Vishniakov v Lay
[2019] VSC 403
•20 June 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2018 00624
| ALEXANDER VASILEVICH VISHNIAKOV | Plaintiff |
| v | |
| RIMA LAY | Defendant |
| - and - | |
| RIMA LAY | Plaintiff by counterclaim |
| ALEXANDER VASILEVICH VISHNIAKOV | First Defendant by counterclaim |
| REGISTRAR OF TITLES | Second Defendant by counterclaim |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 4 June 2019 |
DATE OF JUDGMENT: | 20 June 2019 |
CASE MAY BE CITED AS: | Vishniakov v Lay |
MEDIUM NEUTRAL CITATION: | [2019] VSC 403 Revised 9 December 2019 |
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PRACTICE AND PROCEDURE – Appointment of litigation guardian for plaintiff – Applicable principles – Whether plaintiff incapable by reason of mental infirmity of managing her affairs in relation to the proceeding – basis for assessment – Whether solicitor for the plaintiff may be appointed as litigation guardian – Order 15, Supreme Court (General Civil Procedure) Rules 2015.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Arthur | Accuro Legal (Melbourne) |
| For the Defendant | Mr B Harding | Northcote Lawyers & Associates |
HIS HONOUR:
Introduction
The plaintiff, who is also a defendant by counterclaim, applies by summons for the appointment of a litigation guardian to represent him in this proceeding. Although the application is made in the name of the plaintiff, in truth it is made on his behalf by his solicitors, Accuro legal, and in particular Mr Gavin Yang Song (Mr Song). The primary application is that Mr Song be appointed the plaintiff’s litigation guardian. In the alternative, the application is that the plaintiff’s wife, Ms Xiujuan Guo, (Ms Guo), who is Mr Song’s mother, be appointed.
The claims in the proceeding
The proceeding concerns a property at 7 Gretana Street, Dandenong, Victoria (Property).[1] The Property is currently registered in the name of the plaintiff, as to 3/10, and the defendant as to 7/10. It came to be so held, as pleaded by the plaintiff, as follows:[2]
[1]The land more particularly described in Certificate of Title Volume 08465 Folio 834.
[2]Statement of Claim indorsed on the writ filed on 1 August 2018.
(a) the Property is the family home of the plaintiff. By 2005, the plaintiff and his then wife, Tamara Vishniakov (Tamara) became registered as joint proprietors of the Property. It was then subject to a mortgage to the Australia and New Zealand Banking Group Ltd (Bank), securing the sum of about $90,000 (First Mortgage). By 2014 the mortgage had reduced to about $54,000;
(b) in about 2012 the plaintiff and Tamara retired and in 2013 Tamara became unwell. The plaintiff and Tamara were having difficulty servicing the mortgage and Tamara approached her daughter, the defendant, for assistance. The defendant agreed to assist with the payment of the instalments due under the mortgage. There was no agreement for the defendant to become a registered proprietor of the Property;
(c) in January 2014, the First Mortgage was discharged and a new mortgage with the Bank entered into securing the sum of $266,000 (Second Mortgage). The defendant took the plaintiff and Tamara to an office in or near Richmond, Victoria, to sign the Second Mortgage. The plaintiff and Tamara thought they were signing documents so that the defendant could assist them with the payment of the First Mortgage;
(d) at the time of the signing the Second Mortgage, the plaintiff and Tamara had a very limited command of the English language, were unable to read documents written in English, were inexperienced with legal documents, were under financial pressure and were dependent on the defendant (the vulnerability) and at the time of the signing of the Second Mortgage:
(i) the relationship between the plaintiff and Tamara, on the one part, and the defendant, on the other part was a relationship of trust and confidence;
(ii) neither the plaintiff or Tamara had been given independent legal advice about the matter as they trusted the defendant;
(e) on the same day as they signed the Second Mortgage, the plaintiff and Tamara signed a transfer of land, expressed to be in consideration of the payment by the defendant of $65,000, pursuant to which the defendant became registered proprietor of the Property as tenants in common with the plaintiff and Tamara in the proportions mentioned above (Transfer). The plaintiff and Tamara held their interest as joint tenants. At the time of execution of the Transfer, the plaintiff and Tamara understood they were signing documents so the defendant could assist them with the First Mortgage, and did not understand they were signing a transfer of land;
(f) on 14 November 2014, Tamara died. In May 2015, by way of a survivorship application, the plaintiff became registered as tenant in common with the defendant as to 3/10 of the Property;
(g) in May 2015, the Second Mortgage was discharged and a further mortgage was granted to the Bank in the names of the plaintiff and defendant securing the sum of $90,000 (Third Mortgage). The defendant’s husband was included in the loan agreement with the Bank;
(h) the plaintiff does not know what has happened to the amount advanced under the Second Mortgage after paying out the First Mortgage, nor any knowledge of how the funds advanced under the Third Mortgage were spent;
(i) these events are said to involve unconscionable dealing by the defendant, who had knowledge of the vulnerability of the plaintiff and Tamara, such that the defendant took advantage of their vulnerability, the transactions were the product of undue influence by the defendant over the plaintiff and Tamara and also give rise to a claim of non est factum;
(j) in the prayer for relief the plaintiff seeks, amongst other things, that the Transfer be set aside and that the defendant discharge the Third Mortgage, alternatively, equitable compensation, and interests and costs.
