesley gave evidence that:
Until about 2019, Michael would call me every Saturday or Sunday for a chat. From about 2019 Michael was sometimes unable to call me and I would call him. He was often confused and would repeat himself. However, whenever I visited Michael, he still appeared to be functioning well enough at home.[16]
[14]Pickett Affidavit, [13].
[15]Exhibit WSP-1 to Pickett Affidavit, [35].
[16]Pickett Affidavit, [15].
The evidence was that Michael’s health deteriorated throughout 2020 and 2021 and that his friend James reported to Wesley that Michael’s prostate cancer was causing him to have periods of dementia, with erratic behaviour, and that his cataracts had progressed to the point where he could not read, and that when Michael’s professional carers could not attend, Shak was caring for Michael in the morning and taking him to medical appointments; and James was caring for Michael in the evenings, when he would cook for him.[17] From about 2022, following surgery on his prostate in March, Michael’s cognition and health appeared to deteriorate and Michael lost the ability to make telephone calls. Shak would, however, call Wesley and Michael would then speak to him.[18]
[17]Pickett Affidavit, [16].
[18]Pickett Affidavit, [17].
Wesley gave evidence that:
As a result of those discussions [with Shak] and a review of some of the documents provided to me by Chelsea Arcade Medical, I note that:
a.In about March 2022, Michael had surgery on his prostate at the Mulgrave Hospital.
b.On 1 April 2022 Michael was discharged from the Dandenong Hospital and the discharge summary states that he had reported “feeling more confused”.
c.On about 2 May 2022, Dr. Bal Krishna Subedi, geriatrician, attended at Michael’s home with Ms. Janet Long of the Aged Care Assessment Service. They were informed by Shak that Michael’s cognition had declined significantly since his recent operation. Dr. Subedi assessed Michael and later sent a letter to Michael’s general practitioner stating, “He got 24/30 in the Mini-Mental State Examination with a recall being 1/3. He was not able to do the clock drawing test and in the serial 7, he got 1/5… I suspect Michael has some resolving delirium. The other possibility could be stroke in the context of withholding Xarelton after the operation when he had a haematuria… I suggest you to watch his cognition and I am hoping his cognition will improve further.”[19]
[19]Pickett Affidavit, [17]. Note also the terms of the solicitor’s certificate filed on 29 November 2023 at [1].
The letter from Dr Subedi to Michael’s general practitioner dated 4 May 2022 also stated:
He reports intermittent haematuria, but is overall stable. He has declined quite significantly since recent operation. His friend reported that prior to surgery he was able to do crosswords and read newspapers which he is not able to do now. He also struggles to operate TV remote. He used to ring his friend and brother regularly which he is not able to do now. He used to remember all the phone numbers, but he struggles with them and I saw those numbers were written on the wall.
Michael was admitted to Frankston Hospital in November 2023. The discharge summary for his discharge on 10 October 2023 referred to his admission to hospital ‘for unwitnessed fall on a background of likely dementia’, and stated in the ‘Issues List’ that there was ‘#Confusion on a background of dementia’ and stated as a ‘Principal Diagnosis’, ‘Confusion’ and as an ‘Additional Diagnosis’, ‘Dementia’.[20]
[20]Pickett Affidavit, [7]; Exhibit WSP-1 to Pickett Affidavit, 18-31.
Following Michael’s admission to hospital Wesley telephoned Shak to discuss aged care homes for Michael. Wesley gave evidence that Shak told him that he had been appointed Michael’s medical decision maker and that he was also Michael’s attorney for personal and financial matters.[21] Wesley subsequently saw a copy of an Enduring Power of Attorney dated 1 February 2014 appointing Shak for medical decisions, and appointing Max, Wesley’s father, as alternative attorney.[22] Wesley gave evidence that in his telephone conversation with Shak:[23]
… Shak indicated that he would need to sell Michael’s home to pay the deposit for the aged care home. I asked Shak why Michael’s savings or one of Michael’s other properties could not be sold instead. I also told Shak that his proposal would need to be discussed further and with my father and Scott.
On 7 November 2023, Scott called me. He said that James had obtained title searches for The Avenue and Camp Street, and neither were in Michael’s name anymore.
[21]Pickett Affidavit, [18].
[22]Pickett Affidavit, [18].
[23]Pickett Affidavit, [19]-[20].
On 8 November 2023, Wesley, his father, and his brother met with Shak at Michael’s home. Wesley’s evidence was that during the meeting Shak told them that:[24]
[24] Pickett Affidavit, [24].
a.Michael had appointed my father to be his alternative attorney for his financial matters in the event that Shak could not act.
b. Michael still owns The Avenue and Camp Street. When we let on that we knew Shak was lying and asked if the purchase price recorded with the Titles Office, namely $900,000 for The Avenue and $1,025,000 for Camp Street, were in Michael’s bank account, Shak said that the properties had been “gifted” to him.
c. Michael’s only remaining assets were his home, which was mortgaged with the ANZ Bank for an unknown amount, and about $14,000 in Michael’s bank account.
d. Shak was not paying rent for The Avenue.
