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Supreme Court 14 December 2001

Nikolic v Nikolic

[2001] NSWSC 1121

Fraud & dishonesty
PROCEEDINGS DISMISSED.

Citation: Nikolic v Nikolic [2001] NSWSC 1121
Court: Supreme Court of New South Wales, Equity Division
Date: 14 December 2001
Judge(s): Master Macready

Background

The plaintiff was an 88-year-old man born in Yugoslavia who had migrated to Australia in 1987. He could neither read nor speak English and relied on others to communicate in legal and administrative contexts. He owned a residential property at St Johns Park, New South Wales, which he had inherited from his second wife.

The plaintiff had remarried in September 1997, and his new wife (referred to throughout the judgment as Radmilla) was pressing him to make a will in her favour. Against that backdrop, two transfers were executed: the first in December 1997, by which the plaintiff transferred a remainder interest in the property to his son, the first defendant; and the second in August 1998, by which the plaintiff transferred his remaining life interest to the son, effectively divesting himself of all ownership.

The plaintiff brought proceedings to set aside both transfers. He alleged that his son and his solicitor, the second defendant (who was fluent in Serbian), had fraudulently misrepresented the nature of the documents to him, telling him the first was merely a will and the second would put him in a stronger position against his new wife. The son and the solicitor denied those representations and gave a markedly different account of events.

  • Whether the first and second defendants made fraudulent misrepresentations about the nature and effect of the two transfer documents
  • Whether the second defendant (solicitor) breached his retainer, acted negligently, or breached his fiduciary duty to the plaintiff in connection with the transactions
  • Whether the plaintiff executed the transfers under undue influence or duress
  • Whether the transfers were unjust contracts within the meaning of the Contracts Review Act 1980
  • Whether the transfers should be set aside on any of the above grounds

Decision

Master Macready rejected the plaintiff's account of events and preferred the evidence of the son and the solicitor. The court found that no fraudulent misrepresentations had been made to the plaintiff about the nature or effect of either document. Instead, the court found that the transfers were part of a deliberate and voluntary scheme devised by the plaintiff himself to place his property beyond the reach of Radmilla's potential claims for provision.

On the negligence and breach of retainer claims against the solicitor, the court examined each of the alleged failures in turn. The court was satisfied that the solicitor had explained the relevant documents to the plaintiff in plain language in Serbian, including the nature and consequences of both transfers. The court found no basis for a conclusion that the solicitor had failed to adequately explain the material parts of the transactions or their consequences.

The claims of undue influence and duress were also rejected. Given the court's finding that the plaintiff was the author of the scheme, and that he had made multiple deliberate decisions over an extended period to proceed with the transactions, there was no basis for concluding he had acted under compulsion or improper pressure. The claim under the Contracts Review Act was not advanced in submissions and could not be sustained on the court's findings.

The proceedings were dismissed in their entirety.

Orders Made

  • The plaintiff's claims in fraud and negligence were dismissed.
  • The claim under s 2 of the Fair Trading Act 1987 (misleading or deceptive conduct) was dismissed.
  • The claim of fiduciary duty against the first defendant was not sustained.
  • The claims of undue influence, duress, and unjust contract under the Contracts Review Act 1980 were dismissed.
  • The claim of breach of retainer and negligence against the second defendant (solicitor) was dismissed.
  • The plaintiff's claim was dismissed, with the court indicating it would hear argument on costs.

Key Takeaways

  • The Supreme Court dismissed all claims where a plaintiff alleged fraudulent misrepresentation in the context of property transfers, finding the plaintiff's own evidence of the representations was not credible when weighed against consistent contrary evidence from the defendants.
  • A deliberate scheme to defeat a spouse's potential claims for provision can undermine a plaintiff's subsequent attempt to set aside transactions on the basis of misrepresentation or undue influence, particularly where the court finds the plaintiff was the instigating party.
  • Where a solicitor acting for a non-English-speaking client explains documents in the client's own language and the client demonstrates understanding, courts may find the solicitor's obligations under the retainer have been discharged, even where the client later denies comprehension.
  • Claims of undue influence and duress require more than a plaintiff's assertion of pressure; where a court rejects the plaintiff's evidence and finds the transactions were entered into willingly over an extended period, those claims will not succeed.
  • Grounds under the Contracts Review Act 1980 that are not advanced in submissions are unlikely to succeed, particularly where the court's factual findings are inconsistent with any case of injustice in the circumstances of contracting.

Legislation and Cases Referenced

Legislation:
- Contracts Review Act 1980 (NSW)
- Fair Trading Act 1987 (NSW), s 2

Cases cited: No cases were cited in the metadata or in the portions of the judgment provided.