Barkley v Barkley Brown [2009] NSWSC 76 (24 February 2009)

Last Updated: 3 March 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
Barkley v Barkley Brown [2009] NSWSC 76


JURISDICTION:
Equity Division

FILE NUMBER(S):
5265 of 2007

HEARING DATE(S):
15, 16, 17, 18 and 19 December 2008

JUDGMENT DATE:
24 February 2009

PARTIES:
Paul Barkley (First Plaintiff)
John Hawkins (Second Plaintiff)
Vicki Barkley Brown (Defendant)

JUDGMENT OF:
Ward J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
V R Gray (Plaintiffs)
M D Broun QC with him Ms E Picker (Defendant)

SOLICITORS:
Henshaws (Plaintiffs)
Peter Dawson & Associates (Defendant)


CATCHWORDS:
EQUITY – equitable remedies – accounts and inquiries – whether defendant should be ordered to account to deceased’s estate for withdrawals made from deceased’s bank account – whether defendant owed fiduciary duties to the deceased – HELD – defendant acted as deceased’s agent, owed a fiduciary duty to keep accounts and should be ordered to account
EQUITY – general principles – undue influence and duress – whether defendant’s account that withdrawn amounts were gifts from deceased to or for the benefit of the defendant and/or to or for the benefit of the first plaintiff should be accepted – whether relationship between defendant and deceased gives rise to presumption of undue influence – whether presumption displaced by evidence – HELD – relationship such as to give rise to presumption of undue influence – presumption not displaced by evidence – account that withdrawn amounts were gifts not accepted.

LEGISLATION CITED:


CATEGORY:
Principal judgment

CASES CITED:
Allen v Tobias (1958) 98 CLR 367
Asset Risk Management Limited v Hyndes [1999] NSWCA 201
Asset Risk Management Limited v Hyndes (unreported, 2 April 1998)
Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 23
Commonwealth Bank of Australia Limited v Amadio (1993) 151 CLR 447
Doss v Doss (1843) 3 Moo Ind App 175; 18 ER 464
Gray v Haig (1855) 20 Beav 219; 52 ER 587
Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 29
Hospital Products Ltd v United Surgical Corporation (1984) 156 CLR 41
Huguenin v Basely (1807) 14 Ves Jun Supp 372; 34 ER 1138
In re Coomber [1911] 1 Ch 723
Johnson v Buttress (1936) 56 CLR 113
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548
Lord Chedworth v Edwards (1802) 8 Ves Jun 46; 32 ER 268
Nelson v Nelson (1995) 184 CLR 538
NWR FM t/a North West Radio v Broadcasting Commission of Ireland & Anor [2004] IEHC 109
Pearse v Green (1819) 1 Jac & W 135; 37 ER 327
Peninsular and Oriental Steam Navigation Co v Johnson [1937-1938] 60 CLR 189
Rapid Metal Developments (Australia) Pty Ltd v Rosato [1971] Qd R
Re Sharp (FCA unreported 12 December 1992)
Rhodes v Bate (1866) LR 1 Ch App 252
Spalla v St George Motor Finance Ltd (ACN 007 656 555) (No 6) [2004] FCA 1699
Spong v Spong (1914) 18 CLR 544
The Ophelia [1916] 2 AC 206
Thomas v High (1960) 60 SR (NSW) 401
Urane v Whipper [2001] NSWSC 796
Warman International Ltd v Dwyer (1995) 182 CLR 544
Whereat v Duff [1972] 2 NSWLR 147
Winefield v Clarke [2008] NSWSC 82
Yasuda Ltd v Orion Underwriting Limited [1995] QB 174

TEXTS CITED:
Sir Anthony Mason, "The Impact of Equitable Doctrine on the Law of Contract" (1998) 27 Anglo-American Law Review 1
Mozley and Whitley’s Law Dictionary
Snells Principles of Equity (28th ed.)

DECISION:
The defendant held liable to account. Declined to order further account. Consequential relief.



JUDGMENT:

- 59 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WARD J

TUESDAY 24 FEBRUARY 2009.

5285/07 PAUL BARKLEY & ANOR V VICTORIA BARKLEY-BROWN

JUDGMENT

1 These proceedings were brought by Mr Paul Barkley (one of the beneficiaries under the will of the late Rhoda Brenda Farrell) and the retired Reverend John Hawkins (one of the two executors of Mrs Farrell’s will) against Mrs Victoria Barkley-Brown, seeking an order that Mrs Barkley-Brown account to Mrs Farrell’s executors (of whom Mrs Barkley-Brown is one) in respect of moneys withdrawn from Mrs Farrell’s bank account over the period from 19 February 1999 to Mrs Farrell’s death in 2005, during which time Mrs Barkley-Brown had possession and/or use of Mrs Farrell’s bank passbook.

2 The sum for which Mrs Barkley-Brown is asked to account is $864,671.38, as specified in a report (“the Nelson report”) dated 28 March 2006 by Mr Lawrence Nelson (who was Mrs Farrell’s accountant for the period from 1982 to about 2004) as well as such additional moneys identified in a Scott Schedule attached to the third amended statement of claim in a column headed “Moneys for which Mrs Brown is accountable” which are not included in the moneys referred to in the Nelson report. Mrs Barkley-Brown is also asked to account for interest on all such moneys.

3 It is alleged against both Mrs Barkley-Brown and Mr Barkley that certain moneys were applied to or for their benefit (either alone or jointly with another or others), not by way of gift, and that neither of them accounted to Mrs Farrell (or her executors) for the said moneys.

4 Declaratory relief is sought as to how the estate of Mrs Farrell is to be administered and distributed, including declarations that the interests of each of Mrs Barkley-Brown and Mr Barkley under Mrs Farrell’s will are to be determined, respectively, on the basis that the moneys identified in the Nelson report or the Scott Schedule as moneys for which each is accountable be brought into account and charged against those interests.

5 For his part, Mr Barkley says that he acknowledges that most of the amounts for which it is sought that he be made accountable, were loans and he is prepared to repay them. He said that he came to the court seeking determination as to a “fair amount” to be repayable by each of him and Mrs Barkley-Brown to the estate. Accordingly, I understand that he would not object to a declaration of the kind outlined above in respect of the determination of his interest under Mrs Farrell’s will. Indeed, in closing submissions, Mr Barkley’s Counsel (Mr V R W Gray) submitted that, amongst other relief, the court should declare that Mr Barkley is liable to pay to the estate of Mrs Farrell the total of all moneys withdrawn from her bank account and applied to his use and benefit which were not repaid by him to Mrs Farrell in her lifetime. As there is no record of repayments by Mr Barkley (other than Exhibits 9 and 10 recording payment in full in 1993 of two specific loans made prior to the period in question in this proceeding), and Mr Barkley says he can provide no further information to assist the court in relation to his finances, this suggests to me that all amounts found to have been attributable to Mr Barkley should be repaid by him.

6 An order for exemplary damages is also sought against Mrs Barkley-Brown.
7 There was a question raised (when this matter was before Macready AsJ in July 2007 on the hearing of a strike-out application by Mrs Barkley-Brown) as to the constitution of the proceedings; in particular, as to the fact that one executor was suing another executor and as to the standing of the first plaintiff, Mr Barkley, to sue.

8 Macready AsJ considered that, under Pt 7 r 12, it was appropriate for Mr Barkley to be a plaintiff because what was in question was whether Mrs Barkley-Brown had appropriately paid moneys on his behalf as well as on her own behalf. Nor did Macready AsJ see any difficulty, in the context of this claim, with the fact that the two executors were on opposite sides of the record.

9 When the matter came before me, no further challenge was raised in relation to the constitution of the proceedings, although some confusion did seem to have arisen (on the part of both Mrs Barkley-Brown and Mr Barkley) from the way in which the relief had been claimed from time to time, that apparent confusion being as to whether what is sought is that they should simply be required to repay to the estate with interest sums received by them or paid for their benefit from the moneys withdrawn from Mrs Farrell’s account or (as I apprehend is the relief sought in prayer 1A of the third amended statement of claim and the basis on which the matter was argued) that an account be ordered in equity as to the purpose for, and what was done with, the moneys withdrawn from Mrs Farrell’s account.

10 The latter process, as was made clear in Doss v Doss (1843) 3 Moo Ind App 175 at 196-7; 18 ER 464 at 472, involves more than a “mere direction to inquire and report” but proceeds upon an assumption that the party calling for the account is entitled to the sum found due after such an accounting. As noted by Macready AsJ, this was applied in Rapid Metal Developments (Australia) Pty Ltd v Rosato [1971] Qd R by Wanstall J and in Re Sharp (FCA unreported 12 December 1992) by Drummond J.

Facts

11 Mrs Farrell was born in 1911. She and her husband (who predeceased her in 1980) had no children. Mrs Barkley-Brown was Mrs Farrell’s niece and her closest living relative at the time of Mrs Farrell’s death. Mrs Farrell had raised Mrs Barkley-Brown from childhood. Mrs Barkley-Brown is a beneficiary under and an executrix of the will.

12 Mr Barkley is Mrs Barkley-Brown’s son (and hence was Mrs Farrell’s great nephew). Mr Barkley was born in 1974. When her first marriage ended (in about 1977), Mrs Barkley-Brown returned with Mr Barkley to live with the Farrells. Mrs Barkley-Brown subsequently moved out to live separately from the Farrells but Mr Barkley (then somewhere between 12 months and three years old) remained with the Farrells. Mrs Barkley-Brown remarried and lived overseas for about a year in 1989. Her third marriage to Mr Brown was in 1993. She and Mr Brown have two young sons.

13 Mrs Farrell raised Mr Barkley for most of his childhood. The relationship between Mr Barkley and his mother is strained, to say the least. Mr Barkley said that he “absolutely despised” his mother and was hurt that she had abandoned him as a baby. However, at least for a period of time (from the mid 1990’s until it would seem around 2003-4, when Mr Barkley was informed of concerns held by Mr Nelson in relation to Mrs Farrell’s accounts) their relationship is acknowledged by both to have been a reasonably amicable one.

14 From at least 1999, Mrs Barkley-Brown had resumed regular contact with Mrs Farrell. By then Mrs Barkley-Brown and her husband had two young sons and were residing in Schofields. In February 1999 Mrs Farrell suffered a fall at Lidcombe railway station and was hospitalised as a result. Mr Barkley gave evidence that following this fall Mrs Farrell was “not the Nan I knew”. Mrs Barkley-Brown stayed with Mrs Farrell for about a month in 1999 to assist her recovery from the fall and then relocated with her family back to Sydney. It is not disputed that from 1999 onwards Mrs Barkley-Brown spent several hours most days with Mrs Farrell (again moving in to live with Mrs Farrell for a few months at the start of 2003 following Mrs Farrell’s discharge from an admission to hospital caused by a subsequent fall at her home).

15 Reverend Hawkins said that he was able to converse with Mrs Farrell over the period but that she was “more often confused” in the period from 2003 to 2005. He said that in early 2002 there were occasions when she was forgetful, such as once when making tea for him.

16 In seems that in about 2003, if not before, Mr Barkley moved out of Mrs Farrell’s home. Mr Barkley said that he visited Mrs Farrell “about weekly” over the period. The evidence of other witnesses who had seen Mrs Farrell over the last few years of her life (Reverend Hawkins and Mr Terry Lockley, who was a grandson of Mrs Farrell’s sister) was that they visited Mrs Farrell much less frequently. Mr Nelson had not seen Mrs Farrell since 2003 when she signed her 2002 tax return, but said at that time she was “up and well”, having by then recovered from her fall in 2003.

17 Over the relevant period (1999 to 2005), Mrs Farrell, maintained a savings account with the Commonwealth Bank. Transactions on that account were recorded by way of a bank passbook entry. It appears that Mrs Farrell’s practice had been to make handwritten annotations on most (though not all) withdrawal entries in her passbook, recording her financial transactions, and that she kept detailed records of her transactions.

18 There was evidence (including from Reverend Hawkins) that Mrs Farrell had made loans from time to time both to Mrs Barkley-Brown and to Mr Barkley, and at least on one occasion to Reverend Hawkins and his former wife, and that she recorded at least some of those loans in writing. Although Mr Barkley recalled that Mrs Farrell had kept papers recording the repayment of loans, only a small number of those records was available. Reverend Hawkins deposed to Mrs Farrell having referred to the giving of large amounts to both Mr Barkley and Mrs Barkley-Brown which she told him had been carefully recorded.

