Re Heller
[1998] QSC 128
•24 June 1998
IN THE SUPREME COURT
OF QUEENSLAND
O.S. No 4088 of 1998
Brisbane
[Re Heller]
IN THE MATTER of the Property Law Act
- and -
IN THE MATTER of a Power of Attorney made by ERNEST HELLER
- and -
IN THE MATTER of a Power of Attorney made by JOSEPHINE HELLER
CATCHWORDS: CONTRACTS - Particular parties - Principal and agent - Authority of agents - Powers of attorney - Gift - Authorisation by court - Powers of Attorney Act 1998, ss.88, 118.
Counsel:Mr M Conrick for the applicants
Mr G Dickson (solicitor) for the respondent Mr J Cockerill (Adult Guardian)
Mr M Green for the Attorney-General
Solicitors:Griffiths McColm & Parry for the applicants
Official Solicitor to the Public Trustee for the respondent Mr J Cockerill (Adult Guardian)
Mr B T Dunphy, Crown Solicitor for the Attorney-General
Hearing Dates: 2, 5, 12 June 1998.
REASONS FOR JUDGMENT - FRYBERG J.
Judgment delivered 24 June 1998
This is an unusual application. The limited amount of evidence contains much hearsay. Some of it is of questionable reliability, not because of the credibility of the deponent but because of its anecdotal nature. I shall make my findings upon it but they are somewhat tentative for this reason.
Ernest Heller is over 99 years old. His wife, Josephine is almost 91. They are living at the Tri-Care Nursing Home, Kawana Waters. In August 1992 they were living together at their home. In that month, both made wills devising and bequeathing all of their property to each other absolutely. They appointed Dr Barry McKeon as executor. They consciously and deliberately refused to make any further disposition of their property and in particular, refused to make any provision for what should happen on the death of whoever lived longer. On a number of occasions Mr Heller said, “The survivor will decide” or “There’s no need to make a will yet, do you think we are going to die soon?” Mrs Heller said, “It will go to the people who look after us.” I infer that it was their intention that the survivor of them should make a further disposition when they had decided who had best looked after them in their declining years. In March 1995 they gave Dr and Mrs McKeon powers of attorney, which were duly registered. The McKeons had thought that the Hellers were only “comfortably off”, but after they entered the nursing home in 1995, the McKeons discovered that they have “financial interests” in seven countries over four continents the value of which, together with that of their property on the Sunshine Coast, totals a “considerable figure”. They did not anticipate that the Hellers’ assets were so extensive or that the task of administering them would prove so challenging. Dr McKeon is over 70 years old and has retired. Neither he nor his wife has any desire to be embroiled in legal proceedings as to entitlement to those assets, and he sees a problem should he die before one of the Hellers. Unfortunately, neither of the Hellers is now mentally competent to comprehend and instruct on legal matters. Therein lies the problem which this application was designed to overcome.
Before I turn to the legal questions, I should say something of the Hellers’ background. Dr McKeon described it thus:
“4. Ernest Heller was born in Budapest on May 17th, 1899, one of two children. His brother died unmarried at about the age of 21 years. His father died of diabetes post amputation for gangrene. I understand his mother probably died during the second world war. Ernest Heller trained as a photographer and after the first world war he lived and worked in France, where he met and later married (March 4th, 1933, Nice) Josephine Hollesch.
5. Josephine Heller (nee Hollesch) was born in Vienna on September 11th, 1907, and was an only child. She has not related anything of her parents. She had an uncle in France but no cousins. She went to France to complete her education and later her uncle introduced her to Ernest Heller, whom she married. Their marriage has been without issue. They have each told me, independently, that they have no living relatives.
6. They established a photographic studio in Billy-Montigny, a town near Lille in northern France. During the second world war they served in covert operations with the Resistance, and assisted in the shelter and escape from France of over twenty allied airmen. For these services, Mr and Mrs Heller received French and International decorations and acclaim after the war.
7. They worked hard, lived frugally, and were largely content with their own company. They prospered and retired to Spain and later Mexico, before arriving in Australia in December 1981, a few days before my wife and I met with them.
