Szozda v Szozda - [2010] NSWSC 804

NEW SOUTH WALES SUPREME COURT

CITATION:
Szozda v Szozda [2010] NSWSC 804

JURISDICTION:
Equity Division

FILE NUMBER(S):
2008/280064

HEARING DATE(S):
22/02/10, 23/02/10, 24/02/10, 25/02/10, 26/02/10, 01/03/10

JUDGMENT DATE:
23 July 2010

PARTIES:
Mark Thomas Andrew Szozda - First Plaintiff
Anna Kathrin Szozda - Second Plaintiff
Gregory Christopher Szozda - Third Plaintiff
Barbara Zofja Szozda - First Defendant
Edward Codd - Second Defendant

JUDGMENT OF:
Barrett J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable

COUNSEL:
Mr G O Blake SC/Mr E A J Hyde - Plaintiffs
Mr W G Muddle SC/Ms G F Mahony - Defendants

SOLICITORS:
J P Gould - Plaintiffs
O'Hara & Company - Defendants

CATCHWORDS:
AGENCY - powers of attorney - aged donor - whether power of attorney void for want of mental capacity of donor - general and enduring power of attorney - general law test of incapacity discussed - whether general law test affected by Powers of Attorney Act 2003 - survey of evidence of lay and medical witnesses - PROCEDURE - challenge to capacity of donor to grant power of attorney - whether review procedure under Powers of Attorney Act 2003 is only available avenue - held not - whether donor must be party to any proceedings - whether donee of challenged power of attorney has standing to maintain like challenge to other powers of attorney

LEGISLATION CITED:
Conveyancing (Powers of Attorney) Act 1983, s 17
Powers of Attorney Act 2003, Division 4 Part 3, ss 7(1), 36(1), 36(3)(a), 36(10)

CATEGORY:
Principal judgment

CASES CITED:
Angliss v Urquhart [2002] NSWCA 256; (2001) 11 BPR 20,765
Attorney General v Parnther (1792) 3 Bro CC 441; (1792) 29 ER 632
Crago v McIntyre [1976] 1 NSWLR 729
Ghosn v Principle Focus Pty Ltd (No 2) [2008] VSC 574
Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423
Guthrie v Spence [2009] NSWCA 369
Lake v Crawford [2010] NSWSC 232
McLaughlin v Daily Telegraph Newspaper Co Ltd (No 2) [1904] HCA 51; (1904) 1 CLR 243
Murphy v Doman [2003] NSWCA 249; (2003) 58 NSWLR 51
Owners of Strata Plan No 23007 v Cross [2006] FCA 900; (2006) 153 FCR 398
Ranclaud v Cabban [1988] NSW Conv R 55-385
Re HAA [2007] QGAAT 6
Re K [1988] Ch 310
Re W [2001] Ch 609
Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505; (2008) 13 BPR 25,343

TEXTS CITED:
“A Practical Treatise of the Law Concerning Lunatics, Idiots, and Persons of Unsound Mind”, second edition (1847) by Leonard Shelford
New South Wales Law Reform Commission, Report No 20 (1975) – Powers of Attorney and Unsoundness of Body or Mind

DECISION:
1. Declare that the power of attorney purportedly made by Aniela Szozda on 28 September 2006 is invalid.
2. Declare that the instrument of proxy purportedly given to Paul Christopher Marsh by Barbara Szozda as attorney for Aniela Szozda on 30 July 2008 and used by him at 4.18pm on 31 July 2008 at a general meeting of Szozda Holdings Pty Ltd is invalid and of no effect.
3. Declare that each of the resolutions purportedly passed at the purported meeting of Szozda Holdings Pty Ltd held at 4.18pm on 31 July 2008 and attended by Damien Tudehope and Paul Christopher Marsh is invalid and of no effect.
4. Directions for submissions on costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

FRIDAY 23 JULY 2010

2008/280064 MARK THOMAS ANDREW SZOZDA & 2 ORS v BARBARA ZOFJA SZOZDA & ANOR

JUDGMENT

Boleslaw Szozda and his wife Aniela came to Australia as Polish immigrants in 1950 and made their home here. They had two children, Barbara and Andrew.
Boleslaw Szozda died on 25 July 1981. Mrs Szozda is still living. She is aged 99 years (having been born in March 1911) and resides in a nursing home. Her living descendants are her daughter Barbara (born 1938), and the children of her late son Andrew – Mark (born 1971), Anna (Mrs Thorne, born 1974) and Gregory, a few years younger. Andrew died on 3 March 2006. He left a widow, Teresa, in addition to their three children just mentioned.
The family had built up real property assets over the years, including, in particular, blocks of flats at Burwood and Kogarah and a boarding house at Neutral Bay. These assets were housed in family companies which held as trustees of discretionary trusts. In the years leading up to Andrew’s death in March 2006, Mrs Szozda, Andrew and Barbara were the decision-makers in relation to the companies and trusts and Andrew was, in a sense, chief among them in that his mother and sister recognised his leading role in the operation of the businesses. Andrew’s death left something of a void that his children wished to fill.
In 2008, various actions were taken with a view to changing governance arrangements in relation to the companies and trusts. These proceedings concern a narrow but pivotal aspect of those activities.
The central issue goes to Mrs Szozda’s capacity to grant a general and enduring power of attorney. Certain relevant events may be stated in chronological order:
1.On 16 March 2004, Mrs Szozda executed a general and enduring power of attorney appointing her son Andrew and his son Mark jointly and severally as attorneys. I shall refer to this as “the 2004 power of attorney”.
2.On 29 March 2006 – almost four weeks after Andrew’s death – Mrs Szozda executed a general and enduring power of attorney appointing Mark and Anna (two of Andrew’s three children) jointly and severally as attorneys. I shall refer to this as “the March 2006 power of attorney”.
3.On 28 September 2006, Mrs Szozda executed a general and enduring power of attorney appointing Barbara as attorney subject to a proviso that if Barbara was unable or unwilling to act, Mark and Mr Paul Marsh, solicitor, should be attorneys jointly. This will be referred to as “the September 2006 power of attorney”.
4.On 23 November 2006, Mrs Szozda executed an instrument revoking the March 2006 power of attorney naming Mark and Anna as attorneys.
5.On 20 September 2007, Mrs Szozda executed an instrument revoking the 2004 power of attorney naming Andrew and Mark as attorneys.
6.On 3 December 2007, Mrs Szozda executed an instrument revoking the September 2006 power of attorney naming Barbara as attorney or, if she was unable or unwilling to act, Mark and Mr Marsh jointly.
Each power of attorney was a general and enduring power of attorney created by reference to the provisions of the Powers of Attorney Act 2003 empowering the attorney or attorneys to do whatever the donor might lawfully do and so as to continue in operation despite any supervening incapacity of the donor.
In these proceedings, Mark, Anna and Gregory are the plaintiffs and cross-defendants. Barbara is one defendant and Edward Codd (who has entered a submitting appearance, except as to costs, and whose role will be mentioned presently) is the other defendant; Barbara is also the cross-claimant.
Mark, Anna and Gregory claim a declaration that the September 2006 power of attorney is invalid. Barbara, by her cross-claim, claims a declaration that the September 2006 power of attorney is valid and a declaration that each of the 2004 power of attorney and the March 2006 power of attorney has been revoked and is no longer effective.
Declaratory relief is also sought in relation to steps taken in relation to Szozda Holdings Pty Ltd. Barbara seeks a declaration that a proxy given by Barbara herself, as attorney for Mrs Szozda, to Mr Marsh on 30 July 2008 for the purposes of a general meeting of Szozda Holdings Pty Ltd is valid. Mark, Anna and Gregory seek a declaration that each of the resolutions purportedly passed at that general meeting, with Mr Marsh purporting to vote as Mrs Szozda’s proxy, is invalid. Among the resolutions were resolutions changing the composition of the board of directors, including by the appointment of Mr Codd. This is the only reason why he is a party (and explains his submitting appearance, except as to costs).
Issues for trial filed on both sides identified as the central issue in the case whether Mrs Szozda had the capacity to grant a general and enduring power of attorney on 28 September 2006 when she purported to create the September 2006 power of attorney.
Attention must be given to certain legal questions at the outset. It is necessary to identify the test to be applied by the court in determining the capacity that Mrs Szozda must be found to have had at the time of her execution of the several challenged documents. It is also necessary to decide where the burden of proof lies and whether it is for a party seeking to uphold a particular document to establish that Mrs Szozda had the necessary capacity at the particular time or whether the person arguing that the act was invalid must prove lack of that capacity. Questions of standing will also arise for consideration in due course.
Counsel on both sides approached the proceedings, both in the pre-trial phase and throughout the six day trial, on the footing that the claims for relief and the issues they raise fall to be determined according to the general law, unaffected by the provisions of the Powers of Attorney Act. When I began to consider the matter after judgment had been reserved, it occurred to me that the assumption implicit in this approach may not be valid. I therefore raised the matter with counsel on both sides by means of a letter from my Associate dated 2 March 2010, as follows:
”Justice Barrett wishes to have supplementary submissions from both sides on a matter that appears to arise from the Powers of Attorney Act 2003. The matter can be listed for short oral argument if that is preferred.
The proceedings were approached on the footing that the principles of common law and equity preserved by s 7(1) apply to the question of mental incapacity and its effect, if present at the time of the giving of an enduring power of attorney; as well as to matters of proof, the burden of proof and the powers of the court.
Section 17 prescribes consequences of the mental incapacity of a principal at the time of the giving of a power of attorney. The Supreme Court is given express powers to deal with such incapacity, at least in relation to an enduring power of attorney (which is, by force of s 33(1) and s 33(2), a ‘reviewable power of attorney’) - see, for example, s 29 and s 36(3) (also, in relation to the latter, the procedural matters in s 35 and the discretions in s 36(1) and s 36(2)).
Given the exception at the end of s 7(1), should these statutory provisions be regarded as a code in relation to the impact of a principal's mental incapacity at the time an enduring power of attorney is given; so that the Supreme Court is confined to exercising the specific statutory jurisdiction in accordance with the Act?
To put this another way, since
(a)an enduring power of attorney is a creation of statute;
(b)the statute itself confers on the Supreme Court:
(i)a power to review an enduring power of attorney on the application of an “interested person”; and
(ii)a power to make certain orders with respect to the making of the power of attorney (with reference to the mental capacity of the principal at the time of making);
(c)the Supreme Court’s statutory power under (b)(ii) above includes a power to make an order declaring that the principal did or did not have the requisite mental capacity;
(d)the statute also deals comprehensively with the matter of parties to such a review; and
(e)the rules of common law and equity in relation to powers of attorney do not apply, to the extent that the Act displaces them,
is it correct to think that the Supreme Court’s power to make an order declaring that the principal did not have the necessary mental capacity at the time of giving an enduring power of attorney is a wholly statutory power and is exercisable only in accordance with the Act and upon an application made under the Act?”