19 Mr Nelson gave evidence as to one particular loan made by Mrs Farrell to Mr Barkley for him to purchase a car and said that, at Mrs Farrell’s request, he opened a separate statement account in which Mr Barkley was to deposit repayments. There were in evidence documents recording that and other loans to Mr Barkley (including a loan in 1991 for a computer, the record of which was witnessed by Mrs Barkley-Brown).

20 While it seems that Mrs Farrell made a practice of recording various family loans, I would not accept the suggestion made during cross-examination by Mrs Barkley-Brown that if there was no written record of a loan then Mrs Farrell had not intended any particular advance to be a loan. The documentation of family loans seems to have been done in a relatively simple manner (by acknowledgement signed by the recipient) or by annotation in Mrs Farrell’s bank passbook.

21 It seems that Mrs Farrell did not insist on any particular schedule for repayment of debts (and for some loans considered that they could be repaid out of her estate). Mrs Barkley-Brown gave evidence that Mrs Farrell had orally forgiven certain loans both to her and to Mr Barkley (including loans for a not insubstantial sum in connection with the purchase of a house by Mrs Barkley-Brown and her husband in about 1999/2000). It is not inconceivable that towards the end of her life Mrs Farrell might have been prepared to forgive debts within the family (as she clearly intended the estate ultimately to be distributed amongst her family as evidenced by her 2000 will). However, apart from conversations recounted by Mrs Barkley-Brown there is no evidence of this.

22 It was submitted by the plaintiffs that Mrs Farrell led a relatively frugal life and that Mrs Farrell was not someone who exhibited financial largesse towards even her closest relatives. As an example, it was said there is no evidence of any specific significant gift to anyone prior to 1999 and, in particular, that Mrs Farrell did not give a gift to Mrs Barkley-Brown on her wedding (it would seem this is a reference to Mrs Barkley-Brown’s second wedding overseas). However, there is very little evidence as to what pattern of gifts there was on Mrs Farrell’s part prior to 1999. It is not clear to me that I should draw any inference as to a lack of generosity from the particular instance cited, not least because I have no knowledge as to the state of the relationship between Mrs Barkley-Brown and Mrs Farrell at that stage.

23 To the contrary, the evidence suggests that Mrs Farrell was generous in providing moneys where necessary to assist Mr Barkley to meet credit card or other debts from time to time (including payment of about $2,500 on one occasion when Mr Barkley was travelling overseas and had run out of funds).

24 Mr Barkley accepted that Mrs Farrell was generous to him throughout his upbringing (para 29 of his affidavit sworn 27 February, 1980). Similarly, Mrs Barkley-Brown gave evidence that Mrs Farrell was generous to her family. According to Reverend Hawkins, Mrs Farrell had said to him that she had provided generously for Mrs Barkley-Brown’s care during her upbringing. Reverend Hawkins also gave evidence that on one occasion Mrs Farrell told him she had bought Mrs Barkley-Brown and her family a caravan (which other evidence shows was in 2000) and I did not understand him to have suggested that Mrs Farrell had said to him this was a loan.

25 That said, the evidence before me was that Mrs Farrell was frugal in her personal expenditure. She was apparently also keen to ensure that Mr Barkley respected the value of money (not only did Mr Barkley give evidence as to this, but so also did Mr Lockley in the context of the loan to Mr Barkley for a computer, at a time when Mr Barkley must have been about 17 or 18). Mr Nelson gave evidence as to comments made to him by Mrs Farrell about the need for Mr Barkley to look after his money and to take responsibility; and that Mr Barkley should repay a car loan she had made to him.

26 The evidence that Mrs Farrell wished to ensure that, during his teens or young adult years, Mr Barkley should learn respect for money, or accept responsibility for money advanced to him is not, to my mind, inconsistent with Mrs Farrell being generous with gifts or assistance to family members in her later years. Those comments may do no more than indicate a view on Mrs Farrell’s part as to Mr Barkley’s youth and responsibility or lack of responsibility at that stage with money, rather than a lack of generosity on her part. It was not suggested that Mrs Farrell had made similar comments in relation to Mrs Barkley-Brown.

27 It appears that from 1999 until her death Mrs Farrell was in a state of progressive cognitive decline. Professor Chan gave expert evidence as to her mental state (which I consider later). Exhibit B Vol 4 contains various reports as to Mrs Farrell’s medical condition over the period from 1999.

28 Nevertheless, the various witnesses all appear to have been able to converse with Mrs Farrell in the period at least up until 2003 and there seems to have been no perceived need for Mrs Farrell to be cared for (she remained in her home) or assessed as to her mental state at that stage.

29 Mrs Barkley-Brown gave evidence that from about 1998 she assisted Mrs Farrell by looking after her banking and shopping for her. I was informed that when this first took place the practice was that Mrs Farrell would sign blank bank withdrawal slips, which she then gave to Mrs Barkley-Brown with her passbook. In early 1999 Mrs Barkley-Brown became a signatory on Mrs Farrell’s account. It appears that this was at the suggestion of the bank, apparently because Mrs Farrell’s signature was by then weak and had been queried a few times. Mrs Farrell attended at the bank with Mrs Barkley-Brown for that purpose. A medical certificate was signed by a Dr Scott as to Mrs Farrell’s capacity at the time of that appointment and I can only assume that Dr Scott, who was not called to give evidence, (and for that matter the bank) was satisfied at that stage as to Mrs Farrell’s mental ability to appoint Mrs Barkley-Brown as her signatory.

30 Mrs Barkley-Brown gave evidence as to the manner in which she used Mrs Farrell’s bank passbook over the period 1998 to about 2003. The passbook was kept by Mrs Farrell in a Chubb safe in her bedroom, the key to which was on a chain around Mrs Farrell’s neck. Mrs Barkley-Brown says that Mrs Farrell instructed her to draw money from her bank account for various housekeeping, pharmaceutical or other requirements and occasionally to purchase shares or investments.

31 Mrs Barkley-Brown says that at the beginning of her visits to the bank she wrote notations in the bank passbook as to the purpose of the withdrawals but that on occasions Mrs Farrell said, “for goodness sake dear, just put it in the safe. No need to write things in”. Mrs Barkley-Brown also gave evidence that in the early years Mrs Farrell normally looked briefly at the bank passbook each time it was returned to her.

32 During the period from about 2000, Mrs Farrell’s eyesight had deteriorated. Mrs Barkley-Brown sought assistance from the Blind Society and borrowed large print books from the library for Mrs Farrell to read. The plaintiffs rely on this to say that it is unlikely that Mrs Farrell could have read the bank’s computer imprint recording withdrawals in her passbook over the period in which Mrs Barkley-Brown did her banking. They further note that in some instances Mrs Barkley-Brown’s handwritten annotations obscured or obliterated the bank imprint on the passbook. It was suggested that this was deliberate, an accusation which Mrs Barkley-Brown denied.

33 Mrs Farrell was admitted to Auburn Hospital on 8 April 2002. According to the hospital notes she had gone to the park and forgotten her way home. A transient ischaemic attack (or minor stroke) was diagnosed. A Mini Mental State Examination (“MMSE”) conducted at that time recorded a result of 20/30, a level indicative of significant loss of cognitive ability. Mrs Farrell discharged herself from hospital against medical advice.

34 On 17 February 2003, it appears that Mrs Farrell suffered a more serious stroke. She collapsed at home and was unconscious for a period of time. She was admitted to Westmead Hospital. Her admission notes recorded that she was clearly delirious and did not know her own birthday, and that during the period of her admission she had an MMSE result of 8/30 on 26 February. Mrs Barkley-Brown moved in to stay with Mrs Farrell on her discharge from hospital in March 2003.

35 In about May 2003, Mrs Barkley-Brown arranged for Mrs Farrell to stay in Guildford Nursing Home for a two week period of respite care. During that period Mrs Barkley-Brown said that nursing staff had remarked to her that Mrs Farrell was beginning to show the earliest signs of dementia. Nevertheless, Mrs Barkley-Brown says that Mrs Farrell was still able to converse and express herself; and gave as an example that Mrs Farrell had argued with her and expressed her dislike of the nursing home.

36 On 22 June 2003, Mrs Farrell was admitted to Auburn Hospital suffering from gastroenteritis. Dementia was documented in her medical notes. She was aggressive and an anti-psychotic drug was administered.

37 Mrs Farrell became a resident of Berala Nursing Home in June 2003, where she remained until her death.

38 Mrs Barkley-Brown gave evidence that in 2003, after Mrs Farrell entered the Berala Nursing Home, Mrs Farrell said to her:

Use the bank book whenever you need to buy anything for me, nursing fees and bills, or any clothes or other things I need while I am in the nursing home and also buy things for the boys, for Paul and for yourself when you need it.

39 In cross-examination, Mrs Barkley-Brown said that Mrs Farrell had earlier made a similar statement to her (in about 2000). She also said that Mrs Farrell had pressed her to take possession of the bank passbook prior to 2003 (when Mrs Barkley-Brown in fact took possession of the passbook). Mrs Barkley-Brown’s evidence in relation to the suggestion by Mrs Farrell that she take possession of the passbook prior to 2003 was supported by her husband (Mr Brown)’s recollection of events (albeit as related to him by Mrs Barkley-Brown before 2003).

40 In about November 2003, Mr Barkley (at Mrs Barkley-Brown’s suggestion and with Mrs Farrell’s agreement) moved back into Mrs Farrell’s house with his now wife.

41 Shortly thereafter, there was a disagreement between Mrs Barkley-Brown and Mr Barkley over the removal by him of a wooden mantelpiece from Mrs Farrell’s house. This disagreement is only of any relevance, in my view, insofar as Mr Barkley’s reaction to this disagreement arising was promptly to visit Mrs Farrell in the Berala Nursing Home and seek her approval for the removal. This suggests that at least as at November 2003 Mr Barkley considered that Mrs Farrell had the capacity to understand and give her consent to such an action (the only other inference seemingly being that he was prepared to take advantage of a perceived weakness on her part at that stage). However, Mr Barkley, when cross-examined as to this, conceded that Mrs Farrell was not in a “great frame of mind” when he sought her consent to the removal of the mantelpiece, perhaps indicating that the alternative inference would be the correct one. Nevertheless, nothing ultimately turns on the circumstances relating to the vexed issue of the removal of the mantelpiece.

42 It was after her admission to Berala Nursing Home that Mrs Farrell executed an enduring power of attorney (on 10 November 2003) in favour of Mrs Barkley-Brown. Mrs Barkley-Brown said that the execution of a power of attorney had been suggested by a solicitor after she expressed concern at renovations (ie the removal of the mantelpiece) being effected by Mr Barkley to Mrs Farrell’s house.

43 The execution of the power of attorney by Mrs Farrell was witnessed by a solicitor, Mr Geoffrey Walter Kenneth Allars, who certified that he had explained the effect of the general power of attorney to Mrs Farrell and had attested its execution. No evidence was adduced from Mr Allars in these proceedings. Mrs Barkley-Brown, who was present when the power of attorney was signed, was questioned as to the circumstances in which it was executed and said that Mr Allars had asked questions to satisfy himself that Mrs Farrell understood what she was doing.

44 Mrs Farrell had a further admission to Auburn Hospital, with slurred speech, on 19 July 2004, at which time dementia was (to use Professor Chan’s words) well documented.

45 By early 2005, Mrs Farrell’s mental state had deteriorated such that the Guardianship Tribunal later found that as at January 2005 she was unable to communicate in a meaningful way. By then Mrs Farrell was 93. As at August 2005 the Tribunal was in no doubt that Mrs Farrell was a person with a disability and incapacity warranting the appointment of a financial manager.