8. They bought their own unit in Caloundra in the next few months and coped quite well, with paid daily assistance provided by a lady from the local Church. Both Ernest and Josephine Heller at that time were mentally and physically active. He followed world events and financial matters in newspapers and journals in a variety of languages. Both Ernest and Josephine Heller were multi-lingual. Ernest Heller swam laps daily at the local pool up to his 94th year. However they made no social contacts of significance and were not only content with each other’s company but were suspicious of people in general.
9. About March 1982, Josephine Heller tripped while walking in the street, sustained a fracture of her hip, and required operation and hospitalisation. She thereafter developed a chronic depressive illness, for which she refused treatment. Ernest Heller wanted to travel around Australia but his wife would not agree and they became more and more reclusive and isolated.”
In 1985 Dr McKeon accepted the post of Regional Geriatrician for North Eastern Victoria. He moved to Beechworth in that state from Caloundra, where he had been in general practice. On the completion of his contract, the McKeons returned to the Sunshine Coast and renewed social contact and visits with the Hellers. Mr Heller was then 89 and Mrs Heller 81. As Dr McKeon describes it, “[T]hey were barely coping, but declined our advice that they should move into a care situation.”
The Hellers made their wills in August 1992. Dr McKeon described the circumstances thus:
“In August 1992, Mr and Mrs Heller discussed their future with me, it became apparent they had not made Wills. I prevailed upon them to make Wills and they ultimately did so, but would not make provision beyond each leaving their respective estates to the other. Each insisted that I alone be appointed Executor. They had little trust in lawyers, accountants, bankers or such like.”
Dr McKeon knows of no later will or codicil and does not believe that any has been made.
By September 1994:
“[T]he daily help had retired, various catastrophes had been traversed, brain failure was evident in both Mr and Mrs Heller, and Mrs McKeon and her sister Mrs Gannon were visiting daily to see that Mr and Mrs Heller had food and such help as we could get them to accept, since Mrs Heller would allow no one else into her home.”
In March 1995, Mrs Heller sustained another fracture and was admitted to hospital. Mr Heller accepted admission also to allow joint assessment of their mental and physical states. Dr McKeon described what happened in these terms:
“17. ... The Nambour Hospital consultant geriatrician, a doctor unknown to me, assessed that Mr Heller and Mrs Heller each individually had sufficient physical incapacity to warrant immediate nursing home admission.
18. Mrs McKeon, as close friend, located accommodation for them in a new nursing home, soon to be opened, where they could share their own room and remain together.
19. With the encouragement of the Nambour Hospital geriatrician and staff they made their own decision to enter the nursing home and personally signed the application forms. Also on the advice of the hospital staff, before moving to the nursing home, Mr and Mrs Heller signed Enduring Powers of Attorney, appointing my wife and I to be their attorneys.
20. ...
21. Once Mr and Mrs Heller were settled into the nursing home, my wife and I attended to cleaning their unit, locating valuables, and memorabilia, and sorting and filing over 30 plastic shopping bags of most loose financial documents, and generally preparing the unit for sale. In the garage we discovered certain important documents amongst bundles of old newspapers.
22. We have located financial interests in America, Australia, France, Germany, Morocco, Netherlands Antilles, and Switzerland, which together with the residential unit in Caloundra, in total amounts to a considerable figure.
23. In sorting and (as necessary) translating the various documents were found references to Mr Heller’s intention to consolidate his major investments in Switzerland. I discussed this with him and he was agreeable that I should continue with his plan to transfer overseas holdings and when I saw fit and consolidate them in the joint account in Geneva, Switzerland.
24. To facilitate our appointment as their Attorneys, Mr and Mrs Heller provided my wife and I with a number of specific letters of authority, and in particular, specific individual Powers of Attorney over the joint account and the assets therein at Robeco Bank, Geneva. That Power of Attorney is expressed, as we understand is possible under Swiss Law, to continue to have effect after the death of the surviving Donor. We will be travelling to Europe on May 12th 1998, in company with Mr and Mrs Heller’s Accountant, Mr Garry Wardle, to attend to the various European and American investments, and to seek further continental legal advice.”
