Citation: Kenneth Charles Ward v Brian Charles Ward & Anor [2011] NSWSC 107
Court: Supreme Court of New South Wales
Date: 4 February 2011
Judge: Brereton J
Background
The plaintiff was a 77-year-old man who, in 2003, purchased a property at Kings Park in the names of himself, his de facto spouse, and his son (the first defendant). In doing so, he effectively gifted his son a one-third interest as joint tenant, without receiving any consideration in return. The relationship with the son had only recently been re-established after years of estrangement, following a violent assault on the plaintiff by his younger son.
Also in 2003, the first defendant, acting under a general power of attorney granted by the plaintiff, executed a loan agreement on the plaintiff's behalf. Under this agreement, $140,000 from the proceeds of the plaintiff's former Marrickville home was advanced to the plaintiff's grandson (the second defendant), purportedly as trustee of a trust, to fund a residential development in Campbelltown. The maturity date was 6 September 2009, at which point the advance and capitalised interest at 15 per cent per annum were to be repaid.
Neither defendant filed a defence or otherwise pleaded to the allegations in the statement of claim. This had significant procedural consequences, as uncontested allegations in the pleadings were treated as deemed admissions.
Legal Issues
- Whether the plaintiff's gift of a one-third interest in the Kings Park property to his son should be set aside on the ground of unconscionable dealing, specifically whether the plaintiff was under a special disability and whether the son took unconscionable advantage of it.
- Whether the $140,000 loan advance, together with agreed interest under the loan agreement, was recoverable from the grandson as borrower.
Decision
Unconscionable dealing (Kings Park property)
Brereton J examined whether the transaction bore the hallmarks of unconscionable dealing under equitable principles. The plaintiff had been assaulted by his younger son, had only recently re-established contact with the first defendant after roughly a decade of estrangement, and had a history of alcohol abuse. The transaction conferred a substantial benefit on the son at no cost to him, while exposing the plaintiff and his de facto spouse to the real risk that the son, as a joint tenant, could compel a sale of the property they lived in.
His Honour acknowledged that, had the case been defended, the question of whether a "special disadvantage" was established on the evidence available might have been debatable. However, because the first defendant failed to file a defence, the allegations in the statement of claim, including that the plaintiff was under a special disability known to the son and that the son unconscionably took advantage of it, stood as deemed admissions. On that basis, the plaintiff was entitled to succeed, and the son was found to hold his interest in the Kings Park property on trust for the plaintiff.
Loan recovery (second defendant)
The loan agreement, though poorly drafted and not clearly protective of the lender's interests, established a loan of $140,000 with interest at 15 per cent per annum, capitalised and payable on the maturity date of 6 September 2009. That date had passed without repayment. As with the first defendant, the second defendant had not filed a defence, and the relevant allegations were deemed admitted. The plaintiff was accordingly entitled to judgment for the advance and interest, calculated on an annually compounding basis.
Remaining claims
Allegations against the first defendant concerning the loan transaction were not pressed at the time of judgment. Brereton J reserved further consideration of those remaining claims.
Orders Made
- Declaration that the first defendant holds his interest in the Kings Park property on trust for the plaintiff.
- Judgment against the second defendant for the loan advance of $140,000 plus interest at 15 per cent per annum, compounding annually, from October 2003 to the date of payment.
- Further consideration reserved in respect of the remaining claims against the first defendant.
- Both defendants to pay the plaintiff's costs.
- Plaintiff directed to bring in short minutes to give effect to the judgment.
Key Takeaways
- Deemed admissions arising from a defendant's failure to plead can be decisive. Where allegations of special disability and unconscionable conduct go uncontested, a court may rely on those deemed admissions to grant equitable relief even where the evidence, considered alone, might not have been conclusive.
- Unconscionable dealing in equity requires that the defendant took advantage of a plaintiff's special disability or disadvantage. Here, the relevant factors included recent estrangement followed by rapid reconnection, vulnerability from family violence, alcohol dependency, and the improvidence of a transaction that conferred no benefit on the plaintiff while creating substantial risk.
- A gift of a joint tenancy interest exposes the donor to the risk that the donee can seek a court-ordered sale, which courts may treat as a significant element of improvidence when assessing unconscionability.
- Where a loan agreement provides for capitalised interest, the court will calculate the sum due on an annually compounding basis in accordance with the contractual terms.
- The Supreme Court confirmed that powers of attorney can be exercised in ways that harm the donor, and transactions entered into by an attorney that are improvident and potentially adverse to the donor's interests may form part of a wider pattern of unconscionable conduct.
Legislation and Cases Referenced
Legislation
- Family Provision Act 1982 (NSW), s 32
Cases
- Bridgewater v Leahy (1998) 194 CLR 457
- Louth v Diprose (1992) 175 CLR 621
- Mirembe Pty Ltd v Dangar [2009] NSWSC 1268
- MY Distributors Pty Ltd v Omaq Pty Ltd and Another (1992) 36 FCR 578
- Sergi v Jurcevic (1999) 46 NSWLR 672
- Tillett v Varnell Holdings Pty Limited & ors [2009] NSWSC 1040