…
Subsequently, solicitors for Wesley provided him with historical title and instrument searches for the various properties, which showed that the properties had been subject to various dealings since 2014. Most relevantly, those dealings were as follows:
(a) Michael’s home, owned by Keleb as sole proprietor had been sold and transferred to Michael in his personal capacity for $600,000 in early 2015.[25] In February 2016, ANZ registered a mortgage on the property.[26] Wesley gave evidence that he could not think of any reason why Michael would have wanted Keleb to sell his home to him in 2015, noting that the transaction would have attracted stamp duty; nor why he would mortgage his home in 2016 given that he did not understand him to have any significant financial needs.[27] Wesley placed a caveat on Michael’s home on 10 November 2023.
[25]Exhibit WSP-1 to Pickett Affidavit, 92, 97-98.
[26]Pickett Affidavit, [27]; Exhibit WSP-1 to Pickett Affidavit, 92.
[27]Pickett Affidavit, [28]-[29].
(b) The Avenue, registered in 2005 in the name of Keleb, was sold to Michael in October 2014 for $641,000.[28] In November 2014, Michael was registered as sole proprietor and Westpac registered a mortgage, which was discharged on 13 May 2015.[29] In August 2022, the Avenue was sold for $900,000 and it was registered in the name of Shak and his wife as the joint proprietors.[30] Again Wesley gave evidence that he could not identify a reason why Michael would have wanted Keleb to sell the Avenue to himself.[31]
[28]Exhibit WSP-1 to Pickett Affidavit, 78.
[29]Exhibit WSP-1 to Pickett Affidavit, 62.
[30]Pickett Affidavit, [21]; Exhibit WSP-1 to Pickett Affidavit, 63, 65, 78.
[31]Pickett Affidavit, [22].
(c) Michael was registered as sole proprietor of Camp Street in February 2016, having apparently purchased the property for $825,000.[32] ANZ Bank registered a mortgage in February 2016 which was discharged on 11 November 2022.[33] On 1 May 2023, Shak and his wife were registered as joint proprietors of Camp Street after it was registered as having been sold for $1,025,000[34] and on 4 August 2023, Perpetual Trustee Company Ltd registered a mortgage on the property.[35] James remained a tenant of Camp Street and continued to pay rent into Michael’s bank account.[36]
(d) The Hastings property was registered to Keleb as sole proprietor. In August 2021, Keleb sold Hastings for $2,200,000 and in October 2021 Anthony Eichstadt and Penelope Eichstadt were registered as joint proprietors of the property.[37] In November 2022 they sold the Hastings property to Dorset Australia Pty Ltd for $5,214,357.[38] Wesley gave evidence that Michael had wanted to develop the Hastings property and found it difficult to believe that he would have sold it without developing the property, and at a price of $2.2 million when it appeared, from the subsequent sale for over $5.2 million, to be worth considerably more.
(e) The Hallam Road property was sold by third parties to Shak and Michael in 2016, and they were registered as joint proprietors in May 2017.[39] On 14 February 2018 Shak was registered as the sole proprietor of Hallam and an Electronic Instrument Statement from the Department of Environment, Land, Water and Planning records the consideration for that transfer as ‘non-monetary’.[40] On 22 June 2018, National Australia Bank registered a mortgage on Hallam Road property, which in August 2018 was discharged and a mortgage registered by Perpetual Trustee Company.[41] The property was listed for sale on the website realestate.com.au as at 28 November 2023.[42]
[32]Exhibit WSP-1 to Pickett Affidavit, 80.
[33]Exhibit WSP-1 to Pickett Affidavit, 80.
[34]Exhibit WSP-1 to Pickett Affidavit, 80, 86.
[35]Pickett Affidavit, [23]; Exhibit WSP-1 to Pickett Affidavit, 80.
[36]Pickett Affidavit, [26(b)].
[37]Exhibit WSP-1 to Pickett Affidavit, 112, 117, 118-9.
[38]Pickett Affidavit, [32]; Exhibit WSP-1 to Pickett Affidavit, 117.
[39]Exhibit WSP-1 to Pickett Affidavit, 99, 105-106.
[40]Pickett Affidavit, [30]; Exhibit WSP-1 to Pickett Affidavit, 100, 103-104.
[41]Exhibit WSP-1 to Pickett Affidavit, 100.
[42]Pickett Affidavit, [30]; Exhibit WSP-1 to Pickett Affidavit, 107.
Proposed proceeding
Wesley gave evidence that he intended to sue Shak on Michael’s behalf as soon as possible for compensation pursuant to s 77 of the Powers of Attorney Act 2014, alleging that Shak has caused Michael losses by not acting honestly, diligently and in good faith, contrary to section 63(1)(a) of that Act, by:
a.transferring The Avenue and Camp Street to Shak and Rahna for no consideration;
b.causing a mortgage to be registered over Michael’s home for Shak’s own benefit;
c. transferring Michael’s share of Hallam Road to Shak; and
d.selling Hastings for about 42% of its market value and keeping the proceeds of sale to himself.[43]
[43]Pickett Affidavit, [11]-[12].