The statement of claim indorsed on the writ was amended once, without leave pursuant to r 36.04(a) of the Rules, on 18 October 2018. There were no changes of substance to the Statement of Claim, merely the addition of particulars.
The defendant filed a defence and counterclaim on 15 November 2018 which tells a very different story:
(a) The defendant alleges that in or about 2013 the plaintiff, Tamara and the defendant entered into an agreement pursuant to which the defendant would accept a transfer of 7/10 shares in the fee simple interest in the Property, make all mortgage repayments on the Property, agree to take out a further mortgage on the Property, transfer the whole of the loan moneys advanced under the further mortgage to the plaintiff and Tamara for their sole use and benefit and allow the plaintiff and Tamara to continue to reside in the Property.
(b) Pursuant to that agreement, a contract of sale was entered into between the plaintiff and the defendant pursuant to which the plaintiff and Tamara sold their fee simple interest in the Property to themselves and the defendant for the sum of $65,000. That sum of $65,000 was never paid because it represented the amount owing to the Bank under the First Mortgage.
(c) The Second Mortgage was granted to the Bank securing the loan of $266,000, and those funds were provided to the plaintiff and Tamara for their exclusive use and benefit. Thereafter, the defendant made all mortgage repayments to the Bank.
(d) After Tamara’s death, the plaintiff and defendant and the defendant’s husband entered into a further loan agreement with the Bank under which the sum of $90,000 was advanced secured by the Third Mortgage. The moneys advanced were provided to or retained by the plaintiff for his exclusive use and benefit.
(e) The defendant has made all the payments due under the second mortgage and the Third Mortgage and the plaintiff holds his 3/10 share in the Property on a resulting trust for the defendant.
(f) The defendant is entitled to an order that the Property be sold, and the proceeds divided between the plaintiff and defendant in proportion to their entitlements.
(g) Further, on or about 16 May 2018, the plaintiff lodged a caveat over the Property on the ground of a ‘registered proprietor being entitled to possession of the certificate of title for the land and to prevent improper dealings’ (Caveat);
(h) Because the plaintiff is registered as proprietor of the Property as to 3/10, he does not have an interest sufficient to support the Caveat and the Caveat should be removed.
(i) The defendant’s counterclaim claims a declaration that the Transfer is valid and an order removing the Caveat.
Background to the application
On 16 May 2018 the defendant commenced a proceeding against the plaintiff in the Victorian Civil and Administrative Tribunal (VCAT) seeking a sale of the Property and a division of the proceeds of sale pursuant to s 228 of the Property Law Act 1958 (Vic). By Notice dated 3 July 2018 from VCAT, the plaintiff was informed of a directions hearing to be held on 3 August 2018 in the proceeding. This led to the commencement of this proceeding on 1 August 2018.
The writ was issued by solicitors other than the solicitors currently on the record for the plaintiff (plaintiff’s former solicitors). On 12 February 2019, Accuro Legal (Melbourne) (Accuro) took over the conduct of the proceeding on behalf of the plaintiff. The solicitor at Accuro who has the conduct of the proceeding is Mr Song. He is the step-son of the plaintiff. His mother, Ms Guo, is the wife of the plaintiff. The plaintiff and Ms Guo were married in Shenyang City, China on 30 September 2015.
No evidence is given as to the circumstances in which the plaintiff instructed the former solicitors to act, nor any material relating to the plaintiff’s ability to give those instructions. The evidence does show, however, that after the defendant filed her defence and counterclaim on 15 November 2018, a number of relevant events occurred.
The first difficulty arose from delay in the defendant’s solicitor responding to the plaintiff’s solicitor’s request for documents referred to in the defence and counterclaim. These arrived under cover of an email dated 14 December 2018.[3] By this time the plaintiff had already requested an extension of the time within which to file a reply and defence to counterclaim (Reply).
[3]Exhibit GYS-6 to the affidavit of Gavin Yang Song made 11 April 2019.
The second difficulty was the plaintiff’s then solicitors had difficulty obtaining instructions from the plaintiff in order to file his Reply. This was said in correspondence to arise from the need to obtain instructions from the plaintiff through a Russian interpreter in relation to matters that are of a ‘complex and serious nature.’[4] Before Christmas 2018, the solicitors for the parties had agreed to an extension of time to 25 January 2019 for the plaintiff to file his Reply. Despite requests, no further extension was forthcoming from the defendant, notwithstanding that the plaintiff’s then solicitor revealed that –
We restate our position that we have continued to confer with our client through a Russian interpreter and Counsel (on two occasions in the last two weeks) in an attempt to work through the issues in dispute. The issues are complex and the discussions with our client are important as well is time-consuming. Whilst we are making some progress, we do not anticipate having a defence to your clients counterclaim until 8 February 2019 or perhaps shortly after. We are making every endeavour to progress the proceeding from our client’s perspective but we are unable to properly progress with our client without having separate conferences with intervals in between as well as further communications. At this stage we are not in a position to determine whether any third parties ought to be joined to the proceeding or which parties they may be. However, we will continue to keep you informed of our anticipated time for filing a defence.[5]
[4]Email from the plaintiff’s former solicitor to the defendant’s solicitor dated 17 January 2019, exhibit MM‑3 to the affidavit of Marta McCormack made 7 February 2019.
