Ryan v Ryan

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY & PROBATE LIST

S CI 2016 04129

IN THE MATTER of the Estate of RONALD KEITH RYAN

BETWEEN

RONALD KEITH RYAN (who sues by his Administrator BRETT RONALD RYAN)	Plaintiff
v
KAREN JUNE RYAN (in her own capacity and as attorney pursuant to enduring powers of attorney granted by RONALD KEITH RYAN and SHIRLEY JEAN RYAN on 22 July 2011, as former Administrator of the Estate of RONALD KEITH RYAN and as Executor of the Deceased Estate of SHIRLEY JEAN RYAN)	Defendant

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JUDGE:	EMERTON J
WHERE HELD:	Melbourne
DATE OF HEARING:	1 May 2017
DATE OF JUDGMENT:	30 August 2017
CASE MAY BE CITED AS:	Ryan v Ryan
MEDIUM NEUTRAL CITATION:	[2017] VSC 490

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TRUSTS, EQUITY AND PROBATE – Defendant given power of attorney for elderly parents — Defendant appointed as administrator of her father’s estate under Guardianship and Administration Act 1986 (Vic) Part 5 — Defendant borrowed money from her father and mother — Written loan agreements — Whether loans forgiven — Defendant withdrew moneys from mother’s and father’s bank accounts to use for her own purposes — Whether defendant must repay money to father’s estate.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr Edward Moon	McCarthy Partners
For the Defendant	Ms Ryan, in person	None

HER HONOUR:

Introduction

Karen Ryan and Brett Ryan are sister and brother. They are the adult children of Shirley Ryan, who died on 25 June 2014, and Ronald Ryan, whose affairs are currently administered by Brett. Ron is 87 years old, very frail and lives in an aged care facility in Pascoe Vale. Karen and Brett do not get on. Brett has brought this proceeding on behalf of his father to recover from Karen moneys that he alleges were taken by Karen from their father’s estate in breach of her duty to him.

In 2011, Ron and Shirley were still living in their joint matrimonial home in Treadwell Road, Niddrie. On 22 July 2011, each of them appointed Karen as their attorney pursuant to an enduring power of attorney. Karen had authority to, and did, operate their joint bank account with the Commonwealth Bank.

By late September 2012, Ron had been assessed as requiring a high level of care and, in October 2012, Ron and Shirley moved to the Dorothy Impey Home for the Aged in Pascoe Vale. Although Shirley did not require a high level of care at this stage, she wanted to remain with Ron. By then, Ron and Shirley had become dependent upon Karen for the management of their financial affairs, and for organising and attending medical appointments, shopping expeditions and social outings.

In December 2012, Brett commenced proceedings in the Victorian Civil and Administrative Tribunal (‘Tribunal’) seeking orders revoking the enduring powers of attorney granted to Karen and the appointment of administrators to the estates of each of Shirley and Ron. In the event, on 15 May 2013, the Tribunal dismissed Brett’s application in respect of Shirley but, in respect of Ron, made an order revoking Karen’s appointment as his attorney and appointing her instead as the administrator of his estate pursuant to Part 5 of the Guardianship and Administration Act 1986 (Vic) (‘Administration Order’).

Shortly after the Tribunal’s decision, a ‘pensioner security account’ was opened for each of Shirley and Ron, and their pensions were henceforth paid into these accounts.

In October 2013, the matrimonial home was sold. The proceeds of sale were used in large part to satisfy Shirley and Ron’s obligations to provide aged care bonds to the Dorothy Impey Home.

In early 2013, Shirley’s cousin died, leaving her a bequest of $200,000. However, the bequest was not paid to Shirley until December 2013.

Shirley died on 25 June 2014. By her last will and testament, she appointed Ron as her executor or, if Ron was unable to act as executor, Brett and Karen jointly, as executors and trustees of her estate, and devised and bequeathed the whole of her estate to Ron, bar a payment of $20,000 to Brett.

On 2 July 2015, Karen swore an affidavit as executor of Shirley’s will to obtain probate, deposing that Shirley had left personal estate in Victoria to the value of $325,427.56.

Probate was granted in August 2015.

Just under a year before her death, on 9 August 2013, Shirley signed two documents expressed to be loan agreements making loans to Karen. The first loan was for an amount of $45,000; the second for $95,000. The loan agreements specified an interest rate of 4 per cent, and provided for the repayment of the principal sum in full ‘on the date nominated by the Borrower’. The agreements also nominated as the ‘security property’ Karen’s home at 32 Cardwell Street in Elmore.

Karen also borrowed money from Ron. Documents expressed to be loan agreements dated 30 November 2012, 7 September 2014 and 10 September 2014 provide for Ron to lend to Karen $55,000, $48,000 and $2,000 respectively. The loans are ‘interest only’ loans with interest rates of 3 and 4 per cent. Monthly payments were to commence three months after all moneys had been drawn down. According to Karen’s defence, this did not occur until February 2016.

On 4 February 2016, the Tribunal re-assessed the administration order pertaining to Ron under s 61A of the Guardianship and Administration Act. The Tribunal found that as administrator, Karen had appropriated at least $40,000 from Ron’s estate without the approval of the Tribunal and had failed to provide a number of documents, including documents explaining the level of income to Ron’s estate from Shirley’s estate and documents showing the balance in Ron’s passbook account[1] as at 30 June 2015. The Tribunal revoked the Administration Order and appointed Brett administrator of Ron’s estate.
[1]Which I understand to be the joint account rather than Ron’s pensioner security account.