46 It is not disputed that Mrs Barkley-Brown withdrew a considerable amount from Mrs Farrell’s account over the period from 1999 to 2005. Although, the exact amount withdrawn is denied, this seems to be a function of the errors evident in the Scott Schedule. Mrs Barkley-Brown does not deny that from February 1999 she made all of the withdrawals from Mrs Farrell’s bank account, for much of which Mrs Barkley-Brown was able in these proceedings to give only a very general explanation as to how the moneys were expended. Mrs Barkley-Brown identified a number of specific disbursements (which she said were gifts either to her and her family or to Mr Barkley) out of the funds withdrawn (see paragraphs 70, 82, 84, 93, 101 and 112 of Mrs Barkley-Brown’s affidavit of 27 February 2008) as well as amounts expended by way of purchase of clothing and presents for Mrs Barkley-Brown’s two younger sons; Christmas, birthday and other family gifts, personal clothing, taxi fares, household furniture and appliances.

47 It is also not disputed that Mrs Farrell was very appreciative of Mrs Barkley-Brown’s company and assistance over the period from 1999. Reverend Hawkins gave evidence that Mrs Farrell said her prayers had been answered when Mrs Barkley-Brown returned into her life. Mr Lockley deposed to a conversation in about 1998 with Mrs Farrell (when she had changed her will to include Mrs Barkley-Brown as an executrix) in which Mrs Farrell said, “I have a lot of trust and faith in Vicky and I prayed to God for her return and I thank Him every night for Vicky’s return into my life.” Mrs Barkley-Brown herself deposed to a conversation with Mrs Farrell before 2003 (in which Mrs Farrell had suggested that she keep the bank passbooks) in which Mrs Farrell said “I would trust you with my life”.

48 The concerns over Mrs Farrell’s bank account withdrawals emerged in 2004 in the following circumstances.

49 As mentioned before, Mr Nelson had been Mrs Farrell’s accountant for some years prior to 2003. Mr Nelson gave evidence that in early 2003 Mrs Farrell told him Mrs Barkley-Brown had come to look after her and would be helping to pay the bills and keep the records up to date (para 7 affidavit).

50 Up until the 2003 tax year Mr Nelson had prepared Mrs Farrell’s tax returns on the basis of information collated and provided to him by Mrs Farrell. That information did not include bank passbooks. (Insofar as Mrs Barkley-Brown said Mrs Farrell was very “private” about her financial affairs, this is supported to the extent that Mr Nelson’s recollection was that he was never given any bank passbooks by Mrs Farrell.)

51 Mrs Barkley-Brown gave evidence that during 2003 she arranged for a different accountant (MEB Taplone) to prepare Mrs Farrell’s tax returns and that MEB Taplone lodged the tax returns for the 2004 and 2005 tax years (on the basis that this would be cheaper and she did not consider Mrs Farrell’s affairs to be complex). There was a suggestion (from Mrs Barkley-Brown) that Mrs Farrell may have been dissatisfied with Mr Nelson’s accountancy services, but no other evidence supports this. In any event, it would seem that Mr Nelson was instructed in 2004 to prepare Mrs Farrell’s 2003 tax return.

52 Mr Nelson gave evidence that in March/April 2004 he attended at Mrs Farrell’s home to pick up documents relating to her tax returns for the 2003 tax year. By this time, Mrs Farrell was a resident of Berala Nursing Home. Mrs Barkley-Brown gave Mr Nelson a parcel of documents, which included some of Mrs Farrell’s bank passbooks from December 2000 to May 2002 and at least one earlier 1999 or 2000 passbook. (I interpose to note that if Mrs Barkley-Brown had been consciously attempting to hide any wrongdoing in respect of the bank withdrawals it seems unlikely that she would have proffered the passbooks to Mr Nelson at least without a request. There is no evidence that Mr Nelson requested them and, indeed, he had not previously been provided with them by Mrs Farrell.)

53 There was some conflicting evidence from Mr Barkley to the effect that in May 2004 he had forwarded passbooks to Mr Nelson. However, Mr Nelson confirmed that he received the passbooks in a bag or parcel of documents given to him by Mrs Barkley-Brown.

54 Mr Nelson said that when he reviewed the passbooks he noted what he regarded “as an extraordinary number of withdrawals from the account, which was not consistent with my previous observations about Rhoda’s spending and saving habits”. The basis for his “previous observations” is not clear. Mr Nelson did not previously sight any of Mrs Farrell’s bank passbooks; rather in previous years he was provided with information from Mrs Farrell as to interest earned on her account. Mr Nelson was aware that Mrs Farrell had a substantial income from dividends on her investments (and conceded that his later review of the passbooks confirmed that her account was always substantially in credit).

55 In his subsequent statement to the Guardianship Tribunal dated 20 May 2005 Mr Nelson stated that usually Mrs Farrell had spent no more than $200 per week or $10,000 per annum for her own requirements (plus money for payment of rates and taxes). Again it is not clear from where Mr Nelson had drawn that information.

56 By letter dated 25 November 2004, Mr Nelson wrote to Mrs Barkley-Brown referring to quite large withdrawals from the account, sometimes on consecutive days and on some occasions on the same day, and said that the amounts seemed to be much greater than Mrs Farrell’s lifestyle would require. The letter said:

As I understand it you have Mrs Farrell’s permission to access the bank account to pay for goods and services relating to her personal requirements and any other payments would be at her direction, of gifts, loans etc.

57 There was some evidence that the first letter written by Mr Nelson in November 2004 to this effect had been sent to an address for Mrs Barkley-Brown which by then had been changed. Mr Nelson said he re-sent the letter.

58 Mrs Barkley-Brown did not immediately respond to that letter, a fact which (together with delay in finalising Mrs Farrell’s 2003 tax return) apparently prompted Mr Nelson to contact Mr Barkley (and, subsequently, Henshaws, the solicitors who acted for Mr Barkley on his subsequent application to the Guardianship Tribunal) in relation to his suspicions.

59 Mrs Farrell’s 2003 tax return was lodged late (in October 2004) and the ATO issued a demand for payment of $29,829.25 on 27 October 2004.

60 Mrs Barkley-Brown took issue with the provision by Mr Nelson of information to Henshaws.

61 Mrs Barkley-Brown responded to Mr Nelson’s November 2004 correspondence through her solicitors, who forwarded a copy of the Power of Attorney in favour of Mrs Barkley-Brown and requested the return by Mr Nelson of all documentation. By letter dated 23 February 2005, Mrs Barkley-Brown’s solicitors wrote to Henshaws stating that “up to November 2003, Mrs Farrell had control of her finances” and that Mrs Barkley-Brown had instructed another accountant to proceed with “administration procedures”.

62 Part of the suspicions held by Mr Nelson may have stemmed from his (mistaken) assumption that no tax returns had been filed for the 2004/5 years (for which purpose, as noted above, another accountant had been retained by Mrs Barkley-Brown).

63 On 25 August 2005, on the application of Mr Barkley, the Guardianship Tribunal made orders that Mrs Farrell’s estate be subject to management under the Protected Estates Act 1983 and (ultimately by consent) appointed Mr Nelson as manager of the estate. The Tribunal dismissed the application for a guardianship order. Mr Barkley had initially applied for himself to be appointed financial manager, though he gave evidence that he did not wish to be so appointed and said he had not appreciated that the application was for his appointment until he arrived at the Tribunal hearing.

64 After the making of the financial management orders, and with the authority of Mr Nelson, Mrs Barkley-Brown withdrew a further sum (variously suggested to be approximately $6,000 or $10,000) from Mrs Farrell’s account. Although Mrs Barkley-Brown was present at the Guardianship Tribunal when the orders were made, and they were made by consent, she seems to have been confused (and was still confused in the witness box) as to what those orders required in terms of the relinquishment by her of any powers in relation to or use of Mrs Farrell’s bank account.

65 As at 2005, Mr Nelson estimated in his statement to the Tribunal that Mrs Farrell’s assets were between $3.8 million and $4 million, 90% of which was made up of shares and investments.

66 The estate of Mrs Farrell assessed when her will was admitted to probate was in the order of $8 million. Mrs Farrell left her estate as to 2/5ths to Mrs Barkley-Brown, as to 1/5th to each of Mrs Barkley-Brown’s younger sons, and as to 1/5th to Mr Barkley.

Basis of claim for account

67 The liability to account is said to arise from the fact that Mrs Barkley-Brown was acting in a fiduciary capacity for Mrs Farrell when she made the withdrawals in question.

68 An initial strike-out application was brought by Mrs Barkley-Brown, contending that the plaintiffs had not properly pleaded a cause of action for such an account. Macready AsJ considered that the amended statement of claim (as it had then been pleaded) fairly set out an appropriate factual claim which would give rise to the question whether or not there should be an account but considered there was a problem in that the relief then claimed was simply for a declaration that there be an order for account. Pursuant to leave granted by his Honour, the plaintiffs sought the order for account now set out in the amended pleadings.

69 What was not pleaded (initially or by way of amendment to the statement of claim) was any separate cause of action based on any alleged undue influence or unconscionable dealing.

70 This is so notwithstanding that in paragraph (g) of the particulars to paragraph 1 of the third amended statement of claim setting out the facts by reason of which it is alleged the fiduciary capacity arose, it is asserted that Mrs Barkley-Brown had obtained possession of Mrs Farrell’s bank book, withdrawal forms and moneys “by reason of the trust and confidence imposed [sic]” by Mrs Farrell in Mrs Barkley-Brown; that Mrs Barkley-Brown knew this and “exploited and took advantage of such trust and confidence” and exercised undue influence over Mrs Farrell to procure from Mrs Farrell the means to withdraw from her bank account the sum referred to in the Nelson report.

71 Similarly, the only reference in the third amended statement of claim to the deceased’s mental state was in the particulars to paragraph 4 whereby it is said that, insofar as Mrs Barkley-Brown communicated with Mrs Farrell in relation to the application of any of the moneys withdrawn by Mrs Barkley-Brown from the account, Mrs Farrell was mentally incapable of understanding the general effect of these transactions and, in particular, the fact that Mrs Farrell was impoverishing herself to the benefit of Mrs Barkley-Brown and such moneys were in truth gifts to Mrs Barkley-Brown which she could use for her own benefit in whatever way she saw fit.

72 It seems to me that it is unsatisfactory (if this be what was intended) for a separate claim of undue influence or to set aside a transaction on the basis of mental incapacity to be raised simply by way of particulars to an allegation that Mrs Barkley-Brown was acting in a fiduciary capacity. This issue was raised by Mr Broun QC, appearing for Mrs Barkley-Brown, at the commencement of the hearing.

73 Counsel for the plaintiffs, Mr Gray, submitted in his opening that a plea of undue influence was inherent in the allegation that Mrs Barkley-Brown, acting in a fiduciary capacity, took the money and never accounted for it. As outlined by him, I understood this submission to be that if and to the extent that Mrs Barkley-Brown, in giving an account for the moneys withdrawn, asserted that these were gifts, then a claim of undue influence would arise and the onus would be on Mrs Barkley-Brown to prove that the moneys were gift to her (or her family, including Mr Barkley) bearing in mind that the relationship between her and her aunt was one of trust and confidence.

74 There was also a suggestion by Mr Gray in his opening submissions that a claim for conversion might lie (although none was pleaded). It was submitted that if Mrs Farrell did not have capacity to appoint Mrs Barkley-Brown as her agent, then it would follow that Mrs Barkley-Brown had withdrawn the money without authority and so would be liable for conversion.

75 While it is possible for a claim in conversion to lie in relation to dealings with specific notes, coins or cheques (Thomas v High (1960) 60 SR (NSW) 401), the withdrawal of money from an account will not amount to conversion, as there is no chattel to be converted. French J (as his Honour then was) considered this issue in Spalla v St George Motor Finance Ltd (ACN 007 656 555) (No 6) [2004] FCA 1699, citing Lord Templeman’s reasoning in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (at 559):

Conversion does not lie for money, taken and received as currency ... But the law imposes an obligation on the recipient of stolen money to pay an equivalent sum to the victim if the recipient has been “unjustly enriched” at the expense of the true owner.

76 In the course of the hearing there was a succession of amendments to the pleadings, the culmination of which was that allegations of undue influence and mental incapacity were squarely pleaded by way of reply to the second amended defence. In response to paragraphs 2 and 3 of the second amended defence the plaintiffs pleaded that:

(a) Mrs Farrell was, to the knowledge of Mrs Barkley-Brown, mentally incapable of giving authority to her to withdraw moneys from Mrs Farrell’s bank account or of ratifying the withdrawal or use of those moneys; and

(b) Mrs Farrell “imposed” [sic] trust and confidence in Mrs Barkley-Brown; Mrs Barkley-Brown knew this and Mrs Barkley-Brown exerted undue influence over Mrs Farrell to enable her to withdrawn moneys for her (or Mr Barkley’s) use and benefit.

