New South Wales Court of Appeal CITATION: Doulaveras v Daher [2009] NSWCA 58 HEARING DATE(S): 10 December 2008 JUDGMENT DATE: 20 March 2009 JUDGMENT OF: Giles JA at 1; Campbell JA at 6; Macfarlan JA at 173 (1) Appeal dismissed with costs. (2) Note that the stay ordered by Allsop P on 7 July 2008 concerning orders below in the present proceedings ceases upon the making of these orders. DECISION: (3) Vary order 2 made by Allsop P on 7 July 2008 to read: Order that the Appellant by herself, her servants and agents or otherwise be restrained from selling, mortgaging, leasing or otherwise dealing in any way with the land comprised in folio 33/381014 and known as 26 Ocean Avenue, Newport, New South Wales or any interest therein, save for the purpose of carrying out orders 3 and 6 made by Windeyer J on 25 June 2008. (4) Order (3) hereof be dissolved upon compliance by the Appellant with orders 3 and 6 made by Windeyer J on 25 June 2008. CATCHWORDS: LEGAL PROFESSION – lawyers – retainer – challenge to – proper procedure for a challenge to retainer – whether a challenge to retainer can be pleaded by way of defence – whether a separate motion is needed to mount a challenge to retainer – circumstances where a challenge to retainer can be litigated together with a final hearing – onus of proof of showing that solicitor lacks authority – PROCEDURE – courts and judges generally – proper procedure for a challenge to retainer – inherent power of a court to stay proceedings as an abuse of process – PROCEDURE – judgments and orders – effect of judgments – effect of pleading an argument by defence – difference between outcome of a defence and a notice of motion – difference between estoppel by judgment and stay or striking out of action – PROCEDURE – courts and judges generally – effect of pleadings alleging technical language with no legal content – PROCEDURE – Supreme Court procedure – New South Wales – bringing an action by tutor – meaning of "person under legal incapacity" – EQUITY – general principles – unconscientious conduct – special disability – lack of capacity to understand the effect of transactions – whether evidence shows problems with cognition and language – EVIDENCE – witnesses – failure to call witness due to problems with cognition and language – whether Jones v Dunkel inference should be drawn – whether absence of witness is unexplained – - WORDS AND PHRASES – "estoppel by judgment" – "challenge to retainer" – "challenge to solicitor's retainer" – "person under legal incapacity" Bankruptcy Rules Civil Procedure Act 2005 Interpretation Act 1987 Powers of Attorney Act 2003 LEGISLATION CITED: Protected Estates Act 1983 Real Property Act 1900 Supreme Court Rules 1970 Trading With The Enemy Act 1914 (UK) (4 & 5 Geo V, c 87) Uniform Civil Procedure Rules 2005 CATEGORY: Principal judgment Anthanasopoulos v Moseley [2001] NSWCA 266; (2001) 52 NSWLR 262 Australian Workers' Union v Bowen (1946) 72 CLR 575 Banco de Bilbao v Sancha [1938] 2 KB 176 Bowen v Bowen (1873) IR 7 Eq 251 Daher v Doulaveras [2008] NSWSC 583 Daimler Company Limited v Continental Tyre and Rubber Company (Great Britain) Limited [1916] 2 AC 307 Re GHI (a protected person) [2005] NSWSC 581; (2005) 221 ALR 589 Hawksford v Hawksford [2005] NSWSC 463; (2005) 191 FLR 173 Hillig v Darkinjung Pty Ltd (No 2) [2008] NSWCA 147 Inglis v Moore (No 2) (1979) 25 ALR 453 at 464; (1979) 46 FLR 470 John Shaw & Sons (Salford) Limited v Shaw [1935] 2 KB 113 CASES CITED: Jones v Dunkel (1959) 101 CLR 298 Le v Williams [2004] NSWSC 645; [2005] NSW ConvR 56-109 Masterman-Lister v Brutton & Co [2002] EWCA Civ 1889; [2003] 1 WLR 1511; [2003] 3 All ER 162 MultitecFMB (Asia Pacific) Pty Ltd v Han [2008] NSWSC 1339; (2008) 68 ACSR 106 Nichols v Lee [2008] NSWSC 1243 Payne v Parker [1976] 1 NSWLR 191 Richmond v Branson & Son [1914] 1 Ch 968 Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse [1925] AC 112 Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse [1923] 2 KB 630 SBBH v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 684 United Service Insurance Co Ltd (in liq) v Lang (1935) 35 SR (NSW) 487 Wood v Inglis [2008] NSWSC 1147; (2008) 68 ACSR 420 PARTIES: Helen Doulaveras - Appellant Georgette Daher (by her tutor Basil Daher) - Respondent FILE NUMBER(S): CA 40196/08 COUNSEL: MW Sneddon - Appellant R Evans - Respondent SOLICITORS: KR Barnes & Co, Hornsby - Appellant Lee Hourigan & Brooks, Sydney - Respondent LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): 5931/06 LOWER COURT JUDICIAL OFFICER: Windeyer J LOWER COURT DATE OF DECISION: 19 June 2008 LOWER COURT MEDIUM NEUTRAL CITATION: Daher v Doulaveras [2008] NSWSC 583 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40196/08 SC 5931/06 GILES JA CAMPBELL JA MACFARLAN JA 20 MARCH 2009 HELEN DOULAVERAS v GEORGETTE DAHER by her tutor BASIL DAHER Judgment 1 GILES JA: I agree with Campbell JA, whose reasons I have had the advantage of reading in draft, in relation to Mrs Daher's capacity and a Jones v Dunkel inference. 