A review of the response of the Courts and NSW Guardianship Tribunal to cases of financial abuse.

• Jurisdiction: Australia
• Date: 01 January 2008
• Author: Whitehead, Peter
• Published date: 01 January 2008
• Author: Whitehead, Peter

Table of Contents About the Author 1 Introduction 2 Restoration of property by the Court 2.1 Capacity, Fraud and Contracts Review Act 1980: 2.2 Undue Influence 3 Passing on liability for loss to legal advisor 3.1 Yaktine v Perpetual Trustees Victoria Ltd [2004] NSWSC 1078 (Young CJ in Eq) 3.2 Graham v Hall & 1 Or [2006] NSWCA 208 (Giles JA; Ipp JA; McColl JA) 4 Intervening in matters where abuse has occurred: removing the abuser from a financial management role 4.1 Re R [2000] NSWSC 886 (Young J) 5 The Court applying criminal sanctions 5.1 Regina v Van Tongeren [2000] NSWCCA 522 (Court of Criminal Appeal) 6 The Court's response to abuse not detected until after death? 6.1 Watson & 2 Ors v Watson [2002] NSWSC 919 (Acting Master Berecry) 7 How the Court responds where the attorney does not follow the expressed intentions of the donor 7.1 Dynayski v Grant [2004] NSWSC 1187 (Master Macready) 8 Role of Guardianship Tribunal 8.1 How the Guardianship Tribunal has used the power to review 8.2 Particular examples 9 Conclusion Introduction

In NSW, the Supreme Court and the Guardianship Tribunal have made it very clear that they are very supportive in protecting vulnerable persons against abuse. They have done this by a range of measures both remedial and punitive. This paper explores a series of key cases which will assist all of us in understanding what to do next when abuse is suspected or detected. The key areas of focus are:

* Passing on liability for loss

* Removing the abused from a position of influence

* Applying criminal sanctions

Restoration of property by the Court

Once abuse has occurred the principal aim is to return the victim to the position they were in before the abuse occurred. The following cases illustrate both the remedies and the attitudes of the Court in how those remedies can be applied.

Capacity, Fraud and Contracts Review Act 1980:

Hancock V JasVentures P/L and Others [2007] NSWSC 1.

The facts of this case reflect what can only be described as a shocking example of financial abuse to a vulnerable old woman. The Court needed to consider the rights of this woman to regain ownership to a property which she had sold with settlement already having occurred: based on a claim that the transfer was procured and registered without her knowledge and approval.

In mid December 2005 Miss Hancock sold a block of waits for $1.56m. She had lived in one of the units as her home for years. A Ms Sokol, a solicitor without a practising certificate, had acted for her, and witnessed her signature on the property transfer. Settlement of the sale occurred a week after exchange of contracts. The property was valued in November 2006 at $2.6m i.e. $900,000 above the sale price.

The NSW Guardianship Tribunal in November 2006 in finding that Miss Hancock was not capable of managing her financial affairs observed she:

"... had no notion that she had made some kind of agreement to sell her home and it is hard to know whether she has signed some documents and forgot about it or whether the transaction is entirely fraudulent"

The Court was required to look at Miss Hancock's capacity to enter into the agreement for sale; that she may have been subject to equitable or common law fraud or unconscionable dealing; and whether the property dealing was able to be reviewed under the Contracts Review Act 1980.

There were significant factual matters:

* Short time to complete the sale

* No agent being involved

* Vendor did not get the Certificate of Title from her regular solicitor

* No record of the Solicitor personally attending Mrs Hancock about the transaction

* Significant undervalue sale price

* Settlement monies NOT paid to Miss Hancock

* No information as to what happened with deposit

* Miss Hancock was allowed to remain in occupation even through contract required vacant property on settlement.

It was not until 8 months after the sale that the abuse had been detected. The sale was financed through a number of sources, too complicated to recount here. An employee of Miss Hancock's former managing agent was involved.

So would the Court allow a caveat lodged on behalf of Miss Hancock to remain while further enquiries and proceedings could achieve justice for her?

Fortunately yes. Although there is a large amount of law on caveats and their lapsing, the Court was very alert to the fact that there were too many unresolved issues to prevent Miss Hancock's solicitor from further protecting her interests.

