Sutton v Sutton - [2012] SASC 186

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
SUTTON v SUTTON
[2012] SASC 186
Reasons of Judge Burley a Master of the Supreme Court
16 October 2012
PROCEDURE
AGENCY - Enduring Power of Attorney - whether donor has legal capacity to direct donee as to the exercise of powers under the grant - standing of daughter of grantor to bring application to vary terms of power of attorney or to make a declaration as to the exercise of powers - uncertainty whether donor has legal capacity to give a valid direction to the donee - whether the plaintiff could pursue an interlocutory application for injunctive relief.
Powers of Attorney and Agency Act 1984 (SA) s 11(1)(c) and s 11(3), referred to.
Dynayski v Grant [2004] NSWSC 1187 at [19]; Re Evans [2010] SASC 193; ABC v O'Neill (2006) 227 CLR 57, considered.

SUTTON v SUTTON
[2012] SASC 186

JUDGE BURLEY. By interlocutory application dated 17 September 2012 the plaintiff (wrongly referred to in the proceedings as the applicant) applied for the following orders:
1. …
2.That the Respondent [defendant] be restrained from acting under the Power of Attorney of Dawn Sutton appointing him Donee until such time as the mental capacity of the Donor of the Power of Attorney is established.
3.That the Respondent [defendant] be further restrained from dealing with the estate of Dawn Sutton, including the sale of real estate and business assets until such time as the extent of Dawn Sutton’s recovery from her current illness is established and her ongoing personal and medical needs are determined.
4.…
The application was listed before the Court on 20 September 2012 when a Master heard the application on an ex parte basis. The Master made a number of orders, including the following:
1.That until 5pm on 3 october [sic] 2012 the defendant, whether by himself or his agents or employees, be restrained from acting under the power of attorney of Dawn Sutton appointing him donee in any manner, save that the defendant shall be permitted to receive the income from and pay the reasonable expenses of the business (Palm Manor Incorporated) of Dawn Sutton during the period of the interim interlocutory injunction.
2.That the defendant is further restrained from dealing with charging or in any manner affecting the estate of Dawn Sutton, including the sale of the real estate and business assets for the duration of this interlocutory injunction.
Although the respective orders are referred to as “the interim interlocutory injunction” and “this interlocutory injunction”, I take the orders to be interim in nature because of the limited period of the injunction and the fact that it was granted on an ex parte basis.
The application was adjourned to 2 October 2012 and was listed before me for further hearing. By that time the defendant was represented by a solicitor and counsel.
On 2 October 2012, the plaintiff sought to continue the injunctions granted on 20 September 2012 “until such time as the mental capacity of the Donor of the Power of Attorney is established”.
Although paragraph 3 of the orders sought referred to a period “until such time as the extent of Dawn Sutton’s recovery from her current illness is established and her ongoing personal and medical needs are determined”, Mr Hegarty, the solicitor for the plaintiff, sought the continuation of both injunctions until the mental capacity of the donor of the power of attorney is established. Mr Hegarty did not state how or by whom the mental capacity of the plaintiff’s mother was to be determined. It was not suggested that the Court would be asked to make that determination.
Mr G Stevens, counsel for the defendant, opposed the extension of the injunctions as sought by the plaintiff. He submitted that the injunctions should be immediately discharged. In view of the fact that the defendant did not wish to adduce evidence on the application and on the assumption that it was appropriate for an interlocutory application to be pursued, I acceded to the defendant’s request that the application for interlocutory injunctive relief be dealt with immediately.
The following affidavits and exhibit were admitted at the hearing:
(a)Affidavit of the plaintiff sworn on 17 September 2012 (FDN 3).
(b)Affidavit of Justine Dawn Smith affirmed on 17 September 2012 (FDN 4).
(c)Affidavit of the plaintiff sworn on 27 September 2012 (FDN 9).
(d)Exhibit “DMS-1” to the affidavit of the defendant sworn on 28 September 2012 (FDN 6A).
