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[2022] NSWSC 820
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Bale v Kimberley Developments Pty Ltd [2022] NSWSC 820 (23 June 2022)
Last Updated: 9 February 2023
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Supreme Court
New South Wales
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Case Name:
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Bale v Kimberley Developments Pty Ltd
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Medium Neutral Citation:
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Hearing Date(s):
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3 – 9 September 2021; 6 December 2021
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Date of Orders:
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23 June 2022
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Decision Date:
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23 June 2022
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Jurisdiction:
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Equity
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Before:
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Ward P
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Decision:
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1. Set aside the transfer dated 21 February 2011 in
relation to the property referred to in these reasons as the Forest Lodge
Property. 2. Direct the first defendant (Kimberley
Developments) within 28 days to transfer the title to the Forest Lodge Property,
unencumbered,
to the plaintiff (Ms Françoise Bale) as executor of the
estate of the late Michel Schein. 3. Subject to order (11),
order the plaintiff, as executor of the estate of the late Michel Schein,
following transfer of the title
to the Forest Lodge Property, to pay the sum of
$288,242.63 to the sixth defendant (Super Start Batteries Pty Ltd) or at the
direction
of its director, the fifth defendant (Mr Theofanis Trigas), being the
sum paid to discharge the Suncorp mortgage, plus interest calculated
at the rate
specified in the Suncorp mortgage. 4. Order that the sum
payable pursuant to order (3) be charged on the Forest Lodge Property after its
transfer to the plaintiff
as executor of the estate of the
deceased. 5. Declare that the first defendant as from
21 February 2011 held, and holds, the Forest Lodge Property on constructive
trust for
the deceased (and since his death, for the benefit of the
deceased’s estate). 6. Declare that the first
defendant breached the trust on which the Forest Lodge Property was held by
encumbering the property with
the mortgage to NAB in 2012 and transferring the
funds so borrowed to the sixth defendant (Super Start Batteries Pty Ltd) (and/or
at the direction of the fifth defendant, Mr Theofanis Trigas) and not used for
the purposes or benefit of the trust. 7. Declare that the
fifth and sixth defendants had constructive notice of the matters giving rise to
the constructive trust and
of the breach of that trust and are liable for being
knowingly concerned in the breach of that trust or in knowing receipt of trust
property in breach of trust. 8. Order the fifth and sixth
defendants to repay to Kimberley Developments, as constructive trustee of the
deceased’s estate’s
interest in the Forest Lodge Property, the funds
received by the sixth defendant out of the facility secured by the NAB mortgage
over the Forest Lodge Property and any interest thereon that is required in
order to discharge the NAB mortgage (such amounts to
be paid within 21 days
in order to make good the trust funds transferred in breach of
trust). 9. Order the plaintiff, as executor of the estate of
the late Michel Schein, to pay to the first defendant such amounts as are
determined
by the Court appointed referee (to be appointed pursuant to order
(12) below) to be properly referable to expenses reasonably incurred
in the
maintenance of the Forest Lodge Property since
2011. 10. Order the first defendant to account to the
plaintiff, as executor of the estate of the late Michel Schein, for all amounts
received by way of rent or other income in respect of the Forest Lodge Property
since 21 February 2011 to date, and interest thereon
pursuant to s 100 of the
Civil Procedure Act 2005 (NSW). 11. Order that the sums
payable in orders (3), (9) and (10) be offset against each other with the sum
remaining to be paid to the
relevant party within 21 days of determination by
the Court appointed referee of that amount. 12. Order that
the matter be referred to a Court appointed referee (at the cost of the parties
to be borne proportionately) for
determination of the amounts to be paid, and
the offset amount, pursuant to the above orders. 13. Declare
that the fourth defendant (Ms Chyna Schein, nee Richardson) is liable to the
deceased’s estate for breach of fiduciary
duty in relation to entry into
the sale transaction in respect of the Forest Lodge
Property. 14. Order the fourth defendant to indemnify the
deceased’s estate for any loss sustained as a result of entry into the
sale
transaction in respect of the Forest Lodge
Property. 15. Give liberty to the plaintiff to apply on
reasonable notice for orders in relation to the implementation of the above
orders. 16. Reserve the question of costs and direct the
parties to file brief written submissions on costs within 21 days, with a view
to determining the issue of costs on the papers. 17. Direct
the parties within 7 days to forward to Ward P’s associate the name of an
agreed and suitably qualified person
to be appointed as referee or, failing
agreement, to submit three proposed names, with a view to the Court determining
the identity
of the person to be appointed as Court appointed referee in the
absence of any such agreement. |
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Catchwords:
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CONTRACTS – Formation – Intention to create legal relations
– Whether agreement signed by the plaintiff constituted
a binding contract
– Whether unjust contract under the Contracts Review Act 1980
(NSW) EQUITY – Unconscionable conduct – Special
disability or disadvantage – Independent advice – Inequality of
bargaining power – Whether unconscientious advantage taken – Whether
defences of laches and acquiescence applied –
Whether Limitation Act 1969
(NSW) applied by analogy – Whether transaction ought to be set
aside EQUITY – Trusts and trustees – Constructive
trusts – Remedial – Breaches of trust – Whether a constructive
trust arises – Whether knowing receipt of trust property – Whether
encumbrance of trust property constitutes a breach
of trust EQUITY
– Fiduciary duties – Breach – Agent and principal –
Whether donee of power of attorney acted in best
interests of the
plaintiff |
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Legislation Cited:
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Australian Consumer Law, ss 20, 21, 22, 236 and 237 Competition and
Consumer Act 2010 (Cth), ss 20, 21, 22 of Sch 2 Contracts Review Act 1980
(NSW), ss 7, 9Conveyancing Act 1919 (NSW), s 54ACorporations Act 2001
(Cth), s 461Evidence Act 1995 (NSW), ss 59, 69, 76- 79, 80, 81, 82, 91, 135,
136Limitation Act 1969 (NSW), ss 14, 16, 23, 36, 52Powers of Attorney
Act 2003 (NSW) Powers of Attorney Regulation 2016 (NSW), cl 7, Sch 2 Real
Property Act 1900 (NSW), s 36 |
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Cases Cited:
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Texts Cited:
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B Edgeworth, Butt’s Land Law (7th ed, 2017, Lawbook Co) E Sykes,
“The Doctrine of Constructive Trusts” (1941) 15 Australian Law
Journal 171Elder Law New South Wales (2015, LexisNexis) GE Dal Pont, Law
of Agency (2020, 4th ed, LexisNexis) J McGhee, Snell’s Equity (32nd
edition, 2010, Sweet & Maxwell) J W Carter, Greg Tolhurst and Keith
Mason, Mason & Carter’s Restitution Law in Australia (2021, 4th ed,
LexisNexis) JD Heydon, Cross on Evidence (2021, 13th ed,
LexisNexis) Jeannie Marie Paterson, Corones’ Australian Consumer Law
(2019, 4th ed, Thomson Reuters) Michael Liu, ‘Application of Limitation
by Analogy: Equity Exceptions’ (2016) 25 Australian Property Law Journal
150P Butt, Land Law (6th ed, 2010, Thomson Reuters) P Young, C
Croft, ML Smith, On Equity (2009, Thomson Reuters) Paul Finn,
‘Equitable Doctrine and Discretion in Remedies’ in William Cornish,
Richard C Nolan, Janet O’Sullivan
and G J Virgo, eds, Restitution: Past,
Present and Future (1998, Hart Publishing) RP Meagher, J D Heydon and M J
Leeming, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies
(2002, 4th ed, LexisNexis) |
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Category:
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Principal judgment
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Parties:
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Françoise Bale (Plaintiff)
Kimberley Developments Pty Ltd (First
Defendant)
Albert Darwiche (Second Defendant)
Martin Churchill (Third
Defendant)
Chyna Schein (Fourth Defendant)
Theofanis Trigas (Fifth
Defendant)
Super Start Batteries Pty Ltd (Sixth Defendant)
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Representation:
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Counsel:
DP O’Connor with J McEnaney (Plaintiff)
R Perla (1st,
2nd, 5th, 6th Defendants)
Solicitors:
SCB Legal
(Plaintiff)
Weinberger Lawyers (1st, 2nd, 5th, 6th Defendants)
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File Number(s):
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2018/00237019
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Publication Restriction:
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Nil
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JUDGMENT
- HER
HONOUR: This matter relates to the transfer on 21 February 2011, by the late
Michel Schein (the deceased), of a commercial property at Forest
Lodge, New
South Wales (the Forest Lodge Property) to the first defendant, Kimberley
Developments Pty Ltd (Kimberley Developments).
- The
proceeding was initially commenced in 2018 in the name of the deceased by his
daughter, Ms Françoise Bale, as his tutor.
Ms Bale held an enduring power
of attorney on behalf of the deceased from 11 August 2016 (following a
proceeding in the NSW Civil
and Administrative Tribunal (NCAT) to which I will
refer in due course). Ms Bale commenced the proceeding as the deceased’s
tutor on the basis that the deceased was suffering from cognitive impairment and
incapable of commencing or conducting the proceeding
in his own right. The
deceased subsequently died on 9 April 2021, aged 90 years.
- It
does not appear to be disputed that, at the time of the deceased’s death,
the deceased had advanced Alzheimer’s disease.
The deceased was described
as being in a catatonic state. There is, however, an issue as to when the
deceased’s cognitive
impairment first began to manifest itself (and the
extent of that impairment), which is relevant to the question of the
deceased’s
capacity (though a claim of incapacity is not now pressed as
such) or vulnerability to exploitation; and to the claim based on unconscionable
conduct by reference to the defendants’ alleged knowledge of the
deceased’s special disadvantage in his dealings with
the various
defendants.
- Ms
Bale points to medical records and other like documents in which reference is
made to the deceased suffering from cognitive decline
since at least 2007, and
to the evidence of lay witnesses (including herself) as to their observations of
the deceased in the period
from various dates through to 2015 (after the
impugned transaction). The defendants maintain their objection to the
admissibility
of representations contained in those medical records insofar as
they are relied upon by Ms Bale for the truth of what was there
recorded (which
I address in due course).
- As
adverted to above, the claim of incapacity was not ultimately pressed by Ms
Bale; rather, the case was put, in effect, on the basis
of the deceased’s
vulnerability to exploitation (as I explain later in these reasons), with an
alternative claim for breach
of contract.
- After
the deceased’s death, the proceeding has been continued by Ms Bale in her
capacity as the executor of the deceased’s
estate. Principally, what
Ms Bale seeks in this proceeding is an order setting aside the transfer of
the Forest Lodge Property to
Kimberley Developments. There are, however,
additional and alternative claims (which I explain in due
course).
The parties
- The
plaintiff, Ms Bale, is the only child of the deceased and his first wife (the
late Mrs Denise Schein). Ms Bale is the sole executor
of the deceased’s
estate.
- The
first defendant, Kimberley Developments, which was incorporated in early 2011
shortly prior to the impugned transaction, is the
entity to which the Forest
Lodge Property was transferred.
- The
second defendant, Mr Albert Darwiche, was at the relevant time (i.e., at the
time of transfer of the Forest Lodge Property) the
sole director (and, on the
face of the ASIC records, its controlling mind) of Kimberley Developments and
conducts a waste recycling
business (known as ABS Recycling & Services).
Prior to the sale of the Forest Lodge Property, Mr Darwiche had performed some
demolition and “cleaning up” work at the Forest Lodge Property for
the deceased.
- The
third defendant, Mr Martin Churchill, was the solicitor who acted (it seems for
all parties) on the transfer of the Forest Lodge
Property to Kimberley
Developments (and who it is said introduced Mr Darwiche to the deceased).
Mr Churchill had apparently been
a friend or associate of Mr Darwiche for
some twenty years (see Mr Darwiche’s evidence at T 253.5). (Mr Churchill
also seems
to have had an association with the deceased’s second wife
and/or her associate, Mr Max Mohr, to whom I refer below.) At the
time of the
hearing of the present proceeding, Mr Churchill was on remand in gaol awaiting
trial in relation to charges of commercial
drug supply unrelated to the present
matter. At that stage, Mr Churchill had been incarcerated since August 2020. Mr
Churchill took
no active role in the hearing before me; the claims against Mr
Churchill having been resolved by settlement between the parties in
November
2020, with the ensuing dismissal of the claim against Mr Churchill.
- The
fourth defendant, Ms Chyna Schein (whose first name was variously spelt as
“China”), was the deceased’s wife
at the time of the impugned
transaction (she being his second wife; not Ms Bale’s mother). Ms Chyna
Schein has taken no role
in the proceeding; indeed, as I understand it, Ms Chyna
Schein’s whereabouts are presently unknown. Ms Chyna Schein was, however,
served with the statement of claim filed on 24 July 2018. Ms Chyna Schein
appears to have left her then residence in Woolgoolga
(with no forwarding
address) after being informed of the institution of this proceeding (see
T 181.26-181.38) and the plaintiffs’
process server was unable to
locate her to serve the notice of motion for default judgment (see the affidavit
of Ms Bale’s
solicitor, Ms Sionea Breust, sworn on 7 September 2021).
Ms Bale seeks default judgment against Ms Chyna Schein with damages to be
assessed at the conclusion of the hearing.
- The
fifth defendant, Mr Theofanis Trigas (known as Theo) is now the director of
Kimberley Developments and of the sixth defendant,
Super Start Batteries Pty Ltd
(Super Start). Mr Darwiche and Mr Theo Trigas are longstanding friends. (Mr
Darwiche is also a longstanding
friend of Mr Theo Trigas’ brother, Mr
Arthur Trigas, who gave evidence in the proceeding but is not himself a party to
the
proceeding.)
- The
sixth defendant, as noted above, is Super Start. Its involvement in the
proceeding arises out of the fact that, after the transfer
of the Forest Lodge
Property to Kimberley Developments, a loan facility was obtained (on 3 May 2012)
secured by a mortgage granted
by Kimberley Developments over the Forest Lodge
Property (securing borrowings in an amount totalling $700,000, in two tranches),
those funds then having been transferred to Super Start (according to Mr Theo
Trigas, for the purpose of or connected with the company’s
“stock
levels” – see T 315.34).
- Each
of Kimberley Developments, Mr Darwiche, Mr Theo Trigas and Super Start was
represented at the hearing by Mr Perla of Counsel;
and in these reasons I refer
to those (active) defendants collectively as the defendants. Ms Bale was
represented at the hearing
by Mr O’Connor and Mr McEnaney of
Counsel.
The proceeding
Further amended statement of claim
- I
have referred above to the commencement of the proceeding in 2018 in the
deceased’s name by Ms Bale as his tutor; and to its
subsequent
continuation by Ms Bale on behalf of the deceased’s estate.
- By
the time of the hearing, the relevant iteration of the pleading was the further
amended statement of claim dated 31 May 2019 and
filed on 10 June 2019. As
adverted to above, at the hearing, various causes of action and claims for
relief were not pressed by Ms
Bale (including claims for lack of capacity, undue
influence and misleading or deceptive conduct claims). The remaining claims
against
the defendants are as follows.
- As
against Kimberley Developments and Mr Darwiche: claims pursuant to s 7 of
the Contracts Review Act 1980 (NSW) (Contracts Review Act)
(see [26]-[32]); claims for unconscionable conduct for the purposes of ss 20, 21
and 22 of Schedule 2 to the Competition and Consumer Act 2010 (Cth)
(Australian Consumer Law) (see [35]-[46]); in the alternative to the
statutory relief, a claim for unconscionable conduct under the general law (see
[46A]);
in the alternative, claims for breach of contract (see [62]-[68]).
- As
against Kimberley Developments, Mr Theo Trigas and Super Start: claims under the
heading in the pleading “claims for breach
of trust” (but, more
precisely in the context of the claims against Mr Theo Trigas and Super Start,
claims for knowing involvement
in the alleged breach of trust or knowing receipt
of trust property). The pleading requires careful analysis in this respect. The
various claims under this heading are premised on the existence of a
constructive trust – the allegation being (at [69]) that
Kimberley
Developments held the deceased’s interest in the Forest Lodge Property on
constructive trust. It is alleged that
Mr Theo Trigas, as sole director of
Kimberley Developments (which he became after the transfer of the land to
Kimberley Developments),
had knowledge of the fact that Kimberley Developments
held the deceased’s interest in the property on constructive trust (see
[69B]). It is then alleged that, in breach of trust, Kimberley Developments and
Mr Theo Trigas: first, encumbered the trust property
(i.e., the Forest Lodge
Property) with the NAB mortgage (see at [70]) and second, disbursed those
“trust” funds (to Super
Start – see at [72]) and did not use
those funds to develop the Forest Lodge Property ([71]). It is alleged that
Super Start
was aware (in the particulars it is clear that this knowledge is
imputed from Mr Theo Trigas’ position as sole director of
both entities)
that those funds were held on constructive trust for the deceased and that their
transfer to it was in breach of that
trust (see at [73]); and that Mr Theo
Trigas was “knowingly concerned” in the breach of trust of Kimberley
Developments
(referring back to the matters pleaded at [69]).
- Thus,
when analysed, the allegation is that Kimberley Developments held the
deceased’s interest in the Forest Lodge Property
on constructive trust for
the deceased; Kimberley Developments was in breach of that constructive trust by
encumbering the property
with the NAB mortgage and not using the funds for the
purposes of the development of the property; Mr Theo Trigas (who is not the
constructive trustee) was “knowingly concerned” in the breach of
trust by Kimberley Developments (by virtue of the circumstances
pleaded in which
the consideration for the transfer was not paid – although I interpose to
note that those circumstances are
part of the conduct that gives rise to the
unconscionable conduct and hence the constructive trust itself); and that the
funds were
transferred to Super Start, which was aware that the funds were held
on constructive trust for the deceased and the transfer was
in breach of that
trust (i.e., a cause of action for knowing receipt of trust property transferred
in breach of trust).
- Therefore,
within the umbrella of “claims for breach of trust” there seem to be
claims for breach of the constructive
trust, for knowing assistance (or knowing
concern) by Mr Theo Trigas in that breach of trust, and for knowing receipt (by
Super Start)
of trust funds transferred in breach of trust. In respect of those
claims, Ms Bale seeks “damages” as against Kimberley
Developments
and Super Start for breach of trust (though the heading to this section of the
pleading and the prayers for relief that
follow the declarations sought as to
Mr Theo Trigas as well as Super Start – prayers 16D and 16C –
also suggest a claim
for “damages” as against Mr Theo Trigas in this
regard) and the return of the moneys that formed part of the alleged
constructive trust “so as to make the trust whole” (see at
[75]).
- The
relief claimed as against Kimberley Developments and Mr Darwiche (see the
heading to this section of the pleading, although it
also encompasses relief
sought against Mr Theo Trigas and Super Start – see below) includes a raft
of declaratory relief: that
the alleged 21 February 2011 contract is an unjust
contract within the meaning of s 7 of the Contracts Review Act or under
the general law (prayer 1); that the alleged 21 February 2011 contract and the
subsequent transfer of the Forest Lodge Property
was unconscionable (prayer 2)
or alternatively is void for uncertainty (prayer 3); that the alleged
21 February 2011 contract was
entered into for no consideration to the
plaintiff or alternatively inadequate consideration (prayer 4); alternatively,
that the
said defendants, in procuring the deceased’s entry into the
contract engaged in unconscionable conduct within the meaning of
ss 20, 21
and 22 of the Australian Consumer Law (prayer 5); that Kimberley
Developments holds the Forest Lodge Property on trust for the plaintiff (prayer
11); that the transfer
of property dated 21 February 2011 be declared void and
of no effect (prayer 16); alternatively, that Kimberley Developments holds
the
Forest Lodge Property on constructive trust for the plaintiff (prayer 16B); that
Kimberley Developments and Mr Theo Trigas were
knowingly concerned in a breach
of trust by mortgaging the Forest Lodge Property to the National Australia Bank
(NAB) in the amount
of $700,000 (prayer 16D); and that Super Start was knowingly
concerned in Mr Theo Trigas’ breach of trust and took funds derived
from
the property held on trust by Kimberley Developments with knowledge of Mr Theo
Trigas’ breach of trust (prayer 16C). There
is a broad claim for
“damages for the breaches of trust in the alternative” at prayer 16B
(where second occurring).
- As
against Kimberley Developments and Mr Darwiche, orders are sought: that the
contract (i.e., the alleged 21 February 2011 contract)
be declared void pursuant
to s 7 of the Contracts Review Act (prayer 7); alternatively, pursuant to
the same provision, that the contract not be enforced (prayer 8) (cf the
submission made in
opening written submissions as to specific performance at
[128] and [132]-[133], in which the plaintiff seeks specific performance
of the
alleged 21 February 2011 agreement, being the receipt of 60% of the shares in
Kimberley Developments promised under the terms
of the alleged agreement, or
alternatively the amount of $302,000); an order that Kimberley Developments
execute an instrument and
do all things necessary to convey the Forest Lodge
Property back to the plaintiff (prayer 12); an order for an account of moneys
derived from the Forest Lodge Property from the date of the transfer of the
property to Kimberley Developments (prayer 13); that
all executed copies of the
contract be cancelled (prayer 15); alternatively, damages for breach of contract
(prayer 16A); and (though
this in context must encompass claims also against
Mr Theo Trigas and Super Start) “[d]amages for breaches of trust in
the
alternative” (prayer 16B, where second occurring).
- As
against Ms Chyna Schein, the claim is that she owed the deceased a fiduciary
obligation in all transactions that she purported
to enter on his behalf
(particularised by reference to the power of attorney held by her and the
Powers of Attorney Act 2003 (NSW)) (see at [58]) and that she was in
breach of that fiduciary obligation in purporting to enter into the contract on
behalf of
the deceased (see at [59]) and by purporting to execute a transfer of
the Forest Lodge Property to Kimberley Developments (see at
[60]), as a result
of which it is alleged that the plaintiff has suffered damage and loss (see
[61]). The relief claimed against
Ms Chyna Schein is for declarations that she
was in breach of her fiduciary duties to the plaintiff by the execution of the
alleged
21 February 2011 contract and by executing a transfer of the
property in favour of Kimberley Developments and Mr Darwiche (prayers
22 and
23); and for damages for breach of fiduciary obligation (prayer 24).
- In
the alternative to the above relief, the plaintiff seeks a declaration that the
plaintiff’s caveat lodged in connection with
the Forest Lodge Property is
a valid caveat (see prayer 25) and an order that Kimberley Developments be wound
up on the just and
equitable basis pursuant to s 461 of the Corporations Act
2001 (Cth) (see prayer 26) (this latter order seemingly premised on the
deceased having an interest as shareholder in the company).
- Further,
a declaration is sought that “generally” the plaintiff (i.e., the
deceased) was under a relevant disability at
the time of entering into the
agreement for the purposes of s 52 of the Limitation Act 1969 (NSW)
(Limitation Act) (prayer 27).
Defences
- The
defendants rely upon their respective (and largely identical) second further
amended defences that were filed with leave during
the course of the hearing on
6 September 2021. The amendments for which leave was granted relate, first, to
the pleading of statutory
limitation defences (relying upon s 14 and s 23
of the Limitation Act – at [76]). These amendments were not
opposed.
- Leave
was also sought (and opposed) to plead defences of laches and acquiescence (in
respect of which there had been no previous pleading
or particularisation), the
question at that stage being whether it would expand the evidentiary ambit of
the proceeding. After debate
(and on the basis of the defendants’
contention that there would be no foreshadowed expansion of the hearing or the
evidentiary
ambit of the claim), I permitted the defendants to plead reliance on
the doctrine of laches and acquiescence (see [76] of the respective
defences
– in the case of Mr Theo Trigas and Super Start’s defences, [76]
where second appearing), allowing the proposed
amendments at [77B], [77C] and
[77E] of the draft pleadings (but not those at what were then [77A] and [77D] of
the proposed amended
defences).
- In
the further amended defences filed by each of Mr Theo Trigas, Super Start,
Kimberley Developments and Mr Darwiche (with some variation
in the paragraph
numbering) the laches and acquiescence defences that are pleaded (see [76] or
[77]-[79]) are based on the allegation
that Ms Bale had been aware since at
least August 2016 that the subject property had been sold or transferred to
Kimberley Developments
([77](a) or [78](a)); that, after the property was
transferred to Kimberley Developments on 21 February 2011, neither the vendor
(the deceased) (nor anyone on his behalf) communicated to the defendants or
anyone on their behalf that: no consideration or no adequate
consideration had
been paid for the transfer of the subject property or that there was any failure
to perform any obligation pursuant
to the agreement for the sale of the subject
property (at [77](c) or [78](c)); and, further, that Ms Bale had waited until 24
July
2018 to commence the proceeding.
- Further,
and in answer to the whole of the statement of claim, reliance was placed on s
54A of the Conveyancing Act 1919 (NSW), to which allegation the
particulars are that the contract dated 21 February 2011 relied upon by
Ms Bale was not signed by
anyone on behalf of the defendants (at [78] or
[80]).
Conduct of the hearing
- The
hearing commenced on 3 September 2021. At the conclusion of the hearing, Counsel
for Ms Bale sought further time to prepare written
closing submissions (to which
request, with some reluctance given the delay to which it would inevitably give
rise in light of other
hearings, already listed before me in the interim, I
acceded). The hearing thus did not conclude until the completion of oral closing
submissions on 6 December 2021.
Chronology of events
Background
- The
deceased was an engineer who had operated a plating and manufacturing business
(through a company known as British Franco Electric
Pty Ltd, of which he was
sole director) from the Forest Lodge Property for a number of years prior to the
events in question (see
Ms Bale’s evidence at T 39.32-39.39; see also
at [2] of her first affidavit sworn 23 November 2018), there being some
reference
also to another company associated with the deceased, Schein
Industries. The deceased was the registered proprietor of the Forest
Lodge
Property (which was located at Kimber Lane and was a battleaxe block with right
of way access to Junction Road in Forest Lodge).
- The
deceased and his first wife had one child (the plaintiff, Ms Bale). It was
evident from Ms Bale’s cross-examination that
she is very proud of her
late father’s achievements (see at T 36.30-37.30) and that the two were
close (at least apart from
a period after the deceased’s remarriage from
around 2008 to 2015).
- Prior
to his first wife’s death, the deceased and his first wife were living in
a house in Gordon (which Ms Bale described in
her statement to the NSW Civil and
Administrative Tribunal (NCAT) at the 2016 hearing as her parents’ dream
home – see
below). The deceased also owned property at Summer Hill (in
which Ms Bale and her husband, Gavin, lived for a time) that was the
subject of
a development application in around 2001 and which caused considerable financial
difficulty for the deceased in the period
around 2007/2008 (see below) (the
Summer Hill Property).
Summer Hill Property development
- In
around 2001, an order was made in the Land and Environment Court in relation to
the Summer Hill development (see T 40.20ff), that
being a proposed development
of two detached Torrens title dwellings and eight attached strata townhouses.
The deceased had obtained
a loan (of a not insubstantial amount) from NAB to
cover construction costs in relation to the Summer Hill development.
Suncorp loan facility
- In
February 2005, the deceased obtained a loan facility with Suncorp-Metway Ltd
(Suncorp) in connection with the development of the
Summer Hill Property. The
Suncorp loan facility secured a cash advance of $4.4 million to refinance the
NAB loan. The Suncorp facility
was secured over both the Summer Hill Property
and the Forest Lodge Property. In connection with the application for the loan
secured
by a first registered mortgage over the Forest Lodge Property in 2005,
the deceased obtained a valuation from Colliers International
in respect of the
Forest Lodge Property on 4 February 2005 (the property there being valued at
$1,200,000).
- At
the time of the Suncorp loan facility, construction work was to commence in
March 2005 and the work was due to be completed in
October 2005. The original
completion date for the sale of the Summer Hill development properties was 23
February 2006 (allowing
for an eight month construction period and a four month
selling period).
- Ms
Bale’s evidence was that she and her husband were not part of the Summer
Hill development nor privy to its details (T 39.10-39.24).
However, as I explain
below, in due course (in 2007/2008) Ms Bale did assume a role or responsibility
in relation to that development
(she says, and I accept, in order to assist her
father).
Death of deceased’s first wife
- Mrs
Denise Schein died on 19 August 2006, after 56 years of marriage. Ms Bale
has deposed that the death of the deceased’s wife
marked an obvious
acceleration in the deceased’s mental decline (see [3]-[4] Ms Bale’s
first affidavit). Indeed, Ms Bale
says that, by February 2011, the deceased had
declined from a mentally astute and savvy businessman to someone no longer
having the
capacity for complex conversation or business decision making. (The
defendants argue, with no little force, that this is no more
than
assertion.)
- Ms
Bale’s evidence is that, in late 2006, the deceased began unintentionally
neglecting to pay his Optus phone account, which
Ms Bale says was entirely out
of character since the deceased had always been the one to advise his late wife
of when to pay the
bills (see her first affidavit at [8]-[9]). From this time,
Ms Bale says that she and her husband began paying the deceased’s
bills.
Suncorp arrears as at September 2006
- As
at 12 September 2006, the interest in arrears in respect of the Suncorp loan
facility was in excess of $170,000 secured against
the Summer Hill and Forest
Lodge Properties. (Ms Bale’s evidence was that she did not know much of
the detail of this –
see T 42-44.)
- The
Suncorp loan facility was due to expire in October 2006. Enforcement action was
apparently deferred initially from 9 September
2006 to 20 October 2006. It is
not clear exactly what happened then; although it is obvious from later events
that no enforcement
action was taken at that time.
Discussions
with Easy Choice Home Loans
- Ms
Bale gives evidence that in around February or March 2007, she attended a
meeting with the deceased, his friend Nathan Elali (from
Easy Choice Home Loans)
and Mr Elali’s solicitor, Mr Michael Douehi; after which Ms Bale says she
received a telephone call
from Mr Elali and Mr Douehi (from which conversation
Ms Bale seems to have become concerned that the deceased was not managing his
own affairs – see her first affidavit at [13]-[15]). Ms Bale gave
evidence in cross-examination that Mr Elali or his solicitor
suggested that she
should assist the deceased in relation to the Summer Hill development (and that
she did so).
- It
appears that there was a discussion in early 2007 (I note that Ms Bale says she
did not meet Mr Elali until February – see
T 43.11) as to refinance being
obtained with Challenger Finance. Given the timing, it appears likely that this
was to refinance the
Suncorp facility.
Deceased’s health as
at March 2007
- The
deceased had a fall on 4 March 2007, following which the deceased underwent
surgery at Prince of Wales Hospital to have a pacemaker
inserted (see Ms
Bale’s first affidavit at [10]). The deceased was discharged from hospital
on 10 March 2007 (according to
the note of his general practitioner of over
30 years, Dr P Sawrikiar) (see annexure “A” to Ms Bale’s
first affidavit).
- At
that time, i.e., in March 2007, according to Dr Sawrikiar’s undated letter
addressed to Ms Bale’s solicitor (to which
objection was taken in relation
to the observations of the deceased’s mental condition) (see below), the
deceased was suffering
from aortic stenosis with enlarged heart, chronic
obstructive pulmonary disease, and cervical spondylosis. The letter also stated
that the deceased suffered from “early onset of dementia, this being
exacerbated by the recent death of his wife”. (As
noted, there was an
objection to this evidence, which I address below. For present purposes I simply
note that it must have been
written sometime after the deceased’s
discharge from hospital on 10 March 2007 and yet close enough to August 2006 for
the
death of the deceased’s wife to be referred to as recent and I do not
rely on it as more than indicating a potential issue
as to the deceased’s
cognitive ability at that stage.)
- Ms
Bale’s evidence is that the letter from Dr Sawrikiar was obtained to
confirm the deceased’s state of health as he had
been required to attend
Court with his solicitor but was unable to do so as he was in hospital (see [10]
of her first affidavit).
The dispute in question was said to be one involving
the builder for the Summer Hill development (see
below).
Difficulties with development of the Summer Hill
Property
- In
a statement provided by Ms Bale to NCAT in connection with an application in
2016 to review an enduring power of attorney that
the deceased had given to his
second wife (Ms Chyna Schein) in June 2008, Ms Bale has recounted various
difficulties experienced
in relation to the development of the Summer Hill
Property being undertaken by the deceased (see annexure “S” to
Ms Bale’s
first affidavit), including that on 7 March 2007 there was
a meeting with a solicitor (Mr David Creais) at the development site “due
to trouble with builder for non-completion of works on development”.
- Ms
Bale there recounted that the Court proceeding with the builder continued
“in May, September through to 2008” (and
that the deceased was
unsuccessful in the proceeding and had no funds to continue paying the lawyer).
Ms Bale stated that court costs
and the builder’s cost could only be paid
when the development was sold. I refer in due course to the ongoing difficulties
described by Ms Bale in relation to the development.
- At
this stage, however, it is relevant to note that, on 16 March 2007, Suncorp
issued a letter of default to the deceased, demanding
payment as to a total debt
of $5,214,048.59 (see Ex 1 at p 969).
Power of attorney in favour
of Ms Bale
- In
May 2007, the deceased executed a power of attorney in favour of Ms Bale.
This was prior to the deceased undergoing open heart
surgery on 30 May 2007 (see
Ms Bale’s first affidavit at [16]; and T 42.49-43.4).
- Ms
Bale’s evidence is that at this time the deceased had become more
“fragile” and that his demeanour changed. Ms
Bale said that he was
far more blunt and abrupt in his dealings with her and that the deceased began
discussing his physical and
sexual needs with her, which she found confronting
and said was out of character (see at [20]-[21] of her first
affidavit).
August 2007
- In
August 2007, Ms Bale arranged for a community services organisation (Mercy
Community Services) to provide a nurse to attend the
deceased’s residence
on weekdays to assist with his care (see her first affidavit at [22]-[23]).
(There is corroboration of
such an arrangement in later hospital records
referring to a nurse who had discovered the deceased with decreased
consciousness in
his bed in 2007 – see below.)
September
2007 incident
- Ms
Bale has deposed that, on 10 September 2007, the deceased was found slumped over
in his car, with urine incontinence, across a
median strip near Mona Vale
Hospital. Ms Bale has deposed that the deceased informed her that he was
confused, did not know where
he was, and that he had “got lost” (see
[26]-[27] of her first affidavit; see also annexure “B” to her first
affidavit).
- There
is in evidence a copy of a hospital discharge summary dated 17 September
2007 which corroborates Ms Bale’s evidence as
to the deceased’s
admission to hospital (see annexure “B” to her first affidavit)
– recording the deceased’s
admission on 10 September 2007 to Mona
Vale Hospital and including the following notes:
76 yrs old male. From home presented to MVH after found slumped in his car with
urine incontinence and confused.
...
Pt [patient] reviewed by psychiatrist – normal grieving after losing wife
- The
notes recorded the principal diagnosis as “Syncope ?cause
[sic]”.
- A
Northern Sydney Health Admission Summary document also recorded admission on 10
September 2007 with a discharge date of 18 September
2007, and noted the reason
for admission as “Confusion ? Syncope” (see annexure “B”
to Ms Bale’s first
affidavit).
13 November 2007 admission
to hospital
- On
13 November 2007, the deceased was admitted to Royal North Shore Hospital.
According to the hospital records, this was after the
deceased was found (by a
Mercy Community Services nurse) in bed with decreased consciousness and slurred
speech (see annexure “C”
to Ms Bale’s first affidavit). Ms
Bale has deposed that the nurse informed her (see [29] of her first affidavit,
this being
read for the fact of communication not its truth) that there was a
female there (at the deceased’s house) who had informed
the nurse that the
deceased had drunk a bottle of scotch the night before and she thought that he
was just drunk. Ms Bale believes,
and it seems likely that this female was Ms
Chyna Schein (see below). The Northern Sydney Central Coast Health records note
that
the principal diagnosis was “Collapse ? cause” and state
that:
76 year old man BIBA after found at home in bed with decreased consciousness and
slurred speech. Patient had GSC of 15 by the time
he arrived in emergency. B/G
of recent similar episode 2 months ago, investigated at Mona Vale hospital.
- Ms
Bale has deposed that she was concerned and asked the hospital to conduct tests
to confirm her father’s blood alcohol level
(and Ms Bale has deposed that
the tests showed very little alcohol in the blood) but it is not clear from the
hospital records that
this was there recorded and I can draw little, if
anything, from this, other than to note that it is evident that there was some
kind of health issue afflicting the deceased at this stage (since there is no
dispute as to the fact of his successive hospitalisations).
- Ms
Bale says that this was the first time that she became aware of Ms Chyna Schein,
deposing at [30] that the deceased continually
asked for “Chyna” but
that the deceased could not remember how he had met her.
- On
6 December 2007, the deceased was reviewed by Dr Dent at Royal North Shore
Hospital, who referred the deceased to a geriatrician
(Dr Veitch) at Royal North
Shore Hospital (see at [31] of Ms Bale’s first
affidavit).
Summer Hill development
- Ms
Bale’s evidence is that she became involved in the Summer Hill development
(to assist the deceased) between 2007 and 2008
(see T 40.29). Ms Bale explained
her role as relating to obtaining Council approval of the development so as to
permit the sale of
the properties to be completed (see T 40.34). Ms Bale
said that she was dealing with Suncorp in relation to the facility. Ms
Bale’s
evidence in cross-examination (see at T 41.30) was that at this
time, Ms Bale knew that money was owed (to Suncorp) and that there
was a sense
of urgency to sell the properties, in the context of which there was some
urgency in obtaining Council approval for the
development (so that the sales of
the properties could be completed). Ms Bale also knew that there was a delay in
relation to the
Council approval and that this was costing a lot of money.
- In
her statement to NCAT in 2016, after referring to the Court proceeding with the
first builder that had been unsuccessful (to which
I have referred above)
Ms Bale went on to recount that:
2- Council approval for development registration delayed until
certain details were completed. Builder no longer working on development.
I
worked with council to complete. New builder used.
Survey and flood management redone for council approval. Funds needed.
No council approval, no sales of development properties. This delay cost
hundreds of thousand of dollars in interest alone. Constant
negotiating and
reporting to lenders, Suncorp, Challenger, Perpetual Mutual to delay payment
until development was sold, to repay
loans and accruing expenses
3- Second builder garnished [sic; garnisheed] rental income
from development. Most properties rented and those funds were being
used to
complete works to meet council approval, but now stopped as builder had
garnished [sic; garnisheed] rent.
Second Builder also put a writ on Michel Schein’s house. This was my
father and mother’s dream house. It took 3 ½
year[s] to find. [This
is a reference to the Gordon house as confirmed in cross-examination by Ms Bale
at T 48.48]
4- My father and I were advised by long time solicitor, Ken
Hancock, that my father would have to sell house to pay debts. My father
decided
to refinance. I contacted finance person recommended by my father, Antoni[a]
Romeo. She was working on refinancing my father’s
situation but it was
complex, it took time. Additional pressure.
5- Properties were auctioned but contracts and funds could not
be exchanged due to council delays to register development.
6- Properties previously sold withdrew from contacts [sic;
contracts] due to Sunset clause and registration delays.
- The
picture there painted (in 2016) was thus of pressing financial difficulties in
2007 and going into 2008.
Closure of deceased’s
business
- On
25 January 2008, the deceased’s business (conducted through either British
Franco Electric or Schein Industries and, as noted,
a plating and manufacturing
business) which had operated out of the Forest Lodge Property, closed down (see
Ms Bale’s first
affidavit at [32]). Ms Bale accepted in cross-examination
that the deceased was very upset about this (T 52.40). Indeed, in her statement
to NCAT in 2016, Ms Bale recounted that the deceased had said, when told of the
decision to close the business, that “[y]ou
killed my baby”; and Ms
Bale explained that the business was “just breaking even” but not
making money; that the
business could not compete with imports due to increased
costs; and that the decision to be made was to close down the business rather
than lose money. Ms Bale has also deposed that the deceased did not pay her
husband (who had worked for the deceased’s business
for some years) his
holiday, long service or termination pay (see her first affidavit at [32]). Ms
Bale also said in cross-examination
that in 2008 the deceased decided to
refinance so that he would not have to sell the house (at Gordon) (see
T 49.36-49.46). The precise
timing of this was
unclear.
Retainer of Mr Andreacchio in relation to the sale of
the Summer Hill Property
- At
some point in around 2008, the deceased engaged Mr Anthony Andreacchio (a real
estate agent from Raine & Horne in Ashfield)
to sell the property at Summer
Hill (see Mr Andreacchio’s affidavit sworn 11 February 2019 at
[5]).
Deceased’s bank account as at February 2008
- Ms
Bale has deposed that she attended a bank in Gordon with the deceased in
February 2008 to see how much money he had available and
that there was about
$24,000 in the account which (on her calculation) was enough to cover the
deceased’s personal expenses
(including the mortgage on the house at
Gordon) for the next six months (see her first affidavit at [33]). It appears
from Ms Bale’s
evidence in cross-examination that this calculation assumed
that the Summer Hill development properties were sold and that the debt
in that
regard was met out of the sales of the properties.
March 2008
further accident
- Ms
Bale has deposed that, on 18 March 2008, the deceased was involved in another
car accident, his car being located at Mount Kuring-gai,
but that the deceased
did not remember anything about the accident (see her first affidavit at
[35]).
Contact in relation to Mr Mohr
- Ms
Bale has deposed that, at the end of March 2008, she received a telephone call
from the deceased, asking her to meet a friend of
his (Mr Max Mohr) to explain
the deceased’s financial affairs to him. Ms Bale has deposed that she had
not heard of Mr Mohr
prior to this (see her first affidavit at [36]). Ms Bale
has also deposed that when she attended the deceased’s home in Gordon
the
next day, upon her arrival, Mr Mohr greeted her (and that the deceased was still
in bed). Ms Bale said that she did not discuss
the deceased’s affairs with
Mr Mohr as her father was not there; that Ms Chyna Schein came a little later
and did not join
them to discuss business; and that the deceased later joined
them and Ms Bale noticed that his speech was slightly slurred and he
needed to
sit down as he was not feeling well (see her first affidavit at [37]). Ms Bale
has deposed that there was little discussion
about the deceased’s
financial affairs. It appeared to Ms Bale that Mr Mohr was living in the Gordon
house with the deceased
and Ms Chyna Schein.
Withdrawal of
$10,000 from the deceased’s bank account
- Ms
Bale has deposed that she discovered in April 2008 that $10,000 had disappeared
from the deceased’s bank account since February
2008. Ms Bale’s
evidence is that the deceased could only recall going to the bank with Ms Chyna
Schein and nothing more (see
her first affidavit at [34]). (Ms Bale’s
evidence was that at the subsequent 2008 NCAT hearing Ms Chyna Schein said
that this
amount was withdrawn for the couple’s honeymoon – T
91.44.)
Marriage application
- Ms
Bale’s evidence is that, a few days after the meeting with Mr Mohr, she
was at the deceased’s house and noticed a person
place a notice on the
property stating that a writ had been placed on the vacant part of the property.
Ms Bale has deposed that the
deceased did not know why and that she contacted
his solicitor, Mr Ken Hancock, who advised her to locate the paperwork. Ms Bale
has deposed that, when looking through a very large box that Mr Mohr told
her was “rubbish”, she located the paperwork
and a marriage
application for the deceased and Ms Chyna Schein (see her first affidavit at
[38]). Ms Bale has deposed that (when
she asked the deceased about this) the
deceased told her that the marriage was in about two and a half weeks and said
that “Max
and Chyna told me not to tell you” (see her first
affidavit at [38]).
ACAT assessment
- Ms
Bale has deposed that on 2 April 2008 she was in attendance during an ACAT
assessment of the deceased (see her first affidavit
at [40]; see also annexure
“F” to her first affidavit) by a registered nurse from Hornsby
Kuring-gai Community Health
Services (Trish Price RN). The assessment (to which
objection was taken) included reference to the deceased grieving for his wife
and being depressed, but recorded that his memory had not been formally
assessed. On the self-care functional assessment, the deceased
was assessed at
20 (independent); on the domestic functioning assessment 27 out of 30 (within
the mild dependence range). The notes
make reference to a “lady
friend” (presumably Ms Chyna Schein who, according to Ms Bale, appeared by
then to have been
living at the Gordon Property).
- The
outpatient notes completed by RN Price also record concerns by Ms Bale as to the
deceased’s “increasing memory impairment”
and that it was of
grave concern to Ms Bale that a “female friend” who had been
temporarily residing with the deceased
had introduced a “male
friend” (presumably, Mr Mohr) to the deceased and that Ms Bale had
discovered the “male
friend” had been involved in “sorting
out” all of the deceased’s documents. Objection is taken to these
notes.
For present purposes, I simply note that the recording of these concerns
corroborates the timing of Ms Bale’s concerns as to
the deceased’s
memory and vulnerability to exploitation. The notes also recorded that a
dementia monitoring programme had been
suggested (consistent with Ms
Bale’s apparent concern) (see annexure “F” to Ms Bale’s
first affidavit); though
it is not clear if that was implemented.
- On
24 April 2008, Dr Veitch reported on his review of the deceased in his clinic
that day with Ms Bale (see annexure “G”
to Ms Bale’s first
affidavit). It is clear that the letter records a number of matters that Ms Bale
had conveyed to Dr Veitch
(and hence can only be as reliable in that context as
Ms Bale’s account is shown to have been) (such as Ms Bale’s concern
that the “new girlfriend maybe [sic] after her father’s
assets”); and Dr Veitch also noted that some of the history
that the
deceased gave was different from that given by Ms Bale. The letter stated that
from a functional point of view, the deceased
is “otherwise pretty
good”; examination revealed a “well looking but somewhat belligerent
elderly man”; Dr
Veitch had some concern about the deceased’s
insight even though the deceased “gave plausible explanations” for
many of his questions; the deceased was reasonably orientated in place, though
not able to name the hospital and not sure of the
date or day of the week; and
the deceased “probably has some cognitive impairment although not severe,
which may be affecting
his decision-making, and I believe he is at risk of being
taken advantage of”. (As noted, objection is taken to this
evidence.)
Evidence regarding the placement of an advertisement
for a companion
- Ms
Bale’s evidence (see her first affidavit at [42]) is that on 2 May 2008
(the day before the wedding to Ms Chyna Schein was
to take place), the deceased
told Ms Bale how important it was for him to have a companion and asked her to
place an advertisement
for a companion. Ms Bale says that, together, they wrote
an advertisement and placed it in a newspaper that day. Ms Bale relies
on this
as evidence that the deceased had apparently forgotten that he was to be married
the next day. (It is certainly bizarre,
to say the least, that someone would
wish to advertise for a companion on the eve of that person’s marriage,
but so might it
be said is the seemingly unquestioning acceptance by Ms Bale of
such a request.)
Wedding of the deceased to Ms Chyna
Schein
- On
3 May 2008, Ms Bale (with her husband and son) attended the wedding of the
deceased and Ms Chyna Schein. Ms Bale has deposed that
she noticed that the
deceased smelt of alcohol and that she had never known the deceased to drink to
the point of having the alcohol
emanate from him (see her first affidavit at
[43]). (One would hope that the celebrant would not have officiated at the
wedding if
objectively there was concern as to the deceased’s capacity,
but ultimately this is no more than speculation.)
- Ms
Bale has deposed that the following day she and her son attended the
deceased’s home; and that the deceased removed his wedding
ring and said
that “I’ve made a mistake” and that he thought if he married
Ms Chyna Schein she would be like Ms
Bale’s mother (see her first
affidavit at [44]).
- After
the marriage, Ms Bale appears to have had little involvement with the couple (as
Ms Bale readily conceded in cross-examination),
although at that stage Ms Bale
was still involved in the Summer Hill development. Ms Bale’s evidence was
that she did not know
what had happened (with the deceased) in the period from 3
May 2008 (when her father married Ms Chyna Schein) and 13 June 2008, when
she received a copy of the revocation of her power of attorney (see T
88.13-88.19).