[5]Email from the plaintiff’s former solicitor to the defendant’s solicitor dated 29 January 2019, exhibit MM‑6 to the affidavit of Marta McCormack made 7 February 2019.
The first directions hearing for the conduct of the proceeding had been fixed by the Court to be held on 8 February 2019.[6] The defendant’s solicitors pressed the plaintiff’s former solicitors to file and serve a Reply and to agree to directions. The plaintiff’s former solicitors continued to face difficulties obtaining appropriate instructions, so much so that by 6 February 2019 they still had not completed taking those instructions and requested an adjournment of the directions hearing.[7] The defendant’s solicitors proposed directions, including vacating the directions hearing and a timetable for the filing of a Reply (by 15 February 2019) and the taking of other steps. The plaintiff’s former solicitors were unable to agree to a timetable they were unlikely to be able to meet.[8]
[6]Notice of First Directions Hearing 10 December 2018.
[7]Email from the plaintiff’s former solicitor to the defendant’s solicitor dated 29 January 2019, exhibit MM‑8 to the affidavit of Marta McCormack made 7 February 2019.
[8]Email from the plaintiff’s former solicitor to the defendant’s solicitor dated 29 January 2019, exhibit MM‑10 to the affidavit of Marta McCormack made 7 February 2019.
At the directions hearing on 8 February 2019, Counsel for the plaintiff, briefed by the former solicitors, told the Court that despite several conferences with the plaintiff, with a Russian interpreter, the last of which was on 7 February 2019, it had been very difficult to advance the matter. He told the Court that the position reached was that it would be necessary to have the plaintiff medically assessed to see whether he had the capacity to give instructions. An adjournment was sought to enable that to be undertaken.
Counsel for the defendant complained about the delay, about the fact that the defendant’s VCAT proceeding had been held up because of the commencement of the plaintiff’s proceeding, about relief in the Amended Statement of Claim concerning the Bank’s mortgage, and about the fact that all the while the defendant is servicing the Third Mortgage. Nevertheless an adjournment to obtain a medical assessment was granted until 12 April 2019.
On 12 February 2019 Accuro, and particularly Mr Song under the supervision of his principals, took over the conduct of the proceeding on behalf of the plaintiff. On 25 February 2019 Dr Leonie Keall, Clinical Neuropsychologist, was asked to give an expert opinion on the plaintiff’s cognitive functioning and his capacity to give instructions to his lawyers in relation to the proceeding.[9] She made her report, dated 1 April 2019. It was received by the plaintiff’s current solicitors on 3 April 2019 and filed and served on 4 April 2019. Dr Keall gives answers to a number of questions relevant to the allegations made in the proceeding as well as to the whether the plaintiff is capable of managing his affairs in relation to this proceeding. She concludes, in brief, that:[10]
[9]Exhibit GYS-3 to the affidavit of Gavin Yang Song made 11 April 2019.
[10]Expert Report of Dr Leonie Keall filed 4 April 2019, 11 [9].
(a) the plaintiff would have difficulty making decisions and giving instructions with consideration to any advice that might be received;
(b) his difficulties with processing and remembering lengthy and/or complex information would impact on his ability to take in and recall advice given to him;
(c) he would have difficulty comprehending and remembering all the relevant information that would need to be considered;
(d) his poor reasoning would mean that, even if he could take in the material, he would be likely to have trouble thinking through and making judgments about his options and potential consequences of these;
(e) he would struggle to understand the broader implications of his choices as he tends to think in a literal, concrete way;
(f) based on the results of the interview and assessment, in Dr Keall’s opinion the plaintiff does not have a clear understanding of this litigation;
(g) he would have difficulty understanding, remembering and weighing up any advice in order to make a decision or instruct his lawyers and would in her opinion benefit from a litigation guardian in this proceeding.
It is also relevant to refer to what Dr Keall said about the plaintiff’s understanding of the proceeding:[11]
Alexander was aware that he is involved in a court proceeding. He knew the matter is regarding the house he lives in. He could give a basic account of some of his allegations against his stepdaughter, Rima. He stated that he and his wife, Tamara, had signed documents that gave ownership of their house to Rima without knowing what the documents were. He said they thought the documents were to show that Rima would help them pay a debt. He was unable to read the document but signed it because his wife had said that Rima would not lie to them.
Alexander did not have a clear understanding of his involvement in initiating the proceeding. He said that his stepdaughter brought the matter against him. He was inconsistent in his account of the timeframe of the case. He initially stated the proceeding began 4 to 5 years ago. On direct questioning however he said that lawyers only became involved around 12 months ago. When asked what happened to start the legal case 12 months ago, he said “I don’t remember that”.
[11]Ibid 5-6.