77 Further, the plaintiffs, again by way of reply, pleaded that by reason of the alleged mental incapacity any communication between Mrs Farrell and Mrs Barkley-Brown was ineffectual as a discharge for such moneys.

78 Mr Broun QC submitted that there was no liability to account but that in any event in the circumstances of the case an order for accounts should not be made. The said circumstances were particularised as follows:

· The accounts would relate to an excessive period – from February 1999 (8 years at commencement now 10 years ago).

· The accounts would involve an examination of approximately 840 items.

· There are inadequate records to enable either Mr Barkley or Mrs Barkley-Brown to identify the items to be included in any account.

· The memory and recollection of these parties would not be reliable.

· It would be unfairly onerous on the Mrs Barkley-Brown to provide further information as to numerous cash transactions which may have encompassed more than one transaction on a number of occasions.

· Mrs Barkley-Brown could not in practical terms provide an informative account.

· Neither Mr Barkley nor Mrs Barkley-Brown were persons who by habit or experience maintained full cash records, and

· The accounts sought in the orders included items for which Mrs Farrell personally signed withdrawal slips.

Scott Schedule

79 The Scott Schedule (Annexure “M” to Mr Nelson’s affidavit sworn 19 December 2007) purports to note the actual amounts withdrawn from Mrs Farrell’s bank account from 2 February 1999 to 31 October 2005 as being $1,121,042.86, of which the amounts contained in a column headed “Obliterated or Unexplained Component” totalled $879,128.38. It became apparent very quickly during the course of the hearing that the “Actual Amounts Withdrawn” column was incorrect. At some stage the author of the report apparently ceased to note the full amount of certain withdrawals in that column and instead included only the amount in respect of which no account was sought (the balance appearing in the “Obliterated or Unexplained” column).

80 The provenance of the Scott Schedule was not satisfactorily explained. Mr Nelson swore in his affidavit that he prepared that document after receiving Mrs Farrell’s passbooks for the years 1999-2005 and that the amounts noted in this document are those which, in his opinion, were either not accounted for or inadequately accounted for in the passbooks.

81 When Mr Nelson was called for cross-examination he squarely denied having prepared the Scott Schedule. Further, Mr Nelson said he did not know who had prepared the Scott Schedule:

Well I guess I’m responsible for it but I didn’t prepare it. This was prepared – well when I say I don’t know I’d have to say it would have been prepared by the solicitors, Henshaws, but I don’t know exactly who did it. It would be under the control, under the control of Mr Henshaw I would say.

82 What Mr Nelson did prepare was the Nelson report (Annexure J), the initial report as to passbook entries which was annexed to a statement made by him which accompanied Mr Barkley’s application for guardianship and/or financial management orders filed with the Guardianship Tribunal in about May 2005. The Nelson report does not, however, cover the whole of the period covered by the Scott Schedule.

83 Mr Barkley said he had put the Scott Schedule in the hands of his solicitor “to draw up”. It is Mr Henshaw’s footer reference, I was told, which appears on at least one of the versions of the Scott Schedule. Mr Henshaw was not called to give evidence.

84 There were numerous errors or inconsistencies in the Scott Schedule, both in terms of incorrect amounts being shown in the “Actual Amount Withdrawn” column (the total of which must on any view therefore be wrong) and inaccurate or missing notations in the “Passbook Notation” column. In one or two cases it seems that an entry was attributed to the wrong date or a notation was allocated to the wrong entry

85 While Mr Gray indicated, during the cross-examination of Mr Barkley, that Mr Nelson would be able to answer any questions about the preparation of or errors in the Scott Schedule, unfortunately (and perhaps not surprisingly since it was not his document), Mr Nelson was not able to do so. He could not explain, for example, situations where there was a notation in the passbook but no notation transcribed in the Scott Schedule and could not assist as to how particular items were prepared.

86 Mr Nelson said he did not personally check through the whole of the Scott Schedule, rather that he checked “only that part that I had prepared earlier” and he did that by looking at his earlier report. Mr Nelson conceded that he did not have any basis, other than comparison with the Nelson report, for checking whether the Scott Schedule was correct or ensuring its accuracy. However, Mr Nelson also said that he did not check whether entries were correctly transcribed from his report to the Scott Schedule. He did not decide what the particular columns in the Scott Schedule would be or how items would be attributed to the columns and he did not check what the columns were.

87 In the Nelson report, the apportionment of moneys which Mr Nelson considered as between either Mrs Barkley-Brown or Mr Barkley should be accounted for seems to have been effected on a relatively simplistic basis and largely (if not entirely) without reference to bank account records of either Mrs Barkley-Brown or Mr Barkley (though with reference to some invoices or bank cheque slips then in Mr Nelson’s possession).

88 Mr Nelson said he looked at the bank book and the notations when preparing the Nelson Report. He said that where the annotation said, for example, “insurance or house rates or Paul” then he would “allow” that to be classified as an expense. Where there were other entries where no annotations were made he put those into the column headed “unexplained”. Mr Nelson accepted that in his report he was listing all amounts withdrawn and where there was some record or note he assumed the note was correct. On some occasions Mr Nelson had invoices (from the bundle Mrs Barkley-Brown provided) to compare the entries in the passbooks.

89 Mr Nelson said that he did make a list “somewhere” of the amount of information he had to get from the bank that was not contained in the passbooks or when the passbooks were not available. Mr Nelson accepted that he had not seen all of the passbooks over the relevant period. He said he was not concerned about what had happened to the money, but was just “recording the information”. He made no inquiries of Mr Barkley as to any records of his bank accounts or to explain or record any amounts from Mrs Farrell’s account to Mr Barkley’s account.

90 How Mr Nelson can properly have sworn an affidavit directly attesting to his preparation of a document which he later swore he did not prepare, or as to his belief in relation to items in a document the preparation of which he seemed to concede he had not carefully overseen, was not satisfactorily explained. Mr Nelson said that when he first looked at the Scott Schedule he “was prepared to accept that what they [the solicitors] had done was correct”. He seems simply to have assumed that what he had prepared in May 2005 had been correctly transposed into the Scott Schedule and, with any subsequent information prepared by him, it was on that basis that he swore to his belief that the amounts in the relevant column had not been adequately accounted for or explained. If, as emerged from the cross-examination, Mr Nelson’s belief in relation to the Scott Schedule was based at least partly on an assumption that others had correctly transposed his earlier work, that assumption should have been expressly noted.

Basis for Mr Nelson’s suspicions

91 The commencement (and perhaps also the conduct) of these proceedings by the plaintiffs seems to have been marked by the suspicions of wrongdoing, first held by Mr Nelson, which were communicated to, and apparently readily shared by, Mr Barkley and Reverend Hawkins.

92 Those suspicions on Mr Nelson’s part appear to have been based solely on the frequency and volume of withdrawals from Mrs Farrell’s bank account over the period from 1999. Although Mr Nelson said that he became suspicious having regard to the departure from Mrs Farrell’s previous custom, it is by no means clear that when Mr Nelson first raised his questions as to the account he was privy to any information from which he could have formed a view as to Mrs Farrell’s previous custom in respect of bank withdrawals. His evidence was that prior to 2003 Mrs Farrell had not provided to him any of her personal banking passbooks – and what he received, from Mrs Barkley-Brown in about March or April 2004, were some (but not all) of Mrs Farrell’s bank accounts from February 1999 or 2000 to May 2002.

93 Therefore, it is hard to see that Mr Nelson could have known much if at all about the pattern of withdrawals by Mrs Farrell before Mrs Barkley-Brown had use of the bank passbooks.

94 Mr Barkley seems readily to have concluded that (to use his words) Mrs Barkley-Brown was “ripping-off” his aunt (even though he had not previously queried the largesse shown to him over the period in question). Mr Barkley said that Mr Nelson’s query confirmed ‘suspicions’ he had earlier had (though he did not say on what those hitherto presumably unvoiced suspicions had been based).

95 There was a suggestion, appearing through the plaintiffs’ affidavit evidence, that in late 2004 Mr Nelson considered (or in Mr Barkley’s case that even earlier, “since 2003” he had considered) that Mrs Barkley-Brown may have had a gambling problem or habit. Whether this belief formed part of, or led to, the suspicions to which Mr Nelson and Mr Barkley had deposed is not clear to me. No convincing evidence was adduced to that effect and this was not put directly to Mrs Barkley-Brown or her husband in cross-examination. Suffice it to note that I do not believe any such finding is warranted on the evidence before me.

Nature of relationship between Mrs Farrell and Mrs Barkley-Brown

96 I think it is clear that when Mrs Farrell entrusted her bank passbook to Mrs Barkley-Brown (whether on the particular occasions on which Mrs Barkley-Brown made withdrawals from time to time up to 2003 or when Mrs Barkley-Brown had it in her sole possession while Mrs Farrell was hospitalised in 2002 and then from mid 2003) and when she made Mrs Barkley-Brown a signatory to her bank account, Mrs Barkley-Brown owed fiduciary duties to her aunt.

97 In Hospital Products Ltd v United Surgical Corporation (1984) 156 CLR 41 at 102, Mason J, when noting that the categories of fiduciary relationships are infinitely varied and that the duties of the fiduciary vary with the circumstances which govern the relationship, commented that fiduciary relationships range from the trustee to the errand boy (citing the example given by Fletcher Moulton LJ in In re Coomber [1911] 1 Ch 723). Mrs Barkley-Brown was clearly more than a mere “errand boy” when she looked after Mrs Farrell and took care of her banking in the period from 1998/9 onwards. Certainly by 2003 Mrs Farrell appears to have reposed considerable trust and confidence in Mrs Barkley-Brown.

98 While there are cases which express doubt as to whether agents necessarily owe fiduciary duties (as noted by Meagher Gummow & Lehane in para 5-190 – 5-200), the authors there concluded that:

Even if it remains possible to identify cases in which non-fiduciary agencies have been recognised, they are of so special a character as not to merit significant qualification of the general rule that agency is a fiduciary.

99 Meagher JA, in Asset Risk Management Limited v Hyndes [1999] NSWCA 201, accepted that an employee to whom money was entrusted owed a fiduciary duty to his master, relying upon Hospital Products. So too, in my view, did Mrs Barkley-Brown owe a fiduciary duty to Mrs Farrell.

Liability of Agent to Account

100 As her agent (and absent any attenuation by Mrs Farrell of such a duty) the first duty of Mrs Barkley-Brown was to keep and, at least when requested, communicate a clear account of the moneys passing through her hands. That duty was described in the following terms in Pearse v Green (1819) 1 Jac & W 135 at 140; 37 ER 327:

It is the first duty of an accounting party, whether an agent, a trustee, a receiver, or an executor, for in this respect, as was remarked by the Lord Chancellor in Lord Hardwicke v Vernon (14 Ves. 500 And see White v Lincoln, 8 Ves. 363) they all stand in the same situation, to be constantly ready with his accounts.

101 An agent who fails to render an account when called upon to do so will be in breach of that duty. The obligation to provide an account (again, absent express agreement to the contrary) survives the termination of the agency - Yasuda Ltd v Orion Underwriting Limited [1995] QB 174 for the reasons give by Colman J at 185-186. In that cause it was said that:

There is no suggestion in any authority - decided case or textbook - that, if there is merely a gratuitous agency, there is no duty to provide records or accounts.

Because the agent's duty to provide records of transactions to the principal is founded on the entitlement of the principal to the records of what has been done in his name, termination of the agent's authority to enter into further transactions should have no bearing on the continuance of the duty to provide pre-existing records pertaining to the period when transactions were authorised. Accordingly, in the absence of express agreement to the contrary, the agent's duty to provide to his principal the records of transactions effected pursuant to the agency must subsist notwithstanding termination of the agent's authority. That, as I have held, is a duty that is imposed by law in consequence of the existence of the agency relationship and is not founded on the existence of a contract of agency.