Lodgment of Strata Management Statement or strata
plans
- Ms
Bale gave emphatic evidence that on 2 or 3 June 2008 the strata plan for the
Summer Hill development was finally able to be registered.
Ms Bale graphically
(and with evident emotion) described the “blood, sweat and tears”
that had been involved in achieving
this (T 50.28). Ms Bale also said (at
T 50.30) that she delivered it personally to the Council, to Suncorp, and
to the office of
the solicitor (Mr Ken Hancock). Ms Bale emphasised the
importance of the registration of the strata plan (see T 57.39). Pressed on
this
(and see the communication from Mr Hancock on 13 June 2008 below), Ms Bale
retreated somewhat to saying “well I thought
I’d attended to that,
but obviously I haven’t” (see T 58.9-58.21).
- Pausing
here, I note that the date stamp for registration of the Strata Management
Statement is 15 August 2008 (see also T 82). The
document seems to have been
signed with the deceased’s signature on 11 June 2008 (see T 83.9) but
bears the handwritten words
“Françoise Bale on behalf of Michel
Schein pursuant to power of attorney”. Ms Bale said that the handwritten
words
did not look like her signature (T 84.27) but that the signature did look
like the deceased’s signature. At T 85.18, Ms Bale
said that
“perhaps I didn’t sign the Strata Management Statement but I
certainly did deliver [it]”. At T 85ff,
Ms Bale gave the following
evidence:
Q. Just so I understand your evidence, Ms Bale, is now your
evidence that you didn’t sign this document?
A. Well, I can’t see my signature. But on behalf of my
father, I went to - I got the letter, I got all the information required
to
register the development, and gave it to Ken Hancock. Because - I’m going
back a long time now, okay. And there was a considerable
amount of pressure
there. I was to get everything so that Ken Hancock could register the
development, and that - and that meant the
plans, getting the, you know, this
paperwork to the - so that the surveyor could sign it, and take it to Suncorp,
and then I took
it back to Ken Hancock, who was in Padstow at the time. Yeah. So
perhaps it didn’t require my signature per se, but it required
my taking
everything, getting everything, and then bringing it back to Ken Hancock, so
that he could do as quickly as possible what
he needed to to register the
property. [set out]
...
Q. Were you present when your father signed this document on 11
June 2008?
A. No. He was living with his wife.
Q. I think your evidence was that the signature that appears
to the left of the words “Francoise Bale”--
A. Yeah.
Q. --looks like your father’s signature. Was that your
evidence?
A. It does - it is. That’s what I said. That’s
what it looks like to me.
...
Q. Ms Bale, you know, don’t you, that if your father
signed documents, there’s no need to refer to a power of attorney,
is
there?
A. Well, if that was the case, then why was he with - why did
my power of attorney continue after - you know, for 12 months afterwards
because
he was with me, but he wasn’t well.
- Pausing
here, arguably there would be no logic to the reference to a power of attorney
on the Strata Management Statement if it was
intended to be signed by the
deceased himself but it might well be the case that the words were written on
the document in anticipation
that it would be signed by Ms Bale under her (then)
power of attorney (and that, by the time it came to be signed that power of
attorney
had been revoked so that Ms Bale was no longer able to sign). In any
event, it seems apparent that the document was simply signed
by the deceased
himself. This precludes any suggestion that Ms Bale was improperly signing as
the deceased’s attorney (and
there is moreover doubt as to when she was
notified of revocation of the power of attorney). However, it makes it unlikely
that Ms
Bale physically delivered the documents on 2 or 3 June
2008.
Appointment of Ms Chyna Schein as power of attorney and
revocation of Ms Bale’s power of attorney
- There
is in evidence a copy of a General Power of Attorney executed in favour of Ms
Chyna Schein (see annexure “I” to
Ms Bale’s first affidavit)
which is purportedly witnessed by Mr Churchill and dated 3 June 2008 (and signed
by “China
Schein”). Clause 2 of the document provided that the
deceased gave this power of attorney “with the intention that it
will
continue to be effective if I lack capacity through loss of mental capacity
after its execution”; accordingly, although
the title of the document is a
“General Power of Attorney”, it appears that the document is in fact
an Enduring Power
of Attorney. On that document, Mr Churchill certified that he
had explained the effect of the power of attorney to the principal
before it was
signed and that the principal appeared to understand the effect of the power of
attorney.
- There
is also in evidence a document headed Notification of Revocation of Powers of
Attorney (see annexure “I” to Ms Bale’s
first affidavit)
bearing a signature which Ms Bale thought looked like her father’s
signature. The document is undated but
refers to the grant of a power of
attorney to “China Schein” dated 3 June 2008.
- Ms
Bale’s evidence is that she received these documents on 13 June 2008 (see
below).
11 June 2008 letter to Suncorp
- On
11 June 2008, Ms Bale wrote to Suncorp advising that the deceased had remarried
in May 2008, that she would no longer be acting
on his behalf; and that all
correspondence was to be sent to the deceased or his wife.
- At
T 89.7-89.24, Ms Bale accepted that there was concern at that time as to the
“debts” and that Suncorp wanted her and
the deceased to sell the
Forest Lodge property.
13 June 2008 letter from Mr Hancock to the
deceased
- By
letter dated 13 June 2008 from Mr Hancock to the deceased, Mr Hancock referred
to the deceased attending Mr Hancock’s office
and giving him instructions
on 11 June 2008 to proceed with the lodgment of the plans concerning the Summer
Hill Property (see T
57.46-58.3; see also annexure “H” to Ms
Bale’s first affidavit). (This makes it unlikely that the plans had
already
been delivered by Ms Bale to the Council by then, assuming that this is
a reference to the same plans. It also suggests that Mr Hancock
had no concerns
about the deceased’s capacity to give those instructions at that
stage.)
- The
letter dated 13 June 2008, in terms responding to a facsimile from 12 June
2008 apparently received from the deceased, relevantly
states:
I was surprised to receive your facsimile of 12 June, 2008. You state that I
have not been fully accounting to you and suggest that
there have been
activities and dealings that have been occurring without your knowledge. This is
not true.
You are aware that I have been regularly speaking with you on the telephone and
in my office over the past year and a half concerning
your property matters and
your finance arrangements. In addition, you have made it very clear to me that I
am to consult with your
previous attorney, your daughter Françoise, in
regard to all of your matters and that you were relying on her to assist you.
You made this clear to me on a number of occasions.
I therefore had numerous attendances both by telephone and in person on
Françoise dealing with your matters. In all respects,
I can state that
notwithstanding the difficulties encountered, everything was attended to with
the best of our ability. In addition,
I can confirm that your daughter
Françoise has spent a considerable amount of time and energy in regard to
looking after your
affairs. You acknowledged to me on many occasions that you
appreciated the efforts of Françoise. In addition, you are aware
that I
have forwarded to you recently a copy of a letter sent to your attorney at the
time, Françoise, enclosing a number
of accounts. At that time, these
accounts totalled $28,814.29. These accounts represented work done up to that
time and as you know,
we have not received any payment in regard to those
accounts.
I now acknowledge that you have revoked your appointment of Françoise as
your attorney and that you have appointed your wife
China as your attorney and
that you have authorised us to deal with China in regard to all of your matters.
We accept these instructions
and will abide by them. This does not mean that we
should not have communication directly with you be telephone and in view of the
terms of your facsimile of 12 June, we require you to telephone us to discuss
the matters referred to therein.
In addition, if you have concerns regarding the actions of Françoise,
then you should take these matters up directly with
her,
When you attended at our office on 11 June last [i.e., 2008], you gave clear
instructions that we would proceed with the lodgment
of the plans concerning the
Summer Hill property. I can report that the plan of subdivision has been
accepted and requires payment
of the fee of $2,280.00. We are arranging to pay
this from the funds held in the Estate of your previous wife in accordance with
your instructions in that regard. We understand that the fees that will be
payable on the strata plan will be a further $2,180.00,
making a total of
$4,460.00. The strata plan is in order except that the Strata Management
Statement requires the signature of your
mortgagee, Suncorp and we are making
arrangements for this to be attended to as a matter of urgency.
...
- The
letter recorded that various of the properties had been sold (Townhouses 6, 7
and 9 and House 29) and that contracts for Townhouse
3 had been exchanged that
day. The letter advised that the debts were as follows: owing to Suncorp (as at
23 May 2008) $6,183,384.54
and; to Commonwealth Bank $1,251,185.68. (In the
witness box, Ms Bale thought that the Commonwealth Bank loan might have been
referable
to the Gordon Property. This is seemingly inconsistent with the
November affidavit in which Ms Bale said that $24,000 in the bank
account would
be enough to cover personal expenses for the deceased including the mortgage on
the house at Gordon. However, Ms Bale’s
evidence was that her
understanding was that once the development was sorted out, there would be
sufficient funds to pay the deceased’s
debts (see T 62.11).)
- The
letter concluded that:
When you saw us on the 11 June last, amongst other things you gave me very clear
instructions that you wanted to have Mr Max Mohr
leave your premises at Gordon.
You specifically instructed me to write to him requiring him to vacate. We were
therefore surprised
to receive your telephone call thereafter countermanding
those instructions. In view of our long association with you and the terms
of
your facsimile of 12 June, we ask that you telephone our Mr Ken Hancock to
discuss the terms of your letter.
- Pausing
here, while the letter is clearly expressing concerns on the part of
Mr Hancock as to the deceased’s instructions (consistent
with, say, a
concern as to the possibility of exploitation or undue influence being exerted
over the deceased), it does not appear
that Mr Hancock had any concern at that
stage about the deceased’s capacity to give him instructions on 11 June
2008 in relation
to the lodgment for registration of the strata plans.
- As
appears from Mr Hancock’s 13 June 2008 letter, it appears that at that
stage (i.e., 13 June 2008) the Strata Management Statement had not been signed
by anyone
on behalf of Suncorp (T 58.16). It is consistent, however, with the
deceased himself having signed the document on 11 June
2008.
Revocation of Ms Bale’s power of attorney
- Ms
Bale’s evidence (see her first affidavit at [49]) is that, shortly after
the deceased’s marriage to Ms Chyna Schein,
she received a telephone call
from Mr Hancock telling her that the deceased had said he did not want Mr Mohr
to live at his property
any longer and that he had instructed Mr Hancock to send
a letter but had received a call one hour later from the deceased asking
him not
to send the request. (This is consistent with the letter extracted above and
would place any such telephone call as being
not before 11 June 2008.) Ms Bale
has deposed that Mr Hancock sent her a copy of the 13 June 2008 letter (which is
extracted above)
and advised her to contact the Guardianship Tribunal (see her
first affidavit at [50]).
- The
time at which Ms Bale received notification of the revocation of her power of
attorney was an issue that arose in the course of
her cross-examination. Mr
Hancock’s letter clearly refers to Ms Bale as being the deceased’s
“previous attorney”.
- Ms
Bale’s evidence (as noted above) is that she discovered the power of
attorney had been revoked before receiving the letter
as to revocation of the
power of attorney (see T 60.2-60.35); and she discussed this with
Mr Hancock, who expressed concern for the
deceased’s wellbeing and
advised Ms Bale to contact the Guardianship Tribunal (T 64.11). At [51] in her
first affidavit, Ms
Bale deposed that she received a copy of the power of
attorney appointing Ms Chyna Schein and the document confirming her power of
attorney had been revoked on 13 June 2008. Ms Bale was adamant in the witness
box that she made a telephone call in the course of
doing business for her
father to an unidentified person, who disclosed that her power of attorney was
revoked, and that this occurred
before she received the letter (saying that she
was not surprised when she received notification of the revocation) (T
59.12-60.45).
Ms Bale said she still had the envelope in which the letter had
been sent.
- Ms
Bale also gave evidence of a telephone conversation with the deceased around
this time in which she says the deceased told her
that he had been in a car and
that Ms Chyna Schein and Mr Mohr had stopped the car on the side of the road and
would not drive home
until he called Mr Hancock and cancelled the request for Mr
Mohr to vacate the property (see her first affidavit at [49]).
- On
13 June 2008, as noted above, Ms Bale received a copy of an enduring power of
attorney by which the deceased appointed Ms Chyna
Schein as his attorney. The
document was witnessed by Mr Churchill. (Thus indicating that Ms Chyna Schein
was acquainted with Mr
Churchill at least in his professional capacity by
then.)
Financial position in mid-June 2008
- The
defendants say that, by mid-June 2008, the deceased was in serious financial
difficulty. It is noted that, prior to 13 June 2008,
the deceased had been in
communication with Mr Hancock because the 13 June 2008 letter referred to
non-payment of legal fees of $28,800
(T 56.9-56.43).
First NCAT
Guardianship Division proceeding
- In
June 2008, Ms Bale commenced proceedings in the Guardianship Division of NCAT,
this being an application to review the revocation
of Ms Bale’s power of
attorney. Ms Bale says that the proceeding was commenced on
Mr Hancock’s recommendation (T 64.11).
The matter was heard between
13 June 2008 and 25 July 2008. Ms Bale’s evidence is that the first
time that she met Mr Churchill
was when Ms Chyna Schein and the deceased
were at NCAT in 2008.
- In
evidence before NCAT there seems to have been a letter dated 10 July 2008,
addressed to the deceased’s general practitioner
(Dr Sawrikiar) in which
Dr Veitch stated that he had reviewed the deceased in his clinic that day in the
presence of the deceased’s
wife Chyna (incorrectly stating that their
marriage was in March that year). The letter stated that “I gather the
family situation
is somewhat of a mess with Mr Schein’s daughter, Francois
[sic], applying to become his financial manager through the Guardianship
Board
leaving her at loggerheads with her father and step-mother”. The letter
stated that the deceased looked well and that
Ms Chyna Schein said that his
memory had improved since the recent medication changes. The letter stated that
overall the deceased
scored 27/30 on a Folstein MMSE and that:
Mr Schein has mild cognitive impairment affecting memory and probably executive
functions. Whilst he is at risk of being taken advantage
of, he is probably
competent to make his own decisions. I have not formally tested him for
testamentary capacity.
- Objection
is taken by the defendant to the first part of that extract and I limited it to
the fact that this is what had been reported
by Dr Veitch to Dr Sawrikiar.
- More
significantly, for present purposes, on 25 July 2008, NCAT determined that the
deceased was capable of making his own decisions.
Lease of the
Forest Lodge Property
- On
2 February 2009, Mr Moore leased the Forest Lodge Property (see his affidavit
sworn 13 February 2019 at [3]). There was in evidence
the front page of a
commercial lease between the deceased as landlord and Mr Moore as tenant (see
annexure “A” to Mr
Andreacchio’s first affidavit) commencing
on 2 February 2009 for the term of one year at a monthly rent of $1,520.
(The coversheet
of that lease does not include any option to purchase,
cf Mr Moore’s evidence below.)
March 2009 letter
from Dr Veitch to Dr Kluger
- On
5 March 2009, Dr Veitch wrote to a Dr Kluger (another general practitioner),
enclosing copies of his letters dated 24 April and
10 July 2008 in relation to
the deceased and referring to having reviewed the deceased in the presence of
his wife; there noting
that Ms Chyna Schein “remains at loggerheads
with Mr Schein’s daughter over financial issues” and that
Ms Chyna
Schein reported that the deceased was becoming more forgetful and
was unsettled whenever she was not with him. The letter noted that
the deceased
and Ms Chyna Schein were considering moving to Woolgoolga, where it was said
that the deceased owned some land (there
is no evidence that the deceased in
fact owned any property at Woolgoolga). The letter noted that the deceased had
scored 24/30 on
the Folstein MMSE (as opposed to 27/30 nine months ago) and went
on to say (and objection is again taken to this) that:
My impression was that Mr Schein is declining cognitively (and maybe having some
sundowning). As it is likely Mr Schein has early
Alzheimer’s disease ...
Move to Woolgoolga
- At
some point in 2009, the deceased and Ms Chyna Schein moved to a rental property
in Woolgoolga (some hours drive from Sydney). Ms
Bale accepted in
cross-examination that she effectively lost close contact with the deceased
between 2008 and 2015 (T 100.19) but
said that she regularly visited him in
Woolgoolga (see T 97.26.)
Instructions regarding the marketing of
the Forest Lodge Property for sale by auction in 2009
- Mr
Andreacchio, of Raine & Horne, received instructions from the deceased in
2009 to place the Forest Lodge Property on the market
for sale by auction. Mr
Andreacchio prepared a contract for sale of land in respect of the Forest Lodge
Property (T 119.37). Mr Andreacchio
says that he had first met the deceased in
2008 (see T 121.46).
- On
3 April 2009, a Mr Edward Fotosong sent an email offering to purchase the Forest
Lodge Property for $650,000 (see T 127.25; see
also annexure “C” to
the second affidavit of Mr Andreacchio affirmed 19 September 2020). The
offer was declined by the
deceased.
- A
marketing campaign for the sale of the Forest Lodge Property was conducted in
April 2009. Mr Andreacchio’s evidence was that
the normal time for such a
campaign would be around four weeks. (See advertisement for auction on-site on
18 April at 11am, marked
as annexure “B” to
Mr Andreacchio’s first affidavit sworn 11 February 2019.)
- An
on-site auction was held on 18 April 2009, which was unsuccessful. The highest
non-vendor bid was from the incumbent tenant, Mr
Moore, who offered $650,000
(which was below the property’s reserve price of $1,000,000).
Mr Moore’s evidence was that
he had a lease in 2009 that gave him an
option to purchase the property; but it does not appear that he invoked this
right (see T
172.48-173.15). Mr Moore confirmed that he had made the highest
(non-vendor) bid for the property (at the auction) at $650,000.
- In
cross-examination, Mr Andreacchio did not recall the auction. However, by email
sent on 19 April 2009 at 11.39am, Mr Andreacchio
reported that the property had
been passed in at auction at $850,000 (which was a vendor’s bid).
Mr Andreacchio confirmed (at
T 136.17) that Mr Moore had been the highest
(non-vendor) bidder at the auction. Mr Andreacchio also said that the reserve
was set
in discussions with Ms Chyna Schein and Mr Mohr at close to $1
million (T 136.35). (From this, it may confidently be inferred that
the
principal instructions as to the sale of the property were also coming from
Ms Chyna Schein and Mr Mohr, rather than the deceased
himself; or at the
very least that they were a driving force behind the instructions for sale.
Ms Chyna Schein, it will be remembered,
held the deceased’s power of
attorney by this stage.)
- On
8 May 2009, Mr Andreacchio referred to the Forest Lodge Property in a Raine
& Horne property update, which is consistent with
it remaining on the market
at that stage.
- Mr
Andreacchio’s evidence is that, following the unsuccessful auction, he met
Mr Darwiche (who he said was retained to clean
up the property).
Mr Andreacchio has deposed that he was introduced to Mr Darwiche by
Ms Chyna Schein and Mr Mohr (see his first
affidavit at [10]-[14]).
Mr Andreacchio’s evidence was that Mr Darwiche gave a quote to clear
the property and to remove the
contents of the property of about $20,000 to
$30,000 (see also T 140.32-140.44). Pausing here, it appears that it was in
the course
of Mr Darwiche carrying out works to clear the Forest Lodge Property
(in 2009 or 2010) that he became acquainted with the deceased.
As noted earlier,
it seems that Mr Churchill (a long-term friend and associate of Mr Darwiche
seemingly also acquainted with Ms Chyna
Schein) introduced Mr Darwiche to
the deceased.
- Mr
Darwiche’s evidence is that in or about mid-June 2010 he received a
telephone call from Mr Churchill to the effect that one
of his clients (the
deceased) was selling the Forest Lodge Property and needed work done to it
– and that he met the deceased,
Mr Churchill and Ms Chyna Schein; that the
deceased explained what he wanted done; and that the works were complete in
around February
2011 (see his second affidavit at [6]-[9]). There is thus some
discrepancy in the evidence as to when Mr Darwiche was first retained
to do
works on the property.
- There
was also some evidence that, in mid-2009, Mr Andreacchio recommended the sale of
the family home in Gordon. Mr Andreacchio said
(T 132.9-132.16) that he was
aware of the Suncorp lender and that there were some issues about financiers
“holding off”
action.
- From
5 June 2009 (until 21 February 2011), cheques and rental moneys were paid on
many occasions by Mr Andreacchio to Mr Mohr (according
to Mr Andreacchio,
at the request of Ms Chyna Schein) (see Mr Andreacchio’s first
affidavit at [17]-[18]).
- Mr
Andreacchio says that, while Mr Darwiche was carrying out the cleaning works in
late 2010, Mr Darwiche had a conversation with
him regarding the sale and
unsuccessful auction of the Forest Lodge Property, in which conversation Mr
Andreacchio says he expressed
to Mr Darwiche that the deceased was looking for
offers of $1,000,000. Mr Darwiche denies that the conversation ever took place
(see
T 257.19-257.26). Rather, Mr Darwiche says that, while undertaking the
cleaning works to the Forest Lodge Property, the deceased
requested him to
“ask around” if anyone was interested in a direct sale of the
property due to a pending foreclosure
from the bank. (Ms Bale points out
that Mr Darwiche does not note when this happened with any precision; and she
argues that there
is no evidence that the bank ever intended to exercise its
power of sale over the Forest Lodge Property at any time. However, there
was
evidence of default notices having been issued on 19 January 2009 and 9 February
2010, and I note the Suncorp email sent on 18
January 2011 stating that there
would be no further extensions granted – see Ex 6.)
- For
his part, Mr Andreacchio gives evidence that the Forest Lodge Property was
producing significant rental income and that there
was no suggestion from anyone
that a lender was proposing to exercise its power of sale; and
Mr Andreacchio further says that if
such a scenario was in the offing, he
would have known about it. (That assumes a level of involvement by
Mr Andreacchio with the
property, or with the deceased, that is by no means
clear on the evidence.) In any event, it is clear from the contemporaneous
documents
that Suncorp was indeed threatening to exercise its power of sale over
the period from at least 2009 to January 2011.
- Mr
Moore signed a statutory declaration on 18 December 2019 (marked “MFI
6” during the hearing) in which he referred to
a conversation with
Mr Darwiche about the property. In cross-examination, Mr Moore said that,
to the best of his knowledge, the statutory
declaration was correct, but he
accepted that he did not know the dates of “transactions and things”
(see T 176.14-177.40).
Mr Moore confirmed that Mr Darwiche had
demolished a shed on the property in either 2009 or 2010 (see T
174.28).
1 October 2009 letter regarding Mr Gavin Bale’s
unpaid wages
- Meanwhile,
on 1 October 2009, the deceased’s solicitor (Mr Hancock) sent a letter to
the deceased (addressed to the Woolgoolga
address) stating that Mr Gavin
Bale (Ms Bale’s husband) had asked that he (the deceased) be reminded that
there was a considerable
amount owing to him for wages during his time at the
factory (referring to an amount of $10,900) and requesting confirmation that
the
solicitor could attend to this. The letter contained a postscript
stating:
P.S. re Forest Lodge – Suncorp will sell this as mortgagee unless you sell
it first. Please contact me or Tony.
- The
defendants argue, from this, that there were discussions prior to 1 October
2009 between Mr Hancock and Ms Bale to the effect
that the deceased was at risk
of losing the Forest Lodge Property. Ms Bale denied this (T 100.7) (and her
understanding in cross-examination
was that this note was in reference to the
house at Gordon, although the Gordon Property was not security for the Suncorp
loan; cf
the Summer Hill and Forest Lodge properties). Moreover, the letter does
not refer to discussions between Mr Hancock and Ms
Bale.
March to June 2010
- There
is in evidence what appears to be a draft advertisement “for lease”
of the Forest Lodge Property (produced on subpoena
from
Mr Andreacchio’s files – marked “MFI 4”) which
includes reference to the figure of $600,000. In cross-examination,
Mr Andreacchio said that this was a typographical error. (As noted above,
Mr Moore confirmed in cross-examination that he had a lease
in 2009 –
but that was a one-year lease which would have expired in February 2010.)
- Mr
Andreacchio in cross-examination said that he had not discussed the sale of the
Forest Lodge Property for a long time after the
auction (until around 2010 when
he started a conversation with Ms Chyna Schein and Mr Mohr about this). Mr
Andreacchio also says
that, by this time, the deceased was starting to be a
“recluse” at Gordon (see T 143.50). (The deceased’s move
to
Woolgoolga, it will be recalled, seems to have occurred sometime after March
2009 – when Dr Veitch’s letter referred
to such a move being
considered – and before October 2009, when Mr Hancock wrote to the
deceased at the Woolgoolga address.
Thus, by 2010, the deceased seems to have
been based in Woolgoolga not Gordon.)
Visit by Ms Bale in
2010
- Ms
Bale’s evidence is that (at some time in 2010) Ms Bale visited the
deceased at his home. Ms Bale was concerned that the
deceased could not
recognise his dog, Pedro, despite the dog having been his companion since the
death of his late wife (see her
first affidavit at [58]).
First
reference in medical notes to Alzheimer’s dementia – June
2010
- There
is a reference in medical notes dated 22 June 2010 (see annexure “L”
to Ms Bale’s first affidavit) to the
deceased having Alzheimer’s
dementia (and coronary artery disease). (The defendants, however, point to other
entries in the
history recorded in notes included in annexure “M” of
Ms Bale’s first affidavit – including on 14 December
2011 that
the deceased was “feeling well, no complaints”, and on 19 January
2012 that the deceased “feels well”
– and note that on 21
February 2011 there is a record of a consultation for 14 minutes 31 seconds
in which there is no reference
to dementia.)
- Ms
Bale refers to the lay evidence of the deceased’s mental decline and the
contemporaneous medical notes referred to above
as supporting her contention as
to the deceased’s decline in cognitive ability in the relevant period. I
deal with the objections
to this material in due
course.
Communications with Mr Zounis in relation to the Forest
Lodge Property
- Mr
Michael Zounis owned an adjacent property to the Forest Lodge Property (the
Forest Lodge Property being located behind three properties
that fronted onto
Junction Street). Access to the Forest Lodge Property was through a right of way
on Junction Street; and Mr Zounis
owned one of the properties on Junction
Street.
- The
relevance of Mr Zounis in the chronology of events relates largely to
communications in which Mr Zounis discussed a proposed development
of the Forest
Lodge Property with Mr Andreacchio. In cross-examination, Mr Andreacchio
agreed that he had communicated for many years
with Mr Zounis (T 114.37).
The defendants place these discussions as occurring from around mid-2010 to the
beginning of 2011. Mr
Andreacchio, however, denied (at T 144.30) that from
mid-2010 to the beginning of 2011 he was in discussion with Mr Zounis as to
a
potential purchase of the property. That said, Mr Zounis certainly seems to have
been keen to progress discussions in relation
to a development at around that
time.
- There
is in evidence a letter sent by Mr Zounis to Mr Andreacchio, referring to a
telephone conversation on 3 July 2010 (as to the
option of developing the entire
site including the land occupied by the three terraces – see letter dated
5 July 2010, marked
Ex 4). Taken to this in cross-examination,
Mr Andreacchio’s response (convincing in its tone) was that he did
not have time
to read “all this stuff” from Mr Zounis (see T 148.9)
and he said that “I didn’t want Mr Zounis running the
agenda” (T 149.5). Mr Andreacchio said that it was important to get
Mr Zounis “off his back” and that he paid a
sum of $15,000 to an
organisation named Amflo for a “feasibility study” (see
T 149.35; 152.49). However, Mr Andreacchio
says that he did not speak to
the other proposed neighbour who Mr Zounis had identified (i.e., the owner of
the other property adjacent
to the Forest Lodge Property) (see at T
151.28).
- My
observation of Mr Andreacchio in the (virtual) witness box was that he was
somewhat defensive on this topic (see T 156-158). Mr
Andreacchio was, however,
firm in his evidence as to the conversation he had with Mr Darwiche as to
the price at which the Forest
Lodge Property was passed in at auction
(T 162.18-162.24), maintaining that this was in 2010 (though his reason for
ascribing this
date to the conversation seemed to be simply because that was
what was stated in his affidavit). Mr Andreacchio was no longer the
managing
agent for the property after 2014 (T 159) but there is nothing to suggest that
he was not in communication with Mr Darwiche
before that time. At T 163.2,
Mr Andreacchio accepted that he was not aware of the deceased’s
financial situation, except that
he knew the rent was going to Mr Mohr or
Ms Chyna Schein, so he thought that the deceased was “travelling
OK”.
- By
email on 4 February 2011, Mr Zounis wrote to Mr Churchill (which suggests that
Mr Churchill was also involved in some capacity
at this point), copied to
Mr Andreacchio, in which Mr Zounis referred to a discussion earlier in the
week, and set out a development
proposal for the Forest Lodge Property in
addition to other properties at Junction Street (see Ex 4 at p
12).
Letter from Suncorp
- On
18 January 2011 (see Ex 6), Suncorp sent an email to Mr Mohr (not, it should be
noted, addressed to the deceased) stating in effect
that the bank would hold off
taking further recovery action until 14 February 2011 but that, if the debt was
not discharged in full,
the bank would appoint receivers and managers; and that
no further extension would be granted. (As referred to earlier, Suncorp
had
previously sent the deceased two letters of default, on 19 January 2009 and
9 February 2010, respectively - see Ex 1 at pp
970-971.)
Incorporation of Kimberley Developments – 9
February 2011
- Kimberley
Developments was incorporated (by, it appears, Mr Churchill) on 9 February
2011. Mr Darwiche was recorded as the sole director
and sole shareholder of
Kimberley Developments on the inception of the company. Ms Bale places
emphasis on the fact that the name
of the company is the same as the name of the
property the subject of the transaction set out in the 21 February 2011
Agreement;
and draws from this the conclusion that the purpose of incorporation
of Kimberley Developments was connected with the sale and proposed
development
of the Forest Lodge Property (see below).
- In
Mr Darwiche’s second affidavit affirmed 25 February 2019, he has deposed
at [6] that he never conducted business as a director,
agent or representative
of Kimberley Developments. However, in cross-examination, Mr Darwiche said that
Mr Churchill set up the company
for him “to do a development”,
although he did not issue any invoices in the company’s name to Mr
Churchill (T
199.3-199.14 and 201.47). Mr Darwiche’s evidence was that he
“always” incorporated a company for big jobs but
he could not name
more than one such company in the twenty years he had been in the business (that
one company being Amani Group
Propriety Limited). Mr Darwiche accepted that he
knew he was the director of Kimberley Developments but said that he never saw
any
documentation. Mr Darwiche also deposed that it was not his signature on
the application form for registration of the company (and
postulated that Mr
Churchill had forged his signature). Mr Darwiche denied that he had
fabricated a reason for bringing the company
into existence in order to rebut
the submission that it was created to develop the Forest Hill Property with the
deceased (T 204.6).
February 2011 – proposed agreement
regarding the Forest Lodge Property
- By
2011, the Forest Lodge Property was the deceased’s “chief
asset” and “was his major source of financial
security” (see
[79] of Ms Bale’s first affidavit).
- Mr
Darwiche’s evidence is that, in about February 2011, he was contacted by
the deceased and Mr Churchill; and that the deceased
handed him a copy of an
agreement which proposed a development plan for the Forest Lodge Property site
and for Mr Darwiche to be
involved in the construction of a unit complex (see
his second affidavit at [12]-[13]). Mr Darwiche also deposed that “at
no
time did [the deceased] seem as though he was incompetent in his business
dealings” (an observation on which I place no weight
– self-serving
as it clearly is).
- Pausing
here, it is telling that the document annexed to Mr Darwiche’s second
affidavit (and which he deposes was the proposed
agreement handed to him by the
deceased which he rejected) is a document that on its face is signed by the
deceased, witnessed by
Ms Chyna Schein, and dated 21 February 2011. I
regard this as telling because, in the ordinary course, one would not expect a
“proposed”
or “draft” agreement to be presented to the
proposed counterparty to that agreement to be one that was already signed
or
dated (since that would presume agreement in advance to its terms); at least in
the absence of some previous discussion as to
the proposed agreement (and Mr
Darwiche does not suggest that there was any such discussion to this point).
That the deceased would
present an agreement in such a form to Mr Darwiche
is also somewhat at odds with Mr Darwiche’s statement in his second
affidavit
at [13] that at no time did the deceased seem as though he was
incompetent in his business dealings (having regard to the criticisms
Mr Darwiche now makes as to this agreement).
Terms of the
alleged agreement
- The
“proposed” agreement that Mr Darwiche (in his affidavit at least)
said was the agreement handed to him by the deceased,
and that in respect of
which Ms Bale here sues, is a document that appears on its face to be in
different fonts. So, for example,
the coversheet (which simply names the parties
as Albert Darwiche and Michel Schein) is in larger font than the balance of the
document
and, more relevantly, the operative clauses (cll 5-29) are
inconsistently aligned. There is also a problem with the sequence or numbering
of the clauses, since at the conclusion of cl 29 the numbering reverts to cl 26
(and it and the following clauses are further indented).
- The
document, as it appears in the Court Book, bears underlining and handwritten
annotations (it being unclear whether these were
on the document as signed but,
if Mr Darwiche’s affidavit evidence is correct – though noting that
he resiled from this
in cross-examination – these were on the document as
handed to him).
- The
document is dated 21 February 2011 (in apparently the same font as the
coversheet) in the heading on the first substantive page
of the document, and in
handwriting next to the execution clause. The document is purported to be signed
by “Chyna Schein &
Michel Schein” (those names being printed in
handwriting next to the execution clause) but seems to bear only one signature
at the bottom of each page (which looks like that of the deceased, at least by
my comparison with his signature on other documents)
and a different signature
under the printed names (presumably that of Ms Chyna Schein). There is a
space for signature by a witness
but none appears to have been noted there.
There is also space (above the execution clause signed by the deceased and/or Ms
Chyna
Schein) for execution by another party (presumably Mr Darwiche, who is the
named counterparty to this agreement). It is also relevant
to note that the
final clause of the document contemplated the execution and exchange of
counterparts (but noting that the agreement
“shall be of no force and
effect until the counterparts are exchanged”). At the foot of the
execution page, appear the
words “Agreement between”, which seem to
be the introductory words for the coversheet (which may perhaps simply be a
photocopying glitch of some kind).
- To
say that the document is oddly or infelicitously drafted is an understatement.
There is nothing on the face of the document to
indicate by whom it was
drafted.
- The
document (to which I will hereafter refer as the 21 February Agreement, though I
do not use this definition as a label from which
to conclude that it was in fact
a binding agreement – bearing in mind the admonition by the High Court
against such reasoning
in Owners of the Ship, Shin Kobe Maru v Empire
Shipping Co Inc (1994) 181 CLR 404; [1994] HCA 54 at 419), recites that the
deceased is the registered proprietor and owner of the Forest Lodge Property
(Recital A); that Kimberley
Developments “is a company focused [o]n the
improvement, development and management of property and services” (Recital
B); that Mr Darwiche had agreed to take actions “to participate in the
improvement development and management” of the
Forest Lodge Property
(Recital C); and that the deceased had requested Mr Darwiche “to take
actions with him to jointly develop
the property” (Recital D).
- The
21 February Agreement, after cl 1 (definitions) and cl 2 (containing
interpretation provisions), there contained a number of operative
clauses.
Relevantly, I note the following clauses.
- Clause
3.1 provided that the deceased wished to appoint Mr Darwiche as the
“exclusive and strategic Decision maker in respect
to the improvement,
development and management of the development of the property” and that
the deceased wanted “to take
no active part in the project or
projects”. The clause contained an acknowledgment by the deceased as to
the need for a “single
decision maker in the proposed project” and
(having in the first sentence stated the wish to appoint Mr Darwiche) that the
deceased “hereby appoints” Mr Darwiche “or his nominees or
assigns” to be the “single decision maker”
(the concept of
plural nominees or assigns being the single decision maker seems to be a
contradiction in terms). Clause 3.2 provided,
among other things, that Mr
Darwiche may assign each and any rights under the agreement and appoint
“such agents, distributors
or licences [sic]”.
- Clause
4.1 (under the heading “Rights and obligations of Albert Darwiche”)
provided that, during the “Term”
(capitalised but not defined) of
“this Agreement”, Mr Darwiche “shall take all actions he
considers necessary for
the improvement development and management” of the
Forest Lodge Property and that Mr Darwiche “is authorised and directed
to
take such actions as he in his absolute unfettered discretion deems
necessary” (a very broad discretion and on its face
not in the
deceased’s interests).
- This
clause (in a separate paragraph) provided that Mr Darwiche “will transfer
60 percent of the Class B non-voting shares”
in Kimberley Developments to
the deceased “upon the signing this Agreement, and the [sic] on the
signing of the agreement for
the sale of the land to Kimberley Developments ...
and on the signing of a transfer of title of the land [the Forest Lodge
Property]
to Kimberley Developments ...”. Against this clause appear the
handwritten words (which can only sensibly have been written
at some later
point) “where are shares?”.
- Clause
4.2 provided that Mr Darwiche “will make payments on any shortfall on
mortgage payments in respect of the property from
the date of settlement”
and that Mr Darwiche was “authorised to use any income from the property
to use for whatever
purpose he may consider appropriate”.
- Clause
4.3 provided that Mr Darwiche was to “take such actions as he in his
absolute unfettered discretion considers necessary
for the improvement and
development of the property” and that the parties agreed to improve,
develop, and manage the property
using the Company.
- Under
the heading “The Parties Agree”, there were then various short
clauses (inconsistently aligned) dealing (among other
things) with the
parties’ agreement as to their aims and objects in relation to the company
and to provide for the operation
and administration of the company (see cl 6),
including the shareholding of the company (cll 8-19) and its management on a
day-to-day
basis (by Mr Darwiche) (cl 7).
- Relevantly,
there were to be two classes of shares – Class A shares with full voting
rights, the shareholders of which were
to make all decisions; and Class B shares
with no voting rights. Apparently in case that was not clear enough, the
agreement also
provided that Class B shares were to have no voting rights in
respect of the appointment of directors and Class A shares were to
have full
voting rights in respect of the appointment of directors. The 21 February
Agreement recorded that the parties envisaged
that in the “normal course
of business” dividends and profits would be paid to Class B shareholders.
Clause 16 in effect
repeated what was provided for in cl 4.2 in relation to the
making of mortgage payments of any shortfall in mortgage and the use
of any
rental or other income coming in from the property by Mr Darwiche to make
mortgage or other payments due on the property.
- Clause
17 specified that the deceased was to hold 60% of the Class B shares and Clause
18 in turn specified that Mr Darwiche was to
hold 40% of the Class B shares. The
holder of the Class A shares was not identified.
- Clause
21 referred to an agreement by the parties that Mr Darwiche use the property to
obtain replacement finance for the mortgage
currently held over the property;
that it was the intention of the parties to use Kimberley Developments as a
“borrower”
and the land as security; that the payments made during
the term of the agreement would be “credited” to Mr Darwiche
and be
reimbursed to him; and that the parties acknowledged that Mr Darwiche
needed to approach a non-bank lender to obtain funding
and the deceased
requested Mr Darwiche to take immediate action to obtain such funds.
- Clause
22 provided that the parties agreed that should the development not proceed then
Mr Darwiche “shall be reimbursed for
all sums expended” (against
which there is a handwritten note, again which must have been placed on the
agreement at a later
date – “what sums have been expended?”).
There is a deletion from cl 22 (seemingly otiose words “that if”
after “should”) and (which I consider not insignificant) the
deletion of those words has been initialled.
- The
content of cll 21 and 22 are seemingly for Mr Darwiche’s benefit –
and, again, not obviously in the deceased’s
interest as to reimbursement
“for all sums expended” in the circumstances contemplated by the
case.
- Clause
24 is a lengthy (and in parts repetitive) clause dealing with legal costs in
respect of the property and the formation of the
company, including that the
parties authorise Mr Churchill to place a caveat or caveats on the property
should he consider it appropriate
to secure his fees, costs and disbursements
and that the parties pledged the property as security therefor. (There is a
handwritten
note, again seemingly written after the event, against this clause
“what were his costs”.)
- Clause
25 recorded the parties’ intention that Mr Churchill was to rank as the
primary secured creditor in respect of the property
and provided for the parties
to indemnify Mr Churchill from “any failures to secure such
position”.
- The
defendants contend that the above clauses indicate that Mr Churchill drafted
this agreement (and they contend that this was done
on the instructions of the
deceased on the basis that this was within the particular knowledge of the
deceased not Mr Darwiche).
Ms Bale (to the contrary) submits that the document
was most likely drafted by Mr Darwiche with the help of Mr Churchill (see
below).
- Pausing
here, I accept that it seems likely that the agreement was drafted by Mr
Churchill or at least by someone with an interest
in affording him priority or
security for his fees and with his lawyer (though I frankly cannot see that the
draftsmanship of this
agreement is anything of which a lawyer could be proud,
and it seems to me on its face more likely to be an agreement cobbled together
by a non-lawyer). That said, I have no knowledge of Mr Churchill’s
drafting skills (or otherwise) to be able to comment on
the likelihood that he
did in fact draft it. However, I cannot see that the agreement was inherently to
the deceased’s advantage
(particularly noting the absolute and unfettered
discretion accorded to Mr Darwiche; his sole decision-making capacity under
the
agreement; and the provisions for reimbursement to him of payments made;
amongst other provisions to his obvious advantage), which
makes it implausible
to my mind that the deceased was responsible for its drafting.
- Ms
Bale maintains that the agreement encapsulates the terms and representations
upon which Mr Darwiche “enticed” the deceased
to transfer the
property, noting in this regard that the 21 February Agreement is dated the same
day the transfer of the Forest Lodge
Property was signed.
- Clause
26 (where first occurring) provided that the parties had agreed a price for the
property of $590,000 based on a listing of
the property by “A Licenced
[sic] Real Estate agent” for $600,000, stating that “[t]his listing
was not able to
obtain any acceptable offers”. The clause recorded that
the parties had agreed that the property would be sold by the deceased
to
Kimberley Developments for $590,000. (The defendants rely on this – and
other clauses – as suggesting that the agreement
was drafted on the
deceased’s instructions.)
- Clauses
28 to 29 (where first occurring) dealt with matters relating to the development
costs and development approval; and cl 27
(where first occurring) provided for
the vesting in Mr Darwiche (in the event of a winding up of the company
“or this joint
venture”) of the intellectual property of the company
and the joint venture, including any rights that may accrue from a development
application or building application or any variations.
- After
cl 29, and a space in the document, there is then a section headed “Michel
Schein agrees”, commencing from cl 26.
In that section the document
provides for: the deceased’s agreement on the signing of the agreement to
enter into an agreement
for the sale of land to Kimberley Developments
(cl 26); that on the signing of the agreement the deceased will sign a
transfer of
title of the land to Kimberley Developments (cl 27) ; and that the
deceased will pay all land tax, water rates and Council rates
up to the date of
settlement (and goes on to record a request for delay in calling on those
contributions “until Darwiche determines
that they must be paid” (cl
28)).
- Clauses
29 (where second occurring) to 33 provide that:
29. Schein agrees that Darwiche provided substantial work on
the property and removed materials from the property at the request
of Schein to
enable the development to proceed. The parties agree that all such sums that may
be owed to Darwiche by Schein have
been merged in this agreement. Darwiche has
provided a professional and workman like service to Schein who wishes to enter
into this
Arrangement with Darwiche.
30. Michel Schein hereby acknowledges receipt of the sum of
$590,000.00 for the sale of the property comprising of the discharge
of the
outstanding Mortgage, the shareholding in the Company and for settlement of
monies owed to Darwiche in respect of the clean
up and improvement of the
property and other services.
31. A signature on any document by his wife Chyna Schein, also
known as China Schein shall bind Michel Schein. Michel Schein has
appointed his
wife Chyna Schein also known as China Schein under a Power of Attorney. Michel
Schein advises Albert Darwiche that
such Power of Attorney was challenged in the
Guardianship Tribunal of New South Wales and was upheld to be a valid Power of
Attorney.
32. Schein advises Darwiche that Schein was in default of his
Mortgage with Suncorp who were to take possession of the property.
Schein has
requested Darwiche to take all actions necessary to obtain finance including
finance from private financiers.
32. Schein has advised Darwiche that he has difficulty in
travelling to Sydney and wishes to remain a passive investor. Schein
has
authorised Darwiche take all such actions that Darwiche may consider
necessary.
33. Schein agrees that his interest in the Property has been
transferred to the Company Kimberley Developments Pty Ltd. Schein
acknowledges
that he has no right to place caveats or other restrictions on the property.
- Against
cl 29 in this section are the handwritten words “does that make
Dad’s costs part of contract? OR is [sic] monies
still owing?”
(which indicates that this, and the earlier handwritten comments, are those of
Ms Bale).
- As
noted above, cl 31 provides that a signature on any document by Ms Chyna
Schein shall bind Michel Schein (and notes that Ms Chyna
Schein has a valid
power of attorney). Reliance is placed on this (by Ms Bale, as indicating that
Mr Darwiche was aware of the deceased’s
cognitive ability at the time
– see below). I would not draw such a conclusion – since it is
equally possible that provision
was here being made in case there were to be a
challenge in future – particularly since Mr Darwiche’s own evidence
was
that the deceased had told him about a challenge by his daughter in
NCAT.
- After
cl 33, there appear various clauses (seemingly boilerplate but including a
confidentiality provision) that are not sequentially
numbered in accordance with
the earlier clauses.
- Ms
Bale contends that Mr Darwiche, having become aware of the prospect of sale of
the Forest Lodge Property, incorporated Kimberley
Developments in early February
2011 and that, at or around that time, Mr Darwiche proposed to the deceased
that if the deceased transferred
the Forest Lodge Property to Kimberley
Developments, Mr Darwiche would develop the Forest Lodge Property with a view to
selling it
for a profit. It is said that, with that in mind, Mr Darwiche and Mr
Churchill drafted the 21 February Agreement. Ms Bale says that,
given the
terms of the agreement, and what she maintains is the cognitive decline of the
deceased, it is impossible to conclude that
it emanated from anyone else but
Mr Darwiche. In that regard, Ms Bale contends that the relevant terms of
the 21 February Agreement
were not commercial and confer a disproportionate
advantage on Mr Darwiche.
- Mr
Darwiche maintains that he never agreed to any of the terms in the
21 February Agreement. Mr Darwiche asserts that Mr Churchill
showed him a
copy of the agreement (already executed by the deceased) and that “upon
reviewing this agreement, I rejected the
agreement” (although in
cross-examination Mr Darwiche seemed to resile from the proposition that he had
carried out any real
review of substance of the document – see T
214.42-217.21).
- Similarly,
Mr Theo Trigas (who is not named as a party to the agreement nor is he the
subject of any clause in the agreement) states
in his second affidavit sworn 25
February 2020 at [9] that he considered the proposal and also rejected it.
- The
defendants emphasise that the copy of the 21 February Agreement in evidence is
not executed by any of Kimberley Developments,
Mr Darwiche or Mr Theo
Trigas.
- Mr
Darwiche and Mr Theo Trigas maintain that there was an oral agreement between
themselves and the deceased for the deceased to transfer
the Forest Lodge
Property to Kimberley Developments for $590,000 only (that sum comprising a
discharge of the outstanding mortgage
sum of around $285,000 owing to Suncorp
Bank and the alleged debt owed to Mr Darwiche for cleaning up the Forest
Lodge Property of
around $38,000, with the balance to be paid in cash). The
defendants point to the fact that the transfer, as registered, records
the
consideration for the transfer of the property as being in the sum of
$590,000.
- No
contract for the sale of the property has been produced in evidence.
Ms Bale contends that there is none; the defendants contend
that it should
be inferred (from the stamp duty paid on the transfer and the Duties Notice of
Assessment) that a standard form contract
for the sale of the land as used in
New South Wales was indeed executed and exchanged on 21 February 2011 (and they
have given hearsay
evidence to the effect that Mr Churchill said it was
lost).