Colloquially "The dealing smelt ... perhaps stunk." There were doubts about capacity as well as the other facts which led to a conclusion that Miss Hancock's claim "had substance."

The Court had to decide what course it should take to "achieve justice between the parties" ( Hall J at para 40). It was found that both the evidence and inferences from the evidence raised an arguable case that Miss Hancock did not have capacity to enter into the contract and had not received independent advice and therefore had a basis for claiming relief.

The Court at this stage effectively prevented anyone from dealing with the property and so allowed Miss Hancock's lawyer to pursue the recovery of the property. The facts must have spoken for themselves as the matter did not ultimately have to be determined by the Court: it was agreed to re- transfer the property to Miss Hancock.

Observations

If Miss Hancock's friends had not been visited and noticed her declining capacity, and further had not gone to the managing agent for the property ... when would this abuse have been detected? .... Possibly not until after death. Miss Hancock's long term lawyer Ms Suttor of L Rundle & Co moved quickly ... and as an experienced solicitor in elder law issues, was definitely better equipped than most lawyers to deal.

The evidence had to be strong enough to draw the inference of the unjust deal ... i.e. abuse... for the Court to intervene.

Undue Influence

Janson v Janson [2007] NSWSC 1344 (Biscoe A J)

This case is about a claim of undue influence by way of a transfer of a frail and elderly man's residence (sole asset) to his nephew. There was no independent advice. The nephew held his uncle's general (not enduring) power of attorney and had given him care and assistance for many years. The case discussed at length the principles surrounding the presumption of undue influence, including the impact of being an attorney on this presumption.

Was the relationship arising under the general power of attorney a presumptive relationship of undue influence?

Biscoe A J decided that there was undue influence but provided the following commentary answering this question at paragraphs 76 and 77

"The argument that any type of fiduciary or confidential relationship gives rise to the presumption of undue influence has been rejected: In Re Coomber [1911] 1 Ch 723. In that case, a mother assigned to her son a business of which he was the manager. The Court of Appeal forcefully rejected the proposition that there was a presumption of undue influence, which he had to rebut, merely because the son was the mother's agent in carrying on the business. It was held that the nature of the fiduciary relation must be such as to justify the presumption.

Sir Frederick Jordan in his Chapters on Equity in New South Wales, (6th ed, 1947) p 138 wrote that the relationship of principal and agent is not per se one of influence, citing In Re Coomber. Meagher, Gummow and Lehanes's Equity Doctrines and Remedies (4th ed, 2002) at [15-100] consider in this context that "[w]hether an agent-principal relationship is one of influence as well as fiduciary will depend upon the particular case" (citing Moxon v Payne (1873) LR 8 Ch App 881 which, however, was a case where a sale was set aside for fraud of the "gravest character")."

Bryson J in Hillston v Bar-Mordecai [2003] NSW SC 89 at Paragraph 48 had clearly concluded that each case must be treated without a presumption of influence but rather that undue influence must be proven in detail.

Biscoe A J in Jansen's case found that the case fell within the category of undue influence in that the uncle had a dependence or trust on his nephew or the nephew was in a position of influence over his uncle. Because the presumption of undue influence had not been rebutted by proof of independent, competent advice or any other evidence, there was finding of undue influence in respect of the transfer of the house.

The case is also interesting for its observations in Paragraph 86 about the distinction between undue influence and unconscionable conduct, as explained by Deane J in Commercial Bank of Australia v Amadio (at 474) as follows:

"Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party... 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."

Irvine v Irvine [2008] NSWSC 592 (Barrett J)

A 93 year old woman's home at Orange was transferred for a purely nominal consideration to her nephew and his two sons. She had never married and had no children. She claimed a review of the dealing on three alternative bases: first, under the Contracts Review Act 1980, second, on the basis of actual undue influence that she says was brought to bear upon her by the transferees; and, third, because of unconscionable conduct of the transferees towards her.

The property had been her home for more than 30 years. She had executed a power of attorney appointing the nephew to be her attorney. She also made a will naming the nephew and his two sons as the only beneficiaries.

There was evidence that the nephew had spoken to his aunt with words to the following effect:

"This is no use to me the way it is. I think I should have the place in my own name. I want you to give me the house. Why don't you give the house to me now...