Section 77(1) of the Powers of Attorney Act2014 provides, relevantly:
77 Compensation for acts of attorney
(1)The Supreme Court or VCAT may order an attorney under an enduring power of attorney to compensate the principal for a loss caused by the attorney contravening any provision of this Act relating to enduring powers of attorney when acting as attorney under the power of attorney.
Section 63(1)(a) of that Act provides:
63 Duties of attorney
(1) An attorney under an enduring power of attorney—
(a) must act honestly, diligently and in good faith; …
By the time of the hearing, a writ had been filed which was indorsed with a claim based on those provisions of the Powers of Attorney Act2014, arising from Shak’s various dealings with the property. The indorsement also alleged that Shak had acted in breach of his fiduciary duties to act in Michael’s best interests and or avoid conflict by reason of transferring to Shak the interest in Hallam Road property for no apparent consideration, and transferring Michael’s interests in The Avenue property and the Camp Street property to the defendants. It is alleged that the second defendant received an interest in The Avenue and the Camp Street property with the knowledge that they were obtained in breach of the first defendant’s fiduciary duties and, further or alternatively, that she has received the interest with the knowledge that it was obtained by the first defendant’s fraud or deception.
Application for Mr Wesley Pickett to be appointed litigation guardian
A preliminary issue in the application related to the question of whether Wesley could act as litigation guardian for Michael.
Order 15.03 of the Rules makes provision for proceedings to be conducted by a litigation guardian:
(1)A person may be a litigation guardian of a person under disability if the first-mentioned person—
(a) is not under disability; and
(b)has no interest in the proceeding adverse to that of the person under disability.
(2)Where a person is authorised by or under any Act to conduct legal proceedings in the name of or on behalf of a person under disability referred to in paragraph (b) of the definition of that term in Rule 15.01, the person so authorised shall, unless the Court otherwise orders, be entitled to be litigation guardian of the person under disability in any proceeding to which that person’s authority extends.
(3)Where, after a proceeding is commenced, a party to the proceeding becomes a person under disability, the Court shall appoint a litigation guardian of that party.
(4)Where the interests of a party who is a person under disability so require, the Court may—
(a)appoint or remove a litigation guardian; or
(b)substitute another person as litigation guardian.
(5)Where a party has a litigation guardian in a proceeding, no other person shall act as litigation guardian, unless the Court otherwise orders.
(6)Except where a litigation guardian has been appointed by the Court, the name of a person shall not be used in a proceeding as litigation guardian of a person under disability unless there is first filed in the office of the Prothonotary—
(a)the written consent of the person to be the litigation guardian; and
(b)a certificate by the solicitor for the person under disability certifying that the solicitor knows or believes that—
(i)the person to whom the certificate relates is a person under disability, giving the grounds of the solicitor’s knowledge or belief; and
(ii)the litigation guardian of the person under disability has signed the written consent and has no interest in the proceeding adverse to that person.
Rule 15.01 defines ‘person under disability’ as
(a) a minor; or
(b)a person who is incapable, by reason of injury, disease, senility, illness or physical or mental infirmity, of managing that person’s affairs in relation to the proceeding.
Wesley filed the summons and the writ identifying himself as litigation guardian. He filed a consent to act as litigation guardian and a solicitor’s certificate pursuant to r 15.03(6). However Wesley does not currently hold any power of attorney or other legal authority to act on behalf of Michael Pickett. The evidence is that an enduring power of attorney for medical decisions is held by Shak;[44] and also that Michael had previously appointed his brother (Wesley’s father) to be his attorney for financial matters, but that this power of attorney was revoked in about 2013 or 2014.[45] Michael also gave evidence that Shak had told him that he was Michael’s attorney for personal and financial matters.
[44]Pickett Affidavit, [18].
[45]Pickett Affidavit, [18].
Mr Stephen Schembri of Schembri + McCluskys, the solicitors acting for the plaintiff, gave evidence that he had, on behalf of Wesley, filed an application with VCAT on 10 November 2023 to revoke the power of attorney granted by Michael to Shak.[46] As at 30 November 2023, the application was yet to be determined.[47]
[46]Affidavit of Stephen Ronald Schembri sworn 30 November 2023 (Schembri Affidavit), [6].
[47]Schembri Affidavit, [10].
In circumstances where Wesley does not have any existing authority under any Act to conduct legal proceedings in Michael’s name or on his behalf, r 15.03(2) does not apply to authorise Wesley to act as attorney. Rule 15.03(6) does not in my view provide an independent basis on which a person may be appointed litigation guardian but rather is a procedural requirement for any person to act as litigation guardian. Rule 15.03(3) is also inapplicable in these circumstances, as it relates to the Court appointing a litigation guardian where, after a proceeding has commenced, a party to the proceeding becomes a person under a disability. No proceeding had been commenced at the time the summons was filed and the writ was filed naming Wesley as the litigation guardian for Michael.