Dr Keall noted that there was no evidence of the plaintiff suffering from dementia, no history of progressive cognitive decline or behaviour or personality changes over the last four years. There was no report of neurological illness from the plaintiff or his general practitioner. There was also no evidence of delirium at either of the testing sessions she undertook.[12]
[12]Ibid 9.
Accuro also obtained a report from Associate Professor Ute Knoch, who is director of the Language Testing Research Centre at the University of Melbourne.[13] Professor Knoch gives an account of an assessment of the plaintiff’s English language proficiency in relation to the language demands in legal documents that he signed.
[13]Expert Report of Associate Professor Ute Knoch filed 11 April 2019.
By summons filed on 9 April 2019, application is made for the appointment of Mr Song as litigation guardian, alternatively Ms Guo. In his affidavit in support Mr Song relates that he first met the plaintiff in about February 2015 through his mother, Ms Guo. Since the dispute began with the letters from the defendant’s solicitors in about February 2018, and the initiation of the VCAT proceeding, Mr Song has regularly discussed the matter with the plaintiff to try and find out what happened. In particular, he tried to find out what happened in relation to the transactions which took place in about January 2014 in regard to the Property.
Mr Song states his belief that as a result of his dealings with the plaintiff, and because of his relationship with him, he is well placed to understand the way that he thinks, talks and understands and that he is able to simplify and represent complex information and questions to the plaintiff in a way easier for him to understand. He expresses the view, based upon the report of Dr Keall, that it is evident the plaintiff is in need of a litigation guardian in this proceeding and that as the plaintiff’s step-son and as his current solicitor he believes he is ideally placed to act in that role and for his benefit and is willing to consent to do so.
The material so far before the court indicates that Mr Song has been involved in assisting the plaintiff since February 2018. That is because he deposes that on about 21 February 2018, before the proceeding commenced, he sent the defendant’s solicitors an email attaching a letter dated 21 February 2018, together with an authority from the plaintiff, requesting copies of all statements and documents, correspondence and records, in relation to the Property in the defendant’s possession, in particular, legal documents which authorised the Transfer.[14] That letter refers back to a letter from the defendant’s solicitors dated 9 February 2018, which is not in evidence. I infer it is a letter that precedes the commencement of the VCAT proceeding. In the letter, Mr Song noted that the defendant previously assisted the plaintiff to manage and retain most of his documents and correspondence, and arrange his legal and personal affairs, due to the plaintiff’s poor understanding of English. There was no response to this letter, so far as is revealed in the evidence, until after the commencement of the proceeding when, in December 2018, the defendant provided informal discovery of some documents.
[14]Exhibit GYS-15 to the affidavit of Gavin Yang Song made 11 April 2019.
The documents provided by way of informal discovery included:
(a) a letter dated 19 November 2013, purportedly signed by the plaintiff and Tamara, instructing RTC Legal to act for them in the sale of part of the Property to the defendant;
(b) an unsigned loan agreement dated 5 December 2013 between the Bank, the plaintiff, Tamara and the defendant for a $266,000 loan to be secured by the Property;
(c) an email from the defendant to a person described as ‘Boon’ of Oxley legal dated 12 August 2013 stating:
I’ve spoken with my parents and we came to a conclusion where I will be taking 70% of the share and my parents 15% each which will be left for my brother & sister (my dad is not wanting to leave a cent for my brother basically because of his addiction (sic) to his share of 15% is divided between me & my sister) hopefully this will be okay for them not to make a big deal about it in the future, even though I know that they still wouldn’t let it go easy. Contract to be written that I’ve taken over my parents outstanding home load (sic) balance, covering future funeral cost and that they remain living in the house for as long as they are alive. The reason of taking 70% is that I fear for my family safety so it would be best to leave my brother/sister something that would help them a bit. Please let me know if you need anything or what is the next step I need to do.
(d) an undated but executed contract of sale and vendors statement in respect of the sale and transfer of the Property from the plaintiff and Tamara to the plaintiff, Tamara and the defendant which showed that RTC Legal was the vendor’s solicitor.
Before learning of these documents, the plaintiff was not aware, and could not give instructions about, the contract of sale and the instructions letter to RTC Legal.
Mr Song’s prior involvement in assisting the plaintiff is also revealed by an affidavit made by Martyn Lewis, who describes himself as a mutual friend of the plaintiff and Mr Song. He gives evidence that on 21 February 2019 he went with the plaintiff to the former premises of RTC Legal in West Footscray to see if the plaintiff recalled ever having been to that place. The plaintiff told him he had never been there and did not recognise the name RTC Legal.[15]
[15]Affidavit of Martyn Lewis made 7 April 2019.
As a result of seeing the reference to RTC Legal in the defendant’s defence and counterclaim, and seeing the documents provided by informal discovery in December 2018, Mr Song investigated RTC Legal and found from the Legal Services Commissioner (LSC) that the proprietor thereof, Raj Thevarajah, had his practising certificate suspended and that disciplinary action was underway against him. RTC Legal had ceased to operate. Mr Song obtained the file of RTC Legal in respect of the sale of the Property from the LSC. That file reveals the only contact details for the plaintiff and Tamara to be the defendant.[16]
[16]Exhibit GYS-13 to the affidavit of Gavin Yang Song made 11 April 2019.
