Shields v De Sousa

[2015] NZHC 206

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-00828 [2015] NZHC 206

BETWEEN

RUVE ADELE SHIELDS

Plaintiff

AND

CARLA ADRIENNE DE SOUSA First Defendant

CORBAN REVELL Second Defendant

Hearing:	5 February 2015
Appearances:	Mr D Wood for Plaintiff Ms Helen Chung for Second Defendant Mr A Ho for Third Defendant
Judgment:	18 February 2015

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

18.02.15 at 5 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

SHIELDS v DE SOUSA [2015] NZHC 206 [18 February 2015]

Introduction

[1]      This proceeding is about a family dispute between two daughters on the arrangements that their mother made in 2012 to transfer her residential property to a trust.  The beneficiaries of the trust were the mother and one of the daughters, Carla. The discretionary beneficiaries were to be the mother, Carla and her descendants. The other sister, Sarah, was therefore excluded from her mother’s property.

[2]      The mother has now brought proceedings against Carla asserting that the arrangements that were entered into resulted from the undue influence of Carla and also that the arrangements in 2012 amounted to unconscionable dealing.  She seeks to set aside the transfer of the property to the trust.   She also brings a claim in negligence against the solicitors who advised and drew up the documents relating to the trust and the transfer of the residential property to the trust.

[3]      The mother now lacks mental capacity. The issue for the present case is whether there should be a litigation guardian to manage the litigation started by her.

The appointment of a litigation guardian

[4]      It is common ground between the parties that the mother lacks the mental capacity to deal with her property.   When this occurred is not precisely clear, but dates back to, at least, August 2013 when a gerontology nurse tested the mother and found that her memory was very poor, no doubt due to her advanced years.   Her mental capacity was confirmed in a formal assessment carried out by Dr Shepherd in August 2014, in which the doctor assessed the mother as being “mentally incapable”. That assessment was required because certain powers of attorney, which will be referred to in due course, were conditional upon the mother becoming “mentally incapable” before those powers would take effect.

[5]      Since questions about the mother’s mental capacity emerged in the evidence, the same questions not unexpectedly arose as to whether or not there should be a litigation guardian appointed under rule 4.30 of the High Court Rules to manage the litigation that had been started by her. The rule reads:

Rule 4.30 provides as follows:Incapacitated person must be represented by litigation guardian

(1)       An incapacitated person must have a litigation guardian as his or her representative in any proceeding, unless the court otherwise orders.

(2)       If a person becomes an incapacitated person during a proceeding, a party must not take any step in the proceeding without the permission of the court until the incapacitated person has a litigation guardian.

[6]      A litigation Guardian is defined by rule 4.29 in the following terms:

litigation guardian

(a) means—

(i) a person who is authorised by or under an enactment to conduct proceedings in the name of, or on behalf of, an incapacitated person or a minor (but only in a proceeding to which the authority extends); or

(ii) a person who is appointed under rule 4.35 to conduct a proceeding; and

(b) has the same meaning as the expression “guardian ad litem”

[7]      The proposed appointment of a litigation guardian is opposed by the first defendant.   The position taken is that while there is no objection in principle to a litigation guardian being appointed, the first defendant objects to the proposal that Sarah should be that litigation guardian.  It is contended that Sarah has an interest in the litigation.   If the plaintiff is successful in setting aside the disposition of the residential property to the trust, it will then revert to the plaintiff and will be part of her estate on her death.  In that circumstance, Sarah’s position would improve to the extent that she would have an interest in 30 per cent of the shares in which the estate is divided and which is the basis for distribution on the death of the mother.  That contrasts with the present position whereby Sarah would not receive any interest in the residential property.

[8]      The position is also complicated by the fact that the plaintiff created enduring powers of attorney.  The most recent of these was given to Sarah and Carla jointly. In August 2013, the plaintiff purported to revoke any power of attorney in favour of Carla.  Her capacity or otherwise to take that step is strongly contested.  The first defendant, Carla, takes the position that by that time her mother had lost contractual capacity.

Analysis

[9]      The issue for determination on the present application is whether a litigation guardian should be appointed, and whether that litigation guardian should be Sarah or some other person.