On 8 April 2016, the solicitors acting for Karen wrote to Brett’s solicitors stating that they held $253,437.82 in their trust account on behalf of Ron. This was made up of Shirley’s aged care bond plus a small amount of interest. The letter recorded that an interim distribution of $20,000 had been made to Ron in November 2015.

The sum of $253,437.82 was duly deposited in Brett’s solicitor’s trust account.

On 10 May 2016, the Tribunal approved Brett using up to $25,000 of Ron’s funds to take legal action on Ron’s behalf in order to recover from Karen funds said to be due to Ron from Shirley’s estate or from his own estate when it was administered by Karen.

On 22 August 2016, Karen provided to the Registrar of Probates what she described as ‘outstanding paperwork’. In this paperwork, Karen referred to the loan from her mother of $140,000. She wrote:

Mum lent me the money as my brother had borrowed against their house for a number of years (5 I think) enabling him to purchase 3 properties. I was never given the same opportunity.
I have signed an additional Affidavit as this sum was neglected in the Probate Application.
I had discussed the loan with our then solicitor when mum offered the funds to me. I simply forgot to include it in mum’s assets because naively I didn’t see it as one.
I insisted that loan documents were drawn up as security. I made interest payments until mum’s passing as that was the arrangement with mum.

In the Statement of Moneys and Securities held by the Executor, Karen stated:

I am holding approximately $18,000 (on paper) which I will use for my father’s support. I am happy to answer to the Supreme Court for this amount for dad’s welfare. Not my brother.

On 7 September 2016, the Tribunal advised that Karen was obliged to yield all funds and property of Ron.

Karen now says that it was not correct that she held $18,000 for Ron at that time. In her evidence she said that she currently holds around $12,430, which includes $2,430 carried over from her mother’s account.

It is common ground that Karen has not yielded the funds that she holds on behalf of Ron. Karen gave evidence that she had offered that sum to Brett’s lawyers but was told to ‘hold onto it’. She said that she continues to use this money for Ron’s care.

Moreover, Karen does not dispute that she has not repaid the loans from Shirley and Ron. She stopped paying interest on the loans from Shirley at the time of Shirley’s death and she has not paid any interest on the loans from Ron.

Claim

By writ and statement of claim dated 3 October 2016, Brett commenced this proceeding as administrator of Ron’s estate to recover certain monies from Karen. Apart from the loans, Brett has identified in banking and other records amounts withdrawn from Ron’s and Shirley’s bank accounts that he contends Karen has failed to properly account for.

By amended statement of claim dated 10 April 2017, Brett seeks payment or repayment from Karen of the following amounts:

(a)$140,000, representing the loans from Shirley;
(b)$105,000, representing the loans from Ron, in respect of which a demand for payment was made on 15 September 2016;
(c)$11,000 for a bank cheque purchased in Karen’s name from moneys held in her parents’ joint account on or about 30 October 2012;
(d)$2,147.44 withdrawn from Shirley’s pensioner security account via automatic teller machines in Indonesia in October 2013;
(e)$2,500 withdrawn from Shirley’s pensioner security account on 21 December 2013;
(f)amounts totalling $11,000 withdrawn in cash from Shirley’s pensioner security account on various dates in February and March 2014, said by Karen to have been given to a friend for emergencies for Ron and Shirley while Karen was overseas;
(g)$4,426 withdrawn from Shirley’s pensioner security account via automatic teller machine transactions in France, Malaysia and Indonesia in March and April 2014;
(h)a further $4,000 withdrawn from Shirley’s pensioner security account on 29 and 30 June 2014;
(i)amounts totalling $3,000 withdrawn from Ron’s pensioner security account in the period between March and July 2015;
(j)$4,927.93 withdrawn from Ron’s pensioner security account via transactions effected in Indonesia in July 2015.

Karen filed a document dated 2 December 2016 entitled ‘Statement of Claim’ responding point by point (albeit often in shorthand) to paragraphs in the statement of claim dated 3 October 2016. By order of the Court, Karen’s document was deemed to stand as her defence.

At trial, Counsel for the plaintiff handed up a document entitled ‘Plaintiff’s Summary of Payments in Dispute’ (‘Summary of Disputed Payments’). The Summary of Disputed Payments is in tabular form, setting out 15 items (a number of which can be grouped together) identifying particular amounts that the plaintiff contends have not been accounted for by Karen and are therefore recoverable by or on behalf of Ron. The Summary of Disputed Payments does not include the loans.

The plaintiff was given leave to file an amended statement of claim to more clearly reflect the amounts in the Summary of Disputed Payments.

The trial was adjourned for a month to enable Karen to collect documents and prepare responses specifically addressing the amounts claimed in the Summary of Disputed Payments. All but two of the Disputed Payments relate to Shirley’s estate, the bulk being withdrawals from Shirley’s pensioner security account.

At the resumption of the trial, Karen gave sworn evidence and tendered a folder of documents to explain or account for each of the withdrawals or payments in the Summary of Disputed Payments. Karen also gave evidence about the loans.

I shall refer to the records tendered by Karen as ‘Karen’s records’. A number of other tables prepared by Karen, apparently for the Tribunal in her capacity as administrator of Ron’s estate, were included in the court book prepared by Brett. These are also ‘Karen’s records’.