2 As to the third issue, Campbell JA attributes to Helen the submission that the action should have been struck out or dismissed because it had not been demonstrated that Mrs Daher was in need of a tutor: at [83]. With respect, that is not my understanding. I do not think there was a ground of appeal to that effect. I do not think that Helen's submissions on appeal extended to the submission that she had been entitled to have the claim against her dismissed because she had put the need for a tutor in issue in her defence in the substantive proceedings. Counsel for Helen affirmed in oral submissions that his point was that the trial judge was in error so far as he reasoned that, in the absence of the "challenge to the tutorship", there was a presumption that Mrs Daher lacked capacity on which he acted. 3 The short answer to that submission is that it is apparent from the trial judge's reasons, remarks set out at [82] of Campbell JA's judgment, that his Honour did not reason in that way. He decided on the evidence that Mrs Daher lacked capacity when the transfers were signed. 4 Having said that, there is nothing in Campbell JA's consideration of whether there can be challenge to a retainer as part of substantive proceedings with which I would disagree. That possibility should not rigidly be excluded. It does not matter to the result in the proceedings, since the trial judge was satisfied that a challenge to the validity of Basil's appointment as tutor, if properly mounted, would have failed. Quite apart from any procedural question, then, Helen failed because of the findings as to incapacity, which findings remain. 5 I agree with the orders proposed by Campbell JA. 6 CAMPBELL JA: Nature of the Case 7 The Respondent, Mrs Daher, is a widow who was 78 years old at the time of the trial. She and her husband had two sons, Spiro Daher and Basil Daher. The Appellant, Helen Doulaveras, is the wife of Spiro. The name of Basil's wife is Mandy Daher. Like the trial judge, I shall refer to the sons and their wives by their first names. 8 Mrs Daher was formerly the registered proprietor of a 66/100th share as tenant in common in a property at Ocean Street, Newport. The other 34/100th share as tenant in common was held by Helen. The property was not subject to a mortgage. 9 On 8 July 2005 Mrs Daher executed two Real Property Act 1900 transfers. By one of them, she transferred a 16/100th interest in the Newport property to Helen. The consequence of that transaction was that Helen and Mrs Daher held the Newport property as tenants in common in equal shares. Also on 8 July 2005 Helen and Mrs Daher executed a document whereby the two of them as tenants in common transferred their interest in the Newport property to themselves as joint tenants. 10 On 5 November 2007 Helen and Mrs Daher executed a mortgage of the Newport property to the ANZ Bank. That mortgage was to support a borrowing made by Helen and Spiro to enable them to purchase a new home at St Ives. 11 Mrs Daher, in proceedings she brought with Basil acting as her tutor, sought to set aside those transactions as between the Appellant and Respondent. Windeyer J has held that the two transfers and mortgage were procured by the undue influence of the Appellant over the Respondent, and were the product of unconscientious conduct by the Appellant: Daher v Doulaveras [2008] NSWSC 583. His Honour has made orders to the effect that: · the transfers dated 8 July 2005 be set aside; · Helen execute documents that bring about once again a situation where the Newport property is held as to 66/100th by Mrs Daher and 34/100th by Helen; · Helen discharge the mortgage; · until the discharge occurs, any sum secured by the mortgage be charged against Helen's 34/100th share in the property; and · Helen indemnify Mrs Daher against any liability that Mrs Daher may have to the mortgagee under the mortgage. 