Exhibit “DMS-1” is a copy of an Enduring Power of Attorney showing Dawn Sutton as the donor and the defendant as one of three donees. The power of attorney has only been accepted by the defendant and a Mr Joseph Gentile. The two donees may exercise the powers conferred by the Enduring Power of Attorney both jointly and severally. The plaintiff has not joined Mr Gentile as a defendant.
I shall refer to Dawn Sutton as Mrs Sutton. She was born on 14 December 1930. On 12 August 2012 she suffered a stroke and she is currently an in-patient at the Queen Elizabeth Hospital at Woodville. A brief medical reported dated 15 August 2012 as to Mrs Sutton’s condition has been exhibited to the affidavit. It is as follows:
Mrs Sutton is currently an in-patient of the Queen Elizabeth Hospital, SA, under the care of the Stroke Team. She has suffered an acute, debilitating medical condition as of the 12/8/12 and she is currently unable to fulfil her previous functional capacities. Her treatment and assessment is still on-going and it is unclear at this stage whether this will be permanent.
The report was written by Dr Trent Zeitzen. When Dr Zeitzen referred to “her previous functional capacities”, it is not clear whether he was referring to both physical and cognitive functions. It is, nevertheless, clear that she has been unable to attend to the running of the business “owned” by her, referred to in the evidence as “Palm Manor”. It is a supported residential facility with 49 beds situated at 63-69 Hall Street, Semaphore.
In her affidavit the plaintiff said that she had applied to the Guardianship Board for a guardianship order in respect of her mother in case it transpired that Mrs Sutton lacked mental capacity. It appears that the application was made without reference to Mrs Sutton because at Section A2 of the application form[1], the plaintiff stated that she was “unaware” as to Mrs Sutton’s attitude to the application. The application has not been dealt with.
[1] Exhibit “JS 2” to the affidavit of the plaintiff sworn on 17 September 2012.
In Sections B2 and B3 of the application form, it appears that a medical practitioner has stated that he is unsure as to whether Mrs Sutton has a mental incapacity. He has explained that Mrs Sutton “[r]equires further brain scans to fully ascertain this [mental incapacity]. The results of the scans need to be reviewed with the consulting medical team (Stroke team)”. It appears from page 8 of the application form that Mrs Sutton was to have brain scans on 19 September 2012 and 15 October 2012.
At paragraph C1 of the application form the question is posed “What financial or legal issues currently exist?” The answer given is that “[t]here is conflict between decision-makers or family”.
By letter dated 15 August 2012, three days after Mrs Sutton suffered the stroke, solicitors acting on behalf of the defendant advised the plaintiff’s daughter, an employee of the business, as follows:
We act for Dawn Sutton on instructions from her Attorney Donald Sutton.
We are instructed you are currently the manager of Palm Manor. As you are aware Dawn Sutton is currently in the Queen Elizabeth Hospital and is not capable of making financial or business decisions. Accordingly, our client has instructed us he will now be making all business and financial decisions on behalf of his mother.
We have been instructed to write to you and indicate that you must now:-
1.Take and comply with directions given to you by Donald Sutton.
2.You are to ensure that all cash from residents in payment of board and living expenses are handed to Donald Sutton for banking.
3.All rosters are to be reviewed by our client before publication.
4.All expenditure is to be approved by our client.
We are instructed that you will continue to be employed as manager pending a financial review being undertaken by the accountants for Dawn Sutton and Palm Manor Pty Ltd, McCormack & Reynolds. After our client has had the opportunity of reviewing the business operations, a decision will be made with respect to the viability of the business and its continuing operation. Please ensure that you communicate with Donald Sutton regularly in relation to the management of the business and raise all business matters or issues with Donald Sutton directly for his consideration and determination.
Paragraphs 9-12 of the plaintiff’s affidavit of 17 September 2012 are as follows:
9.On Tuesday 11/9/2012 I was present with my brothers Donald Sutton and Robert Sutton attending on my mother at the Queen Elizabeth Hospital. Donald said: “and by the way Mum Palm Manor has to be sold. It is not viable”.