- The
defendants maintain that the deceased insisted that the remaining balance (after
discharge of the Suncorp mortgage and taking
into account the $38,000 debt to Mr
Darwiche), totalling just over $300,000, be paid in cash. The defendants state
that this money
was provided by the now deceased Mr Marinos Trigas (the
father of Mr Theo Trigas and Mr Arthur Trigas) who it is said had at any
one
time up to $500,000 in cash in a safe at his home (having, it is said, made his
money in the sale of cigarettes) (see T 288.42-289.3).
Ms Bale points out that
there is no evidence of the moneys being paid, other than the assertions of Mr
Darwiche and Mr Arthur Trigas;
in particular, that there is no evidence of the
funds being withdrawn or any receipt for their payment. Ms Bale maintains that
the
account of a cash payment is an obvious lie and refers in this regard to the
observations of Hammerschlag J, as his Honour then was,
in Sergei Sergienko v
AXL Financial Pty Limited [2021] NSWSC 297 (Sergienko v AXL Financial Pty
Limited) at [1] as to large undocumented cash transactions, namely
that:
A party asserting, and seeking to rely upon, the terms of an alleged,
undocumented commercial transaction said to involve the transfer
of very large
sums of cash, ought not to be taken by surprise when he, she or it fails to
persuade the Court of its existence.
- Mr
Darwiche and Mr Arthur Trigas were cross-examined on their accounts of the
payment in cash of over $300,000 to the deceased and
Ms Chyna Schein in the
house at Woolgoolga on 21 February 2011 (and the counting of the money),
together with the issue of the lack
of any receipt for the money. I refer to
this cross-examination in due course.
- Mr
Darwiche said that the cash payment was made up of bundles of $50,000 and that
the $50,000 bundles were in turn made up of $10,000
bundles. In
cross-examination, Mr Darwiche said that the deceased did not actually count the
individual bank notes but that he counted
the bundles; and that it took half an
hour to count six identical bundles (T 249.43). Mr Darwiche’s evidence was
that the question
of the giving of a receipt was raised but that
Mr Churchill and the deceased said that the sales contract and the transfer
were the
receipt (T 251.16).
- A
transfer of the title to the Forest Lodge Property from the deceased to
Kimberley Developments was in evidence. The transfer is
dated 21 February
2011 and appears to be signed by the deceased, whose signature is witnessed by
Ms Chyna Schein. The transfer was
signed by Mr Churchill as
“solicitor for the transferee”. (For the defendants, it is submitted
that, on 21 February 2011,
Mr Churchill was working for Mr Theo Trigas on
behalf of Kimberley Developments or perhaps for Kimberley Developments on behalf
of
Mr Theo Trigas – see T 264.10. One difficulty in this submission is
that if that is the case the transfer was signed by the
solicitor, allegedly on
behalf of Kimberley Developments, but instructed by someone who (on the ASIC
records at the time) had nothing
to do with the company.)
- The
transfer acknowledged receipt of the consideration of $590,000. The copy of the
transfer in evidence was stamped for duty of $10.
- On
24 February 2011, payment of $288,242.63 was made directly to Suncorp via bank
cheque in payment of the outstanding mortgage over
the Forest Lodge Property.
There are bank statements in evidence that record the payment of $22,606 (for
stamp duty on the purchase
price of $590,000).
Ms Bale’s
awareness of the sale at this stage
- At
this point, it is relevant to note that there is an issue raised by the
defendants as to when Ms Bale first became aware of the
sale or transfer of the
Forest Lodge Property. The defendants plead (at [77B]) that Ms Bale was aware
from 21 March 2011 that the
Forest Lodge Property had been transferred to
Kimberley Developments. Ms Bale has deposed, to the contrary (at [77]), that she
became
aware only on 11 August 2016 at the NCAT hearing of the contract which is
in dispute (the 21 February Agreement) and the deceased
transferring the Forest
Lodge Property to Kimberley Developments (see below).
- Reliance
is placed by the defendants on an email dated 21 March 2011 from Mr Zounis to Mr
Andreacchio (produced on subpoena apparently
issued by Mr Churchill when he
still had an active role in the proceeding). In the 21 March 2011 email, Mr
Zounis confirmed his understanding
that the Forest Lodge Property had been sold.
On its face, it appears that the email was copied to Ms Bale’s relevant
email
address (that being in her husband’s name), from which it is said
that Ms Bale became aware of the sale of the property in
2011. (This is relevant
to the pleading of laches and acquiescence – see [77B], [77C] and [77E]
for which leave to amend was
given during the hearing – as to this see T
77.)
- It
was put to Ms Bale in cross-examination (by reference to that email) that in
February 2011 Ms Bale was contacted by Mr Zounis.
Ms Bale did not remember
this (see T 80.28-81.5) and said that, after June 2008, she had nothing to do
with the deceased’s
business affairs (“why would Zounis contact me
perhaps he did I don’t remember”) (T 80.11-80.14). Nevertheless,
Mr Zounis’ email suggests that Ms Bale was on notice that there had
been a sale of the property from as early as late March
2011.
18
March 2011
- There
is in evidence a medical report of Dr Raju Minhaz Lalani from Palm Beach Medical
Centre, on 18 March 2011, in which the deceased
was reported to have been
“wandering at night shouting” showing signs of paranoia, running to
neighbours and having behavioural
problems (see annexure “M” to Ms
Bale’s first affidavit).
Admission to hospital on 29 April
2011
- A
medical discharge referral from the North Coast Area Health service noted that
the deceased was admitted to Coffs Harbour Emergency
on 29 April 2011 with
confusion, noting that his wife described witnessing a possible seizure. The
report diagnosed pneumonia; and
noted that:
Mr Schein’s wife reported seeing him start shaking, become unconscious,
and incontinent of urine and feces. He was then very
drowsy. Mr Schein has no
history of seizures and he had no seizures while an inpatient. Mr Schein was
confused and agitated on presentation
but neuro examination in EG was grossly
normal and CT brain was normal, showing only age related atrophy.
- The
report noted the expected date of discharge was 5 May
2011.
Further admission on 13 June 2011
- According
to the hospital records, the deceased was admitted again to Coffs Harbour Health
Network on 13 June 2011, presenting with
acute confusion and fevers. The report
noted a recent admission to hospital on 2 May 2011 with acute confusion and
pneumonia. The
deceased was discharged on 22 June
2011.
Change in directorship of Kimberley Developments
- On
23 December 2011, Mr Darwiche ceased as a director of Kimberley Developments and
Mr Theo Trigas was appointed director. Mr Theo
Trigas is now recorded as the
holder of all the Class A and Class B shares in the company (but interestingly,
the ASIC search records
that the shares are not beneficially owned – see
annexure “B” to the affidavit of Ms Sionea Breust sworn 22 January
2019).
Replacement of the managing agent for the Forest Lodge
Property
- By
letter dated 1 June 2014, Mr Darwiche sent an email to Mr Andreacchio
advising him that from 1 June 2014 another person (“Rabie
from 1 Group
Real Estate”) would be looking after the Forest Lodge Property, and
requesting that all documents be ready for
collection on that date (see annexure
“B” to Mr Andreacchio’s second affidavit). By this time, on
the defendants’
case and on the ASIC records, Mr Darwiche was not a
director of Kimberley Developments. Mr Darwiche in cross-examination described
himself as caretaker, not owner, of the property (see T
252.40).
January 2016
- Ms
Bale has deposed that, in August 2015, she arranged for a Baptist Pastor,
Gregory Vaughan, to meet with the deceased and that,
after that, Pastor Vaughan
regularly took the deceased to church (see her first affidavit at [70]). Ms
Bale says that in January
2016 she called Pastor Vaughan to see how the deceased
was going and that Pastor Vaughan asked her if the deceased could live with
her
as he had observed that the deceased was neglected and felt that the home
environment was unsafe (see her first affidavit at
[71]).
- A
statement dated 23 February 2016 from Pastor Vaughan was annexed to Ms
Bale’s affidavit (being part of the material that Ms
Bale had submitted to
the subsequent 2016 NCAT hearing). In that statement (on which the defendants
rely), Pastor Vaughan gave an
account of the deceased’s distress and hurt
by the relationship between Ms Chyna Schein and “Martin” (who the
defendants
infer is a reference to Mr Churchill) in the deceased’s home;
and of Pastor Vaughan’s own observations in that regard,
as well as
occasions when he observed a lack of personal care or attention for the
deceased. The defendants in particular point to
parts of the statement that
indicate that the deceased was aware of how he was being treated by his wife and
“Martin”
and to the statement by Pastor Vaughan that “[t]hese
were not like the confused ramblings of an old man, but rather a man who
was
deeply hurt and didn’t know where to turn for help”.
- Pausing
here, it is by no means clear who was the other male apparently living in the
Woolgoolga property with the deceased and Ms
Chyna Schein at the time. Ms
Bale’s statement to NCAT identified this person as a “Martin
Kips”.
February 2016
- It
is not disputed that, following the above events, the deceased returned to live
with Ms Bale in February 2016.
Retrospective medical report from
Dr Regal
- A
retrospective medical report of Dr Paul Regal on 29 February 2016 was provided
(in the context of the second application brought
by Ms Bale to the Guardianship
Division of NCAT – see below; in which Ms Bale sought a review of the
appointment of Ms Chyna
Schein as the deceased’s power of attorney). Dr
Regal’s opinion was that (based on the matters recorded in the medical
records that had been reviewed and tests of executive function administered on
22 February 2016) the facts suggested that the deceased
had mild dementia when
he appointed Ms Chyna Schein as power of attorney on 3 June 2008. Dr Regal
was of the opinion that, as at
the date of this report, the deceased had
moderate dementia. (Ms Bale says that the findings of Dr Regal were confirmed by
Dr Howard
Oxley on 1 March 2016 – see below.) There is objection to this
document, which was admitted as evidence of what was before
NCAT at the time of
the second hearing.
- It
is evident that the report of Dr Regal must have been based (at least partly) on
the history of events given to him (presumably
by Ms Bale), since it recounts
that the deceased had been neglected and abused by Ms Chyna Schein, from which
he was “suffering
greatly” (and in that respect it appears to be in
the nature of a submission to NCAT).
March 2016 – second
application to NCAT
- On
4 March 2016, Ms Bale submitted an application to NCAT for the review of the
power of attorney that the deceased had granted in
favour of Ms Chyna
Schein. In support of that application, Ms Bale submitted various documents,
including a medical certificate dated
1 March 2016 from a general practitioner
in Wyong (Dr Howard Oxley) who stated his opinion that the deceased was
suffering from a
“degree of dementia” but nevertheless was satisfied
that the deceased understood his own feelings and his present home
situation and
who said that the deceased’s responses “confirm that he is in a good
frame of mind to make a decision as
to where he wishes to live and with
whom”; the statement from Pastor Vaughan (referred to above); and the
report of Dr Regal
(also referred to above).
- The
hearing at NCAT commenced on 31 May 2016. Handed up during the hearing was a
statement dated 24 May 2016 by Ms Bale in which Ms
Bale recounted various
matters (including as to difficulties with the Summer Hill development, to which
I have referred above) and
her concerns. In that statement, Ms Bale stated that
all the properties her father had at the time of his marriage to Ms Chyna Schein
had been sold “as far as we know” and that the deceased was on a
government pension but that she did not know what had
happened with the proceeds
of the properties and any income earned from them. (The statement also suggested
that, by the time the
deceased had returned to live with Ms Bale, Mr Mohr was no
longer in contact with the deceased; according to Ms Bale the deceased
had been
told by Ms Chyna Schein that Mr Mohr had gone to Machu Pichu.)
- Ms
Bale says that, at the 2016 NCAT proceeding, Ms Chyna Schein stated that she:
wanted a property settlement from the deceased and
believed that half of all of
his assets belonged to her; wished to defend the validity of the power of
attorney appointing her appointee;
and believed that the deceased was still a
60% owner of the Forest Lodge Property by virtue of an agreement as between the
deceased,
Kimberley Developments and Mr Darwiche. (It is in this context
that Ms Bale says that she first became aware of the existence of
the 21
February Agreement. Ms Bale says that the Tribunal advised her to make further
inquiries about the transaction.) The hearing
was adjourned on 31 May 2016 and
resumed on 11 August 2016.
- In
cross-examination, Ms Bale said that she assumed that all the properties had
been sold because the deceased had become an aged
pensioner in April 2011 (see T
106.44-107.6).
- Ms
Bale said that the 21 February Agreement was put in front of her for the first
time at the NCAT hearing on 11 August 2016 (T 104.8)
and that it bore the
original signatures of Ms Chyna Schein and the deceased. (One logical difficulty
that flows from this seems
to be that, if the contracts were executed and
exchanged as counterparts, one would assume that Mr Darwiche would hold the
original
counterpart as executed by the deceased and that what Ms Chyna
Schein would have retained would be the original executed by
Mr Darwiche.)
- Ms
Bale notes that Ms Chyna Schein told NCAT that the Forest Lodge Property had
sold for $590,000 (T 109.6-109.7). (This is consistent
with the transfer
registered in relation to the sale of the property and cl 26 of the
21 February Agreement. However, it does not
exclude the possibility that
the $590,000 there recorded as consideration had been agreed to be regarded as
paid by the issue of
shares in the company which is the understanding to which
Ms Chyna Schein deposed at the NCAT hearing.)
Orders made by NCAT
on 11 August 2016
- On
11 August 2016, orders were made in the Guardianship Division of NCAT removing
“Ms Chyna (China) Schein” from office
under the enduring power of
attorney made by the deceased on 3 June 2008 and appointing Ms Bale to
replace “Ms Chyna (China)
Schein” as the deceased’s
attorney.
Caveat over Forest Lodge Property
- Ms
Bale has deposed that, in early October 2016, she visited the Forest Lodge
Property and met Mr Moore (see her first affidavit at
[82]). Ms Bale has
further deposed that, in October 2016, Mr Andreacchio contacted her to advise
that the Forest Lodge Property was
to be sold and advised her that to protect
the deceased’s interests a caveat should be lodged (see her first
affidavit at [83]-[84]).
Ms Bale then engaged a solicitor (Mr Peter Steele) to
place a caveat on the Forest Lodge Property and to conduct searches, and
Mr
Steele confirmed by email on 14 November 2016 that the caveat had been
lodged on 9 November 2016 and registered (see registration
notice annexed as
“X” to Ms Bale’s first affidavit).
Attempts to
obtain information
- Ms
Bale instructed lawyers who attempted in the period from January 2017 onwards to
obtain information as to Kimberley Developments
and to make contact with Mr
Darwiche.
Increase in mortgage facility in respect of Forest
Lodge Property
- Meanwhile,
in 2012, a mortgage facility had been obtained by Kimberley Developments secured
over the Forest Lodge Property with funds
advanced of $400,000. On 18 September
2017, there was an increase in the facility amount to $700,000 with the sum of
$300,000 being
transferred to an account held by Super
Start.
Court proceeding commenced
- This
proceeding was commenced on 24 July 2018. There were some difficulties in
effecting service on various of the defendants. It
is not necessary here to go
into these in any detail. Suffice it to note that the first and fourth
defendants (Kimberley Developments
and Ms Chyna Schein) were validly served, but
the latter did not file a defence. Mr Darwiche’s position is that he did
not
learn of the proceeding until so informed by Mr Churchill in January 2019
whereas the plaintiff contends that Mr Darwiche was on
notice of the proceeding
(by reference to a telephone conversation – that Mr Darwiche denies
was with him – at an earlier
time). Nothing now turns on this (other than
that it raises issues of credit against Mr Darwiche) since he has taken no
active part
in the proceeding and no default judgment is sought against
him.
- As
to Ms Chyna Schein, Ms Bale’s solicitor (Ms Breust) has deposed to
attempts to effect service of further documents on Ms
Schein (who, as noted
above, apparently vacated the Woolgoolga premises after being informed of the
proceeding, without leaving a
forwarding address).
- A
freezing order was made by Campbell J in respect of Kimberley
Developments’ bank account and the Forest Lodge Property referred
to at
[3]-[4] in the form of order (see his Honour’s judgment of 18 January
2019).
Valuation of Forest Lodge Property as at November
2018
- In
November 2018, Mr Andreacchio provided a valuation of the Forest Lodge Property
(phrased as a suggestion of a reasonable selling
price) as being in the range of
$3,750,000.
Death of the deceased
- The
deceased died in 2021 (after the proceeding had been
commenced).
Pleaded case
- I
have referred above to the pleaded case as against the various defendants and to
the amended defences thereto.
- As
noted, the principal claim against the (active) defendants is for unconscionable
conduct in relation to the 21 February Agreement
(noting that the claims for
undue influence and for misleading or deceptive conduct were not pressed) and it
is only in the alternative
that claims for breach of contract are made. There
are, however, also claims for breach of constructive trust by Kimberley
Developments
and disbursement of trust funds in breach of trust (see [69]-[71])
and breach of trust in the transfer of the funds to Super Start,
including
accessorial claims against Mr Theo Trigas of knowing concern in breaches of
trust.
- As
against Ms Chyna Schein, the claim is in essence for damages for breach of the
fiduciary obligation owed by her as the deceased’s
attorney in relation to
the sale transaction in question.
- In
opening written submissions, the crux of the case for Ms Bale was described as
being that the deceased was preyed upon by Kimberley
Developments and Mr
Darwiche, who it is said induced the deceased to enter into a complex agreement
that they knew he could not have
understood. Similarly, in closing submissions,
Ms Bale contends that Mr Darwiche persuaded the deceased to enter into the 21
February
Agreement.
- Insofar
as the defendants in their submissions suggested that Ms Bale was abandoning the
pleaded claims pursuant to the Contracts Review Act or the Australian
Consumer Law, Ms Bale in reply submissions affirmed that the case as to
relief under the Contracts Review Act is pressed. (What is not pressed
(see T 324) is: the relief claimed in relation to capacity ([6]); the
Australian Consumer Law relief (see [9], [10], [14]); the claims at [33]
and [34] and the misleading or deceptive conduct allegations at [46]-[49].)
- The
defendants’ position in summary is that Ms Bale has failed to prove her
case; that the 21 February Agreement is not binding;
and that Ms Bale has
not established part performance of the Agreement and therefore s 54A of
the Act provides a complete defence.
The defendants say that their evidence
should be accepted and that there should be a finding that the cash payment was
made to the
deceased in accordance with the sale of the Forest Lodge Property
that was memorialised in a (now lost) standard form contract for
the sale of
land and the transfer. It is said that Mr Churchill retained the contract
for the sale of land and arranged for it and
the transfer to be stamped; that
Super Start (of which Mr Theo Trigas is sole director and shareholder) paid for
the discharge of
the Suncorp mortgage over the Forest Lodge Property in the sum
of $288,242.63 and paid the stamp duty in the sum of $22,060.00.
- It
is submitted that there is insufficient evidence to conclude on the balance of
probabilities that, as at 21 February 2011, the
deceased was unable to
understand the general nature of the sale transaction; and that if (which is
denied) the deceased was incapacitated,
it is said that Ms Bale has failed to
establish that the defendants had or ought to have had any knowledge of that
incapacity.
- The
defendants further say that the claims are not maintainable as they have been
brought after the expiration of a limitation period
of six years relying on ss
14 and 23 of the Limitation Act; and that Ms Bale has failed to establish
that the deceased was suffering from a disability within the meaning of s 52 of
the Limitation Act at the relevant time. Further, the defendants say that
Ms Bale has not articulated how her claim is a cause of action for an
equitable
estate or interest in land. The defendants acknowledge, however, that,
to the extent that the cause of action relied upon by the
plaintiff is that
there is a remedial constructive trust, the plaintiff’s claim is
effectively a claim for an interest in land
and on this basis would not be
statute barred (T 359.44-360.19). The defendants also contend that they have
made out a defence of
laches.
Issues
- The
key issues may thus be summarised as being: whether there was unconscionable
conduct in relation to the agreement for the sale
of the Forest Lodge Property
(which is predicated on there being an agreement or at the very least an
arrangement in terms of the
21 February Agreement, although not perhaps
requiring a finding that there was a binding agreement as such); in the
alternative whether
there has been a breach of contract (which is predicated on
there being a binding contract in terms of the 21 February Agreement);
whether
Kimberley Developments held or holds its interest in the Forest Lodge Property
on constructive trust for the deceased (and
now his estate); whether the
defendants were in breach of, or knowingly concerned in a breach of, that
constructive trust; whether,
as against Ms Chyna Schein, she was in breach of
fiduciary obligations owed to the deceased as his attorney under the 3 June 2008
power of attorney; and what relief flows from the findings made in respect of
those issues.
Evidentiary issues
- At
the hearing I deferred (or made provisional) rulings on certain of the
evidentiary objections that had been raised, principally
as to: whether
identified representations contained within documents that were admitted as
business records are opinions within the
meaning of s 76 of the Evidence Act
1995 (NSW) (Evidence Act) and should be excluded (in the absence of
evidence as to the basis on which the opinions recorded were formed); and as to
the admissibility
of the reasons of the Guardianship Division of NCAT published
on 11 August 2016, when determining that the deceased was capable of
making his
own decisions at that stage (apart from the orders referred to at [1]-[4] of the
decision, to which no objection was taken).
There are also deferred rulings with
respect to the transcript of the evidence given by Ms Chyna Schein at the 2016
NCAT hearing
(Ex C) and as to the provisional admission of documents that were
marked as Ex 1 (which included statements of account, credit approval
request
forms and Suncorp reports, letters of default issued by Suncorp and the Strata
Management Statement, all in relation to the
Suncorp loans issued to the
deceased).
- Those
evidentiary objections are addressed below. I note that complaint is made by the
defendants that there is extensive reliance
in Ms Bale’s closing
submissions on documents which were either not admitted into evidence or which
were (or it is contended
should be) limited in their use pursuant to s 136 of
the Evidence Act.
The representations of Dr Sawrikiar and
RN Price
- At
T 12.45; T 14, I reserved the question whether representations identified by the
defendants that were made by Dr Sawrikiar (the
deceased’s general
practitioner) and RN Price (a nurse who recorded various observations in the
deceased’s hospital or
medical records) those representations being
contained in medical records and notes tendered by Ms Bale as business
records, should
be excluded as inadmissible opinions (as the defendant contends)
within the meaning of s 76 of the Evidence Act.
- Reference
is made by the defendants to the observation by Beech-Jones J (as his Honour
then was) in Rodriguez and Sons Pty Ltd v Queensland Bulk Water Supply
Authority trading as Seqwater (No 13) [2018] NSWSC 565 at [3] that s 69 of
the Evidence Act operates as an exception to the hearsay rule only so far
as the document contains the representation and that it is the evidence
of that
representation (and not the document generally) that s 69 renders admissible
(his Honour there citing Capital Securities XV Pty Ltd (formerly known as
Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 at [88] where
Leeming JA in turn cited the decision in Lithgow City Council v Jackson
(2011) 244 CLR 352; [2011] HCA 36 (Lithgow City Council) at [17] per
French CJ, Heydon and Bell JJ). The defendants note that, in Lancaster v The
Queen (2014) 44 VR 820; [2014] VSCA 333, Nettle and Redlich JJA and
Almond AJA confirmed (at [68]) that a representation of opinion is not
admissible under s 69(2) of the Evidence Act unless it complies with the
requirements for admission of opinion evidence prescribed by ss 76-79 of the
Evidence Act, citing Lithgow City Council.
- The
defendants submit that (although accepting that the documents that contain the
representations are admissible as business records),
if the representations made
by Dr Sawrikiar and/or RN Price are relied upon by Ms Bale as to the truth
of the facts asserted therein,
then the particular representations identified by
the defendants are inadmissible statements of opinion within the meaning of s 76
of the Evidence Act unless they satisfy an exception to the opinion
rule.
- It
is submitted that, in the absence of sufficient reasoning, and for the
additional reasons set out in the defendants’ schedule
of objections, the
representations made by Dr Sawrikiar (to the effect that the deceased had
“early onset of dementia”
as at an unidentified date after 10 March
2007) and by RN Price (that the deceased’s judgment or insight and thought
content
or processes were both “reduced” as at 29 April 2008) should
not be admitted as they do not satisfy s 79 or s 135 of the Evidence Act.
It is said that it is not known if the opinions are within the education,
training and experience of the author, as there is no
evidence as to the
author’s education, training or experience, and in the absence of any
reasoning the Court cannot be satisfied
that the evidence is based wholly or
substantially on that knowledge (citing Dasreef Pty Ltd v Hawchar (2011)
243 CLR 588; [2011] HCA 21 at [31]- [32] per French CJ, Gummow, Hayne, Crennan,
Kiefel and Bell JJ).
- In
reply submissions as to the deferred evidentiary rulings, Ms Bale maintains that
the deceased’s medical records are admissible,
referring to Albrighton
v Royal Prince Alfred Hospital & Ors (1980) 2 NSWLR 542 for the
proposition that hospital medical records and assessments are taken as
admissible as evidence of the facts of the case. There
it was held (at [90] per
Hutley JA with whom Reynolds and Hope JJA agreed) that medical records of a
hospital and by extension of
a practice are “kept for the information of
the staff and treating doctors” and therefore, fall within the exception
to the hearsay rule for business records.
- Ms
Bale notes that the various medical records were admitted (mostly subject to
weight) as business records for the purpose of the
fact of the recording of
various notes by doctors and nurses who were examining the deceased as his
treating medical practitioners.
Ms Bale accepts that a single medical record
indicating the prospect of the deceased suffering from advanced dementia would
be of
limited evidentiary value but argues that the fact that numerous entries
were made about the same issue provides strong evidence
that the deceased was in
mental decline as alleged.
- Insofar
as the defendants contend that the records of Dr Sawrikiar or RN Price do not
comply with the requirements for admission of
opinion evidence, Ms Bale submits
that this should be rejected. It is said that they are trained medical
professionals giving a diagnostic
opinion wholly based on their training study
or experience in accordance with s 79 of the Evidence
Act.
The NCAT 11 August 2016 decision
- The
defendants accept that, at around the time that Ms Bale’s initial power of
attorney from the deceased was revoked in June
2008, the Guardianship Division
of NCAT determined that the deceased was capable of making his own decisions
(indeed the defendants
refer to this in their written submissions).
- The
defendants do not object (nor could they) to evidence as to the orders
subsequently made by NCAT following the hearing of the
second application (made
by Ms Bale in 2016). As to the balance of the reasons for decision of NCAT
published on 11 August 2016,
to which the defendants did take an evidentiary
objection, in closing submissions the defendants have assumed that (in the
absence
of submissions as to this issue) Ms Bale no longer presses the admission
of the remainder of the NCAT decision. Lest that assumption
be incorrect, I
nevertheless deal with it below.
Transcript from the 2016 NCAT
hearing (Ex C)
- For
Ms Bale, the entirety of the transcript of the 2016 NCAT hearing is tendered. It
is submitted that the transcript is relevant
both for what Ms Bale said and for
what Ms Chyna Schein said (see submissions at T 109.28-109.31) and that the rest
should be admitted
as context (T 179.35). As to the hearsay objection in
relation to Ms Bale’s evidence to the Tribunal, it is noted that Ms Bale
was made available for cross-examination. The real issue is as to the transcript
of Ms Chyna Schein’s evidence (she being unavailable
for
cross-examination).
- The
defendants submit that anything attributed to Ms Chyna Schein at the NCAT
hearing upon which Ms Bale relies for the truth of those
statements should be
limited pursuant to s 136 of the Evidence Act as evidence that the
statements were made by Ms Chyna Schein during the NCAT hearing but not as to
the truth of the statements.
- During
the course of the proceeding, I admitted the transcript provisionally (subject
to weight) as Ex C, but indicated that insofar
as there were particular
representations where there was a prejudice identified by the defendants, I
would admit that representation
subject to a s 136 limitation (T 182.23).
(A schedule of the representations contained in the transcript was marked
as MFI 7 during the hearing.)
- The
defendants did not identify, in the course of final submissions, any particular
representations by which they would be prejudiced
but maintain that if a s 136
limitation is not made in respect of that evidence, then they are prejudiced by
the inability to test Ms Chyna Schein’s evidence
(including evidence that
they say is demonstrably factually incorrect). In that regard, it is noted, by
way of example, that Ms Chyna
Schein gave evidence at NCAT that the deceased
“found a partner” (who she later identified as Mr Darwiche) and
“opened
a company with this guy”; that the partner paid off the
loan; and that the deceased still owned the Forest Lodge Property which
was
solely in his name.
- In
this regard, as is evident from the above chronology of events, it was obviously
incorrect as at 2016 for Ms Chyna Schein to suggest
to NCAT that the Forest
Lodge Property remained solely in the deceased’s name. It had been
transferred – pursuant to
a transfer she had herself witnessed – to
Kimberley Developments in 2011.
Exhibits Q and R
- Annexure
“Q” to Ms Bale’s first affidavit is the opinion of Dr Regal as
to the cognitive ability of the deceased,
which was put before NCAT at the
Tribunal hearing in 2016. It was provisionally admitted as evidence of what was
before the Tribunal
not as to its truth (T 15). Similarly, annexure
“R” to Ms Bale’s first affidavit (being Ms Bale’s
application
to NCAT to review the Enduring Power of Attorney granted to Ms Chyna
Schein and attachments) was admitted on that basis.
The
provisional admission of the documents that were marked as Ex 1
- As
to the provisional admission of the documents in relation to the Suncorp loans
that were marked as Ex 1, which included statements
of account, credit approval
request forms and Suncorp reports, letters of default issued by Suncorp and the
Strata Management Statement,
the defendants point to the absence of submissions
in the plaintiff’s closing written submissions (and suggest that Ms Bale
takes no issue with the admission of those documents). Again, lest that be
incorrect I deal with this briefly below.
Determination
- It
was not disputed that evidence to which objection was taken (the medical records
and transcript) was hearsay (and hence not admissible
pursuant to s 59 of
the Evidence Act as evidence of the truth of a fact supposed by a
previous representation (see De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in
liq) (2011) 200 FCR 253; [2011] FCA 645 (De Bortoli Wines) at [25]
per Stone J; Fodare Pty Ltd v Shearn [2010] NSWSC 737 (Fodare v
Shearn) at [14] per Barrett J). Nor was it disputed that, where evidence
satisfies s 69 of the Evidence Act such that the hearsay rule does not
apply, this nevertheless does not affect the question whether an opinion
expressed in a business
record is admissible; that being contingent upon whether
ss 76-80 permit the use of that opinion (see Lithgow City Council at
[18]-[22] per French CJ, Heydon and Bell JJ; Shafston Avenue Construction Pty
Ltd, in the matter of CRCG-Rimfire Pty Ltd (subject to a deed of company
arrangement) v McCann (No
3) [2021] FCA 938 at [142] per Reeves J; see also
JD Heydon, Cross on Evidence (2021, 13th ed, LexisNexis) at
[35555]).
- The
medical records tendered by Ms Bale could not be admitted as expert evidence
because the holders of those opinions had not acknowledged
and were not bound by
the expert witness code of conduct (and the medical practitioners were not being
made available for cross-examination
to test their opinions). The difficulty as
to the admission of the representations contained in these records as to the
mental condition
of the deceased is that the records do not include sufficient
information as to the basis upon which the opinion was formed (such
as would
enable those opinions to be assessed). While I would be prepared to infer (from
their medical qualifications) that the medical
practitioners held specialised
knowledge in their respective areas of practice, neither Dr Sawrikiar nor RN
Price appears to be a
specialist in the area of geriatric medicine or dementia.
The medical records do not in my opinion provide sufficient evidence as
to the
basis for the opinions there expressed (and, in any event, it can be seen from
the medical records extracted above that the
opinions were relatively qualified
at the time that they were made). Accordingly, for that reason I find that the
evidence is not
admissible as opinion evidence pursuant to s 79 of the
Evidence Act (see the well-endorsed passage of Heydon JA (as His Honour
then was) in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705;
[2001] NSWCA 305 at [85]). Those records will therefore be admitted only for the
fact that such statements were made, not as to the truth of the conclusions
there stated.
- Pausing
here, it does not seem to me that much ultimately turns on this. Even had the
records been admitted as opinion evidence, they
would not necessarily have
assisted me. An opinion that the deceased had mild dementia at a particular time
would not, for example,
permit me to conclude that the deceased had no capacity
to understand matters in relation to particular transactions on particular
days;
nor even would an opinion of moderate dementia (even were capacity to have
remained in issue in the proceeding; which it has
not). Moreover, it seems to me
not insignificant that in 2008 there was a finding made by NCAT in effect that
the deceased was capable
of making his own decisions and, as at June 2011, the
deceased’s own solicitor of many years (Mr Hancock), though concerned
as
to the content of instructions he had been given, nevertheless appeared
satisfied that he could proceed on the basis that the
deceased did have capacity
to give instructions in relation to his property dealings (for example, in
relation to the issues on which
Mr Hancock had sought and was apparently
prepared to act upon the deceased’s instructions).
- The
relevant issue here is whether the deceased was under a special disadvantage or
disability (of which the respective defendants
were aware and which they
exploited) such as to give rise to a conclusion that there was unconscionable
conduct in the defendants’
dealings with the deceased.
- There
is no doubt that the deceased was, by the end of his life, suffering significant
cognitive impairment. What is by no means clear
is when the severity of that
impairment would have been manifest to persons, such as the defendants, who were
then dealing with him.
I consider this issue in due course.
- As
to the 2016 NCAT reasons, I do not accept that the findings of fact there made
would be admissible in this proceeding (see s 91 of the Evidence Act; see
also Quach v MLC Limited (No 6) [2021] FCA 271 at [8]- [10] per Rares J)
(and in any event the basis for NCAT’s decision to remove Ms Chyna
Schein as attorney, which is the issue to which
the reasons were addressed, is
not of assistance to me on the issues here to be determined – that being a
perceived conflict
of interest on the part of Ms Chyna Schein).
- Turning
to the 2016 NCAT hearing transcript (Ex C), it was said by the defendants in
closing submissions that the question of its
admissibility might well be a
“non-issue” given that Ms Bale did not rely on anything contained in
the transcript in
any detail (T 335.30-335.36). However, I did not understand
Ms Bale to be abandoning any reliance on the transcript and so it is
necessary
to deal with this.
- Pausing
here, whether the transcript was admissible as containing admissions by Ms Chyna
Schein (see s 81 of the Evidence Act) would not assist in relation to the
claims against the other defendants (but as against Ms Chyna Schein it can
be noted that s 81 provides that the hearsay and opinion rules do not apply to
evidence of an admission; nor do they apply to evidence of a previous
representation that was made in relation to an admission at the time the
admission was made, or shortly before or after that time,
and to which it is
reasonably necessary to refer in order to understand the admission) (and see in
this context s 82 of the Evidence Act).
- As
to the objection by the defendants to the admission (without a limitation) of
the evidence given by Ms Chyna Schein to NCAT in
2016, I accept that the
inability to test the evidence of Ms Chyna Schein is a relevant consideration
that may cause some prejudice
to the defendants (and it means that I would in
any event be hesitant to place reliance on any evidence given by her that goes
to
contested factual matters). While this seems to me largely to go to a
question of weight, I will limit the admission of that evidence
pursuant to s
136 for the fact that this was what was said at the Tribunal by Ms Chyna Schein
(and not as to the truth of the statements there made).
The fact that
Ms Chyna Schein made certain statements in her evidence to the Tribunal has
some relevance (for example when considering
the actions taken by Ms Bale
thereafter) but ultimately I do not place any great weight upon the untested
assertions contained in
the transcript (not least because of the obvious
self-interest of Ms Chyna Schein in the giving of that evidence at the Tribunal
and that parts of the transcript demonstrate that Ms Chyna Schein’s
understanding or recollection of events was not reliable
given the matters shown
to have been clearly incorrect).
- The
same evidentiary deficiencies discussed above in relation to the medical records
are applicable in respect of Annexure Q and p
240 of Annexure R; and thus I
accept the defendants’ submissions in this regard. These documents will
therefore be admitted
only for the fact that such statements were made, not as
to the truth of the conclusions there stated. With respect to p 235 of
Annexure
R, which the defendants complain is not admissible pursuant to the hearsay and
opinion rule, I again will only admit this
document for the fact that such
statements were made not to the truth of those statements.
- To
the extent that the documents tendered as Ex 1 are hearsay (pursuant to
s 59 of the Evidence Act) I consider that the documents fall
comfortably within the business records exception, as account statements,
internal Suncorp reports,
registered documents and correspondence between
Suncorp and the deceased, and I admit them on that basis.
- Finally,
for completeness, I note that objection was taken to the tender of, or reliance
placed on, a judgment in an earlier District
Court proceeding in which Mr Arthur
Trigas had made a personal injury claim (and his evidence had not been accepted)
(see Trigas v Owners of Strata Plan [2019] NSWDC 473). I rejected the
tender of that judgment (it being tendered to show that Mr Trigas had not
been accepted as a witness of truth) (see
T 316.20). As indicated at the
hearing, the fact that Mr Arthur Trigas’ evidence was not accepted in that
case or that adverse
credit findings were there made does not assist me in
determining the issues now before me. It does not follow that because a witness
is disbelieved on particular matters that he or she ought to be disbelieved on
all matters (see Steinberg v Federal Commissioner of Taxation (1975) 134
CLR 640; [1975] HCA 63 (Steinberg v Federal Commissioner of Taxation) at
695 per Gibbs J, as his Honour then was; Farah Constructions Pty Ltd v
Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (Farah) at
136 [100] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ; Australian
Securities and Investment Commission v Hellicar (2012) 247 CLR 345; [2012]
HCA 17 at [232] per Heydon J). I consider that Mr Arthur Trigas’
credibility should be tested on the evidence and material before me in the
present proceeding (not the fact that he may falsely have brought a personal
injury claim in some other proceeding).
Evidence
- Before
turning to the parties’ submissions as to the issues for determination, it
is convenient to deal first with my observations
as to the various
witnesses.
Plaintiff’s lay witnesses
Ms Bale
- The
defendants say that Ms Bale’s evidence was “problematic”,
referring to the following matters.
- First,
that Ms Bale conceded that, in respect of the time Ms Bale was managing the
Summer Hill development under power of attorney,
she had not told the truth when
she denied knowing about attempts in 2008 to refinance the secured debt over the
Summer Hill Property
with Challenger Finance.
- Second,
in respect of the signatures on the strata plan of the Summer Hill development
on behalf of the registered proprietor, that
Ms Bale gave conflicting evidence
(on the one hand that she had signed the strata plan and on the other hand that
it was the deceased
who had signed the strata plan).
- Third,
it is said that Ms Bale gave conflicting and self-serving evidence in respect of
the date of registration of the strata plan.
Ms Bale gave evidence that the
registration of the strata plan occurred on 2 or 3 June 2008 on “a
Friday” and that she
had a specific recollection of that because it was
“blood, sweat and tears” and “important” and that she
had “delivered it personally”, having attended the Council,
Suncorp’s office and Mr Hancock’s office. However,
it is noted that
Ms Bale later conceded that she might have been wrong and that it might have
been between 2 and 11 June 2008 and
said “I mean, we are talking 2008 and
that’s what – how many years? That what, 13 years ago? So I may
have got
that wrong. And if I have, I’m sorry”. The defendants note
that when it was then put to Ms Bale that the signing of the
strata plan
happened after revocation of her power of attorney on 13 June 2008, despite her
concession that her recollection may
have suffered from the passage of time, Ms
Bale responded “[n]o, it didn’t happen after 13 June. No way, Jose.
No”.
The defendants say that this last answer is self-serving and was only
given in that unequivocal manner because Ms Bale feared making
an admission to
having done the wrong thing by continuing to act as the deceased’s
attorney after it was revoked. (I do not
accept that Ms Bale’s evidence
was consciously self-serving in that regard. Rather, I considered
Ms Bale’s evidence to
be a genuine expression of the firmness of her
belief as to the events about which she was there being questioned.)
- Fourth,
the defendants say that there was conflicting and dissembling evidence about Ms
Bale’s role in the Summer Hill development.
The defendants say that that,
on the one hand, Ms Bale stated that in 2007 and 2008 she was not involved in
the development being
actually built and that her activity in those years was
trying to get Council approval but, on the other hand, Ms Bale stated that
in
2007 she “didn’t know” that the credit recovery team of
Suncorp was in contact with her and the deceased regarding
further delays that
had occurred at the development, due to the configuration of the stormwater
drainage system not being signed
off by an engineer and approved by Council. It
is noted that Ms Bale later gave evidence as to handling sales and being in
contact
with Mr Andreacchio, attending court with the deceased relating to
litigation involving the second builder and opening all of the
deceased’s
letters.
- Fifth,
it is said that Ms Bale gave dissembling evidence as to the date she was
notified that her power of attorney for the deceased
was revoked. The
defendants point out that, in her affidavit, Ms Bale only deposed to receiving a
copy of a document revoking her
power of attorney on 13 June 2008; whereas in
cross-examination Ms Bale variously insisted that she had received notification
of
the revocation during a business phone call with an unidentified person after
13 June 2008 and then conceded that it might have,
or must have, been before 13
June 2008.
- Sixth,
it is said that Ms Bale gave conflicting and dissembling evidence about whether
she had Ms Chyna Schein’s telephone number.
It is said that Ms Bale
gave evidence that “I didn’t have her telephone number. I had no
contact details to speak to
her one way or another” but then said “I
correct myself. I think dad gave me her telephone number, said that I could
ask
about the details as to where it was. I didn’t realise that I needed to
put all of that information in the affidavit for
a matter that happened three
years afterwards”.
- Finally,
reference is made to the evidence Ms Bale gave to the effect that she had kept a
diary, including during the period of the
Summer Hill development, in which she
made contemporaneous notes. The defendants point out that none of the diary
notes is in evidence.
It is noted that Ms Bale purported to annex a copy of her
diary to her affidavit but resiled from this in her cross-examination,
stating
that she provided the “diaries” to her counsel (T 107.45-108.6). The
defendants submit that it should be inferred
that the diary (or diaries) would
not have assisted Ms Bale’s case on these issues, particularly in light of
her conflicting
and dissembling evidence as referred to above. (Pausing here, I
note that Ms Bale offered to produce the diary but no call for it
was made
– see T 107.45-108.6.)
- Ms
Bale was loquacious and in my view a very open and genuine witness. Ms Bale was
co-operative in cross-examination, not reticent
in answering questions, with a
tendency to digression (see T 43) and often “jumping in” to answer
anticipated questions;
and at times somewhat rambling in her answers (see for
example at T 98). Ms Bale candidly accepted that her memory was not good (see
at
T 48) and was prepared to concede that events may have occurred other than as
she remembered them (such as in relation to the
Zounis email and as to the
signing or delivery of the strata management plan in 2008).
- My
impression was that Ms Bale often spoke almost in a stream of consciousness
manner (or off the top of her head based on her then
recollection) without
necessarily focusing carefully on the detail of the chronology of events that
she was there describing. This
was particularly evident in the evidence of her
delivery of the signed strata plans or Strata Management Statement. It was quite
apparent that Ms Bale’s focus was on her relief that the Council approval
had been obtained (and the blood, sweat and tears
that it had taken to obtain
it); not on the logistics involved.
- I
found Ms Bale to be a sincere and credible witness overall, although her
recollection of events was not always reliable when tested
against the
contemporaneous documents. That is not surprising given the passage of time and
it does not to my mind bespeak any attempt
to misstate the evidence or to
advance the plaintiff’s case.
- I
accept that Ms Bale was genuinely concerned at the relevant time as to the
position of the deceased and his vulnerability to exploitation
(which seems to
me to be obvious, whether or not he was then suffering from undiagnosed
dementia, having regard to the somewhat extraordinary
turn of events surrounding
his marriage to Ms Chyna Schein and the unexplained presence of Mr Mohr as part
of the marital arrangements,
and having regard to what happened thereafter). Ms
Bale was genuinely and visibly upset in the witness box (T 48) at the events
that
had occurred. I do not accept the suggestion, implicit in the evidence of
some of the defendants, to the effect that Ms Bale was
seeking improperly to
have access to or control over the deceased’s assets.
- That
said, the relevant question is whether any vulnerability the deceased had to
exploitation by Ms Chyna Schein and/or Mr Mohr (or
any special disability or
disadvantage in that regard) was or would have been manifest to the defendants
(other than Ms Chyna Schein
herself) at the relevant time. I address that in due
course (save to note at this stage that the suggestion by Mr Arthur Trigas that
the deceased was mentally “very sharp” because he had a young wife
(see at T 314.11) is hardly a ringing endorsement
of the deceased’s mental
condition – with all due respect to the deceased; the fact that the
deceased had a much younger
wife might indeed be the very circumstance that
indicated his vulnerability to exploitation; certainly, such a concern was
evidently
felt by Mr Hancock by 13 June 2008 as appears from the communications
referred to above).
- In
any event, overall, while I place more weight on objective and contemporaneous
evidence, and while her recollection was not always
reliable, I considered Ms
Bale to be a truthful witness.
Mr Andreacchio
- Mr
Andreacchio, who as noted above, was a real estate agent at Raine & Horne
Ashfield and its general manager from February 2011,
gave evidence of his lay
observation of the deceased. Mr Andreacchio was the managing agent for the
Forest Lodge Property from 2009
until 2014. Mr Andreacchio gives evidence
in his first affidavit at [15]-[16] that following the deceased’s marriage
to Ms
Chyna Schein:
I saw a significant decline in his mental state; he was no longer able to make
independent and informed decisions. He became less
communicative, less engaging,
and would always defer to Chyna. He did not give responsive answers to even the
simplest of questions,
we were not able to have in-depth conversations and he
didn’t appear to understand the substance of what I was saying.
...
I saw a decline in the plaintiff’s business acumen; he no longer made
informed and independent decisions.
- Ms
Bale contends that Mr Andreacchio is “the closest this case comes”
to having a disinterested witness. Mr Andreacchio’s
evidence was that he
was involved in a number of property matters relating to the deceased’s
affairs. In cross-examination,
Mr Andreacchio accepted that he was paid a
management fee in relation to the rental of the properties at Summer Hill (see T
124.23-124.50)
and obtained a commission on sales from the development from
14 October 2008.
- It
also emerged in cross-examination that Mr Andreacchio had been involved to some
extent at least in discussions as to the potential
acquisition and development
of the Forest Lodge Property. Thus, he was not disinterested in the fate of the
Forest Lodge Property
at the relevant time. That said, I do not accept that this
necessarily coloured his evidence as to his observations of the deceased;
I
simply treat with caution that evidence insofar as it cannot be said that he is
a wholly independent witness.
- For
the defendants, it is said (of Mr Andreacchio’s evidence as to his
observations of the deceased after the deceased’s
marriage to Ms Chyna
Schein) that it is equally plausible that those changes resulted from the issues
that the deceased was experiencing
with Ms Chyna Schein and Mr Mohr’s
involvement in his life and his relationship with Ms Chyna Schein (which it is
noted was
largely unexplored in the evidence due to Ms Chyna Schein’s
failure to appear in the proceeding).
- The
defendants say that Mr Andreacchio’s evidence also needs to be approached
with caution; on the basis that he had a vested
financial interest in the
possibility of the development of the Forest Lodge Property and had met with Mr
Zounis, the owner of an
adjacent property on a number of occasions to discuss
the possibility about selling the adjoining properties in conjunction with
the
Forest Lodge Property.