12 In these proceedings Helen seeks to have the orders of Windeyer J overturned. The orders summarised by the first three dot points have been stayed pending the outcome of this appeal. 13 The attack on the judgment below is made on three grounds. The first concerns the judge's conclusions about Mrs Daher's capacity. The second concerns the judge's failure to draw an inference in accordance with Jones v Dunkel (1959) 101 CLR 298 in consequence of Mrs Daher not giving evidence in the court below, even though she was physically present at court during the hearing. The third ground of attack concerned the judge's failure to hold that Basil (as tutor) had not established that Mrs Daher was incapable, and hence to hold that the proceedings were not properly brought by him as tutor. 14 Understanding those attacks requires a moderately extensive account of the factual circumstances from which the litigation arose. Family Background 15 Mrs Daher was born and spent her early years in Egypt, in consequence of which she could speak Greek, Arabic, English, French and a little Italian. She and her husband had lived in the one house at Matraville until her husband died in November 2000. 16 The trial judge made findings, that are not contested, in the following terms: "3. … After her husband's death, Mrs Daher continued to live in the [Matraville] house, despite concerns expressed by her two sons about her living alone given her age and deteriorating health. 4. Mrs Daher had not been in good health, even prior to her husband's death, suffering from non-insulin dependent diabetes, atrial fibrillation, chronic hypertension and a dominant hemisphere stroke in 1994 which caused Mrs Daher's speech to lapse into a mixture of languages. From November 2001 onwards, Basil and Mandy did their best to assist Mrs Daher with her domestic, financial and health matters, visiting her up to 4 times a week, despite the considerable distance to Matraville. At this time, Helen and Spiro together with their three children lived in Riyadh, Saudi Arabia and were unable to provide practical assistance on a regular basis, although they did visit Mrs Daher on the several occasions each year when they returned to Sydney. 5. In early 2003 Helen returned to Sydney permanently with the children living initially at Newport and later at Bilgola Plateau. Spiro joined his wife and children in Sydney in 2004. It is clear on the evidence that as much as possible Mrs Daher's children sought to provide practical assistance …" The "considerable distance to Matraville" arises from the fact that Basil and Mandy have at all relevant times lived on Scotland Island. 17 Other uncontested findings of the judge were: "On 5 October 2001 Helen Doulaveras purchased the Newport property for $625,000. In December 2001, with the agreement and assistance of both her sons and their wives, Mrs Daher moved from [Matraville] to the house at Newport. Mrs Daher continues to live in the Newport property. It appears she is quite happy there." "The house at [Matraville] was initially rented out and all rental payments received were deposited in Helen's bank account. In November 2003 the [Matraville] property was sold for $720,000 and the balance of the proceeds amounting to around $698,000 were deposited in Mrs Daher's bank account. From this bank account, in January 2004, $691,104 was withdrawn and paid to the defendant to purchase from the defendant a 66/100 interest in the Newport property …" "On 1 November 2002 Mrs Daher made a will, prepared by Mr Hourigan of Messrs Lee Hourigan and Brooks, which appointed Spiro and Basil as executors, and gave the whole of her estate to them in equal shares. On 22 July 2004 Mrs Daher made a second will, again prepared by Mr Hourigan, which named Basil and Mandy as executors and gave the whole of the estate to Basil or in the event of his death to Mandy. The following day, on 23 July 2004 Mrs Daher made a third will, again prepared by Mr Hourigan, which appointed Spiro and Basil as executors, and gave the whole of her estate to them in equal shares. … On 8 July 2005, Mrs Daher made her fourth will, prepared by Mr Smith solicitor under which she gave the Newport property to Spiro if Helen predeceased her and the residue of the estate to Basil and Spiro. It should be noted that the Newport property is the major asset owned by Mrs Daher." 