10.My mother said “What: you can’t sell my business”.
11.On this being said my brother Robert shut the door on me and my daughter Justine.
12.I could hear my mother through the door, crying.
That is the only evidence of any conversation between the defendant and Mrs Sutton relating to the possible sale of the Palm Manor business. There is no evidence to the contrary.
Mr Hegarty relied upon the letter of 15 August 2012 as evidence of an intention on the part of the defendant to sell the business. When this was combined with the conversation referred to in paragraphs 9-12 of the plaintiff’s affidavit as set out above, he asserted that there was clear evidence that if the defendant proceeded to sell the business, it was against the wishes of Mrs Sutton. Although it is not clear from the summons or any of the affidavit material, Mr Hegarty said during the course of argument that his client relied solely upon the provisions of s 11(1)(c) of the Powers of Attorney and Agency Act 1984 (SA) (“the Act”) as forming the basis of a cause of action which, he submitted, the plaintiff is entitled to pursue against the defendant. The relevant parts of that provision are as follows:
11—Powers of Supreme Court in respect of enduring powers
(1)Any person who has, in the opinion of the Supreme Court, a proper interest in the matter may, at any time, apply to the Supreme Court for an order—
(a)     [Immaterial];
(b)     [Immaterial];
(c)     revoking or varying the terms of an enduring power of attorney or appointing a substitute donee of such a power.
As I understand it, the plaintiff contends that she has a proper interest in the matter the subject of these proceedings because she is the daughter of Mrs Sutton and is attempting to prevent what she believes to be the wrongful exercise of powers under the power of attorney by the defendant. The alleged wrongful exercise of such powers is the sale of the Palm Manor business contrary to the wishes of Mrs Sutton.
It was not disputed by the defendant that the donee of a power of attorney may not exercise powers conferred by the grant contrary to the wishes of the donor, provided that, in the case of an enduring power of attorney, the donor possesses the requisite capacity enabling him or her to give a competent instruction to the donee[2]. However, the defendant contends that:
(1)the plaintiff has no standing to make the application;
(2)that the plaintiff has not established in the documents filed at Court an arguable cause of action maintainable by the plaintiff and in any event, even if such cause of action had been articulated, the plaintiff had failed to establish a prima facie case as referred to by the High Court in ABC v O’Neill[3].
[2] Dynayski v Grant [2004] NSWSC 1187 at [19]. .
[3] (2006) 227 CLR 57.
Mr Stevens submitted in addition that even if a prima facie case had been established the balance of convenience clearly favoured an order that the interim injunction be dissolved.
The plaintiff’s case is that Mrs Sutton has said in the presence of the defendant that she does not wish the business to be sold. Prior to that conversation, the defendant indicated through his solicitors that he had instructed accountants to prepare a report reviewing the business. Given that both sides accept that, whatever her mental status, Mrs Sutton is incapable of running the business, the contemplated review of the business could be a prudent course to take. An accountant’s letter dated 12 September 2012 to the defendant was put into evidence[4]. The plaintiff challenges the conclusion in that letter that the business is unviable. In addition the plaintiff contends that the dismissal of two employees of the business – a grand-daughter Justine Dawn Smith and her husband Aaron Smith – is further evidence that the defendant is not acting in the best interests of Mrs Sutton.
[4] Exhibit “JDS 1” to the affidavit of Justine Dawn Smith sworn on 17 September 2012.
If this application is a properly constructed interlocutory application, the only basis upon which the plaintiff may succeed is if she can establish a prima facie case in respect of a cause of action which she has the right to pursue. That cause, or ability to bring an application in her own name, is said to arise under s 11 of the Act. She does not rely on actual or ostensible authority from Mrs Sutton to bring the application; nor does she rely upon authority derived from the appointment of her as the guardian or litigation guardian of her mother or as manager of her mother’s estate. She does not profess to be the donee of a power of attorney of her mother. Instead, she asserts that, as the daughter of Mrs Sutton, she has the right to bring this application pursuant to s 11(1)(c) of the Act. In order to invoke that provision, she must demonstrate that she has a proper interest and that the powers conferred by paragraph (c) of subsection (1) and subsection (3) can be used to resolve the questions posed by the bringing of these proceedings.