In reply, counsel for Mark, Anna and Gregory submitted that the court’s power to deal with alleged mental incapacity of the donor at the time of the giving of an “enduring power of attorney” is not confined to the statutory power to “review” under Division 4 of Part 3 of the Powers of Attorney Act in relation to that particular species of power of attorney. In other words, the question raised by the letter just quoted was answered “no”. Reference was made, in that connection, to s 7(1) of the Act:
“This Act does not affect the operation of any principle or rule of the common law or equity in relation to powers of attorney except to the extent that this Act provides otherwise, whether expressly or by necessary intention.”
Counsel for Mark, Anna and Gregory also referred to the general principle that legislation is presumed not to oust established jurisdictions unless the intention to do so is expressed in clear and unambiguous language. It was submitted that, as far as this court is concerned, the review jurisdiction created by Division 4 of Part 3 of the Powers of Attorney Act is an additional jurisdiction that co-exists, in relation to enduring powers of attorney, with the ordinary jurisdiction to determine in the usual way claims made in relation to those or any other powers of attorney.
Counsel for Barbara submitted, however, that the only power to declare that Mrs Szozda did not have the requisite mental capacity at the time she gave an enduring power of attorney is the statutory power under s 36(3)(a) – a submission that was, however, recognized as sitting uncomfortably with Barbara’s cross-claim, in these proceedings as now constituted, for a declaration that the September 2006 power of attorney is valid, since the same position must prevail whether the proposition pursued is that the power is invalid or that it is valid.
I am not persuaded that the Powers of Attorney Act creates an exclusive code with respect to enduring powers of attorney, in the sense that a review by a “review tribunal” (being this court or the Guardianship Tribunal) under Division 4 of Part 3 is the only available path to a binding legal conclusion that the effectiveness of such a power of attorney is compromised because of lack of mental capacity on the part of the donor at the time of creation. A question of that kind can arise in a range of proceedings. A party who has ostensibly contracted with the principal through the attorney may sue the principal for breach of contract. The authority of the attorney may become an issue in those proceedings and that in turn may raise the question of the principal’s capacity to give the power of attorney. It is impossible to think that those proceedings would have to be postponed until the separate review mechanism created by the Act had answered the question whether the power of attorney was invalid for want of capacity on the part of the donor at the time of its creation.
This conclusion is strengthened by a consideration of certain of the provisions within Division 4 of Part 3. It is sufficient to refer to two aspects of the legislation. I refer first to s 36(1). Under that section, an “interested person” may seek a “review”, but it is for the “review tribunal” to decide whether or not to carry out a review. Only if the “review tribunal” decides, as a threshold matter, that a review should be undertaken will the person who made the request for review obtain any form of useful outcome. A person’s right to invoke this court’s general jurisdiction, including its jurisdiction to grant declaratory relief, is a right not subject to any such preliminary screening. It is true that declaratory relief is, in the end, discretionary but the discretion applies to the grant of the relief after the claim for it has been heard; it is not a discretion that arises at the threshold as to whether the claim should be entertained at all.
Second, reference may be made to s 36(10) which states the nature of an order made by a “review tribunal”. In substance, such an order is made by statute to operate upon and in relation to the world at large. Unlike an order of the court in an ordinary suit, it is not an order affecting the parties only.
The Act itself makes it sufficiently clear, in my opinion, that the review process created by Division 4 of Part 3 is a statutory process that may be availed of by anyone within the class of competent applicants who wishes to obtain a declaration binding on the world at large on any of the matters with respect to a “reviewable power of attorney” (including an “enduring power of attorney”) put by the Act within the jurisdiction of the two “review tribunals” (one of which, as I have said, is this court). I accept the submission that there is no manifested statutory intention thereby to oust other aspects of this court’s jurisdiction where a power of attorney becomes the subject of an application for relief commenced and prosecuted in the ordinary way.
I deal now with the question of onus. The starting point must be the so-called “presumption of sanity” derived from observations such as that of Lord Chancellor Thurlow in Attorney General v Parnther (1792) 3 Bro CC 441; (1792) 29 ER 632:
“The course of procedure, for the purpose of trying the state of any party’s mind, allows of rules. If derangement be alleged, it is clearly incumbent on the party alleging it, to prove such derangement:”
As Handley JA pointed out in Murphy v Doman [2003] NSWCA 249; (2003) 58 NSWLR 51 at [36]:
“This means, in modern terms, that there is a presumption that a person of full age is capable of managing his or her affairs.”
The effect and consequence of the presumption were stated by Edmonds J in Owners of Strata Plan No 23007 v Cross [2006] FCA 900; (2006) 153 FCR 398 at [66]:
“It follows that the person who asserts incapacity must prove it.”
Edmonds J quoted with approval an extract from “A Practical Treatise of the Law Concerning Lunatics, Idiots, and Persons of Unsound Mind”, second edition (1847) by Leonard Shelford (at 56):
“The presumption of law is in favour of sanity: and, therefore, if a person has never been subject to a commission of lunacy, nor has had an unsound state of mind imputed to him by his friends or relations, or even by common fame ... the burthen of proof is cast upon those who impeach his understanding. And where a particular transaction is sought to be avoided on the ground of insanity, the evidence of it ought to apply to that particular period; and the question in such a case is, not whether the party had ever been insane before, but whether he was of sufficient sound mind on the day of the contract in question.”
It was suggested in submissions made on behalf of Mark, Anna and Gregory that the approach to onus in a case such as the present should be the same as in a will case, that is, that if circumstances are proved which cast doubt on the capacity of the donor (or testator), then it is for the party seeking to uphold the power of attorney (or to propound the will) to prove that the donor (or testator) possessed the requisite capacity. The two cases were assimilated in this way in Ghosn v Principle Focus Pty Ltd (No 2) [2008] VSC 574 at [68].
The contrary submission advanced on behalf of Barbara is that there is no room for any analogy drawn from the field of wills and probate. In proceedings for a grant of probate, it is pointed out, it is the putative executor who has the onus of proving testamentary capacity to obtain an order in rem. And the position is the same where, as in Ghosn v Principle Focus Pty Ltd (above) a positive case of validity of a power of attorney is to be made.
I accept the submissions made on Barbara’s behalf on this matter. Mark, Anna and Gregory, as plaintiffs, seek declarations of invalidity in respect of the September 2006 power of attorney. Mark, Anna and Gregory, in pursuing a claim of that kind, must affirmatively displace the “presumption of sanity”. This is consistent with the recent observations of Harrison J in Lake v Crawford [2010] NSWSC 232 at [13]. Barbara’s claims are predicated on the operation of the “presumption of sanity”. The fate of those claims will follow from the conclusions reached regarding the contention of the plaintiffs that Mrs Szozda lacked capacity at the relevant time.

