Call Us on (02) 9344 8383

Son unconscionably transfers mother’s property to his name

Posted by Benchmark Lawyers in Probates & Powers of Attorney, Wills | 0 comments

Cohen v Cohen [2016] NSWSC 336 (24 March 2016)

Keywords: power of attorney – breach of fiduciary obligation – unconscionable dealing – special disadvantage

Background
Timeline

The plaintiff is represented by Maree Rice of the NSW Trustee and Guardian. The plaintiff is 92 years old and resides at an aged care facility in Chatswood. She has been in the facility since June 2012 and has become a high care resident. She suffers from moderate blindness and deafness and has a mild form of dementia.

The defendant is the son of the plaintiff who is 61 years old.

The plaintiff made a Will on 15 October 1974 where she appointed her husband as executor and sole beneficiary of her estate. Her alternate executor was the defendant and he too was the sole beneficiary. The husband died in December 1994.

The plaintiff made an Enduring Power of Attorney (POA) on 6 October 2000 which gave the Attorney power to do anything that the plaintiff may lawfully do. There were not limitations set out in the POA. Clause 2 states that the attorney has to the authority to “to execute any assurance or other document, or do any other act, whereby a benefit is conferred on him” which consequently attracts s 163B(2)(B) of the Conveyancing Act.

The POA was registered on 12 September 2001.

In November 2001, the plaintiff purchased a property in Lane Cove for $245,000 (the property). The Transfer document showed that the Plaintiff was the sole registered proprietor on 17 November 2001.

On 26 August 2008, the Defendant was appointed as an Enduring Guardian.

On 31 July 2013, a transfer was signed showing the plaintiff as the transferor and defendant as transferee for a consideration of $1.00. The transfer was registered in early August and on 9 August 2013 a certificate of title was issued naming the defendant as the registered proprietor.

At [18] Hallen J said “It appears that the Transfer was signed by the Defendant as the Attorney for the transferor and by him as the transferee”.

The plaintiff’s bill at the aged care facility was increasing day by day. On 31 January 2014, the manager of the aged care facility lodged an application with the NSW Civil and Administrative Tribunal to appoint a manager for the Plaintiff. 16 April 2014 the plaintiff’s estate was committed to the NSW Trustee and Guardian.

Service of Documents

The defendant had used several solicitors throughout the course of the proceedings. Attempts were made by the plaintiff’s solicitor to serve the state of claim onto the Defendant. The matter was heard ex parte as the defendant chose “to not engage at all in the litigation”.

The Hearing

Hallen J considered whether the Court should give the Defendant an opportunity to appear but concluded that there would be no utility in adjourning the proceedings further. He stated at [48]: “There is simply no reason to believe that he would be more likely to appear on the next occasion than on this occasion”. Hallen J also took into consideration the urgency to manage the plaintiff’s affairs, irreparable prejudice and hardship to the defendant.

The relevant sections cited were ss 163B(1) and 163B(2). In particular s 163B(2) says that unless expressly stated in the instrument, an attorney does not have authority to execute a document which would confer a benefit to the attorney.

Althought the POA gave the defendant power to execute a document which would give him a benefit, it was submitted by the plaintiff that he (ther defendent son) was still bound by fiduciary obligations and should not have transferred the property to his own name.

At [66] Hallen J stated:

In this case, I am satisfied that by transferring the Lane Cove property to himself, a transfer which does not appear to have been disclosed to the Plaintiff, and which had the effect of depriving the Plaintiff of her only substantial asset, the Defendant acted in breach of his fiduciary obligations to the Plaintiff”.

Consequently, the plaintiff sought to set aside the sale of the property as an unconscionable dealing. The principles relied upon for unconscionable dealing are stated in the case of Ward v Ward [2011] NSWSC 107 at [33]-[36] by Brereton J.

In summary, they are as follows:

  1. Plaintiff must establish that a relationship of special disadvantage exists;
  2. That the defendant understood that the plaintiff was at a special disadvantage; and
  3. Onus is on the defendant to show that the dealing was “fair, just and reasonable”.

With regard to the above principles, Hallen J stated:

In this case, I am satisfied that each of the elements identified by Brereton J has been established. There was a relevant relationship of “special disadvantage” between the Plaintiff and the Defendant. At the relevant time, the Plaintiff was elderly; she was blind; she suffered some cognitive impairment; and she was in an aged care facility. The Defendant understood that the Plaintiff was at a special disadvantage. Certainly, he knew, or ought reasonably to have known, that she was not in a position to look after her own interests. Finally, the Defendant has not attempted to establish that the transaction was fair, just and reasonable. Certainly, there is no evidence that shows either that the Plaintiff received full value or that she was independently advised.”

The defendant made claims that he contributed to the purchase of the Lane Cove property but no evidence has been shown to this regard.

An order was made set aside the transfer to the Defendant and a declaration made that the defendant holds the property in trust for the plaintiff.

Tags: , ,