Schein by his Tutor Francoise Bale v Kimberly Development

[2019] NSWSC 19

Supreme Court

New South Wales

Medium Neutral Citation:	Schein by his Tutor Francoise Bale v Kimberly Development and others [2019] NSWSC 19
Hearing dates:	18 January 2019
Date of orders:	18 January 2019
Decision date:	18 January 2019
Jurisdiction:	Equity
Before:	Campbell J
Decision:	Orders in accordance with Short Minutes of Orders.
Catchwords:	CIVIL PROCEDURE – interim freezing orders – no question principle
Legislation Cited:	Australian Consumer Law 2010 (Cth) Contracts Review Act 1980 (NSW)
Category:	Procedural and other rulings
Parties:	Michel Schein by his tutor Francoise Bale (Plaintiff) Kimberly Development and Ors (Defendant)
Representation:	Counsel: D.P. O’Connor (Plaintiff) No appearance (Defendant)
File Number(s):	2018/237019

EX TEMPORE Judgment - Revised

1. The plaintiff by his tutor has commenced proceedings in the Equity Division by a statement of claim filed on 24 July 2018. The pleading seeks extensive relief relating to the circumstances in which the plaintiff is said to have been divested of valuable real property of which he was the registered proprietor situated at 1 Kimber Lane, Forest Lodge. The relief sought depends upon the establishment by the plaintiff, or on his behalf, of an entitlement to either general equitable relief including for undue influence, or relief under the Contracts Review Act1980 (NSW) or the Australian Consumer Law 2010 (Cth) in respect of an unfair contract or statutory unconscionable conduct.

2. The averments in the statement of claim seek to establish a case that, at the material time, 21 February 2011, the plaintiff was a man in his eighties who was already, regrettably, caught in the grip of the dementia which has now entirely overtaken him. He was then, and for some time prior thereto, vulnerable because of the onset of that insidious condition. Evidence will be led I anticipate, according to the content of the averments, that before the events with which the proceedings are concerned, the plaintiff's treating doctor was concerned that he was at risk in relation to his financial affairs because of the on-setting dementia. For instance, at the trial, I infer from para 11 of the pleadings, evidence will be led from the plaintiff's then treating General Practitioner that, as early as 10 July 2008, the practitioner considered him "at risk of being taken advantage of. However, probably capable of making his own decisions". It seems that, at that time the doctor recorded that the plaintiff had withdrawn a large sum of money from his own bank account but could not remember what he did with it. By June 2010 the doctor seems to have come to the conclusion that the plaintiff was suffering from Alzheimer's Disease or dementia.

3. The defendants in the proceedings are a company named Kimberley Developments Pty Limited, an individual named Albert Darwich, a solicitor named Martin Churchill and a fourth defendant named Chyna Schein. In very short compass, it is put that the fourth defendant is pivotal here because she was a person who was 40 years the plaintiff's junior with whom he formed a relationship, and eventually married. She seems to be the person, on my understanding of the averments, who facilitated the entry into a contract on 21 February 2011 by which he transferred his sole significant asset, the real property at Forest Lodge of substantial value, to Mr Darwich and then, at his nomination, to the first defendant.

4. It was said in the written agreement that the consideration for that transfer amounted to $590,000. However, that had various components being the expected discharge of an existing mortgage, a point to which I will briefly return, recompense for Mr Darwich performance of work cleaning up the property and the issue of a parcel of 60 per cent of the Class B shares in the corporate defendant. Those Class B shares do not give the plaintiff any right to any control of the company. He had no voting rights, although he had a putative right to profit and dividends. There is no evidence that any profit or dividend was ever paid to him. Nor is there any evidence that the property, as at February 2011, was in fact subject to a mortgage, although I acknowledge the materials before me, at this stage, may be somewhat incomplete in that regard.

5. A matter of real concern is that of the defendants, only the solicitor, who acted for both parties in this transaction, and who is sued for breach of his duty of care, and of his fiduciary duty, has filed a defence. I am satisfied on the affidavit of service that has been read, and by reference to the company search attached to the affidavit of the solicitor for the plaintiff filed in Court today that the first and the fourth defendants have been validly served, but neither of them has filed an appearance for a defence. There is evidence of service on the second defendant in accordance with his direction as to service given to the plaintiff's solicitor but, perhaps, prudently, the plaintiff is seeking orders confirming valid service from the registrar in accordance with the rules.

6. Not only have the other defendants not taken any part in these proceedings, but there is also evidence from an independent process server of a certain degree of heat at the time of service by him of some of the process at the Lansvale address as directed by Mr Darwich and which is the registered office of the company. There is also some evidence that veiled threats may have been made by the second defendant that these proceedings should be dropped "or else".

7. What is apparent is that the first defendant has mortgaged the property. Initially, the mortgage was in the sum of $400,000. At the end of November 2017, that was increased to $700,000. It is not clear what the current state of the mortgage is because, for reasons that will appear from the transcript, it does not appear that the bank has produced all of the documents in relation to the relevant account ending in the numbers 3361.

8. Given the attitude of the first and second defendants, who control the property, I am satisfied that the plaintiff has made out a case, at this preliminary level, for the orders sought in relation to freezing both the bank account and also the real property referred to in paragraphs 3 and 4 of the form of order handed up by Mr O'Connor of counsel today.

9. At this stage, it is proposed that the matter come back before the Duty Judge in Equity next Wednesday to determine whether the orders ought to be continued. It seems to me that, given the nature of the case and the evidence I have read that, there is likely to be little prejudice to the defendants effected by the orders in that short space of time.

10. I make that observation for two reasons. The first is that, as at the end of 2017, it seems that the facility with the bank was fully drawn anyway. There is no evidence as to its current status. And, secondly, the plaintiffs are not really in a position to back up the undertaking as to damages proffered as part of the necessary process by cold hard cash. Both are relatively indigent. The plaintiff, for example, as I have said, has been overcome by his disease and confined to an aged care facility, and the tutor, his daughter, is unfortunately devoid of assets other than her expectation of an inheritance of her father's estate. It seems on the evidence available to me that that sorry state may be, if the case is made good, attributable to the undue influence or unconscionable conduct of the defendants and, in the circumstance, notwithstanding the insecure foundation for the undertaking, I think it appropriate to make the orders as sought.

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Decision last updated: 30 January 2019