- It
is said that Mr Andreacchio’s efforts in terms of the possibilities of
redevelopment were significant and that he had a developer
(a Mr Joseph Panetta
from Amflo) wanting to know if the adjoining lot owners would sell. It is noted
that Mr Zounis provided Mr Andreacchio
with an example introductory letter for
him to put on his letterhead and send to the adjoining owners. The defendants
say that Mr
Andreacchio’s explanation for the sending of the letter dated
3 September 2010 should not be accepted nor should his explanation
regarding the
conversation to which he deposed at [11] of his second affidavit (in which Mr
Andreacchio says he expressed surprise
to his receptionist that the deceased
would accept an offer of $650,000). Mr Andreacchio’s explanation for the
3 September
2010 email was that it was simply a template email and he sent it
out of frustration without double-checking the email (T 150.25-150.37);
while his explanation for the conversation at [11] was that the figures may be
incorrect but he was expressing surprise that the
deceased would accept a lower
offer and he was not aware of the deceased’s financial situation at the
time (see T 164). The
defendants say that both explanations are inherently
implausible.
- Apart
from the submissions to the effect that Mr Andreacchio had a vested interest in
the property, it is said by the defendants that
any commentary that Mr
Andreacchio provides regarding whether the sale to Kimberley Developments was a
good move financially for
the deceased needs to be considered in light of the
fact that he gave evidence in cross-examination that he had no idea that in
early
February 2011, Suncorp had (for the third or fourth time) threatened to
sell the Forest Lodge Property pursuant to its powers of
mortgagee sale; and no
idea of what had occurred regarding the deceased’s financial position
during the two years prior to
February 2011. It is said that Mr
Andreacchio’s evidence in that regard is implausible having regard to the
fact that he was
aware that Suncorp was the lender and that he had spoken to
someone in Queensland who “asked me how the sales were going”
and
that while selling properties at the Summer Hill development he was “aware
that the bank was hounding us, especially for
a few sales very
quickly”.
- It
is noted that Mr Andreacchio did not express any concerns he had about
discussing the reserve price to be set for the auction of
the Forest Lodge
Property in April 2009 with Ms Chyna Schein and Mr Mohr; and that, despite the
fact that Mr Andreacchio was directed
to draw cheques by Ms Chyna Schein in
favour of Mr Mohr from the proceeds of the rent of the Forest Lodge Property, he
did not raise
any concerns he had with Ms Bale (which the defendants attribute
to Mr Andreacchio’s interest at that time with the potential
development
of the Forest Lodge Property).
- It
is noted that Mr Andreacchio’s evidence as to the apparent changes in the
deceased’s behaviour were limited to the
period after the deceased married
Ms Chyna Schein in 2008; and that Mr Andreacchio accepted that in 2008 and 2009
he did not have
any knowledge or insight as to what was going on in the
deceased’s personal life regarding his relationship with Ms Chyna
Schein.
- On
the whole, I considered Mr Andreacchio to be an honest witness who was seeking
to give his recollection of events truthfully. Certain
of his evidence had the
ring of truth to it (in particular, his response to questions relating to
Mr Zounis’ email communications).
I accept that Mr Andreacchio, while
privy to discussions with Mr Zounis as to a proposed redevelopment of the Forest
Lodge Property
was maintaining some distance from him. However, I treat with
some caution his evidence as to the deceased’s cognitive
decline.
Mr Moore
- Mr
Moore was briefly cross-examined. Mr Moore had made a statutory declaration (Ex
6) dated 18 December 2019. That evidence went to
Mr Moore’s
recollection as to the demolition work carried out by Mr Darwiche at the Forest
Lodge Property (which he placed
as occurring in 2010 and was the first time that
he had encountered Mr Darwiche) and to his discussion in early 2011 with Mr
Darwiche
and two individuals who he understood to be negotiating to buy the
property (on which occasion he says that he told them about his
highest bid at
the auction of the property). Mr Moore there declared that, from 2011, in the
event of arrears of rent or other issues
relating to the property he would be
contacted by “I Group Real Estate and Albert Darwiche functioning as the
caretaker of
the property”. Pausing here, Mr Moore’s recollection as
to the 2011 date appears to be inconsistent with the fact that
1 Group Real
Estate was only appointed as from 2014.
- In
the (virtual) witness box, Mr Moore was a co-operative and unobjectionable
witness. His memory of events was not necessarily wholly
reliable but I make no
adverse credit findings in his regard.
Defendants’ lay
witnesses
Mr Darwiche
- There
were quite extensive submissions for Ms Bale adverse to Mr Darwiche as a
witness. In summary, it is submitted that Mr Darwiche’s
evidence was
confused, beset by speeches, argumentative, and in parts an obvious lie. It is
said that Mr Darwiche gave contradictory
evidence in his affidavits and yet
further versions of events in his oral evidence that contradicted his affidavit
evidence.
- In
particular, Ms Bale refers to Mr Darwiche’s evidence in cross-examination
as to the following matters: the conversation to
which Mr Darwiche deposed
at [15] of his affidavit affirmed 21 February 2019, responding to Ms
Breust’s account of her telephone
conversation with him in relation to the
issue of notice of the proceeding (see T 193.18-194.26);
Mr Darwiche’s inconsistent
statements as to his understanding of the
importance of an affidavit and whether he had read his affidavit before signing
it, blaming
his solicitors for inconsistencies in his affidavit (T 194.15;
T 194.23); Mr Darwiche’s evidence as to the incorporation of
Kimberley Developments, including that Mr Churchill had probably falsely filled
out the application for registration form and signed
it purportedly on his
behalf; and the purpose for its incorporation; his evidence at T 204.48-50, that
he only knew he was a director
of the company “from what Martin
[Churchill] told [him]”.
- Ms
Bale contends that, in his evidence as to the purpose of Kimberley Developments,
Mr Darwiche was distancing himself for the original
position that the company
was set up for the purposes of obtaining cleaning work for both sites and in
cross-examination introduced
the idea, for the first time, that he set the
company up for the development of the properties.
- It
is also noted that Mr Darwiche gave conflicting accounts as to how he received a
copy of the agreement annexed to his affidavit:
first, that the deceased handed
him a copy of the agreement; later, in a separate affidavit, that it was in fact
Mr Churchill that
proposed the possibility of being a part of the development
(not the deceased); and in cross-examination that there were many agreements
“floating around” and that the agreements referred to in the various
affidavits were not in fact the same. Ms Bale submits
that the purposes of this
new position is to explain away the contradictory statements across his
affidavits, noting that Mr Darwiche
gave inconsistent evidence as to who it was
that he had spoken to (and that perhaps it could have been either the deceased
or Mr
Churchill) but denied the obvious inconsistency as to who gave him the
agreement (whether it was Mr Churchill or the deceased) saying
that “[i]t
was a long time ago, it could be either one, I don’t know I can’t
really remember”.
- Ms
Bale says that the suggestion in Mr Darwiche’s oral evidence that the
deceased offered the Forest Lodge Property to him for
$590,000, considering the
money he owed him and the potential commission he was going to have to pay, and
that it would have added
up to close to $650,000 “anyways” is the
first time Mr Darwiche has ever suggested that the deceased would sell the
property
to him for the stand-alone price of $590,000.
- Reference
is also made as to Mr Darwiche’s denial that his role in the transaction
was as a buyer and his evidence that he and
the Trigas brothers were “like
partners in this relationship” (see T 211.36) (by which he said he meant
that “my
belief is they buy it, and I look after it, and we’re like
partners in this relationship”), which Ms Bale contends is
contradicted by
Mr Darwiche’s affidavit evidence and the evidence of Mr Theo and Mr
Arthur Trigas (see for example Mr Darwiche’s
second affidavit at
[14]-[15]).
- Ms
Bale points also to Mr Darwiche’s evidence as to the form of the alleged
contract, noting that Mr Darwiche: said that he
had no idea how a date got there
or how a signature made its way onto the document (despite the fact he annexed a
copy to his own
affidavit); denied that the agreement attached to his affidavit
was definitely the one given to him by the deceased (cf his affidavit)
(T
222.18); refused to concede that the agreement dated 21 February 2011, a
form of which he admitted was given to him in February
2011, could be the same
one (T 224.21); maintained that he was unaware that the document was executed or
signed; agreed that his
evidence was that he was taken through the document (by
the deceased) in detail (see [13] of his affidavit), saying that this was
“to try and convince him of how good a deal it was” (T 216.22) but
then denying that he ever went into the document with
detail (see at T 216) and
saying that agreement is “not known to me” and denying that he
understood any specifics of
the deal (T 219). It is noted that Mr Darwiche also
would not concede that in his affidavit he had deposed that the deceased had
told him “his daughter didn’t think he was of a sound mind”
(saying “that’s not how I read it”).
(At [49] what he had
deposed to was that “[h]e [in context meaning the deceased] mentioned to
me that his daughter didn’t
think that he was of a sound mind and he did
tell me that his daughter had taken him to a tribunal trying to get a power of
attorney
over his affairs”. The suggestion that Mr Darwiche was not there
deposing that the deceased had told him his daughter did not
think he was of
sound mind is untenable.)
- Insofar
as Mr Darwiche asserted in his cross-examination that he would not lie, the
plaintiff points to Mr Darwiche’s criminal
record (see Ex D) and to the
cross-examination in relation to this (see at T 235).
- Ms
Bale also refers to the evidence given by Mr Darwiche as to the receipt of scrap
batteries (in satisfaction of the $38,000 he claims
was part of the purchase
price) and points out that the first time that Mr Darwiche had stated that he
never received the sum of
$38,000 and that he was never paid the money by Mr
Theo Trigas after the transaction was in his oral evidence. It is said that this
evidence is inconsistent with Mr Darwiche’s affidavit and does not sit
comfortably with his later assertions that whenever
he needed cash he would go
to Mr Marino Trigas and he would give him cash (see at T 249.25).
- As
to the evidence that Mr Arthur Trigas wanted a receipt for the cash allegedly
provided at the time the transfer was signed, Ms
Bale says that the confusion in
cross-examination on this issue (due, it is accepted, to confusion in the
question as to who was
seeking the receipt – see at T 250.12-250.50), Ms
Bale says that the fact that Mr Darwiche did not appreciate this (the error
in
the question) at the start “only adds weight to the likelihood the whole
thing is a lie”. (In this regard, I do not
accept that the confusion in
the question assists the plaintiff – as it is quite possible that Mr
Darwiche had simply not focused
on the question and had not noticed the error.)
Ms Bale says that Mr Darwiche’s evidence as to the actual payment of
the cash
and failure to get a receipt in return was argumentative and made
little sense. It is submitted that it is counterintuitive to conclude
that
reasonable business people, acting rationally, would not issue a proper receipt
for a vast amount of cash; and that Mr Darwiche’s
evidence makes even
less sense when it is noted that the transfer document does not identify how
much money had been paid in cash
and that a contract for sale has never been
produced by any of the defendants.
- Finally,
Ms Bale points to the evidence of Mr Darwiche to the effect that it was Mr
Churchill’s fault that Mr Theo Trigas was
not a shareholder, director,
company secretary or officer bearer of Kimberley Developments; that
Mr Churchill was not representing
Mr Darwiche in any capacity on
21 February 2021; and that Mr Theo Trigas was represented by Mr Churchill
who acted for and signed
for the company. Ms Bale points out that, legally, Mr
Theo Trigas had nothing to do with the company at that time.
- Ms
Bale submits that, overall, the evidence of Mr Darwiche was clearly fabrication.
It is said that Mr Darwiche’s answers were
self-serving; that he was
unwilling to accede to matters of fact (such as the words of his own affidavit)
that did not align with
the “new” version of events he was
asserting; and that Mr Darwiche’s evidence in the witness box bore little,
if
any, resemblance to the evidence he had previously given in his affidavit.
- In
particular, Ms Bale says that Mr Darwiche: has lied about receiving the phone
call from her solicitor (stating that he could not
remember it and then that it
must have been someone else answering using his name) although he had already
deposed to a version of
the phone call in his own affidavit; gave three separate
(and contradictory) explanations as to how he came to be in possession of
the 21
February Agreement (in two separate affidavits – one that he got it from
the deceased; another he got it from Mr Churchill;
and in cross-examination
that there were multiple drafts of the agreement and he had received them from
both parties); attached the
21 February Agreement to both his affidavits
and did not state anywhere that it was not signed or that the date had not been
affixed.
As to the last, it is noted that neither affidavit suggests that Mr
Darwiche got the agreement from the deceased; and that the effect
of Mr
Darwiche’s evidence is thus simply that a copy of the agreement is
attached as received from either the deceased or Mr
Churchill, depending on
which version is to be believed.
- Ms
Bale says that Mr Darwiche’s account of the stated purpose for the
incorporation of Kimberley Developments (which changed
between his affidavit
evidence and his cross-examination) is vague; that it makes little sense; and
that it was fabricated to try
to give some innocuous explanation for the
existence of the company aside from the terms of the 21 February Agreement.
- Ms
Bale thus says that Mr Darwiche’s evidence should be rejected in its
totality unless it is directly corroborated by an unimpeachable
piece of
objective documentary evidence. In that regard it is said that almost all
aspects of Mr Darwiche’s evidence are fabrications
designed to try and
explain away that to which the overwhelming objective evidence points (namely,
that Mr Darwiche persuaded the
deceased to enter into the 21 February
Agreement).
- As
to my observations of Mr Darwiche (who Mr Arthur Trigas said was “not the
smartest tool in the shed” – see at
T 273.37), I consider that he
was argumentative and confrontational in the virtual witness box (see at T 191;
T 193; T 195, for example)
and more than once he became testy in the course
of cross-examination. So, for example, at T 195, Mr Darwiche said “I get a
lot of phone calls from a lot of people even the taxation department. I mean is
that what you want me to say”; at T 194.27
confronted with inconsistency
in his affidavit evidence, “well some of it would be accurate
wouldn’t it?”; at T
196 “why would I?”; and at T
238 “you’d have to ask Martin” (presumably knowing full well
that Mr Churchill
was not giving evidence in the proceeding or at least
that he had not subpoenaed Mr Churchill to give evidence); at T 241 that
“well
a lot of things don’t appear in writing don’t it”
and then “why don’t you get the paperwork for Mr
Schein and see how
much he paid me”. At T 257, Mr Darwiche asked “how am I
supposed to talk to Churchill after he got
locked away?”
- Tellingly,
at T 196, there was the following evidence by Mr Darwiche as to his affidavit
evidence:
I didn’t fabricate anything. If this – this wasn’t written by
me. If this was done by a lawyer it was just agreed
to some questions he gave me
and then I signed it. I didn’t think this matter was going to go anywhere.
Later on when I looked
at the contract there is no signature on it ...
I rarely paid attention to anything I was doing.
- Mr
Darwiche suggested that it was only as to the last of his affidavits that he
“really applied” himself and paid more
attention to what he was
doing and said that the other ones “that was just as cheap as I can get it
done and as quick as I
can get it done on the go” (T 196). Mr Darwiche
emphasised that “I don’t pay as much attention to a lot of
things”;
that he did not pay much attention to what the lawyers were
doing; and Mr Darwiche agreed (at T 197) that at first he was happy to
go along
with more or less what was put to him. At T 197.15-197.17, Mr Darwiche
said:
I relied upon my solicitors, or the solicitor that was preparing the document
for to be looking after what my interests were. I didn’t
get into it, I
mean, you don’t get a baker if you cook your own bread.
- Mr
Darwiche said more than once that he did not read his affidavit and that he
relied on what was done for him (T 197; and see T 211);
and that the way things
were expressed in his affidavits were due to his solicitors (see at T 214).
So, for example, after being
pressed for some time in cross-examination as to
the document attached to his own affidavit Mr Darwiche said that he had attached
a copy of the agreement that came in the statement of claim “because
that’s what my solicitor told me to do” (T
232.25).
- There
is no doubt that Mr Darwiche’s oral and affidavit evidence was
inconsistent on a number of issues, not least as to how
he came to receive the
21 February Agreement, whether he read it or was taken through it in detail,
whether the copy annexed to his
affidavit was the one he was presented with (by
whoever it was that presented it to him), and whether it was signed or dated
when
he received it. Mr Darwiche said more than once that there were a lot of
agreements “floating around” (see for example
at T 208; T 222;
T 242) although there were certainly not a lot of different copies of the
agreement in evidence. Mr Darwiche denied
that the document was drafted by him
or on his instructions (T 225) and denied that it was executed on the same day
the transfer
of property was signed; could not explain why the document was
dated 21 February 2011 (see at T 224); and was emphatic that the document
was a
draft (T 218; T 220).
- Unfortunately,
the only conclusion that can be drawn from Mr Darwiche’s evidence is
that he was cavalier (to say the least)
in the preparation and execution of his
affidavit evidence (despite the fact that he said he understood the importance
of affidavit
evidence – and one would think that someone not unfamiliar
with the criminal justice system would well understand this). I
am driven to
conclude that Mr Darwiche similarly has a cavalier attitude to the truth. He
certainly did not appear troubled by the
many inconsistencies between his
affidavit and oral evidence; and was only too ready to blame his legal
representatives for any such
inconsistencies or errors. Aspects of his evidence
were frankly implausible (such as the suggestion that the deceased had taken him
in detail through the document – even had the deceased been capable of so
doing which I very much doubt).
- The
bottom line is that Mr Darwiche was not a credible witness and, regrettably, I
cannot accept anything he says that is not supported
by objective
contemporaneous evidence. While I accept that (as noted above) just because a
witness is disbelieved on particular matters
does not mean that the witness
should be disbelieved on all matters, there were simply so many inconsistencies
and self-serving statements
by Mr Darwiche that I have no confidence in his
evidence as a whole. I also consider that on occasion his evidence was evasive
(see
at T 220).
- Finally,
I note that Mr Darwiche was also quick to impugn Ms Bale’s motivation and
to accuse Ms Bale of trying to get access
to the deceased’s money (T 228)
(an accusation that seems to me to be quite unfounded on the evidence and which
does Mr Darwiche
little credit). Mr Darwiche was adamant that the deceased was
“very lucky that Theo came along and purchased” the property
as
there was no way the deceased was going to get $650,000 from anyone else with
all the contamination on the land and the way it
was situated (inconsistent with
the bid at auction made by Mr Moore); and that otherwise the bank would have
taken it and the deceased
would have got nothing (which assumes that the
deceased in fact received the payment alleged to have been made in cash) (see T
241).
Confronted with the fact that Mr Moore had offered $650,000 at auction, Mr
Darwiche’s dismissive (and unsympathetic) response
was that the deceased
“should have taken it” if that had been offered (T
241).
Mr Arthur Trigas
- Ms
Bale says that Mr Arthur Trigas’ evidence, similarly to that of
Mr Darwiche, often conflicted with his own affidavit evidence
and changed
significantly throughout the course of his cross-examination. It is said that
his evidence was also beset by speeches
and argumentative answers.
- As
to the evidence given by Mr Arthur Trigas in cross-examination, reference is
made to the following: the belated evidence as to
payment being made to Mr
Darwiche in scrap batteries (coincidentally or otherwise this emerging the day
after it had been raised
for the first time by Mr Darwiche); the lack of any
record of how much scrap or batteries were paid to Mr Darwiche; the
inconsistency
between giving scrap batteries to Mr Darwiche free and them
being given in payment of the debt Mr Darwiche claimed the deceased owed
him;
and the inconsistency between Mr Arthur Trigas’ evidence that “[w]e
don’t give Albert cash” and Mr Darwiche’s
evidence that he
always went to Mr Marino Trigas when he needed cash.
- Ms
Bale points to inconsistency between Mr Arthur Trigas’ evidence in his
affidavit as to the registration of a company for
the project, Mr Arthur Trigas
stating that he actually meant that Mr Churchill would have done it on his
behalf and that Mr Darwiche
would not be able to do so.
- It
is noted that (contrary to Mr Darwiche’s evidence), Mr Arthur Trigas
stated that the document with handwritten notes and
underlining on it (annexed
to his affidavit) was the copy of the agreement that was shown to him;
and gave contradictory evidence as to what parts of the agreement he read (i.e.,
only the underlined bits and then that “[n]o, I didn’t read all the
underlined bits...only the dollar value”).
Mr Arthur Trigas was blunt in
his assessment of the draft agreement as “crap” and
“rubbish” and said (with
some feeling) at T 281 that “no
way in the world would the Trigas family or company be involved in a piece of
crap like that
– rubbish nonsense”.
- Mr
Arthur Trigas stated that all the Trigas’ conveyancing was done by Cassab
solicitors at Bankstown; and that the agreement
would not have been acceptable
to Cassab; and said that they did not use Cassab on this transaction because
they ran out of time
and trusted Mr Churchill (although he had never met Mr
Churchill before – T 304).
- Ms
Bale points out that Mr Arthur Trigas gave evidence in cross-examination (this
being the first time it was suggested) that the
offer that was first made was
$590,000 minus $38,000 (giving an apparent initial offer of $552,000) (see at T
280) and that the deceased
“pushed us up; good on him” (T 280). Ms
Bale points out that this version of events does not accord with either
Mr Darwiche
or Mr Theo Trigas’ evidence.
- Ms
Bale submits that Mr Arthur Trigas’ evidence should be rejected as
fabrication. It is submitted that it is reasonably clear
that Mr Arthur Trigas
colluded with Mr Darwiche to introduce evidence that he was paid in undocumented
scrap or used batteries (it
being said to be too much to accept that by
coincidence, overnight, Mr Arthur Trigas had some kind of epiphany and realised
that
his evidence should be amended in this way, to accord with evidence that
had emerged only in the viva voce evidence of Mr Darwiche the afternoon
before).
- It
is said that the balance of Mr Arthur Trigas’ evidence suffered from the
same contradictions that beset the evidence of Mr
Darwiche (referring to
Mr Arthur Trigas’ evidence as to what he had read in the agreement);
and that Mr Arthur Trigas’
evidence as to how his father came to be
in the possession of so much cash was vague and ultimately non-responsive. It
is said that
Mr Arthur Trigas gave no satisfactory explanation as to how
his father would have come into possession of hundreds of thousands of
dollars
in cash.
- Further,
Ms Bale argues that it makes little commercial sense for the initial offer
having been less than what both Mr Darwiche and
Mr Arthur Trigas knew the tenant
was willing to offer ($650,000); Mr Arthur Trigas’ explanation being
“you try your luck”.
(Pausing there, the suggestion that Mr Arthur
Trigas was simply trying his luck to secure a lesser purchase price strikes me
as one
of the more credible aspects of the defendants’ evidence. The
overwhelming impression I gleaned from the defendants’
evidence was that
an opportunistic attempt to secure the property at a lesser price would not have
been unusual – the response
“you try your luck” followed by
the laconic comment that the deceased “pushed us up good on him”
seems to
me quite consistent with such an approach. What is less credible is
that the deceased was the one exercising any real negotiating
power in this
scenario.)
- Nevertheless,
Ms Bale’s submission is that the explanation Mr Arthur Trigas offered for
the deceased accepting $590,000 for
the sale when the deceased had an offer of
$650,000 (that the deceased wanted the money in cash and that it was in effect
somewhere
close to $650,000 when the money owed to Mr Darwiche and agents’
fees is added) was fabrication aimed at trying to explain
away the obvious lack
of commerciality of the transaction.
- Ms
Bale thus submits that the entirety of the evidence of Mr Arthur Trigas should
be rejected.
- My
observation of Mr Arthur Trigas was that he was keen to dismiss the alleged
contract as a draft (stating at T 279 that all he remembered
was some
underlining and drawing attention at T 275 to the date being in different font);
and to distance himself from knowledge
of its contents (see at T 284).
Mr Arthur Trigas was also seemingly keen to distance himself from knowledge
of the company, Kimberley
Developments, at all (see at T 284).
- Mr
Arthur Trigas described Mr Darwiche as “like a family member”
(T 271.6) and was at pains to emphasise that the alleged
agreement was not
one in which he or his family or company would be involved (see T 278.8-278.18;
281.47). Mr Arthur Trigas was adamant
that he read the underlined parts and
question marks at the time, and that the document was signed but undated
(T 276.5-276.45).
- The
inconsistencies in Mr Arthur Trigas’ evidence and the belated evidence of
matters to which Mr Darwiche had only the previous
day deposed, as well as the
new evidence of an initial offer not referred to by any of the other defendants,
give me cause to doubt
the credibility of Mr Arthur Trigas. I do not go so far
as to make a finding of collusion or fabrication of evidence. However, I
am left
with real doubts as to the credibility of Mr Arthur Trigas (not helped by the
fact that this conveyancing transaction is
far removed from the standard
conveyancing transaction – no contract for sale of land in evidence and a
frankly implausible
account of the payment of a large sum of cash supposedly
held in a home safe and the result of a successful business of the sale
of
cigarettes); and, as with Mr Darwiche, I exercise caution before accepting his
evidence where it is not corroborated by contemporaneous
objective evidence.
Mr Theo Trigas
- Ms
Bale points to significant inconsistencies between Mr Theo Trigas’
affidavit evidence and his oral evidence. It is noted
that (as did
Mr Darwiche), Mr Theo Trigas seeks to blame his previous solicitors
for the contradictions. It is also noted that Mr
Theo Trigas contradicts Mr
Darwiche’s account that they were partners.
- Ms
Bale says that Mr Theo Trigas’ evidence as to how he came into possession
of the agreement annexed to his affidavit significantly
departs from Mr
Darwiche’s explanation, noting that in cross-examination, Mr Theo Trigas
stated that the agreement annexed
to his affidavit was the agreement that Mr
Darwiche showed him.
- Ms
Bale points to inconsistency in that, in cross-examination, Mr Theo Trigas
stated that he did not read the document (cf [10] of
his second affidavit sworn
25 February 2020 that “at the above time I read this document”). It
is said that the evidence
given by Mr Theo Trigas, that he never saw the
agreement until his solicitor showed it to him and that he did not read it at
the
time, is contradicted by [10] of his second affidavit (and it is noted that
Mr Theo Trigas conceded that the affidavit must have
been based on information
provided by him).
- Ms
Bale argues that it is inconsistent with Mr Theo Trigas’ acceptance that
he is an astute and savvy businessman that he never
deals with property
documents after a deal is made (including the contract for the sale of land),
and that he had made no attempt
to obtain this material from Mr Churchill even
when he went to gaol (Mr Theo Trigas’ evidence being that Mr Arthur Trigas
told
him that Mr Churchill had lost the contract for sale and so he did not
attempt to contact him at all).
- Ms
Bale submits that Mr Theo Trigas’ evidence should also be rejected as
fabrication. It is said that Mr Theo Trigas tried in
cross-examination to
distance himself from the narrative he swore was true in his affidavit (and, in
particular, tried to distance
himself from ever reading the agreement, despite
the fact he deposed to doing just that).
- Ms
Bale also points to the lack of explanation for the fact that, if
Mr Churchill was solely in possession of the contract (“the
receipt” for the alleged cash payment) and “somehow managed to lose
it”, and was also sufficiently trusted by Arthur
and Theo Trigas to
perform a conveyance they would normally leave to Cassab Solicitors, the
defendants would be expected to, but
did not call him or explain their failure
to do so.
- My
observation of Mr Theo Trigas is, again, that the inconsistencies between his
oral evidence and his affidavit evidence mean that
caution must be exercised
before accepting either version as the truth. Mr Theo Trigas was not an
argumentative witness. However,
his account of events (as was that of both Mr
Darwiche and Mr Arthur Trigas) is inherently implausible (not least, the entry
into
a purchase transaction allegedly involving a large payment of cash for
which there is no record). Mr Theo Trigas gave inconsistent
evidence as to what
he had read in the alleged agreement and sought to distance himself from
involvement in property transactions
(“I don’t engage in [property
transactions] my staff do” – see T 303.42).
- In
his second affidavit (at [27]) which was read as an assertion, not for the truth
of the facts asserted, Mr Theo Trigas had deposed
that Mr Churchill had set up
the company (Kimberley Developments) for Mr Darwiche and that Mr Theo
Trigas had to arrange the change
of directorship at a later date when he was
informed that Mr Churchill had not done so. This is consistent with
Mr Arthur Trigas’
evidence that Mr Churchill advised that he created
the company Kimberley Developments and he would make the necessary changes to
the directorship from Mr Darwiche to Mr Theo Trigas (see Arthur Trigas’
affidavit affirmed 25 February 2020 at [18]). However,
during his
cross-examination Mr Theo Trigas gave evidence that he believed he was a
director of Kimberley Developments on 21 February
2011 (T 305.50) and denied in
his evidence that he was always in substance a director of Kimberley
Developments (T 306.35).
Overall conclusion as to
defendants’ evidence
- All
in all, I considered that each of the defendants’ main witnesses were
unsatisfactory and not credible witnesses.
- Ms
Bale says that a compelling reason to accept her version of events is that the
defendants are clearly lying. (Pausing here, while
I have serious reservations
as to the evidence of each of the defendants’ witnesses, I do not make
findings of dishonesty as
such.) In support of this submission, Ms Bale points
out that the amount of $590,000 is recorded as the sale price on the transfer
and that this is the same amount noted in the agreement as the sale price. It is
submitted that, to avoid the obvious conclusion
that the consideration that the
deceased was to receive was (in part) the 60% shareholding in Kimberley
Developments as prescribed
in the 21 February Agreement, the defendants had
to demonstrate that the deceased did receive $590,000 worth of consideration.
Thus,
it is said, the story of the unproven cash transaction (for which it is
said no receipt – other than the transfer or contract
itself – was
asked for or obtained; and for which no contract of sale was ever produced) was
maintained. Ms Bale says that
if the cash transaction story is disbelieved then
the only logical conclusion left is that the 21 February Agreement represented
the basis on which the deceased agreed to transfer the property to the control
of Mr Darwiche via Kimberley Developments.
- Ms
Bale points out that lies can be used to corroborate a plaintiff’s case if
“the liar cannot give an innocent explanation
of proven facts”, or
is “unable to account for what the witnesses say they saw in any way
consistent with his own innocence
which are capable of providing
corroboration” (reference being made to R v Heyde (1990) 20 NSWLR
234 (R v Heyde) at 236 per Clarke JA, which is said to be here apposite).
Ms Bale says that the defendants had to lie because they are unable to
account
for how they extracted the transfer from the deceased if not through the
promises outlined in the Agreement.
- Ms
Bale contends that the “whole narrative” of the defendants should be
rejected as lies. Ms Bale says that they could
not agree amongst themselves how
they came into possession of the agreement, or if they read it (in whole, in
part, underlined or
otherwise), or simply not at all; and that all three defence
witnesses distanced themselves from their own affidavit evidence, and
suggested
that to the extent that their affidavits were wrong, the mistake was
attributable to a solicitor’s error. It is noted
that Mr Darwiche gave
multiple explanations as to how he came into possession of the agreement and
whether or not he had read it
(initially he claims he went through the agreement
in detail with the deceased, he then later essentially denied that he had read
it at all) and that Mr Arthur Trigas also gave contradictory evidence as to
whether he read the agreement or not. Ms Bale argues
that the fact that there is
no documentation to support the alleged cash transaction at all is powerful
evidence that it simply did
not happen (invoking the statement of Hammerschlag J
in Sergienko v AXL Financial Pty Limited at [1]).
- Ms
Bale maintains that Mr Darwiche (who she describes as a serious criminal) lied
about a series of matters (as noted above). Ms Bale
contends it is not plausible
that the price for which Arthur and Theo Trigas purchased the property for was
coincidentally the exact
same price that was noted in the 21 February
Agreement and says that the manner in which the defendants assert that the sale
price
was actually $650,000 is self-serving, confused and tortured (and an
obvious lie to account for the fact that selling the property
at $590,000 made
no commercial sense). It is noted that the defendants themselves concede in
their evidence that the deceased had
an offer of $650,000 from Mr Moore.
Further, it is said that the evidence as to Mr Darwiche being paid in
batteries is fabrication;
an account concocted to explain the $38,000 allegedly
owing to Mr Darwiche (and it is said that the witnesses colluded in this
regard).
Defendants’ submissions as to the
defendants’ evidence
- The
defendants emphasise (and I accept) that it does not follow from rejection of
part of the evidence of a witness that the whole
of that witness’ evidence
must also be rejected even if it is found that the witness was lying (referring
to what was said
by O’Loughlin J in Cubillo v Commonwealth (2000)
103 FCR 1; [2000] FCA 1084 at [124]; and to the legal principles relevant to
fact finding where credit is in issue as set out by Kunc J in Pavlis v Pavlis
[2021] NSWSC 1117 at [158]- [167]).
- Insofar
as Ms Bale has highlighted inconsistencies between the affidavit and oral
evidence of the defendants’ witnesses, the
defendants invoke the
observation of Nettle and Gordon JJ in Queensland v Masson (2020) 94 ALJR
785; [2020] HCA 28 at [112] to the effect that, having regard to the “oft
unspoken reality” as to the manner in which lay witness statements are
liable to be “workshopped, amended and settled by lawyers”, it is
usually the assessment of the oral evidence of the
witness that is of paramount
importance. In this regard, the defendants refer to the cross-examination
as to what Mr Darwiche meant by his affidavit evidence as to the conversation
with the deceased in which Mr Darwiche deposed that the deceased
“mentioned to me that his daughter didn’t think that
he was of sound
mind”. Mr Darwiche said that what he meant there was that “[h]is
daughter was playing out for him to
be like he was crazy” and went on to
say that in his view the deceased could make decisions for himself (see T
227.19).
- The
defendants say that, while there were some inaccuracies in the affidavit
evidence (as borne out by the cross-examination), the
defendants’ evidence
was consistent on the central issues (namely the rejection of the
21 February Agreement proposed by the
deceased, the subsequent agreement to
purchase the land for $590,000, the cash payment, the discharge of the mortgage
and the deceased’s
capacity in early 2011). The defendants reject the
contention by Ms Bale that they colluded to concoct their version of events; the
defendants submit that their versions are consistent because that was what
actually occurred.
- The
defendants contend that their version of events is supported by: the absence of
a signed copy of the 21 February Agreement; the
absence of any steps taken by
the parties to perform the terms of the 21 February Agreement; the
deceased’s acknowledgement
of the receipt of $590,000 in the transfer; the
fact that the Forest Lodge Property was actually transferred to Kimberley
Developments
incurring a stamp duty obligation; the payment of stamp duty and
the Duties Notice of Assessment; Suncorp’s position regarding
mortgage
default; the discharge of the Suncorp mortgage; and the absence of any complaint
by anyone at any time prior to the commencement
of proceedings about the
defendants’ alleged failure to perform their obligations pursuant to the
terms of the 21 February
Agreement.
- I
accept that much of the accounts given by the defendants’ witnesses is
implausible and self-serving; and that the last minute
changes in evidence give
rise to suspicion as to collusion. However, collusion is a serious finding to
make and I am not persuaded
that it is appropriate in the present case. Suffice
it to note that I considered the defendants’ witnesses not to be credible
and I do not accept their evidence unless corroborated independently (and by
objective contemporaneous evidence).
Failure to call Mr Churchill
to give evidence – Jones v Dunkel
- That
brings me to the Jones v Dunkel inference sought by Ms Bale in respect of
the defendants’ failure to call Mr Churchill. Jones v Dunkel
(1959) 101 CLR 298; [1959] HCA 8 establishes that the unexplained failure by
a party to call witnesses may in appropriate circumstances lead to an inference
that
the uncalled evidence would not have assisted that party’s case. In
order for such an inference to arise, the witness must
be one that would be
expected to have been called (see Payne v Parker [1976] 1 NSWLR 191 at
200-202 per Glass JA).
- Ms
Bale says (but I note that this is disputed) that the defendants did not explain
why Mr Churchill was not called, save an assertion
(as a matter of fact, but not
of explanation) from the Bar table that Mr Churchill is currently incarcerated.
It is submitted that
the mere fact of incarceration is not a legitimate reason
for a party not to call a witness; and it is said that no actual evidence
was
adduced by the defendants of efforts undertaken to secure
Mr Churchill’s evidence. This submission is disputed by the
defendants, who argue that Ms Bale has failed to have regard to the email dated
9 September 2021 sent to the defendants by Mr Churchill’s
former
solicitors, in which it was communicated that Mr Churchill did not propose to
discuss the matter with the defendants or provide
evidence on their behalf (see
Ex 12). (I interpose to note that the letter draws attention to the fact that
it was only on 30 August
2021 that the defendants advised they wished to call Mr
Churchill in their case.)
- The
adverse inferences that Ms Bale submits should be drawn are to the effect that:
Mr Churchill’s evidence regarding the drafting
of the 21 February
Agreement and the alleged payment of cash would not have assisted the
defendants; and that Mr Darwiche had registered
Kimberley Developments (contrary
to Mr Darwiche’s asserted lack of knowledge on this point) and was its
de facto and de jure director (i.e., not Mr Theo Trigas) at the
time the property was transferred. It is submitted that, additionally, the
inference may
be drawn that Mr Churchill signed on behalf of the transferee
(Kimberley Developments) at the direction of Mr Darwiche given his
role as
director of Kimberley Developments (contrary to his assertion that Mr Churchill
was the solicitor of Arthur and Theo Trigas
at the time of the transfer).
- It
is submitted that that the whole case advanced by Ms Bale (that the defendants
colluded with Mr Churchill to deprive the deceased
of his property by way of a
false promise of partial ownership in a development of the land) can be more
readily accepted because,
on the defendants’ own evidence,
Mr Churchill was central to each step of the 21 February Agreement. It is
submitted that the
absence of evidence from Mr Churchill (given the
defendants’ case is that the entire purchase was legitimate and proper) is
simply bizarre.
- Ms
Bale refers to the principles of law as they relate to Jones v Dunkel
inferences as summarised by Campbell J, as his Honour then was, in Manly
Council v Byrne [2004] NSWCA 123 at [44]- [54]; and reference is made also in
this context to RPS v R (2000) 199 CLR 620; [2000] HCA 3 at [26]
per Gaudron ACJ, Gummow, Kirby and Hayne JJ. It is noted that Jones v Dunkel
inferences may be drawn even where a witness is equally available to both
the plaintiff and defendant, as the Court is entitled to
assess by whom calling
the witness would be “more natural”. It is sometimes expressed that
a Court may expect a witness
to fall into “one camp” or the
other.
- Ms
Bale says (and broadly I agree) that Mr Churchill was a witness who would
naturally be expected to fall into the “camp”
of the defendants, on
the basis that he was their solicitor, and signed the crucial transfer document
which deprived the deceased
of the Forest Lodge Property. It is submitted that
if the defendants’ case were to be accepted, it would have necessitated
the giving of evidence of Mr Churchill on those matters. (Part of the difficulty
here, however, is that Mr Churchill appears also
to have acted for Ms Chyna
Schein (and through her the deceased) in relation to the transaction or at least
to have been understood
by them to be acting for all the parties.)
- Ms
Bale points out that the evidence of all three defence witnesses is replete with
references to Mr Churchill’s involvement
in the transaction and that, from
the outset of this proceeding the defendants (or at least some of them) were in
telephone contact
with him (so, for example, referring to
Mr Darwiche’s evidence that Mr Churchill informed him of the
proceeding – see
Mr Darwiche’s affidavit affirmed 21 February 2019
at [7]; T 253.14).
- Insofar
as Mr Theo Trigas gave evidence that his brother, Mr Arthur Trigas, had been
told by Mr Churchill that he had lost all documents
relating to the transfer, it
is said for Ms Bale that direct evidence of this from Mr Churchill would have
been of obvious assistance
to the defendants. Further, Ms Bale argues that Mr
Churchill could have given evidence of: his role in the transaction (which Ms
Bale says is mired in uncertainty); as to the alleged cash payment made on 21
February 2011 and what occurred at that meeting; as
to who completed the
application for registration of Kimberley Developments (himself or Mr Darwiche);
as to who drafted up the 21
February Agreement (himself or the deceased); as to
whether a contract for sale of land was drawn up, and where copies of it were
kept and whether and how it had been lost; as to who had given him the authority
to sign the transfer document on behalf of Kimberley
Developments; and as to the
change of directorship of the company (the form for which was filed 12 months
after the change there
recorded).
- Ms
Bale says that the failure of the defendants to call their own solicitor
(though, as noted above, Mr Churchill seems to have adopted
a role acting for
all the parties in the transaction) to give evidence to support their version of
events, and in whose possession
they left the only alleged paper evidence of the
validity of their purchase of the Forest Lodge Property, is unexplained and
should
lead to the drawing of adverse Jones v Dunkel inferences.
- As
adverted to above, the defendants cavil with the proposition that there was no
explanation for the fact that Mr Churchill was not
called (in circumstances
where he was incarcerated) and they cavil with the proposition that he was in
“their camp”.
Complaint is made by the defendants as to the
extensive reliance in Ms Bale’s closing submissions to the
defendants’
alleged failure to call Mr Churchill as a witness, or to
explain the failure to call him. The defendants point to the evidence as
to Mr
Churchill’s incarceration and say that there have been steps taken by the
defendants to procure him as a witness. Further,
it is said that the submissions
in this regard ignore the fact that Mr Churchill was previously a party to the
proceeding and acted
for the deceased, as well as Kimberley Developments on the
subject transaction.
- The
defendants emphasise that the onus is on Ms Bale to prove to establish her
pleaded case (referring to the approach set out by
Sackar J in Lorretta
Kistmah Craig v Kia Silverbrook [2013] NSWSC 1687 at [125]- [126]).
- Insofar
as Ms Bale asserts that the defendants did not explain why Mr Churchill was
not called save an assertion “from the bar
table that Mr Churchill is
currently incarcerated” and that “no actual evidence was adduced ...
of efforts undertaken
to secure [Mr Churchill’s] attendance”, the
defendants say that this submission ignores: the evidence adduced by
Ms Bale’s
counsel during the cross-examination of Mr Darwiche that
Mr Churchill was incarcerated at the beginning of 2020 and the documentary
evidence which suggests that may have in fact occurred around August 2020; the
email from Mr Churchill’s former solicitor (Mr
Michael Thornell of K &
L Gates) in which he confirmed that, as at 2 September 2021, Mr Churchill was in
Long Bay Correctional
Facility on remand pending hearing of his criminal matter
that was scheduled to commence on 9 September 2021 (i.e., during the hearing
of
the present proceeding); and the evidence of the defendants’ attempts to
secure Mr Churchill as a witness and his refusal
(communicated through Mr
Thornell) that he would not be willing to discuss the matter with the
defendants’ legal representatives
or to give evidence on their
behalf.
- The
defendants say that the above is sufficient to defeat the plaintiff’s
Jones v Dunkel submission. Further, the defendants say that Ms
Bale’s Jones v Dunkel submission ignores the fact that: Mr
Churchill was a party to the proceeding until 3 November 2020; and that Mr
Churchill acted for
both the deceased and the defendants in relation to the
subject transaction.
- It
is noted that the fact that Mr Churchill was retained by the deceased was the
basis for the claim made against him and one of the
particulars of the breach of
his duty of care to the deceased was said to be acting for both the deceased and
Mr Darwiche on the
transaction. The defendants say that it was not therefore
“more natural” for the defendants to have called Mr Churchill.
It is noted that Ms Bale pleads in this proceeding that Mr Churchill
drafted the Agreement and that it is Ms Bale who must prove
each element of the
cause of action. As such, it is submitted that Mr Churchill would be expected to
be called by Ms Bale, rather
than the defendants.
- As
to the fact of Mr Churchill’s incarceration, I accept that this is not a
satisfactory explanation for the fact that he was
not called to give evidence.
There might have been logistical difficulties involved but it is by no means
unheard of for prisoners
to be subpoenaed to give evidence in court proceedings.
What makes it less “natural” to expect the defendants to call
Mr Churchill is the fact that he was himself a defendant (until settlement
of the claims against him). However, after the claims
against Mr Churchill were
resolved that difficulty would not have arisen; and I accept that, as between Ms
Bale and the defendants,
it would be more natural to expect the defendants to
call Mr Churchill than for Ms Bale to have done so. It should be noted that
Mr
Darwiche gave evidence (at T 253.3-253.8) that he had known Mr Churchill for
some twenty years and he was in fairly close contact
with Mr Churchill over
the years. (Moreover, it is clear that Ms Bale did attempt to make enquiries of
Mr Churchill and requested
all paperwork associated with the deceased since 3
June 2008 to no avail – see her letter dated 18 January 2017 addressed to
Mr Churchill, annexed and marked “Y” to her affidavit sworn 26
November 2018.)
- Thus,
I would be inclined to accept that the requirements for a Jones v Dunkel
inference are here satisfied at least from after the time at which the
proceeding against Mr Churchill had been dismissed. However,
it must be noted
that even if such an inference is drawn it cannot be used to supply missing gaps
in the evidence and can only strengthen
inferences otherwise available on the
evidence (and where there are competing available inferences) (see Stellar
Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2022] NSWSC 144
at [273]).
- In
the circumstances, I do not rely on any such adverse inference for the
conclusions that I have reached on the factual matters for
determination (as I
explain below).
Factual findings sought by the plaintiff
- Ms
Bale submits that the following findings should be made as to what
happened.
- First,
that Mr Darwiche met the deceased some time in 2010 when Mr Darwiche was
contracted to undertake clean-up works to the property
(see
Mr Darwiche’s second affidavit affirmed 25 February 2019 at [7];
Mr Darwiche’s third affidavit sworn 24 February
2020 at [18];
Mr Andreacchio’s affidavit sworn 19 September 2020 at [5]) and
that he was apparently introduced to the deceased
by Mr Churchill (see Mr
Darwiche’s second affidavit at [6]).
- Apart
from the uncertain import of a finding that there was “apparently”
an introduction, there does not appear to be
any real dispute that Mr Darwiche
first met the deceased in or around 2010 (at least after the unsuccessful April
2009 auction);
nor that Mr Darwiche was engaged to carry out clean-up works on
the property. Mr Andreacchio’s evidence (at [7]-[8] of his
second
affidavit) and Mr Moore’s evidence supports such a finding (and that
Mr Darwiche demolished a shed on the property)
(see Mr Moore’s
affidavit sworn 13 February 2019 at [9]; see also T 174.22-174.33).
Accordingly, I find that Mr Darwiche met
the deceased in around 2010; that Mr
Darwiche’s services were retained for the clean-up of the property,
extending to the demolition
of a shed; and that Mr Churchill introduced Mr
Darwiche to the deceased. As to who instigated the introduction of Mr Darwiche
to
the deceased, on the balance of probabilities I would accept that it is
likely that it was Mr Churchill who introduced Mr Darwiche
to the deceased,
having regard to the evidence that Mr Churchill was a long term friend or
associate of Mr Darwiche and that Mr Churchill
seems to have been known to Ms
Chyna Schein and apparently Mr Mohr (insofar as Mr Churchill’s involvement
as a solicitor or
witness on various documents seems to have occurred at the
behest of Ms Chyna Schein not the deceased – whose solicitor for
some time
had been Mr Hancock).
- Second,
that Mr Darwiche became aware that the deceased was in mental decline (reference
being made to Mr Darwiche’s third affidavit
at [49] where Mr Darwiche
deposed to the deceased having mentioned that his daughter thought he was not of
a sound mind and made
reference to a matter in the Tribunal); and likely
vulnerable to being taken advantage of financially.
- For
Ms Bale, it is said that the evidence that the deceased was in mental decline
and in danger of being taken advantage of (at the
relevant time) is well
documented (though this refers to a large extent on the medical records that I
have not admitted as truth
of the matters there recorded). As noted, reliance is
placed on Mr Darwiche’s own evidence as to his awareness that
concerns
had been raised as to the deceased’s mental health (see his third
affidavit at [49]); and to the fact that there was reference
at cl 31 of the
21 February Agreement to the deceased having had a power of attorney
appointed and being involved in proceedings
in the Guardianship Tribunal.