However r 15.04 authorises the Court to appoint or remove a litigation guardian where the interests of a party who is a person under a disability so require. I am aware that Mukhtar AsJ, in Alford v State of Victoria,[48] doubted that this rule authorised the appointment of a litigation guardian before a proceeding is commenced, primarily because of the reference to the interests of a ‘party’ in the rule. However, his Honour did observe at paragraph [29] of this judgment that:
I would hold that the Court is not without power in the right case to appoint a litigation guardian before a proceeding is commenced where it was necessary to do so for the attainment of a pursuit of civil justices, and in the interests of the person under disability. It will be a rare case. … I see two sources of possible power. First, [under] rule 1.15 the Court has power to determine procedure where the rules are wanting or in doubt. Rule 1.15(3) speaks of “an application for directions with respect to the commencement of a proceeding” being brought by originating motion. If that was not enough, I think there could be recourse to the Court’s inherent jurisdiction to facilitate the proper conduct of legal proceedings.[49]
[48][2010] VSC 468.
[49]Citation omitted.
In that case Mukhtar AsJ identified a number of other barriers to the appointment of a litigation guardian, including the absence of a properly conceived and composed statement of claim and of a person identified to be the appropriate litigation guardian.[50]
[50][2010] VSC 468, [30], [36].
In the present case, these practical difficulties do not arise. Wesley has consented to being a litigation guardian for Michael, and has provided the Court with the signed written consent and solicitor’s certificate contemplated by order 15.03(6) (albeit intended for cases other than where the Court appoints the litigation guardian). Secondly, the nature of the proceeding sought to be instituted is clear, and was at the time of the hearing the subject of an indorsed writ.
Further, there is authority to the effect that the Court’s powers under r 15.03 are, in any event, derived from the inherent jurisdiction of the Crown as parens patriae to care for those who are unable to care for themselves: see Vishniakov v Lay[51] and the authorities cited there by Derham AsJ. While, as noted by Derham AsJ in that case at [30(i)], the appointment of a litigation guardian is a serious matter because it may deprive a person of their rights under the common law to sue or defend a proceeding in their own name, it is also relevant to consider, in an urgent case such as this, what will best serve the administration of justice. There is a risk that the processes of the Court and any prospective judgment may be frustrated if the current application cannot be made, which would be the case if no litigation guardian can be appointed.
[51](2019) 58 VR 375, [24].
The application for appointment of a litigation guardian is not made on notice to the defendants but in the circumstances of urgency and risk attending the application for the freezing order, I consider that it would not be appropriate to disclose the making of the application prior to the resolution of the application for freezing orders.[52]
[52]See Pistorino v Connell [2012] VSC 438, [10] (Dixon J).
It remains for me to consider two issues:
(1)Whether Michael Pickett is a person under a disability, which is defined by r 15.01(b) as ‘a person who is incapable, by reason of injury, disease, senility, illness or physical or mental infirmity, of managing that person’s affairs in relation to the proceeding.’
(2)Whether Wesley Pickett, the proposed litigation guardian, is not a person under disability and has no interest in the proceeding adverse to that of Michael Pickett, the person under a disability.
As to the first issue, there is the evidence before me in the Affidavit of Wesley Pickett affirmed on 29 November 2023, referred to at paragraphs [14]-[18] above, as to Michael’s health and cognitive function since around 2020, and in particular:
(a) The evidence of his deteriorating cognitive function since surgery in May 2022, when Dr Subedi the consultant geriatrician described Michael as having ‘declined quite significantly cognitively since recent operation’.[53]
(b) The discharge summary from Frankston hospital which described him as having the issues of, among others, ‘#Confusion on a background of dementia’ and gave him a principal diagnosis of ‘Confusion’ and an additional diagnosis of ‘Dementia’.[54]
(c) The evidence that he had been discharged to a geriatric evaluation and management facility and was now living in an aged care facility and unable to live on his own due to advanced dementia.[55]
[53]Exhibit WSP-1 to Pickett Affidavit, 60.
[54]Pickett Affidavit, [7]; Exhibit WSP-1 to Pickett Affidavit, 18-31.
[55]Pickett Affidavit, [6]-[7].
I am persuaded that for the purposes of this urgent application that there is sufficient evidence that Michael is incapable, by reason of illness, or physical or mental infirmity, of managing his affairs in relation to this proceeding, and is a person under disability within the meaning of r 15.01(b).
As to the second issue, I am persuaded that Wesley is not a person under a disability. I also accept on the evidence before me that he does not have an interest in the proceeding adverse to that of Michael:
(a) First, the tenor of his evidence is that he is concerned to ensure that Michael’s assets are not dissipated by the defendants, in a way which is of no benefit to, or is positively detrimental to, Michael. More specifically, I accept that he is concerned to ensure that the remaining assets in Michael’s name, being his home and what Wesley understands to be no more than $14,000 in his bank account,[56] are not dealt with in a way which is adverse to Michael’s interests and which may endanger his future care needs.