Karen’s records contain almost no original or primary documentation, such as receipts or invoices. The records tendered by Karen are in the form of tables prepared by her showing amounts she says she withdrew from her parents’ bank accounts and amounts of expenditures she says she made on their behalf. The right hand column appears to be a kind of running balance showing the amount held by Karen from time to time on behalf of her parents. It was described in Court as a form of ‘kitty’ held by Karen to buy things or make payments for Shirley and Ron.

I have reviewed Karen’s records. Generally speaking, they record that as amounts are withdrawn from Ron and Shirley’s bank accounts (recorded in the far left hand column), the right hand column (showing monies held ‘kitty’) increases. It decreases as expenditures are recorded.

Following Shirley’s death in June 2014, Karen’s records show that $16,572 was held in ‘kitty’. The most recent records show moneys held for Ron in ‘kitty’ as at 28 April 2017 as $2,430. It is not clear to me how this accords with Karen’s evidence that she currently holds around $12,430, which includes $2,430 carried over from her mother’s account.

In her evidence, Karen was asked whether the amounts in ‘kitty’ were notional amounts or amounts actually held by her in cash. Karen gave evidence that she held these amounts in cash. She said that she kept ‘kitty’ in a safe in a house belonging to her friends. She said that when her mother died, the safe had nearly $16,000 worth of cash in it. Karen’s records show that around the time of Shirley’s death in the middle of 2014, the amount in ‘kitty’ was as much as $26,301.

It is unclear why Karen needed to hold so much of her mother’s money in cash and why she kept adding to a cash ‘kitty’ when the money was not needed and could more safely have been held in her mother’s pensioner security account.

Karen gave evidence that her parents knew at all times how much money she was holding for them. She said that Ron would often say to her, ‘Can I see the bank book?’, and she would show it to him.

That does not explain how Ron knew how much Karen was actually holding as cash in ‘kitty’.

I find Karen’s evidence on how she held ‘kitty’ to be implausible. I find it to be more likely than not that ‘kitty’ was not a cash amount but was the amount that Karen owed to her parents from time to time.

Karen’s evidence in this regard calls into question her credibility as a witness more generally and the reliability of Karen’s records.

Karen’s position of trust

The plaintiff alleges that Karen breached fiduciary obligations as attorney and as administrator by taking money from her parents and thereby putting herself into a position where her interests conflicted with those of her parents.

Both Ron and Shirley appointed Karen as attorney pursuant to enduring powers of attorney in July 2011. The relationship between a donor and an attorney is fiduciary in nature, as there is a dependency or vulnerability on the part of the donor causing the donor to rely on the attorney.[2]
[2]See generally Johnson v Buttress (1936) 56 CLR 113. See also Ash v Ash [2016] VSC 577 [102]-[104].

An attorney is burdened with fiduciary obligations not to enter into a position of conflict other than with the donor’s informed consent and not to profit from the relationship.[3] At the time Karen acted as attorney for both Ron and Shirley, these requirements were reflected in Instruments Act 1958 (Vic). Section 125B(5) required an undertaking to be given by the attorney as follows:[4]

(5) The statement of acceptance must include an undertaking by the person accepting appointment as attorney—
(a)to exercise the powers conferred by the enduring power of attorney with reasonable diligence to protect the interests of the donor; and
(b)to avoid acting where there is any conflict of interest between the interests of the donor and the attorney's interests; and
(c)to exercise the powers conferred by the enduring power of attorney in accordance with this Part.

[3]See Hospital Products Ltd v United States Surgical Corporation (1984)156 CLR 41, 67 (Gibbs CJ).

[4]Instruments Act 1958 (Vic) Part XIA has since been repealed by Powers of Attorney Act 2014 (Vic) s 144 which came into effect on 1 September 2015.

Karen was administrator of Ron’s estate between 15 May 2014 and 4 February 2016. Section 58B(1)(b) of the Guardianship and Administration Act 1986 (Vic) provides that it is the administrator’s duty to take possession and care of, recover, collect, preserve and administer the represented person’s property and estate. Section 49(1) provides that an administrator must act in the best interests of the represented person. Further, the Act is to be interpreted so that the best interests of a person with a disability are promoted.

Karen also acted as executor of Shirley’s estate, having obtained probate of Shirley’s last will and codicil on 15 October 2015. The plaintiff also submits that Karen breached various duties as executor pursuant to the Administration and Probate Act 1958 (Vic).

However, it is common ground that Karen held money on behalf of her parents, whether in cash or ‘on paper’. Karen does not dispute that monies held by her in ‘kitty’ are held for Ron, nor, as I understand it, does she dispute that those monies have to be repaid, Ron’s administrator having called for their repayment. The question is essentially one of accounting: how much does Karen have to repay? There is also the question of the loans.

The loans

Karen does not deny that monies were advanced pursuant to the loan agreements which have not been repaid. In particular, Karen does not dispute that she borrowed $140,000 from her mother and $105,000 from her father and that these loans have not been repaid. Karen’s position is that her parents wanted her to have this money in order to buy a house and renovate it. I infer that Karen contends the loans are not repayable.

The loan from Shirley is recorded in two deeds of the same date, 9 August 2013. By the deeds, Karen agrees to repay the principal sum to Shirley with interest in the manner set out in the Schedule. As to repayment, the Schedule provides:

The Principal Sum must be paid in full on the date nominated by the Borrower.

However, the loan agreement also provides that in the event of the Borrower (Karen) failing to make any one of the payments referred to on the due date for payment and such default continuing for seven days, the amount immediately becomes due and payable upon demand, together with penalty interest.