Further, it is said that the lay evidence of the deceased’s mental decline
(given by Mr Andreacchio
and Ms Bale) was not challenged in
cross-examination; and it is noted that Mr Darwiche conceded that he knew
the deceased had a power
of attorney appointed to his affairs. (I do not
consider that the fact that Mr Darwiche knew that the deceased’s daughter
had
thought he was not of sound mind or that there was a challenge in the
Tribunal to a power of attorney that had been granted, amounts
to awareness of
the deceased’s mental decline as such; and I have difficulty with the
proposition that Mr Darwiche, having
only recently met the deceased, was or
would have been able to form a view as to any decline as such (since he would
not have a benchmark
or baseline from which to judge the deceased’s
cognitive ability). I do, however, accept as genuine Ms Bale’s evidence
as
to her observations of the deceased’s declining health and cognitive
ability; and I would also accept Mr Andreacchio’s
lay observations as to
his dealings with Mr Darwiche.)
- Ms
Bale says that the fact that the deceased entered into a such an uncommercial
agreement is perhaps the strongest evidence of his
mental decline and inability
to protect his own interests. That submission is of course predicated on an
assumption that the deceased
did indeed enter into the 21 February
Agreement (which I address below) and it also must be considered in the context
of the significant
financial pressures then confronting the deceased.
- I
have difficulty with the proposition that the conversation to which
Mr Darwiche deposed in his affidavit evidence would have put
him on notice
of any cognitive decline on the part of the deceased at that stage. First, as
adverted to above, a statement that the
deceased’s daughter thought he was
of unsound mind does no more than raise the issue of potential mental decline
– and
would be equally consistent with the deceased being of sound mind
and simply upset that it be suggested otherwise by his daughter.
The fact that
someone thinks an elderly parent is of unsound mind of itself says little or
nothing as to whether that is in fact
the case – it would be necessary to
know much more about the circumstances in or basis on which that view was held.
Second,
I do not consider much weight can be placed on awareness of proceedings
in the Guardianship Tribunal to challenge the power of attorney
(particularly
since it is not clear what Mr Darwiche knew about them and in any event the
determination of the Tribunal at that stage
was that the deceased was capable of
making his own decisions). Third, as noted above, if Mr Darwiche had only been
introduced to
the deceased in around late 2010, Mr Darwiche could have had no
‘baseline’ (so to speak) from which to assess any mental
decline or
otherwise on the part of the deceased.
- Certainly,
I accept that over the period of time in which Mr Darwiche knew the deceased it
would have been possible for him to have
observed changes in behaviour and the
like which could have pointed a reasonable observer in his position to the
conclusion that
the deceased was declining in his mental acuity. However, it is
not clear that the dealings between the deceased (who by 2009 was
living in
Woolgoolga) and Mr Darwiche (who does not present as the most astute observer of
events) from around 2010 were very extensive
so as to permit the inference to be
drawn that Mr Darwiche must necessarily have observed a mental decline on
the part of the deceased
in the period from 2010 to, relevantly, early 2011. It
is also relevant in this context that others dealing with the deceased in
that
period (in particular, Mr Hancock) did not appear to question the
deceased’s then mental capacity; and, as noted, the
Tribunal in 2008 had
found the deceased capable of making his own decisions.
- More
problematic is the issue as to whether Mr Darwiche became aware that the
deceased was vulnerable to being taken advantage of
financially (something that
was clearly a concern to Mr Hancock, for example, at the time that he sent his
letter of 13 June 2008
to the deceased; and which was also a concern to Ms Bale
at the time).
- There
are to my mind a number of indications that support the conclusion that the
deceased was vulnerable to exploitation in the period
from 2008 – he was
elderly; he was grieving the loss of his first wife and seeking a companion; he
had formed a relationship
with a much younger woman (in circumstances that are
not clear on the evidence) and had apparently accepted an arrangement whereby
Mr
Mohr had also moved into his home and had permitted him to have access to his
financial affairs; and he had suffered a number
of physical incidents (where he
had displayed confusion or loss of consciousness) which must have indicated a
concern as to his physical
(if not also mental) health. However, Mr Darwiche was
not introduced to the deceased until sometime after April 2009 (most likely
in
2010) and it is by no means clear that Mr Darwiche was on notice of many
(if not any) of the matters referred to above.
- What
must, however, have been clear to Mr Darwiche by February 2011 was that the
deceased was elderly, under some financial pressure
from his lenders (since that
was recorded in the 21 February 2011 Agreement), was dependent on Ms Chyna
Schein (his attorney), and
was someone about whom concerns as to his cognitive
ability had at least previously arisen. As to the fact that the deceased (on
Ms
Bale’s case) entered into the 21 February Agreement on uncommercial terms,
I accept that they were uncommercial and that
they strongly suggest that Mr
Darwiche took advantage of the deceased (but the extent that he was able to do
so because of an awareness
of the deceased’s mental decline is somewhat
moot, as opposed to his general vulnerability based on the influence of others
around him, such as Ms Chyna Schein and Mr Mohr, and the financial pressure
under which he was suffering at the time). I therefore
cannot comfortably
conclude that Mr Darwiche was aware (in the period from 2010 to 2011) of
the deceased being in mental decline
(and therefore likely vulnerable to
financial exploitation). Rather, I consider that the evidence comfortably
establishes that Mr
Darwiche was aware by 2011 of the deceased’s
vulnerability to exploitation by reference to the factors to which I have
referred
above.
- Third,
that in February 2011 Mr Darwiche had become aware that the deceased was
interested in developing the Forest Lodge Property.
(In this regard it is noted
that Mr Andreacchio gave evidence that in September 2010 he had been given money
by Ms Chyna Schein
to undertake a development study with a view to putting in a
development application (see Mr Andreacchio’s second affidavit
at
[27]) and that those attempts to develop the property did not bear fruit.)
- As
to this, I accept that Mr Darwiche became aware in early 2011 that the Forest
Lodge Property might be available for sale. It is
not so clear that
Mr Darwiche became aware at that stage of failed attempts to secure a
development proposal for the property. However,
it does appear that
Mr Darwiche was aware of plans to develop the property and came into
possession of a letter dated 3 September
2010 from Mr Andreacchio addressed
to Mr Zounis which sought expressions of interest for a development proposal
opportunity (see
Ex 4 to Mr Darwiche’s third affidavit; see also at
[52]).
- Fourth,
that at around this time the deceased was under financial pressure from Suncorp
to refinance his loans secured over the Forest
Lodge Property. There is no doubt
that this was the case (see the matters referred to in the chronology of events
above) and I so
find.
- Fifth,
that, at around some time in February 2011, Mr Darwiche (with the help of Mr
Churchill) put together the 21 February Agreement
by which the deceased would
sell the Forest Lodge Property to Kimberley Developments for $590,000. Ms Bale
says that the agreement
contemplated that the deceased would not be paid cash
but would receive consideration comprising (see cl 30 of 21 February Agreement)
“the discharge of the outstanding Mortgage, the shareholding in the
company and for settlement of monies owed to Darwiche in
respect of the clean-up
and improvement of the property and other services”. Ms Bale says that
the deceased was never to receive
any cash payment; rather, that the agreement
was that the mortgage would be paid out and he would receive a 60% shareholding
in the
company.
- Ms
Bale maintains that the 21 February Agreement is drafted in such a fashion as to
be so advantageous to Mr Darwiche that it is silly
to suggest it was drafted by
the deceased or anyone acting for him. Ms Bale argues that the fact that Mr
Darwiche (or Mr Churchill,
on his behalf) drafted the agreement is said to be
further supported by the fact that Mr Darwiche (or Mr Churchill, on his
behalf)
filled out the ASIC form incorporating Kimberley Developments (ensuring
that there were Class A and B shares in accordance with the
terms of the
agreement).
- It
is noted that Mr Darwiche’s evidence is that: Mr Churchill set up
Kimberley Developments and made Mr Darwiche director, without
Mr Darwiche’s knowledge; because Mr Churchill registered the
business, and because the ASIC ‘Application for Registration
as an
Australian Company’ form bore both Mr Darwiche’s name and signature
(although on his evidence this signature was
not his) the steps taken by
Mr Churchill were done so fraudulently; despite the above, when Mr Churchill
signed the transfer document in February
2011, he did so in his capacity as the
solicitor for Mr Theos Trigas, because it was Mr Theo Trigas who was in
fact (if not at law)
the director and controlling mind of Kimberley
Developments.
- The
evidence of Mr Arthur Trigas regarding Mr Churchill’s role in the case was
of similar import, to the effect that: Mr Churchill
registered Kimberley
Developments (thus, it is said, increasing the confidence with which it can be
concluded that Mr Churchill did
so by signing Mr Darwiche’s name to it, or
reducing the confidence in which it holds the evidence of both witnesses); and
that
the entirety of the purported sale on their case ($590,000, representing
some form of “deal” involving Mr Darwiche and
agency fees) was
acceptable because the deal needed to be done quickly, and the defendants
trusted Mr Churchill as their solicitor.
- I
address in due course the issue as to whether there was a binding agreement to
the effect contended for by Ms Bale. Suffice it at
this stage to say that there
is doubt in my mind that the document referred to in these reasons as the 21
February Agreement was
a document drafted by Mr Churchill. Given the
lamentable drafting of the document, it is difficult to see that even the most
incompetent
solicitor could have prepared it – although I accept that I
have no idea as to the competence or otherwise of Mr Churchill
as a
solicitor.) It looks on its face more likely to be a document cobbled together
(the product of a cut and paste exercise so to
speak) from other documents. The
repetitive nature of its contents and the non-sequential clause numbering; as
well as the different
fonts and alignment of clauses; all point to such a
conclusion. That said, I consider it most likely that Mr Churchill did have
some
input into the drafting of the agreement because of the clauses that
clearly favour his interests (by reference to the clauses giving
priority to and
security in respect of his fees).
- I
do not consider it likely that the agreement was drafted by the deceased –
not least because it does not seem to be in his
interests in a number of
respects but also because there is no reason to think that, if the deceased had
wanted an agreement to be
prepared of this kind, he would not have retained his
longstanding solicitor (Mr Hancock) to prepare it. It is also relevant to
note
that the coversheet to the 21 February Agreement does not contain reference to
any solicitor’s firm as having drafted
the agreement.
- There
is also the possibility (not addressed in the evidence or submissions) that the
agreement was prepared by one or other of Ms
Chyna Schein and Mr Mohr
(whether with or without the assistance of Mr Darwiche and/or
Mr Churchill). This could also explain the
infelicitous drafting but not
the clauses clearly for the advantage of Mr Churchill.
- Ultimately,
I think it most likely (on the balance of probabilities) that the
21 February Agreement was prepared by a lay person (with
input from
Mr Churchill). It seems to me equally plausible that it was a document
prepared by Ms Chyna Schein and/or Mr Mohr as it
is that it was prepared by Mr
Darwiche (but in either case it seems to me almost unarguable that it was
prepared with reference to
or input from Mr Churchill to some extent and that it
was put to the deceased with Mr Darwiche’s support or concurrence).
- Sixth,
that, on 21 February 2011, the deceased, Mr Darwiche and Kimberley Developments
entered into the 21 February Agreement; and
Mr Churchill and the deceased
executed the transfer of title instrument.
- Ms
Bale says that the evidence of Mr Moore supports the proposition that
Mr Darwiche assumed control of the property as though he
owned it (noting
that Mr Moore formed the view that Mr Darwiche was the owner of the Forest Lodge
Property and that Mr Moore had
never met Arthur and Theo Trigas). Ms Bale also
points to the evidence of Mr Andreacchio, who she says is the closest this case
has
to a disinterested third party, to the effect that the agreement as annexed
to his affidavit was the agreement he understood the
deceased to have had
entered into with Mr Darwiche (see Mr Andreacchio’s second affidavit
at [10]) (but also noting that Mr
Andreacchio believed the entire
transaction to be “a sham” – see his second affidavit at
[11]). It is noted that
Mr Andreacchio had never met Arthur and Theo Trigas and
believed (as did Mr Moore) that Mr Darwiche controlled Kimberley Developments
and the Forest Lodge Property.
- It
is said that, if it be accepted (as Ms Bale contends) that the deceased received
no money for the transaction, then this is powerful
evidence that the deceased
thought he was entering into the 21 February Agreement. It is noted that Ms
Chyna Schein believed that
the deceased had an interest in the Forest Lodge
Property (referring to her evidence to the Guardianship Tribunal) and that Ms
Chyna
Schein tendered the agreement (a copy of which is annexed to Ms
Bale’s affidavit as support for that proposition (see Ex C
at p 13))
and gave evidence to the Tribunal that she had been trying to get in touch with
Mr Darwiche without success.
- Ms
Bale says that Ms Chyna Schein’s evidence to the Guardianship Tribunal is
inherently plausible because Ms Chyna Schein admitted
that her interest (as the
deceased’s “soon to be ex-wife”) was aligned with that of the
deceased in enjoying some
benefit from the purported share of Kimberley
Development. It is noted that Ms Chyna Schein told the Tribunal that she had had
no
reason to continue to act as the deceased’s carer in his late decline
except for the fact that she had continued to believe
she was entitled to a
portion of the financial benefit from the transaction.
- This
particular (sixth) finding sought by Ms Bale is critical to the alternative
claim brought for breach of contract. There is little
doubt as to the second
limb of the sixth finding for which Ms Bale contends. The transfer of title
document was registered and it
purports on its face to bear the signatures of
both the deceased and Mr Churchill. There was no challenge made as to the
authenticity
of the signature of the deceased on the document (and it is
sufficiently similar to other signatures purportedly of the deceased
to warrant
the conclusion, to the lay observer, that it is his signature); and I so find.
However, the first limb of this sixth finding
is more difficult; not least
because there is no document in evidence that bears the signature of Mr Darwiche
or any person purportedly
on behalf of Kimberley Developments.
- There
is no dispute by Mr Darwiche that he was provided with a proposed (or draft
agreement) to the effect of that on which Ms Bale
here relies (and each of
Arthur and Theo Trigas accept that he also was shown such a document). However,
as referred to above, there
is much dispute as to who provided the document to
whom (and the form it was in when provided to Mr Darwiche and then shown to
Arthur
and Theo Trigas).
- To
repeat the salient evidence, Mr Darwiche gave evidence that: the deceased gave
him the “draft agreement” (see his second
affidavit at [13]),
although he resiled from this in his third affidavit and in oral evidence and
ultimately said that either Mr
Churchill or the deceased gave it to him; and
that the document attached to his affidavit was not the form in which the
document
was given to him (simply being a draft and one of many agreements that
were “floating around”); and Mr Arthur Trigas
made much of the fact
that the document bore underlining.
- I
would comfortably draw the inference that the document that was shown to Mr
Darwiche (and signed by the deceased and Ms Chyna Schein)
did not contain the
handwritten annotations that now appear on the copy annexed to his affidavit
(since, as already noted, the content
of those annotations makes it more than
tolerably clear that they were written after the event). I would also conclude
that the underlining
was not on the document at the time it was provided to Mr
Darwiche or signed by the deceased and Ms Chyna Schein (because this would
be inconsistent with the fact that there was one amendment to the document that
was initialled but the underlining was not so initialled).
- I
would also infer that the document in evidence is a copy of one that was
retained by Ms Chyna Schein, since Ms Bale’s evidence
was that it was
shown to her (for the first time) at NCAT on 11 August 2016. However, that gives
rise to some doubt (as adverted
to above) because, if the agreement was executed
and exchanged in counterparts, one would expect that the deceased and Ms Chyna
Schein
would have retained the copy signed by Mr Darwiche; and Mr Darwiche
would have retained the copy signed by the deceased and Ms Chyna
Schein.
- I
would also draw the inference that the document as signed by the deceased and Ms
Chyna Schein was not understood or intended by
them to be a draft (since it is
not consistent with ordinary practice to sign documents – particularly
going to the trouble
of initialling handwritten amendments thereto – which
are intended only to be draft documents and to have no formal effect).
- The
difficulty I have is that, in the absence of a document signed by
Mr Darwiche, I cannot be satisfied on the balance of probabilities
that
there was any exchange of counterpart contracts in the form of the 21 February
Agreement. The strongest evidence in favour of
the conclusion that there was in
fact such an exchange is the incorporation of Kimberley Developments
(particularly the fact that
there were two classes of shares issued – the
Class A and Class B shares; with Mr Darwiche as the sole director on
incorporation)
which is consistent with an agreement or understanding that the
company was to be established as provided for under the 21 February
Agreement.
- However
(and notwithstanding my serious reservations as to Mr Darwiche’s
credibility), I cannot be sufficiently confident that
signed contracts were in
fact exchanged between Mr Darwiche and the deceased with the intent that they be
contractually binding.
- What
I do, however, comfortably find (on the balance of probabilities) is that Mr
Darwiche persuaded the deceased to sell or transfer
(to the deceased and/or to
Ms Chyna Schein on his behalf) the Forest Lodge Property to Kimberley
Developments on the basis of a representation
to the effect that the property
would be developed in a joint venture along the lines set out in the
21 February Agreement –
since that is the logical explanation both
for the incorporation of Kimberley Developments with the differential
shareholding and
for the understanding expressed by Ms Chyna Schein at the 2016
NCAT hearing (incorrect or otherwise as it may have been) as to the
proportionate shareholding that was to be held by the company that was to carry
out the contemplated development of the property.
In that regard, I do not rely
on the statements made by Ms Chyna Schein to the Tribunal as to the truth of the
matters there deposed
but, rather, as to the fact that she expressed that
understanding to the Tribunal (consistently with the document on which she had
witnessed the deceased’s signature). I address the import of that finding
on the claims here made by Ms Bale in due course.
- Seventh,
Ms Bale contends for a finding that some time after the 21 February
Agreement was signed, Mr Darwiche obtained the funds
to discharge the mortgage
over the Forest Lodge Property and effected the transfer “from the Trigas
brothers and Super Start”.
As to this finding, there is evidence that the
outstanding mortgage amount was paid by Super Start and I so find. I do not
understand
the reference to the “transfer” from the Trigas brothers
and Super Start, as so phrased. Certainly, it is clear that
the shareholding in
Kimberley Developments was transferred to Mr Theo Trigas (and Super Start
obtained funds from the facility secured
over the property).
- Eighth,
Ms Bale seeks a finding that the shares in Kimberley Developments were never
transferred to the deceased in accordance with
the 21 February Agreement. There
is no doubt (and it is not disputed) that no shares in Kimberley Developments
were issued or transferred
to the deceased. The defendants dispute an obligation
to do so. I have recorded above the findings I make as to the alleged 21
February
Agreement.
- Ninth,
that, from time to time Ms Chyna Schein tried to make enquiry of
Mr Darwiche but Mr Darwiche had not spoken to her in a year
and a half
(Ex C at p 28). Insofar as this finding seems to be based on an acceptance
of the truth of what Ms Chyna Schein told NCAT,
I cannot make such a finding. I
note that this was what Ms Chyna Schein told NCAT but she was not available to
be tested on that
evidence. Further, whether or not Mr Darwiche was avoiding
communicating with Ms Chyna Schein would be a matter of no more than
speculation
on the evidence; and I do not consider it appropriate to make any
such finding.
- Tenth,
that the Forest Lodge Property was never developed. There appears to be no
dispute as to this; and I so find.
- Finally,
that the whole transaction was a sham designed by Mr Darwiche to extract
from the deceased a transfer of the Forest Lodge
Property. It is submitted by Ms
Bale that Mr Darwiche knew that the deceased was in failing mental health and
was not in a position
to protect his interests and was under pressure from the
bank to refinance; and knew that the deceased wished to try and develop
the
property and retain an interest in it. It is submitted that Mr Darwiche
tailored a sham transaction that appeared to satisfy
the deceased’s wish
to develop the Forest Lodge Property (and to deal with his issues with the bank
without the deceased having
to give up his entire interest in the Forest Lodge
Property).
- As
to this last finding for which Ms Bale contends, it appears to be inconsistent
with the earlier finding contended for in relation
to entry into the 21 February
Agreement. In other words, if what is contended for is that the whole
transaction was a sham then that
must carry with it the conclusion that Mr
Darwiche never intended to be bound by the 21 February Agreement (and hence
there would
appear to be a difficulty in Ms Bale’s alternative claim based
on a breach of such a contract). As to the deceased’s
mental health and Mr
Darwiche’s awareness thereof, it is clear that the deceased at some point
lost capacity. However, the
point at which his mental health declined is not
clear (and Mr Darwiche’s awareness of this in those circumstances is also
unclear) – see my finding above.
- Turning
then to the claims that are here pressed by Ms Bale, I address each as
follows.
Claims for breach of contract
- Although
the breach of contract claims are in the alternative to the primary claims for
relief against Kimberley Developments and
Mr Darwiche, it is convenient to deal
first with the claims for breach of contract (see [62]-[68] of the pleading),
noting that (as
the defendants point out in their submissions) a substantial
part of Ms Bale’s pleaded case relies on the alleged 21 February
Agreement.
Plaintiff’s submissions
- Ms
Bale submits that the impugned transaction resulted from a proposal by Mr
Darwiche to develop the Forest Lodge Property and contends
that this proposal
was reduced to writing (the 21 February Agreement), which contemplated that, as
consideration for the Forest Lodge
Property being transferred to Kimberley
Developments, the deceased was to receive 60% non-voting Class B shares in
Kimberley Developments
(with Mr Darwiche to retain 40% of the Class B shares and
the discretion to do as he wished with the property; apparently without
any
obligation to account to the deceased). It is noted that under the terms of the
21 February Agreement, the deceased was also
to receive a payment of $590,000,
comprising of the discharge of the outstanding mortgage over the property with
Suncorp and what
was said to be a debt owed to Mr Darwiche for “cleaning
work”.
- Ms
Bale says that the 21 February Agreement contemplates that Mr Darwiche
would develop the Forest Lodge Property in a manner that
would be mutually
beneficial to the deceased and Mr Darwiche through their respective interests in
Kimberley Developments. The complaint
here made is that, although the Forest
Lodge Property was transferred to Kimberley Developments (said to be in
performance of the
21 February Agreement) in February 2011, neither the shares
nor the contemplated payment of money was ever received by the deceased.
It is
said that the only part of the 21 February Agreement with which Kimberley
Developments and Mr Darwiche complied was the payment
out of the mortgage;
and it is noted that no developments or improvements have ever been made to the
Forest Lodge Property.
- Ms
Bale contends that the deceased had been suffering significant mental decline
for some time prior to the transfer and that, by
the time the sale of the Forest
Lodge Property took place in February 2011, the deceased’s mental state
had significantly deteriorated
due to the effects of Alzheimer’s disease.
Reliance is placed in this regard on the deceased’s contemporaneous
medical
records diagnosing the deceased with Alzheimer’s dementia (in that
regard I have noted the objections above and the limits
on that evidence). (Ms
Bale does not now press the issue as to incapacity as such.) It is also noted
that the solicitor that acted
on the sale (Mr Churchill) was not the
deceased’s usual solicitor; and it is said that he acted for all parties
in the transaction.
- In
written submissions it is said that, if the transfer is not set aside on the
basis of unconscionable conduct (with which I deal
below), Ms Bale seeks in the
alternative that the 21 February Agreement be specifically performed;
specifically, that the deceased’s
estate receive the 60% shares promised
in the terms of the 21 February Agreement. (I note that in the amended
statement of claim,
Ms Bale sought a declaration that the plaintiff has validly
rescinded the 21 February Agreement and damages for breach of contract,
but Ms
Bale appears to have withdrawn from this position in written submissions.)
- Ms
Bale submits that the fact that the deceased did not retain a signed copy of the
agreement is no bar to a finding that the 21 February
Agreement represented the
terms upon which the deceased agreed to transfer the Forest Lodge Property to
Kimberley Developments; noting
that acceptance can be inferred from conduct if
that inference is indicated by the objective circumstances (Ms Bale here
referring
to Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd
(1988) 14 NSWLR 523 where Kirby P, as his Honour then was, cited with
approval Brogden v The Directors of the Metropolitan Railway Company
(1877) 2 App Cas 66 at 530).
- Ms
Bale contends for a finding that the parties agreed to transfer the Forest Lodge
Property on the terms as outlined in the 21 February
Agreement because: the 21
February Agreement is signed and dated the same day as the transfer was executed
and registered; the 21
February Agreement contemplated that the Forest Lodge
Property would be transferred to Kimberley Developments, which is what actually
occurred; and there is no competing contract or other written document in
evidence which outlines the basis upon which the Forest
Lodge Property was to be
transferred or the parties’ intentions in this regard. Ms Bale contends
(and I accept the force of
this contention) that the defendants’ version
of the transaction is inherently unbelievable; and says that this strengthens
the probability that the 21 February Agreement reflects the terms upon
which the parties agreed to transfer the Forest Lodge Property.
- Ms
Bale maintains that Kimberley Developments and Mr Darwiche have breached the
contract by not providing 60% of the shares in the
company or providing $590,000
in consideration. It is said that Kimberley Developments has also breached the
contract by encumbering
the Forest Lodge Property to secure a $700,000 loan that
has been forwarded to Super Start. As noted, in written submissions, Ms
Bale
seeks either specific performance of the contract providing the 60% shareholding
in Kimberley Developments or damages. Pausing
here, this submission assumes that
Kimberley Developments was itself a party to the agreement comprised in the
21 February Agreement
(which seems to me to be problematic as I discuss
below).
- In
the further alternative, Ms Bale says that, if it is concluded (as the
defendants claim) that the Forest Lodge Property was simply
purchased for
$590,000, then the only consideration that was received was the removal of the
mortgage over the property in favour
of Suncorp in the amount of $288,242.63. Ms
Bale says that, if it be accepted that the defendants’ asserted cash
payment is
a concoction, then there is a debt owing in the amount of $302,000
plus interest as against Kimberley
Developments.
Defendants’ submissions
- The
defendants deny that Mr Darwiche entered into the 21 February Agreement and say
that all of the causes of action that rely on
the 21 February Agreement
must fail.
- The
defendants’ case, in essence, is that Mr Churchill initially proposed the
21 February Agreement to Mr Darwiche on the deceased’s
behalf but
that Mr Darwiche rejected the proposal; and that, ultimately, there was an
agreement reached between Mr Theo Trigas and
the deceased (who it is said had
been introduced by Mr Darwiche after the deceased expressed an interest to sell
the land to Mr Darwiche),
whereby Kimberley Developments purchased the Forest
Lodge Property for the sum of $590,000.
- The
defendants contend for the following findings on the basis of their evidence:
that the deceased proposed the 21 February Agreement
to Mr Darwiche and
that it was not accepted by Mr Darwiche or the Trigas family and the parties
agreed to a straightforward sale
of the Forest Lodge Property in the form of a
standard form contract for the sale of land; that on 21 February 2011, Mr
Darwiche
and Mr Arthur Trigas drove from Sydney to Woolgoolga to meet with the
deceased, Ms Chyna Schein and Mr Churchill at the deceased’s
(Woolgoolga)
residence; that Mr Arthur Trigas gave the deceased $302,500 in cash and the
contract for the sale of land was executed
as was the transfer; that there was
no separate receipt issued for the cash payment as the purchase amount was
recorded in the contract
for the sale of land and the transfer; that Mr
Churchill retained the contract for the sale of land and arranged for it and the
transfer
to be stamped; and that Super Start discharged the Suncorp mortgage in
the sum of $288,242.63 and paid the stamp duty in the sum
of $22,060.00.
- The
defendants contend that payments were made in accordance with the
deceased’s direction on behalf of Kimberley Developments
by Mr Theo Trigas
(namely, $288,242.63 to Suncorp to discharge the mortgage secured against the
Forest Lodge Property and $302,000
in cash). It is said that the relevant stamp
duty component for the transfer was also paid by Mr Theo Trigas on behalf of
Kimberley
Developments.
- It
is the defendants’ case that the parties agreed to the sale of the Forest
Lodge Property which was memorialised in a standard
form Contract for Sale of
Land and a Transfer of Land (Transfer), which were both signed on
21 February 2011. It is accepted that
there is no copy in evidence of any
such Contract for Sale of Land (and the defendants say that they do not have a
copy of any such
contract). However, reliance is placed on the fact that the
transfer was stamped by the Office of State Revenue with a $10 stamp
and that
the Duties Notice of Assessment refers to an “Agreement for sale of
land”.
- Further,
reliance is placed by the defendants on s 54A of the Conveyancing Act,
which prohibits an action or proceedings brought upon any contract for the sale
or other disposition of land or any interest in
land, unless the agreement upon
which such action or proceedings is brought, or some memorandum or note thereof,
is in writing, and
signed by the party to be charged or by some other person
thereunto lawfully authorised by the party to be charged. The defendants
emphasise that there is no memorandum or note signed by Mr Darwiche, nor anyone
on his behalf; and the defendants submit that the
evidence relied upon by Ms
Bale does not establish that the parties’ conduct evidenced an agreement
to be bound by the 21 February
Agreement, or that there was part performance of
the 21 February Agreement.
- The
defendants say that the absence of an executed copy of the 21 February
Agreement is relevant for two reasons: first, that it is
consistent with the
defendants’ case that, although proposed by the deceased or
Mr Churchill to Mr Darwiche, it was rejected
(and the parties entered into
a standard Contract for the Sale of Land); and, second, having regard to the
operation of s 54A of the Conveyancing Act.
- The
defendants emphasise that, in the absence of a duly executed agreement, in order
to succeed on the contract claim Ms Bale must
establish that the parties
considered themselves bound by the 21 February Agreement and that it is not
enough to establish conduct
consistent with what are alleged to be the terms of
the alleged binding agreement (the defendants here referring to Francis
Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321 at [77]
per Robb J; Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd
[2009] FCA 499 at [39]- [40] per Sundberg J).
- It
is noted that, in opening submissions, Ms Bale submitted that the
21 February Agreement provided, inter alia, that the Forest Lodge
Property was to be transferred by the deceased to Kimberley Developments in
return for 60% of Class B non-voting
shares in the company (citing cl 4.1) and
$590,000 (citing cl 26) (as summarised above); but that in closing submissions
Ms Bale
contends for a finding that the deceased received no money for the
transaction and that this was consistent with the terms of the
21 February
Agreement.
- The
defendants say that the contention that the 21 February Agreement did not
provide for the payment of money to the deceased in
exchange for the Forest
Lodge Property is inconsistent with the terms of the 21 February Agreement for
the following reasons.
- First,
that the 21 February Agreement unequivocally states that a separate contract for
the sale of land would be entered into by
the parties. The defendants say that
it should be inferred that a standard contract for the sale of land ordinarily
acknowledges
the payment of monetary consideration by the purchaser to the
vendor.
- Second,
that the 21 February Agreement records that: the parties agreed on a purchase
price of $590,000 “based on a listing
by A Licensed Real Estate agent for
$600,000” and agreed that the Forest Lodge Property would be sold by the
deceased to Kimberley
Developments for $590,000; and the deceased acknowledged
receipt of the sum of $590,000 for the sale of the Forest Lodge Property
comprising of the discharge of the outstanding mortgage, the shareholding in
Kimberley Developments and for settlement of moneys
owed to Mr Darwiche in
respect of the clean-up and improvement of the Forest Lodge Property and other
services. Therefore, it is
submitted that the 21 February Agreement itself
is ambiguous as to whether or not there would be a monetary component paid to
the
deceased.
- The
defendants say that Ms Bale does not point to any other evidence that
establishes that the defendants acted in a manner that positively
indicates that
they considered themselves to be bound by the Agreement. It is noted that
Kimberley Developments was incorporated
on 9 February 2011, whereas the 21
February Agreement is dated 21 February 2011; and (though it seems to me that
the following matters
are equally consistent with a submission that there was a
breach of the agreement) that there was no transfer of shares (cl 4.1),
there were no steps taken towards a joint development (cl 5), there were no
dividends paid (cll 14-15) and there was no replacement
finance arranged (cll 21
and 23).
- The
defendants argue that there is evidence that the parties, and in particular the
deceased, acted in a manner that was inconsistent
with the terms of the 21
February Agreement, pointing to cl 31 (which it is said envisages that
Ms Chyna Schein would sign the documents
on the deceased’s behalf)
and noting that neither the 21 February Agreement nor the transfer was signed by
Ms Chyna Schein
pursuant to the power of attorney granted to her on 3 June 2008;
rather, both documents were signed by the deceased in his own capacity
and
witnessed by Ms Chyna Schein.
- The
defendants say that there are further reasons for their own evidence to be
preferred on this issue, referring in this regard to
the Duties Notice of
Assessment (Ex 9) and to the failure to complain.
- As
to the former, it is noted that the Duties Notice of Assessment records the
document type as “Agreement for sale of land”
with an execution date
of 21 February 2011 and a dutiable amount of $590,000. The duty assessed
was $22,060 (comprising $22,040 and
$10 for a duplicate; and $10 for the
transfer). The duties assessment number (6177289-001) corresponds with the
handwritten number
on the transfer.
- The
defendants say that the transfer could not have been stamped with a
$10 stamp unless the agreement which contemplates that transfer
was stamped
with ad valorem duty, noting that it is essential that the agreement was
“entered into” for it to be a dutiable transaction. The defendants
say that the presumption of regularity applies where some action has been taken
which depends for its validity on the completion
of prior formalities. It is
submitted that, in the absence of evidence to the contrary, it can be presumed
that there was compliance
with the formalities. It is the defendants’ case
that the document that was in fact stamped with ad valorem duty was a
Contract for Sale of Land executed by the parties on 21 February 2011, which
settled on 24 February 2011. It is noted
that the ad valorem duty payable
on $590,000 as at 22 February 2011 was $22,040 (and that this accords with what
is recorded on Ex 11).
- I
interpose to note that the presumption of regularity applies only where what is
in question is compliance with formal requirements;
it cannot be invoked to
determine a substantive issue, such as the existence or terms of a missing
contract (see Chase v Chase [2020] NSWSC 1689 at [34]- [35] per Rein J,
where the presumption was held to be inapplicable to prove the existence and
terms of a trust deed; see also Twigg v Twigg [2022] NSWCA 68 at [26] per
Brereton JA (with whom Bell CJ and Payne JA agreed); Burnside v Mulgrew; Re
the Estate of Grabrovaz [2007] NSWSC 550 at [25] per Brereton J (as his
Honour then was)). Accordingly, I do not accept that the defendants can rely on
the presumption of regularity
to compensate for the paucity of evidence as to
the contract.
- The
defendants say that the agreement on which Ms Bale relies (the 21 February
Agreement) cannot on any view have been stamped; and
that if counterparts of
that contract had been exchanged (as contemplated by the 21 February
Agreement) the copy stamped would have
to have been the copy signed by the
deceased. It is noted that Ms Bale has not adduced a stamped copy of the 21
February Agreement.
- The
defendants say that the reference on the Duties Notice of Assessment to the
document type as “Agreement for sale of land”
also supports a
finding that the 21 February Agreement was not stamped and they seek an
inference that the 21 February Agreement
would not have been described in that
way. The defendants accept that they have been unable to locate a copy of a
Contract for Sale
of Land executed on 21 February 2011. They say that the
evidence is that it was retained by Mr Churchill and that, despite the
defendants
attempting to obtain a copy, nothing has been produced.
- The
Duties Notice of Assessment recorded that Kimberley Developments was liable to
pay the sum of $22,060 which was due on 3 March
2011. The defendants say
that the evidence establishes that the sum of $22,060 was paid out of the Super
Start NAB Business Cheque
account on 24 February 2011, as authorised by Mr Theo
Trigas.
- The
defendants further say that if the parties had entered into the 21 February
Agreement (which they accept essentially provides
for a joint venture), there
would have been no need to transfer the Forest Lodge Property to Kimberley
Developments and thereby incur
an obligation to pay stamp duty.
- The
defendants thus maintain that Ms Bale’s case fails to engage with the
Duties Notice of Assessment. It is noted that the
proposition put to
Mr Darwiche in cross-examination that the 21 February Agreement was signed
at the same time as the transfer and
that he obtained a copy of the transfer,
and registered it, ignores the fact that the transfer could not have been
stamped unless
the agreement which contemplates that transfer was stamped with
ad valorem duty. The defendants say that Ms Bale has not explained how it
came to be that the transfer was stamped (assuming that the 21 February
Agreement was in fact the operative agreement as between the parties).
- As
to the submission based on the failure to complain, reference is made to the
observations by Sackar J in Sybil Dawne Hintze v Ratna Tsering [2018]
NSWSC 1190 at [58] ff. Emphasis is placed on the absence of any complaint from
the deceased or Ms Chyna Schein (or anyone else) that the defendants
failed to
comply with their obligations under the 21 February Agreement. It is said that
the probative value of that failure to complain
is significantly enhanced by the
following: that the 21 February Agreement was dated 21 February 2011 (some
seven years before the
present proceeding) and at the latest, on her own
evidence, Ms Bale became aware of the existence of the 21 February Agreement on
11 August 2016; that the deceased lived with Ms Bale from 2015 until his death
in early 2021 (though I interpose here to note that
for at least part of that
period it is likely that the deceased’s mental capacity had declined
considerably); that Ms Bale
attended the Forest Lodge Property in October 2016
and spoke to Mr Moore when she was informed by him that Mr Darwiche was his
landlord
and that Ms Bale was subsequently informed by Mr Andreacchio that
the Forest Lodge Property was going to be sold in October 2016
and she should
place a caveat on it; and that Ms Chyna Schein was aware of and involved in the
transaction (having witnessed the
deceased’s signature on the transfer).
It is submitted that, in circumstances where, on Ms Bale’s own evidence,
Ms Bale
was concerned with Ms Chyna Schein’s intentions regarding the
deceased’s assets and finances, the absence of any complaint
from Ms Chyna
Schein is most telling.
- Further,
it is noted that (as at 2011) the deceased had recently completed the Summer
Hill development. It is said that the deceased
was experienced and familiar with
what was involved in that development and that this experience makes his failure
to complain about
the fact that the defendants had not taken any steps to
transfer the shares in Kimberley Developments or to develop the Forest Lodge
Property even more relevant.
- The
defendants say that, even if it is accepted that Ms Bale only became aware of
the transfer in August 2016, Ms Bale has not adduced
any evidence of any steps
she took to ascertain what benefit the deceased had received for entering into
the Agreement. It is submitted
that this is telling in light of the fact that
the deceased lived with Ms Bale between 2015 and his death in early 2021, the
defendants
pointing to the fact that Ms Bale does not refer to any conversation
that she had with the deceased about the sale of the Forest
Lodge Property; nor
as to any conversations she had with Mr Moore or Mr Andreacchio on the
issue.
- Reference
is made in this context to Gray v Coles Supermarkets Australia Pty Ltd; Coles
Supermarkets Australia Pty Ltd v Chandler Macleod Group Ltd [2020] NSWCA 209
at [123] per Adamson J as to the availability of an inference from an
unexplained failure to adduce evidence (the Court of Appeal there citing
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd
(1991) 22 NSWLR 389 at 418 (per Handley JA)). The defendants say that such an
inference should be drawn even more readily in circumstances where the
very
person who could have been expected to give such evidence (Ms Bale, who was
reunited with the deceased in 2015) failed to adduce
any such evidence.
- The
difficulty with the above submission is that I am not satisfied that the
deceased was or would have been capable of giving Ms
Bale any relevant
information about the transaction in the period from 2015/2016 (even accepting
that Pastor Vaughan’s observations
at the time the deceased left
Woolgoolga suggested some awareness on the part of the deceased as to his social
situation); and the
position in that regard would unarguably have worsened as
the deceased’s cognitive ability deteriorated (as it is beyond question
it
did in the period prior to his admission to a nursing home and eventual death).
Relevantly, Ms Bale’s evidence was that
she had questioned the deceased
about the matter (after she first learnt about the 21 February Agreement at the
NCAT hearing in 2016)
and that the deceased had no recollection of Kimberley
Developments or Mr Darwiche. For the same reason I draw nothing from the lack
of
evidence from Ms Bale as to any discussion with the deceased in the period of
five years that the deceased lived with her as to
the subject transaction or any
complaint about the transaction (that being a matter that the defendants say
weighs heavily against
a finding that the parties entered into the 21 February
Agreement). Even more problematic is the submission by the defendants that
Ms
Bale failed to adduce any evidence from the deceased himself during the period
that the proceeding was on foot (it being commenced
in 2018) and before his
death in early 2021.
- The
defendants also point to the evidence of Mr Andreacchio as to his awareness of
the sale and transfer of the Forest Lodge Property
pursuant to the
21 February Agreement and that he continued to speak to Mr Darwiche
“every few weeks” in the period February
2011 until 2 June 2014 and
note that Mr Andreacchio did not give any evidence as to any complaint by the
deceased or anyone on his
behalf that he could have communicated to
Mr Darwiche about any obligations under the 21 February Agreement that were
not being fulfilled.
Again, this suffers from the assumption that the deceased
was capable and in communication with Mr Andreacchio in the relevant
period.
- Further,
the defendants say that the deceased (before his death) and Ms Bale were in the
possession of the defendants’ evidence
about the cash payment for a
considerable period of time. In that regard, it must be borne in mind that the
proceeding was commenced
in 2018 but the defendants’ evidence was not
served until 21 February 2019. Therefore, the window of opportunity (if there
was indeed one at all) for Ms Bale to ascertain information from the deceased as
to the alleged cash transaction was small.
- Nevertheless,
the defendants submit (on the basis of the above matters) that it should be
inferred that: the deceased’s evidence
would not have assisted Ms Bale on
the issue as to whether the 21 February Agreement was the instrument that
memorialised the sale
of the Forest Lodge Property; the evidence of the
deceased, Mr Moore and Mr Andreacchio would not have assisted Ms Bale on the
issue
of what benefits the deceased did or did not receive as a result of the
sale of the Forest Lodge Property; and the deceased’s
evidence would not
have assisted on the issue of whether or not he received the cash payment. I
cannot comfortably draw any such
inference in circumstances where, on any view
of things, as the deceased’s life came to an end he was suffering from
cognitive
disability and where I accept Ms Bale’s evidence that she made
enquiry of the deceased about the transaction after she became
aware of the 21
February Agreement, and he was unable to provide any information.
- The
defendants submit (contrary to Ms Bale’s submission that Mr Darwiche,
with the help of Mr Churchill, put together the 21
February Agreement) that it
is more than likely that Mr Churchill drafted the 21 February Agreement, but
they deny that it was done
on Mr Darwiche’s instructions. It is submitted
that the unusual benefits conferred on Mr Churchill by cll 24-25 (which the
defendants accept are drafted to provide Mr Churchill with a significant
advantage for his role in the transaction) strongly suggest
that
Mr Churchill drafted the 21 February Agreement. I have already made
findings in this regard. I think it most unlikely that this
document was drafted
by a lawyer (or at least by a lawyer with even a passable degree of competence)
but I accept that it is likely
that Mr Churchill had input into the drafting of
the document (having regard to the clauses that operate in his interest).
- Where
I differ from the defendants’ conclusions as to the document is that the
defendants maintain that the terms of the 21
February Agreement strongly suggest
that the document was more likely drafted by Mr Churchill on the
deceased’s instructions
than on Mr Darwiche’s instructions. I
disagree.
- In
support of their conclusion, the defendants point to the following matters.
- First,
that the 21 February Agreement includes references to information that was in
the deceased’s exclusive knowledge, including
that the parties agreed on a
purchase price of $590,000 “based on a listing by A Licensed Real Estate
agent for $600,000 ...
[which] was not able to obtain any acceptable offers
...”. The defendants submit that it should be inferred that this was a
reference to the attempts by Mr Andreacchio to sell the Forest Lodge Property in
2010, after the unsuccessful auction in 2009. It
is said that while
Mr Darwiche knew about Mr Moore’s highest bid of $650,000 at the 2009
auction, he did not know that Mr Andreacchio
had subsequently advertised the
Forest Lodge Property for sale for $600,000.
- The
difficulty I have with this submission (apart from the fact that I can place no
weight on Mr Darwiche’s account of events,
having regard to my conclusions
as to his credibility as a witness) is that Mr Andreacchio and Mr Darwiche
were in communication
during the period in which it is said that the Forest
Lodge Property was subsequently advertised for sale for $600,000; and if in
fact
the sale was so advertised it is perfectly plausible that Mr Andreacchio
would have communicated this to Mr Darwiche. Therefore,
I cannot assume that
this was knowledge exclusive to the deceased (even apart from the fact that it
is more likely that any listing
at this price was on instructions from Ms Chyna
Schein and/or Mr Mohr, since they were directly involved in the setting of the
reserve
for the unsuccessful 2009 auction and were providing instructions as to
the distribution of rental from the property; not the deceased).
- Second,
that the proposed development of the Forest Lodge Property was an idea that was
being “floated” by the deceased
and/or Ms Chyna Schein. It is said
that Mr Andreacchio’s evidence confirms that steps were taken in relation
to the proposed
development including that $15,000 was provided to him on behalf
of the deceased to conduct a feasibility study. I note that
Mr
Andreacchio’s evidence is that he quoted to Ms Chyna Schein and Mr
Max Mohr an amount of $15,000 to complete the study (T 153.1-153.10)
and that Ms
Chyna Schein sent $15,000 to Mr Andreacchio in September 2010 (see Mr
Andreacchio’s second affidavit at [27]).
Further, Mr Andreacchio is
emphatic in his evidence that the deceased was disinterested in his affairs from
2009 and would tell
Mr Andreacchio “just [to] do what Chyna
says” (see his second affidavit at [20]-[21]). Thus, while it is possible
that
the idea was “floated” by Ms Chyna Schein, Mr
Andreacchio’s evidence undermines the defendants’ submission
that
the idea was “floated” by the deceased.
- There
was certainly evidence suggesting that the development potential for the Forest
Lodge Property was a matter of some consideration
by various people (not simply
the deceased and/or Ms Chyna Schein) at the time; and Mr Andreacchio did
pay for a feasibility study
at the time. However, as noted earlier, Mr Churchill
also seems to have been copied into at least one of Mr Zounis’
communications
in relation to a proposed development. Therefore, little can be
drawn as to the authorship of the 21 February Agreement from the
fact that it
contemplated a proposed development of the property. It is certainly not clear
whose idea it was to canvas the development
potential of the property.
- Third,
that the reference in cl 32 to the deceased being in default of the mortgage
with Suncorp who were to take possession of the
Forest Lodge Property was a
matter that was exclusively in the deceased’s knowledge. Again, I cavil
with the proposition that
this was a matter exclusively within the
deceased’s knowledge. Ms Bale’s evidence suggests that, from around
the time
of the deceased’s marriage to Ms Chyna Schein, Mr Mohr was going
through the deceased’s “paperwork” (the
timing of which is
corroborated to an extent by the complaints recorded by others as having been
made by Ms Bale at the time). Moreover,
Ms Chyna Schein held the
deceased’s power of attorney from 3 June 2008 and it is clear from Mr
Hancock’s letter of 13
June 2008 that he had accepted that he was
instructed to communicate with Ms Chyna Schein (as indeed Ms Bale had
directed Suncorp
to do at around this time). Therefore, knowledge of default
notices or the like from Suncorp would almost certainly have come to
Ms Chyna
Schein and it is not much of a stretch to infer that it would also have come to
Mr Churchill’s attention. Certainly,
I cannot conclude that his was a
matter exclusively within the deceased’s knowledge.
- Fourth,
that the 21 February Agreement included terms that were beneficial to the
deceased, reference being made by way of example
to cl 28 (which, as noted
earlier, provided that the deceased requested a waiver of immediate payment of
the items which are normally
paid up to and including the date of settlement and
requested that Mr Darwiche and Kimberley Developments assist him by delaying
in
calling upon such contributions). It is said that, had Mr Darwiche proposed the
terms of the 21 February Agreement to the deceased,
the inclusion of those terms
would have been unnecessary and burdensome on Mr Darwiche. I accept that cl 28,
on its face, was to
the advantage of the deceased. However, it might also have
been seen to operate in Mr Darwiche’s favour if what he was seeking
was an
immediate transfer of, and control over, the Forest Lodge Property and deferral
of such contributions was one way of making
the “deal” more
attractive to the deceased (particularly at a time when the deceased was under
financial pressure). Therefore,
I cannot simply assume that clauses of this kind
point to the document having been drafted on the deceased’s instructions.