Applicable Law
The power of the court to appoint a litigation guardian in ord 15 of the Supreme Court (General Civil Procedure) Rules 2015 (Rules) is derived from the inherent jurisdiction of the Crown as parens patriae to care for those who are unable to care for themselves.[17]
[17]Howell v Lewis (1891) 61 LJ Ch 89; Secretary, Department of Health and Community Services v JWB (1992) 175 CLR 218, 258 (Mason CJ, Dawson, Toohey and Gaudron JJ) (Marion’s case); L v Human Rights and Equal Opportunity Commission (2006) 233 ALR 432, 438 [23]-[24] (L v HREOC); A v City of Swan[No 5] [2010] WASC 204, [62] (City of Swan); Goddard Elliott v Fritsch [2012] VSC 87, [552] (Goddard Elliott).
Rule 15.01 of the Rules defines a ‘person under disability’ to mean a minor or –
a person who is incapable, by reason of injury, disease, senility, illness or physical or mental infirmity, of managing that person's affairs in relation to the proceeding.
Rule 15.02(3) of the Rules provides that a litigation guardian of a person under disability shall act by a solicitor.[18] Rule 15.02(4) provides that, unless for special reason the Court otherwise orders, the litigation guardian of a person under disability is not personally liable for costs awarded against the person. This rule was introduced in 2016. Before that sub-rule was introduced, a litigation guardian was liable for the party’s costs.
[18]Rule 2.04 empowers the Court to dispense with any of the requirements of the Rules.
Rule 15.03(1) of the Rules provides that a person may be a litigation guardian of a person under a disability if they are not under a disability and they have no interest in the proceeding adverse to the person. Rule 15.03(3) of the Rules provides that where, after a proceeding is commenced, a party to the proceeding becomes a handicapped person, the Court shall appoint a litigation guardian of that party.
The rules do not restrict who may apply to the court for the appointment of a litigation guardian. A judge may raise the issue of incapacity on the Court’s own motion.[19] A litigation guardian may also be appointed on the application of a party’s solicitor.[20]
[19]Slaveski v Victoria [2009] VSC 423, [61]; Pistorino v Connell [2012] VSC 438, [8] (Pistorino).
[20]Farrell v CSL Ltd [2004] VSC 308, [4]; Pistorino [2012] VSC 438, [2], [8], [31].
There is no general rule as to whether notice should or should not be given to other party or parties. Each application must be considered on its own circumstances.[21] The guiding consideration as to who might be heard on the application is whether such persons are relevantly interested in, or might be affected by, the application.[22]
[21]Pistorino [2012] VSC 438, [13].
[22]Ibid.
The following principles have been established in authorities in Australia and the United Kingdom:
(a) There is a presumption that everybody of full age has the mental capacity to manage their own affairs, including the commencement and defence of legal proceedings. The burden of proving to the contrary rests with those asserting incapacity.[23]
[23]Murphy v Doman (2003) 58 NSWLR 51, 58 [36] (Murphy); L v HREOC (2006) 233 ALR 432, 437-38 [20]; Masterman-Lister v Brutton & Co [Nos 1 and 2] [2003] 1 WLR 1511, 1520 [17] (Masterman-Lister); City of Swan [2010] WASC 204, [66]; Owners of Strata Plan No 23007 v Cross (2006) 153 FCR 398, 414-15 [66]-[68] (Owners of Strata Plan No 23007); Slaveski v Victoria [2009] VSC 596, [25]-[26] (Slaveski); Goddard Elliott [2012] VSC 87, [546].
(b) The law requires that a person must have the necessary mental capacity if he is to do a legally effective act or make a legally effective decision for himself.[24]
[24]Masterman-Lister [2003] 1 WLR 1511, 1533 [57] (Chadwick LJ); Goddard Elliott [2012] VSC 87, [547].
(c) The authority of a lawyer to represent a client depends on the client having the requisite mental capacity.[25] A lawyer has a duty of care not to coerce their client into a settlement or to take or act on instructions from a client to settle a case when they know or should know the client lacked the mental capacity to give the instructions or could not be reasonably satisfied the client had that capacity.[26]
[25]Goddard Elliott [2012] VSC 87, [548].
[26]Ibid [541].
(d) The commencement of proceedings on behalf of a client implies the solicitor, as an officer of the court, is reasonably satisfied the client has that capacity.[27] It is therefore the solicitor’s responsibility to be reasonably satisfied that the client has the mental capacity to participate in the proceeding and to instruct.[28] If the issue cannot be resolved to the reasonable satisfaction of the solicitor, they must raise the issue with the court. It is the court which has the final responsibility to determine the issue.[29]
[27]Ibid.
[28]Borchert v Terry [2009] WASC 322, [69]; Goddard Elliott [2012] VSC 87, [549].
[29]Goddard Elliott [2012] VSC 87, [568]; Pistorino [2012] VSC 438, [6].