The loan from Ron was described as ‘an interest only’ loan. The interest rate is 3% with monthly payments to commence three months after all monies have been withdrawn. The loan documents (of which there are three) add that Brett will be entitled to the same amount ‘on my [Ron’s] passing’.

Karen told the Court that her parents were insistent that she own a house and that they wanted to buy one for her. However, Karen said she would borrow the money rather than accept it as a gift. She caused loan agreements to be prepared, signed and witnessed, as advised by her parents’ lawyer, Bruce Chalmers.

As to the $140,000 loan from Shirley, Karen gave evidence that she paid interest on that loan as agreed until June 2014 when Shirley died. The plaintiff concedes that amounts totalling $2,635 were paid into Shirley’s pensioner security account in December 2013, January 2014, February 2014 (twice), April 2014, May 2014 and at the beginning of June 2014. However, Karen made no further interest payments after Shirley’s death. Karen gave evidence that she and Shirley had an understanding that the debt would die on Shirley’s passing.

While Karen drew down all the money under the loans from Shirley straight away, she only drew down moneys pursuant to the loan agreements with Ron as and when she needed money for home renovations. She gave evidence that some of the borrowed funds were spent on the bathroom which has been purpose-renovated for disabled showering, toileting and wheelchair access for Ron. A table of the drawdowns prepared by Karen shows the first drawdown on 18 December 2014, and the last on 2 February 2016. The withdrawals are stated to come ‘from dad’s passbook account’.

No interest has been paid on the loans from Ron despite the final drawdown having been made in February 2016.

The plaintiff has queried why two loan agreements with Ron (for loans totalling $50,000) are dated September 2014, whereas a third loan agreement (for $55,000) was purportedly signed on 30 November 2012. No moneys were advanced until much, much later, in 2014. In each case, the person witnessing the loan agreement is the same person. However, there is a different stamp on each of the two loan agreements in 2014, while the stamp on the 2012 loan agreement is the same as the stamp on one of the 2014 loan agreements. Further, on 30 November 2012, when the first loan agreement was ostensibly entered into, bank records show that neither Ron nor Shirley had anything like $55,000 to lend. The joint account shows a balance as at 1 December 2012 of $9,877.73. By that stage, Shirley and Ron had moved into the Dorothy Impey aged care home and owed money for the aged care bonds.

I consider it to be likely that all of the loan agreements with Ron were entered into in or post September 2014, following Shirley’s death. This would be consistent with the loan from Shirley being for the purchase of Karen’s property in Elmore and the loans from Ron being for its renovation. It would also be consistent with the fact that there were no drawdowns on the loans from Ron until late 2014. As a result, I find that the loans from Shirley were made while Karen held an enduring power of attorney from Shirley; the loans from Ron were made while Karen was his administrator. At both times, Karen owed obligations of a fiduciary nature towards her parents.

The question then arises as to whether the loans are repayable. Karen contends that at least Shirley did not intend the loans to be repaid.

Karen called as a witness her friend, Margaret Mary Caradus, who had occasionally gone to visit Shirley and Ron with Karen. Mrs Caradus gave evidence that on one occasion Shirley asked her whether her (Mrs Caradus’) children had their own home, and when she said ‘yes’, Shirley said, ‘I’d love to buy a home for my daughter, she’s on her own’. Shirley also said, ‘My son has a home but my daughter doesn’t and she’s not settled and that’s one thing that makes me very sad’. According to Mrs Caradus, Shirley also said, ‘If I ever sell my home I would like to buy her a house’.

In relation to Ron, Ms Caradus gave evidence that on one occasion, she and Karen took Ron on an outing to the local RSL Club. Ron was chatting away with her while Karen was somewhere else and asked her, ‘Have you got money?’ When she said she had enough, Ron said, ‘I want my daughter to have some’. Mrs Caradus said jokingly to Ron, ‘Will you put that in writing?’ and he said, ‘Yes’. He grabbed a serviette and wrote it on a serviette.

Ms Caradus gave evidence that she did not know about any of the loan agreements. She also agreed that Shirley’s statement about selling her house and buying one for Karen was made at a time when Shirley’s house was definitely not on the market. In fact, Shirley was living in the house at the time.

Whatever Shirley may have intended from time to time about Karen’s obligation to repay the loan from Shirley, the loan formed part of her estate when she died, and Ron inherited it. The loan made by Shirley now belongs to Ron. Ron, through Brett, has made a demand that the loan be repaid.

In addition, Karen is in default on the loan from Shirley, having failed to make interest payments since June 2014. The loan from Shirley is repayable upon demand in that circumstance.

It may well be that Shirley wanted to give Karen money with which to buy a house. To provide housing security for a child is not an uncommon wish for a parent to have. However, Shirley did not make a gift; she made a loan. Objectively, the evidence does not support an inference that Shirley intended to give Karen $140,000 by agreeing that Karen’s obligations under the loan agreements would lapse upon Shirley’s death. As Karen was in the position of a fiduciary in relation to her mother, any intention by Shirley that the loan was to be forgiven upon her death needed to be expressed in the clearest terms. It was not.

Mrs Caradus’ evidence that Shirley told her that she would ‘love’ to buy Karen a home does not evidence an agreement by Shirley to waive Karen’s obligations under the loan agreements. Shirley intended to and did leave her estate to Ron. Shirley’s statements about which Mrs Caradus gave evidence were of a generally aspirational nature unrelated to the loans. When the matrimonial property was sold in August 2013 Shirley was still alive. Shirley did not make any arrangements to buy Karen a home or waive Karen’s obligations under the loan agreements at that time.