18 Mrs Daher's fourth will was made on the same day as the transfers of the Newport property that are attacked in the present case. Thus, once those transfers had taken effect and the Newport property was held by Mrs Daher as joint tenants with Helen, the combined effect of the documents executed on that day was that if Mrs Daher predeceased Helen, Helen would take the whole of the Newport property as a joint tenant taking by survivorship, and if Helen predeceased Mrs Daher, Spiro would take the whole of the Newport property under the will. 19 The judge found (at [8]): "On 1 November 2002 Mrs Daher had executed a power of attorney in favour of Basil. On 22 October 2004 a new power of attorney in favour of Basil and Spiro jointly was executed. The earlier power of attorney was revoked on 13 November 2004." Each of those powers of attorney was drawn by Mr Hourigan. 20 Though the money by which Mrs Daher paid for the 66/100th interest in the Newport property was paid in January 2004 the transfer was dated and registered in March 2004. The transfer shows the consideration as being $655,250, not $691,104. For assessing stamp duty, a valuation of the property was obtained in January 2004 from an independent valuer, which put the value of the property at $895,000. At that valuation, a 66/100th interest in the property would be $590,700. These discrepancies were not explained, as no impropriety was alleged concerning that transaction. Basil became aware of the transaction when Spiro told him about it in March 2004, after it had occurred. Circumstances of Execution of the Disputed Documents The Transfers 21 Basil gave evidence, that was not challenged in cross-examination, that Spiro proposed to him in about February 2005 that the Newport house be sold. Basil set about locating alternative accommodation for Mrs Daher, but a unit that he located in a retirement complex did not meet with Spiro's approval. After that Spiro told Basil that he and Helen had changed their minds about selling the Newport house. 22 On 8 July 2005 Helen and Mrs Daher went together to the office of Mr Stephen Smith, a solicitor who practices at Newport. Mrs Daher and Mr Smith had not previously met. Mr Smith had received instructions on 7 June 2005 from Helen to act on the sale of the Newport property. He did not seek any instructions from Mrs Daher concerning that proposed sale, because he assumed that Helen had authority to speak for her. His instructions to act for Helen concerning the sale of the Newport property ceased on 5 July 2005. 23 A few days before 8 July 2005 Helen telephoned Mr Smith and discussed creating a joint tenancy in the Newport property between herself and Mrs Daher. His evidence, accepted by the judge, was that Helen rang to arrange an appointment and "she would have said she wanted to end up with a joint tenancy. And I would have told her how to go about that. You would need two transfers for that". The judge rejected Helen's evidence that she had not previously known what a joint tenancy was, and that the suggestion to have a joint tenancy came from Mr Smith. 24 At no time was Mr Smith informed that Mrs Daher had any form of disability. The two transfer documents were drawn up ready for execution when Helen and Mrs Daher arrived at Mr Smith's office on 8 July 2005. 25 The will of 8 July 2005 had not been drawn up in advance. Mr Smith's evidence in chief was that he spoke to Mrs Daher by herself concerning the will, and questioned her about it. However in cross-examination, when Mr Smith had put to him the suggestion that he was given the instructions by Helen, he said: "A. I can't recall who – it would have been her, and Mrs Daher together. Q. I suggest to you that the instructions were given to you by Helen Doulaveras. What do you say about that? A. I can't deny it." The judge preferred Mr Smith's evidence in cross-examination on that topic. 26 Mr Smith adopted different procedures concerning execution of the two transfers. The first transfer executed was the transfer by Mrs Daher to Helen of 16/100th shares in the Newport property. The stated consideration, $132,000, was calculated by Mr Smith on the basis of a valuation dated 4 July 2005 that put the value of the Newport property at $825,000. 27 The judge found (at [17]): "Mr Smith … saw Mrs Daher and Helen together and explained the transaction and was satisfied that Mrs Daher understood the transfer. … Mr Smith then witnessed the signatures of both Mrs Daher as transferor and Helen as transferee to the transfer." 