(e) A solicitor who persists with representing a client who has lost mental capacity is liable to have costs awarded against them on an indemnity basis even if there is no impropriety.[30]
[30]Yonge v Toynbee [1910] 1 KB 215, 228; (Buckley LJ). Goddard Elliott [2012] VSC 87, [549].
(f) The authority of a court-appointed litigation guardian may be challenged, and a proceeding issued by them dismissed, where the party is shown to be capable of managing their affairs.[31]
[31]J (by her next friend) v J [1953] P 186, 191; Martin (1973) 20 FLR 345, 348; Goddard Elliott [2012] VSC 87, [550].
(g) The appointment of a litigation guardian protects the person under a disability and the processes of the court as these apply to the parties generally.[32]
[32]Masterman-Lister [2003] 1 WLR 1511, 1525 [31] (Kennedy LJ), 1536 [65] (Chadwick LJ); City of Swan [2010] WASC 204, [63]-[65]; Goddard Elliott [2012] VSC 87, [552].
(h) Provisions of the kind established by ord 15 are procedural and not substantive law designed to ensure that:
(iii) there is someone answerable to the Court on behalf of the litigant with a disability;
(iv) crucial decisions affecting that litigant can be properly and responsibly made.[33]
[33]State Rail Authority of New South Wales v Hammond (1988) 15 NSWLR 395, 400-401 (Kirby J). Kirby J also stated that another purpose was to ensure that a person exists who can bear any costs ordered against the person under disability at the end of the litigation. That is no longer apt to the Victorian situation. Dyke v Stephens (1885) 30 Ch D 189 ; Rhodes v Swithenbank (1889) 22 QBD 577, 578-9; See also R v Registrar of the County Court; Ex parte Farrington [1927] VLR 406, 409-10 where Cussen J said it was an open question whether the purpose of a litigation guardian is to provide for the defendant's costs or to provide for the care of the infant’s interests in connection with the action or suit.
(i) An application for the appointment of a litigation guardian for a person is very serious because it deprives the person of their fundamental civil rights under the common law, most especially the ‘right to sue or defend in [his or her] own name, and … compromise in litigation without the approval of the court’.[34]
[34]Masterman-Lister [2003] 1 WLR 1511, 1520 [17] (Kennedy LJ); Goddard Elliott [2012] VSC 87, [553].
(j) There is no universal test for determining whether a person is capable of managing his or her affairs.[35] Lack of capacity is usually denoted by a person's inability to understand the nature of an event or transaction when it is explained.[36]
[35]Murphy (2003) 58 NSWLR 51, 58 [33]; Slaveski [2009] VSC 596, [26].
[36]Gibbons v Wright (1954) 91 CLR 423, 437 (Dixon CJ); Masterman-Lister [2003] 1 WLR 1511, 1521 [18] (Kennedy LJ), 1533 [58] (Chadwick LJ); see also Goddard Elliott [2012] VSC 87, [555].
(k) The words ‘in relation to the proceeding’ in r 15.01 are important because they focus on the person's ability to bring or defend a particular proceeding rather than on whether the person is able to manage his or her affairs generally or in relation to some other transaction.[37]
[37]Slaveski [2009] VSC 596, [27].
(l) The question of incapacity in relation to litigation must be examined against the facts and subject matter of the particular litigation, the number and complexity of the issues involved and the identity, number and interests of the other parties, particularly opposing parties.[38] A person can have the requisite capacity for one proceeding and lack it for another.[39]
[38]Dalle-Molle v Manos (2004) 88 SASR 193, 199 [23] (Dalle-Molle); Slaveski [2009] VSC 596, [28]; Pistorino [2012] VSC 438, [20]-[22].
[39]Slaveski [2009] VSC 596, [28].
(m) A person will be incapable of managing their affairs in relation to the proceeding if they do not have the mental capacity to understand the nature of the acts or transactions in respect of which they need to give instructions to the lawyer.[40]
[40]Martin v Azzopardi (1973) 20 FLR 345, 347-8; Slaveski [2009] VSC 596, [29].
(n) Depending on the nature and circumstances of the particular case, there may be many factors relevant to the determination of whether a person lacks capacity in relation to a proceeding.[41] As a general rule, however, the following have been found to be relevant:[42]
[41]See for example the list applicable to a self-represented litigant in Slaveski [2009] VSC 596, [32].
[42]Murphy (2003) 58 NSWLR 51, 58 [35]; Slaveski [2009] VSC 596, [30].
(i) whether the person had the ability to understand that they required advice in respect of the relevant legal proceeding;
(ii) whether the person had the ability to communicate this requirement to someone who could arrange an appropriate advisor or, alternatively, whether he or she could arrange such an advisor of their own accord;
(iii) whether the person had the ability to instruct the advisor with sufficient clarity to enable that advisor to understand the situation and to advise the person appropriately; and
(iv) whether the person had the ability to make decisions and give instructions based upon, or otherwise give effect to, such advice as might be received.
(o) The level of mental capacity required by a litigant in person is greater than that required to instruct a lawyer, because a litigant in person has to manage court proceedings in an unfamiliar and stressful situation.[43]
[43]Slaveski [2009] VSC 596 [31]; Murphy (2003) 58 NSWLR 51, 58 [35]; Goddard Elliott [2012] VSC 87, [557].