The Court was provided with a statutory declaration made by Mrs Caradus on 24 March 2017 in which Mrs Caradus stated that she heard Shirley say that ‘any debt her kids had would die with her’. She also stated that she heard Ron offer Karen $100,000. However, Mrs Caradus’ oral evidence was different. It did not support the waiver of obligations in respect of the loans from Shirley and Ron.

In the course of the trial, Karen found and put before the Court a scrap of paper on which appeared the following handwritten message:

KAREN JUNE RYAN
is entitled to receive
from S + R RYAN $105,000 –
one Hundred + Five THOUSAND
DOLLARS 74,000 + accumulated Interest 16/9/2012

The note is signed ‘Ron Ryan’, although Karen gave evidence that she wrote the note herself.[5] Karen’s evidence about the genesis of the note was that she was talking to Ron and he said, ‘You can have 105’. She said that Brett had previously borrowed $74,000. Karen did not rely on the note as evidence that the $105,000 was a gift. Rather, she asserted that the note showed that the loans were ‘legit’. Karen agreed in cross-examination that in September 2012, her parents had made a gift to her of $61,000, which was the same amount as had been given to Brett.
[5]Transcript of proceedings, 133.

In effect, nothing turns on the note. Karen does not deny that Ron has loaned her a total of $105,000.

Accordingly, Karen must repay the amount of $140,000 representing the principal on the loans from Shirley plus interest as provided in the loan agreement. Likewise, Ron, through Brett, has demanded repayment of the loans from Ron. Again, Karen cannot resist repaying the loans on the ground that Ron had some vague intention of helping her to buy a house. Karen must repay the amount of $105,000 representing the principal loan amount plus interest at the agreed rate from the date upon which the final amount was drawn down (2 February 2016) to the date of the demand.

$11,000 bank cheque – October 2012

On 30 October 2012, a bank cheque in the sum of $11,000 was issued to Karen from the proceeds of her parents’ joint account.

In October 2012, Shirley and Ron had just moved into the Dorothy Impey Home. They had not yet paid the bond that was required. They did not have funds to give away.

Karen gave evidence that she paid the amount of $11,000 into her own bank account and then it on her parents. She provided to the Court a three page table entitled ‘$11,000 cheque expenses’, recording expenditures totalling $6,806.69 and showing a balance of $3992.71. The expenditure included payments to Australian Power and Gas, City West Water and two amounts to AGL. Karen said that this expenditure was for her parents’ house, including final bills ‘and that kind of thing’. Karen provided her own bank account statements showing entries corresponding to the entries on the table that she had produced.

In cross-examination, Karen gave evidence that Shirley told her to take $11,000 to cover Shirley’s and Ron’s needs. It was put to Karen that it made no sense for Karen to draw money from her parents’ joint account by way of a bank cheque as she could operate the joint account directly. Karen responded that she had to prove that the money came from her mother and father, so she had a cheque made out from their bank account in her name in order that it could be traced. She also said that she put the funds into her own account because her parents did not have credit cards and she did. When it was again put to Karen that there was no need for her to pay monies to herself using a bank cheque, her answer was unresponsive. She said, ‘Have you ever looked after two parents that are elderly?’ She said that she assured her parents that ‘everything’ would be spent on them.

It was put to Karen that, on own case, approximately $4,000 was not spent on her parents. Karen responded that $4,904.17 in house expenses was ‘still to come’.

Karen did not produce any evidence that the various payments made to utilities companies were in fact made for the matrimonial home. However, she denied that the funds were used to pay her own bills.

There is nothing in Karen’s evidence to link the payments from her bank account to the payment of bills for the matrimonial home. The payments could just as well have been made for Karen’s home. Indeed, Karen settled on her property in Elmore on 19 November 2012, and the matrimonial home was not sold until the following year, almost 12 months later.

I do not accept Karen’s evidence that the expenditures on utilities were for ‘final bills’ for the matrimonial home. Other tables produced by Karen show payments in 2013 for electricity bills for the matrimonial home. In addition, Karen gave evidence that the matrimonial home was professionally painted in the second half of 2013 in preparation for its sale. It is likely that basic services such as electricity and water remained connected at that time.

Although I do not accept all of Karen’s evidence about the use of the bank cheque, I accept that some of the expenditures she made were for Shirley and Ron. There were payments, for example, on medical supplies and medical insurance that appear to have been made for Shirley and Ron. The difficulty is in knowing how much was spent on them rather than on Karen’s own needs.

It does not appear to be disputed by the plaintiff that Karen was the primary carer for Shirley and Ron. Karen – not Brett – looked after them day to day, even after their move to Dorothy Impey House. Karen was left to organise their move out of the matrimonial home and its subsequent sale, which involved organising and paying for removals and the clean-up of and repairs to the house. Karen is now asked to account for the money spent in that process and to distinguish it from amounts that she spent at about the same time on her own move to Elmore. I am conscious that it would be unfair if Karen were effectively penalised for being the one who looked after her parents by now being made to repay amounts expended on their behalf years ago because her record keeping is poor. On the other hand, having regard to the evidence as a whole, Karen does appear to have used some of her parents’ funds for her own purposes – in this case to carry out the move to Elmore and set herself up in her new home.

The $11,000 deposited in Karen’s bank account belonged to Ron and Shirley. Of that amount, approximately $4,000 is unaccounted for on Karen’s records. A number of withdrawals that are accounted for can be attributed to the needs of Shirley and Ron. I accept that Karen made payments for at least medical equipment and medical insurance on their behalf and that she provided them with cash. There would also have been removal costs involved the move from the matrimonial home to the aged care facility.