102 From Lord Chedworth v Edwards (1802) 8 Ves Jun 46; 32 ER 68 it can been seen that the failure of the principal to ask for an account, even over a long period, does not diminish the duty of the agent to keep proper accounts.

103 Therefore, it seems clear that, as Mrs Farrell’s agent (to whom use and eventual custody and sole control of the bank passbook was entrusted), Mrs Barkley-Brown had a duty to keep proper records so that she could, if called upon, account for all funds withdrawn by her from Mrs Farrell’s bank account. She could have been called upon to give that account at any time by Mrs Farrell and, after her death, by her executors.

104 It would of course have been open to Mrs Farrell (subject to her having the mental capacity to do so) to have dispensed with the obligation of Mrs Barkley-Brown to account for moneys withdrawn by her, whether on a transaction by transaction basis or globally.

105 Mrs Barkley-Brown’s evidence suggests that Mrs Farrell did so on at least some occasions, when Mrs Farrell said to her words to the effect “Don’t worry” as Mrs Barkley-Brown was offering to make a notation on the bank passbook or was explaining what she had done with the money.

106 Mr Gray submitted that Mrs Barkley-Brown is not a credible witness. He urged me not to accept any evidence (including the above) from Mrs Barkley-Brown that was not corroborated. I do not accept that Mrs Barkley-Brown’s evidence was dishonest. There were certainly points on which her oral evidence conflicted with that given in her sworn affidavit (for example, in relation to whether a sum of $45,000 for use by way of deposit in the purchase of her house was a loan to Mrs Barkley-Brown and her husband or a gift) and where the explanation proffered by her (such as to the status of moneys advanced to her in relation to the deposit on her house) was not convincing. Nevertheless, other witnesses (not the least being Mr Nelson, on whose report much reliance has been placed, as well as Reverend Hawkins, in relation to the amount of his earlier loan from Mrs Farrell, and Mr Barkley, in relation to the state of Mrs Farrell’s relationship with Mr Barkley) also gave contradictory evidence.

107 Overall, I formed the impression that Mrs Barkley-Brown was endeavouring to answer the questions put to her in the witness box truthfully. She did not shy away from the proposition (unfavourable as it was in the terms it was put to her) that she had treated the situation as being that she could make whatever use she wanted of the funds in Mrs Farrell’s bank account or that she had been in breach of the duties owed to her aunt. She saw her ability to access the bank account as limited only by the instruction that withdrawals be for her or her family’s benefit and acted accordingly. Mrs Barkley-Brown did not exclude Mr Barkley from the distribution of her aunt’s largesse.

108 Mrs Barkley-Brown did not attempt to offer explanations for a number of withdrawals where she accepted she had none. She seemed genuinely confused by the suggestion that she had an obligation to keep records or accounts (other than what she might have considered necessary for tax purposes or perhaps as warranties for items purchased). She was not defensive or argumentative in cross-examination. Indeed, Mrs Barkley-Brown seemed resigned to the criticism or censure of her conduct by Mr Gray. She was prepared to accept that if moneys were found to have been loans to her then she would be obliged to repay them. She was not, however, shaken in her belief that Mrs Farrell had given her permission for the manner in which she had withdrawn the moneys and that she believed she had acted within that authority.

109 That said, even accepting that Mrs Farrell may have not required an explanation from Mrs Barkley-Brown each time the bank passbook was returned to her in the period from 1999 to 2003, I cannot see that this would be sufficient to amount to an authorisation for Mrs Barkley-Brown to use the bank passbook as if it were her own on an indefinite basis and without ever having to account to Mrs Farrell for the use she had made of it, nor do I accept that any mandate in those very broad terms was given to Mrs Barkley-Brown.

110 As it is impossible to ascertain those particular withdrawals for which Mrs Farrell may have orally dispensed with the need to account, I have concluded that Mrs Barkley-Brown as agent remained under an obligation to account to Mrs Farrell for all the sums withdrawn by her from Mrs Farrell’s passbook from 1999 and that Mrs Farrell’s executors were entitled after her death to demand such an account.

Should there now be an order to account?

111 It was submitted by Mr Broun QC that, before Mrs Barkley-Brown could be required by the court to account for the moneys, breach of some equitable obligation or duty must be shown, relying in this regard on Doss and Rosate.

112 However, an agent can be ordered to account when in breach of no duty other than the duty to provide an account. Meagher JA in Asset Risk Management Limited v Hyndes held that there was an obligation to account in what he described (at [5]) as a “very curious case” in which:

There was no allegation of legal wrongdoing, no allegation of breach of any express term of the contract; an initial allegation of breach of an implied term of the contract was abandoned. Nor was there any allegation of breach of any equitable duty, - other, of course, than breach of duty to account. There was no allegation that the respondent held the moneys on trust, or on some quasi-trustee basis. There was no allegation of any breach of confidence. There was no evidence that an account would be too complicated to take at law. There was no suggestion that the respondent had profited personally from the transaction. It seems to have been conceded that the moneys had been distributed in accordance with the appellant’s direction.

While his Honour noted that the respondent was in breach of an express term of his employment contract (being a representation and warranty that he would immediately inform the company of any matter coming to his notice during the employment which might be of interest or of any importance or use to the company or its subsidiaries), it does not seem that such a breach was essential to the existence of an obligation to account as his Honour went on to say (at [8]):

In my view it would be wrongful to hold the appellant disentitled to bring an action for account. The respondent was its superior agent. The respondent obviously stood in a relationship of confidence to the appellant. The respondent had received an enormous sum of the appellant’s money. Why should he not account for it?

113 His Honour thought that if authority were needed for that proposition one need go no further than Snells Principles of Equity (28th ed.) where reference was made to the concurrent jurisdiction of the Court of Chancery to order an account in certain cases in aid of a legal right, including the case of principal and agent, noting that:

A principal could maintain a suit in equity for an account against his agent “on the ground of the confidence reposed by the principal in the agent and the impossibility of discovering, except by the oath of the agent, how he had acted in the execution of his agency”, and that the agent was also required to account for any secret profits he had made.

114 Mr Gray relied on the statement of Latham CJ in Peninsular and Oriental Steam Navigation Co v Johnson [1937-1938] 60 CLR 189 at 218, that

Any person who, as agent or manager or director, has in fact the disposition or control of the moneys or other property of another person is a person who may be ordered to bring in an account.

115 Insofar as reference needs to be made to the 19th century principles referred to at first instance by Young J (as his Honour then was) in Asset Risk Management Limited v Hyndes (unreported, 2 April 1998), the present case would seem to be a case where:

the relationship is such as a confidence is reposed by the principal in his agent, and the matters for which an accounting is sought are peculiarly within the jurisdiction of the latter such that equity would assume jurisdiction to order an account (Pomery’s Equity Jurisprudence 5th Ed (1941) Vol 4 p 1077.

Has Mrs Barkley-Brown adequately accounted to Mrs Farrell for the withdrawals?

116 In the period at least to 2003, when Mrs Farrell went to live in Berala Nursing Home, Mrs Barkley-Brown says in effect, as I understand it, that her practice when she made withdrawals was to give or to proffer an account of what she had spent and that was accepted by Mrs Farrell. Any such account was either oral or as recorded in the handwritten annotations in Mrs Farrell’s bank passbook.

117 Subject to the difficulties posed by Mrs Farrell’s deteriorating mental condition, I would be prepared to accept that in the period up to 2003 Mrs Barkley-Brown gave an account of the withdrawals which was acceptable to Mrs Farrell (or for which Mrs Farrell dispensed with any further requirement to account) at least insofar as Mrs Barkley-Brown had made annotations in the bank passbook against the withdrawals and had presented the bank passbooks for inspection.

118 The plaintiffs say that the passbook imprints were not clear and that there was overwriting by Mrs Barkley-Brown. It was said that in view of Mrs Farrell’s acknowledged deterioration in eyesight, it could not be assumed that any written account was made known to Mrs Farrell in any realistic way. I do not believe that there is sufficient evidence to find that Mrs Barkley-Brown deliberately deceived Mrs Farrell by way of overwriting of entries written in passbook. I was not taken to any entries which seemed particularly suspicious in this regard. There is, in my view, an available alternative explanation - namely inattention to detail on passbook entries, which were (both in Mrs Farrell’s case and in Mrs Barkley-Brown’s) summary in content.

119 However, at least from the time Mrs Barkley-Brown had full possession of the bank passbook and was the signatory on the account, there is no evidence that any account was given of what was done (whether orally or by showing Mrs Farrell the bank passbook) and no records were kept of numerous withdrawals, those being generally not for trifling sums.

120 Therefore, at least from 2003, I am not satisfied that Mrs Barkley-Brown either gave a clear account for the withdrawals or was excused from so doing. (Before then, there is an issue as to Mrs Farrell’s mental capacity to do so, which I consider below.)

121 Nevertheless, there has now (in these proceedings) been an account made by Mrs Barkley-Brown for various of the withdrawals – first, by reference to annotations in the bank passbooks and also in the affidavit/oral evidence given before this Court by Mrs Barkley-Brown. I am told that no further account can, for all practical purposes, be given by Mrs Barkley-Brown. (Nor for that matter does Mr Barkley say he can give any further account for moneys received by him over that period.)

122 In at least one respect, the account given by Mrs Barkley-Brown was not convincing. Mrs Barkley-Brown’s evidence in relation to a $45,000 sum paid to her was not convincing. Mrs Barkley-Brown denied that this was a loan. Mr Lockley, however, deposed to a conversation with Mrs Barkley-Brown in which Mrs Barkley-Brown had said that the money was a loan and was to be repaid out of Mrs Farrell’s estate. This is consistent with the way in which Mrs Farrell dealt with loans amongst family members and is consistent with the passbook annotations. The explanation Mrs Barkley-Brown gave in the witness box (that because no loan document was signed it was not a loan) is not convincing. It may well be that, as with other amounts, Mrs Farrell did not press for repayment of the debt during the course of her lifetime but that does not mean that this was not intended to be a loan. I would treat moneys paid in respect of the acquisition of Mrs Barkley-Brown’s home and home extensions as moneys which Mrs Barkley-Brown is liable to repay to the estate.

123 Further, while I accept that Mrs Barkley-Brown believed that she was acting in accordance with the instructions or mandate expressly given to her by Mrs Farrell, I do not accept that the mandate said to have been given by Mrs Farrell could have been intended to give Mrs Barkley-Brown carte blanche over the use of Mrs Farrell’s funds. Construed in the context of what is known of Mrs Farrell’s previous financial assistance to her family, such an authority would seem likely at best to have extended to the use of funds when needed.

124 Nevertheless, both Mrs Barkley-Brown and Mr Barkley say that they have put to the court all the evidence to which they say they have access and their best recollection of the withdrawals in question. In light of the evidence given by each of Mrs Barkley-Brown and Mr Barkley, I am of the view that to order accounts to be taken now would be likely to be an exercise in futility at a disproportionate cost. I cannot see any benefit in further costs being incurred in having another hearing on 840-odd items of expenditure. It seems to me that it is not (as was submitted by Mr Gray) encouraging misconduct by fiduciaries to take a practical view of what benefit is likely to be gained from bringing both parties back before an Associate Judge for what both parties say is likely to be a futile exercise in attempting to identify the use to which (quite some time ago) numerous withdrawals were put.

125 The errors in the Scott Schedule, coupled with the lack of any evidence from the person who prepared the Scott Schedule as to how it was completed, exacerbates the position. Relevant records appear to have passed from Mrs Barkley-Brown to Mr Nelson, and then to Mr Henshaw. It is not clear where all the records now may be or what other accounting documents might be available. Mr Nelson during the course of his evidence produced various “rabbits out of the hat” in terms of documents not previously made available to the defendant (Ex 14, 15 and 16). Original bankbooks were uncovered (apparently to the surprise of all parties) when material produced by Mr Allars on subpoena was inspected in court during the hearing. Neither Mrs Barkley-Brown nor Mr Barkley appears to have complete records of his or her own personal accounts and therefore would seem unlikely to be able to carry out a thorough forensic accounting exercise as to what sums were paid to or for their benefit out of the moneys withdrawn.