It is necessary to consider next the concepts of “capacity” and “incapacity” in this context. The relevant general law principles are often associated with the decision of the High Court in Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423 and were recently explained by Campbell JA (with whom Basten JA and Handley A-JA agreed) in Guthrie v Spence [2009] NSWCA 369 at [174]:
“Under the general law there is no single test for capacity to perform legally valid acts – rather, capacity is decided, in relation to each particular piece of business transacted, by reference to whether the person has sufficient mental ability ‘to be capable of understanding the general nature of what he is doing by his participation’, and concerning any legal instrument ‘is relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of that transaction when it is explained’: Gibbons v Wright (1954) 91 CLR 423 at 437–8 per Dixon CJ, Kitto and Taylor JJ. Thus, capacity of both children and adults to give evidence is dependent, in broad terms, on being able to understand the nature and significance of the task that is involved in giving evidence: Heydon, Cross on Evidence, 7th Australian edition, (2004), para [13050]-[13065], pp 376-83. Capacity to consent to medical treatment depends on the ability of the person in question to understand fully what is proposed: Secretary, Department of Health and Community services v JWB (Marion’s Case) (1992) 175 CLR 218 at 237-8. The familiar test of testamentary capacity laid down in Banks v Goodfellow (1870) LR 5 QB 549 and Re Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 is dependent on being able to carry out the particular tasks involved in understanding and evaluating the matters that need to be taken into account in deciding what one’s testamentary dispositions will be. Capacity to marry is dependent on being able to understand the nature of the relationship of marriage: In the Estate of Park; Park v Park [1954] P 89; Sheffield City Council v E [2004] EWHC 2808 (Fam); [2005] Fam 326.”
According to these principles, the inquiry in the present case must be directed towards the ability to understand the creation of a general and enduring power of attorney, that is, an instrument empowering the attorney or attorneys to do for the donor anything and everything that the donor may lawfully do and creating an authority that continues even if the donor comes to lack capacity. There were suggestions in submissions that the degree of understanding required will vary with the extent and complexity of the donor’s affairs – that a finding of lack of capacity will more readily be made in relation to a person with a great deal of property of various kinds and interests in many businesses than in relation to a person exhibiting objectively identical characteristics who has only, say, a house, its contents and a bank account.
That notion is consistent with the approach taken to a general power of attorney by Young J in Ranclaud v Cabban [1988] NSW Conv R 55-385. His Honour stated the general nature of the capacity question in relation to a general power of attorney in this way:
“Such a power permits the donee to exercise any function which the donor may lawfully authorise an attorney to do. When considering whether a person is capable of giving that sort of power one would have to be sure not only that she understood that she was authorising someone to look after her affairs but also what sort of things the attorney could do without further reference to her.”
In Ghosn v Principle Finance Pty Ltd (No 2) (above), Forrest J applied this test to determine capacity in relation to the creation of a general power of attorney, and said that it was not sufficient that the donor had an understanding of the purport of the power of attorney. The court also needed to be satisfied that the donor had “a more intricate understanding of the consequences of the powers of attorney, and in particular the actions that could be taken by [the attorney] in relation to the companies and the trust properties”. Applied to the particular circumstances of that case, adoption of the test extracted from Ranclaud v Cabban (above) was seen as involving the following:
“Each instrument and its execution is to be examined in accordance with the accompanying circumstances. Indeed, the facts of this case demonstrate amply why the Ranclaud test should be applied in relation to complex matters. The two properties which have been sold are the property of two trustee companies which owe fiduciary obligations to the beneficiaries. As Mr Moussi was the sole director of the companies, he in a practical sense was the trustee. Application of the Ranclaud test means, I think, that it must be proved that Mr Moussi knew that when he executed the Powers of Attorney, he was giving Mr Abi Ghosn control over trust properties in a real, if not legal, sense. He did not, in my view, need to understand all the intricate parts of the transactions that Mr Abi Ghosn was about to enter into. But given that there were significant assets, it was necessary that he understood at the time of the execution of the Powers of Attorney that Mr Abi Ghosn would have the ability to transfer the shareholdings and the directorship of the trust companies to others (including himself) and to effect the sale of the properties which were the subject of the trust deed at a price determined by Mr Abi Ghosn.”
In considering the question of capacity to create a general and enduring power of attorney, resort is sometimes had to an analogy with testamentary capacity. The validity of the analogy is questionable. A testator must have the capacity to appreciate what his or her property is, to recognise the persons who have a moral claim to the estate and to exercise a balanced judgment as to those claims. The making of a will involves decisions about particular dispositions and the wisdom of them from the point of view of the exercise of the testator’s bounty, just as the giving of a power of attorney specifically to facilitate a particular transaction involves a decision as to the wisdom of the transaction from the point of view of the donor’s interests. In the latter case, an understanding of the transaction to be facilitated is indispensable to an understanding of the power of attorney: Crago v McIntyre [1976] 1 NSWLR 729 at 749-750.
It seems to me that different considerations attend a decision to grant a general power of attorney without reference to any foreshadowed transaction and as a means of catering for the possibility that the donor might be unavailable or unable to act at some undefined future time when action is needed. The donor is prescribing no dispositions. He or she has no need to appreciate the extent and nature of moral claims and the extent and nature of the property available to meet them. Because no particular transaction is in contemplation, there is no specific dealing to be assessed as an indispensable concomitant of the giving of the power of attorney. The only matter that can sensibly become the subject of assessment is the creation of the power of attorney itself, for use as and when the need may arise in the future. It is the nature of that act (by which I mean to include its ramifications and consequences) that the donor must sufficiently understand. That, as I apprehend matters, is what is required by what was said by Dixon CJ, Kitto J and Taylor J in Gibbons v Wright (above) at 437-438:
“[T]he mental capacity required by the law in respect of any instrument is relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of that transaction when it is explained.”
The approach outlined by Hoffmann J in Re K [1988] Ch 310 and approved by the English Court of Appeal in Re W [2001] Ch 609 is, in my opinion, appropriate. Those cases were decided in a particular statutory context but the principle regarding the relevant capacity to understand was not, in my view, affected by that and is of general application. Hoffmann J said (at 313):
“Finally I should say something about what is meant by understanding the nature and effect of the power. What degree of understanding is involved? Plainly one cannot expect that the donor should have been able to pass an examination on the provisions of the 1985 Act. At the other extreme, I do not think that it would be sufficient if he realised only that it gave cousin William power to look after his property. Counsel as amicus curiae helpfully summarised the matters which the donor should have understood in order that he can be said to have understood the nature and effect of the power: first, if such be the terms of the power, that the attorney will be able to assume complete authority over the donor's affairs; second, if such be the terms of the power, that the attorney will in general be able to do anything with the donor's property which he himself could have done; third, that the
authority will continue if the donor should be or become mentally incapable; fourth, that if he should be or become mentally incapable, the power will be irrevocable without confirmation by the court.”
The central concept is thus one of complete and lasting delegation to a particular person, albeit with the ability to put an end to the delegation while capacity to do so remains. That concept of empowering another person to act generally in relation to one’s affairs raises two basic questions. First, is it to my benefit and in my interests to allow another person to have control over the whole of my affairs so that they can act in those affairs in any way in which I could myself act – but with no duty to seek my permission in advance or to tell me after the event, so that they can, if they so decide, do things in my affairs that I would myself wish to do (such as pay my bills and make sure that cheques arriving in the post are put safely into the bank) and also things that I would not choose to do and would not wish to see done – sell my treasured stamp collection; stop the monthly allowance I pay to my grandson; exercise my power as appointor under the family trust and thereby change the children and grandchildren who are to be income beneficiaries; instruct my financial adviser to sell all my blue chip shares and to buy instead collateralised debt obligations in New York; have my dog put down; sell my house; buy a place for me in a nursing home? Second, is it to my benefit and in my interests that all these things – indeed, everything that I can myself lawfully do – can be done by the particular person who is to be my attorney? Is that person someone who is trustworthy and sufficiently responsible and wise to deal prudently with my affairs and to judge when to seek assistance and advice? The decision is one in which considerations of surrender of personal independence and considerations of trust and confidence play an overwhelmingly predominant role: am I satisfied that I want someone else to be in a position to dictate what happens at all levels of my affairs and in relation to each and every item of my property and that the particular person concerned will act justly and wisely in making decisions?
The decision to create a general and enduring power of attorney differs from that involved in the making of a will but must be regarded as of a similar degree of complexity or even greater complexity. I quote, in that connection, a passage from the decision of the Queensland Guardianship and Administrative Tribunal in Re HAA [2007] QGAAT 6 at 34:
“Expert medical opinion provided to (and which appears to have been accepted by) the Court in Adult Guardian (In Re Enduring Power of Attorney of Vera Hagger) v Vera Hagger, Declan James Barry and Albert Craig Ray SC Qld No 1083 of 2001 (Unreported), was that an Enduring Power of Attorney was both more unfamiliar and more complex (for most members of the community) than a will. Accordingly, a higher cognitive ability and therefore standard of capacity would be required for an Enduring Power of Attorney.
If capacity, in the relevant sense, is absent when a power of attorney is granted, the general law position is that the power of attorney is void: McLaughlin v Daily Telegraph Newspaper Co Ltd (No 2) [1904] HCA 51; (1904) 1 CLR 243.
Having dealt with the general law principles, I return to the Powers of Attorney Act and, in particular, to s 17.

“(1)Subject to this Act, a power of attorney is not ineffective only because any act within the scope of the power is of such a nature that it was beyond the understanding of the principal through mental incapacity at the time the power is given.

(2) However, a power of attorney does not authorise an attorney to do any such act unless it is authorised by or under this Act.”

This section, it must be noted, applies to all powers of attorney, not just those of the special kinds for which the Powers of Attorney Act makes particular provision. The Act makes no attempt to define “power of attorney”. The expression thus has its ordinary meaning (Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505; (2008) 13 BPR 25,343 at [205]) and obviously extends, in Mrs Szozda’s case, to the September 2006 power of attorney and the others mentioned. Section 17, a provision relating to powers of attorney generally, effects a statutory modification of the general law of New South Wales with respect to powers of attorney generally; and it does so in a way that is underwritten by s 7(1).
It was submitted on behalf of Barbara in supplementary submissions (see paragraph [15] above) that s 17(1) requires the adoption of a test of the capacity necessary for the creation of a power of attorney different from that I have outlined. I am not persuaded that that is correct. Section 17 takes as its starting point the existence of a valid power of attorney. It operates in the context of the valid power of attorney and, in the case with which it deals, reduces the effective scope of that power of attorney.
Section 17 was first enacted in 1983 as s 163E(1) and (2) of the Conveyancing Act 1919 (added by the Conveyancing (Powers of Attorney) Act 1983). The purpose of the new provision was explained by the New South Wales Law Reform Commission in Report No 20 (1975) – Powers of Attorney and Unsoundness of Body or Mind (at Part 8, paragraph 8.3) as follows:
“The draft section on this subject (draft section 163E) is not concerned with cases where the instrument is void because, by reason of unsoundness of mind, the execution by the principal of the instrument creating the power is not accompanied by an intention to execute an instrument affecting his legal position, or he does not understand the nature of a power of attorney. The draft section is concerned with cases where the principal knows that he is executing an instrument creating a power of attorney and understands the nature of a power of attorney, but does not (or may not) understand, by reason of unsound mind, the nature of some or all of the acts within the scope of the power. In other words, the aim of the draft section is to provide a means for removing doubt about the effectiveness of a power of attorney which the principal intended to create and did create, not to give legal effect to an instrument which, by reason of initial unsoundness of mind, is merely an empty gesture.”
Section 17 thus does not define or describe the extent or quality of mental capacity required for the creation of a valid power of attorney. It merely removes from the scope of the authority created by a valid power of attorney acts the nature of which mental incapacity at inception puts beyond the donor’s understanding. There is thus a form of pro tanto invalidity by statute. Assuming no validating intervention of a provision of the Act, the valid power of attorney is ineffectual as a source of authority for the attorney to do acts within the scope of the power the nature of which was beyond the grantor’s understanding because of mental incapacity at the time of the creation of the power of attorney.
Bearing in mind the general law principles I have described and recognizing the effect of s 17 of the Powers of Attorney Act, I proceed on the basis that it is appropriate to decide whether, on 28 September 2006, Mrs Szozda had a full and unimpaired ability to understand commensurate with the description at paragraph [34] above (remembering that the persons in whom trust and confidence were being reposed were Barbara or, if she was unable or unwilling to act, Mark and Mr Marsh). If she did not, then the September 2006 power of attorney will be invalid on general law principles.
Evidence was given in the plaintiffs’ case by Mark, Anna, Anna’s husband (Geoffrey Thorne), Gregory and Teresa; also by lay witnesses Agnieszka Ciszewska, Joanna Chojnacki and medical witnesses Dr Lukaszewicz and Dr Roberts. The witnesses in Barbara’s case were Barbara, Edward Codd and Tanya Codd, Bruce Thomson, two solicitors (Mr Marsh and Mr Eriksen), an accountant (Mr Jirsch) and a medical witness (Dr Ogle).
The witnesses and the evidence they gave fell into several broad categories. Mark, Anna, Geoffrey Thorne, Gregory, Teresa and Barbara gave evidence of interaction among family members and, in particular, of actions of Mrs Szozda and things said and done by her in the family context. Mr Codd, Mrs Codd, Ms Ciszewska, Ms Chojnacki and Mr Thomson had contact with Mrs Szozda outside the family circle: Mr Codd and Mrs Codd as neighbours, Ms Ciszewska and Ms Chojnacki as friends or acquaintances and Mr Thomson as a boarder in the boarding house at Neutral Bay operated by Mrs Szozda with the assistance of Barbara. Mr Jirsch falls into this last category, as he gives evidence about events at family business meetings. Mr Eriksen and Mr Marsh gave evidence about events associated with the execution of the September 2006 power of attorney. Dr Lukaszewicz, Dr Roberts and Dr Ogle gave medical evidence. Each saw Mrs Szozda in his or her rooms. The first is a general practitioner, the others specialist psychiatrists. Dr Lukaszewicz also had a social acquaintance with Mrs Szozda.
I deal first with the evidence of family members called in the plaintiffs’ case. Certain matters of a negative kind are put forward by Barbara in relation to this evidence: that Mark, Anna, Gregory and Teresa collaborated to some extent in the preparation of their affidavits and that their evidence was presented in such a way as to emphasis one-on-one conversations with Mrs Szozda, thus reducing the risk that inconsistent versions might be given.
There is force in these criticisms. The criticisms are set out in full at paragraphs 10 to 52 of the closing submissions of counsel for the defendants. I need not repeat them in detail here. It is sufficient to say that the usefulness of the evidence of each of Mark, Anna, Gregory and Teresa is reduced by the fact the none gave his or her own separate recollections uncoloured by matters communicated by the others, elements of reconstruction and an obvious emphasis upon aspects that might be thought to indicate lack of understanding and awareness on the part of Mrs Szozda.
I should, however, refer to some of the particular aspects that call into question the value of the evidence.
Mark gave evidence that, at the end of 2005, he considered Mrs Szozda to be insightful and coherent but he also said that he doubted her capacity on 25 December 2005 because he understood her to have said that she did not know it was Christmas Day; yet on that very day he spoke to her about refinancing of a National Australia Bank loan of $1.5 million at 6.5% fixed interest and compared that facility with another. Why he should have done that when he doubted her capacity to understand is something that he could not explain.