[10]     The issue is becoming a pressing one because a trial has been scheduled for the opposed proceedings to commence on 23 February 2015.  The first defendant has filed an application for stay of proceedings.  The stay is sought to enable the first defendant to bring proceedings to obtain the determination of the  Family Court concerning, amongst other issues, whether “Sarah [should] have issued the High Court proceedings?”

[11]     As  I understand  it,  what  Carla  hopes  to  achieve  with  the  Family Court proceeding is to obtain a determination whether she and Sarah are both the attorneys of their mother or whether it is only one of them.  It would then be asserted that for various reasons Sarah was not the sole attorney, or that the powers conferred on her by the power of attorney were prematurely exercised. This, then, should affect the continuation of the High Court proceeding.  The expectation is, I understand, that the Family Court might be persuaded to give a direction to Sarah that the High Court proceedings, having been improperly commenced, ought to be halted.

[12]     What needs to be considered is the effect of the continuance in existence of powers of attorney.   There is no doubt that the powers of attorney were validly conferred on both Sarah and Carla.  There is, however, a dispute as to whether that power given in favour of Carla was validly revoked.   If there is a valid enduring power of attorney in existence, or that to be given effect to, the attorney has assumed control of the proceedings rather than the court imposing a litigation guardian.

Is there a valid enduring power of attorney in existence?

[13]     A person who meets the definition in rule 4.29(a) has the status of a litigation guardian.  If there is such a person with that status, that person will be the litigation

guardian  and  the  court  is  neither  required  nor  empowered  to  make  an  order appointing another person under rule 4.35.

”Authorised by or under an enactment”

[14]     A person holding an enduring attorney pursuant to the provisions of the Protection of Personal and Property Rights Act 1988 (PPR) would seem to qualify as a person who is “authorised by or under an enactment” to conduct proceedings in the name of an incapacitated person, provided that the power actually conferred empowered that attorney to take proceedings.   That view is based upon the observations of Potter J in Waldron v Public Trust,1  which has been described as carrying the  conclusion  that  “an  enduring power of attorney is  not  a power of attorney but a separate creature of Parliament”.2

[15]     Certainly, a power of attorney which would survive the loss of capacity on the part of the principal was unknown at common law.  It therefore did not exist until the enactment of the provisions of the PPR.  There are therefore two preconditions to enduring powers of attorney taking effect; the first being that there actually had to be a written conferment of power and the second requirement was the statutory recognition of such powers.  I consider that a person who holds authority as a result of satisfying the requirements of that process is “authorised by or under an enactment”.  Such a person derives his/her authority from the instrument which the donor executed and the provisions of the PPR which provide recognition of the continued existence of such powers in the event of an capacity, absent which recognition, the power granted would no longer exist.  There is a further reason for viewing such powers as “authorised by or under an enactment” and that is that the power which is held is controlled by the provisions of the PPR, such as s 102 of the Act which confers power on the Family Court to determine whether an instrument is an enduring power of attorney and includes powers, amongst other things, to modify

such a power of attorney.3

1      Waldron v Public Trust [2010] NZFLR 277 (HC).

2      LexisNexis Family Law Service (NZ) Protection of Personal and Property Rights (online ed) at

[7.894].

3      Section 102(d).

Authority must extend to the proceeding in question

[16]     The proceeding must be one to which the authority contained in the power applies before the donee is deemed or presumed to be a litigation guardian within the terms of rule 4.29.  It is therefore necessary to enquire whether the various powers granted in the present case respond to that description.

[17]     The forms of enduring power relating to property that  were used in  the present case are brief in their terms.   Taking as an example that conferred upon Carla, dated 3 April 2008, the statement of authority appoints the attorney “for the purpose of Part IX of that protection of Personal and Property Rights Act 1988 with general authority to act on my behalf in relation to the whole of my property.”

[18]     Section 97 of the PPR states that a donor of an enduring power of attorney may authorise the attorney to act generally in relation to the whole or a specified part of the donor’s affairs in relation to his or her property, or to act in relation to specified things on the donor’s behalf, and in either case such authorisation may be given subject to conditions and restrictions.  Further, the section states that, subject to certain limitations not presently relevant, the attorney shall have authority to do anything on behalf of the donor that the donor can lawfully do by an attorney.