As the holder of a power of attorney from her parents and then as her father’s administrator, Karen bears the onus of establishing that she spent her parents’ funds on them. In the case of the $11,000 taken in late 2012, there is a question mark over some of the expenditures in the relevant part of Karen’s records.

All the amounts in question were expended in late 2012, almost five years ago. It is impossible to know at this late stage what was spent on whom. It would be pure guesswork to attribute any particular expenditure to Karen for her own purposes.

In the circumstances, I have decided that it is fair and reasonable that Karen should be required to repay the $4,000 that is unaccounted for.

The withdrawals

Brett alleges that in 2013 to 2016, Karen made a variety of withdrawals from Shirley’s and Ron’s respective pensioner security accounts for Karen’s own purposes and not for Shirley’s or Ron’s care. Karen admits that this was so in some instances. However, she contends that most of these amounts were repaid by putting monies in ‘kitty’. Her evidence was that she held $16,572.67 in ‘kitty’ at the time of Shirley’s death, $18,000 at the time of the grant of probate and that she currently holds either $12,430 or $10,309.67 in ‘kitty’ to be spent meeting Ron’s ongoing needs.

As discussed above, it is uncertain how, or if, Karen actually holds the funds in ‘kitty’. I find Karen’s evidence that she held the funds in cash in the safe of some friends to be unconvincing. There was and is simply no reason to hold such a large amount in cash on behalf of her parents. Moreover, Karen’s records are not of a kind that inspires confidence in their accuracy or reliability. It is not clear when they were created. There are few original records supporting the amounts recorded as spent. Further, the difference between the amounts shown as withdrawals from Shirley and Ron’s accounts and the amounts then spent on items for Ron or Shirley is not necessarily reflected in the ‘kitty’ column.

Nonetheless, Karen says that she continues to hold a large amount of money in ‘kitty’ on behalf of Ron. Some of those funds, according to Karen, are repayments of amounts that she withdrew from Shirley’s pensioner savings account and spent on herself.

Notwithstanding my reservations about Karen’s record keeping, insofar as the withdrawals used for her own purposes are reflected in Karen’s records as forming part of ‘kitty’, the repayment of those amounts may be effected by the repayment of ‘kitty’. It is necessary to consider more closely the way in which the repayments were made and how monies were disbursed by Karen on behalf of her parents.

Withdrawals that appear in Karen’s records
Indonesian ATM withdrawals - $2,147.44

Karen agreed that in October 2013 she made withdrawals from Shirley’s pensioner security account while holidaying in Indonesia (‘Indonesian withdrawals’). The Indonesian withdrawals totalled $2,147.44. Karen gave evidence that Shirley knew that Karen had made the withdrawals and gave her consent for the withdrawals to be made. Karen gave evidence that she paid interest on the amounts withdrawn and paid the money back to Shirley ‘through her [Shirley’s] drawings’. Karen said she held the money in cash for her mother at home and did not deposit it in Shirley’s bank account because she knew that Shirley would need it. She said she spent the money on Shirley.

Karen produced a table that she had prepared listing Shirley’s expenses. The relevant table runs from 1 November 2013 to 30 November 2013. It contains the following record: ‘Paid to mum on my return 2467.72’.

The record ‘Paid to mum on my return’ appears in Karen’s records but was not supported by any evidence, such as bank statements, showing where the funds came from and where they went. The record of payment is simply a piece of paper created by Karen. Karen said she paid the money to Shirley in cash. However, when she was asked how the payment was made, and she said, ‘I just hold the money for mum, Your Honour. I just showed it – said “Here’s your money mum”. She said “All right keep it”. I said “Mum here’s your money back that I borrowed while I was away”. She said “Keep it and use it for me when you need it”’.

Karen accepted that the moneys that she borrowed were not put back into her mother’s pensioner security account or the joint account. The only money Karen deposited into her mother’s pension security account related to interest on the loans from Shirley.

The question then is whether the amount of $2,467.72 is reflected in the running record of funds taken and spent on her parents by Karen — referred to as ‘kitty’.

The amount in question appears as a deposit in Karen’s records. It is recorded as having been disbursed on ‘expenses’ in the following months. It is reflected in the balance of $16,572.67 that was in ‘kitty’ at the time of Shirley’s death.

Although I have expressed doubts about the accuracy and reliability of Karen’s records, I am satisfied that the repayment of the Indonesian withdrawals formed part of ‘kitty’ and were accounted for in that sense.

Withdrawals totalling $11,000 – February 2014

Shirley’s pensioner security account shows the following withdrawals:

10 February 2014:     $5,000
24 February 2014:     $500
25 February 2014:     $700
26 February 2014:     $3,800
28 February 2014:     $500
1 March 2014:           $500

In addition, on 28 February 2014, $600 was withdrawn from Ron’s pensioner security account.

In paragraph 30 of Karen’s defence, these amounts are described as ‘kept aside for emergency for when I was overseas’, or, ‘for Fay (mum and dad) while I was O/S’. Karen went overseas on 1 March 2014.

Karen told the Court she gave the $11,000 as emergency money to the person – Fay – who was going to look after Shirley and Ron while Karen was overseas. She also said that she gave Fay $600 from Ron’s pensioner security account for this purpose.

When asked why Fay needed so much money for emergencies, Karen said she thought that if there was a funeral or an emergency and she could not get home, she had to have it covered. This was her big trip of a lifetime, and she was going to be away for a while.