Like criticism is properly levelled at Anna’s evidence. She gave firm evidence that she believed Mrs Szozda to be unable to understand even simple conversations as at May 2004, yet at that very time she made a point of asking Mrs Szozda whether she wished to change a family trust from a discretionary trust to a fixed trust. Likewise, in relation to matters as they stood in August 2006, Anna said in the one breath that conversations in which Mrs Szozda participated were appropriate and rational but in another that she did not appreciate the implications of giving a share in Trishwa Pty Ltd to Barbara.
Gregory gave confused evidence. He spent considerable time in the witness box changing the evidence given in his affidavit and speaking of the difficulties he had experienced in composing the affidavit. It is clear that he relied heavily on what he was told by other family members and had little independent recollection.
It was submitted on behalf of Barbara and I accept that Teresa played something of a co-ordinating role in relation to the evidence of her three children. Her evidence was also framed in a scarcely credible way in order to discredit Barbara. For example, she testified that when Andrew was ill with stomach cancer, Barbara said to her:
“How did he get it?”
“What is stomach?”
“What are intestines?”
Barbara works as a social worker at a large hospital and has done so for many years. It is hardly believable that she could be so ignorant about basic medical matters of common knowledge.
In summary, therefore, I approach with caution the evidence of Mark, Anna, Gregory and Teresa regarding factual matters and reported observations relevant to Mrs Szozda’s mental state. There was, I might say, a great deal of such evidence ranging from supposed unawareness of what day it was, failure to remember the names of her children and grandchildren, failure to remember where family members lived, failure to remember details of Andrew’s illness and death, failure to remember assets of the family trusts, disjointed speaking, confusion and inappropriate social behaviour.
The evidence of Anna’s husband, Geoffrey Thorne, is of limited value. He first met Mrs Szozda in 2001 and had what appears from his affidavit to have been a normal social conversation with her. He reports like conversations in the next four years or so when she chided him about not shaving and wearing jeans. She always spoke to him in English, even though many family conversations were in Polish. From early 2005, however, she spoke in Polish when he answered the phone at the home of Anna and himself.
The evidence of Ms Ciszewska and Ms Chojnacki is likewise of limited value. They had been employees of a family travel agency business at Strathfield and knew Mrs Szozda in both a business and a social context. Each had had very limited contact with Mrs Szozda after about 2004. On one occasion of meeting Ms Chojnacki, Mrs Szozda confused her with another former travel agency employee. Ms Ciszewska saw Mrs Szozda at Anna’s wedding in 2005 and Andrew’s funeral in 2006. At the first event, Mrs Szozda looked frail and was shuffling (she was, after all, 94 years old) and Ms Ciszewska thought Mrs Szozda did not recognise her. On the second occasion, Ms Ciszewska noted that Mrs Szozda did not shed tears or bow her head and, at one point, had to be led back to her seat in the church. This was at the funeral of her only son. None of this evidence has any significant bearing on the matters for decision.
Of the defendants’ witnesses, three gave evidence of everyday events. Mr Codd and Mrs Codd lived next door to the boarding house at Neutral Bay that was the home of Mrs Szozda and Barbara (they lived in a flat forming part of the boarding house). They gave evidence of normal neighbourhood conversations with Mrs Szozda, as well as evidence of her having offered on the spur of the moment to pay $2 million for their house when they put it on the market in January or February 2006 at $3 million. After moving from Neutral Bay, Mr Codd and Mrs Codd called on Mrs Szozda a couple of times, the first in June 2008, and noticed that she had deteriorated.
Mr Thomson lived in the boarding house and helped Mrs Szozda and Barbara with odd jobs. His evidence is that Mrs Szozda gave precise instructions and operated efficiently until about April 2007, although she did on occasions speak to him in Polish. After April 2007, Mr Thomson noticed a decline.
The most significant lay evidence in Barbara’s case was that of Barbara herself. She lived with Mrs Szozda and had done so since 1971. She was intimately involved in Mrs Szozda’s daily life.
Barbara gave evidence about Mrs Szozda’s close involvement in the operation of the boarding house and decision-making for the family companies and trusts, as well as daily living, social events and two cruises, one in 2005 and the other in 2007. Barbara’s evidence referred to numerous instances of apparently insightful behaviour by Mrs Szozda, particularly in relation to the boarding house and matters such as the collection and banking of rents. These observations related largely to the period leading up to Andrew’s death on 3 March 2006, an event that, according to Barbara’s observation, caused Mrs Szozda to become withdrawn, subdued and depressed. Barbara’s account of an old lady dealing competently with her affairs is, however, qualified by reference to a number of matters:
During 2006, Barbara observed Mrs Szozda to be erratic in crossing the road by herself.
In late 2006 and early 2007, Barbara noticed that Mrs Szozda was obstinate, insisting on doing things as she had always done them (catching the train from a particular platform and the ferry from a particular wharf) despite clear indications that some other course was required and refusing to take less cash on community group outings as requested by organisers.
From the beginning of 2007, there was a tendency for Mrs Szozda to speak Polish inappropriately in circumstances where she would normally have spoken English.
After Andrew’s death, Barbara noticed that Mrs Szozda could not deal with property matters relating to properties other than the Neutral Bay boarding house and could not deal with more than one matter at a time.
From as early as 2005, Barbara had observed that Mrs Szozda often forgot non-regular appointments (such as hairdresser appointments) although able to remember things such as her regular Sunday outings with a friend.
From about the end of 2003, Barbara was aware of the increasing frequency with which Mrs Szozda lost her keys to their flat in the Neutral Bay premises.
Barbara refers to three occasions in the period July – September 2006 on which Mrs Szozda became lost while following a familiar route, once when coming home to Neutral Bay by public transport, a second when visiting family at Strathfield, also by public transport, and the third when she went by public transport to Kogarah to meet a friend in accordance with a long-established practice.
Barbara also noted marked physical and mental deterioration of Mrs Szozda following her May 2007 hospitalisation after suffering a fall during the second cruise.
Barbara had a strong tendency in cross-examination to make non-responsive statements. It is clear that she was close to her mother. They had lived together for decades in a close domestic relationship centred on the boarding house. There was regular contact with Andrew, Teresa and their children. Barbara went out to work each weekday but was otherwise attentive to her mother’s needs.
Particularly after Andrew’s death, there was clearly much discussion between Barbara and Mrs Szozda about what should be done in relation to the family finances for which they had been content to see Andrew take primary business responsibility. Barbara, it is fair to say, became anxious about her financial security and that of her mother and was not convinced that any of Andrew’s children could replace their father in the family business context. She did not have the same confidence in the next generation as she had had in her brother.
Barbara’s evidence in cross-examination was replete with statements about what “Mum thought” and “Mum wanted” and “Mum decided”; also what “we thought” and “we wanted” and “we decided”. There was no real distinction between the two; and it is clear not only that Mrs Szozda’s thinking and decision-making were heavily guided by Barbara but also that Barbara had a tendency to believe that whatever she thought or wanted her mother thought or wanted too. This is relevant to an assessment of the parts of Barbara’s evidence to the effect that, during 2006 and 2007, Mrs Szozda was able to read and understand documents, weigh up claims of potential beneficiaries and understand issues in relation to company and property administration and that she played an active part in formulating instructions given to Mr Marsh, solicitor, that led to the signing of a will and the September 2006 power of attorney on 28 September 2006 (see paragraphs [75] and [76] below). Barbara and Mrs Szozda discussed such matters at home together – no doubt in the way they had over many years. But Barbara ascribed to her mother views that were really Barbara’s views. Barbara’s suggestions of independent thinking and action by Mrs Szozda cannot be accepted.
The various family members gave evidence about events at two business meetings held at Mr Jirsch’s office in 2006. Evidence about those meetings was also given by Mr Jirsch. A sufficient appreciation of the relevant events can be obtained from Mr Jirsch’s account. It is to his evidence that I now turn.
Mr Jirsch was the family accountant from about 1999. He dealt with the accounting and taxation affairs of various individuals, companies and trusts, including Mrs Szozda herself (but excluding Anna and, from 2005, Mark, Gregory and a company called Epic Real Estate Pty Ltd). Until Andrew’s death, he was the person having principal contact with Mr Jirsch, including in relation to Mrs Szozda’s own affairs.
After Andrew’s death, Mrs Szozda attended Mr Jirsch’s office on several occasions but he has no recollection of having seen her alone. Mr Jirsch refers in his affidavit to meetings with Mrs Szozda alone in the period 2000 to 2002 about matters to do with her pension and to meaningful and intelligent observations made by her. He also gives evidence about events of 2005 and, in particular, a meeting at which various family members were present for the purpose of discussing possible changes to the family trusts. Mrs Szozda and Barbara were among those present and, although he cannot recall precisely what Mrs Szozda said, he remembers her expressing a wish that the trusts continue and that the status quo be maintained.
Mr Jirsch further refers to the fact that, after Andrew’s death in March 2006, “the management of the trustees fell into limbo”. Mr Jirsch was of the opinion that “the company needed to sort a few things out”. He therefore suggested a meeting of all shareholders and beneficiaries and took steps to call such a meeting at his office.
The meeting took place on 16 August 2006. Present were Mrs Szozda, Barbara, Teresa, Mark, Anna, Gregory, Mr Sneddon (a solicitor) and Mr Jirsch. Mark and Anna were made directors of Szozda Holdings. There was consensus on this and no expression of objection. In the course of the meeting, there was acrimony between Barbara and Teresa which, to Mr Jirsch’s observation, upset Mrs Szozda who said, “Stop this”. Other family members remained silent. Mr Jirsch recalls that Mrs Szozda’s capacity to participate in the meeting was not called into question or discussed.
Mr Jirsch gave evidence about a second business meeting at which the same persons (except Mr Sneddon) were present. Evidence about this meeting is given by other witnesses as well. The meeting took place on 16 November 2006. Soon after the meeting started, Anna tabled a medical certificate relating to Mrs Szozda (this was the certificate issued by Dr Lukaszewicz: see paragraph [97] below). Mr Jirsch observed Mrs Szozda to be agitated, in that she appeared nervous and fidgety and was moving around in her chair. The meeting broke up after the certificate was produced, with Anna, Mark and Barbara all referring to powers of attorney granted to them by Mrs Szozda.
In relation to both the meetings mentioned, Mr Jirsch observed Mrs Szozda to respond to questions in a coherent and appropriate manner. When there were heated and emotional exchanges which moved very quickly (dominated by Barbara, Teresa and Anna), Mrs Szozda, to Mr Jirsch’s observation, did not have much input and to a large extent did not participate.
Mr Jirsch says in his affidavit that during the meetings of 16 August 2006 and 16 November 2006, there was insufficient opportunity for him to observe and form a view as to Mrs Szozda’s ability to undertake general and abstract reasoning and to read with comprehension. He did observe, however, that she was well groomed and said nothing to indicate that she did not know anyone in the room. Mr Jirsch said to Mrs Szozda, “Do you remember me?” Mrs Szozda replied, “Of course I do”.
Mr Jirsch saw Mrs Szozda on a few occasions after November 2006 but not after November 2007. She was with Barbara on each such occasion and he did not have sufficient interaction with her to make any comment on her physical and mental functioning.
The evidence of the lay witnesses on both sides (by which I mean all witnesses other than the two solicitors and the three doctors) contains threads of consistency that must be regarded as uncontroversial. Mrs Szozda was, in September 2006, 95 years old. She remained mobile although with some physical infirmity. She was of an independent disposition and, to a large extent, set in her ways. She continued to deal with rents at the boarding house as she had done for many years but did not deal with other properties. She was sometimes vague and forgetful and lapsed into her native tongue in situations in which she would normally have used her second (acquired) language. She sometimes forgot people’s names, including family members. Just when these aspects of general deterioration began to emerge cannot be pinpointed. That is not surprising. Each of us begins to age from the moment of birth and the process is, of its nature, gradual. I think the only conclusion the lay evidence permits is that, as of September 2006, Mrs Szozda exhibited behaviour as I have just outlined that, while not suggestive of any pronounced delusion or obvious mental breakdown, made it clear that she had impaired comprehension and awareness outside the familiar confines of the home and the ordinary running of the boarding house. That this should have been so in a person of that age is scarcely surprising.
The process of assessment called for in these proceedings depends heavily on the medical evidence. Before considering that evidence, however, I should deal with the events surrounding the preparation and execution of the September 2006 power of attorney on 28 September 2006.
The September 2006 power of attorney was prepared by Mr Marsh, a solicitor in sole practice at Strathfield. He had done legal work intermittently for Andrew and the family companies over a number of years. He had prepared a will for Mrs Szozda in 1996.
Contact was made with Mr Marsh in 2006 initially by letter. The letter was handwritten. He assumed when he received it that the letter had been written by Mrs Szozda but later came to think that Barbara had written it and Mrs Szozda had signed it (this is consistent with the interaction between Barbara and Mrs Szozda discussed at paragraph [62] above). The letter referred to a need to change Mrs Szozda’s will so that parts of the Neutral Bay property would pass to the grandchildren and Barbara could not be forced to leave during her lifetime. There was subsequent contact between Mr Marsh and Barabara by telephone and letter and at meetings at his office in the course of which Mr Marsh obtained information about assets and how they were held, including through family trusts (the Neutral Bay property itself was a trust asset). The discussions made it clear to him that Mrs Szozda’s wishes could not be accommodated in any simple way.
Mr Marsh prepared wills and powers of attorney in final draft for both Mrs Szozda and Barbara and sent them to Barbara by post. Both women then attended at Mr Marsh’s office at Strathfield by appointment on 28 September 2006. This was the first time that Mrs Szozda had been in contact with Mr Marsh about the relevant matters. She had not, in any first hand way, been in touch with Mr Marsh during the process that caused him to draft the documents in the form presented for signing on 28 September 2006; and it is likely that what was conveyed to him by Barbara as the wish of Mrs Szozda corresponded with the wish of Barbara (see paragraph [62] above).
When Mrs Szozda and Barbara arrived at the office, Mr Marsh sat them down by themselves and gave them their respective documents to read. He then saw Mrs Szozda alone. He began by offering condolences on Andrew’s death, to which Mrs Szozda reacted in an emotional way. He then dealt with the will, first by reading it aloud to her. He deposes to the following conversation in his affidavit:
“PM:Barbara has explained to me that you want to make sure that both you and Barbara can continue to reside at Neutral Bay and operate the business at Neutral Bay for as long as you choose. In your Will you have left all of your estate to Barbara and it is only if she died before you that your estate will pass to Mark, Gregory and Anna.
AS:Yes Mr Marsh. That’s what I want.
PM:I know you had wanted to leave two bedrooms in the Neutral Bay property to your grandchildren. As I explained to Barbara, you do not own Neutral Bay and there is only a single title of the whole property. This means it is not possible to make separate gifts of a flat to your grandchildren.
AS:I understand that. I want to make sure that Barbara can remain at Neutral Bay for as long as she likes and that it can’t be sold without her consent.
PM:Mrs Szozda, the will I have prepared seeks to achieve this.
AS:Good. That is what I want Mr Marsh.”
Mr Marsh then dealt with the power of attorney. He read aloud to Mrs Szozda the five operative clauses. He did not read the notes and certificates. He deposes to the following conversation:
“PM:This is a general power. Barbara can take any action you could do as a matter of law.
AS:Yes, I want Barbara to look after my affairs.
PM:This will continue to operate even if you lose capacity to understand it.
AS: Yes Mr Marsh. I am not getting any younger.”
Mr Marsh, according to his affidavit, then said to Mrs Szozda:
“The power of attorney allows Barbara or, if she was unable, Mark and me to act as your Attorney in the event that you are unable to manage your own affairs. Mrs Szozda, because you want me to be one of your attorney in the event that Barbara is not able to act as your attorney, I will need to have my colleague Mr Erickson, explain the document to you.”
Mr Marsh accepted in cross-examination that there may well have been further conversation that he does not recall. In fact, Mr Marsh accepted that he had no real recollection of the meeting except as gathered later from his file notes (which are quite detailed) and that his account of what was said and done was based very largely on his general practice in such matters. He was cross-examined about aspects of that practice:
“Q. And I take it that part of your usual practice was not to, in explaining a power of attorney, was not to take a step to test the client's memory of the explanation you'd given?
A. No, it's not part of my usual practice.
Q. Right, so you are agreeing with me that that's not part of your usual practice?
A. That's the case, yes.
Q. Yes?
A. Well, sorry, it's certainly not part of, part of my usual practice, particularly where there's nothing to indicate the need to test the client's memory.
Q. Yes; and do you agree with me that without testing that Mrs Szozda understood each element of your explanation you couldn't be sure that she understood your explanation?
A. No, I, I came away from the conference without any difficulty in forming the view that Mrs Szozda understood both her will and power of attorney.
Q. Right; and that's on the basis that you followed your usual practice and you answered any questions that she may have asked?
A. And her demeanour in our conversation on the day.
Q. Yes; would you agree with me that without discussing with Mrs Szozda what particular property she held or powers over property she held and the sorts of transactions that the attorney could undertake using the power of attorney, you could not be sure that she understood the consequences and effects of the power of attorney, would you agree with that?
A. No, I don't agree with that. If you mean, if you mean by that did she have an understanding of the mechanics of the way in which the power of attorney might be used within, within the context of Szozda Holdings Pty Ltd and the exercise of the trust, that might be the case.
Q. Right--
A. But she understood that she was vesting custody of her affairs in Barbara's hands. She understood that.
. . .
Q. Would you agree would with me you couldn't be sure that Aniela understood that by signing the power of attorney that Barbara could exercise a power of appointment under a discretionary trust?
A. I think she understood it precisely, I think that was her desire that control of Szozda Holdings Pty Ltd would be in Barbara's hands, that is what she was seeking to achieve.
Q. And if you followed your usual practice Mr Marsh, there was no way Mrs Szozda would have understood that, would she?
A. Well, umm, that is not my opinion, no.
Q. Your usual practice, I think you just explained what it was in terms of the third sentence within paragraph 1?
A. Yes.
Q. And that didn't involve elaborating on the sorts of acts a power of attorney could do, did it?
A. Did I take Mrs Szozda senior to the manner in which or the occasion on which Barbara might exercise her appointment in relation to Szozda Holdings Pty Ltd, I did not, no.
Q. The same with Trishwa?
A. Same with Trishwa, yes.
Q. Would you agree with me that without taking Mrs Szozda to those matters you couldn't be sure she understood that Barbara could do all those things?
A. I don't agree with you, no, I made it perfectly clear to Mrs Szozda that the appointment of Barbara and the gift of her estate to Barbara effectively meant that she was resting control of the trustees or leaving control of the trustees in Barbara's hands.
Q. You say that on the basis of following your usual practice?
A. No I say that on the basis of that is what occurred on the day, and Mrs Szozda told me quite definitely that is what she wanted.
Q. Would you agree with me that without testing Aniela's, that is Mrs Szozda's short-term memory, you couldn't be sure she remembered your explanation when she signed the power of attorney?
A. Well I didn't test her short-term memory so I had no basis on which I could be sure or otherwise but again, nothing occurred in the conference to indicate to me that she would lose her recollection within the space of 15 or 20 minutes.”