28 The judge's finding concerning payment of the consideration was: "The $132,000 has not been paid. Mr Smith's evidence was that he did not know if the money was to be paid. He left that to the parties, … Helen claims that she planned to pay Mrs Daher the $132,000 when she reached the stage she could no longer live alone and required nursing. I do not accept the evidence. Her earlier evidence was she was not required to pay. Neither do I consider any proper explanation as to the stated consideration was given by Mr Smith to Mrs Daher." 29 Concerning the second transfer, whereby the tenants in common transferred the property to themselves as joint tenants, Mr Smith sent Mrs Daher and Helen away from his office to seek independent legal advice and get the transfer signed. They returned some time later that day, with a transfer that was signed and witnessed. The witness appears, from what is written on the transfer, to be someone called Lillian Gerges. Her address does not appear on the transfer. Mr Smith did not know who Lillian Gerges was. The judge rejected evidence from Helen that she had taken Mrs Daher to see another solicitor in Newport. The judge found that no legal advice was given about the second transfer. The judge also, however, evidently accepted Mr Smith's evidence that he explained the effect of this transfer, though not the wisdom of the transaction. 30 Mr Smith's evidence was that both the will and the transfers were explained to Mrs Daher, and she seemed to understand. He said he had "quite a bit" of difficulty in understanding her. Mr Smith's conversation on that day was conducted in English. Mr Smith's partner (who did not give evidence) also spoke to Mrs Daher "a little bit in French", but Mr Smith is not familiar with French, and thus could not recount anything of what had been said in French. 31 Mr Smith and his partner made a file note that day, which says: "We, Stephen Anthony Smith and Allison Paten attended Georgette Daher for the purpose of explaining this her Will of even date. Neither of us had acted for Georgette Daher prior to this instance and we spent approximately 30 mins in which time all three of us were present and at which time we formed the joint view that Georgette Daher did understand the full input [sic] of her proposed Will and that she had the necessary testamentary capacity to sign the same." 32 They made no file note concerning execution of the first transfer, or explanation of either transfer. 33 Mr Smith gave his evidence in chief orally, as he had not been willing to make an affidavit. His explanation for that was, "because of the time involved, and my limited recollection of the conversations." 34 Both transfers occurred without the knowledge of Basil and Mandy. In April 2006 Mrs Daher had a conversation with Basil that roused his suspicions. He then ordered a legal search, and discovered the transfers. The Mortgage 35 The judge found (at [25]): "… the Newport property was listed by Ray White Northern Beaches for sale by auction on 23 December 2006. Basil was alerted of this fact in early December when Mrs Daher telephoned to tell him that a large billboard had been erected in her front yard listing the property for sale. Basil asked his wife Mandy to drive to the Newport property to obtain the real estate agent's details. On 6 December 2006 Basil's lawyer, Mr Mark Hourigan, telephoned Margie Masson, the real estate agent from Ray White Northern Beaches and was informed that Margie Masson did have an agency agreement signed by Helen and Mrs Daher to sell the Newport property." 36 Basil then began the present proceedings. On 14 December 2006 Brereton J granted an ex parte injunction, paragraph 1 of which reads: "The Defendant, her servants and agents are restrained up to 5pm on 19 December 2006 from selling, mortgaging, leasing or otherwise dealing with the land comprised in folio [number] and known as [address], Newport, NSW." 37 After the documents initiating the proceedings, and the injunctive order, were served on Helen, Brereton J extended the order on 19 December 2006 until further order of the court. Helen and her solicitor Mr Hughes were present in court on that occasion on 19 December 2006. Concerning the mortgage, the judge found (at [28]-[29]): "In November 2007 Helen and Spiro purchased a property at [address] St Ives for $1,060,000. The evidence, but not the