(b) Secondly, I have also had regard to the certificate of the solicitor, Stephen Schembri, that Wesley currently has no interest in the application for freezing orders or the other proceedings to be commenced against the defendants that is adverse to the interests of Michael.
[56]Pickett Affidavit, [24].
Noting that the application for the appointment of a litigation guardian has been made, with the application for freezing orders, on an urgent basis it was also relevant to the exercise of my discretion in considering whether to make the order appointing a litigation guardian that the Court may at any time remove a litigation guardian or substitute another person as litigation guardian should any other relevant matters be put before the Court.
I therefore made an order that Mr Wesley Pickett be appointed litigation guardian of Mr Michael Pickett. I also granted liberty to apply.
Freezing orders
The Supreme Court of Victoria has inherent jurisdiction or inherent power to make a freezing order,[57] where the order is appropriate to prevent the abuse or frustration of its processes in relation to matters coming within its jurisdiction. Where the freezing order is sought with respect to a proceeding which has not yet been commenced, but is imminent, it may be granted to facilitate the process of enforcement of a prospective judgment.[58]
[57]PT Batan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1, [37], [43].
[58]PT Batan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1, [46]-[47]; Rozenblit v Vainer [2019] VSCA 164, [14].
The Rules provide for the making of a freezing order by rr 37A.05(4), (5) and (6) which state:
(4)The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied because any of the following might occur_
(a)the judgment debtor, prospective judgment debtor or another person absconds; or
(b)the assets of the judgment debtor, prospective judgment debtor or another person are—
(i)removed from Australia or from a place inside or outside Australia;
(ii)disposed of, dealt with or diminished in value.
(5)The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that—
(a)there is a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied because—
(i)the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(ii)the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(b)a process in the court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment of the Court, under which process the third party may be obliged to disgorge assets or contribute towards satisfying the judgment or prospective judgment.
(6)Nothing in this Rule affects the power of the Court to make a freezing order or an ancillary order if the Court considers it is in the interests of justice to do so.
These rules preserve the inherent jurisdiction of the Court, and state the minimum requirements for the grant of a freezing order.[59]
[59]Rozenblit v Vainer [2019] VSCA 164, [19] (McLeish and Niall JJA).
Justice J Forrest in Zhen v Mo[60] referred to the following principles relevant to an application for a freezing order:
[60][2008] VSC 300 [22]-[30]; See also Rozenblit v Vainer [2019] VSCA 164 (McLeish and Niall JJA).
First, that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party’s capacity to deal with his or her assets.
Second, the order is not designed to provide security for the applicant’s claim. It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.
Third, the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order.
Fourth, that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.
Fifth, that before such an order can be made it is necessary that the applicant establish–
(a) an arguable case against the defendant; and
(b) that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant’s actions in either removing the assets or disposing or dealing with them so as to diminish their value.
Sixth, the balance of convenience must favour the granting of the freezing order.
Seventh, that there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.
Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party’s assets and property.
Finally, there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court.
Arguable case
As noted above at paragraph [24], the claims identified in the indorsement on the writ are, broadly, put in three different ways.
The first is a claim against Shak for breach of fiduciary duties to act in the best interests of Michael and/or ‘to avoid conflict transactions’ by transferring his interests in the Hallam Road property to himself for no consideration, and transferring Michael’s interests in The Avenue and the Camp Street property to himself and his wife. The facts giving rise to the fiduciary relationship are not pleaded.
The second is a claim for compensation under s 77 of the Powers of Attorney Act 2014 for losses caused by Shak, acting under an enduring power of attorney, breaching the obligation in s 63(1)(a) of that Act to act honestly, diligently and in good faith. This is based on Shak having unnecessarily incurred stamp duty by transferring The Avenue and Michael’s home from Keleb to Michael; transferring Michael’s interests in Hastings to a third party for less than market value and failing to ensure that the proceeds of sale were ‘properly invested and not wasted’; and failing to pay the purchase price for The Avenue and the Camp Street property to Michael.
The third is a pleading of fraud by the first defendant based on his acts in having:
(a)transferred the Plaintiff’s interests in Hallam Road to the First Defendant for no consideration;
(b) transferred the Plaintiff’s interests in The Avenue to the Defendants; and
(c) transferred the Plaintiff’s interests in Camp Street to the Defendants;
(d) retained the proceeds of sale of Hastings;
(e) failed to pay the purchase price for The Avenue to the Plaintiff; and
(f) failed to pay the purchase price for Camp Street to the Plaintiff.
I am mindful that the claims in the indorsement have been formulated with only a preliminary understanding on the part of the plaintiff of all the facts applicable to the transactions, and a limited opportunity on the part of Wesley, as litigation guardian, to formulate claims with precision. I am also conscious that for the purposes of the making of a freezing order, it is not necessary for me to express a view on each and every way the claim is put in order to conclude that there is an arguable case against the defendant which may result in a prospective judgment, if I am in fact satisfied that there is an arguable case with respect to one or more of the claims.