(p) A person who does not have the mental capacity to represent themselves may have sufficient capacity to be able to give instructions to a lawyer to represent them.[44]
[44]Skrijel v Mengler [2003] VSC 128 [5]; Slaveski [2009] VSC 596, [33]; Goddard Elliott [2012] VSC 87, [558].
(q) The means by which the court will determine whether a guardian should be appointed varies from case to case. It is prudent, but not essential, that the decision whether a party lacks the relevant capacity be based on a medical assessment, or the assessment of another appropriately qualified expert.[45] However, the court is entitled to rely on its own observation to make an assessment about the capacity of a party or to rely on other evidence, including the assessments of legal practitioners.[46] This is so particularly where:
[45]Masterman-Lister [2003] 1 WLR 1511, 1520 [17] (Kennedy LJ); Pistorino [2012] VSC 438, [16] – [17].
[46]Slaveski [2009] VSC 596; Pistorino [2012] VSC 438, [17].
(i) there is no medical evidence available or the party refuses to submit to an expert assessment;
(ii) the lack of capacity is so clear that medical evidence is not called for.[47]
[47]Pistorino [2012] VSC 438, [17].
Consideration
Unlike some cases,[48] this is a case where it is desirable that the application is made on notice to the defendant, as has happened. That is because:
(a) the appointment is relevant to the management of the proceeding. It is apparent from the correspondence between solicitors that the defendant desires an early determination of the plaintiff’s claims, and has been pressing the plaintiff to get on with the case for some time. The plaintiff’s solicitors, past and present, have been frustrated in their attempts to obtain instructions by reason of the incapacity of the plaintiff. The defendant thus has an interest in the appointment of a litigation guardian in order to get the matter on track for a mediation or trial if that is necessary. The defendant has made an open offer to resolve the proceeding;
(b) the ability of the plaintiff to manage his affairs in relation to this proceeding is connected with his ability to manage his affairs in relation to the transactions that are sought to be impugned.
[48]Ibid [10].
Notice to the plaintiff as the affected party is usually given, but is not necessary in all cases.[49] In this case, although there is no evidence of formal notice being given to the plaintiff, it seems clear that the plaintiff has notice of a kind as a result of his participation in the testing undertaken by Dr Keall and Professor Knoch. Having regard to the evidence of Dr Keall, I am satisfied that, if given notice formally, it is doubtful whether he could have understood the nature of the application, and that he is incapable of making any meaningful submissions on the matter.
[49]Slaveski [2009] VSC 596, [35]; Pistorino [2012] VSC 438, [10].
It is common that a relative of a person under a disability is appointed as litigation guardian for that person. In the case of both minors and persons who lack capacity, it is commonly a parent, guardian or another appropriate family member. A member of the person’s family is usually preferred to a stranger unless the interest of the relative is adverse to the person under a disability.[50]
[50]Dey v Victorian Railways Commissioners (1949) 78 CLR 62, 113 (Williams J); Deputy Commissioner of Taxation v P (1987) 11 NSWLR 200, 203 (DCT v P).
It is clear from the evidence of Dr Keall, that the plaintiff is incapable of managing his affairs in relation to this proceeding. He does not have the mental capacity to understand the nature of the acts or transactions in respect of which he needs to give instructions to his lawyers. It is not clear, however, that he did not have the relevant capacity when the proceeding was commenced, in relation to the claims then made. In this respect I note the observations of Dr Keall referred to above ([14]).
The requirement that a litigation guardian of a person under disability shall act by a solicitor is a protection for the person under a disability as well as for the conduct of the proceeding. It is implicit in this requirement that the litigation guardian and solicitor acting cannot be the same person. Rule 2.04 of the Rules empowers the Court to dispense with any of the requirements of the rules so that in appropriate circumstances the requirement for a solicitor to act may be dispensed with.
There are some reported decisions where it has been held that there should not today be seen to be any objection in principle to a solicitor playing the dual role, provided that the solicitor is free from conflicting duty or allegiance.[51] There are likely to be many others unreported. Some of instances where a solicitor has been permitted to be litigation guardian of their client are as follows:
[51]Schwartz v Brentwood [2002] NSWSC 1020, [6] (Schwartz).
(a) On a review in the Supreme Court of the decision of a Court of Petty Sessions, in which a minor did not need to have a litigation guardian, it was found convenient and cost effective to appoint the solicitor acting.[52] In this case it was recognised that the respondent had a right to insist on the appointment of a litigation guardian (at that time called a ‘next friend’) so as to have some security for his costs.
[52]Hines v Phillips [1906] VLR 417, 420.
(b) In a proceeding brought by the Deputy Commissioner of Taxation against a minor where there was no parent or relation willing to be appointed as litigation guardian (in that jurisdiction, called a tutor).[53]
[53]DCT v P (1987) 11 NSWLR 200.