126 A comparison of Mr Barkley’s bank records (some of which were produced for the first time during the hearing) led to Mr Barkley conceding in court that the proceeds of a number of the withdrawals which had been called into question in the Scott Schedule (and for which the plaintiffs were apparently seeking Mrs Barkley-Brown to account) had in all likelihood been deposited into his own bank account. Mr Barkley conceded that on a number of occasions he had asked Mrs Farrell for monetary assistance, including one or two requests made by him to her through Mrs Barkley-Brown in 2003, saying, “I’ll be honest with you, I did rely on borrowing money from Nan quite a bit in my early twenties”. There was little evidence of any repayment by him of that assistance.

127 As noted earlier, Mr Barkley said that he came to court seeking a “fair amount” to be repaid by himself and by Mrs Barkley-Brown. Mr Barkley said he could not assist the court (or anybody else) with any more detailed answers than he had already given. He accepted that he owed most of the items in the column of the Nelson report attributed to him. As I understood it, he intimated that he did not want the court to order him to give any or any further explanation for these moneys (but, rather, seemed to seek an account in terms of an order for repayment by him of the amounts withdrawn).

128 I note that in Warman International Ltd v Dwyer (1995) 182 CLR 544 at 577 (albeit where the court was considering an application for an account of profits) the court referred to the “cardinal principal of equity that the remedy must be fashioned to fit the nature of the case and the particular facts”. In the circumstances, that is what I propose to do.

Withdrawals from Mrs Farrell’s account

129 On the evidence before me, the withdrawals seem to fall within various categories:

(i) those in respect of which the relevant annotation in the passbook (or Mr Nelson’s enquiries to date) indicated that the moneys were paid for Mrs Farrell’s benefit (tax payments, water rates, electricity, telephone bills, accounting fees, medication, nursing home fees, ambulance, Mrs Farrell’s clothing and the like) sometimes mixed with other payments;

(ii) those in respect of which the relevant annotation in the passbook (or a perusal of Mr Barkley’s own bank records) indicated they were to or for the benefit of Mr Barkley (in which category I would include payments relating to his car, phone bills, payment for his wedding expenses, vet bills for treatment of his cat, and other payments to his account to meet credit card or other bills);

(iii) those in respect of which the relevant annotation in the passbook (or Mrs Barkley-Brown’s own evidence) indicated they were for the benefit of Mrs Barkley-Brown, Mr Brown or their family (in which category I would include payment for the house extensions, family holidays, clothing, payments for Mr Brown’s coat, for a trip to Japan, the children’s expenses and the caravan); and

(iv) withdrawals in respect of which there was no annotation in the passbook and withdrawals identified only as “housekeeping”.

130 I consider each category in turn:

(i) withdrawals for Mrs Farrell’s benefit.

As I understand it, no account is sought in respect of items within this category (other than, perhaps, items where there may have been mixed expenditure; see for example the withdrawal on 11 July 2005, to which no annotation was ascribed in the Scott Schedule but which nevertheless appears to have been noted in the bank book as “water rates, Ryan’s birthday, clothes for Nana”).

(ii) withdrawals for Mr Barkley’s benefit.

Although Mrs Barkley-Brown said that where there was more than one withdrawal on the same day she believed the second one was for Mr Barkley, there is nothing to corroborate that and I do not accept that.

However, where the relevant annotation ascribes a withdrawal to Mr Barkley, in general I would accept it as likely to be correct. I have no doubt that Mrs Barkley-Brown did make sums available to Mr Barkley out of Mrs Farrell’s funds, just as she admittedly used moneys in Mrs Farrell’s account for the benefit of her other sons. Mr Barkley conceded that he had benefited from monetary assistance from Mrs Farrell up to and even during 2002 or 2003. Had the preponderance of the withdrawals been ascribed to Mr Barkley then I would have been inclined to form a different view. However, in the scheme of things, the proportion of items shown as attributable to Mr Barkley seems relatively low, consistent with Mrs Barkley-Brown providing him with monetary assistance from time to time or in connection with specific purchases or when his bank account was low or he had bills to pay.

I have already noted that Mr Barkley made concessions in relation to a number of the items in (ii) where the withdrawal appeared to have been matched in whole or in part by a corresponding deposit in his account. However, issue was taken by Mr Barkley as to the amount attributed in the bank passbooks to payments in relation to his car. He asserted a belief that Mrs Barkley-Brown might have “skimmed” moneys - as I understand it, by inflating the amount withdrawn in respect of Mr Barkley’s car and pocketing the balance. Mr Barkley relied upon Ex F as showing that the cost of the vehicle purchased in November 2000 was $25,985, whereas the total withdrawals for the car were noted in the bank passbook as $29,895. Mrs Barkley-Brown’s recollection was that there were other expenses associated with the purchase of the car including a car alarm and radio; as well as insurance. Mr Barkley appears to have accepted that moneys were expended at least on a car radio and alarm out of moneys withdrawn by Mrs Barkley-Brown, but disputes about $4,000 of the payments so attributed to him.

Although Mr Barkley deposed to a conversation with Mrs Barkley-Brown in about 2003 to the effect that she said Mrs Farrell was willing to forego the rest of the repayments for the car loan (and Mr Barkley appears not to have questioned Mrs Farrell’s competence to do so at the time), consistent with his stance in these proceedings he accepts he should now repay the balance of the debt.

Given that Mr Barkley appears to have no records of the level of repayments he said he made, but both Mr Barkley and Mrs Barkley-Brown accept that some repayments had been made; and that the amount Mr Barkley asserts was “skimmed” is, in the scheme of things, a fairly small amount, I consider that of the sum of $29,895 attributed to Mr Barkley’s car, only $4,000 of which Mr Barkley disputes, Mr Barkley should be treated as having paid half of the amount shown in Ex F, the balance of which should be treated as being repayable by him.

(iii) Withdrawals admittedly for Mrs Barkley-Brown or her family’s benefit.

Mrs Barkley-Brown admits that a number of withdrawals were applied for her and her family’s benefit. I see no reason to disbelieve her identification of those amounts.

(iv) Unexplained withdrawals and “housekeeping”.

In relation to category (iv), I consider below whether a presumption arises against Mrs Barkley-Brown from the failure to keep (or destruction of) accounting records, by application of the maxim omnia praesumuntur contra spoliatorem. This has, perhaps imprecisely, been translated as “all things are presumed against the wrongdoer” per Mozley and Whitley’s Law Dictionary as cited in NWR FM t/a North West Radio v. Broadcasting Commission of Ireland & Anor [2004] IEHC 109).

Mrs Barkley-Brown said she had kept invoices and receipts at Mrs Farrell’s home but stopped doing so once Mrs Farrell went into the Berala Nursing Home. I understood her to mean that she had kept some invoices at her own place after June 2003 but that when she moved house (in about 2004) various invoices were not kept.

In Gray v Haig (1855) 20 Beav 219 at 235-238; 52 ER 587 the Master of the Rolls (Sir John Romilly), in a case where account records were destroyed while litigation was pending and before accounts arising from certain transactions had been finally adjusted, said:

In such a case some very cogent reason must be given to satisfy the court that the destruction was proper or justifiable, and, in the absence of any such satisfactory reason ... I am compelled to ... presume as against the person who destroyed the evidence, everything most unfavourable to him, which is consistent with the rest of the facts, which are either admitted or proved.

The High Court in Allen v Tobias (1958) 98 CLR 367 at 375, adopted the statement of the maxim given in The Ophelia [1916] 2 AC 206:

If any one by a deliberate act destroys a document which, according to what its contents may have been, would have told strongly either for him or against him, the strongest possible presumption arises that if it had been produced it would have told against him; and even if the document is destroyed by his own act, but under circumstances in which the intention to destroy evidence may fairly be considered rebutted, still he has to suffer. He is in the position that he is without the corroboration which might have been expected in his case.

This suggests that even bona fide destruction can nevertheless have negative consequences.

Here, Mrs Barkley-Brown either did not keep the necessary records to identify the use to which funds were put at the time or else, some time later (perhaps when moving house), she threw them away or otherwise destroyed them. I do not accept there is necessarily any suspicion attaching to Mrs Barkley-Brown in that regard. She showed a degree of financial naivety in relation to her own banking records. Moreover, it seems the same criticism might be made of her son’s record keeping (though he was not in the position of agent when receiving moneys out of Mrs Farrell’s account and so it was not incumbent on him to do so).

Nevertheless, it seems the maxim omnia praesumuntur contra spoliatorem does not arise only where the destruction of evidence is by a wrongdoer. If Mrs Barkley-Brown cannot not account for transactions because of a lack of records which she could easily (and as agent should) have kept, it seems to me that a presumption that the records would not have assisted her may well have been available.

In the event, it is not necessary for me to draw any adverse inference from the non-existence of such records because Mrs Barkley-Brown concedes that, except as otherwise noted in the bank passbooks or explained by her in court, all moneys withdrawn by her were for her or her family’s benefit. Therefore, all unexplained items in category (iv), subject to one qualification, will be treated by me as if they were for Mrs Barkley-Brown.

The qualification I would make relates to the relatively few instances where there were withdrawals which were of larger amounts (including in one case $60,000) for which there is no annotation in the relevant bank passbook. Mrs Barkley-Brown’s only explanation for these was that they may have been for the purpose of acquiring investments. She recalled on a number of occasions obtaining a bank cheque to purchase Commonwealth Bank or other shares (and suggested that was for about $20,000). Given that there are not many such withdrawals (the bulk of the withdrawals being for sums ranging from $300 to $2,000 or occasionally $3,000 or $4,000), I suspect that withdrawals of over $5,000 on any one occasion may indeed have been for a particular identifiable investment or transaction on behalf of Mrs Farrell.

I am concerned that Mrs Barkley-Brown may not have had access to sufficient material from the records held of Mrs Farrell’s estate as to the share investments held by Mrs Farrell in order to confirm her belief that some of the larger unexplained withdrawals were for the acquisition of shares. That is something which should be able to be ascertained from Mrs Farrell’s share portfolio or investment records. I understand that those are in the hands of the solicitors or accountants for the estate. I therefore consider it would be appropriate for me to direct Reverend Hawkins (who I understand is presently seeking a considerable sum by way of commission as executor of this estate and presumably therefore can be expected to be taking an active role in the administration of the estate and to be conscious of his obligations as executor to take care in the maintenance of such records) to provide that information.

As to the amounts described in the passbooks as being for “housekeeping”, it goes almost without saying that up until Mrs Farrell became a resident of Berala Nursing Home moneys must have been expended by Mrs Barkley-Brown for housekeeping and personal needs (since the evidence is that Mrs Farrell herself did not, from about 1999, attend to the payment of bills, etc). Mr Nelson suggested in his May 2005 statement that Mrs Farrell’ personal expenditure had previously been in the order of $200 per week or $10,000 per annum plus payment of rates and taxes. The entries which were in fact annotations being for housekeeping varied considerably from $100 to $500 through to over $1,000. There were withdrawals so described every few days and sometimes on consecutive days (see for example, entries for 23, 26, 29 November 1999 and 2, 3, 6, 10, 13, 16 and 22 December 1999) during the first part of the period in question. Allowing for the fact that Mrs Barkley-Brown may well have been less “frugal” on her aunt’s behalf than Mrs Farrell was wont to have been, I consider that out of the unexplained or housekeeping withdrawals (ie category (iv)) an amount of at least $300 a week would fairly be treated as being referable to Mrs Farrell’s housekeeping/personal needs up to June 2003 when she was admitted to the Berala Nursing Home.

Where the entries were mixed as between references to Mr Barkley and other items (such as 16 February 2000 ($650 annotated as “Housekeeping and Paul’s Bill”) or 12 December 2001 (“Paul Kerry Tel. Bill” - $900)) and it is not possibly to identify the component referable to Mr Barkley. I consider the fairest way to apportion this would be to attribute half to Mr Barkley’s account and half to Mrs Barkley-Brown’s account, since Mr Barkley conceded that he had received monetary assistance from Mrs Farrell both over the period from 1999 onwards and before (see for example, Ex 10, showing an advance of $2,500 in 1997) (and seemed to wish to impress upon me that all monetary assistance towards him should be treated as a loan and there was no evidence of any repayment of assistance of that kind).