On 28 May this year, the McKeons applied for a declaration that, pursuant to the powers of attorney, they “may transfer some or all of the property of Ernest Heller and Josephine Heller to themselves as trustees” to be held on trust pursuant to trust deeds exhibited to Dr McKeon’s affidavit. In essence, the trust deeds provide for the McKeons to hold the property for the Hellers during their joint lives and thereafter for the survivor of them and for any other person whom the Hellers may nominate in the unlikely event that they should both recover their mental faculties. After the death of the survivor, any property not held on behalf a nominee is to be held for the next of kin of the survivor entitled to take the estate upon an intestacy, and in the absence of any next of kin, for a charitable trust. It seems unlikely that any next of kin will be located if Dr McKeon’s understanding recorded above is correct.
The application came before me in Chambers on 2 June, ex parte. At that time there was no evidence as to whether the Hellers were or were not of sound mind, and they had not been served with the material. I refused to deal with the matter on that basis, but informed counsel for the applicants that I would deal with it if either the Hellers were served or, if it transpired that they were not competent to instruct lawyers, the Attorney-General were served. When the matter again came before me on 5 June, there were additional appearances, for the Attorney-General and for Mr J Cockerill, who has been appointed the Adult Guardian pursuant to s.127 and Part IV of Chapter 7 of the Powers of Attorney Act 1998. I was persuaded that Mr Cockerill’s appearance was sufficient to provide any necessary adversarial input and gave counsel for the Attorney leave to withdraw. Procedural directions were given which resulted in the matter coming on for hearing on 12 June.
The application was entitled in the Property Law Act 1974 and argument addressed to me on 2 June revolved around the provisions relating to powers of attorney in that Act. However those provisions were repealed by s.182 of the Powers of Attorney Act 1998, which came into force on 1 June. Section 163 of this Act provides:-
“Except where this Act expressly provides otherwise, on the commencement of this section, a general power of attorney, or enduring power of attorney, made under the Property Law Act 1974 and of force and effect immediately before the commencement of this section is taken to be a general power of attorney, or enduring power of attorney, made under this Act.”
The Act might be thought to “otherwise provide” by s.6, which is in these terms:-
“Except where otherwise provided, this Act applies only to documents made, whether under this Act or otherwise, after the commencement of this Act.
To overcome this clumsy drafting, the Act is littered with footnotes but these are not part of the Act[1]. Section 163 is a more particular provision than s.6, and deals with the question of applicability more precisely. In my judgment, the Act applies to the powers of attorney held by the applicants.
[1]Acts Interpretation Act 1954, s.14(6).
In a sense, this is unfortunate, because the evidentiary material was apparently not drafted with the provisions of the Act in mind. There was also some confusion over the source of the Court’s power to make an order of the nature of the order being sought. Counsel was inclined to argue that the matter should be treated as a construction summons under the Rules of Court, but the relief sought and the content of the arguments went well beyond matters of construction. In my judgment, the application can succeed only if it be regarded as having been brought under s.110 of the Act. That section authorises an application to the Court for a declaration, order, direction, recommendation or advice about something in or related to the Act.
The first question which arises is whether the proposed transaction is outside the McKeons’ authority because it amounts to a gift. It was unclear whether the previous legislation authorised the making of a gift, but it is clear that the current legislation does so only in limited circumstances. Section 88 provides as follows:-
“(1) Unless there is a contrary intention expressed in the enduring power of attorney, an attorney for financial matters for an individual may give away the principal’s property only if -
(a)the gift is -
(i)to a relation or close friend of the principal; and
(ii)of a seasonal nature or because of a special event (including, for example, a birth or marriage); or
(b)the gift is a donation of the nature that the principal made when the principal had capacity or that the principal might reasonably be expected to make;
and the gift’s value is not more than what is reasonable having regard to all the circumstances and, in particular, the principal’s financial circumstances.
(2) The attorney or a charity with which the attorney has a connection is not precluded from receiving a gift under subsection (1).”
On behalf of the McKeons it was argued that the proposed transaction would not constitute a gift, and alternatively that if it would, it would be a donation of the nature that the Hellers might reasonably be expected to make.