Moreover, a clause such as this stands in stark contrast to the clauses in
favour of Mr Darwiche himself (not least the clauses providing
for him to be
credited with all expenses made in relation to the proposed development and as
to what was to happen if the proposed
development did not proceed).
- Thus,
I am not persuaded that the finding sought by the defendants (that
Mr Churchill drafted the 21 February Agreement on the deceased’s
instructions) should be made. I have concluded (as noted earlier) that on the
balance of probabilities it is most likely that Mr
Darwiche was responsible for
the drafting or instructions for the drafting of the 21 February Agreement, with
input from Mr Churchill
(not the deceased).
- As
to the submission by Ms Bale that there should be a finding that there was no
cash payment made to the deceased (and that this
in turn is evidence of the
parties’ intention to be bound by the 21 February Agreement), the
defendants contend for a finding
that the cash payment was made to the deceased
as described in the defendants’ evidence.
- The
defendants say that there is contemporaneous and objective evidence that
supports a finding that the cash payment was in fact
made to the deceased (here
pointing to the transfer that was registered in respect of the sale); and point
to the absence of any
evidence in Ms Bale’s case that the deceased did not
receive the cash payment to refute the defendants’ affidavit evidence
(including the lack of evidence of any conversation with the deceased to
ascertain whether he accepted or denied that the cash payment
had in fact been
made – as to which I have already commented above).
- The
defendants cavil with the submission by Ms Bale that there was no record of the
cash transaction. The defendants maintain that
there was such a record (namely,
the contract for the sale of land albeit that it now cannot be located) and the
transfer. As to
the defendants’ reliance on the first of those matters
(the contract for the sale of land), a missing document can hardly be
said to be
a record of any transaction – reliance on such a document begs the
question as to whether there was any such document
at all (and, if so, what were
its terms). Indeed, this is a matter on which Mr Churchill’s evidence
could be expected to have
shed light (and on which a Jones v Dunkel
inference would be available to be drawn to the effect that nothing
Mr Churchill could have said would have assisted the defendants’
case
in this regard).
- The
defendants’ reliance on the registered transfer is of more assistance to
their contention on this issue. The defendants
say that the transfer has
significant probative value, noting that it was signed by the deceased and
stamped by the Office of State
Revenue and that it records as consideration that
“[t]he transferor acknowledges receipt of the consideration of
$590,000”.
Reference is made to the decision of Brereton J (as his Honour
then was) in Talevski v Talevski [2007] NSWSC 945 at [20]- [22], in which
his Honour emphasised the significance of an acknowledgment of receipt of
consideration in a registered transfer, stating
that a fundamental purpose of
documents of record (such as conveyances and transfers) is “to create a
formal record for the
future of important aspects of transactions in order to
minimise scope for later disputation” and that “particularly
with
the passage of time, a court should not easily be persuaded to disregard as
inaccurate such formal matters of record”.
- The
defendants say that the following matters are also relevant to the weight to be
attached to the transfer and the absence of any
evidence of complaint from
anyone until now: the requirement, if a registered proprietor intends to
transfer land, to execute a transfer
in the approved form; the requirement that
the Registrar-General not register a transfer except in the manner provided by
the Real Property Act 1900 (NSW) (Real Property Act); the fact
that the Registrar-General may refuse to register or reject a transfer if it is
not accompanied by a “fully completed”
notice in the approved form
(which notice is taken to accompany the transfer if before presentation of the
transfer the notice is
lodged electronically in a form and in the manner
approved by the Registrar-General); that a transfer form, until registered in
the
manner provided in the Real Property Act, does not have the effect of
transferring the land; that, after the registration of the transfer, except in
the case of fraud, the
land is held free from unregistered interests; and that,
upon registration, a dealing has the effect of a deed duly executed by the
parties who signed it.
- The
defendants place significance on the fact that Ms Bale does not challenge the
evidentiary value of the transfer but merely submits
that there is no
documentation to support the alleged cash transaction. The defendants submit
that significant weight should be given
to the transfer and to the
deceased’s unequivocal acknowledgement of the receipt of the consideration
of $590,000.
- Insofar
as Ms Bale also submits that the contract for the sale of land was the only
alleged paper evidence of the validity of the
purchase of the Forest Lodge
Property, the defendants say that this ignores the existence, and the probative
value, of the transfer.
The defendants maintain that the transfer provides
objective support for the defendants’ case that it was signed at the time
that the cash payment was made to the deceased (and that their evidence was also
consistent on this issue).
- I
accept that caution must be exercised before an acknowledgement of the kind
contained in the registered transfer is disregarded
or treated as inaccurate.
However, it is also worth noting that the specification on the transfer of
consideration in the sum of
$590,000 is not inconsistent with the manner in
which the 21 February Agreement was drafted (see cl 30); i.e., it is not
inconsistent
with the intention of the parties being that a value of $590,000
would be expressed as consideration (on the contemplated contract
for sale of
land to be signed at the same time and, presumably, on the formal transfer) but
that this was to be comprised of the
components there set out (discharge of the
outstanding mortgage, issue of shares in the company that it was contemplated
would carry
out the development, and discharge of the amount stated to be owing
to Mr Darwiche for the cleaning up of the property). It is not
unheard of for a
transfer to acknowledge consideration in a nominated amount where such
consideration has been taken to be satisfied
other than by a monetary payment
(see, for example, though I accept in a very different context, as was said to
be the case in Cong v Shen [2021] NSWSC 1206). Moreover, insofar as the
purpose recognised by Brereton J in Talevski v Talevski was to create a
formal record to minimise scope for later disputation, that purpose would surely
give way where a case of equitable
fraud is raised (as is the case here).
- The
defendants query why they would concoct the “cash transaction story”
(see Ms Bale’s closing submissions) if
Mr Darwiche in fact proposed the
21 February Agreement to the deceased. It is submitted that it does not
make sense that the defendants
would include the amount of $590,000 in the
21 February Agreement, and on the transfer, if there was never an intention
to make any
cash payment to the deceased. The defendants say that, on
Ms Bale’s case, the terms of the 21 February Agreement could have
been limited to the transfer of shares in Kimberley Developments and the
discharge of the mortgage in exchange for the transfer of
the Forest Lodge
Property to Kimberley Developments; and that stamp duty would then have been
paid on a valuation of the Forest Lodge
Property. It is said that there was no
utility in referring to the sum of $590,000 in the 21 February Agreement or
the transfer.
- In
this regard, the defendants point out that, if the consideration payable for the
transfer was non-monetary (as is suggested by
Ms Bale), a valuation of the
Forest Lodge Property would have been required by the Office of State Revenue,
resulting in added complexity
and probable delay. It is submitted that there was
a real and imminent risk (see the email dated 18 January 2011 from Suncorp)
that
Suncorp would take steps to exercise its power of sale or foreclosure
pursuant to its mortgage of the Forest Lodge Property if the
debt was not
discharged in full by 14 February 2011 (and hence the perceived disadvantage of
any delay arising from a non-monetary
consideration).
- To
my mind, this simply makes more plausible the scenario that the monetary amount
was specified on the transfer (and perhaps on any
contract for sale of land that
was prepared but is now missing), so as to facilitate the stamping of the
contract and transfer (and
the registration of the transfer) but that the
parties were proceeding on the basis outlined in the 21 February Agreement
(namely,
that the consideration was to be treated as comprised of the components
referred to above, including the issue of shares in Kimberley
Developments).
- Thus,
I cannot accept that the above matters warrant a finding that there was a cash
payment made to the deceased (as the defendants
contend). There is simply no
objective record of such a cash payment being made (no withdrawal of funds from
a bank – it being
said to have been taken in cash from a safe; no deposit
of funds into any bank account of the deceased; and no receipt having been
issued, as such). The implausibility of a large sum of cash being taken from Mr
Marinos Trigas’ safe, wrapped in bundles (as
graphically described in the
defendants’ evidence, which suggested some familiarity with such cash
transactions), and driven
some distance to be handed over in such an unorthodox
conveyancing transaction as is here described (and without any contract for
sale
of land apparently being retained by any of the parties – seemingly, on
the hearsay evidence, having simply been “lost”
by the solicitor
acting on the transaction), taken with the serious reservations I have as to the
credibility of the defendants,
means that I cannot accept the defendants’
explanation of events. This is another issue on which Mr Churchill’s
evidence
could have shed light (and again an issue on which a Jones v
Dunkel inference would be available to be drawn, that such evidence would
not have assisted the defendants’ case). In any event, it
is not necessary
to resort to such an inference, because I am simply not satisfied to the
requisite degree of satisfaction that there
was any cash payment made on 21
February 2011.
- The
defendants further say that there should be a finding that, as at March 2010,
the deceased was prepared to accept $600,000 for
the Forest Lodge Property
(relying upon the document obtained on subpoena from Mr Andreacchio’s
files in which there appears
to be an advertisement for sale of the property in
that amount. The defendants say that Mr Andreacchio’s explanation
regarding
the typographical errors on the advertisement for the Forest Lodge
Property (i.e., that he maintained was an advertisement for the
lease of the
property) should not be accepted. First, it is said that there was no need for
the property to be advertised for lease
as Mr Moore remained a tenant throughout
the period that Mr Andreacchio managed the Forest Lodge Property. (However, the
copy of
the lease in evidence indicated that it was for a term of one year
expiring in early 2010, which is not inconsistent with an advertisement
of the
property for lease at around that time). Second, it is said that Mr
Andreacchio’s explanation regarding the “total
misprint” of
the inclusion of a price guide of $600,000 is implausible in light of the other
references on the document to
the land size. It is noted that Mr Andreacchio
also did not provide any explanation for the inclusion of the words
“Inspect
Saturday 10.30am, auction at 11am”, other than that was an
additional typographical error. I accept that those references on
the document
are not consistent with it being referable to a proposed lease. However, it is
not inconceivable that it was a document
adapted from the advertisement for sale
of the property prior to the 2009 auction (consistent with Mr
Andreacchio’s explanation
of typographical error); and it is not suggested
that there was any further auction scheduled after the earlier unsuccessful 2009
auction. Therefore, the significance of this document to my mind is moot.
- Moreover,
if the document represented a preparedness on the part of the deceased to accept
the sum of $600,000 for the Forest Lodge
Property at some time in 2010, this
does not explain why there would have been no attempt to renew the offer from Mr
Moore (bearing
in mind that he apparently also had a first option over the
property).
- The
defendants point to the fact that (as is not disputed) in the period leading up
to 2011, the deceased had been involved in a development
of townhouses on the
Summer Hill land, and that there had been numerous issues with that development,
which had cost the deceased
a substantial sum of money. It is noted that
Suncorp had provided at least $4,400,000 secured against the development and the
Forest
Lodge Property; and the defendants say that the position in early 2011
was that: the deceased was unable to pay what was owing to
Suncorp (by the time
of the sale of the Forest Lodge Property this being in excess of $285,000); the
deceased’s business had
closed; and the deceased had sold the family home
in Gordon. It is not disputed that the Forest Lodge Property was the last
remaining
piece of real property that the deceased owned (though I note that it
was rented at the time). (Thus, the defendants maintain that
the transaction for
the sale of the Forest Lodge Property was not improvident at the time.) The
defendants note that it is not in
dispute that Mr Theo Trigas discharged the
mortgage owing over the Forest Lodge Property by making a payment to Suncorp in
the sum
of $288,242.63.
- As
to the above matters, there is difficulty in my opinion in ascribing any logical
explanation to a transaction as unorthodox as
that which the defendants contend
here occurred; and I pause to note that the financial difficulties of the
deceased at the time
simply highlight the special disadvantage under which he
was labouring (see in due course below the consideration of the unconscionable
conduct claims).
- The
defendants rely in defence of the claims for breach of contract on s 54A of the
Conveyancing Act (which prohibits an action or proceedings brought upon
any contract for the sale or other disposition of land or any interest in land,
unless the agreement upon which such action or proceedings is brought, or some
memorandum or note thereof, is in writing, and signed
by the party to be charged
or by some other person thereunto lawfully authorised by the party to be
charged). In this regard, the
defendants note that there is no such memorandum
or note signed by Mr Darwiche, nor anyone on his behalf, in relation to the
alleged
21 February Agreement (and that this is accepted by Ms Bale, who does
not plead otherwise).
- Reference
is made to Phung v Phung [2019] NSWSC 117 (at [59]; [62]-[63]) where
Darke J considered part performance in circumstances where there was no note or
memorandum to satisfy
s 54A of the Conveyancing Act. His Honour there
noted that acts relied upon as part performance “must be unequivocally,
and in their own nature referable
to some such agreement as that alleged”,
citing, inter alia, Pipikos v Trayans (2018) 265 CLR 522; [2018]
HCA 39 where Kiefel CJ, Bell, Gageler and Keane JJ (at [49]) noted that
“unequivocal referability is concerned with the proof of acts
partially
executing a transaction that remains uncompleted, and that proof of the
agreement that had been made was not required to
show the equity to have the
transaction completed” and (at [54]) that “[t]he equity to have the
transaction completed
arises where the acts that are proved are consistent only
with partial performance of a transaction of the same nature as that which
the
plaintiff seeks to have completed by specific performance”.
- The
defendants say that Ms Bale has failed to establish that there has been part
performance of the 21 February Agreement and therefore
that s 54A provides a
complete defence to her claim.
- The
defendants further plead that Ms Bale’s claims for breach of contract are
not maintainable as they have been brought after
the expiration of a limitation
period of six years, relying on ss 14 and 23 of the Limitation Act 1969
(NSW). It is noted that the 21 February Agreement provided that the
transfer of shares in Kimberley Developments would occur upon the signing
of the
21 February Agreement, on the signing of the agreement for the sale of land and
on the signing of the Transfer. The defendants
say that the signing of the
contract for the sale of land and the Transfer occurred on 21 February 2011.
Accordingly, it is submitted
that any claims arising out of the 21 February
Agreement should have been commenced prior to 21 February 2017.
- Insofar
as Ms Bale asserts that the deceased was under a relevant disability for the
purposes of s 52 of the Limitation Act (which provides that where a
limitation period has commenced to run and the person having the cause of action
is “under a disability”,
the running of that limitation period is
“suspended” for the duration of the disability), the defendants
refer to Mclaughlin v Burrows [2021] NSWCA 170 in this context. There (at
[15]), it was said that “[a] person is ‘under a disability’ if
the person is for a period
of 28 days or more ‘incapable of, or
substantially impeded in, the management of his or her affairs in relation to
the cause
of action in respect of the limitation period for which the question
arises’, by reason of ‘any disease or any impairment
of his or her
physical or mental condition’” (see s 11(3)(b)).
- Reference
is made by the defendants to Guthrie v Spence (2009) 78 NSWLR 225; [2009]
NSWCA 369 where Campbell JA (with whom Basten JA and Handley AJA agreed) said
(at [152]) that there needs to be “an impediment that has
interfered with
the ability of the plaintiff to commence the action within time to an extent
sufficient to warrant the suspension
of the limitation period” and (at
[140]) that “[i]n a general sense, managing one’s affairs in
relation to a particular
cause of action includes doing the various things that
would need to be done if that cause of action were to be dealt with”,
including “seeking advice about whether a civil remedy exists for some
perceived wrong, seeking advice about the difficulties,
risks, cost and effort
involved in pursuing any such remedy and the likely returns, comprehending and
evaluating that advice, and,
if the decision to commence proceedings is taken,
thereafter engaging in the continuing process of co-operation, interaction and
decision-making that exists between lawyer and client in running any civil
action”.
- The
defendants say that there is no evidence at all to establish that the deceased
was incapable of, or substantially impeded in,
the management of his affairs in
relation to the causes of action the subject of the present proceeding at the
relevant time. It
is noted that the deceased was living with Ms Bale during the
period that the limitation period expired. The defendants say that
the absence
of evidence from Ms Bale or from medical experts on this issue is fatal to
reliance on s 52 of the Limitation Act.
- By
her reply (filed in court on 3 September 2021), Ms Bale pleads reliance on ss 16
and 36 of the Limitation Act (on the basis that the action is founded on
a deed and that the claim is to enforce an equitable estate or interest in land,
respectively).
The defendants’ response to this is as follows.
- First,
as to the proposition that the 21 February Agreement is a deed, reference is
made to the observations by Darke J in Realm Resources Ltd v Aurora Place
Investments Pty Ltd [2019] NSWSC 379 (from [48]-[49]; [70]-[72]) as to
whether an instrument is a deed (his Honour there referring to what was said in
B Edgeworth, Butt’s Land Law (7th ed, 2017, Lawbook Co) at [12.350]
and 400 George Street (Qld) Pty Ltd v BG International Ltd [2010]
2 Qd R 302; [2010] QCA 245 at [32]).
- The
defendants submit that the 21 February Agreement is not a deed for the purposes
of s 16 of the Limitation Act. It is submitted that the language
used throughout the 21 February Agreement is inconsistent with the document
being construed as a
deed. The defendants note that the document is called an
“Agreement”, that it provides for consideration to pass between
the
parties and that it does not contain the words “signed, sealed and
delivered” in the execution block or anywhere
else in the document.
Further, it is noted that the 21 February Agreement provided that “this
Agreement shall be [of] no force
and effect until the counterparts are
exchanged”. It is submitted that this clause evinces an intention by the
party executing
the 21 February Agreement not to be bound immediately.
- Second,
as to the proposition that the claim is for an equitable estate or interest in
the land, the defendants complain that Ms Bale
has not articulated how her claim
is a cause of action for an equitable estate or interest in land. (I refer
below to Ms Bale’s
submissions in response to this.)
Reply
submissions
- In
reply submissions, Ms Bale confirmed that her case (as to the question of no
consideration or no adequate consideration for the
transfer) is that the
defendants did not provide the deceased with a 60% shareholding in Kimberley
Developments, or develop the Forest
Lodge Property, as agreed. The complaint is
that the deceased received nothing other than the payment of the outstanding
mortgage
to the bank; and, thus, it is said that no consideration or adequate
consideration was paid.
- As
to the defendants’ submissions as to the Duties Notice of Assessment,
Ms Bale maintains that these are of little assistance
because there is no
evidence as to what contract was stamped or what obligations that contract
placed on the parties. Ms Bale argues
that at the highest this indicates that a
contract was stamped for duty but it is said that even if the contract for sale
of land
was in standard form (and was not a copy of the 21 February
Agreement), it is still unclear if that contract contained special conditions
including the transfer of shares in Kimberley Developments to the deceased.
- Ms
Bale says that the defendants (contrary to their submissions) did little to try
to obtain a copy of the contract (simply issuing
a subpoena days before the
hearing and years after the proceeding was commenced. It is noted that this was
long after Mr Churchill
had been incarcerated (and it is suggested –
though there is no evidence of this – that this would have been after
receivers
had been appointed to his legal practice). Ms Bale argues that the
defendants could never have seriously expected a reply to a call
for documents
in such circumstances. Ms Bale submits that the late subpoenas were not a
genuine attempt to secure a copy of the contract
and were nothing more than a
last-minute attempt to try to shield the defendants from the inevitable
observation that they had otherwise
done nothing to secure the most central
piece of evidence supportive of their case theory. In this regard, it is noted
that the defendants’
affidavit evidence was silent on the issue of the
contract being “lost”; the only evidence of this coming by way of
hearsay
in cross-examination (which Ms Bale says should be rejected).
- Ms
Bale contends that the absence of the contract is far from a neutral point.
Accepting that she bears the onus, Ms Bale nevertheless
invokes the principles
in Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63, at 65; [1774] EngR 2; 98 ER 969 at 9 (Blatch v
Archer) and contends that, where relevant facts are peculiarly within the
knowledge of a defendant or where the defendant has greater means
to produce
evidence relating to those facts, then, provided the claimant provides
sufficient evidence from which the matter can be
inferred, the defendant comes
under an evidentiary burden, or an onus of adducing evidence such that would
explain the controversy
(here referring to what was said by Black J in In Re
Sirrah Pty Ltd (In Provisional Liquidation) [2021] NSWSC 413 at [135], where
his Honour made reference to the observations of Sifris J in KQ International
Trading Pty Ltd v Yang [2016] VSC 146 (at [132])).
- Ms
Bale contends that, she having called into question the transaction for the
purchase of the Forest Lodge Property and having provided
evidence to support
the allegations, the defendants have an evidentiary onus to provide evidence
such as to prove the bona fides of the transaction and that they have
failed to do so. Ms Bale argues that the problem with the lack of documents is
exacerbated
by the fact that the defendants had the greater means to produce
evidence attesting to the providence of the transaction. It is noted
that the
defendants were in contact with Mr Churchill during the proceeding until his
incarceration (whereas the deceased was in
a nursing home for much of the
proceeding before his death).
- As
to the defendants’ submissions based on a failure to complain,
Ms Bale says that it was the deceased’s inability to
protect his own
interests due to his declining mental capacity that made him a target for the
defendants; and that they knew he was
beyond hiring lawyers and instituting
proceedings to protect his own interests (if he ever again possessed enough
mental faculty
to realise that he had been duped). (This submission raises both
the issue as to the deceased’s vulnerability to exploitation
and the issue
of capacity – the latter not being established by any expert evidence in
the present case.)
- Ms
Bale says that, in any event, if her version of events is accepted (i.e., as to
the 21 February Agreement), then Mr Darwiche was
supposed to be developing
the Forest Lodge Property for the mutual benefit of the deceased and using the
income gained from the property
for that purpose. It is said that, as such, the
deceased was likely not expecting an immediate return or the regular payment of
rent;
that it was not a transaction that was intended to provide immediate
remuneration; and thus that there was no basis to complain at
the outset. (There
is some force to this submission in my opinion even if the 21 February Agreement
was not a binding contract; because
the transaction contemplated by that
document was not one that would produce an immediate return and not one that
contemplated a
cash component of the consideration to the deceased on the
signing of the agreement and transfer of the land.)
- Insofar
as the defendants contend that there is no evidence of what steps Ms Bale
took to ascertain if the deceased had received any
benefit from the transaction,
Ms Bale points to the fact that the deceased’s bank account statements
from the period of the
transaction are in evidence (at Ex A) and do not
show any deposit that would reflect part or all of the proceeds of the alleged
sale (and it is noted that the defendants
did not suggest otherwise in
cross-examination).
- Reference
is made to Ms Bale’s (unchallenged) evidence that after she became aware
at the 2016 NCAT hearing of the agreement,
Ms Bale consulted the deceased who
had “no recollection and could not tell [her] who Albert Darwiche or
Kimberley Developments
were” (see at [80]). Ms Bale therefore agrees that
the evidence of the deceased would not have assisted her case but says that
this
is because, by the time that Ms Bale became aware of the questionable nature of
the transaction (in 2016 at the Guardianship
Tribunal hearing), the deceased was
unable to recall anything about the transaction.
- Reference
is also made to Ms Bale’s (again, unchallenged) evidence that, after the
Guardianship Tribunal hearing, she engaged
a solicitor (Mr Peter Steele) to
try to contract Mr Darwiche and Mr Churchill and that this was unsuccessful. Ms
Bale’s evidence
is that she then tried to call Mr Darwiche and Mr
Churchill herself but did not receive any reply. It is noted that Ms Bale sent
a
letter by registered post to Mr Churchill to obtain a copy of all of her
father’s documents that were held in his possession,
the letter stating
that:
At the Guardianship Tribunal, China/Chyna Schein presented a copy of a contract
between Albert Darwiche and Michel Schein. They directed
that I make contact
with Albert Darwiche, as Michel Scheins enduring power of attorney. Would you
have the contact details of Mr
Darwiche and pass them on to me, please?
Would you please send all the paperwork that is associated with Michel Schein
since 3 June 2008.
- Ms
Bale submits that, far from drawing an inference from any alleged failure to
complain, there should be drawn an inference of consciousness
of guilt from the
fact that Mr Darwiche and Mr Churchill avoided speaking to her. It is noted that
Mr Churchill did not provide the
documents as requested and it is said that Mr
Darwiche avoided service of the proceeding (an issue to which her solicitor, Ms
Breust,
gave evidence). Ms Bale says that these are not the actions of litigants
with nothing to hide. Pausing here, I do not draw any adverse
inference from the
alleged failure to complain (for the reasons submitted by Ms Bale and as
discussed earlier). However, nor can
I conclude that the failure to respond to
Ms Bale’s queries (or attempts by her legal representatives to make
contact with
Mr Darwiche and Mr Churchill) that this amounts to a consciousness
of guilt.
- In
reply to the defendants’ submissions based on s 54A of the Conveyancing
Act, Ms Bale emphasises that equity will not permit a statue to be used as a
cloak for fraud (including equitable fraud), referring to
Rochefoucauld v
Boustead [1896] UKLawRpCh 180; [1897] 1 Ch 196 at 206; Organ v Sandwell [1921] VLR 622 at
630.
- In
any event, Ms Bale contends that the 21 February Agreement has been part
performed, in that the Forest Lodge Property was transferred
as contemplated in
the 21 February Agreement. It is submitted that such a transfer was clearly a
part execution of the substance
of the 21 February Agreement, done upon the
faith of the 21 February Agreement (reference being made to Francis v Francis
[1952] VLR 231 at 340).
- As
to the defendants’ submission that the 21 February Agreement is not a deed
for the purposes of s 16 of the Limitation Act, in reply submissions for
Ms Bale it is noted that this is a matter of construction having regard to all
of the surrounding circumstances
in order to determine whether the parties
intended the agreement to be a deed or not (reference being made to the decision
of Brereton
J, as his Honour then was, in Re Cummings Engineering Holdings
Pty Ltd [2014] NSWSC 250 at [52]).
- Ms
Bale says that the answer to the defendants’ argument is that she is here
seeking that the transfer of the property to Kimberley
Developments be set
aside. It is said that the transfer document is a deed and has the effect of a
deed on the parties upon registration
(referring to s 36(11) of the Real
Property Act). Hence, it is said that this is an action founded on a deed
for the purposes of s 16.
- Further,
reference is made to the decision of Young J, as his Honour then was, in
Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 327-373 to the effect
that statutory based forms of transfer of Real Property Act lands were
deeds since they were cast in the most solemn form applicable to deal with the
particular land.
- As
to Ms Bale’s claim to have an equitable estate or interest in the land,
Ms Bale asserts that Kimberley Developments holds
the Forest Lodge Property
on trust for it and seeks an order that Kimberley Developments execute an
instrument and do all things
necessary to convey the property back to Ms Bale
(as executor of the deceased’s estate) (see prayer 3). Ms Bale
contends that
this is an equitable estate in the land for the purposes of
s 36 of the Limitation Act.
Determination
- As
to the breach of contract claims, as noted earlier, I would infer that the
annotations and underlining on the copy of the 21 February
Agreement that is in
evidence were placed on the document sometime after it was signed (by Ms Bale
– since there is a reference
there to “dad”; and hence the
annotations cannot have been on the document in 2011 because Ms Bale only saw a
copy of
the document in 2016).
- The
document itself appears to have been signed with some formality (being witnessed
and with the one correction thereto being initialed).
The document bears all the
hallmarks of a document drafted by a non-lawyer (but cobbled together from other
documents perhaps drafted
by a lawyer): its numbering is not sequential; its
alignment is not consistent; its content is repetitive; there is no attribution
on the coversheet to any lawyer or firm of solicitors; the font is not
consistent; and parts appear to have pro forma headings. That said, I
would infer that the document was drafted with reference to, or the assistance
of, Mr Churchill (because it
is clearly to his benefit that his fees have
priority and be charged against the Forest Lodge Property) and I do not accept
that
it is likely that the deceased gave Mr Churchill instructions for the
drafting of the document (noting that Mr Churchill was a longtime
associate
or friend of Mr Darwiche; and that the agreement was not on its face to the
deceased’s advantage – see the
provisions for crediting of payments
or reimbursement of expenses to Mr Darwiche and his ownership of
intellectual property and the
like, to which I have earlier referred).
- I
have explained my concerns as to the credit of the respective witnesses called
in the defendants’ case. I cannot place any
weight on the
defendants’ (inconsistent) accounts in relation to the provenance of the
21 February Agreement or their protestations
that it was not accepted. That
said, there is no document in evidence that is signed by Mr Darwiche (the named
counterparty thereto)
and no evidence as to exchange of counterparts with the
intent that it become contractually binding (and the retention by Ms Chyna
Schein of a document with original signatures thereon (which is what Ms Bale
recalls seeing at NCAT and which Ms Bale says the Tribunal
asked her “to
follow up on”, see T 32.50-33.2) would suggest that there was no such
exchange of counterpart contracts).
- Ms
Chyna Schein’s evidence at NCAT (admitted as to the fact of what she there
said, not as to the truth of what she said) shows
an understanding or belief on
her part that there was such an agreement (and would be consistent with Ms Chyna
Schein seeking to
maintain access to the deceased’s assets – since
any interest in the Forest Lodge Property would be the only remaining
asset of
the deceased); but this must be balanced against the fact that Ms Chyna
Schein also expressed the (demonstrably incorrect)
understanding that the Forest
Lodge Property remained owned by the deceased. In other words, Ms Chyna
Schein’s understanding
of the arrangements in relation to the Forest Lodge
Property, as at August 2016, was not reliable.
- As
to the involvement of Arthur and Theo Trigas in the transaction, there is no
evidence of any ability of Mr Darwiche in his own
right to finance the
acquisition of the Forest Lodge Property or to carry out a development in
relation to that property (which makes
plausible the defendants’ account
that he approached the Trigas brothers in relation to the proposed development;
and that,
if not a joint venture as such, there would be some involvement of
those parties in any proposed development). However, the company
(Kimberley
Developments) was clearly incorporated with Mr Darwiche as its director and sole
shareholder; and the incorporation of
the company with a Class A and Class B
shareholding structure is consistent with the 21 February Agreement that I have
concluded
was prepared by Mr Darwiche with the assistance or input from Mr
Churchill and presented to the deceased by or with Mr Darwiche’s
support
and concurrence.
- What
is left unexplained (since I cannot accept the evidence of the defendants at
face value and neither Mr Churchill nor Ms Chyna
Schein gave evidence in the
proceeding) is what actually occurred at the time that the transfer form in
respect of the Forest Lodge
Property was signed. I accept that it is likely that
the transfer was signed in Woolgoolga (the deceased and Ms Chyna Schein living
there at the time) since the transfer bears the signatures of the deceased and
Ms Chyna Schein as witness, and that at least Mr Churchill
must have attended at
the time it was signed. It is not insignificant that he signed as solicitor for
the transferee. As noted, the
transfer form acknowledges consideration in the
sum of $590,000; and the transfer form was stamped with duty of $10 (suggesting
that
some other document had been stamped for the duty payable on the sale of
the property). However, no contract for sale was in evidence
and I do not accept
that it can be inferred that there was a contract for sale in any particular
form (let alone the terms of the
standard form contract for sale of land in New
South Wales). All that can be concluded is that there was some document put to
the
Office of State Revenue which was accepted as being liable for stamp duty in
an amount corresponding to a purchase price of $590,000
(most likely a document
prepared by Mr Churchill and, for all I know, a contract in the form of that
which was in evidence as the
21 February Agreement, perhaps with a statement as
to the payment of consideration thereunder). That does not persuade me (to the
requisite degree of satisfaction) that there was a cash payment made in that (or
any) amount to the deceased on 21 February 2011.
- I
do not accept the defendants’ account of the way in which the purchase
price was comprised; nor do I accept the colourful
(and to my mind inherently
implausible) account of large sums of cash being taken from the late
Mr Marinos Trigas’ safe and
delivered to Woolgoolga in a black
computer bag – the detail of which emerged only in cross-examination
– to be counted
by the deceased. Nor do I accept the convenient way in
which it is said by the defendants that the practical effect of the transaction
was the same as if the deceased had received the sum of $650,000 that had been
rejected at auction previously; which evidence was
redolent of an attempt at
ex post facto justification of the stated consideration on the transfer
document).
- Therefore,
I am left with the (on any view infelicitously) worded 21 February
Agreement that I am comfortably satisfied was put to
the deceased by
Mr Darwiche or by Mr Churchill on Mr Darwiche’s instructions or with
his concurrence (and, on its face, accepted
by the deceased – since he
signed it with Ms Chyna Schein as his witness) as governing the arrangements for
the proposed development
of the Forest Lodge Property, on the one hand; and the
evidence of the signed and registered transfer acknowledging consideration
in
the sum of $590,000 (but with no credible evidence that any such sum was ever
paid to the deceased); and with arrangements clearly
having been made consistent
with a proposed joint venture for the development of the property in which the
deceased was to have an
interest through a shareholding in Kimberley
Developments (i.e., the incorporation of the company). Whether Mr Darwiche ever
intended
to be bound by such a transaction is moot; but it seems to me that it
is implausible that he did. In any event, the arrangements
proposed seem
intended to have given him ample latitude to do what he liked with the property
(and left the deceased vulnerable to
whatever Mr Darwiche then chose to do with
it – indeed, the deceased was not even permitted to lodge a caveat to
protect the
interest that under the 21 February Agreement it was contemplated he
would retain in the property or its development).
- Ultimately,
I am not persuaded (to the necessary degree of satisfaction, on the balance of
probabilities) that there was a binding
agreement between Mr Darwiche and
the deceased on the terms of the 21 February Agreement, though I am comfortably
satisfied that
this was the arrangement that was put to the deceased (by Mr
Darwiche with the assistance of, or input from, Mr Churchill) and on
the
basis of which the deceased was persuaded or induced to sign the transfer
document in relation to the sale of the Forest Lodge
Property to Kimberley
Developments.
- I
am also not persuaded that there was any monetary consideration actually paid to
the deceased for the transfer of the property to
Kimberley Developments (though
it is not disputed that there was a payment made by Mr Theo Trigas –
although in some submissions
it is suggested that it was Super Start which made
the payment – to discharge the mortgage debt to Suncorp). That conclusion
is reinforced by the deceased’s bank statements that are in evidence (Ex
A).
- One
might well think it unlikely that Ms Chyna Schein would have participated or
assisted the deceased to participate in a transaction
in which the property was
transferred without any monetary consideration. However, for what it is worth,
the understanding as expressed
by Ms Chyna Schein at the 2016 Tribunal hearing
seems to have been that the property was to be retained by the deceased and that
the arrangement was for him to gain a shareholding in Kimberley Developments and
participate in the profits of any development in
that way (and indeed this seems
likely to have been the basis on which Ms Chyna Schein sought to resist the
revocation of the power
of attorney she held in respect of the deceased –
since Ms Chyna Schein appears to have been wishing to preserve a claim for
half
of the deceased’s assets , whereas if the Forest Lodge Property had
already been sold for the acknowledged consideration
there would be nothing left
to preserve).
- The
telling point in this whole sorry saga is that there is simply no documentary
evidence of any transfer of funds as consideration
for the transfer. The
subsequent payment of the mortgage amount does not assist the defendants in this
regard because that was after
the transfer was registered and is consistent with
the proposed joint venture arrangement and components for the purchase price
contemplated
under the 21 February Agreement in any event.
- In
those circumstances, I have concluded on the balance of probabilities that there
was no monetary consideration paid for the transfer
of the Forest Lodge Property
(other than the discharge of the Suncorp mortgage, which Ms Bale accepts can be
taken to be part of
the purchase price). Assuming for this purpose the
deceased’s capacity to understand the transaction at all (something of
which
the defendants’ witnesses seemed adamant was their perception,
although at least in the case of Mr Arthur Trigas this seemed
to be based on
nothing more than the youth of the deceased’s wife – see at T 314),
I find that the deceased was persuaded
to sign the transfer document (and thus
to part with ownership of the Forest Lodge Property) on the understanding that
there was
an agreement or arrangement for its development along the lines set
out in the 21 February Agreement and in which he would participate
through a
shareholding in the company that was to carry out the development. (That is
consistent with the deceased having a desire
to retain an interest in the
property and with the deceased being prepared to accept a sum lower than that
which had been rejected
at auction in 2009.)
- The
alternative claim based on a binding contract in terms of the 21 February
Agreement thus fails; in which case it is not necessary
to consider the
limitation defences raised to that claim. Suffice it note that I have no little
doubt as to the deceased’s
ability to manage his affairs in the period at
least from January 2016 onwards; and would have found on the evidence that he
was
under a relevant disability (for Limitations Act purposes) from that
point onwards (which is within the limitations period for a breach of contract
claim).
Contracts Review Act claim
- Next,
I turn to the claims against Kimberley Developments and Mr Darwiche under
the Contracts Review Act, namely that the 21 February Agreement is an
unjust contract within the meaning of s 7 of the Contracts Review
Act or under the general law. These claims appear to be premised on the
21 February Agreement being a binding contract (and hence would
fail having
regard to the conclusion reached above). Nevertheless, for completeness I note
that Ms Bale presses these claims on the
same basis that Ms Bale claims
unconscionability at general law. Further, I note that there was some argument
in opening submissions
to the effect that the transfer (operating as a deed) of
the Forest Lodge Property was itself unjust within the meaning of the
Contracts Review Act.
- In
opening submissions it was said that, at the time of the sale of the Forest
Lodge Property in February 2011, the deceased’s
mental decline was such
that he was no longer able to comprehend complex transactions, would only give
minimal and non-responsive
answers in conversation and seemed to be
disinterested in his affairs generally; and his condition was such that he could
no longer
protect his own interests. The submission as to capacity ultimately
became a submission as to the vulnerability of the deceased to
exploitation.
- Ms Bale
contends that the deceased’s estate is entitled to have the transfer
declared void effective from when the contract
was made (for the purposes of s
7(2) of the Contracts Review Act). Ms Bale’s submissions in this
regard turn on the argument that the 21 February Agreement to transfer the
Forest Lodge Property
was unjust withing the meaning of the Contracts Review
Act, having regard to the matters outlined in s 9(2) of the Contracts
Review Act. In particular, it is said that there was a material inequity in
the bargaining power between the deceased on the one hand and Kimberley
Developments and Mr Darwiche, on the other hand; as the deceased was unable
reasonably to protect his interests (see s 9(2)(a) and (e) of the Contracts
Review Act); that the deceased was unable to negotiate complex contractual
terms such as those that ultimately made up the 21 February Agreement
and would
not have understood the true effect of the terms of the 21 February Agreement
(see s 9(2)(b) and (c) of the Contracts Review Act); that the 21
February Agreement is drafted in confusing and ambiguous terms (see s 9(2)(g) of
the Contracts Review Act); that the deceased did not receive independent
legal advice as Mr Churchill was advising all parties to the 21 February
Agreement
(see s 9(2)(h) of the Contracts Review Act); that the deceased
did not have the capacity at the time to understand the true nature and effect
of the 21 February Agreement (see
s 9(2)(i) of the Contracts Review
Act). Further, it is noted (see s 9(5) of the Contracts Review
Act) that the deceased has not received any transfer of shares, dividends or
other consideration for his transfer of the Forest Lodge
Property to Kimberley
Developments.
- Ms
Bale relies on the same matters in this context as those propounded in her claim
based on unconscionability at general law (see
below) and says that if those
matters are established then it would follow that the elements of the
Contracts Review Act have been made out. As noted, the relief sought is
for the transfer to be declared void (see s 7(2) of the Contracts Review
Act).
- The
defendants submit that the pleaded claims pursuant to the Contracts Review
Act are statute barred (T 359.7-359.15). In light of the concession made by
Ms Bale as to the evidence not going far enough to establish
incapacity, the
defendants argue that it must follow that the plaintiff cannot establish a
relevant disability within the meaning
of s 52 of the Limitation Act, and
that any cause of action that is subject to the six-year limitation period in s
14 is statute barred. As noted above, Ms Bale seeks a declaration
“generally” that the deceased was under a relevant disability
at the
time of entering into the 21 February Agreement (for the purposes of s 52
of the Limitation Act in answer to the limitation defence raised by the
defendants).
- As
to the substance of the Contracts Review Act claims, the
defendants’ submissions appear to be those raised in response to the
claims of unconscionable conduct and I consider
those submissions below before
making a determination on the Contracts Review Act claims
themselves.
- Suffice
it for present purposes to say that, of the complaints made in the pleading in
respect of these claims, I find as follows:
there was a material inequality in
bargaining power as between the deceased on the one hand and Mr Darwiche and
Kimberley Developments
on the other (albeit not because the deceased is
established to have been suffering from dementia in early 2011 but because of
his
vulnerability to exploitation – see below – and the admitted
financial pressure under which he was then operating); the
terms of the 21
February Agreement were confusing and not readily understandable (including as
to how the arrangements in relation
to the proposed shareholding were to
operate); the deceased had no independent advice in relation to the 21 February
Agreement; and
the agreement contained in the 21 February Agreement was, on
its face, improvident and not in the best interests of the deceased
(not least
because the provision for payment of consideration in relation to the transfer
was not clear).
Claims of unconscionable conduct
- The
unconscionable conduct claims against Kimberley Developments and
Mr Darwiche are made relying on ss 20, 21 and 22 of the Australian
Consumer Law) (see [35]-[46]) and, in the alternative to the statutory
relief claimed, for unconscionable conduct under the general law (see
[46A]).
- Ms
Bale contends that the deceased’s estate has personal equities as against
the defendants such that it would require the registered
proprietor to transfer
the property back to the estate despite registration (citing Breskvar v
Wall (1971) 126 CLR 376; [1971] HCA 70 at 384-385). Primarily, Ms Bale
argues that the defendants took advantage of the deceased’s declining
cognitive ability or
position of vulnerability (not now putting this as high as
a lack of capacity as such). (The knowledge of that “cognitive degeneracy
and or dementia” is put by reference to cl 31 of the 21 February Agreement
(which to my mind is not made good – since
a provision of that kind could
equally be included to protect against later cognitive disability and is not an
acknowledgment of
such a condition at that time).
- The
pleading of unconscionable conduct for the purposes of the statutory claim for
relief includes that Mr Darwiche and Kimberley
Developments: ([35]) knew the
deceased was suffering cognitive degeneracy and or dementia: ([36]) ensured that
the terms of the agreement
gave them an unfettered discretion to deal with the
deceased’s property generally as they chose in circumstances where they
knew that the deceased was unable to negotiate terms or protect his interests;
([37]) ensured that the terms of the agreement gave
them unfettered discretion
not to pay any profit or rental proceeds to the deceased; ([38]) sought to
prevent the deceased from attempting
to protect his property by registering a
charge over it; ([39]) knew that the transaction was not in the deceased’s
best interests
and “as such” knew that Ms Chyna Schein was acting
outside the terms of her power of attorney; and ([40]) knew that Ms
Bale was
challenging the validity of the deceased’s power of attorney.
- The
pleading then alleges that no profits or dividends have ever been paid to the
deceased; that no shares have been transferred to
the deceased; no consideration
(or alternatively no adequate consideration was received for the property); and
that Mr Darwiche and
Kimberley Developments knew that the terms of the agreement
would act unfairly on the deceased when they executed it and have refused
to
enter into any communication with Ms Bale or the deceased’s
representatives (see [41]-[46]).
- The
same facts and circumstances are relied upon for the claim of unconscionable
conduct under the general law (see at [46A]).
- As
noted above, Ms Bale contends that, at the time of the sale of the Forest Lodge
Property in February 2011, the deceased’s
mental decline was such that he
was no longer able to comprehend complex transactions, would only give minimal
and non-responsive
answers in conversation and seemed to be disinterested in his
affairs generally; and his condition was such that he could no longer
protect
his own interests. Ms Bale contends that Mr Darwiche never intended to transfer
any shares in Kimberley Developments to the
deceased or to develop the Forest
Lodge Property. It is said that Mr Darwiche proposed the 21 February
Agreement and incorporated
Kimberley Developments as vehicles for him
unconscionably to procure the consent of the deceased to transfer the Forest
Lodge Property
and that the 21 February Agreement was a sham.
- Although
in opening written submissions Ms Bale argued that the deceased was plainly
suffering from more than just slight cognitive
decline, as already noted that
issue of incapacity is no longer pressed. However, Ms Bale still points to
the references in the medical
records and the lay evidence (including from Mr
Andreacchio); and to the terms of the 21 February Agreement itself as
evidence of
cognitive decline and a lack of judgment resulting in the deceased
being unable to protect his own interests.
- In
that regard, Ms Bale contends that the transaction itself, as recorded in the 21
February Agreement, was complex, ambiguous and
uncommercial; that the
21 February Agreement is poorly drafted (it being said that, even without
any suggestion of cognitive decline,
it is difficult to understand if not
nonsensical in parts). It is noted that the 21 February Agreement purported to
give Mr Darwiche
an “absolute unfettered discretion” to do what
he deemed necessary to develop the property (per cl 4.2); that the transaction
involved a division of shares, and the shares had different rights attached to
them for the purpose of controlling the company; and
that the 21 February
Agreement outlined a regime for the apportionment of Class A and Class B shares,
with the Class A shares only
having voting rights. It is noted that the 21
February Agreement does not specifically state who will get the Class A shares
(cl
4.3 referring only to Class B shares).
- Ms
Bale also points to the fact that the 21 February Agreement uses vague terms
(for example, that it is “envisaged” that
the deceased would be
entitled to profits and dividends without explaining how and when such payments
were to be made); and that
it permitted security to be taken over the property
by Mr Churchill to secure his fees (at cl 4.3) and provided that both
Kimberley
Developments and Mr Darwiche and the deceased would be liable for his
fees.
- It
is noted that the 21 February Agreement does not contemplate that the deceased
would obtain any payment from the promised $590,000;
rather, the consideration
would comprise “of the discharge of the outstanding mortgage, the
shareholding in the company and
for settlement of monies owed to Darwiche in
respect of the clean-up and improvements of the property and other
services”;
and that there is no amount given for the value of the
“clean up” or “improvements of the property”. Further,
Ms Bale points to the statement recorded in the 21 February Agreement that the
deceased advised Mr Darwiche that he wished to be
a “passive
investor” (cl 4.3).
- As
noted above, the 21 February Agreement provided that the deceased would sign a
transfer of title conveying the land to Kimberley
Developments upon signing the
agreement (Ms Bale says without apparently any separate contract for the sale of
the land – though
the terms of the document do seem to contemplate a
contract of sale of some kind) (see cl 4.3). Ms Bale points out that there was
apparently to be no settlement of water rates, council rates and land tax and
that, although the deceased would owe these amounts
to Kimberley Developments
and Mr Darwiche, they would only be payable when “Darwiche determines that
they must be paid”
(cl 4.3).
- Ms
Bale says that other parts of the 21 February Agreement reflect matters that are
factually wrong and/or “legally dubious”,
namely that: the deceased
was to “acknowledge that he had no rights to place caveats or other
restrictions on the property”
(cl 4.3); and that the Forest Lodge Property
was listed for $600,000 and the deceased was not able to obtain any acceptable
offers
(cl 4.3). As to the latter, Ms Bale says that there is no evidence of
this; and that it is contradicted by Mr Andreacchio’s
evidence (he having
stated that the deceased had previously rejected offers of $650,000) and that
Mr Moore, the tenant of the property,
offered $650,000 at auction and it
was rejected. However, as noted above, there was in evidence a document which
purported to advertise
the property for sale with a guide of $600,000.
- It
is submitted that, even without mental decline, one would struggle to understand
the terms of the 21 February Agreement that purported
to record the basis that
the deceased transferred the Forest Lodge Property; and that it is incapable of
being properly understood
by anyone (for the reason that it does not disclose
who would receive the Class A shares and therefore control the voting).
- Ms
Bale accepts that she needs to show that Kimberley Developments and Mr Darwiche
had knowledge of the deceased’s mental decline
(again, not now asserting
this to be mental incapacity as such) but says that such knowledge can be
constructive knowledge (referring
to Edna May Collins by her next friend
Glenys Lesley Laraine Poletti v May [2000] WASC 29 at [68], where it was
said that actual knowledge is not necessary).