I am satisfied that there is an arguable case that Michael has a claim for compensation under s 77 of the Powers of Attorney Act 2014¸ or alternatively a claim for breach of fiduciary duty with respect to some of Shak’s dealings with the Camp Street Property, The Avenue, the Hastings Property and the Hallam Property, for the following reasons.
(a) As a preliminary to the Powers of Attorney Act 2014 claims based on Shak’s acts under an enduring power of attorney, while there is no formal or direct evidence that Shak held an enduring power of attorney for financial and personal matters, Shak had told Wesley that he held such a power of attorney.[61] Wesley also was aware that Michael had revoked the Power of Attorney appointing his brother Max, Wesley’s father to be attorney for financial matters in about 2013 or 2014. Wesley had seen an enduring power of attorney appointing Shak as Michael’s attorney for medical decisions, which was dated 1 February 2014.[62] It is arguable on this evidence that Shak was Michael’s attorney under an enduring power of attorney for financial matters, and that this was the case from around 2014.
(b) The evidence is that Michael was in a state of material cognitive decline from around 2019, and that during 2020 and 2021 he was experiencing periods of dementia and erratic behaviour, and could not read. By March 2022 after surgery on his prostate Michael declined further and by May 2022 was assessed by a geriatrician as having declined quite significantly in cognitive function.[63]
[61]Pickett Affidavit at [18(b)].
[62]Pickett Affidavit at [18(a)].
[63]See above at paragraphs [13]-[14].
Turning to the individual properties, the evidence establishes troubling transactions occurring at times when Michael was unlikely to have had the cognitive capacity to approve them.
The Avenue was sold, ostensibly for $900,000 in August 2022, and registered in the name of the two defendants. There was no evidence of funds being transferred to an account for Michael from that sale. Shak told Wesley when challenged that the property had been ‘gifted’ to him. If Michael had purported to give Shak and his wife a gift of The Avenue, it was at a time when it is arguable on the evidence that he had no proper capacity to do so.
Similarly, the Camp Street property, after having been sold ostensibly for $1,025,000, was then registered in the name of the defendants as joint proprietors. Again, Shak claimed this property was gifted to them by Michael, but the transaction occurred at a time when Michael arguably had no capacity to do so.
If Shak authorised these gift transactions as attorney for Michael, there is an arguable case that it was in breach of his obligation under s 63(1)(a) of the Powers of Attorney Act 2014. Equally, if there was no authorised gift, but the proceeds of the sale were not held for Michael in each case, there is also an arguable case that there was a breach of the s 63(1)(a) obligation.
As to the Hastings property, this was sold by Keleb, of which Michael was a director and shareholder, in August 2021 for $2,200,000, an amount which appears, from the subsequent sale in November 2022 for $5,214,357, to have been at a significant undervalue. While the evidence is less clear as to Michael’s cognitive state in August 2021, there remains an arguable case that he did not have the capacity to consent to that transaction. If it was a transaction effected by Shak under an enduring power of attorney, there is also an arguable case that this was an act in breach of his s 63(1)(a) obligations.
Finally, the Hallam property was purchased in December 2016 and registered in the name of Shak and Michael, but in February 2018, Michael’s interest is recorded as having been transferred to Shak for ‘non-monetary’ consideration. This was at a time when the evidence did not clearly establish an incapacity on Michael’s part to have approved such a transaction. In circumstances where the property was apparently purchased jointly, there is a question raised as to the basis on which it was then transferred to Shak for no consideration little over a year later. It is open to infer that Shak may also have acted as Michael’s attorney to effect that transaction, given that there is evidence from which it can be inferred that he held an enduring power of attorney from 2014. In my view there is an arguable case that this transaction involved Shak acting in breach of his obligations under s 63(1)(a) of the Powers of Attorney Act 2014. The case may not be as strongly arguable as with respect to The Avenue, the Camp Street property, or the Hastings property. However, given my state of satisfaction as to the existence of an arguable case with respect to those three properties, the strength of the claim with respect to the Hallam property is not decisive.
Other matters are identified in the indorsement on the writ as the basis of the claim under the Powers of Attorney Act 2014, including what was said to be the unnecessary incurring of stamp duty on the transfer from Keleb to Michael of The Avenue and Michael’s home. The evidence is insufficient to establish why this may have occurred, or whether it was authorised by Michael. I do not take those matters into account as giving rise to an arguable claim.