(c) In proceedings concerning trust property, where a child who might be interested as a beneficiary under a trust needed to be represented.[54]
(d) In a case where a young woman under 21 (the age of majority at the time) wished to commence an action for the dissolution of her marriage and had no relatives in Australia other than her husband. The solicitor proposed to be appointed had been put in funds to cover the costs if they were awarded against her.[55]
(e) In a partition proceeding relating to property in which one of the defendants was 100 years of age, in a nursing home, and in need to funds which could be released by a sale of the property. The plaintiff had identified a suitable independent solicitor where no one else was available. The supervisory jurisdiction of the Court was sufficient protection from any conflict of interest between the litigation guardian and the party.[56]
[54]Schwartz [2002] NSWSC 1020.
[55]Ex Parte Shearer [1949] QWN 41.
[56]Sperling v Sperling [2015] NSWSC 286 (Sperling).
In DCT v P, Hodgson J considered an earlier decision, Loorham v Loorham[57] where the appointment of the solicitor as a litigation guardian was found to be wrong for a number of reasons. Hodgson J disagreed, dealt with the reasons given in Loorham and said:
…if the solicitor is competent and disinterested, I do not think there is any significant possibility of a conflict of duty and interest.[58]
[57](1947) 65 WN (NSW) 98 (Loorham).
[58]DCT v P (1987) 11 NSWLR 200, 205.
The notion that the litigation guardian needs to be ‘disinterested’ is not one that arises out of the provisions of the rules. The proscription made in the rules is limited to the situation where the litigation guardian has an interest adverse to that of the person under a disability. The critical matters relevant to the selection of a litigation guardian are the protection of the disabled person’s interests and the proper conduct of the proceeding.
The regulatory rules made under the Legal Profession Uniform Law Application Act 2014 (Vic), in particular the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 proscribe solicitors acting where they are in a position of conflict between their duty and interest.[59] But the circumstances facing Mr Song do not strike me as giving rise to any such conflict.
[59]Rules 11, 12.
In this regard, Williams J noted in Dey v Victorian Railways Commissioners in relation to the previous designation of a litigation guardian (a ‘next friend’):[60]
The next friend will be removed by the court if he has an interest, or is closely connected with some person who has an interest, which is adverse to that of the infant, or if for any reason the court considers that the infant’s interest will not be properly protected by him. If there be any suspicion that the proceeding is an improper one or that the next friend is unfit to have the conduct of it, an inquiry may be directed on such matters, and if it appears on inquiry, or in clear cases without inquiry, that the proceeding is not for the infant’s benefit it will be stayed, or, if the circumstances warrant it, dismissed with costs to be paid by the next friend.
[60](1949) 78 CLR 62, 113.
Slattery J observed in Sperling:[61]
[A]s Hodgson J said in Deputy Commissioner of Taxation v P, there are inherent conflicts of duty and interest in appointing a tutor solicitor, of which the Court must always be mindful. But the Court can do, what it is often called upon to do in relation to trustees who are expressly permitted to charge fees in their capacity as trustees: to scrutinise and approve or disapprove those fees before they are ultimately paid. The Court’s supervisory jurisdiction over the tutors it appoints will be sufficient protection from any conflict of interest between a tutor and a party.
[61][2015] NSWSC 286, [27].
The supervisory powers of the Court and the modern management of litigation, pursuant to which the litigation is controlled by the court to a much greater extent than in the past, mean that the limitations perceived in the past in the appointment of a solicitor as litigation guardian for a person under a disability are of a reduced significance. In short, the Court can keep a close watch on the conduct of the litigation so as to ensure, so far as possible, that neither the person under a disability or the other parties are disadvantaged by the appointment of the solicitor as litigation guardian.
The factors that in this case indicate that it is appropriate to appoint Mr Song as the litigation guardian, notwithstanding that he is the solicitor having the conduct of the matter in the Accuro firm (and may be assumed to have allegiance to the plaintiff through his mother, the plaintiff’s wife) are:
(a) he has been involved in assisting the plaintiff in relation to the matters the subject of the proceeding since February 2018, at least;
(b) he has performed considerable work on the case to date, including a great deal of work in bringing the application before the Court;
(c) that work has involved considerable effort and time spent trying to elicit the facts from the plaintiff, such that he clearly has a firm grasp of those facts;
(d) the only other person identified as willing and appropriate to act as litigation guardian is Ms Guo. She has limited ability in the English language and mainly communicates with the plaintiff and Mr Song in the Chinese (Mandarin) language;
(e) The plaintiff is a pensioner whose only property is the Property. It would be wasteful of the limited resources available to him to be compelled to engage another person, who if a solicitor would need to be compensated;
(f) Mr Song has no apparent interest adverse to the interests of the plaintiff, indeed quite to the contrary as his mother lives at the Property with the plaintiff and I infer he is concerned to ensure she has a place to live with the plaintiff;
(g) The Court’s supervisory jurisdiction over litigation guardians it appoints will be sufficient protection from any conflict of interest between the litigation guardian and the party.
Conclusion
For these reasons, I propose to make the orders sought in the summons and appoint Mr Song as the litigation guardian of the plaintiff. Because the firm that employs him is the solicitor on the record representing the plaintiff in the proceeding, it may not be strictly necessary to dispense with the requirement that Mr Song be represented by a solicitor, but to the extent that it is necessary I am prepared to make that dispensation.
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