The argument that there would be no gift proceeded on the assertion that there would be no change in beneficial ownership of the Heller’s property. Such a change is the essential characteristic of a gift[2]. Under the proposed trusts, the Hellers would retain full beneficial ownership, including the right to dispose of property to others. Should they again become competent, they could, under the rule in Saunders v. Vautier demand revesting of the property in themselves. Hence, there is no gift.
[2]Compare Leary v. Federal Commissioner of Taxation (1980) 11 A.T.R. 145 and the cases there cited.
I do not accept this argument. It exaggerates the effect of the proposed deeds in a number of ways. First, assuming that the Hellers each have some separately owned property (the evidence is very deficient in regard to the ownership and size of their estates), the proposed transactions would amount to a gift by each to the other of that property. Even if Mrs Heller were to regain competence, she would be unable by herself to terminate the trust unless Mr Heller also regained competence. The rule in Saunders v. Vautier might well not apply. More importantly, the first proposed trust in my view establishes only life interests for the Hellers in place of their present absolute interests in such of their property as may be transferred to the trustees. In effect, they lose the power to dispose of property in the future should they regain the competence to make a will. Their next of kin obtain a vested interest in such property, albeit one defeasible in the event that the Hellers should regain competence and exercise their power of nomination. Indeed the whole point of the exercise seems to be to remove the property from the estate of the survivor of the Hellers. In my judgment, the exercise of the powers of attorney in the manner proposed would amount to a gift.
Would such a gift be “a donation of the nature ... that the principal might reasonably be expected to make.” There is some ambiguity in the drafting of this provision. In ordinary parlance, it is often said that a person might reasonably be expected to make a donation to a cause or another person in circumstances where the speaker is expressing a view that this is what the putative donor reasonably ought to do. In that sense, the expression is normative. On the other hand, the expression occurs in the context of para.(b), and is the alternative to “a donation of the nature that the principal made when the principal had capacity”. This suggests that the expression under consideration is to be read subject to the condition “if he or she had capacity”. Admittedly, whoever drafted the Act has eschewed the use of the conditional subjunctive in the clause under consideration, but our education system abandoned teaching grammar long ago; the precision of the subjunctive could not be expected. In my judgment, the context indicates that the second construction is to be preferred.
On this construction, I cannot conclude that the section is satisfied. The evidence rather suggests the contrary. The Hellers’ intention seems to have been that while they were both alive, no gift over was to be included in their wills. I see no ground for reaching the conclusion that if they had capacity, they would now enter into a transaction of the nature proposed. In these circumstances, it is unnecessary to decide whether the gift’s value is not more than what is reasonable having regard to all the circumstances, under the concluding words of s.88(1) of the Act. As the evidence stands, I doubt if a conclusion would be possible. In my judgment, the proposed transaction is not permitted under s.88. I also think that section was plainly intended to deal comprehensively with the question of gifts, subject only to the other provisions of the Act. Whatever might have been the position at common law or under the Property Law Act 1974, gifts must now be authorised under some provision in the Act. As things presently stand, I do not think the proposed transaction would be authorised.
In the alternative, counsel argued on behalf of the McKeons that the Court should authorise the transaction under s.118(2) of the Act. Section 118 provides:-
“(1) On an application about a matter, the court may give directions or advice or make a recommendation, order or declaration about the matter or another matter related to this Act, including about -
(a)the interpretation of the terms of, or another issue involving, a power of attorney, enduring power of attorney or advance health directive; or
(b)the exercise of an attorney’s power or another issue involving an attorney’s power.
(2) Without limiting subsection (1), if the court considers it in the best interests of the principal, the court may, by order and subject to the terms the court considers appropriate, authorise an attorney, either generally or in a specific case, to undertake a transaction that the attorney is not otherwise authorised to undertake or may not otherwise be authorised to undertake.”