- Ms
Bale submits that the facts as known to Mr Darwiche (and therefore to Kimberley
Developments) were such as to raise in the mind
of any reasonable person a very
real question as to the deceased’s ability to see to his own affairs,
referring to the following
matters.
- First,
Ms Bale contends that, on Mr Andreacchio’s account, the entirety of
Mr Darwiche’s narrative as to how the Forest
Lodge Property came to
be transferred would necessarily be rejected (and it is argued that, if this is
a lie on the part of Mr Darwiche,
then this corroborates the alternative view of
the facts (namely, that Mr Darwiche knew that the deceased lacked the capacity
to
understand the 21 February Agreement and he took advantage of that weakness).
Reference is made in this regard to what was said in
Steinberg v Federal
Commissioner of Taxation (at 694) as to circumstances in which an inference
can be drawn from the fact that the witness has told a false story (i.e., of
consciousness
of guilt) and that “if the truth must lie between two
alternative states of fact, disbelief in evidence that one of the state
of facts
exists may support the existence of an alternative state of facts”; and to
R v Heyde at 236, where Clarke JA said, in a passage cited with approval
in Urjraso v NRMA Insurance Ltd (unreported, Court of Appeal, NSW, CA
40353 of 1990, Mahoney CJ, Priestley and Handley JJA, 14 December 1992) that
“it is only
lies which suggest the liar cannot give an innocent
explanation of proved facts, or that he is unable to account for what witnesses
say they saw in any way consistent with his own innocence which are capable of
providing corroboration”. Reference is also
made to the application of
this principle by Rein J in considering the credit of witnesses with competing
versions of events as they
relate to the sale of a property in Chen v Gu;
Chen v Nguyen [2011] NSWSC 1622 at [36]. Ms Bale says that Mr Darwiche has
lied because he cannot properly explain the fact of the transfer of the Forest
Lodge Property
to Kimberley Developments.
- Second,
reference is made to the statement in cl 4.3 of the 21 February Agreement
to the effect that Ms Chyna Schein has a power of attorney over the affairs of
the deceased and that
the deceased “advises Albert Darwiche that such
Power of Attorney was challenged in the Guardianship Tribunal of New South
Wales
and was upheld to be a valid Power of Attorney”.
- Ms
Bale argues that if it is accepted that the entire agreement (including
cl 4.3(31)) was the proposal of Mr Darwiche then this amounts
to an
admission, against interest, by Mr Darwiche and Kimberley Developments that they
knew that the deceased lacked the capacity
to enter into the agreement. Further,
it is submitted that the above statement was a “self-serving and clumsy
attempt to head
off future attacks on the validity of the transfer, which those
defendants must have known were coming”. It is submitted that
the
insertion of this clause in itself is powerful evidence of the knowledge of Mr
Darwiche and Kimberley Developments of the deceased’s
mental decline;
alternatively, that even if Mr Darwiche did not draft the clause, it is noted
that he still admits to having read
it and “considered” it. It is
submitted that, on that view of the case, Mr Darwiche was aware that the
deceased was suffering
mental decline such that his capacity was being
challenged in the Guardianship Tribunal. (Pausing here, the difficulty in this
submission
is that the challenge to the deceased’s capacity was not upheld
in the 2008 challenge; and I see no basis to conclude that
simply being aware of
the fact of such a challenge is evidence of awareness of mental decline as
such.)
- Third,
it is said that if Mr Andreacchio is accepted as a witness of truth, his
evidence (coupled with the contemporaneous medical
records) makes clear that the
deceased was in such a state that no reasonable person could not have formed a
serious concern as to
his capacity to understand the transaction at the very
least. I have dealt with this issue above when determining the factual findings
sought by Ms Bale. The difficulty is that one would need to have a
“baseline” against which to test any observations
of mental decline,
at least unless they were so evident as to be unmissable (and that cannot have
been the case as at 2008 having
regard to the conclusions reached in the NCAT
proceeding and the fact that Mr Hancock was still comfortable taking
instructions from
the deceased in 2008). Moreover, the relevant time at which
knowledge must here be tested is 2011.
- As
to the deceased’s position of disadvantage, Ms Bale refers to the
contemporaneous medical notes as clearly establishing that
the deceased was
suffering from cognitive decline exacerbated by the death of his first wife.
Taken with the lay evidence of Ms
Bale and Mr Andreacchio, it is said that the
deceased was in serious mental decline by February 2011. As adverted to above,
Ms Bale
argues that the unusual and out of character nature of the transaction
is itself strong evidence of the deceased’s mental decline.
As noted, Ms
Bale argues that the 21 February Agreement itself appears to acknowledge (by cl
4.3(31)) that the deceased was in cognitive
decline (though I do not accept this
is the meaning to be accorded to this; rather it would seem that cl 31 was
included on the basis
that Ms Chyna Schein would sign the agreement pursuant to
her enduring power of attorney).
- Ms
Bale argues that the terms of the 21 February Agreement give an uncommercial and
disproportionate advantage to Mr Darwiche; noting
that Mr Darwiche is given
absolute and sole discretion to do as he will with the Forest Lodge Property and
that the deceased was
not even permitted to encumber the property to protect his
interests. It is submitted that the agreement was drafted by Mr Churchill
(who
acted for all parties on the transaction) and that it can safely be concluded
that Mr Churchill was acting in the interests
of Mr Darwiche to the detriment of
the deceased. It is submitted (and I would accept) that this lack of independent
legal assistance
to see to the deceased’s interests is another reason the
deceased was at a disadvantage.
- Reference
is made to Blomley v Ryan (1956) 99 CLR 362; [1956] HCA 81 (Blomley v
Ryan) (at 371) where the solicitor for the agreement acted for both
the vendor and the purchaser at the execution of the contract and was
found to
have failed to give him proper legal advice and protection; and that the High
Court found that was further evidence of the
vendor’s disability. In the
present case, it is said that Mr Churchill failed to protect the
deceased’s interests or
give independent legal advice; it is said that he
was only acting in the interests of Mr Darwiche.
- Ms
Bale submits that the transaction was clearly improvident; arguing that there is
no cogent argument that would explain the transaction
as commercial on any view.
It is emphasised that: the Forest Lodge Property was valued at $1,200,000 by
Colliers International on
4 February 2005; on 3 April 2009 the deceased
received an offer for the property for $650,000; in August 2009 a bid was made
at auction
of $650,000 which was rejected as being below the reserve price of
$1,000,000; in late 2010 Mr Andreacchio advised Mr Darwiche that
the
deceased was looking of offers of $1,000,000, having previously rejected lower
offers (and says that Mr Darwiche agreed that
was an appropriate price); and an
offer had been rejected for a property next to the Forest Lodge Property
(one-third of the size
of the deceased’s) of $1,300,000.
- It
is said that even if the defendants’ argument (that they simply paid
$590,000 for the property) is accepted, it is significantly
less than prior
offers to purchase the property in the preceding years and less than half the
formal valuation in 2005. It is noted
that Mr Andreacchio has deposed to his
view that the deceased would not have consented to the sale of the property for
less than
$650,000 because he had already rejected this amount and further that
he believed “the entire transfer was a sham”. (I
place no weight on
this evidence because it is nothing more than lay opinion as to what the
deceased would have done; and Mr Andreacchio’s
belief is irrelevant.)
- Insofar
as the defendants suggest that an impending foreclosure was the motivation
behind the sale, Ms Bale maintains that there is
no evidence of that, pointing
to Mr Andreacchio’s evidence referred to above. However, that is
inconsistent with the position
that emerged by reference to Suncorp’s
email.
- Ms
Bale argues that if it is accepted that the deceased did not receive any money
for the transfer, as alleged, then it would necessarily
follow that the
transaction was a sham transaction and therefore improvident. (Certainly, I
would accept that the transaction was
improvident insofar as the transfer was
signed without receipt of monetary consideration by the deceased.) Further, Ms
Bale argues
that, if her contention that the property was transferred pursuant
to the 21 February Agreement is accepted, then the transaction
was undoubtedly a
sham transaction because: the 21 February Agreement bestowed unfettered
discretion to Mr Darwiche to do as he wished
with the property without any input
from the deceased; the deceased was not permitted to secure his interest through
an encumbrance
on title; Mr Darwiche had no intention of even providing the
shares entitling the deceased to maintain 60% ownership of the property;
Mr
Darwiche had already been paid for the “cleaning work” he claims
made up part of the consideration; the 21 February
Agreement did not
contemplate that the deceased would receive any money at all, just forgiveness
of an alleged debt and the shares;
and Mr Darwiche had no intention of
developing the property and in matter of fact did not develop the property.
Again, it is submitted
that, if it is accepted that Mr Darwiche’s evidence
of the transaction is a lie, then that adds corroboration to Ms Bale’s
contention that the real agreement was the agreement to develop the property and
that it was proposed by Mr Darwiche with the assistance
of Mr Churchill.
- As
to knowledge of the improvidence of the transaction, Ms Bale relies on the same
submissions (i.e., the argument that cl 4.3(31)
of the 21 February Agreement is
an admission against interest that Mr Darwiche was aware of the deceased being
under a significant
mental incapacity; that the 21 February Agreement was a
sham (a submission supported by a finding that Mr Darwiche’s version
of
events is a lie); and by reference to the medical reports and lay evidence of
mental decline. Ms Bale says that numerous witnesses
(besides those seeking to
rely on the transfer) give evidence of the deceased’s inability to engage
in anything other than
basic conversation, and further observe that he was
generally only able to give one-word answers or no answers at all.
- It
is submitted that, even without resort to the equitable presumption identified
in Turner v Windever [2005] NSWCA 73, it is clear from the
evidence that Mr Darwiche did take unconscientious advantage of the
deceased’s disability to procure his
consent to transfer the Forest Lodge
Property. In this regard, Ms Bale emphasises the strikingly disproportionate
price at which
the deceased sold the property to Kimberley Developments (an
agreed consideration of $590,000 amounting to less than 50% of the $1,200,000
valuation placed on the property six years prior to the transfer). It is noted
that in Blomley v Ryan (at 371), where the sale of the property at just
over half its market valuation, it was said that the transferees were taken to
have
believed that the purchase was “not just a good bargain but a very
substantial undervalue”. Further, reference is again
here made to the
conversation in around late 2010, between Mr Andreacchio and Mr Darwiche about
the failed auction of the property
(see above). Ms Bale argues that
Mr Darwiche knew what the deceased believed the property to be worth at the
time and that it is
impossible for the defendants to claim that this was in any
way a “good bargain” rather than a substantial undervaluation.
(It
is argued that the defendants have in effect admitted it was undervalued by
“concocting” the foreclosure story “in
an attempt to explain
the problem away”. This submission, however, suffers from the problem that
there is objective contemporaneous
evidence that Suncorp was indeed threatening
to exercise its power of sale, after numerous extensions of time granted for the
discharge
of its debt.)
- Ms
Bale says that there is no evidence any consideration was paid beyond the
discharge of the mortgage. Further, it is said that (in
order to obtain the
property at a vastly reduced price which was not even paid), Mr Darwiche
persuaded the deceased to execute the
transfer under false pretences (namely in
the belief that he would essentially retain 60% ownership in the property and
the property
would be developed by Mr Darwiche with a view to making a
profit, whereas Mr Darwiche never had any intention of carrying out the
terms of
the 21 February Agreement; it was a sham).
- It
is thus submitted that the deceased was under a special disadvantage; that on
either version of the transaction contended for,
it was improvident; that
Kimberley Developments and Mr Darwiche had the requisite knowledge; and, hence,
it is said that it would
be presumed that the improvident transaction was a
consequence of the special disadvantage, and that the said defendants have
unconscientiously
taken advantage of the opportunity presented by the
disadvantage (citing Turner v Windever at [106]).
- On
the basis that the defendants acted unconscionably and in doing so committed an
equitable fraud as against the deceased in the
transfer of the Forest Lodge
Property, Ms Bale seeks equitable relief in the setting aside of the
21 February 2011 transaction (referring
to Vadasz v Pioneer Concrete
(SA) Pty Ltd (1995) 184 CLR 102; [1995] HCA 14 where the High Court
said that unconscionability works in two ways: in its strict sense, providing
the justification for setting aside
a transaction; and “more
loosely” providing “the justification for not setting aside the
transaction in its entirety
or in doing so subject to conditions, so as to
prevent one party obtaining an unwarranted benefit at the expense of the
other”).
Reference is also made to what was said by Lord Wright in
Spence v Crawford [1939] SC (HL) 52 at 77; and to Elkofairi v
Permanent Trustee Company Limited (2002) 11 BPR 20,841; [2002] NSWCA 413,
where the Court, while rescinding an unjust mortgage by which the appellant
stood ready to lose her home, ordered the appellant
to bring to account the
benefit she had received from the mortgage, including paying interest, to the
lender. Ms Bale also refers
to the approach followed in Elkofairi was
followed in Perpetual Trustee Limited v Khoshaba [2006] NSWCA 41.
- Ms
Bale does not dispute that the mortgage over the Forest Lodge Property was
discharged by Mr Theo Trigas (albeit, that she contends
it is part of the
perpetrated equitable fraud). However, Ms Bale submits that, while the payment
of interest on such an amount has
been a feature of some cases of restitution,
it remains necessary to ensure that the defendants do not through their actions
derive
an “unwarranted benefit” of their own. It is submitted that
the discretion should be exercised to refuse the defendants
any interest on the
mortgage sum amount.
- Ms
Bale’s primary submission is that the defendants ought receive no more
than the return of the mortgage sum; that no interest
should be awarded, as the
paying out of the mortgage in order to effect the transfer was simply the
culmination of the defendants’
“reprehensible plan” to divest
the deceased of his last significant asset (i.e., the defendants’
unconscionable
conduct).
- It
is submitted that holding the deceased’s estate liable to those who
defrauded it for an amount of interest would be unreasonable
and would, in
effect, make the deceased the unwitting and unintentional term-deposit holder
for the defendants. It is submitted that
this would not be restitution, but a
penalty to be paid on top of the injustice of the very act itself.
- Ms
Bale submits that, if it is concluded that interest must be paid, then it is
said that the rate of that interest (given the span
of time between the
discharge and the payment) should be determined in the exercise of the
discretion informed by the principles
as to the return of the parties as close
as possible to the status quo ante, while avoiding delivering up an
“unwarranted benefit” to the wrongdoer.
- Reference
is made to Maguire v Makaronis (1997) 188 CLR 449; [1997] HCA 23,
where a contractual rate of interest existed between the parties in the
mortgage deeds between them, and it was held that this would
be properly allowed
on top of the sum payable given that it appeared neither uncommercial nor
unreasonable of itself. Ms Bale submits
that if interest ought to be paid, the
rate of interest should be no higher than the rate payable to the lender under
the discharged
mortgage on the Forest Lodge Property. It is said that this
accords with applicable legal principle (referring to RP Meagher, JD
Heydon and
MJ Leeming, Meagher, Gummow & Lehane’s Equity: Doctrines and
Remedies (2002, 4th ed, LexisNexis) at 351-362 and in particular [9-060]).
It is submitted this approach would accord with the “cost”
the
deceased would have paid had the property remained under the mortgage (i.e., had
it not been discharged in the equitable fraud),
and therefore corresponds to the
benefit the deceased derived by having the mortgage discharged early.
- Ms
Bale also seeks an order that the defendants account for the rental from the
period 21 February 2011 until the present. It is submitted
that this amount,
payable with interest along with the plaintiff’s legal costs should be set
off against any amounts found
to be owing to the
defendants.
Defendants’ submissions as to
unconscionability
- The
defendants contend that Ms Bale has failed to establish any unconscionability (I
note that undue influence is no longer pressed);
in that they say that Ms Bale
has failed to establish that the deceased did not understand the general nature
of the transaction
or that the defendants were aware (or ought to have been
aware) of any cognitive incapacity. The defendants further say that, even
if
(which is denied) the deceased did not have the requisite capacity or did not
understand the nature of the transaction, there
is no evidence to establish that
the defendants had any knowledge of his lack of capacity (nor that the
defendants ought to have
been aware of his lack of capacity).
- As
to the question of capacity, the defendants say that even if it is concluded
(contrary to their submissions) that the 21 February
Agreement is the operative
instrument, there is insufficient evidence to conclude on the balance of
probabilities that, as at 21
February 2011, the deceased was unable to
understand the general nature of the transaction (which the defendants say
– but
I note this is a proposition with which Ms Bale cavils – was a
“run of the mill” contract for the sale of land).
The defendants
refer to Geyer v Redeland Pty Limited [2013] NSWCA 338 at [54] as to what
is involved in a finding on the balance of probabilities and refer to the
well-known proposition that all evidence is
to be weighed according to the proof
which is in the power of one side to have produced and in the power of the other
to have contradicted
(Blatch v Archer at 65).
- As
to the medical evidence, the defendants point out that Ms Bale did not adduce
any expert medical evidence on the issue of capacity
(noting that it was open to
Ms Bale to arrange for the deceased to be medically examined during the period
from 2015 to 2021 and
to obtain expert medical opinion based on the
deceased’s history, available medical records and any other relevant
material).
It is submitted that the fact that this did not occur results in a
significant lacuna in her case. Further, the defendants say that
the difficulty
with the submissions made by Ms Bale on this issue is that most, if not all, of
the evidence relied upon by Ms Bale
and identified in her opening submissions
was either not admitted or admitted subject to limitations on the use of the
evidence (see
above).
- In
relation to the evidence that was adduced by Ms Bale, the defendants say that
there is an absence of any relevant medical evidence
addressing the
deceased’s capacity in and around February 2011. It is noted that the
entries in the clinical notes relied upon
by Ms Bale (i.e., the notes dated 18
March 2011 and 28 April 2011) post-date the subject transaction. The defendant
says that they
are therefore not of any significance without expert medical
opinion and should be given no weight.
- Further,
it is submitted that Ms Bale has selectively referred to the notes. The
defendants point out that in the opening submissions
(which are incorporated
into the closing submissions at [37](1)), Ms Bale relied on the fact that the
North Coast Area Health Service
Discharge Referral recorded that during the
“neurological exam [the deceased] was confused and agitated”. The
defendants
point out that what that note actually records is that the deceased
was “confused and agitated on presentation but neuro examination
in ED was
grossly normal and CT brain was normal, showing only age related atrophy”.
It is noted that the remainder of the
medical evidence relied upon by Ms Bale,
including the opinions of Dr Veitch, the GP’s clinical notes which
reference “Alzheimer’s
dementia”, Dr Regal, Dr Oxley and RN
Price’s outpatient notes were all admitted subject to a limitation made
pursuant
to s 136 of the Evidence Act.
- The
defendants point out that the deceased was seen by his general practitioner on
21 February 2011 at 10.22 am, the day that the
transfer was signed; that the
clinical notes recorded the duration of the examination was some 14 minutes 31
seconds; and that what
is there noted is “discussed fluvax”. The
defendants emphasise that there was nothing recorded in those notes concerning
the deceased’s capacity.
- Accordingly,
the defendants submit that there is no admissible medical evidence upon which Ms
Bale can rely to establish a finding
that, as at 21 February 2011, the
deceased did not understand the general nature of the transaction.
- As
to the lay evidence about the deceased’s capacity, the defendants say that
little weight should be given to Ms Bale’s
evidence as to the observations
that she made of the deceased that are relevant to the issue at hand.
- First,
it is noted that Ms Bale ceased to have any close contact with the deceased
between 2008 and 2015. The defendants refer to
her evidence (see T 63.17-63.34)
as to the extent of the contact in that period. It is noted that in 2009, the
deceased moved to
Woolgoolga (a lengthy drive from where Ms Bale lived) and did
not return to live with Ms Bale until 2015.
- Second,
the defendants say that, even if it is accepted that there was a change in the
deceased’s behaviour as described by
Ms Bale, there are a number of
equally plausible explanations for that change which are unrelated to a decline
in the deceased’s
cognitive capacity. The defendants point out in this
context that, after the death of his first wife in August 2006, the deceased
had
met and started a relationship with Ms Chyna Schein whom he married in May 2008
(and hence they say that the deceased had a new
focus in his life). It is noted
that Ms Bale was concerned with Ms Chyna Schein’s motivation in terms of
the deceased’s
financial position but that, despite the fact that the
deceased started to write Ms Bale letters, Ms Bale did not raise that issue
with
him or did not recall discussing that issue with him.
- Third,
the defendants point to the evidence that the deceased was financially
distressed. The defendants point out that the deceased
had borrowed somewhere
between $4.4 million and $5 million to fund the Summer Hill development; that
there had been delays with the
development including delays due to the first
builder leaving, and a dispute with the second builder over fees; and that the
delays
were costing the deceased a “lot of money in interest”; that
there were court proceedings that the deceased lost; that
the second builder
garnisheed rental income from the development and put a writ on the family home;
and that the deceased’s
longstanding solicitor, Mr Ken Hancock advised him
that he would have to sell that house to pay the debts. It is said that the
deceased’s
business was “just breaking even” and was closed
down in January 2008 by Ms Bale and her husband, which upset the deceased.
- As
at 13 June 2008, the deceased owed Suncorp $6,183,384.54 and Commonwealth Bank
$1,251,185.68 and was unable to pay his solicitor’s
fees in the sum of
$28,800. The deceased had unsuccessfully tried to sell the Forest Lodge Property
in April 2009; and was being
threatened with enforcement action by Suncorp if a
sale of the Forest Lodge Property was not effected on or before 14 February
2011,
following numerous prior extensions in 2007, 2009 and 2010. Reference is
made to the postscript in Mr Hancock’s letter dated
1 October 2009 as to
the position of Suncorp (see above).
- The
defendants say that all of the above matters would have caused the deceased
distress and could be a reason for the change in his
behaviour (if it was
accepted that there was such a change).
- Fourth,
the defendants say that, despite the fact that Ms Bale relied on the
deceased’s failure to pay her husband outstanding
arrears in terms of his
employment, as evidence of the deceased’s change in behaviour, Ms Bale
accepted in cross-examination
that the deceased did not have sufficient funds at
that time to pay her husband the outstanding arrears because the funds were
needed
to undertake works the Council required before the Summer Hill
development could be registered.
- Fifth,
it is submitted that there are significant problems with the credibility of Ms
Bale as a witness (as noted earlier).
- The
defendants say that, without expert medical evidence to distinguish between what
may be explicable as a dramatic change in the
deceased’s personal,
domestic and social life and the problems that the deceased was apparently
experiencing with Ms Chyna
Schein in terms of his marriage and their
relationship as opposed to a decline in his mental condition, Ms Bale has failed
to establish
any relevant decline in his condition.
- Further,
the defendants say that there is also other evidence which weighs against a
finding that there was any decline in the deceased’s
mental condition at
the relevant time.
- First,
reference is made to Ms Bale’s evidence that in mid-2008 and until his
death, the deceased had the awareness and capacity
to speak to her in French
both in person and on the telephone whenever Ms Chyna Schein was around
(presumably, it is said, in an
attempt to keep those conversations secret from
Ms Chyna Schein). It is noted that Ms Bale, in cross-examination said that the
deceased
was very proficient in languages up until he died. The defendants
submit that this is not the behaviour of a person suffering cognitive
decline.
(Pausing here, I cannot see how I could possibly make such a finding in the
absence of expert evidence – it may well
be, for example, that fluency in
one’s native or childhood languages is something retained until well into
cognitive decline.)
- Second,
it is noted that Ms Bale also gave evidence in respect of the period some time
prior to the deceased’s marriage in May
2008 to Ms Chyna Schein, that the
deceased was very open about the fact that that he was looking for someone to
marry (or, I would
add, as a companion, not necessarily for marriage) and that
she did not have problems with that. It is submitted that this demonstrates
that
Ms Bale was not concerned about the deceased’s capacity to engage in
social interactions with people and that this is
inconsistent with Ms
Bale’s subsequent evidence during cross-examination that she was
“concerned that my father would
be taken advantage of in 2008 because of
his vulnerability on so many levels”. I do not accept this. I understood
Ms Bale’s
evidence to be that she was indeed concerned about the
deceased’s behaviour – and his vulnerability to exploitation;
and it
is corroborated by the contemporaneous accounts of her expressing such a concern
to others; and by her unsuccessful attempt
to challenge the revocation of her
power of attorney in 2008.
- Third,
that in June 2008, Mr Hancock was obtaining instructions from the deceased
regarding the Summer Hill development. It is said
that there was no evidence
that, at that time, Mr Hancock expressed any concerns regarding the
deceased’s capacity to give
him instructions on what was presumably a
complex transaction. I accept that Mr Hancock was seemingly comfortable in
taking instructions
from the deceased in 2008 (as I have already noted).
However, it is telling that Mr Hancock was clearly concerned as to the
deceased’s
change in instructions in June 2008 (as to Mr Mohr being asked
to vacate the Gordon home) and I would infer that Mr Hancock considered
the
deceased vulnerable to exploitation in at least some contexts.
- Fourth,
that in July 2008, Ms Bale unsuccessfully challenged the power of attorney
granted to Ms Chyna Schein in the Guardianship
Tribunal by seeking to review the
revocation of the power of attorney that had been granted to her previously. It
is noted that the
Tribunal determined that the deceased was capable of making
his own decisions. I accept the force of this submission although (as
the
defendants themselves emphasise in their submissions) the relevant time to
assess the deceased’s position is not July 2008
– it is February
2011; and it is well understood that capacity must be tested by reference to the
particular transaction at
hand – and may fluctuate. Moreover, Dr
Veitch’s report that was before the Tribunal was relatively guarded in its
terms.
In any event, the question for present purposes is not capacity but
vulnerability to exploitation.
- Fifth,
that in October 2008, Mr Andreacchio was writing directly to the deceased to
update him on the status of the sales and rentals
of the Summer Hill
development.
- Reference
is also made to Mr Darwiche’s evidence that, while he was performing the
clean-up works at the Forest Lodge Property
in 2010, the deceased taught him
some French; and to Pastor Vaughan’s description of a conversation that he
had with the deceased
on 17 February 2016 as “these were not like the
confused ramblings of an old man, but rather a man who was deeply hurt and
didn’t know where to turn for help”.
- Further,
the defendants say that if (which is denied) there was a relevant decline in the
deceased’s capacity, then Ms Bale
bears the onus to establish that the
defendants had knowledge of that decline (or incapacity).
- As
to Ms Bale’s submission (based on Mr Darwiche’s refusal in
cross-examination to concede that the deceased advised him
that his daughter was
of the view that the deceased was not of “sound mind”, that the
entirety of Mr Darwiche’s
evidence should be rejected), the
defendants say that this ignores Mr Darwiche’s oral evidence (and falls
into the “trap”
described by Nettle and Gordon JJ in Masson
as to reliance on documents settled by lawyers). Further, the defendants say
(and I accept) that, even if Mr Darwiche did refuse
to make the concession, that
would not be a basis to reject the entirety of his evidence. (In any event, I
have considered Mr Darwiche’s
evidence above.)
- The
defendants point out that the attempt by Ms Bale to have the power of attorney
restored occurred in 2008; and, therefore, that
evidence is not relevant to what
Mr Darwiche knew or did not know in relation to the deceased’s capacity in
February 2011.
(Pausing here, it might be relevant if Mr Darwiche had known of
the deceased in 2008 and was able to compare his condition then
and later in
2011 but it is not suggested that Mr Darwiche knew the deceased at that stage.)
The defendants say that the fact that
the 21 February Agreement referred to the
appointment of Ms Chyna Schein under a power of attorney and that it was upheld
following
a challenge in the Guardianship Tribunal does not assist Ms Bale. (I
agree.) It is noted that the 21 February Agreement is silent
as to why the
deceased had appointed Ms Chyna Schein as his attorney or why the power of
attorney was challenged; and it is submitted
that the challenge to the power of
attorney could have occurred for any number of reasons. Thus, the defendants say
that even if
(which is denied) the deceased was incapacitated, Ms Bale has
failed to establish that the defendants had or ought to have had any
knowledge
of that incapacity.
- Further,
the defendants maintain that the 21 February Agreement was not established to be
unfair or unreasonable. The defendants contend
that, by the time of the sale of
the Forest Lodge Property, foreclosure on the property by Suncorp was imminent.
- The
defendants emphasise that, immediately prior to the sale to Kimberley
Developments, the deceased was indebted to Suncorp in excess
of $285,000; and
that the deceased did not have any source of income other than the rent being
paid by Mr Moore (approximately $2,000
per month). It is noted that, in the
month prior to the sale, the deceased was incurring in excess of $3,500 per
month in interest
on the Suncorp facility (and that, prior to paying down the
Suncorp facility in the sum of $180,000 in August 2010, the deceased
was
incurring in excess of $5,000 per month for interest.)
- The
defendants say that the deceased was firm on the price, despite Mr Theo
Trigas’ attempts to secure the Forest Lodge Property
at a lower amount
(see Mr Arthur Trigas’ affidavit affirmed 25 February 2020 at [15]; see
also Mr Arthur Trigas’ evidence
at T 280.45-281.10). I treat that
evidence with no little degree of caution because I did not find either of the
Trigas brothers
to be credible witnesses; and the evidence is clearly
self-serving. The suggestion that the deceased was in a strong (or equal)
bargaining
position to that of Mr Theo Trigas or Mr Darwiche, as at February
2011, seems to me to be risible.
- Further,
it is said that, even if there was an inequality in the negotiations (which is
denied), the ultimate transaction was fair,
just and reasonable (referring to
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA
14 at 474 (Amadio)).
- As
to the question of relief, the defendants argue that if the deceased’s
estate is entitled to some form of relief the proper
measure of damages should
be limited to any difference between what was paid by Mr Theo Trigas in February
2011 (in this regard they
maintain that Mr Theo Trigas paid cash of some
$302,000 as well as discharging the mortgage, whereas I am not satisfied that a
cash
component was in fact paid to the defendant) and what the Forest Lodge
Property could have been expected to achieve at (what the
defendants say would
have been the inevitable) mortgagee sale around that time. This is on the basis
of the defendants’ contention
that, if the Forest Lodge Property had not
been sold to Kimberley Developments, Suncorp would have taken possession of the
Forest
Lodge Property in satisfaction of the outstanding debt, pursuant to its
powers of mortgagee sale. The defendants say that, based
on the evidence, on the
balance of probabilities any mortgagee sale was unlikely to achieve a sale of
more than $650,000.
- In
addition, it is submitted that the defendants should have credit for the costs
met by Kimberley Developments since owning the Forest
Lodge Property from
February 2011, net of the rent received from Mr Moore, which it is said is
substantial. The defendants seek leave
to adduce such evidence if
Ms Bale’s claim succeeds.
- As
noted above, the defendants say that the claims based on breach of contract and
the Contracts Review Act are statute barred. They similarly say that the
remaining equitable causes of action are also statute barred by the operation of
s 23 of the Limitation Act. It is said that Ms Bale has failed to
establish that the deceased was under a disability within the meaning of s 52 of
the Limitation Act in order to avoid the operation of the limitation
period.
- It
is convenient at this point to note the laches defence (which I deal with after
addressing the constructive trust claims below).
Reply
submissions
- In
her reply submissions, Ms Bale concedes that the medical evidence does not have
the precision that would be necessary for there
to be a finding that the
deceased’s impairment on 21 February 2011 was such that he did not have
the capacity to understand
the 21 February Agreement. However, it is said that
this does not mean that the evidence of medical decline would not be accepted
in
aid of a finding that the deceased was labouring under a special disadvantage,
of which the defendants were aware and of which
they took unconscionable
advantage.
- Reference
is made in that regard to Antov v Bokan [2018] NSWSC 1474 where reliance
had been placed on medical records submitted to the Guardianship Tribunal to
prove incapacity (see at [60]) and, although
the evidence did not support a
finding of a lack of capacity to execute the relevant agreement at the
particular point in time (see
at [540]), I concluded that the deceased’s
condition was such that she was in a situation of special disability or
disadvantage,
and that the relevant defendant must have known this, thus
grounding a finding of unconscionable conduct (see at [563]).
- Ms
Bale says that in the present proceeding even though the medical records would
not necessarily support a finding that the deceased
lacked capacity at the time
of the 21 February Agreement, when taken with other evidence of his mental
decline it would be accepted
that the deceased was under a special disadvantage
and could no longer protect his own interests.
- It
is reiterated that the defendants had knowledge of the deceased’s special
disadvantage on the basis that Mr Darwiche conceded
that the deceased told him
about it and Mr Darwiche also knew the deceased had a guardian and had been
before the Guardianship Tribunal.
- Finally,
it is said by Ms Bale that it was never put to Mr Andreacchio or Ms Bale in
cross-examination that they were mistaken about
the evidence they gave as to the
deceased’s mental decline; and it is submitted that this evidence should
be accepted as uncontested.
Determination
- As
the claims for statutory relief for unconscionable conduct and the claims at
general law for unconscionable conduct were brought
on the same facts and
circumstances, it is appropriate to consider those together.
- At
general law, a transaction may be voidable where a party makes unconscientious
use of his or her superior position or bargaining
power to the detriment of a
party who suffers from some special disability or is a placed in some special
situation of disadvantage
(see Amadio at 412 per Mason J). The essence of
such disadvantage or weakness is that the party is unable to judge for himself
or herself (see
Amadio at 425 per Deane J, there citing McTiernan J in
Blomley v Ryan at 392). Accordingly, it is not necessary to show that the
ascendant party is dishonest; rather, what must be shown is that the ascendant
party either had actual knowledge of, or knew of the facts which are such as to
raise in the mind of any reasonable person a very
real question as to the weaker
party’s ability to make a judgment as to what was in his or her best
interests (see Amadio at 413 per Mason J).
- In
Amadio, Deane J noted (at 474) that:
The equitable principles relating to relief against unconscionable dealing and
the principles relating to undue influence are closely
related. The two
doctrines are, however, distinct. Undue influence, like common law duress, looks
to the quality of the consent or
assent of the weaker party (see Union Bank
of Australia Ltd v Whitelaw, at p. 720; Watkins v Combes, at pp.
193-194; Morrison v Coast Finance Ltd, at p. 713). Unconscionable dealing
looks to the conduct of the stronger party in attempting to enforce, or retain
the benefit of,
a dealing with a person under a special disability in
circumstances where it is not consistent with equity or good conscience that
he
should do so.
- Deane
J went on in Amadio (at 474) to note that the jurisdiction of courts of
equity to relieve against unconscionable dealing extends generally to
circumstances
in which:
(i) a party to a transaction was under a special disability in
dealing with the other party with the consequence that there was
an absence of
any reasonable degree of equality between them and (ii) that disability was
sufficiently evident to the stronger party
to make it prima facie unfair
or ‘unconscientious’ that he procure, or accept, the weaker
party’s assent to the impugned transaction in
the circumstances in which
he procured or accepted it ...
- His
Honour there noted that where such circumstances are shown to have existed
“an onus is cast upon the stronger party to show
that the transaction was
fair, just and reasonable”.
- In
Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710 at 713 (to which
Deane J referred in the passage extracted above), the elements of an
unconscionable bargain were set out by Davey
JA as follows:
On such a claim the material ingredients [of an unconscionable bargain] are
proof of inequality in the position of the parties arising
out of the ignorance,
need or distress of the weaker, which left him in the power of the stronger, and
proof of substantial unfairness
of the bargain obtained by the stronger. On
proof of these circumstances, it creates a presumption of fraud which the
stronger must
repel by proving that the bargain was fair, just and reasonable
...
- Deane
J in Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61 (Louth v
Diprose) at 637 identifies two prerequisites to the engagement of
equity’s jurisdiction to relieve against unconscionable dealing:
first,
that a party to the transaction was under a special disability in dealing with
the other party such that “there was
an absence of any reasonable degree
of equality between them”; and, second, that that special disability was
sufficiently evident
to the other party to make it prima facie unfair or
unconscionable for that other party to have procured, accepted or retained the
benefit of the disadvantaged party’s
assent to the impugned transaction
“in the circumstances in which he or she procured or accepted it”.
Thus, in this formulation
of this second element, it is not merely knowledge of
the special disability which renders the impugned transaction unconscionable;
rather, it is the combination of such knowledge and the circumstances in which
the assent of the disadvantaged party to the transaction
was procured or
accepted. Deane J further observed (at 638) that “[t]he intervention of
equity is not merely to relieve the
plaintiff from the consequences of his own
foolishness. It is to prevent his victimisation”.
- Reference
was made in submissions by Ms Bale to Turner v Windever, where Austin J
adopted (see at [105]) the following summary of the elements of unconscionable
dealing (based on cases such as Blomley v Ryan per Kitto J; Amadio;
Louth v Diprose; and Bridgewater v Leahy (1998) 194 CLR 457; [1998]
HCA 66 (Bridgewater)): first, that the weaker party must, at the
time of entering into the transaction, suffer from a special disadvantage
vis-a-vis
the stronger party; second, that the special disadvantage must
seriously affect the weaker party’s capacity to judge or protect
his or
her own interests; third, that the stronger party must know of the special
disadvantage (or know of facts which would raise
that possibility in the mind of
any reasonable person); fourth, that the stronger party must take advantage of
the opportunity presented
by the disadvantage; and, fifth, that the taking of
advantage must have been unconscientious. His Honour observed that, once the
first three of those elements is established and the improvidence of the
transaction shown, the plaintiff’s task is “made
easier by an
equitable presumption to the effect that the improvident transaction was a
consequence of the special disadvantage,
and that the defendant has
unconscientiously taken advantage of the opportunity presented by the
disadvantage” (see at [106]).
- More
recently, in Kakavas v Crown Melbourne Limited (2013) 250 CLR 392;
[2012] HCA 25 (Kakavas) (at [152]; [154]) the High Court noted that
unconscionable dealing is a species of equitable fraud and referred to Garcia
v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48 (at [39]),
saying that Gaudron, McHugh, Gummow and Hayne JJ there “did not welcome
the use of constructive notice to establish
that a transaction is impeachable
for equitable fraud”. Their Honours read Mason J’s observation in
Amadio as speaking of wilful ignorance (that being “for the
purposes of relieving against equitable fraud, ... not different from
actual
knowledge” (see Kakavas at [156])); reference also being made in
this context to the statement by Lord Cranworth LC in Owen v Homan (1853)
4 HL Cas 997 at 1035; [1853] EngR 883; 10 ER 752 at 767). Thus, in approaching the
question of the requisite knowledge of the deceased’s special
disadvantage, constructive
notice may not be sufficient to engage the principle
against unconscionable dealing.
- (See
also as discussed in Turner v O’Bryan-Turner (2022) 398 ALR 711;
[2022] NSWCA 23 (Turner v O’Bryan Turner) at [138]-[150] per White
JA, there in the context of establishing requisite knowledge of a breach of
fiduciary duty; see in particular
[143], where his Honour cited the remarks of
Nourse LJ (with whom Ward and Sedley LJJ agreed) in Bank of Credit and
Commerce International (Overseas) Ltd (in liq) v Akindele [2001] Ch 437 at
Ch 455, who said that what was required was that “the recipient’s
stated knowledge should be such as to make it unconscionable
for him to retain
the benefit of receipt”). In Kakavas, the High Court (at [161])
referred to (“[e]quitable intervention to deprive a party of the benefit
of its bargain on the basis
that it was procured by unfair exploitation of the
weakness of the other party requires proof of a predatory state of
mind”).
- The
requisite disadvantage or disability must be one which seriously affects the
ability of the weaker party to make a judgment as
to his or her own best
interests (see, particularly, Amadio at 462 per Mason J, as his Honour
then was; Turner v Windever at [105] per Austin J). There is also a
distinction between knowledge of a special disability and exploitation of that
disability.
- There
may be room for debate as to whether the reference to an equitable presumption
is apt (or consistent with what has now been
said in Kakavas or, indeed,
with Brennan J’s observations in Louth v Diprose – see below)
(and, in that regard, see the discussion in Amit Laundry v Jain [2017]
NSWSC 1495 as to the nature of presumptions – they being aids to
evidentiary determination (described as “the bats of the law, flitting
in
the twilight, but disappearing in the sunshine of actual facts” in
Mackowik v Kansas City St J & C B R Co 94 SW 256, 262 (1906), quoted
with approval in Neilson v Letch (No 2) [2006] NSWCA 254 at [26] per
Mason P with whom McColl and Basten JJA agreed)). However, what is abundantly
clear is that, once the requisite elements of a
special disadvantage, knowledge
of that special disadvantage and improvidence of the transaction are
established, there is at least
an evidentiary onus on the stronger party to show
that the transaction was fair, just and reasonable or it may readily be
concluded
that the improvident transaction was procured by the unconscientious
taking of advantage of that special disadvantage.
- In
Louth v Diprose at 632, Brennan J’s formulation (slightly different
from that of Deane J, with whom Dawson, Gaudron and McHugh JJ agreed) (see
at
637) is to the onus being cast upon the stronger party to show that the
transaction was fair, just and reasonable where there
is a special disability
“with the consequence that there was an absence of any reasonable degree
of equality between them”
and that special disability was
“sufficiently evident to the other party to make it prima facie
unfair or ‘unconscionable’ that that other party procure, accept or
retain the benefit of, the disadvantaged party’s
assent to the impugned
transaction in the circumstances in which he or she procured or accepted
it”. His Honour went on to
say (at 632) that the inference that the gift
is the product of the exploitation may be drawn after “it is proved that
substantial
property has been given by a donor to a donee after the donee has
exploited the donor’s known position of special
disadvantage”; and his Honour said that it must arise “from the
facts of the
case; it is not a presumption which arises by operation of
law”.
- As
to the statutory prohibition on unconscionable conduct (contained in s 20
of the Australian Consumer Law), this applies to unconscionable conduct
generally, provided it occurs in trade or commerce. The legislation does not
alter or extend
the term unconscionable conduct beyond what is recognised under
the general law (see Jeannie Marie Paterson, Corones’ Australian
Consumer Law (2019, 4th ed, Thomson Reuters) at [4.40]; see also ACCC v
Samton Holdings Pty Ltd (2002) 117 FCR 301; [2002] FCA 62 at [49]- [50] per
Gray, French and Stone JJ). However, ss 236 and 237 of the Australian
Consumer Law provide for a limitation period of six years, and so the
plaintiff’s claim is statute-barred to the extent it is based on the
Australian Consumer Law unless reliance can be placed on the relevant
disability in this regard (as discussed earlier).
- I
have concluded that there was unconscionable conduct on the part of
Mr Darwiche and Kimberley Developments in relation to the circumstances
in
which the Forest Lodge Property came to be sold. That is, that the underlying
transaction (and not the 21 February Agreement)
was unconscionable and is liable
to be set aside. I have reached this conclusion for the following reasons.
- First,
as to the existence of a special disadvantage, it is not disputed that the
deceased was elderly at the time of the transaction
and, whatever his mental
capacity might have been diagnosed as being at the time, he was in an obvious
position of vulnerability
– being dependent on his much younger wife for
care and support (she holding his power of attorney). What is clear from the
objective fact of his admissions to hospital around the time of the sale
transaction is that the deceased had failing physical health.
Significantly, the
deceased was by then far removed in terms of location from his daughter,
Ms Bale; and had no independent legal
advice.
- In
Bridgewater, Gleeson CJ and Callinan J noted (at [41]) that absence of
legal advice, like age, or infirmity, may be of factual importance in
determining whether special disability or weakness exists. In that regard, while
the defendants suggest that Mr Churchill was acting
on the deceased’s
behalf or on his instructions (in relation to the drafting of the 21 February
Agreement), I am not satisfied
that the deceased received independent legal
advice. Mr Churchill was a longstanding friend or associate of
Mr Darwiche (and both
appear to have had a chequered history, to say the
least – Mr Darwiche referring to periods in which they were friends
and
periods in which they had little to do with each other; but at least at the
time of the proceeding Mr Darwiche was in contact with
Mr Churchill). At
the time of the sale, Mr Churchill signed the transfer as solicitor for the
transferee.
- Further,
the defendants’ emphasis upon the deceased’s financial need, given
the imminent risk of foreclosure on the Forest
Lodge Property, in my view tells
against any equal footing between the parties; rather, I consider this to be a
circumstance that
affected the deceased’s ability to conserve his own
interests and contributed to his position of disadvantage.
- Second,
as to whether Mr Darwiche (and through him Kimberley Developments) had the
requisite knowledge of that special disadvantage
or disability, it is clear that
(irrespective of whether Mr Darwiche was on notice of any declining capacity on
the deceased’s
part) he was aware of the deceased’s age and, on his
own evidence, Mr Darwiche was aware of the deceased’s financial
difficulties (see Mr Darwiche’s second affidavit at [14];
Mr Darwiche’s third affidavit at [69]). Mr Darwiche also knew
that Ms
Chyna Schein held the deceased’s power of attorney (from which he knew
that the deceased was at least vulnerable to
potential abuse in the exercise of
the power of attorney). Moreover, Mr Darwiche knew that at least to some extent
the deceased was
dependent on Ms Chyna Schein (insofar as he had deposed that
she was always in attendance at their meetings).
- Mr
Darwiche must also have known (or must have been wilfully blind) to the fact
that the deceased had no independent legal advice,
since the only lawyer who had
any involvement in the transaction was Mr Churchill – who was signing as
solicitor for the transferee)
and, on the findings I have made, the
21 February Agreement was one that was most likely drafted by
Mr Darwiche or on his behalf
by Mr Churchill and in any event with the
latter’s input and assistance. (The Trigas brothers’ evident disdain
for the
draft agreement – in emphatic terms – is not inconsistent
with it being prepared by or on Mr Darwiche’s instructions,
since Mr
Trigas bluntly described (albeit a malapropism) Mr Darwiche as “not the
smartest tool in the shed” at T 273.37.)
And Mr Darwiche’s proposed
involvement in the transaction is consistent with the incorporation of Kimberley
Developments with
Mr Darwiche as the sole shareholder and director (and with Mr
Theo Trigas not becoming a director until some time after the transaction).
Indeed, the lack of ability on the part of Mr Darwiche to finance a development
is not inconsistent with him being the controlling
mind of Kimberley
Developments at the relevant time (since the proposed transaction was to be
entirely at Mr Darwiche’s discretion
and, once the mortgage was discharged
– as to which it was not surprising that Mr Darwiche sought Mr
Trigas’ assistance,
there was little required of Mr Darwiche and his
company owned the legal title such that it was open to it to refinance (as
eventually
happened)).
- This
amounts to knowledge of the special disability in the present case, namely the
vulnerability to exploitation.
- As
to whether the relevant defendants unconscientiously exploited that special
disadvantage or disability, as noted, I have concluded
that (on the evidence)
there was no monetary compensation paid to the deceased on the transfer. That is
explicable if the deceased’s
understanding was that the consideration was
to be in the form of the benefits from a proposed joint development and the
issue of
shares in Kimberley Developments (as I have found was how the
arrangement was put to the deceased). However, none of that occurred.
- There
is no evidence from which I could conclude that the deceased (or Ms Chyna
Schein, whether in her capacity as his attorney or
otherwise) understood
(without the benefit of any independent legal advice) the terms of the
transaction (and, as Ms Bale points
out, there are aspects of the agreement that
simply do not make sense such as the failure to identify the Class A
shareholders).
Indeed, Ms Chyna Schein’s mistaken belief that the deceased
continued to own the Forest Lodge Property in 2016 during the NCAT
hearing
reinforces this conclusion.