After Mr Marsh had spoken alone with Mrs Szozda, he arranged for her to see Mr Eriksen whose office is in the same building (according to Mr Eriksen, both Mrs Szozda and Barbara were present with him). Arrangements had been made in advance for Mr Eriksen to be on hand to explain the power of attorney to Mrs Szozda with a view to his giving the statutory certificate of explanation required by the Powers of Attorney Act for an enduring power of attorney. Mr Eriksen set out in a witness statement his usual practice in such matters:
“5.I have a usual practice in relation to an attendance on a person for the purpose of explaining to them the effect of grating a power of attorney. My usual practice is to use the information sheet attached to the general form of power of attorney as a check-list. I explain each of the matters listed in the information sheet. I also explain that where the power of attorney is without restriction, the attorney will effectively have power to do anything in respect of a donor’s affairs.
6.I also ask the person that I am attending on general questions in relation to their life circumstances so as to form a view as to whether they are in full possession of their faculties. Such questions relate to a person’s date of birth, how old they are, how long they have lived at their present residence, where they lived previously, how many children they have and the like. These questions are also designed to test a person’s memory.”
Mr Eriksen has no reason to think that he departed from this practice in the case of Mrs Szozda. His witness statement records one thing said by him to her about the effect of the power of attorney:
“It is important that you understand that this is an enduring power of attorney. That means that if you become unable to look after your affairs, the power of attorney will still be effective and your attorney will be able to control your affairs.”
Mrs Szozda’s response was:
“I understand that.”
Mr Eriksen accepted in cross-examination that he did not do anything to test Mrs Szozda’s understanding of the explanation he had given her and that he took at face value her statement that she understood what he had said. Nor did he expand his explanation to make it clear that the power extended to matters such as the appointment of an alternate director or the exercise of a power of appointment. He took the view that he did not need to “particularise each and every thing that Mrs Szozda could do”. Also, Mr Eriksen was not worried by the presence of Barbara (the principal donee of the power) during his meeting with Mrs Szozda as he did not think that Barbara was exercising any influence.
Both Mr Marsh and Mr Eriksen gave evidence of having been satisfied after speaking with Mrs Szozda on 28 September 2006 that she understood the import of the power of attorney she was about to sign.
I turn now to the medical evidence. Before referring to the respective diagnoses and opinions, I should say something about the way in which Mrs Szozda came to see the three doctors who gave evidence, none of whom was her regular general practitioner (she was a patient of Dr Kharwadkar and, to some extent, Dr Judge at the Big Bear Medical Centre, Neutral Bay).
Dr Lukaszewicz is a Polish-speaking general practitioner at Ashfield. She saw Mrs Szozda on four occasions: 16 January 2006, 5 April 2006, 25 September 2006 and 10 February 2007. Dr Lukaszewicz was already acquainted with Mrs Szozda and her family, having been a client of the Szozda family travel agency and a member of the Sydney Polish community in which the family were involved (Dr Lukaszewicz has known them since she came from Poland in 1980). Teresa lives at Burwood. Dr Lukaszewicz is her regular general practitioner. Dr Lukaszewicz first saw Mrs Szozda as a patient when Teresa brought Mrs Szozda to her rooms at nearby Ashfield. On each of the four occasions on which Mrs Szozda saw Dr Lukaszewicz, Teresa was present throughout the consultation. Dr Lukaszewicz, Mrs Szozda and Teresa spoke in Polish on each occasion.
Dr Roberts, a specialist psychiatrist, saw Mrs Szozda on referral by Dr Lukaszewicz. He saw her three times: on 23 October 2006, 7 November 2006 and 21 February 2007. Teresa was present during each visit of Mrs Szozda to Dr Roberts. All communication by Dr Roberts was in English, but with Teresa sometimes translating for Mrs Szozda what Dr Roberts said and translating for Dr Roberts replies given by Mrs Szozda in Polish.
Dr Ogle saw Mrs Szozda on referral from Dr Kharwadkar, Mrs Szozda’s regular doctor, but under arrangements made by Barbara through the North Shore Aged Care Assessment Team with which Barbara was familiar through her work as a hospital social worker. Barbara accompanied Mrs Szozda throughout the consultation with Dr Ogle. The consultation was in English, but with Polish translation by Barbara for Mrs Szozda as needed, and translation also of any replies by Mrs Szozda in Polish. Dr Ogle is a specialist in geriatric medicine.
I now address the evidence of the three doctors in turn.
Mrs Szozda was taken by Teresa to Dr Lukaszewicz on 16 January 2006 because of dizziness, joint pain and forgetfulness. It was Teresa who explained the symptoms and complaints. Dr Lukaszewicz observed that Mrs Szozda looked weak and that her movements were slow; also that she was unresponsive and did not want to talk. No examination or testing relevant to assessment of Mrs Szozda’s mental capacity was undertaken on that occasion. Medication for dizziness and joint pains was prescribed.
Mrs Szozda’s second visit to Dr Lukaszewicz (5 April 2006) lasted between 30 minutes and one hour. Mrs Szozda did not respond to Dr Lukaszewicz’s opening question whether she remembered having been seen by the doctor in January. Teresa told Dr Lukaszewicz that Mrs Szozda was suffering from dizziness and joint pain and that her memory was impaired. Because Mrs Szozda was unresponsive, Dr Lukaszewicz decided to give her a Folstein’s Minimental State Examination (“FMSE” also known as “MMSE”), a memory test used to assist in determining a patient’s mental capacity. This is generally regarded as a screening tool to judge the need for further investigation but does have a degree of diagnostic relevance.
In the course of the test, Mrs Szozda was unable to state her date of birth or where she lived (except “Australia”), could not copy a drawing of a hexagon, was unable to recall three familiar physical objects a short time after being shown them and could not count backwards from 7 to 1 after the doctor had counted aloud from 1 to 7. The score was 10 out of 30 which Dr Lukaszewicz interpreted as indicating moderate to severe dementia. It was put to Dr Lukaszewicz that a person not trying but otherwise quite capable could achieve a low score. She accepted this but confirmed a recollection that, to her observation, Mrs Szozda was trying.
Dr Lukaszewicz’s own observation was that, as at 5 April 2006, Mrs Szozda’s physical features and mental capacity had “significantly declined” since 16 January 2006. On the whole of her observation, Dr Lukaszewicz formed a view that Mrs Szozda had dementia and showed clear signs of it.
Dr Lukaszewicz’s consultation with Mrs Szozda on 25 September 2006 was short. Mrs Szozda did not respond to Dr Lukaszewicz’s greeting or in any other way. Dr Lukaszewicz wrote a referral to Dr Roberts. That was the only outcome of the consultation. Dr Lukaszewicz did not examine or assess Mrs Szozda.
On 10 February 2007, Dr Lukaszewicz saw Mrs Szozda for about twenty minutes. Mrs Szozda was unsteady on her feet. She did not show that she recognised Dr Lukaszewicz. The opinion of Dr Lukaszewicz is that Mrs Szozda’s mental capacity was then further diminished. There is no reference in the affidavit of Dr Lukaszewicz to any examination on that occasion.
Dr Lukaszewicz, at Teresa’s request, issued a certificate to the effect that Mrs Szozda was suffering from dementia as at April 2006 and “is not capable of making business or legal decisions due to her condition”. The certificate is undated and Dr Lukaszewicz does not recall whether she signed it before or after she received Dr Roberts’ opinion. She conceded that the only examination she made was on 5 April 2006.
Dr Roberts examined Mrs Szozda on 23 October 2006. He conducted an MMSE (which he described as both a screening and a diagnostic tool). This was administered by him in English, but with Teresa sometimes translating his questions into Polish. The answers were in both languages. Teresa again translated. The score was 17 out of 30. In particular, Mrs Szozda could not recall the current date or even the month or year, but could recall the day of the week. Dr Roberts later received pathology results and noted that the report of the MRI of the brain referred to enlargement of ventricles and the cerebral sulci and fissures which he considered clear, obvious and significant. There was also reference to irregularly shaped diffuse peri-ventricular high T2 signals representing ischaemic changes.
Dr Roberts saw Mrs Szozda again on 7 November 2006. The consultation was short. Dr Roberts’ notes of this occasion were uninformative and he has no recollection independent of them. He did, however, write to Dr Lukaszewicz on 10 November 2006. He reported the MMSE score and the pathology findings. In relation to the latter, he said:
“There is clearly an organic basis for the diagnosis of dementia.”
A diagnosis of dementia was thus confirmed.
Dr Roberts saw Mrs Szozda for the third and last time on 21 February 2007. He noted that her condition had deteriorated significantly. He also said in his affidavit:
“ (b)Theresa Szozda informed me that there was a concern that Mrs Szozda appeared to have no idea as to what documents she had signed;
(c)subsequently, Mrs Szozda said she had signed some documents but she was confused in regard to who had asked her to sign documents. She commented that ‘Anya had wanted to take everything from her so she could relax’ and ‘I didn’t see the documents, I didn’t sign, I want all running like before, like until my son was alive’. At this point, she denied signing anything; and
(d)Mrs Szozda appeared to be agitated to the point of incoherence and it was not possible to obtain from her a reliable statement as to whether she had in fact signed documents. In my opinion, this was the catastrophic reaction of Goldstein to which I referred to above.”
The reference to “the catastrophic reaction of Goldstein” is explained elsewhere in Dr Roberts’ report as agitation to the point of incoherence that occurs in dementia patients when exposed to situations with which they cannot cope. They are likely to become anxious, agitated, sullen, angry and evasive.
Dr Ogle was, in 2007, the Director of Aged Care and Rehabilitation Medicine at Royal North Shore Hospital. She saw Mrs Szozda on one occasion, 7 March 2007. Dr Ogle’s report admitted into evidence referred to several matters emerging from the consultation: Mrs Szozda’s attitude and behaviour during the consultation were appropriate and, although she was a little upset about Andrew’s death, she did not appear to be clinically depressed. Mrs Szozda scored 15 out of 30 on an MMSE. She could not recall the date or the season, did not know which State or suburb she was in, could recall only the first of the seven numbers in backwards counting, could not recall three common objects shown to her, could not fold a sheet of paper three times and, when asked to write a sentence, wrote a mixture of English and Polish which did not seem to make sense (Barbara no doubt contributed to this conclusion).
Dr Ogle said in her first statement that, as at 7 March 2007, she was of the opinion that Mrs Szozda could read and understand short passages of text and provide simple instructions, could understand the nature of her property holdings and the concept of a power of attorney, was able to respond coherently to questions in a way that reflected understanding, retained long-term memory and had some impairment in relation to orientation, concentration, short term memory/recall and task sequencing.
Dr Ogle made a second statement after being more fully informed about the issues in the proceedings. She there expressed an opinion that at 7 March 2007, Mrs Szozda may not have understood “the finer detail of a power of attorney” but “would have been able to understand the major purpose and intent of the documents”; also that, despite cognitive impairment during 2006 and particular episodes in that year consistent with a low level of cognitive capacity, this was not inconsistent with “the existence of a base-line level of capacity throughout 2006” carrying with it the ability to understand (if read out to her) the 28 September 2006 power of attorney and the revocation of 23 November 2006.
At the time of her examination, Dr Ogle did not know that there was a dispute over a power of attorney. She was not specifically asked to assess capacity to give a power of attorney. She did, however, take some steps to ascertain Mrs Szozda’s property. Her report records the following conversation:
“Me:What property do you have?
AS:      I have flats in Neutral Bay and Western Sydney.
Me:      Who manages the properties?
AS:I manage Neutral Bay. My son used to manage the others. Now Mark, my grandson manages the Western suburbs one.
Me:Do you want Barbara to help you run that, and be your power of attorney? That would mean that she would sign on your behalf. At the moment Barbara could do it in consultation. But later if you were unable to sign, Barbara could do it for you.
AS:Yes. I want my daughter to help me. [In English]
Me:Do you want your grandson Mark to run your affairs?
AS:No. I want Barbara. But I want Mark if anything happened to Barbara.
Me:      Are you sure?
AS:      Yes I want Barbara to look after me.”
Dr Ogle accepted in cross-examination that Mrs Szozda’s responses were over-simplistic:
“Q. If you assume for the moment that Mrs Szozda had a 50 per cent interest in a company which owned three commercial properties, one at Neutral Bay, one at Kogarah and one at Burwood, the answer she gave was, at best, partial?
A. It certainly wasn't detailed in great detail.
Q. And I suggest if you make the assumption that I gave to you it didn't accurately describe her property?
A. Well it seemed to be sufficient medically, it is probably not sufficient legally.
Q. Thank you. Do you agree with me that that conversation you had with Mrs Szozda indicates nothing about her ability to understand financial issues and issues relating to the administration of the company, running the properties?
A. Yes.”
And later:
“Q. You would agree with me that the explanation you gave of the power of attorney would not have conveyed to Mrs Szozda that Barbara would exercise all the things that she could lawfully do, including exercising her powers as a shareholder in a family company?
A. We didn't go through that.
Q. And you would agree with me that on the basis of your explanation Mrs Szozda wouldn't have understood that?
A. That is hard for me to say.
Q. You couldn't be sure of that, could you?
A. No.
Q. I suggest to you that her response "yes I want Barbara to help me" is not a sufficient basis to form an opinion that she understood that Barbara could exercise all of her powers as a shareholder, do you agree with that?
A. Yes.”
Dr Ogle also accepted that there is a very significant difference between giving instructions for the running of commercial properties and giving instructions for the running of companies and discretionary trusts; and that Mrs Szozda would have been unable, as at 28 September 2006, to provide instructions of the latter type. She also accepted that Mrs Szozda’s statement, “Yes, I want Barbara to look after me”, was consistent with a wish about physical needs but, at the time, took this to include running the household, running her affairs and looking after her, although this was not particularly tested.
Dr Ogle was taken to the following passage in Dr Roberts’ cross-examination:
“If you are looking for decisions in regard to, for example, creating a Power of Attorney you are looking to the future and conducting financial affairs or predicting on extrapolating what your business decisions will make that requires, from a psychiatric viewpoint, a greater level of understanding than is required for most Wills so that is the difference.”
Dr Ogle expressed general agreement with this. She also expressed agreement with the following part of Dr Roberts’ cross-examination:
“A. Again, we are faced with the same problem with the MMSE, it's not an all or nothing affair. If a person becomes confused when they are taken from their normal environment this is highly indicative of a significant degree of dementia but you could not say that because such confusion occurs automatically they could not make a Will or they could not understand a Power of Attorney, but it is a very significant sign of dementia that such confusion would occur.”
All three medical witnesses expressed views on the interactions between Mrs Szozda and Mr Marsh and Mr Eriksen as recorded in the solicitors’ affidavits.
Dr Lukaszewicz expressed an opinion that, despite what Mr Marsh and Mr Eriksen said about Mrs Szozda and her capacity to understand, Mrs Szozda in reality did not have the mental capacity to know what she was doing and there was no possibility that she was capable of understanding a legal document such as a power of attorney or a will. The fact that Mrs Szozda made the positive responses she did to the solicitors does not alter that opinion. Dr Lukaszewicz says that such statements are consistent with spontaneous responses not indicative of understanding.
Dr Roberts’ opinion of the responses made by Mrs Szozda to the two solicitors may be gathered from the following part of his cross-examination:
“Q. I don't want to unless it's necessary take you through those one at a time, but in substance and correct me if I am wrong, your evidence is to the effect that solicitors who explained the powers of attorney and the revocations and their evidence of what occurred didn't make any difference to your opinion because in essence it could have been a learned response, is that fair?
A. It goes a little bit back to the evidence I gave before, is that in a person who comes from an educated middle European culture and any person who is coming from such a socio-economic group wherever, there is certain conversational and behavioural skills that may be present only in the presence of significant dementia and platitudinous responses are better preserved in people who are of high intellect and who are of better education and it may be very very difficult for a solicitor in spite of his best efforts, to undertake an assessment, to differentiate from an intelligent educated person with platitudinous responses and sort that out from someone not understanding and certainly from the psychiatric viewpoint if I am asked to do an assessment, I would go beyond for example explaining the power of attorney in a legalistic sense because I am not legal but I indicate very very comprehensively the implications of a general power of attorney so there is no doubt that the person understands. I don't simply say that if you give a power of attorney to X to a person X they can act as you would act in law but I discuss all the ramifications of how they can write cheques on your account, spend your money, dispose of your property and do so as if it was you doing it yourself and I think if you, very often as you go down the list of the many ramifications of a general power of attorney you get a different response than if you say well look, X can do whatever you can do according to law because I think that's a concept that is not necessarily one that a layperson would have familiarity with.
Q. That may be a counsel of perfection the way in which you do it?
A. Yes, I think that for the very simply reason that if dementia, if a person's understanding is clearly absent anyone can assist that but just as going back to what you raise with the MMSE, that you can get a very much higher MMSE in an educated person who is quite demented and this is the problem that I am not saying was faced by this solicitor in this case but is a situation that I have come across that once you go down the list in layman's terms as to what the implications of the acts of signing a power of attorney are the answers you get and the impressions that you get are very different.
Q. Stepping back a little the possibilities are in such a circumstance where the solicitor is explaining the documents on the one hand there is a platitudinous response and on the other hand a possibility that the response does in fact reflect an understanding and acceptance of what you are explaining; those are the possibilities in any person?
A. Yes certainly they are.
Q. And an important aspect of trying to distinguish between those possibilities and decide which one is prevalent, particularly if there is a suspicion of dementia to the level of that capacity, would be the tone of the voice in which the answers were given whether they were flat or whether there was appropriate inflexion?
A. No you can't form an opinion of understanding on the tone of the voice, you have to go to more substantial things than that. I know elsewhere there has been a comment on body language. I don't think you can judge necessarily body language as meaning anything and I think once you accept the proposition that a response could be platitudinous, unless you address that concern at the time the response is made you have no way of establishing whether the response is platitudinous or not so if you are saying to me could the response be platitudinous, yes, could the response be reflective of an understanding, yes. Which one is it? We will never know because the answer would require that you address these two possibilities at the time the response was given and you can't go back especially when dealing with dementia retrospectively and say four months ago when you were asked this question did you really understand the concept and the implications of the document you were signing?
Q. Quite so but does that go to the extent that you would reject as factors relevant to the assessment observations of the person's demeanour and emotion and level of inflexion and so forth at the time of the interview?
A. No I would not reject; when you do a mental status examination of a patient you take everything into account and you form a diagnostic impression but you cannot say that because there was a certain emotion present or there was a certain tone of voice or certain affect that these three things are indicative of cognitive competence because again a pleasant tone of voice, a friendly manner, a good presentation, talking here in terms of a personal coming across, all of these things are consistent with old memory in a well educated person for whom manners are important.
Q. But nonetheless the observations at the time are a factor you need to take into account in deciding between the two albeit that more detailed questioning of the type which you conduct yourself is another way of doing it?
A. I can understand that a person who is perhaps not psychiatrically sophisticated could perhaps not be in a position to be aware simply because of a presentation that may in fact mask quite significant pathology.”