The problem with this approach is that the evidence presently before me is inadequate to found a decision on whether the proposed transaction is in the best interests of the Hellers. While the Hellers are undoubtedly old and cannot be expected to live for much longer, there is no evidence that they are in danger of imminent death, and I do not think the Court could proceed under s.120(1) of the Act, i.e. without receiving all relevant material. Some of the deficiencies are:-
(a)The material does not disclose the nature of the Hellers’ property (and in particular whether the “financial interests” include movables or immovables for the purposes of our conflict of laws rules[3]) nor its value;
[3]This is relevant since it seems that in relation to immovables, the relevant intestacy law is that of the situs: Nygh: Conflicts of Laws in Australia, 6th ed. (1995), p.564. There could also be problems with recognition of the trusts.
(b)The records which the McKeons have presumably maintained under s.175D of the Property Law Act 1974 have not been exhibited;
(c)No particulars are given of what property is to be transferred, or when;
(d)The taxation and stamp duty implications of the proposed transactions and any subsequent transactions by way of nomination of beneficiary or revocation have not been investigated[4];
[4]Compare Ford and Lee: Principles of the Law of Trusts, 3rd ed. (1996), para.16030.
(e)There has been no attempt to demonstrate that the proposed transaction complies with s.76 of the Act. In particular, the evidence of the Hellers’ present condition is extremely brief. One would hope for evidence from a consultant psychiatrist.
Prima facie, it is not in a person’s interests that his or her goods should pass as bona vacantia. However in the present case, I think a good deal more evidence is needed before a decision can be made under s.118.
It may be argued that it is in the Hellers’ best interests to have the McKeons designated as their executors; and not in their best interests to have the McKeons perturbed by the problems referred to in Dr McKeon’s affidavit, viz. concerns about becoming embroiled in legal proceedings as to entitlement to the assets of the estate and the problems which would arise should one of the Hellers outlive him. That factor would seem to me of little weight for the purposes of s.118. In any event, Dr McKeon’s concerns appear misplaced. I do not think any major problem would arise should one of the Hellers outlive him - that is one of the reasons we have the Public Trustee. Moreover, I cannot see how the proposed transaction will avoid the potential for legal proceedings as to the entitlement to the Hellers’ assets. The proposed trust deed provides for the Hellers’ property to vest in the next of kin of the survivor after his or her death; so the same problems would arise under it as would arise under the will.
Why this provision has been included is not altogether clear to me. It seems unlikely that there is anyone living who would be entitled to take on intestacy, at least under Queensland law; but even if there is, that person has no present interest in the Hellers’ property. He or she would have no right to prevent any disposition of it properly made pursuant to the powers of attorney. Presumably there would be concern about the potential operation of ss.106 and 107 of the Act. However, one would have thought that no right of compensation could arise under s.106 in respect of a transaction authorised by the Court, at least provided there was full disclosure in the application to the Court. If that be so, there would seem to be no requirement for a provision in the trust deeds vesting property in those who would take on an intestacy. That way, investigations which might be difficult and expensive and which would be unlikely to produce a genuine claimant (but which might produce false claimants[5]) might be able to be avoided. I cannot decide these matters on the material presently before me.
[5]R. v. Castro (Tichborne Case) (1880) L.R. 5 Q.B. 490 affirmed on a different point on appeal at [1881-5] All E.R. Rep. 429.
There are two other areas of difficulty. First, the submissions on behalf of Mr Cockerill have disclosed a number of quite serious drafting defects in the proposed trust deeds, and I have observed several others. There is a need for the deeds to be given much more attention than apparently has occurred. Second, Mr Cockerill has raised the possibility that as drafted, the trust deeds might create a situation of conflict of interest for the McKeons, which would give rise to problems under s.73 of the Act. The McKeons have expressly stated that they do not seek to benefit personally from the estate of the Hellers apart from any fees appropriately due to Dr McKeon as executor. That suggestion needs to be resolved.
When the matter was before me, the solicitor for Mr Cockerill submitted that this was a case where there was sufficient justification for him to investigate under s.127 of the Act. I am inclined to think that this submission is correct, and that, pursuant to s.118(1), I should direct that he do so in the light of these reasons. I will hear the parties on that question. Otherwise, provided the summons is appropriately amended, I see no reason why it should not go forward, with both parties having leave to file further material. Again, I will hear the parties on this question, and on the question of costs[6]. Otherwise, the application must be dismissed.
[6]See s.125 of the Act.
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