- Therefore,
while there is a paucity of evidence in respect to the events that led to the
transfer of the Forest Lodge Property, I
can comfortably infer that, not only
was there was a lack of assistance or explanation from Mr Churchill as to
the transaction (where
assistance or explanation of some kind was clearly
necessary) (see Stubbings v Jams 2 Pty Ltd (2022) 399 ALR 409; [2022] HCA
6 at [94]; Blomley v Ryan at 405 per Fullagar J), but further that Mr
Darwiche made representations to the deceased (and Ms Chyna Schein), in the
context of
the document provided to them and which they clearly executed with
some formality, that the transfer would be in the context of an
arrangement for
the development of the Forest Lodge Property (and that the deceased would retain
some interest in the property or
obtain some benefit through a shareholding in
the company that was to develop or act as borrower for the development of that
property
– i.e., Kimberley Developments).
- Third,
as to the improvidence of the transaction, I consider that the transaction was
grossly improvident in that, while it enabled
the deceased to discharge the
mortgage to Suncorp, it left him with no monetary consideration for the sale of
his only remaining
asset (and even on the defendants’ account, had the
property been sold to Mr Moore at the time the offer was rejected or even
in
2011) the deceased would have obtained roughly half of the sale proceeds.
- Therefore,
I consider that it fell to Mr Darwiche and Kimberley Developments to put forward
evidence to show that the transaction
was fair, just and reasonable such that it
can be found not to have been procured by unconscientious dealing; and I am not
satisfied
that they have satisfied that evidentiary (albeit not legal)
burden.
- Equitable
intervention is justified not merely to relieve the deceased from the inadequacy
of consideration, but (as noted in the
above authorities) to prevent his
victimisation. While I accept that Mr Darwiche may not have known of the
deceased’s cognitive
decline (or extent of that decline; and I cannot
assess the extent of that decline in any event), I am confidently satisfied that
Mr Darwiche knew about the deceased’s advanced age, his lack of
independent legal advice and his poor finances. Indeed, the
pressure of the
(said to be imminent) foreclosure was relied upon by the defendants as an
explanation for the circumstances in which
the transfer was executed and that
the Trigas brothers’ usual conveyancers did not act on the transaction.
- As
to Mr Darwiche’s awareness of the deceased’s dependence upon
Ms Chyna Schein, Mr Darwiche’s own evidence was
that Ms Chyna Schein
was always present at their meetings (see his third affidavit at [28]), and that
the 21 February Agreement expressly
referred at cl 31 to Ms Chyna
Schein’s valid power of attorney in respect of the deceased. Mr
Darwiche’s pursuit of the
benefit from the deceased, by putting to the
deceased the shareholding arrangement to induce him to transfer ownership of the
Forest
Lodge property, is suggestive of predatory behaviour (though I note that
even if I am wrong as to this factual finding, the equity
to set aside the
contract is enlivened by passive acceptance of that benefit as well as active
pursuit – see Bridgewater at [122] per Gaudron, Gummow and Kirby
JJ; Lopwell Pty Ltd v Clarke [2009] NSWCA 165 at [52] per Macfarlan JA
(with whom Ipp and Campbell JJA agreed); see also Australian Securities and
Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18 at [149] per
Nettle and Gordon JJ).
- In
circumstances where there is serious reason to doubt that the deceased
appreciated the significance of the transaction (particularly
in light of the
evidence that the deceased had rejected two previous offers of $650,000) and
serious reason to conclude that the
deceased was dependent on Ms Chyna Schein at
the time, I find that the deceased and Mr Darwiche were meeting on unequal terms
and
that Mr Darwiche was well aware of the deceased’s vulnerability to
exploitation (indeed I accept Ms Bale’s submission
that this was what made
the deceased a target for exploitation).
- In
the absence of a logical explanation for the transfer in the unorthodox
circumstances that I find occurred, I therefore conclude
that Mr Darwiche
(and through him Kimberley Developments) unconscientiously took advantage of his
superior position in order to obtain
a benefit to the deceased’s
disadvantage through a grossly improvident transaction, and that Ms Bale has
established her claim
for relief on the basis of unconscionable conduct at
general law.
- I
do not accept the defendants’ submissions that the plaintiff’s claim
for unconscionable conduct is statute barred. Statutes
of limitation do not
generally apply to the equitable claims except insofar as any provision thereof
may be applied by the court
by analogy (see s 23 of the Limitation Act;
see also J W Carter, Greg Tolhurst and Keith Mason, Mason &
Carter’s Restitution Law in Australia (2021, 4th ed, LexisNexis) at
[2736]). For the reasons set out by Merkel J in Gregg v Tasmanian Trustees
Ltd (1997) 143 ALR 328; [1997] FCA 128 at 365-366, I do not consider that
the Australian Consumer Law applies by analogy to limit the
plaintiff’s claims in equity. A statute only applies by analogy where the
Act in terms bars
the equitable remedy, and when it is conscionable to do so
(see also Michael Liu, ‘Application of Limitation by Analogy: Equity
Exceptions’ (2016) 25 Australian Property Law Journal 150). In the
present case, I consider that it would be unconscionable to bar the
plaintiff’s equitable remedy to have the transaction
set aside, in light
of my findings as to when Ms Bale first became aware of the circumstances of the
transaction (see further discussion
below as to the defence of
laches).
Laches
- This
brings me to consider the defence of laches. Reference is made by the defendants
to Kaye v Strandbags Group [2006] NSWSC 1015 where Campbell J (as his
Honour then was) identified the two different types of laches (see at [62]) and
referred to a defence of
laches relating to mere delay (see from [63]-[64]). The
defendants say that the following factors are relevant to this defence.
- First,
that Mr Theo Trigas gave evidence that the Forest Lodge Property had been used
to obtain a loan in May 2012 for the sum of
$400,000, which loan was increased
to $700,000 in September 2017. In those circumstances, it is said that, due to
the absence of
any complaint to the defendants from anyone after 21 February
2011 that there were any issues with the sale of the Forest Lodge Property,
and
the use that Mr Theo Trigas and Super Start have made of the Forest Lodge
Property, it would be inequitable now to permit Ms
Bale to complain and to
obtain the relief she seeks.
- Second,
in terms of the length of the delay, it is submitted that it should be found
that Ms Bale was aware of the sale of the Forest
Lodge Property as at March
2011. It is noted that Ms Bale was using or had access to a particular email
address and that the objective
documentary evidence establishes that that
particular email address was included on email correspondence from
Mr Zounis sent on 21
March 2011, in which he confirmed his understanding
that the Forest Lodge Property had been sold by the deceased. The defendants
point out that Ms Bale did not dispute that she received that email; rather, her
evidence was that she could not recall if she had
received it.
- It
is submitted that even if such a finding (i.e., as to Ms Bale’s awareness
of the sale as at March 2011) is not made, Ms Bale’s
evidence was that she
had assumed that the Forest Lodge Property had been sold when the deceased
became a pensioner in April 2011
(although the defendants accept that the
evidence is not clear if Ms Bale was aware of that fact in 2011 or in 2015). The
defendants
say that, at the very latest, Ms Bale became aware of the transfer of
the Forest Lodge Property to Kimberley Developments in August
2016.
- It
is noted that this proceeding against Kimberley Developments and
Mr Darwiche was not commenced until 24 July 2018 and that Mr Theo
Trigas
and Super Start were not joined as parties until 10 June 2019. The defendants
say that, having regard to the issues in the
proceeding, that period of delay is
inordinate. Taking into account the fact that the deceased lived with Kimberley
Developments
from 2015 and that there is no evidence of any complaint or
communication to the defendants regarding the alleged non-compliance
with their
obligations under the 21 February Agreement, it should be found that the
deceased (and now Ms Bale) have abandoned any
rights they may have had in
relation to the 21 February Agreement.
- I
accept Ms Bale’s evidence that it was not until the NCAT hearing that
Ms Bale relevantly became aware of the transaction (since
I am not
satisfied that Ms Bale took particular note of the March 2011 email from Mr
Zounis and it did not make any reference to
the grossly improvident terms of the
transaction). In any case it was not until that time that Ms Bale was granted
power of attorney
in respect of the deceased in order to pursue these claims).
It follows that I am not satisfied on the balance of probabilities
that Ms Bale
became aware of the terms on which the transfer of the Forest Lodge Property
occurred in 2011 (as the defendants contend),
at most becoming aware or assuming
that it had been sold.
- In
those circumstances, it would be unconscionable for the defendants to rely upon
a right to enforce a statutory limitation by analogy,
and particularly so where
there is no counterpart limitation period for a cause of action arising in
equity. Thus, the defence of
laches is not made out.
- I
consider below the relief to be granted, as this is relevant to the claims made
against Mr Theo Trigas and Super Start.
Claims for breach of
constructive trust and accessorial liability
- Next,
I address the claims made against Kimberley Developments, Mr Theo Trigas
and Super Start for breach by Kimberley Developments
of the (constructive) trust
on which Ms Bale contends that Kimberley Developments held the Forest Lodge
Property; and for disbursement
of trust funds in breach of trust (see [69]-[71])
and breach of trust in the transfer of the funds to Super Start, in which it is
alleged that Mr Theo Trigas was knowingly concerned (see [72]-[74]). Ms
Bale seeks damages against Kimberley Developments and Mr
Theo Trigas and
the return of the moneys that formed part of the constructive trust (see
[75]).
- As
pleaded, the allegations are as follows. At [69] that Kimberley Developments
held the deceased’s interest in the Forest Lodge
Property on constructive
trust (by reason of the failure by Kimberley Developments to pay the
consideration in the 21 February Agreement
or any consideration at all). At
[69A] it is alleged that the following was each a matter of “corporate
knowledge of Kimberley
Developments”: the terms and conditions of the
21 February Agreement; the amount of consideration that Kimberley
Developments
and Mr Darwiche agreed to pay for the property; that Kimberley
Developments and Mr Darwiche had not paid that consideration; and
that Kimberley
Developments held the deceased’s interest on constructive trust by virtue
of the fact that Kimberley Developments
and Mr Darwiche had not paid the
agreed amount of consideration.
- At
[69A] (where second appearing), it is alleged that, as sole director of
Kimberley Developments, Mr Theo Trigas had knowledge of
the fact that
Kimberley Developments held Ms Bale’s interest in the Forest Lodge
Property on constructive trust (specifically,
knowledge that: Kimberley
Developments did not pay the agreed amount of consideration for the property;
the terms and conditions
of the 21 February 2011 contract; and that the deceased
lacked the capacity to enter into the contract to sell the property) (although
the last of those facts is presumably no longer pressed given the abandonment of
the lack of capacity claim).
- At
[70] it is alleged that in breach of trust Kimberley Developments and
Mr Theo Trigas encumbered the trust property with the $700,000
mortgage
facility; at [71] that in breach of trust they then disbursed those funds and
did not use the funds to develop the property.
- At
[72] it is alleged that an amount of $699,000 of the trust funds were
transferred to Super Start; and at [73] that Super Start
was aware that those
funds were held on constructive trust for Ms Bale and that their transfer to
Super Start was in breach of that
trust (this being particularised by reference
to the position of Mr Theo Trigas as sole director of both Kimberley
Developments and
Super Start).
- At
[74] it is alleged that Mr Theo Trigas was knowingly concerned in the
breach of trust by Kimberley Developments (by reason of the
matters pleaded at
[69]).
- At
[75], as noted above, the relief claimed is in effect for the return of the
funds borrowed against the property.
Plaintiffs’
submissions
- Ms
Bale maintains that, if it is accepted (as I have found) that the Forest Lodge
Property was acquired pursuant to an equitable fraud,
and that the transfer is
liable to be set aside, then Kimberley Developments holds the Forest Lodge
Property on trust for the deceased’s
estate. On that basis it is contended
that Mr Theo Trigas and Super Start received trust property from Kimberley
Developments in
breach of the trust and for their own personal benefit. The
evidence is that the moneys were used by Super Start to maintain or increase
its
stock levels.
- Ms
Bale says that the question that here arises is whether the defendants’
conduct (here referring, as I understand it, to the
conduct only of Kimberley
Developments) constitutes an equitable wrong, which turns on what the defendants
knew, or ought to have
known, or were on notice of, in relation to the breach of
trust (reference being made to Lee v Sankey [1873] UKLawRpEq 6; (1873) LR 15 Eq 204 at 211
and Consul Development Pty Ltd v DPC Estate Pty Ltd (1975) 132 CLR 373;
[1975] HCA 8 (Consul)). It is noted that equitable notice includes
constructive notice (within at least the first four categories of knowledge
articulated
in Baden Delvaux & Lecuit v Société
Générale Pour Favoriser le Developpement du Commerce et de
L’Industrie en France SA [1993] 1 WLR 509 (Baden) at 576 [250]
per Gibson J; cited with approval by the High Court in Farah at
[174]-[178]).
- It
is contended that if Mr Theo Trigas (and therefore Super Start) knew that
Kimberley Developments’ only asset had been obtained
by the unconscionable
conduct of Mr Darwiche, then the estate’s case for breach of trust (by
encumbering the property and disbursing
the funds to Super Start) is made good.
It is noted that a person who takes a transfer of trust property knowing that
the transfer
is in breach of trust, holds the property subject to the trust
(reference being made to P Butt, Land Law (6th ed, 2010, Thomson Reuters)
at [20-105]).
- Ms
Bale argues that Mr Theo Trigas and Super Start had the requisite knowledge. It
is said that, if it be accepted that the defendants
have lied as to the payment
of large amounts of money to the deceased, that will corroborate the alternative
view that the transfer
was procured by a sham agreement devised by the second
defendant to take advantage of the deceased. It is submitted that if the cash
payment account is not accepted, then it is inconceivable that Mr Theo Trigas
(and therefore Super Start) was not aware of how Mr
Darwiche acquired the
property from the deceased. (It is submitted that it is that very knowledge
which has compelled them to manufacture
an alternative version of events.)
- Ms
Bale contends that Mr Darwiche and Mr Theo Trigas have colluded with
Mr Arthur Trigas in the “concocted cash payment story”.
It is
said that although these individuals have been very careful to attempt to
“insulate” Mr Theo Trigas from direct
involvement in the
handing over of the “cash” it is “somewhat of a fantastic
notion” to suggest that he had
no knowledge of the actual transaction.
Further, reliance is placed on the fact that Mr Darwiche, despite his claims to
the contrary,
was still involved in the management of the Forest Lodge Property
years later. (In this regard, I note that Mr Moore, the current
tenant of the
Forest Lodge Property as at 13 February 2019, deposed at [7] of his affidavit
that Mr Darwiche continued to attend
the property and make demands for
outstanding rent moneys.)
- Ms
Bale thus submits that it is plain that Mr Theo Trigas and Super Start have
knowingly received property in breach of trust and
are liable to make the trust
whole by removing the encumbrance on the property.
- It
is noted that, in the case of a constructive trust, the enquiry is not as to the
actual or presumed intentions of the parties,
but as to whether, according to
the principles of equity, it would be a fraud for the party in question to deny
the trust (Ms Bale
here citing Cardozo CJ in Beatty v Guggenheim Exploration
Co (1919) 122 NE 378 at 380; that “when property has been acquired in
such circumstances that the holder of the legal title may not in good conscience
retain the benefit interest, equity coverts him into a trustee” cited with
approval Hospital Products Ltd v United States Surgical Corp ( 1984) 156
CLR 41; [1984] HCA 64 at 108). It is further noted that, where conduct of the
defendant is held to have been unconscionable and liable to be set aside,
if
legal title to the property passed to the defendant pursuant to that
transaction, it will usually be held that the defendant holds
it on constructive
trust for the plaintiff (see Amadio).
- Ms
Bale says that the involvement of Mr Theo Trigas as the apparent true purchaser
is a fabrication designed to try and put distance
between Mr Darwiche and
the transaction complained of.
- As
to the claims against Mr Theo Trigas and Super Start, it is noted that Kimberley
Developments registered a change in directors
in February 2012, the new sole
director being Mr Theo Trigas; and that, as noted above, Kimberley Developments
took out a mortgage
over the Forest Lodge Property in the amount of $700,000 and
transferred those funds to Super Start. The claim as against these defendants
is
that Mr Theo Trigas knew that either the deceased lacked the capacity to enter
into the transaction for the sale of the property
(though this capacity issue is
no longer pressed as I understand it) or knew that Kimberley Developments and Mr
Darwiche had proposed
a sham transaction in order take advantage of the
deceased’s cognitive decline.
- It
is said that because Mr Theo Trigas had that knowledge, Mr Theo Trigas knew that
Kimberley Developments held the Forest Lodge Property
on constructive trust for
the deceased when he became director and sole shareholder.
- Ms
Bale contends that mortgaging the Forest Lodge Property and giving the funds to
Super Start was a breach of the trust; and that
Super Start was aware of that
breach because Mr Theo Trigas was also the controlling mind of Super Start. Ms
Bale now seeks the repayment
of the funds, that the encumbrance be removed, and
that the trust property be made whole again.
- The
defendants concede that the claims for breach of constructive trust and
accessorial liability are not statute-barred (T
359.44-360.18).
Determination
- It
should be noted at the outset that what is not pleaded (or at least not clearly
pleaded) is that Mr Theo Trigas (or Super Start
through his directorship)
was knowingly concerned in the unconscionable conduct alleged on the part of
Mr Darwiche and Kimberley
Developments, as such (although, as noted
earlier, there is an allegation that Mr Theo Trigas was “knowingly
concerned in the
breach of trust of [Kimberley Developments]” by virtue of
the matters pleaded at [69] (which, unhelpfully, is a reference to
the
allegation that Kimberley Developments held the deceased’s interest in the
property on constructive trust; but then goes
on to allege that Kimberley
Developments did not pay the consideration contained in the (alleged) contract
for the property “or
any consideration at all”).
- What
is alleged, consequent upon the allegation that Kimberley Developments held the
deceased’s interest in the Forest Lodge
Property on constructive trust
(which, given the defendants’ denial of the 21 February 2011 Agreement,
must mean his interest
as registered proprietor of that property prior to its
transfer to Kimberley Developments) is that it was a breach of that trust
to
encumber the property (with the NAB mortgage) and to obtain funds (the trust
funds) which were not used for the purposes of the
development; thus it is said
that in the hands of Mr Theo Trigas or Super Start the moneys raised by the
mortgage over the Forest
Lodge Property are themselves trust property and must
be restored to the trustee (Kimberley Developments). As noted earlier, the
allegations against Mr Theo Trigas appear to amount to allegation of knowing
assistance (expressed as “knowing concern”)
in the alleged breach of
trust; whereas the allegations against Super Start can only sensibly be
understood as allegations of knowing
receipt of trust property. In those
circumstances it appears clear that Ms Bale is relying (against different
defendants) on both
limbs of Barnes v Addy [1874] UKLawRpCh 20; (1874) LR 9 Ch App 244
(Barnes v Addy).
- Insofar
as Ms Bale claims damages, it would appear that this is referable to the
position if the title is revested in the deceased’s
estate but subject to
a mortgage in favour of the NAB. If, on the other hand, the property were to be
transferred back to the deceased
estate on an unencumbered basis then it is
difficult to see what damages would have been suffered by the deceased
estate.
- As
already noted, the claims against Mr Theo Trigas and Super Start are predicated
on a constructive trust having arisen or being
now recognised as being imposed
in respect of the deceased’s interest in the Forest Lodge Property (which
trust Kimberley Developments
is then said to have breached in the manner for
which Ms Bale contends).
- Insofar
as the claim is one of knowing receipt of trust property within the first limb
of Barnes v Addy the requisite knowledge for such a claim (see
Baden), would include knowledge of circumstances which would indicate the
facts to an honest and reasonable person (i.e., a general understanding
that
fraud, breach of trust or breach of fiduciary duty had occurred). Baden
category four knowledge does not include facts not actually known to the
defendant (other than those known to an agent, for example,
where such actual
knowledge is imputed to them).
- Owen
J in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9)
[2008] WASC 239 (Bell) at first instance (see at [932]), in analysing
the Baden categories, said:
932. ... Items (2) and (3) are often referred to as species of
actual knowledge. The latter two categories are forms of constructive
knowledge.
Item (2) is commonly called ‘Nelsonian blindness’. Proof of the
kinds of knowledge in (4) and (5) may be sufficient
to allow a court to infer,
in the absence of proof to the contrary, that a person had one of the subjective
states of mind referred
to in (1), (2) or (3) ...
- As
to any claim of knowing assistance, I note that in Bell (at [4740]) his
Honour observed that the knowledge required under the second limb (i.e., for
knowing assistance) had been authoritatively
settled by the High Court in
Farah, and Owen J quoted (at [4741]) the judgment of the High Court in
Farah, specifically:
177. The result is that Consul supports the proposition
that circumstances falling within any of the first four categories of Baden
are sufficient to answer the requirement of knowledge in the second limb of
Barnes v Addy, but does not travel fully into the field of constructive
notice by accepting the fifth category. In this way, there is accommodated,
through acceptance of the fourth category, the proposition that the morally
obtuse cannot escape by failure to recognise an impropriety
that would have been
apparent to an ordinary person applying the standards of such persons.
- As
to the allegation that there was “corporate knowledge” that the
property was held on constructive trust, what seems
here to be contended is that
the relevant defendants were on notice of the matters said to give rise to the
imposition of a constructive
trust. As I have had cause to observe elsewhere, it
seems inherently unlikely that non-lawyers, such as Mr Theo Trigas (or
Mr Darwiche
for that matter) would have had an understanding as to the
notion of a constructive trust (impugned as a “vague dust-heap”
by
Professor Edward Sykes in his 1941 article – see E Sykes, “The
Doctrine of Constructive Trusts” (1941) 15 Australian Law Journal
171, 175; as noted in P Young, C Croft, ML Smith, On Equity (2009,
Thomson Reuters) at [6.670]). However, they were clearly on notice of matters
from which a conclusion of constructive trust
is here being said to arise.
- In
Farah, the High Court said (at [179]; [186]) that the relevant passages
in Consul establish, at Australian law, that dishonest and fraudulent
designs can include not only breaches of trust but also breaches of fiduciary
duty, but that any breach of trust or breach of fiduciary duty relied on must be
dishonest and fraudulent (and that “dereliction
of duty is insufficient to
merit the description ‘dishonest and fraudulent’”).
- As
to knowing receipt, it has been said that “knowledge” means a third
party’s knowledge that the relevant property
was trust property being
misapplied or transferred pursuant to a breach of fiduciary duty or trust. The
requisite degree of knowledge,
on the part of the third-party recipient, in
claims of this class was considered by the Full Court of the Federal Court in
Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6.
Relevantly, the Court (Finn, Stone and Perram JJ), in an unanimous judgment,
said (at [268]):
268. The High Court in Farah Constructions did not
settle the knowledge/notice requirement in relation to recipient liability.
Nonetheless, from at least the 1990s and in the
wake of the Baden
classification, judges had begun in recipient liability cases to generalise from
what had been said both by Gibbs J (at 398) and
by Stephen J (at 412) with whom
Barwick CJ agreed, about the insufficiency of traditional, or category (v),
constructive notice —
though not of category (iv) notice — as a
basis for personal liability. To allow that, as Stephen J commented, would be
“to
disregard equity’s concern for the state of conscience of the
defendant”: at 412; see eg Equiticorp Finance Ltd (in liq) v Bank of
New Zealand (1993) 32 NSWLR 50 at 103G; Koorootang Nominees Pty Ltd v
Australia and New Zealand Banking Group Ltd at 105; Hancock Family
Memorial Foundation at 209; Tara Shire Council v Garner [2002] QCA 232; [2003] 1 Qd R
556 at [66]- [72]; Spangaro v Corporate Investment Australia Funds Management
Ltd [2003] FCA 1025; (2003) 54 ATR 241 at [54]- [60]; see also United States Surgical
Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157 at
252-254. In Kalls Enterprise Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; (2007) 63 ACSR
557 — a decision which post-dates Farah Constructions — the
New South Wales Court of Appeal applied Baden’s categories (i)-(iv), but
not category (v) to a knowing receipt
claim. Kalls Enterprise in turn has
been applied subsequently: see eg Horsman v MG Kailis Pty Ltd [2009] WASC
166; Fodare Pty Ltd v Shearn (2011) 29 ACLC 11-036.
- Accordingly,
for the purposes of knowing receipt, knowledge in any of the four Baden
categories identified above is sufficient. As the Full Court went on to say
(at [269]-[270]):
269. There is, in other words, an established line of judicial
decision and opinion both at first instance and in intermediate
courts of appeal
spanning at least 20 years adhering to the view taken in the above cited cases.
We do not consider that that view
is plainly wrong and should be rejected. On
the contrary! Finally, for the sake of completeness, we should note we do not
consider
that what was said by Bryson J in Maronis Holdings Ltd v Nippon
Credit Australia Pty Ltd [2001] NSWSC 448; (2001) 38 ACSR 404 at [469]- [478] is inconsistent
with that view. Commendably, his Honour emphasised the fault based character of
recipient liability: “[u]nconscionability
cannot be fictionalised, and the
grounds on which constructive trust liability is imposed should be real and
substantial”:
at [471].
270. Accordingly, we do not consider the primary judge erred in
law in finding that knowledge falling within category (iv) of Baden was
sufficient for the imposition of liability for knowing receipt...
- In
Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007]
NSWCA 191, the Court of Appeal (Giles JA, with whom Ipp JA and Basten JA agreed)
held that it is sufficient, in a claim for knowing receipt,
that the third party
recipient had constructive knowledge of the kind captured in the fourth category
(but not the fifth) in the
classification deployed in Baden (see at
[199]).
Relief
- The
primary relief claimed by Ms Bale is for the transaction to be set aside.
- There
are a number of factors that might be said to override such an election (see
Grimaldi at [256], [503]-[511], [667], [672]-[681]; see also Paul Finn
‘Equitable Doctrine and Discretion in Remedies’ in William
Cornish,
Richard C Nolan, Janet O’Sullivan and G J Virgo, eds, Restitution:
Past, Present and Future (1998, Hart Publishing) at p 273). In this regard,
it is perhaps trite to note the “cardinal principle of equity that the
remedy
must be fashioned to fit the nature of the case and the particular
facts” (Warman International Ltd v Dwyer (1995) 182 CLR 544;
[1995] HCA 18 (Warman) at 559).
- The
relevant question is whether the imposition of a remedial constructive trust
over the property would be a disproportionate response
having regard to the
extent of the benefit which was attributable to defendants’ wrongdoing,
being the failure to give adequate
consideration for the transfer of the
property (whether in the form of a 60% shareholding in Kimberley Developments as
per the proposed
21 February Agreement or in the form of a cash component in
respect of the purchase price).
- One
relevant matter is that the email dated 18 January 2011 from Suncorp clearly
shows that the deceased was under significant pressure
at the time to sell the
Forest Lodge Property in order to discharge the mortgage. Thus, the defendants
argue that to revest title
to the property would place the deceased in a better
position than he would have been in prior to the unconscionable conduct of the
defendants, as the deceased’s estate would then receive the benefit of the
increased value of the property. Against this, Ms
Bale contends that not to
revest the title would permits the defendants to take advantage of their own
wrongdoing.
- If
it could be said that equitable compensation in effect to enforce the
consideration under the 21 February Agreement would adequately
compensate the
deceased’s estate, that might be an argument against setting aside the
transfer. However, that would require
the issue of shares in Kimberley
Developments and the parties to be bound to a development arrangement that
neither side seems prepared
to undertake. For the reasons given. I consider
that those orders are not capable of doing full justice, and that there is force
to the argument that a remedial constructive trust should be imposed and the
transfer set aside (see Bathurst City Council v PWC Properties Pty Ltd
(1998) 195 CLR 566; [1998] HCA 59 at [42]; John Alexander’s Clubs
Pty Ltd v White City Tennis Club Pty Ltd (2010) 241 CLR 1; [2010] HCA 19
at [128]- [129]).
- In
this regard, the distinction between institutional and remedial constructive
trusts should be noted. There has been much debate
in academic and judicial
circles as to the merits or legitimacy of the so-called remedial constructive
trust, as opposed to the institutional
constructive trust (see J McGhee,
Snell’s Equity (32nd ed, 2010, Sweet & Maxwell), [26-015]; and,
for comment by the English appellate courts upon the difference between the
institutional constructive trust and the remedial constructive trust, see, in
the context of mistaken payments, Westdeutsche Landesbank Girozentrale v
Islington London Borough Council [1996] UKHL 12; [1996] AC 669 (Westdeutsche) at
714-715; and, in the context of profit derived from fraud, Halifax Building
Society v Thomas [1996] Ch 217 at 228-229). The significance of the
distinction lies in the time at which the trust is said to come into existence
and whether it exists independently of any court order.
- In
Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 (Giumelli)
at [4] per Gleeson CJ, McHugh, Gummow and Callinan JJ, it was said that:
The term “constructive trust” is used in various senses when
identifying a remedy provided by a court of equity. The
trust institution
usually involves both the holding of property by the trustee and a personal
liability to account in a suit for
breach of trust for the discharge of the
trustee's duties. However, some constructive trusts create or recognise no
proprietary interest.
Rather there is the imposition of a personal liability to
account in the same manner as that of an express trustee. An example of
a
constructive trust in this sense is the imposition of personal liability upon
one “who dishonestly procures or assists in
a breach of trust or fiduciary
obligation” by a trustee or other fiduciary. [citations omitted]
- The
distinction was considered at length by Gleeson JA, with whom Meagher and
Barrett JJA agreed, in Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA
462 at [149]- [152]). The scope of the remedial trust was outlined by Deane J in
Muschinski v Dodds at 614, where his Honour observed that “the
constructive trust can properly be described as a remedial institution which
equity
imposes regardless of actual or presumed agreement or intention to
preclude the retention or assertion of beneficial ownership of
property to the
extent that such retention or assertion would be contrary to equitable
principle”. An institutional constructive
trust, broadly speaking, arises
by operation of law as from the date of the circumstances which give rise to the
trust, whereas a
remedial constructive trust is an enforceable equitable
obligation that is retrospective in nature (see, for example, Baumgartner v
Baumgartner (1987) 164 CLR 137; [1987] HCA 59). In Westdeutsche at
714 Lord Browne-Wilkinson (with whom Lords Glynn and Lloyd agreed) said the
following of the distinction between institutional
and constructive trusts:
... Under an institutional constructive trust, the trust arises by operation of
law as from the date of the circumstances which give
rise to it: the function of
the court is merely to declare that such trust has arisen in the past. The
consequences that flow from
such trust having arisen (including the possibly
unfair consequences to third parties who in the interim have received the trust
property) are also determined by rules of law, not under a discretion. A
remedial constructive trust, as I understand it, is different.
It is a judicial
remedy giving rise to an enforceable equitable obligation: the extent to which
it operates retrospectively to the
prejudice of third parties lies in the
discretion of the court. ...
- However,
the distinction may not be apposite or useful in certain contexts, for example
in cases concerning proprietary estoppel (see
McNab v Graham (2017) 53 VR
311; [2017] VSCA 352 (McNab v Graham) at [107]-[112]; [115]-[124] per
Tate JA, with whom Santamaria JA and Keough AJA agreed). In McNab v
Graham (at [102]; [107]; [108]) albeit in the context of an estoppel case,
it was said by Tate JA that, generally speaking and subject to
consideration of
all the relevant circumstances (as to which, see the discussion in Giumelli
and Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA
84)):
... where detrimental reliance upon a promise gives rise to a constructive
trust, in the context of an estoppel, the constructive
trust comes into the
existence before a court makes any order. It comes into existence at the time of
the conduct which gives rise
to the trust. ...
... The relevant time is the time at which there is reliance on a promise giving
rise to the estoppel, that is, the time of the reliance which would render
departure from the fulfilment of the promise unconscionable. ...
This approach also resolves the apparent paradox that it is a matter for the
court whether to make an order declaring a constructive
trust or grant a lesser
form of relief where there are relevant third parties who may be prejudiced by
such an order, for example,
by giving rise to an unfair priority to the
beneficiaries of a constructive trust against general creditors. This may give a
sense
that the court is ‘creating’ the trust and that it has no
existence independently of the order ... But the apparent paradox
is no more
than that associated with the maxim nunc pro tunc, that is, that equity
regards as done that which ought to be done. While it is for a court to
determine whether to declare a constructive
trust, the date the trust comes into
existence is the date from which the equitable interest, the interest in land,
arises. That
date is, as mentioned, when the conduct occurs that gives rise to
the trust; the date when the detrimental reliance renders it unconscionable
to
depart from the promise.
[my emphasis; citations omitted]
- Finally,
I note that in Ancient Order of Foresters in Victoria Friendly Society Ltd v
Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43,
Gageler J, having considered what a defendant must demonstrate in order to
establish that it is inequitable to order an account
of the value of the whole
of the identified benefit or gain (see at [92]) went on to caution (at [94])
that, “[t]he judgment
to be made [i.e., as to relief] must accommodate the
stringency of the equitable obligation to be vindicated to the need to ensure
that the remedy is not ‘transformed into a vehicle for the unjust
enrichment of the plaintiff’” (quoting Warman at 561).
- I
have concluded that, in the circumstances, the unconscionable dealings were such
that in equity a constructive trust should be imposed
from the time of the
relevant transaction. I also consider that Mr Theo Trigas (as was, through him,
Super Start) was on notice of
the facts that would have indicated to an honest
and reasonable man that Kimberley Developments held the Forest Lodge Property
for
the benefit of (i.e., on trust for) the deceased, in circumstances where
Kimberley Developments had acquired the property without
payment of any cash
consideration (and without any intention to adhere to the arrangements put
forward to the deceased under the
21 February Agreement). That Mr Darwiche
and Mr Theo Trigas had no intention to adhere to the arrangements outlined in
that document
was made abundantly clear by their evidence in
cross-examination.
- In
those circumstances the claim for damages for breach of trust does not arise. I
note that Ms Bale concedes that Mr Theo Trigas
discharged the Suncorp mortgage
on the Forest Lodge Property and would be entitled to receive the return of the
mortgage sum if the
transfer of the property were to be set aside.
- I
consider that Mr Theo Trigas, having knowingly assisted in the unconscionable
conduct and breach of the constructive trust in the
encumbering of the property
with the NAB mortgage, and Super Start, having received the funds from the NAB
mortgage with the knowledge
(through Mr Theo Trigas) of the circumstances
in which the sale transaction had occurred and of the encumbering of the Forest
Lodge
Property, should make good to Kimberley Developments the amounts
transferred to Super Start in breach of trust (i.e., the sum of
around $700,000)
and should reimburse Kimberley Developments for the interest paid by it under
the NAB mortgage (that was obtained
in breach of trust). That would have the
effect that Kimberley Developments will then be in the position to discharge the
mortgage
to NAB and comply with the order to transfer the Forest Lodge Property
can be transferred unencumbered to the deceased’s
estate).
Claim against Ms Chyna Schein
- As
noted earlier, the claim against Ms Chyna Schein is that she breached the
fiduciary obligations owed to the deceased as his attorney
(in purporting to
enter into the 21 February Agreement on behalf of the deceased and by purporting
to execute a transfer of the Forest
Lodge Property to Kimberley Developments, as
a result of which it is alleged that the plaintiff has suffered damages and loss
(see
[61]; and the prayers for declaratory relief at [22] and [23]; and for
damages for breach of fiduciary obligation at
[24]).
Determination
- In
Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209,
Leeming JA (with whom Bathurst CJ agreed at [1]) stated (at [115]-[116])
that:
115. As between principal and agent, the agent is a fiduciary,
and speaking generally is required not to place himself or herself
in a position
of conflict, nor to obtain a profit or benefit from the position, without first
obtaining fully informed consent: see
most recently Howard v Commissioner of
Taxation [2014] HCA 21 at [33] and [56]. Those fiduciary obligations
inform the decisions on which reliance has been placed in the decisions dealing
with s 163B,
particularly the way in which instruments conferring authority have
been construed. However, the obligations imposed by equity are
ordinarily
subject to the terms of the contractual arrangement between principal and agent;
each of those fiduciary obligations “must
then accommodate itself to the
relationship between the parties created by their contractual
arrangements”: Hospital Products Ltd v United States Surgical
Corporation [1984] HCA 64; (1984) 156 CLR 41 at 99.
116. Questions of... fiduciary obligation focus upon the
internal relations between principal and agent...
- It
is noted that in Howard v Federal Commissioner of Taxation
(2014) 253 CLR 83; [2014] HCA 21, the High Court restated some of the
essential obligations and liabilities of a fiduciary: a fiduciary relationship
imposes upon a
fiduciary obligations to the principal not to obtain any
unauthorised benefit from the fiduciary relationship and not to be in a
position
of conflict; these fiduciary duties are proscriptive obligations; fiduciaries
must exercise their powers honestly for the
purposes for which they are given;
the content of the fiduciary duty is moulded by the particular instrument under
which that duty
is created; and a fiduciary, in equity, has a liability to
account for a breach of these fiduciary duties.
- Powers
of attorney are a form of agency that is subject to a fiduciary overlay as well
as statutory obligations (see Ward v Ward (No 2) [2011] NSWSC 1292 at [3]
per Brereton J, as his Honour then was). The attorney has an obligation to act
in the best interests of the principal, which binds
the attorney on the
prescribed form and as part of the attorney’s fiduciary obligations in
equity and at common law (see cl
7, Sch 2 of the Powers of Attorney Regulation
2016 (NSW); GE Dal Pont, Law of Agency (2020, 4th ed, LexisNexis) at
[10.10]; Elder Law New South Wales (2015, LexisNexis) at [2-10450]). I
note that in the present case, there is no argument (or evidence) that the power
of attorney meets
the statutory requirements of irrevocability (i.e., that it is
expressed to be irrevocable and given for valuable consideration),
and as such
there is no reason to doubt that the usual fiduciary obligations of an agent
fasten upon the donee, Ms Chyna Schein.
- I
find that Ms Chyna Schein acted in breach of her fiduciary duties as the
deceased’s attorney, by facilitating the deceased’s
entry into a
grossly improvident or improper transaction and by failing to obtain independent
legal advice (in circumstances where
knew that Mr Churchill was acting for
Kimberley Developments in the transaction – and was associated with
Mr Darwiche, and
she did not seek advice from the deceased’s own
lawyer, Mr Hancock) or to take any steps to understand the legal effect of
the transaction. (I note, for example, that in the NCAT proceeding, Ms Chyna
Schein is recorded to have said she was “not an
accountant” and got
Mr Churchill to “take care of everything” – see Ex C at
p 40. Even reading this for the
fact that it was evidence of what was said
– and hence of her understanding or professed understanding – and
not the
truth of it, it is consistent with there being no involvement by any
other lawyer for the deceased acting in the transaction.) While
Ms Chyna Schein
purportedly signed the transfer instrument in the capacity of a witness, it
appears that the parties contemplated
that Ms Chyna Schein’s signature on
the 21 February Agreement should be taken to be in her capacity as donee of
the deceased’s
enduring power of attorney (see cl 31 of the agreement, as
noted above) and there is no reason to think that her involvement in the
execution of the transfer was other than as part of her exercise of functions as
the deceased’s power of attorney.
- I
consider that on the balance of probabilities Ms Chyna Schein was acting as the
deceased’s representative in the course of
the transaction (since I
consider it unlikely that the deceased independently understood the nature or
effect of the transaction
and it is most likely that, by February 2011, he was
dependent upon Ms Chyna Schein to manage his financial affairs at the time of
the transaction).
- The
obligation of a defaulting fiduciary is essentially one of effecting restitution
(see Perpetual Trustee Co Ltd v Gibson [2013] NSWSC 276 at [35] per Rein
J), in my opinion the appropriate remedy is for Ms Chyna Schein to compensate
the deceased’s estate for any loss occasioned
by her failure to honour her
obligation to act in the deceased’s best interests. What that compensation
sounds in will depend
on whether the defendants comply with the orders that I
propose to make against them. If the Forest Lodge Property is transferred,
unencumbered, to the deceased’s estate, then the only loss that will have
been suffered would relate to any irrecoverable costs
of the proceeding.
Therefore, I consider that it is appropriate simply to order that Ms Chyna
Schein indemnify the deceased’s
estate for any loss suffered as a
consequence of entry into the sale transaction (such loss to be quantified in
due course) and to
grant Ms Bale liberty to apply in that regard if and when
that necessity arises.
Miscellaneous claims for relief
Declaration sought as to validity of caveat
- In
the alternative to the above relief, in her claim as pleaded Ms Bale seeks a
declaration that the caveat lodged in connection with
the Forest Lodge Property
is a valid caveat (see prayer 25). No submissions were addressed to this relief.
It follows from the above
that the caveat was validly lodged. No declaration to
that effect is necessary.
Claim for winding up of Kimberley
Developments
- As
noted above, the pleading also seeks an order that Kimberley Developments be
wound up on the just and equitable ground pursuant
to s 461 of the
Corporations Act 2010 (Cth). No submissions were addressed to his
particular issue (and it seems to me to be dependent in any event on it being
established
that the deceased’s estate is entitled to a shareholding in
the company – which I have not held is the
case).
Conclusion
- For
the reasons set out above, I have concluded that the claim made against
Kimberley Developments and Mr Darwiche that the underlying
transaction effected
by the 21 February Agreement (which I do not consider to be binding) was
unconscionable has been made good and
that, from the time of the sale
transaction in respect of the Forest Lodge Property, that property was held on
constructive trust
for the deceased (and since his death, the deceased’s
estate). I have concluded that Kimberley Developments breached that trust
by
encumbering the property and then transferring the funds so borrowed to Super
Start (not for any purpose associated with the trust
property). I find that Mr
Theo Trigas had constructive notice of the matters giving rise to the trust and
breach of trust; and hence
that he, and Super Start, are liable for knowing
receipt of property transferred in breach of trust. In light of the relief
granted,
it is not necessary to consider the claims of unconscionable conduct
insofar as they arise from the Australian Consumer Law (noting also that
these claims are statute-barred subject to a finding of a relevant disability
pursuant to s 52 of the Limitation Act).
- I
have dismissed the alternative claims for breach of contract and those claims
arising out of the Contracts Review Act, on the basis that I do not
consider the 21 February 2011 Agreement to be a binding contract (and in
any case I accept the defendants’
submissions that these claims are
statute-barred subject to the application of s 52 of the Limitation Act).
I further decline to make the declaration sought that the deceased was under a
disability at the time of entering into the transaction
(i.e., in 2011) on the
basis that it was conceded the evidence does not go so far as to establish
incapacity and no expert evidence
was tendered on this issue. However, I note
that had the issue arisen I would have found that the deceased was under a
relevant
disability from January 2016 onwards for the purposes of the
Limitation Act which would have had the effect of bringing the contract
and statutory unconscionable conduct claims within the limitations period.
- Ms
Bale’s claim for breach of fiduciary duty against Ms Chyna Schein has also
been upheld.
- In
light of my conclusions, it is not necessary to make the declaration sought as
to the validity of the caveat (although I consider
that the caveat was validly
lodged); and the claim for an order that Kimberley Developments be wound up
pursuant to s 461 of the
Corporations Act does not arise.
- I
have concluded that the defendants’ defences of laches and acquiescence
fail. There was no unreasonable delay or acquiescence
by the deceased in all the
circumstances; and it would be unconscionable to bar the equitable remedy for
unconscionable conduct in
circumstances where Ms Bale only discovered the
purported terms of the sale transaction when she again became the
deceased’s
attorney during NCAT proceedings in 2016.
Costs
- As
to costs, these would ordinarily follow the event. However, the costs of the
defendants’ amended notice of motion filed on
20 August 2021 (by which the
defendants sought security for their costs and which I dismissed, subject to the
direction that the
plaintiff provide copies of invoices and receipts in respect
of the disbursements of funds paid under the Deed of Settlement and
Release to
the defendants) were reserved. Neither party provided evidence or submissions on
that issue prior to 6 December 2021.
As the parties may seek to make submissions
as to costs (including those reserved costs), I will make directions to permit
any further
submissions on the issue of costs within a short time frame and to
be dealt with on the papers.
Orders
- For
the above reasons I make the following orders:
- (1) Set aside
the transfer dated 21 February 2011 in relation to the property referred to in
these reasons as the Forest Lodge Property.
- (2) Direct the
first defendant (Kimberley Developments) within 28 days to transfer the title to
the Forest Lodge Property, unencumbered,
to the plaintiff (Ms Françoise
Bale) as executor of the estate of the late Michel Schein.
- (3) Subject to
order (11), order the plaintiff, as executor of the estate of the late Michel
Schein, following transfer of the title
to the Forest Lodge Property, to pay the
sum of $288,242.63 to the sixth defendant (Super Start Batteries Pty Ltd) or at
the direction
of its director, the fifth defendant (Mr Theofanis Trigas), being
the sum paid to discharge the Suncorp mortgage, plus interest calculated
at the
rate specified in the Suncorp mortgage.
- (4) Order that
the sum payable pursuant to order (3) be charged on the Forest Lodge Property
after its transfer to the plaintiff as
executor of the estate of the
deceased.
- (5) Declare that
the first defendant as from 21 February 2011 held, and holds, the Forest Lodge
Property on constructive trust for
the deceased (and since his death, for the
benefit of the deceased’s estate).
- (6) Declare that
the first defendant breached the trust on which the Forest Lodge Property was
held by encumbering the property with
the mortgage to NAB in 2012 and
transferring the funds so borrowed to the sixth defendant (Super Start Batteries
Pty Ltd) (and/or
at the direction of the fifth defendant, Mr Theofanis Trigas)
and not used for the purposes or benefit of the trust.
- (7) Declare that
the fifth and sixth defendants had constructive notice of the matters giving
rise to the constructive trust and of
the breach of that trust and are liable
for being knowingly concerned in the breach of that trust or in knowing receipt
of trust
property in breach of trust.
- (8) Order the
fifth and sixth defendants to repay to Kimberley Developments, as constructive
trustee of the deceased’s estate’s
interest in the Forest Lodge
Property, the funds received by the sixth defendant out of the facility secured
by the NAB mortgage
over the Forest Lodge Property and any interest thereon that
is required in order to discharge the NAB mortgage (such amounts to
be paid
within 21 days in order to make good the trust funds transferred in breach
of trust).
- (9) Order the
plaintiff, as executor of the estate of the late Michel Schein, to pay to the
first defendant such amounts as are determined
by the Court appointed referee
(to be appointed pursuant to order (12) below) to be properly referable to
expenses reasonably incurred
in the maintenance of the Forest Lodge Property
since 2011.
- (10) Order the
first defendant to account to the plaintiff, as executor of the estate of the
late Michel Schein, for all amounts received
by way of rent or other income in
respect of the Forest Lodge Property since 21 February 2011 to date, and
interest thereon pursuant
to s 100 of the Civil Procedure Act 2005
(NSW).
- (11) Order that
the sums payable in orders (3), (9) and (10) be offset against each other with
the sum remaining to be paid to the
relevant party within 21 days of
determination by the Court appointed referee of that amount.
- (12) Order that
the matter be referred to a Court appointed referee (at the cost of the parties
to be borne proportionately) for determination
of the amounts to be paid, and
the offset amount, pursuant to the above orders.
- (13) Declare
that the fourth defendant (Ms Chyna Schein, nee Richardson) is liable to the
deceased’s estate for breach of fiduciary
duty in relation to entry into
the sale transaction in respect of the Forest Lodge Property.
- (14) Order the
fourth defendant to indemnify the deceased’s estate for any loss sustained
as a result of entry into the sale
transaction in respect of the Forest Lodge
Property.
- (15) Give
liberty to the plaintiff to apply on reasonable notice for orders in relation to
the implementation of the above orders.
- (16) Reserve the
question of costs and direct the parties to file brief written submissions on
costs within 21 days, with a view to
determining the issue of costs on the
papers.
- (17) Direct the
parties within 7 days to forward to Ward P’s associate the name of an
agreed and suitably qualified person to
be appointed as referee or, failing
agreement, to submit three proposed names, with a view to the Court determining
the identity
of the person to be appointed as Court appointed referee in the
absence of any such agreement.
**********
Amendments
09 February 2023 - [33] 'Criminal' to 'Civil'
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