In summary, Dr Roberts did not think that the observations of Mr Marsh and Mr Eriksen in any way called into question the conclusion that Mrs Szozda was suffering from dementia and did not have the capacity to make any but the simplest of decisions on 28 September 2006.
Dr Ogle, in her second report, agreed that the form of some of Mrs Szozda’s responses as recorded by Mr Marsh and Mr Eriksen are consistent with “platitudes” or “learned responses”, that is, instinctive reactions of agreement and politeness rather than a reflection of insightful appreciation of what is being answered. But, as Dr Ogle pointed out, they are also consistent with an understanding of the matters responded to, particularly as parts of the responses were spontaneous rather that reactive repetition (particularly the statement that she did not wish the Neutral Bay property to be sold without Barbara’s consent and the statement, “I am not getting any younger”).
Both Dr Roberts and Dr Ogle accepted that it may be difficult for a solicitor, despite his or her best efforts at assessment, to distinguish mere platitudes from responses based on true understanding; and that to be sure that someone understands a general power of attorney it would be necessary to discuss the ramifications (such as spending the person’s money and disposing of the person’s property) as distinct from merely saying that the attorney can do whatever the person can do.
As to Mrs Szozda’s activities, Dr Roberts expressed an opinion (with which Dr Ogle agreed) that collecting and banking of the boarding house rents and travelling independently on public transport were not inconsistent with a conclusion of dementia and lack of relevant capacity, being “old learning” skills embedded by experience which would be among the last to fail as deterioration progressed. Politeness and grooming are similar.
Having surveyed the evidence relevant to the question of Mrs Szozda’s capacity at 28 September 2006, I proceed to state findings:
1.Each of Mr Marsh and Mr Eriksen explained to Mrs Szozda in broad terms the general nature of the general and enduring power of attorney – in essence, that Barbara (or, in default, Mr Marsh and Mark together) would have authority to do anything and everything that Mrs Szozda herself could do. Each received from Mrs Szozda a generalised statement of acceptance or understanding of what was said to her. Neither, however, referred to any particular things that the attorney could do or to particular aspects of the family companies and family trusts in relation to which the attorney could act; nor did either probe Mrs Szozda by, for example, asking her to repeat what had been said to her or putting questions about aspects of her property and affairs answers to which might have formed a basis for specific questions or comments designed to ensure that an informed understanding had been received and was held.
2.Each of Mr Marsh and Mr Eriksen noted Mrs Szozda’s good grooming and presentation and her polite manner and drew from this an inference of attentiveness to surroundings.
3.The evidence of the solicitors was conscientiously and thoughtfully given but does not dispel the possibility that, on 28 September 2006, Mrs Szozda did not understand the nature and import of a general and enduring power of attorney or the meaning and implications of the power of attorney document that she signed on that day.
4.The family members – including Barbara – had observed a mental decline in Mrs Szozda even before Andrew’s death in March 2006 which became more pronounced thereafter. Mrs Szozda – and also Barbara – had relied heavily on Andrew for guidance in the family business affairs and as a stable point of reference for business matters. They were left with a feeling of isolation in relation to business matters after his death.
5.At least from the start of 2006 and probably earlier, Mrs Szozda was vague and forgetful and lapsed into Polish when she would normally have spoken English; and, while she continued competently with routine matters concerning the boarding house, she could not otherwise deal with matters related to the family properties, companies and trusts. Barbara’s evidence to the effect that Mrs Szozda remained active in commercial decision-making in 2006 and 2007 cannot be accepted: she and Barbara together addressed such matters, and opinions and conclusions of Mrs Szozda expressed by Mrs Szozda were in very large measure those of Barbara, albeit that they may have been reached after discussion between mother and daughter (see paragraph [62] above). Mrs Szozda clung to old ways, was resistant to change and became obstinate when change was proposed (see the second dot point at paragraph [59] above). As she said to Dr Roberts (see paragraph [101] above), “I want all running like before, like until my son was alive”.
6.As stated at paragraph [72] above, the position at September 2006 was that, on the lay evidence of family and acquaintances, Mrs Szozda exhibited behaviour that, while not suggestive of any pronounced delusion or obvious mental breakdown, made it clear that she had impaired comprehension and awareness outside the familiar confines of the home and the running of the boarding house.
7.Dr Lukaszewicz’s evidence is unequivocal. When she saw Mrs Szozda and tested her on 5 April 2006, Dr Lukaszewicz formed a clear opinion that Mrs Szozda had dementia and, as a result, was not capable of making business or legal decisions. Dr Lukaszewicz, it should be emphasised, had seen Mrs Szozda in social and similar settings over a long period, so had a basis for comparisons. She also had the advantage of communicating with Mrs Szozda in her first language.
8.Dr Roberts also made a clear diagnosis of dementia in late October and early November 2006 consistent with incapacity to make anything but an extremely simple decision. He adhered to that opinion under close cross-examination.
9.Dr Ogle’s initial assessment (as at 7 March 2007) was that Mrs Szozda exhibited a basic level of understanding but Dr Ogle ultimately expressed views corresponding, in relevant respects, with those of Dr Roberts (see paragraphs [110] and [111] above). In any event, the basic level of understanding initially described was not, in my opinion, sufficient to support an informed and insightful appreciation of the nature, implications and ramifications of a general and enduring power of attorney or the wide range of acts that could be performed under it.
10.In the end, the medical evidence as a whole was firmly in support of the proposition that, as at 28 September 2006, Mrs Szozda did not have the mental capacity to understand the nature, implications and far-reaching ramifications of a general and enduring power of attorney and the various things it allowed an attorney to do and would not have understood them even if they had been spelled out to her by the solicitors in the most comprehensive and punctilious way.
The overall conclusion is therefore fourfold: first, that nothing in the evidence shows that Mrs Szozda was informed, on 28 September 2006, of the full meaning and significance of the power of attorney she was about to sign (see item 1 at paragraph [119] above); second, that Mrs Szozda’s statements and conduct in the presence of the solicitors on that day suggesting comprehension and acceptance do not establish understanding by her of the nature, implications and far-reaching ramifications of the power of attorney document she was signing and the several acts the attorneys were authorised to do; third, that Mrs Szozda’s cognitive incapacity on 28 September 2006 was such that she could not have understood the nature, implications and far-reaching ramifications of the appointment under the general and enduring power of attorney document she signed or the range of circumstances, affecting herself and her property, in which the attorney would be empowered to act; and, fourth, that, according to the applicable general law principles, Mrs Szozda did not possess, on 28 September 2006, the capacity necessary to enable her to grant a general power of attorney in the form of the document she signed on that day.
I should add here the observation that there is no explanation for the lack of evidence from Dr Kharwadkar, Mrs Szozda’s usual treating doctor. Medical records of Dr Kharwadkar of November and December 2006 concerning Mrs Szozda refer to “mini mental state examination form” and “mental state examination form”, from which it appears likely that Dr Kharwadkar administered a MMSE test on one or perhaps two occasions. I draw the inference that Barbara’s failure to call Dr Kharwadkar lends support to my overall conclusion.
The general law principles to which I have referred, applied in relation to the findings and overall conclusion I have stated, lead me to hold that the September 2006 power of attorney is void: see paragraph [36] above.
If that position had not been reached and mental incapacity of Mrs Szozda had not caused the September 2006 power of attorney to be void, a question relevant to the operation of s 17 of the Powers of Attorney Act would have arisen: was the particular act in issue of such a nature that it was beyond Mrs Szozda’s understanding through mental incapacity on 28 September 2006?
In this case, the particular act that is relevant, viewed narrowly, is the act of delegating to a proxy the power to attend and vote at any company meeting. That was the act performed by Barbara, purportedly pursuant to the September 2006 power of attorney, when she signed the 30 July 2008 proxy in favour of Mr Marsh. But this characterization is, I think too simplistic and confined. An understanding of such a delegation cannot be divorced from an understanding of the things that the delegate (proxy) may do. The relevant understanding therefore extends to things upon which votes may be cast at a meeting of the members of the company and the implications for the donor of those things, since that is the matter that is put into the control of the attorney by means of the conferral of authority to appoint a proxy. An appreciation of the ability of a proxy to make decisions on matters such as changing the composition of the board of directors, declaring dividends and changing the company’s constitution – these together with other things that can be procured or influenced by voting at general meetings – must lie sufficiently within a shareholder’s understanding to warrant a conclusion that the shareholder understands the nature of the act of appointing a proxy.
The findings and overall conclusion already recorded cause me to be of the opinion that, because of mental incapacity on 28 September 2006, the nature of the act of appointing a proxy to attend and vote at a meeting of a company’s shareholders was beyond Mrs Szozda’s understanding at that time. It follows that, if, contrary to my principal conclusion, the September 2006 power of attorney is not void, the authority created by it was, by operation of s 17 of the Powers of Attorney Act, reduced so that it did not authorize Barbara to appoint Mr Marsh to be Mrs Szozda’s proxy for the purposes of the particular meeting of Szozda Holdings Pty Ltd in July 2008.