My conclusions above as to the existence of an arguable case under the Powers of Attorney Act2014 are based on the potential suggested by the evidence that Shak authorised the relevant transactions as attorney for Michael. In the event that the transactions were not authorised by Shak as attorney, there remains, in my view, an arguable case of breach of fiduciary duty, or potentially a related claim of undue influence, with respect to the transactions. While no argument was addressed to the nature of the fiduciary relationship alleged in the indorsed writ, the facts of the transactions do in my view give rise to an arguable case that Shak has breached fiduciary duties owed to Michael, or has exercised undue influence over him. Michael was an older man with significantly diminished cognitive capacity and other health problems. Shak was a man involved in Michael’s care,[64] and Michael had some dependency on him. Shak benefitted demonstrably from what he describes as gifts of real property (The Avenue and Camp Street) and a transfer of the Hallam Road property for ‘non-monetary’ consideration. The evidence indicates that Shak was in a position to exercise real influence over Michael. In these circumstances, it is arguable that the relationship would attract the principles in Johnson v Buttress,[65] namely that it was a relationship involving an ascendancy or influence of Shak over Michael, with the consequence that Shak fell under ‘a duty in which fiduciary characteristics may be seen’.[66] In these circumstances the gifts of real property and transfer of property for no consideration would arguably attract a presumption against a voluntary disposition by Michael.[67]
[64]As well as being cared for by his friend James, and by professional carers.
[65](1936) 56 CLR 113.
[66](1936) 56 CLR 113, 134-135 (Dixon J).
[67](1936) 56 CLR 113, 135 (Dixon J).
Taken as a whole, I therefore consider that the evidence establishes that there are arguable claims with respect to The Avenue, the Camp Street property, the Hallam Road property, and the Hastings property.
I must also be satisfied that there is a process available in the Court or which may ultimately be available to the plaintiff as a result of a prospective judgment under which process the third party may be obliged to disgorge assets or contribute towards satisfying the prospective judgment: r 37A.05(5). I am satisfied that if judgment is given on the claim identified in the indorsement on the writ, it would involve relief relating to disgorgement of real property assets currently owned by the defendants, namely the assets referred to in paragraphs [53]-[57] above, or a judgment for damages against one or both of the defendants.
Danger of prospective judgment being frustrated or unsatisfied
The next issue is whether there is a danger that the assets of the defendants as prospective judgment debtors may be removed from Australia or from a place inside or outside Australia, or disposed of, dealt with or diminished in value. I am satisfied that the evidence before me establishes such a danger and that there is a real possibility that the assets may be dealt with or diminished in value if the order is not made.
First, there is evidence that the first defendant has a British and a Pakistani passport which may make it possible for him to open bank accounts overseas and transfer any funds in Australia to foreign accounts.[68] There is also a possibility that one or both of the defendants may abscond before any judgment could be enforced.[69] I have not given that possibility any significant weight in my assessment, as I was also informed that the defendants have two children and it was not possible to assess how likely it was that they would leave the country without notice or otherwise to frustrate the enforcement of a judgment.
[68]Pickett Affidavit, [45].
[69]Pickett Affidavit, [46].
Secondly, there is evidence that the Hallam Road property (and another property owned by the defendants, referred to at paragraphs [69]-[71] below) are currently on the market for sale, indicating a risk that the properties could soon be sold, with the monetary proceeds being more readily able to be transferred or otherwise dissipated.
Thirdly, there is evidence of Michael’s home having been encumbered with a mortgage in 2016; in 2018 a mortgage registered on the Hallam Road property, and most recently, in August 2023 a mortgage registered on the Camp Street property. This evidence of repeated unexplained encumbrances on the property, in combination with the evidence that Michael has likely not received funds from the secured loans or other transactions, given the very limited amount which he apparently holds in his bank account, indicates the risk of the first defendant engaging in further transactions involving the properties and diminishing their value.
Finally, I am concerned at the evidence given by Wesley that Shak has stated that he will need to sell Michael’s home to pay a deposit for the aged care home, raising the possibility that this property too may be disposed of without further notice.[70] This is of particular concern in the context of the evidence that Shak first incorrectly informed Wesley, his father and his brother that Michael still owned The Avenue and the Camp Street property, and only conceded that they had been transferred to him when challenged.[71]
[70]Pickett Affidavit, [19].
[71]Pickett Affidavit, [24(b)].
This evidence as to the risk of the defendants taking action to remove moneys from the jurisdiction or to dispose of the real property assets was also, in my view, sufficient reason to proceed to hear the application and give orders on an ex parte basis.[72]
[72]See Supreme Court (General Civil Procedure) Rules 2015, r 37Ar Rule 37A.02(1) re notice.
The position of the second defendant
The application for the freezing order is made as against both Shak, the first defendant and his wife, the second defendant. The writ is also issued as against both defendants, and alleges as against Shak contraventions of the Powers of Attorney Act 2014 in his capacity as an attorney for Michael under an enduring power of attorney, and seeking compensation pursuant to s 77. The allegation against the second defendant is that she received an interest in properties with the knowledge that they were obtained in breach of the first defendant’s fiduciary duties, further or alternatively that she has received the interest with the knowledge that it was obtained by the first defendant’s fraud or deception. While there is evidence that The Avenue Property and the Camp Street property are registered in both the first and second defendants’ names, there is currently no evidence before me to the effect that the second defendant had knowledge of any breaches of fiduciary duties or of any fraud or deception. That will be a matter for trial. For the purposes of this application for a freezing order, even if there is no evidence that there is a good arguable case on the substantive cause of action against the second defendant there is in any event power pursuant to the Court’s inherent jurisdiction and under the Rules to make a freezing order with respect to third parties in appropriate circumstances.[73]
[73]Cardile v LED Builders (1999) 198 CLR 380.