Where the mixed entries related to items which were for Mrs Farrell’s benefit and those which were for Mrs Barkley-Brown’s family (such as “water rates, Ryan’s birthday, clothes for Nana” - $1,000, 11 July 2005 or $4,000 – “for children and mum helping”) a determination on an individual basis needs to be made. I would, for example, be inclined to allow all of the 11 July 2005 entry as category (i) (on the assumption that the gift for Ryan would probably be seen as a “trifling” sum in the overall picture); the entry for 28 July 2004 I would attribute to Mrs Barkley-Brown’s account (category (iii)) as it is not possible to make an assumption as to what the purpose for which any payment from Mrs Farrell’s benefit was made. If there are other mixed items I would hope that the parties could agree on a similar apportionment.

What repayment is to be made of moneys in categories (ii) – (iv)?

131 I have already noted Mr Barkley’s position in relation to sums attributed to him. The question arises as to whether Mrs Barkley-Brown should be required to repay to the estate moneys in respect of all items in (iii) and (iv) (other than the housekeeping amounts I would treat as referable to Mrs Farrell).

132 Mr Gray submits that this is a paradigm case of undue influence and that the onus rests on Mrs Barkley-Brown to demonstrate that benefits obtained from Mrs Farrell were not obtained as a result of undue influence. The question is not whether Mrs Farrell intended to benefit Mrs Barkley-Brown, but how that intention was produced.

133 To the extent that the account given by Mrs Barkley-Brown is that the moneys withdrawn by her were gifted to her or her family (or to Mr Barkley for that matter), it is said that the onus lies on Mrs Barkley-Brown to prove that Mrs Farrell had the mental capacity and independently formed intention to make those gifts. This would of course only be the case if a situation of presumed undue influence has arisen. Otherwise there would be a presumption of mental capacity which it would be for the plaintiffs to rebut.

Undue influence

134 In the course of submissions it was said that the relationship between Mrs Farrell and Mrs Barkley-Brown (being akin to a mother/daughter relationship) was one falling with the category of cases in which undue influence would be presumed and that this cast upon Mrs Barkley-Brown an obligation to account for the withdrawals.

135 For the reasons noted above, the entitlement to an account in equity does not in my view require such a finding. However, when the question is as to whether an explanation of gift should be accepted, then the issue does arise.

136 The existence of a fiduciary relationship does not itself call into aid any presumption of undue influence. I note that In re Coomber (when considering the precipitous assignment by an elderly mother of leases and licences to her son who had been managing various affairs on her behalf), Fletcher Moulton LJ and Buckley LJ each cautioned against an assumption that wherever there was a fiduciary relationship between donor and donee a gift could be called into question.

137 Fletcher Moulton LJ said (in a passage referred to by Mason J in Hospital Products for the proposition that the nature of curial intervention which is justifiable will vary from case to case):

...Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation must be such that it justifies the interference. There is no class of case in which one ought more carefully to bear in mind the facts of the case, when one reads the judgment of the Court on those facts, than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them. In my opinion there was absolutely nothing in the fiduciary relations of the mother and the son with regard to this house which in any way affected this transaction. ...

138 Buckley LJ stated (at 730-731):

[T]here was not here any such fiduciary relation between the donor and the donee as that the gift can, on that ground, be called in question. It is not every fiduciary relation that calls this doctrine of equity into action. Between master and servant, between employer and bailiff or steward, there subsists, of course, a fiduciary relation; but there is no authority for the proposition that by reason of the existence of relations such as those a deed of gift from the one to the other can be set aside. This doctrine of equity does not rest upon the existence of a fiduciary relationship whatever be its nature. It rests upon the existence of such a fiduciary relationship as will lead the Court to infer undue influence, or knowledge in the one party concealed from the other, or other circumstances into which I need not go. This ground alone is sufficient to dispose of this appeal. In this respect I differ from the learned judge. He said, "I think, therefore, that the burden of proof is upon him" - that is upon the defendant - "to rebut the presumption that the gift was induced by that relation." There was, I think, no such presumption.

139 Moreover, the archetypal parent/child case where the specific relationship gives rise to a presumption of undue influence, operates where the child confers a benefit upon the parent, not vice versa. This was recognised by Windeyer J in Urane v Whipper [2001] NSWSC 796, who noted that there the case was:

not a transaction where the relationship between the parties of itself raises a presumption of undue influence, as the transaction flows from father to daughter not from daughter to father.

140 Similarly, in Whereat v Duff [1972] 2 NSWLR 147 the relationship between mother and son did not raise a presumption of undue influence when the gift passed from mother to son.

141 Indeed, there is a rebuttable presumption that moneys paid from a parent to a child are advanced is by way of gift (Nelson v Nelson (1995) 184 CLR 538).

142 That said, undue influence is presumed where there is a sufficient relationship of dependency upon (or ascendancy exercised by) the donee. This is the kind of relationship described by Sir Anthony Mason (writing about the doctrines of undue influence and unconscionable dealing in the Anglo-American Law Review 1998) as a class 2B relationship (using the terminology adopted by the English Court of Appeal in Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 23):

My understanding of undue influence, not altogether fashionable in the light of modern English decisions, is that it denotes an ascendancy by the stronger party over the weaker party such that the relevant transaction is not the free, voluntary and independent act of the weaker party (Commercial Bank of Australia Ltd v. Amadio (1983) 151 CLR 447 at 461,474). In other words, it is the actual or presumed impairment of the judgment of the weaker party that is the critical element in the grant of relief on the ground of undue influence (See Peter Birks and Chin Nyuk Yin, On the Nature of Undue Influence, Ed. J. Beatson and D. Friedmann, "Good Faith and Fault in Contract Law" 57 et seq.). The list of the old relationships of influence from which undue influence was presumed supports this view: solicitor and client, doctor and patient, spiritual adviser and novice or parishioner, parent and child, guardian and ward and possibly express trustee and beneficiary (See Meagher, Gummow and Lehane, Equity, Doctrines and Remedies, 3rd edn (1992) § 1519). In these relationships, called class 2A relationships in Barclays Bank plc v. O'Brien ([1994] 1 AC 180 at 189), the weaker party, dependent on the stronger party, is not likely to bring to bear a free, voluntary and independent judgment to a transaction involving the parties to the relationship, whether it is a contract or a gift. Class 2A relationships are to be distinguished from class 2B cases where a de facto relationship of trust and confidence will raise a presumption of undue influence. (My emphasis).

143 The present case would seem clearly to be a case where there was a sufficient relationship of dependence such that Mrs Barkley-Brown “stood in a position of undue influence towards” Mrs Farrell, much as was the case in Winefield v Clarke [2008] NSWSC 82.

144 In Johnson v Buttress (1936) 56 CLR 113 Latham CJ at 119 said:

The jurisdiction of a court of equity to set aside gifts inter vivos which have been procured by undue influence is exercised where undue influence is proved as a fact, or where, undue influence being presumed from the relations existing between the parties, the presumption has not been rebutted. Where certain special relations exist undue influence is presumed in the case of such gifts. These relations include those of parent and child, guardian and ward, trustee and cestui que trust, solicitor and client, physician and patient and cases of religious influence. The relations mentioned, however, do not constitute an exhaustive list of the cases in which undue influence will be presumed from personal relations. Wherever the relation between donor and donee is such that the latter is in a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter, the presumption of undue influence is raised (Dent v. Bennet (1839) 4 My & Cr 269; 41 ER 105; see also Smith v. Kay (1859) 7 HLC 750; 11 ER 299).

Where such a relation of what may be called, from one point of view, dominion, and from another point of view, dependence, exists, the age and condition of the donor are irrelevant so far as raising the presumption of undue influence is concerned. It must be affirmatively shown by the donee that the gift was (to use the words of Eldon L.C. in the leading case of Huguenin v. Baseley (1807) 14 Ves Jun Supp 372; 34 ER 1138) "the pure, voluntary, well-understood act of the mind" of the donor. (my emphasis).

145 From 1999, Mrs Farrell was in a position of increasing dependence on Mrs Barkley-Brown. Mrs Farrell was elderly and (as I discuss below) in a position of deteriorating mental health. Her eyesight was poor. She was grateful for Mrs Barkley-Brown’s assistance and she entrusted effective control over her bank account funds to her. Mrs Farrell became less able to leave her house over the years and both emotionally and physically dependent on Mrs Barkley-Brown.

146 In those circumstances there was a clear relationship of dependence such as to place Mrs Barkley-Brown in a position where undue influence would be presumed over Mrs Farrell. In those circumstances, as noted by Barrett J in Winefield v Clarke , the law requires that Mrs Barkley-Brown positively justify the retention of the benefit conferred on her.

147 It should be noted that it is not necessary for there to have been an actual use of influence for the purpose of obtaining the benefit; ie that undue influence be proved as a fact. Rather, as Asprey JA in Whereat v Duff says (at 167):

... where the relations between the donor and the donee have at, or shortly before, the making of the gift been such as to raise a rebuttable presumption that the donee had an undue influence over the donor. ... the court sets aside the gift unless the donee rebuts the presumption. The court does not act on the ground that any wrongful act has been committed by the donee, but on the ground of public policy and to prevent the relations which existed between the parties and the influence arising therefrom being abused: Allcard v. Skinner (1887) 36 Ch D 145 at 171 (my emphasis)

148 As a consequence of the fact that Mrs Barkley-Brown stood in such a position, as a matter of law she would be required positively to justify the retention of the benefits (at least insofar as they were not trifling benefits) conferred upon her; namely to show that these gifts were the independent and well understood acts of a woman in a position to exercise a free judgment based on information as full as the donee.

149 In Allcard it was said that once the facts are established (as they are here) from which the court will infer that a situation exists where undue influence may have been exerted, then the presumption arises and the onus then falls upon the donee to rebut the presumption by proving that “in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gift was the result of a free exercise of the donor's will”. When undue influence is raised – one looks to the quality of the consent or assent by the weaker party (Deane J – Commonwealth Bank of Australia Limited v Amadio (1993) 151 CLR 447).

150 Although it seems that the court's jurisdiction to interfere is not attracted in the case of trifling gifts (Rhodes v Bate (1866) LR 1 Ch App 252; Spong v Spong (1914) 18 CLR 544), here the quantum of the withdrawals in question must provoke enquiry.

151 The fact that Mrs Farrell may have expressed the intention to make a gift is not sufficient. The question is how that intention was produced. It was said in Huguenin v Basely (1807) 14 Ves Jun Supp 273 at 299-300:

Whereas in those cases where there is a claim by a living person that he has received a gift in the hands of a deceased person the court should carefully scrutinize the evidence to ascertain whether that the living donee puts forward is a probable and credible account of what really happened.

152 In Whereat, Asprey JA said (at 168-169):

The question of intention is basic in the law of undue influence. The fact standing by itself that there is evidence that the donor stated that he intended to make the gift does not rebut the presumption ... The ability of the donor to understand and intend that he is making a gift will not by itself necessarily operate as a bar to equitable relief.

153 The only evidence adduced by Mrs Barkley-Brown to rebut the presumption of undue influence was her own account of the conversations in which it was said Mrs Farrell gave Mrs Barkley-Brown authority so to use the funds in her bank account. The plaintiffs submit that even if those conversations were accepted they did not permit Mrs Barkley-Brown carte blanche over Mrs Farrell’s funds. I agree.

Mental capacity

154 On the evidence adduced by the plaintiffs I am satisfied that Mrs Farrell did not have the necessary mental capacity to form the intention to make a gift of the moneys withdrawn, at least from 2003.

155 Professor Chan, a specialist geriatrician with academic and professional qualifications, was called as an expert by the plaintiffs. He examined the medical records relating to Mrs Farrell and was asked to form an opinion as to her capacity to understand and appreciate the implication of financial transactions from 1 January 1999, until her death.

156 Professor Chan’s report made it clear that the cognitive decline from which Mrs Farrell suffered was caused by vascular disease and that this was a process which takes years to progress. He said it was sometimes difficult to pinpoint when the process begins and precisely when the stage is reached at which the person has ceased to have the ability to understand the significance of a particular transaction.

157 Professor Chan’s conclusion was that by 1999 (aged 88 years) Mrs Farrell had commenced to suffer from medically diagnosed episodes of confusion and that by 2002-2004 this decline had advanced significantly. From that date onwards Mrs Farrell’s cognitive decline continued but it was impossible to assess that the rate of decline was constant rather than variable over time (since it was not uncommon for there to be periods of temporary improved cognitive capacity due to transient improvement in blood flow to the brain).