documentary evidence, is that this was originally purchased by both Helen and Spiro and that Spiro's share was later transferred to Helen. … In spite of the court order dated 19 December 2006, all the purchase moneys, except for the 10 per cent deposit contributed by Helen, were provided by loan from the Australia and New Zealand Banking Group (ANZ Bank) secured by mortgage over the St Ives property and the Newport property. The mortgage over the Newport property was signed by Mrs Daher and Helen on 5 November 2007 in the Brookvale Branch of the ANZ Bank. In executing this mortgage Helen breached the injunctive orders. Mrs Daher received no independent legal advice in relation to the mortgage or indeed any advice as to whether the transaction would be in her best interests, apart from the advice of the involved parties such as the mortgage broker of Helen and Spiro." 38 Helen's evidence was that she was not aware of the court order preventing her from mortgaging, as distinct from selling, the Newport property. The judge rejected that evidence, and found that she was aware of the terms of the order. FIRST GROUND – MRS DAHER'S CAPACITY Evidence Concerning Capacity 39 As mentioned earlier Mrs Daher suffered a stroke in 1994. A CT scan of Mrs Daher's brain in February 2001 identified the size and location of a "large chronic infarct". 40 Dr Ross Mellick, a consultant neurologist, examined Mrs Daher in November 2007. He had available to him the films produced in the CT scan in February 2001. 41 Contrary to the usual medical practice, Dr Mellick did not take a history from Mrs Daher, "because of the considerable nature of the speech disorder which impairs her ability to be understood and to express herself". He noted that she formerly spoke five languages, and said that she "regrettably has considerable speech deficits in all of those languages. She tends to try to communicate with snatches of conversation in either Greek, Italian or English". 42 Though Dr Mellick conducted a neurological examination of her, he said "it was not possible to communicate adequately with her to establish an adequate history or to perform mini-mental testing." 43 Dr Mellick showed Mrs Daher a completed Real Property Act 1900 transfer, "… and asked her to read it. It was evident that she did not comprehend the meaning of the words and could not read the document. I asked her to take down dictation in English. She was unable to comprehend the meaning of what I was saying or to adequately write what I dictated." 44 Dr Mellick's opinion, expressed in his report, was: "Ms Daher has a severe disorder of speech caused by the dominant hemisphere stroke which she suffered in 1994. The abnormalities dating from that time severely impair her ability to understand written and spoken language. There is also indication of an additional cognitive disorder over and above the language impairment. The cognitive impairment is likely to be a direct consequence of the size of the infarct which occurred in 1994. The abnormalities dating from the time of that stroke indicate that Ms Daher is not able to understand the content of documents presented to her and that she would not have been able to understand the content of legal documents presented to her, subsequent to the stroke she suffered in 1994." 45 Cross-examining counsel sought to suggest to Dr Mellick that, while Mrs Daher had real problems with communication through language, that did not mean that her cognitive functioning was in any way impaired. Dr Mellick rejected that proposition. He said that, "The problem with speech and language also inevitably affects cognition", and "it makes no neurological sense to seek to separate a major abnormality of the brain in an area involving language in the dominant hemisphere from an abnormality co-existent and intrinsic to that which is an abnormality of cognition." 46 He said that: "The probability is that this lady has a major problem of cognition in addition to the problem with language." His evidence included: "Q. So you can say as an actual fact Mrs Daher does not understand concepts so far as a contract is concerned? A. Yes. Q. You can tell his Honour as a fact? A. Yes." 47 He said: "I feel confident and I am not hypothesising that this lady, because she has a major lesion in her speech/comprehension/language areas that she has a problem with her speech, comprehension and language." 