More specifically, in her sworn evidence, Karen said that she had a quote for two cremations for approximately $10,000, and there was an extra $1,000 that she thought she should leave in case she could not get home. When asked why it was taken out of Shirley’s bank account in dribs and drabs, Karen said she thought the first $5,000 would be enough for Tobin Brothers, but then she thought maybe she should take out some more money, and then, in the end, she thought she would get out enough for another cremation. She gave it to Fay to hold, and Fay gave it back to her when she came back from her holiday.

Karen gave evidence that Fay was someone she met when she was travelling and that Fay was the only person she could ask to hold the money. Fay’s mother lived in the street next to the nursing home. Fay called in to see Shirley while Karen was away to make sure everything was all right.

Brett made inquiries of the Commonwealth Bank about two of these withdrawals: $5,000 withdrawn on 10 February 2014, and $3,800 withdrawn on 26 February 2014. Both were used for foreign currency purchases. When this was put to Karen, she gave evidence that she bought foreign currency for the same amounts as she had withdrawn as emergency money. She had the cash with her, so she just bought foreign currency for the same amount. She then gave the amounts back to her mother from her money ‘at home’. She was at the bank, and she thought she may as well use the same amount of money for her foreign currency purchase.

In cross-examination, Karen gave evidence that when she returned from overseas, the $11,000 given to Fay went into ‘kitty’. Karen denied that she withdrew the $11,000 from her mother’s pensioner security account and spent it on her holiday.

I find Karen’s explanation that she gave Fay funds so that Fay would have money to spend on Ron and Shirley, including for their funerals, to be utterly implausible. I find it to be far more probable than not that Karen used the funds in question on her ‘big trip of a lifetime’.

However, the amounts in question are accounted for in Karen’s records. They too form part of ‘kitty’. As at 1 March 2014, Karen held $9,957 in ‘kitty’ and Shirley had $33,139.00 in her pensioner security account.

$4,426 in overseas withdrawals – March/April 2014

While she was overseas in March and April 2014, Karen again withdrew money from Shirley’s pensioner security account. She has produced a balance sheet showing withdrawals from 8 March to 9 April 2014 in Paris, Prague, Kuala Lumpur and Bali. Karen’s records show withdrawals of $4,603.05. She does not dispute that she spent these amounts on herself.

Karen insisted in cross-examination that she physically repaid the money to her parents. She clarified that she put the money into ‘kitty’. She did not give the money to her parents in cash, but held the cash to give it back to them (via their ‘drawings’, as I understand it).

Karen’s records again show that Karen borrowed $4,426 from her mother to be repaid through her mother’s weekly expenses. This entry boosted the amount in ‘kitty’ as at 30 April 2014 to $13,281.40. At the same time, Shirley had approximately $29,000 in her pensioner security account.

$4,000 – withdrawn 29 and 30 June 2014

Two amounts of $500 are shown in Karen’s records as having been withdrawn from Shirley’s pensioner security account on 29 June 2014 as ‘moneys to be used for final bills and expenses associated with mum’s passing ‘As per dad’s instructions’.

The following day, an amount of $3,000 is recorded as having been withdrawn with the same notation. At the time these amounts were withdrawn, according to Karen’s tables, she was holding $15,888.82 in ‘kitty’. Following the withdrawal of these funds, ‘kitty’ rose to $19,519.07. Tobin Brothers had been paid $9,425 for prepaid funerals the previous month. However, a number of payments are recorded as having been made to Ron, including $1,175 for a memorial service and $1,500 that is not explained.

It is not at all clear why the withdrawals were necessary or how the $4,000 was spent, having regard to the amount that was already in ‘kitty’ at the time. The withdrawals boosted ‘kitty’ to $19,519, which was quickly reduced to $16,572 with the payments referred to above. So ‘kitty’ stood at the date of Shirley’s death.

Conclusion in relation to recorded withdrawals

The total amount of withdrawals for Karen’s personal use recorded by her and said to have been repaid by paying money into ‘kitty’ is $21,573. Amounts totalling $21,573 are recorded as withdrawals (deposits) in ‘kitty’. To that extent, there has been an accounting of the withdrawals for Karen’s personal use.

On her account, Karen kept a large amount of cash on hand. At its highest, ‘kitty’ was $26,301 on 30 May 2014. So far as I can tell, ‘kitty’ has continued to fall since that time. On Karen’s present accounting it is $12,430.

Of course, ‘kitty’ is not just made up of amounts repaid by Karen. Other amounts were regularly withdrawn from Ron’s and Shirley’s bank accounts and recorded as withdrawals (actually, depots) in ‘kitty’. These withdrawals and Karen’s repayments are intermingled in Karen’s records – both were apparently held in cash and used for Ron’s and Shirley’s expenses as and when needed. Furthermore, Karen says she has continued to use ‘kitty’ after Shirley’s death for Ron’s expenses. This intermingling of monies exacerbates the difficulties arising from the absence of original records.

It seems to me that Karen continues to be indebted to Ron as a result of the $21,573 withdrawn from Shirley’s account. That indebtedness requires her to at least disgorge ‘kitty’, where the repayments were allegedly placed.

Karen’s accounts of how much she held in ‘kitty’ on Shirley’s death and how much she currently holds have not been consistent. Karen’s most recent records for Ron show $3,265 in ‘kitty’ as at 31 July 2016. However, Karen’s records for Ron for the months after Shirley’s death in no way reflect the $16,572 that her records for Shirley show her as holding upon Shirley’s death. It is impossible to make much sense of Karen’s records in this regard.

