HER v MJM [2020] NSWSC 1743

Supreme Court New South Wales

Medium Neutral Citation: HER v MJM [2020] NSWSC 1743 Hearing dates: 2 December 2020 Date of orders: 2 December 2020 Decision date: 02 December 2020 Jurisdiction: Equity - Duty List Before: Parker J Decision: See [27] Catchwords: CIVIL PROCEDURE – incapable person – manager seeks possession of unit forming part of protected estate for the purpose of sale – occupant claims entitlement to share of incapable person's property based on de facto relationship – directions given in protective proceedings for commencement of possession proceedings against occupant Legislation Cited: Family Law Act 1975 (Cth) New South Wales Trustee & Guardian Act 2009 (NSW) Category: Procedural and other rulings Parties: SJH (Applicant) DT (Respondent) Representation: Solicitor advocate: J Ireland QC (Applicant)

Counsel: E Cohen (Respondent)

Solicitors: McGirr Lawyers (Applicant) Livingstone & Company (Respondent) File Number(s): 2020/37603 Publication restriction: Nil

Judgment – EX TEMPORE Revised from transcript; issued 7 December 2020 1. This is an application concerning the administration of the protected estate of the defendant, MJM. In February this year Lindsay J made a declaration that MJM was incapable of managing his affairs and an order pursuant to the New South Wales Trustee & Guardian Act 2009 (NSW) that his estate be subject to management under the Act. 2. His Honour appointed SJH, who is a chartered accountant and had previously acted for MJM, to be manager of his estate, subject to the order and direction of the New South Wales Trustee & Guardian. SJH is the applicant in this application. 3. Before his incapacity MJM was living in an apartment at Potts Point. He had bought the apartment (which was unencumbered) in 2017. 4. Since the orders were made in February this year, MJM's health has declined further. After a period in a nursing home, in July of this year he was moved to a property at Picton, apparently to protect him from Covid-19. That property is owned by one of the family trusts to which I will refer in a moment. MJM has now been moved back to a nursing home in Sydney where he is under continuous care. 5. The major asset in MJM's estate is the unit at Potts Point. Its value is estimated at $4.2 million. MJM is also the registered proprietor of shares in a proprietary company which are valued at $1.4 million. That company owns a property at Croydon said to be worth $3.2 million which is operated as a boarding house. The property is leased to the boarding house operator and the company receives rental income in return. 6. At the time of SJH's appointment MJM's estate also contained some cash and two motor cars. MJM also owns property contents and personal effects which SJH values at almost $450,000. As against this, MJM owes a significant debt to the Australian Taxation Office. The current value of the debt, as recorded in SJH's affidavit, is almost $520,000. 7. The application has arisen because SJH wishes to sell the Potts Point property so as to raise liquid funds to pay for estate expenses (and also, I assume, to meet the liability to the ATO). The evidence shows that the estate has no significant income and incurs significant expenditure in meeting the costs of paying for MJM's care. The estate is also meeting the costs of strata levies and other outgoings on the Potts Point property and there is other expenditure such as the payment of financial management fees. 8. Initially, following SJH's appointment, expenditure of this type was met from the cash assets of MJM but those have either been exhausted or are approaching exhaustion. SJH has sold one of the cars but the proceeds of that will not last long. Accordingly, SJH considers that the most saleable asset is the Potts Point unit. 9. MJM of course no longer needs the unit for himself. But he was not living there alone. He shared occupation with a friend to whom I will refer as DT. 10. In August this year, SJH gave DT notice to vacate the unit. He has declined to do so. He claims that he cohabited with MJM from August 2010 onwards and has been dependent financially upon him since then. He says he has no other assets or income of substance. He is 70 years old and if he has to vacate he will have nowhere else to go. 11. In November DT commenced proceedings in the Family Court of Australia alleging that he was in a de facto relationship with MJM and claiming a share of MJM's assets under the Family Law Act 1975 (Cth). DT has made an application to the Family Court for an order preventing MJM from disturbing his occupation of the property. That application has been given a return date for next year. 12. The present application was made by way of notice of motion filed by SJH in these proceedings. On 27 November (last Friday) it was brought before me in the Duty List on an urgent basis. 13. The affidavit in support of the notice of motion sought directions with respect to the management of the protected estate. The notice of motion itself was in somewhat different form. The prayers for relief included an order for possession of the Potts Point unit, an order for judgment accordingly, and "further directions" with respect to the management of the estate. DT was joined as the respondent to the notice of motion. 14. When DT's legal advisers became aware SJH's notice of motion, they foreshadowed a cross-application by DT to have the proceedings (or at least the proceedings on the notice of motion) transferred to the Family Court. 