48 In re-examination his evidence included: "Q. Assume that Georgette Daher in 2005 about July 2005 was a part-owner of a house property in which she lived at Newport and her share was 66/100 – that's the assumption I am asking you to make – and that she was asked by the other co-owner, who was her daughter-in-law the defendant, to transfer 16/100 of her share, do you think she would understand that transaction? A. I think the probability is that she would not." 49 Mandy, who had seen Mrs Daher frequently, accepted in cross-examination that sometimes it was possible to "get things, your idea, your concept across to her". Mandy agreed with the cross-examiner that Mrs Daher could understand the concept of wanting to move into a house. The cross-examination continued: "Q. She can understand the concept in relation to buying a house? A. No. With money, she's lost. For example, when she goes to the supermarket and she pays for the groceries, she opens her purse and let's the cash teller take the money out. With money, she doesn't have great understanding. Q. In relation to understanding things, you would agree that she understands the concept of giving things away? A. Giving material things away, something she can see. Q. In relation to giving material things away, she understands the concept in relation to her possessions, things she owns? A. Material possessions, but not shares of houses, no. Q. When you say "shares of houses" you say that the concept of her understanding the concept of giving away a house in certain shares is beyond her? A Giving away a house in certain shares is beyond her. Yes." 50 Mandy agreed that Mrs Daher would understand the concept of fifty/fifty. The Judge's Findings on Capacity 51 The judge referred to Dr Mellick's evidence with evident approval. His findings included: "I am satisfied that Mrs Daher was and is unable to read ordinary writing or printing although Helen said that she could. Helen said that Mrs Daher said on occasions, "the house is yours" or "I want you to have it". Mandy said Mrs Daher had no understanding of money and left it to shopkeepers to take the necessary amount for purchases from her purse. I accept that. Mrs Daher, on the other hand did live on her own at the Newport [house], but to do so she needed considerable assistance from her sons when they were available and from their wives at other times. Such assistance was usually given on a daily basis and included looking after the house, shopping, taking the plaintiff to medical appointments and the like." 52 The grounds upon which the plaintiff in the proceedings sought to set the transfers and mortgage aside were undue influence and unconscientious conduct. The judge found that Mrs Daher did not understand the effect of "the first transaction". The structure of the judge's judgment includes a heading "Facts Surrounding the Transactions", under which there are two subheadings, one of which is "The Transfers" and the other of which is "Mortgage". The judge had found that Helen told Mr Smith that she wanted to end up with a joint tenancy, and that he told her that two transfers were needed to achieve that objective. The judge explicitly found that "the reason for the first transfer of 16/100 from Mrs Daher to Helen was to enable a joint tenancy to be brought into being". From these matters I conclude that when the judge spoke of "the first transaction" he meant the two transfers. Appellant's Submissions on Capacity 53 Mr Sneddon, counsel for the Appellant, submits that this finding was erroneous. Mr Sneddon submits that even though the contention of the plaintiff in the court below had been that her impairment of capacity dated from the time of her stroke, she had executed numerous important legal documents in that time, in circumstances where a solicitor had been involved in the execution. Mr Hourigan had been involved in her execution of wills on 1 November 2002, 22 July 2004, and 23 July 2004. Mr Hourigan had also been involved in Mrs Daher's execution of powers of attorney on 1 November 2002 and 22 October 2004. Concerning the general power of attorney of 22 October 2004 Mr Hourigan gave the certificate required under section 19 of the Powers of Attorney Act 2003 in which he certified, inter alia: "1. I explained the effect of this power of attorney to the principal before it was signed. 2. The principal appeared to understand the effect of this power of attorney." 