Other assets of the defendants
There was evidence that the first defendant had an interest in a property at 10 Fox Road, Narre Warren North (the Narre Warren property). A historical title and instrument search, and a search of the website realestate.com.au showed the following:
(a) On 29 October 2018, the Narre Warren property was sold for $1,650,000;
(b) On 29 April 2019, Shak was registered as the sole proprietor of the Narre Warren property and Westpac registered a mortgage;
(c) On 2 June 2020, the Westpac mortgage was discharged and Pepper Finance Corporation Ltd registered a mortgage over the Narre Warren Property;
(d) On 4 August 2023, the Pepper Finance Corporation Ltd mortgage was discharged and Perpetual Trustee Company Ltd registered a mortgage over the Narre Warren Property; and
(e) The Narre Warren Property has recently been listed for sale.
Wesley was unable to say whether Michael or his company had ever had an interest in the Narre Warren Property. However he gave evidence of his belief that ‘Shak will be unable to fully compensate Michael for Michael’s losses if he is permitted to deal with Narre Warren as he pleases’.[74] It was also submitted at the hearing that an inference could be drawn that it may have been moneys arising from the sale of the plaintiff’s property that funded the purchase of the Narre Warren property by the first defendant. I accept that there is a basis for such an inference, having regard to:
[74]Pickett Affidavit, [38].
(a) The date of the sale of the Narre Warren Property in December 2018, and subsequent registration of Shak as the sole proprietor;
(b) The transfer of Hallam Road to Shak in February 2018 for ‘non-monetary consideration’ and the subsequent registration of a mortgage on the property in June 2018, some months before the apparent purchase of the Narre Warren Property;
(c) The mortgages registered in February 2016 on The Avenue property and the Camp Street Property, securing loans of unknown amounts;
(d) The evidence, primarily based on Shak’s statement to Wesley, that Michael had no other assets than approximately $14,000 in his bank account and his home, suggesting that the proceeds of the sale of Hallam Road and any loans may not have been provided to Michael.
In these circumstances, and in light of the evidence that the property was being offered for sale, I considered it appropriate to extend the freezing order to this property.
Undertaking as to damages
Michael, through his litigation guardian Wesley, gave through counsel the undertaking as to damages in the form contemplated by Practice Note SC GEN 17. Wesley’s affidavit appropriately disclosed in his affidavit that, noting Shak’s statement that Michael had only $14,000 in his account, and that the value of Michael’s home was uncertain given the unknown extent of ANZ Bank’s interest in the property, there was some uncertainty about the extent of Michael’s capacity to pay damages if called upon. In the circumstances I did not consider this a barrier to the grant of the freezing order.
Application for order under the Guardianship and Administration Act
The summons also included an application for an ‘ancillary order’ under s 179 of the Guardianship and Administration Act 2019, which was sought to ‘make an urgent referral order … so that Mr [Wesley] Pickett can be appointed an administrator’, and on the basis that it was ‘expected that if the Court was minded to make this order, it would assist in expediting the matter with VCAT’. [75]
[75]Plaintiff’s Submissions dated 30 November 2023, [5].
Section 179 provides, relevantly:
179 Matters before a Court
(1)If in any civil proceeding before a Court the Court considers that a party may be in need of a guardian, a supportive guardian, an administrator or a supportive administrator, the Court may refer the issue to VCAT for determination.
(2)If a Court refers an issue to VCAT under subsection (1)—
(a)the referral is to be treated as it if were an application to VCAT for the making of the relevant order under this Act; and
(b)the prothonotary (in the case of a referral by the Supreme Court) or the principal registrar of the Court (in any other case) is to be taken to be the applicant.
I raised with counsel for the plaintiff several concerns I had in making such an order:
(a) First, the evidence of Mr Schembri was that an application under the Guardianship and Administration Act had already been made by Wesley, seeking to have the first defendant’s enduring power of attorney revoked and for Wesley to be appointed administrator. It did not appear to be appropriate to have that issue referred if it would have the effect under s 179(2) of being treated as another application.
(b) Secondly, where it was Wesley who had first considered that Michael may be in need of an administrator, and had made an application to VCAT, it would not be appropriate to make a referral which would have the effect of the Prothonotary being the applicant, as Wesley remained in the best position to provide the necessary materials to VCAT in support of the application.
(c) It was not clear that a referral to VCAT by the Court would result in any further expedition of the matter in VCAT than the existing application to VCAT, which identified circumstances why the application was urgent.
It was accepted by counsel for the plaintiff at the hearing that the Court’s views on the urgency of the matter may be served by providing VCAT with the freezing orders to be made in this matter, and the application for an order under s 179 of the Guardianship and Administration Act was not pressed.
---
3
8
0