It remains to consider certain further matters. The first of them is a submission made by counsel for Barbara that the proceedings are improperly or incompletely constituted and that, even though the conclusion on the substantive question is as stated, Mark, Anna and Gregory are not entitled to declaratory relief. At the centre of the submission is the proposition that Mrs Szozda herself is a necessary party and that, in her absence, Mark, Anna and Gregory cannot have, as against Barbara, the declaratory relief they seek.
The answer to this is twofold: first and in the abstract, it cannot be said that any proceeding in which the authority of an agent is put in issue is improperly or incompletely constituted just because the principal is not a party; and second and at a practical level, that Barbara is precluded, in these particular proceedings, from taking the particular point. I say this because, at an early interlocutory stage when the parties were as they now are, Barbara, by her counsel, gave to the court (as did Mr Codd, the second defendant) an undertaking that “in the event that the court finds that the proxy purportedly given to Paul Christopher Marsh on 30 July 2008 is invalid, they will consent to an order being made in accordance with order 1 of the summons filed in these proceedings on 12 August 2008”. Paragraph 1 of the summons claimed:
“A declaration that each of the resolutions purportedly passed at the meeting of Damien Tudehope and Paul Marsh at the offices of Jirsch Reilly Tang Pty Limited, Suite 405, 83 York Street [sic] in the State of New South Wales at 4.18pm on 31 July 2008 is invalid.”
I am of the opinion that Barbara, having given this undertaking on 22 August 2008 – ten days after the proceedings were commenced – and having thereafter allowed the proceedings to continue without objection as to the way in which they were constituted until just before the commencement of the hearing more than 18 months later, cannot properly make the objection she seeks to make. The court has, in the proceedings so constituted, made a finding of the kind relevant to Barbara’s undertaking to the court. She must now perform that undertaking.
Mark, Anna and Gregory likewise raise a matter of parties. It relates to the claim by Barbara in her cross-claim for a declaration that the 2004 power of attorney and the March 2006 power of attorney have been revoked and are no longer effective. They say that Barbara lacks standing to make this claim.
In view of my conclusions regarding the September 2006 power of attorney, Barbara is obviously not entitled to any declaration of validity or effectiveness in respect of the September 2006 power of attorney. The basis on which such a declaration would have been supported (had the facts justified it) is, as Barbara’s counsel pointed out, that suggested by Hodgson JA (with whom Mason P and Davies AJA agreed) in Angliss v Urquhart [2002] NSWCA 256; (2001) 11 BPR 20,765 at [32] and [33]:
“32 It is convenient to consider first the claim by the plaintiffs for declarations as to whether their various appointments continue in force. It is important to note that the third defendant’s application did not seek to make out a case that these claims had no reasonable basis. It might have been possible to do so, because in my opinion the claims depend upon it being established that subsequent purported revocations of the appointment are void, it being insufficient to establish that they are voidable. If the revocations were merely voidable, they take effect unless and until someone with standing seeks to set them aside; and, in accordance with the primary judge’s findings, the plaintiffs would have no standing to do this. To make out that the revocations are void would require quite extreme deficiency in the understanding of the third defendant (see Gibbons v. Wright (1954) 91 CLR 423), and having regard to the evidence put on by the first defendant and the third defendant, it may well be that the plaintiffs do not have plausible evidence of such extreme deficiency of understanding. However, since the application was not directed to this question, there was no need for the plaintiffs to put on their evidence in the applications, and there was no basis for the primary judge to strike out the claims on the basis that they had no reasonable foundation.
33 So what the primary judge was faced with on this aspect was a claim by the plaintiffs that they still had the authority and responsibility of being the third defendant’s attorneys and guardian, in circumstances where it was not shown they did not have reasonable grounds for making that claim. I think persons in the position of the plaintiffs have an interest in knowing whether or not they still have such authority and responsibilities: they may quite properly feel an obligation to exercise the authorities if they still have them; and it is conceivable that they could later be subjected to some liability if, having the authority to act, they negligently or otherwise improperly fail to do so.”