[19]     The role of the litigation guardian would seem to involve taking decisions and acting in the areas that are exactly those that the donor would have acted in, but for the loss of capacity.  While, admittedly, the argument concerning this subject (or indeed  any other  aspect  of these  applications)  was  very limited  because of  the circumstances  in  which  I  heard  the  parties,  I  see  no  reason  to  suppose  that undertaking the role of litigation guardian would not fall within the scope of the various powers of attorney which the plaintiff granted to her daughters.

Which, if any, enduring power of attorney is applicable?

[20]     A number of powers of attorney have been executed by the mother.  Some of them are inconsistent with each other in that powers of attorney addressed to both the sisters individually and jointly have been executed.  Also, in 2013, the mother

executed a revocation of power of an individual attorney to Carla which had been granted in 2008.

[21]     Such a power of attorney, if upheld, would take effect if the donor is not “wholly competent to manage his or her own affairs in relation to his or her own property”.4

[22]     The scope of a power of attorney in relation to property would be wide enough to include making decisions about the commencement, continuation management and possible compromise of court proceedings relating to the property of the donor.

[23]     The position in summary, therefore, is that there are a number of powers of attorney which might qualify as powers of attorney relating to the property of the donor.    Some  or  all  of  these  may  no  longer  have  effect  because  of  express revocation.    Further,  there  is  the  possibility that  the  two  daughters,  while  both occupying the position of joint attorneys, may be in a situation where they have quite opposed and disparate views as to the propriety of the litigation which has been commenced seeking to set aside an arrangement under which one of them, Carla, was to benefit to the exclusion of the other sister, Sarah.

[24]     There is no argument that the question of which powers of attorney are in existence is a matter for the Family Court to determine.  Further, the Family Court can give directions about how the power ought to be exercised in the current circumstances.   There is also the further possibility that the Court may revoke a power of attorney.5

This Court does not have the jurisdiction to determine whether enduring power is a joint one

[25]     The problem in this case is that while it is doubtless open to the other person holding an enduring power of attorney (as the two daughters have at various times in

this case done) to act on behalf of the donor, difficult questions arise as to which

4      Protection of Personal and Property Rights Act 1988, s 94(1).

5      Section 105.

power of attorney ought to be given effect to.  There are also allegations that even if there is a power of attorney in existence, it has not been exercised appropriately on the part of Carla.

[26]     There is the further difficulty that it remains an open possibility on the basis of the evidence that I have seen that the two daughters hold a joint power of attorney. Because the two sisters are locked in dispute about what should happen in regard to the undue influence proceedings in this Court, it would be most unfortunate if the Court were driven to recognising them as being the joint litigation guardians of the plaintiff.

[27]     However this Court does not have the jurisdiction to determine whether or not the enduring power is a joint one, let alone to determine that in no circumstances is modification of the power required if an unworkable situation is to be avoided. The Court cannot assume such powers as an adjunct to giving directions as to how the proceedings are to advance now that the plaintiff has lost capacity herself.

[28]     I understand that the application was made to the Family Court last year for directions in these matters and that a hearing has yet to take place.  While delays in dealing with the application to the Family Court are resulting in difficulty in the present proceeding, there may be good reason why they have yet to be concluded. But more importantly, I am firmly of the view that even though there have been delays and it may be some time until the Family Court will have the opportunity to resolve the dispute between the two daughters concerning the power of attorney, it would be undesirable for the litigation to proceed in this Court before that step has been taken.  I reach that conclusion notwithstanding that further delays in the High Court litigation should if possible be avoided.  The appropriate direction therefore is to grant the application for stay of proceedings which the first defendant has sought to enable the Family Court to deal with the extent of application and any further applications either party may wish to make in that jurisdiction.   There will be an order accordingly.  The result will be that the fixture allocated for this proceeding to commence on 23 February 2015 is vacated.

Result

[29]     The  plaintiff’s  application  for  appointment  of  a  litigation  guardian  is dismissed.

[30]     The registrar is to allocate a further case management conference for this matter subsequent to 1 May 2015 or at such earlier date as seems necessary if an application is made to that effect.

J P Doogue

Associate Judge