I have given anxious consideration to what Karen should be required to repay in respect of the withdrawals, having regard to the fact that she was her parents’ primary carer and did spend monies held for them on them.

In the circumstances, I consider that the most appropriate measure of what Karen must repay Shirley’s estate (aside from the loan) is what Karen has recorded as the balance of Shirley’s funds as at October 2016, $16,572.

Karen has kept a record of amounts subsequently paid for legal fees, reducing ‘kitty’ to $10,309. I do not consider that these were amounts that should have been taken from ‘kitty’ as they related to Karen’s use of the money for her own purposes.

Withdrawals that are not recorded in Karen’s records
$3,000 from Ron’s pensioner security account – March and July 2015

Ron’s pensioner security account statements show $500 being used at Essendon Hyundai and for petrol on 13 March 2015, a withdrawal of $500 on 24 June 2015 and the withdrawal of a further amount of $2,000 in four lots of $500 on 2 and 3 July 2015.

In cross-examination, Karen agreed that these amounts had not been paid into ‘kitty’ and were not included in her records. She agreed that they must have ‘slipped through the cracks’.

The amount of $3,000 must be repaid.

$4,927.93 withdrawn at Indonesian ATMs – July 2015

Karen went on holiday to Indonesia again in July 2015. She withdrew amounts totalling $4,927.93 from Ron’s pensioner security account while in Indonesia.

Karen gave evidence that the Tribunal sent her a letter and she sent a letter back to the Tribunal listing all of the monies that she had withdrawn. She believed they went back into Ron’s ‘drawings’. In other words, Karen believed that she had repaid Ron through ‘kitty’. However, when she was taken to the balance sheet for the relevant period, nothing was recorded. Karen said she ‘may very well have overlooked it’, because she had just lost her mother and she was doing everything on her own.

The amount of $4,927.93 must be repaid.

$2,500 in December 2013 — ‘to painter’

On 21 December 2013, Karen withdrew $2,500 cash from Shirley’s pensioner security account. Karen told the Court that this was a payment to the painter who painted the matrimonial home in preparation for its sale. However, in a document prepared by Karen explaining what had happened to the proceeds from the sale from the matrimonial home, $2,500 is recorded as owing to the painter and ‘taken 4 Nov 2013’.

At one point in her sworn evidence, Karen told the Court that she paid different painters. Explaining the discrepancy between the dates, she also said she thought she paid the amount herself and then reimbursed herself. In her evidence, Karen said that there were quite a few payments to the painter, and that she did not pay him all in one go. She said she paid him ‘spasmodically’, and paid about $9,300 in total. Karen said she had notes showing payments on 22 July, 22 August, 18 September, 11 October and 15 October. However, she had nothing from the painter directly showing the amount or amounts payable for the house painting.

It was put to Karen that the painting would have been done well before the contract for the sale for the matrimonial home was entered into in August 2013. Karen said that ‘of course’ it was. The house had to be fixed in order to be sold, as Shirley was a very heavy smoker. Karen gave evidence that the work was done in July, August and September and that she paid for it in October. The painter was finishing some touch-up jobs in September. She did not pay him all in one go. She paid him in dribs and drabs.

I am prepared to give Karen the benefit of the doubt in relation to this expense. It seems to me to be plausible that sums were spent on painting the matrimonial home prior to its sale, even as late as December 2013. Karen’s records show that a number of payments were made for house painting.

Conclusion

Karen borrowed money from Shirley and from Ron. Those loans were not forgiven and demands have been made for repayment. Karen must repay the loans from Shirley and Ron.

It may be that neither Shirley nor Ron would have wanted to see Karen lose her home because the requirement to repay the loans. However, neither of them made any provision for the obligations under the loan agreements to be waived. Given Karen’s position of trust, any intention to forgive the loans needed to be made very clear, and it was not.

As for the withdrawals, I find that Karen has used her parents’ money for her own purposes on a number of occasions. She has produced records to show some repayments, at least nominally. Nonetheless, Karen continues to owe a significant sum to her father.

On the basis of the accounting carried out above, I have concluded that Karen must repay the following amounts:

(a) $140,000 in respect of the loan from Shirley;

(b) $105,000 in respect of the loan from Ron; and

(c) $28,499 for the amounts withdrawn from Ron and Shirley’s accounts, some of which is held in ‘kitty’.

It remains to consider interest.

The plaintiff seeks interest on the loans pursuant to the loan agreements up until 10 October 2016, being the day upon which the proceeding was commenced. Thereafter, he seeks interest to date at the penalty interest rate.

In the case of the loan from Shirley, interest is therefore payable as follows:

(a) on $40,000, from 4 November 2013 to 10 October 2016 (1072 days) at 4% p/a;

(b) on $100,000, from 31 December 2013 to 10 October 2016 (1015 days) at 4% p/a;

(c) on $140,000, from 11 October 2015 to the present at the penalty interest rate.

In the case of the loan from Ron, interest is therefore payable as follows:

(a) on $55,000, from 2 February 2016 to 10 October 2016 (252 days) at 3% p/a;

(b) on $50,000, from 2 February 2016 to 10 October 2016 (252 days) at 4% p/a;

(c) on $105,000, from 11 October 2015 to the present at the penalty interest rate.

Interest is also payable on the amount of $28,499 from 11 October 2016 at the penalty interest rate.

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[2017] VSC 490

30 August 2017