All of this is in the context that the interlocutory relief sought is for the period of time that it takes to ascertain whether Mrs Sutton has the legal capacity to direct the defendant not to sell the business. If it is established that Mrs Sutton does have that capacity, she would also have the capacity, in curial proceedings, to ask the Court to restrain the defendant if he refused to comply with her direction not to exercise his powers under the grant in a particular way. If it is established that Mrs Sutton does not have the necessary capacity, it would seem that the defendant cannot be restrained from selling the business because it is conceded by the plaintiff that the power of attorney is valid and the sale of the business would be a valid exercise of the powers conferred by the grant.
It is apparent from the above analysis that this application is not necessarily interlocutory in nature. For example, is the granting of the injunction in aid of preserving the status quo ante pending the prosecution of proceedings seeking final relief? It is clearly not such an application because, in effect, the interlocutory relief is the same as the “final” relief. Although the nature of the final relief sought is not set out in the summons, it was clear from Mr Hegarty’s submissions that the sole purpose of the summons was to stop the defendant from selling the business pending a determination of Mrs Suttons’ competency.
Viewed in that light, the plaintiff should have sought an urgent hearing of the summons rather than pursue what I now consider to be an ineffective interlocutory application.
In light of that conclusion it is not possible to reach a final decision because argument was directed to an application seeking an interlocutory injunction. In that context, the defendant elected to call no evidence. However, it seems to me that it is possible to deal with the plaintiff’s standing to sue because that part of the application could be decided, without unfairness to the defendant, on the basis of the evidence adduced by the plaintiff.
I think that where there is uncertainty as to Mrs Sutton’s capacity, the plaintiff as the daughter of Mrs Sutton does have a proper interest enabling her to apply under s 11(1) and that paragraph (c) and subsection (3) confers an available power, namely to exclude for the time being, the power to sell the business.
In Re Evans[5], Gray J considered the operation of s 11 of the Act. The plaintiff was the donee of an enduring power of attorney and sought the advice and directions of the Court pursuant to s 11(2)(b). The major asset of the estate was a farming property. There had been a history of disagreement between the plaintiff and her brother William Evans. Gray J said[6]:
[11] These proceedings have a long and complex history and have been drawn out by differences and hostilities between the siblings. The differences centre on William’s continued occupation and management of the farm in the absence of a commercial lease. By affidavit, Jennifer deposed that the farming operations had been conducted at a loss in four of the last five financial years, and that to continue to operate at a loss would not be in the financial interests of Shylie. William has expressed concern about Jennifer’s position, and alleges that Jennifer is not an appropriate person to act as attorney for Shylie as she “has shown that where she has a conflict of interest, she will act in her own interest”.
[5] [2010] SASC 193.
[6] At [11].
Next, he referred[7] to a direction given relating to whether or not William maintained that the relevant power of attorney was invoked. The direction contemplated that William might make an application to the Court for an order revoking the power of attorney or appointing a substitute donee. Such an application would invoke s 11 of the Act. In my opinion, the decision is authority for the proposition that where family members disagree as to the proper exercise of powers under a grant, members of the family other than the donee may have “a proper interest in the matter”. In Re Evans that interest was clear because William Evans was directly affected by the proposed exercise by the plaintiff of powers under the power of attorney. In this case, the connection is not so direct but, in my view, the plaintiff’s concern that the business might be sold contrary to what she understands to be Mrs Sutton’s wishes, is a sufficient circumstance to support the argument that the plaintiff has a proper interest.
[7] At [13].
It is, for the reasons given above, not appropriate to proceed further. At the conclusion of argument on 2 October 2012, the defendant, by his counsel, gave an undertaking not to proceed to a sale of the business without giving 14 day’s written notice to the plaintiff’s solicitors. Given that the summons will need to be set down for further argument, I will hear the parties as to what is to happen as to undertakings or orders in the interim.