158 Professor Chan gave evidence that the level of cognitive capacity required to understand some transactions was higher than others. As I understood his evidence, the cognitive capacity required to understand the implications of and form an intention to make a gift, such as a Christmas gift, for example, would be less than that required to make a decision in respect of complex share or investment transactions.

159 Professor Chan noted multiple admissions to hospital between 2002 to 2004 with evidence of confusion documented in the medical notes. It seemed clear to him that during particular periods it could be confidently stated that Mrs Farrell was extremely confused (such as during her admission to Westmead Hospital in 2003 where she suffered delirium in addition to dementia).

160 Professor Chan said it was not possible to assert with certainty that Mrs Farrell had lost insight into monetary transactions in 1999, but that it was more than likely that she had lost normal insightful perception as to such matters by 2002. He considered it very probable that she had lost or nearly totally lost such insightful perception in 2003 and said that after that it was extremely unlikely that she had insightful perception concerning money matters. When pressed in cross-examination, Professor Chan considered that Mrs Farrell had crossed “the boundary” by 8 April 2002.

161 Professor Chan said that a score of 20 out of 30 on MMSE would be classified generally as indicating a very significant cognitive impaired stage. Professor Chan said that he was suspicious that dementia was well established by 2002. Professor Chan noted that Mrs Farrell had discharged herself against medical advice on 11 April 2002 and said that in any event it could not be inferred from a discharge from hospital that Mrs Farrell had any particularly improved cognitive ability since a discharge from hospital would occur if it was felt to be physically safe for the patient to return home.

162 Professor Chan described the situation as being a whole picture of gradual decline with worse days and worst days. Professor Chan said that in the period from 16 February 1999 to 2002 Mrs Farrell was in decline and that some time (pinpointing 8 April 2002) she “actually crossed the boundary”. The presence of blood in the brain in 2002 was a very poor sign.

163 I accept Professor Chan’s evidence. His answers in cross-examination were considered and I see no reason not to accept his conclusion that by 2003 (and I infer here he means by the time of Mrs Farrell’s hospitalisation in February 2003), it is extremely unlikely that Mrs Farrell would have had insightful perception concerning money matters (notwithstanding that from time to time Mrs Farrell may have had understanding as to some matters – which would explain why Mr Allars may have felt comfortable certifying her execution of the power of attorney and Mr Barkley seems to have felt comfortable relying on Mrs Farrell’s authority to move into her house and then to remove an item of furniture from the home).

164 I think there is more room for doubt as to the point of time before April 2002 by which I could be satisfied that Mrs Farrell lacked the mental capacity to form an intention to make a gift. Certainly at some times over the period 1999-2002 it is highly likely that she lacked that capacity (and I refer in this regard to the times when Mrs Farrell was admitted to hospital and was noted as being confused). However, those were discrete occasions.

165 It seems to me that over the period 1999 to April 2002 there would have been times when Mrs Farrell was capable of forming the requisition intention. There was, I am told, no challenge to Mrs Farrell’s testamentary capacity in relation to the will she made in 2000. Dr Scott was prepared to issue the certificate required in 2000 for Mrs Barkley-Brown to be appointed as signatory to Mrs Farrell’s account. Mr Allars considered her sufficiently capable of appointing a power of attorney in November 2003.

166 However, even for any period in which Mrs Farrell had sufficient mental capacity to make a gift, the question is how the intention to do so was produced.

167 On the material before me I do not believe the presumption of undue influence has been rebutted by Mrs Barkley-Brown. Even before the stage at which there was a probability that dementia precluded Mrs Farrell from having the mental capacity to form the necessary intention, it is not clear to me that Mrs Farrell had all the necessary information (particularly the financial quantum or volume of the withdrawals) in order to make the decision that moneys were to be gifted to Mrs Barkley-Brown or Mr Barkley or was sufficiently independent of the emotional attachment to Mrs Barkley-Brown to form an uninfluenced decision.

168 Professor Chan’s evidence was that dementia is prone to make sufferers more vulnerable to undue influence. Mrs Barkley-Brown relied upon the instruction or authority she said had been given to her in 2000 and again in 2003. As noted previously, I would not construe such an instruction as extending to carte blanche over Mrs Farrell’s funds. In any event, any such instruction given (whether in 2003 or earlier in 2000) is susceptible to the presumption of undue influence.

169 There is no suggestion that Mrs Barkley-Brown did anything in particular to persuade or influence Mrs Farrell to do things in Mrs Barkley-Brown’s favour. However, that is not the issue. As was made clear in Allcard v Skinner, as a matter of public policy such gifts should be set aside not because of any wrongful act committed by the donee but to prevent the special relations existing between the parties and the influence arising therefrom being abused.

170 The position of vulnerability or susceptibility of Mrs Farrell to influence by Mrs Barkley-Brown is clear. Mrs Barkley-Brown cared for her and spent a considerable time with her. Mrs Farrell was in a position of deteriorating health. Mrs Farrell’s delight at Mrs Barkley-Brown return was likened by Reverend Hawkins to the parable of the prodigal son. Mrs Barkley-Brown herself deposed to a conversation in which Mrs Farrell said (at the time prior to 2003 when she tried to give Mrs Barkley-Brown her bank book) “I would trust you with my life”.

171 There is nothing to suggest that Mrs Barkley-Brown did not care lovingly for her great aunt in the last years of her life. From at least 1999 she appears to have been a devoted carer for Mrs Farrell, and from 2003 she took on the burden of almost day to day support of Mrs Farrell for a time on a 24 hour care basis and then, when Mrs Farrell was admitted to Berala Nursing Home, as an almost daily visitor. There is no suggestion that equal devotion was shown to Mrs Farrell by Mr Barkley or anyone else over that period. However, that is not the issue.

172 The fact of Mrs Farrell’s physical dependence on and emotional attachment to Mrs Barkley-Brown and the position of trust and confidence in which Mrs Barkley-Brown was placed (which Mrs Barkley-Brown acknowledged obliged her to act in best interests of Mrs Farrell and not her own), leads me to conclude that Mrs Barkley-Brown (without being conscious of any impropriety) benefited from Mrs Farrell’s disadvantageous position, by taking for her own benefit or for that of her family (including her son, Mr Barkley) gifts/moneys in accordance with what she understood to be Mrs Farrell’s instructions.

Conclusion

173 No claim to set aside any gifts or to recover moneys on the basis of undue influence was pleaded as such. The claim which has been made is for an account to be taken and for declarations or orders to be made as to how any amounts resulting from that account should be dealt with in the distribution of the estate.

174 Where the expenditure falls within category (i), including where the passbook annotation discloses that the sums were for tax, rates or the like it does not appear that there is any dispute that those are amounts for which Mrs Barkley-Brown should not be required to account.

175 As I am not satisfied that the amounts in categories (ii), (iii) and (iv) were gifts made with the necessary intention and mental capacity to benefit Mr Barkley or Mrs Barkley-Brown, I consider that the appropriate order is for those amounts to be treated as owing to Mrs Farrell’s estate.

176 Where the withdrawal falls within category (ii) (including where a relevant concession was made by Mr Barkley as to receipt or likely receipt of moneys from Mrs Farrell’s account then (other than in respect of the ruling I have made as to the payment of $29,000 odd for Mr Barkley’s car)), Mr Barkley should be ordered to repay to the estate those moneys plus interest thereon.

177 There was evidence that moneys paid to Mr Nelson ($7,518.40) and Mr Henshaw ($10,461.55) in connection with the Guardianship Tribunal proceedings (in which each of them was retained for Mr Barkley) had been paid out of the estate moneys. In the absence of evidence that there was any order to the effect that sums incurred by Mr Barkley in connection with those proceedings were payable out of the estate, I think it is appropriate that Mr Barkley also refund those amounts (with interest) to the estate.

178 Before turning to category (iii) items, I consider that where the withdrawal falls within category (iv), Mrs Barkley-Brown should have an opportunity to file a further affidavit identifying any other items in the Scott Schedule which Mrs Barkley-Brown contends are incorrect or which (matched against entries in Mr Barkley’s account) were for his benefit (and for Mr Barkley to respond thereto with any further evidence he may have), and I will then rule on those items. However, subject to any further evidence which may be put forward by Mrs Barkley-Brown in relation to the so-called “unexplained” transactions, I consider that due accounts should be treated as now having been provided and the amounts within category (iv) treated as owing to the estate.

179 Therefore, items within (iii) and any items within category (iv) above for which no further explanation is provided (or in respect of which any explanation is not accepted by the court as showing them to be for Mrs Farrell’s or Mr Barkley’s benefit) should be treated as a withdrawal of moneys for the use and benefit of Mrs Barkley-Brown (after the deduction therefrom of the notional sum of $300 per week for housekeeping or personal need for Mrs Farrell’s benefit over the period to June 2003) and Mrs Barkley-Brown will be liable to repay those moneys plus interest to the estate.

180 Where there are clearly mixed amounts, it would seem to me appropriate to make an apportionment to reflect the fact that not all of the withdrawals was for Mrs Barkley-Brown’s (or Mr Barkley’s) benefit, as the case may be. If the parties cannot reach agreement as to how that apportionment should be made I will do so in due course.

181 As there has not yet been a full distribution of the estate, and it appears the amounts in question form about (or less than) 10% of the overall estate, it seems to me that it would be appropriate for any amounts to be repayable by either Mrs Barkley-Brown or Mr Barkley (plus interest thereon) to be deducted from their respective share of the estate (after the estate is notionally increased to reflect the total of the amounts for which they are together accountable).

Exemplary Damages

182 In submissions Mr Gray put to me that such damages were warranted in order to operate as a deterrent to others in a fiduciary position. Mr Barkley’s explanation for the claim for exemplary damages is far less altruistic. He quite candidly told me that his solicitor had advised him to make such a claim as this could be used as a bargaining tool. I hardly think this is an appropriate basis on which to seek damages of this kind.

183 I would, with respect, follow the reasoning of Heydon JA (as his Honour then was) in the Court of Appeal in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 for the view that there is no power in this Court to award exemplary damages for equitable wrongs, (noting, as I do, Spigelman CJ’s admonition against use of the term ‘exemplary damages”).

184 In any event, I do not accept that the behaviour of Mrs Barkley-Brown evidenced a contumelious or wilful breach (or, for that matter, real understanding) of the fiduciary duties owed by her (even though she accepted in the witness box a general outline of those duties). Mrs Barkley-Brown accepted that she understood by the power of attorney that Mrs Farrell was placing trust and confidence in her and that as such she would have a special responsibility to act in Mrs Farrell’s best interest. However, Mrs Barkley-Brown appeared genuinely not to understand when it was put to her in cross-examination that an explanation of the kind she had given placed a premium on the destruction of accounting records.

185 It seems to me that Mrs Barkley-Brown was inexperienced in financial matters and (wrongly) believed that she had been given an unlimited right to have access to Mrs Farrell’s bank account (or with the right to do so limited only by the proviso that it be for her or the family’s benefit) without the obligation to give any account in relation thereto. I accept that she did not turn her mind to the possibility that she was required to account in any formal way for the moneys withdrawn from Mrs Farrell’s bank account. I do not consider that an order for exemplary damages would be appropriate even if (which I do not) I considered that an order for such damages might otherwise lie in this case.

Orders

186 I consider the appropriate orders would be for Mrs Barkley-Brown and Mr Barkley respectively to account to the estate for the benefits received by each of them (or their respective families) of the amounts in the respective categories I have identified above, by way of a deduction from any further distribution to them out of the estate of those amounts, plus interest thereon (and that the estate distribution should be calculated as if their share of the distribution was 2/5ths or 1/5th respectively out of the estate as notionally increased by the total amount for which account is to be given under those orders).

187 I am inclined in the circumstances to order interest on the amounts repayable to run from the date of Mrs Farrell’s death.

188 I will defer making final orders until the outcome of the limited process of account which I have indicated I propose to order.

189 I direct the parties to confer and bring in short minutes of order (by consent if possible) to reflect these reasons and to outline an appropriate mechanism to finalise the amounts payable by each to the estate.

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LAST UPDATED:
2 March 2009