15. The proceedings were listed before me today. Mr Ireland QC appeared for SJH and Ms Cohen for DT. Although she appeared at the application, Ms Cohen's position was that she was not able to deal today with an application for an order for possession nor to present fully the foreshadowed application to transfer the proceedings to the Family Court. 16. It seemed to me important to draw a distinction between the Court's jurisdiction with respect to the administration of MJM's protected estate on the one hand, and the Court's ordinary jurisdiction to make an order for possession of the Potts Point property, based upon MJM's common law and statutory rights, on the other. The first question for the Court was whether, in the exercise of its protective jurisdiction, it should sanction or direct SJH to bring possession proceedings. That was an application in the nature of judicial advice which was properly brought by notice of motion, but which would not of itself result in the Court making an order for possession. Indeed DT, as the prospective defendant, would not ordinarily be heard on such an application at all. 17. If the Court decided to sanction the bringing of such proceedings then as a separate step SJH (in the name of MJM) would bring possession proceedings against DT as defendant. It would only be at that stage that it would be necessary to consider whether the possession proceedings should be transferred to the Family Court or stayed pending determination of DT's property division application. 18. When I put these views to Mr Ireland and Ms Cohen they agreed. Accordingly, I treated the application before me as being in effect an application by SJH for advice from the Court. 19. I have concluded, based on the circumstances that I have recited, that it is in the interests of MJM for the Potts Point property to be sold if it can be. I accept that unless that is done, there is a risk of MJM's estate running out of the money required to support him. 20. I should note that, in addition to his shareholding in the proprietary company to which I have referred, MJM is a beneficiary under several family trusts. Each of the trusts has as its trustee a proprietary company. The property at Picton is an asset of one of those trusts. 21. The share structure of the relevant companies and the terms of the relevant trust deeds are summarised in an opinion of senior counsel, which was obtained by SJH and has been exhibited to her affidavit. It seems that before his incapacity MJM had a degree of control, or at least influence, over the affairs of the companies and trusts. Senior Counsel's analysis shows, however, that as manager of MJM's estate, SJH lacks power to control the trusts and companies without reference to third parties. 22. The directors of the companies are MJM's children. Although he is appointor under some of the trusts, he is unable to appoint himself as the new trustee. He does not hold a majority shareholding in any of the companies. For practical purposes, therefore, SJH is unable to require the companies or trusts to distribute any income or capital which may be available to meet the costs of MJM's care and the other expenditure associated with his estate. 23. Ms Cohen did not suggest that DT would have any defence to an action for possession. But she strongly urged on me that the proper place for determining DT's claim to a share of MJM's estate was in the Family Court. She stated, moreover, that it was unthinkable, given the pendency of DT's claim, for the Potts Point unit to be sold, leaving him with nowhere else to go. 24. However when I first asked Ms Cohen about what would happen to the Potts Point unit, she indicated to me, as I understood her, that DT did not have long term plans to stay there. In the Family Court proceedings he is claiming a lump sum rather than any interest in the unit itself. It is impossible to say, based on the evidence before me, how strong DT's claims are and whether the Court must allow him to remain in occupation of the unit until it is determined. It should also be noted that this Court would have jurisdiction to determine DT's claim for itself. 25. The evidence before me (and this is one of the reasons why the matter has been dealt with on an urgent basis) is that a trial in the Family Court would be some years off. It will be open to DT, once the possession proceedings are begun, either to seek to have the proceedings transferred to the Family Court or seek to have them stayed pending determination of DT's claim (whether in the Family Court or in this Court, perhaps by way of cross claim). Whether the Court will accede to such an application remains to be seen. 26. For these reasons I will direct that SJH commence possession proceedings. I will make directions in those proceedings, once commenced, to allow the interlocutory issues to be dealt with on an urgent basis in the Duty List next week. 27. The orders of the Court on SJH's motion are: 1. Direct that the applicant is authorised to commence separate proceedings by summons to be filed in the Equity Division of the Court in the name of [MJM], naming as defendant [DT], such proceedings claiming an order for possession of the [Potts Point unit]. 2. Order that the costs of the application as between the applicant and the respondent be costs in the proceedings to be so commenced.