Barbara could assert this kind of interest in the question whether the September 2006 power of attorney in her favour is valid. But once it is recognised that that power of attorney is not valid, Barbara no longer has any relevant interest that will sustain her claims concerning the status of the 2004 power of attorney and the March 2006 power of attorney. She was not a donee of either of those powers. Those powers of attorney have ramifications for the person ostensibly conferring authority under them, the persons on whom authority is ostensibly conferred and anyone upon or in relation to whom the latter persons purport to exercise the authority. Barbara certainly does not fall into the first and second categories and does not obviously fall into the third.
The position regarding Barbara’s claims would be the same if the conclusion in relation to the September 2006 power of attorney were merely that s 17 of the Powers of Attorney Act operated to exclude from its scope the authority to appoint Mr Marsh as Mrs Szozda’s proxy for the purposes of the particular meeting in July 2008.

There is again a practical point. It is of particular significance. The court noted on 22 August 2008 an undertaking as follows:
“The undertaking of the first and second plaintiffs [ie, Mark and Anna], by their counsel, the first defendant [Barbara], by her counsel, and the second defendant [Mr Codd], to the court to limit the issues in these proceedings to the validity of the proxy purportedly given to Paul Christopher Marsh on 30 July 2008 and used by him at 4.18pm on 31 July 2008 arising from the alleged incapacity of Aniela Szozda.”
For the court now to determine the questions about the effects of Mrs Szozda’s incapacity on the several revocation documents would be to extend the proceedings beyond the scope to which the parties are, by their respective undertakings to the court, bound to confine them.
In the result, therefore, there will be declarations, as follows:
1.Declare that the power of attorney purportedly made by Aniela Szozda on 28 September 2006 is invalid.
2.Declare that the instrument of proxy purportedly given to Paul Christopher Marsh by Barbara Szozda as attorney for Aniela Szozda on 30 July 2008 and used by him at 4.18pm on 31 July 2008 at a general meeting of Szozda Holdings Pty Ltd is invalid and of no effect.
3.Declare that each of the resolutions purportedly passed at the purported meeting of Szozda Holdings Pty Ltd held at 4.18pm on 31 July 2008 and attended by Damien Tudehope and Paul Christopher Marsh is invalid and of no effect.
In making these declarations, I merely note that neither Szozda Holdings Pty Ltd nor Mrs Szozda (a significant shareholder) is a party to these proceedings and that the effect of the declaratory relief is to be understood accordingly.
My inclination is to think that Barbara should pay the costs of Mark, Anna and Gregory. But in light of Mr Codd’s position and the possibility that there may be a desire to make submissions on costs, the question of costs is at this point reserved.

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LAST UPDATED:
23 July 2010