54 Mr Sneddon points out that that transaction was only nine months before execution of the transfers. 55 Mr Hourigan gave evidence in cross-examination that he had concern as to her ability or wishes concerning the November 2002 power of attorney. He explained it as follows: "My meetings with her, and I had a number which were always very lengthy. They would go for up to an hour to take instructions, which was extremely difficult, and I tried, as best I could, to determine what she wanted. It was made more difficult by the fact at times she would change languages, and to some extent I was dependent, therefore, upon whoever was there who spoke the language. I say that, because on one occasion it was Basil and on one occasion it was Basil and Spiro together." 56 Concerning the 2004 wills, Mr Hourigan was satisfied that Mrs Daher understood the import and effect of what the will was. There was no exploration with Mr Hourigan in cross-examination of how it happened that Mrs Daher made wills on successive days in July 2004 that made radically different dispositions of her estate. 57 Mr Sneddon also points to Mr Smith's evidence of Mrs Daher having the transfers explained to her, and seeming to understand them. 58 The event that alerted Basil to the transfers was a conversation he had with his mother in about April 2006, when she said words to the effect of: "I am not happy with things as they are. This house now belongs to Helen. I wanted everything to go to you and Spiro but now I do not know what is left or what will happen." 59 That conversation shows at least that she appreciated that there had been a significant change concerning the house (though she was wrong in saying the house "now belongs to Helen"). 60 All these matters were referred to in the judgment below. 61 Even though in written submissions Mr Sneddon had put that in light of these matters it was "not open to the trial judge to conclude that Mrs Daher did not understand the effect" of the transfers, in oral submission he made clear that his contention was that the judge was wrong in reaching the conclusion he had concerning her understanding of the transfers. 62 Mr Sneddon also relies upon evidence given by Basil of circumstances in which his mother had demonstrated her capacity, and was able to make her wishes clear. Basil had been involved in her execution of the various wills and powers of attorney, and had had no problem at the time about his mother's capacity to sign them. She was able to make clear that she wished to move to the Newport house, when moving there was an available alternative for her. On two separate occasions, in June 2001 and April 2005, Basil took his mother to see accommodation that he considered may have been suitable for her in retirement villages. Mrs Daher was able to express her approval of the places, and talk about the features of them that appealed to her. Concerning one of them, she remarked that the place for hanging clothes did not have steps up and down from the washing machine. Concerning another, she remarked on its newness, its spaciousness, that there were rooms in which Basil and Spiro could stay, and that it had a second bathroom. As recently as July 2007, when asked, "when you die, do you want all your money to go to Helen" she replied "No, my two sons, Spiro and Basil". Decision on Capacity 63 I am not persuaded that the matters to which Mr Sneddon points show that the judge's conclusion about Mrs Daher's understanding of the transfers was incorrect. 64 Dr Mellick's evidence was the only medical evidence that was called, and is unequivocal in its rejection of Mrs Daher being likely to understand these transactions. I see no inconsistency between a person being able to understand and communicate advantages they saw in particular houses as places to live – a concrete physical reality – but not being able to understand more abstract matters, like transferring a 16/100th share as a tenant in common, or converting a tenancy in common into a joint tenancy. 65 Mr Sneddon submits that the fact that two solicitors, Mr Hourigan and Mr Smith, on separate occasions decided that Mrs Daher understood the various transactions effected by the documents that they respectively witnessed is powerful evidence against the judge's conclusion concerning Mrs Daher's capacity. However, a difficulty in placing much weight on the views that the two solicitors formed is that there is no detail before the court of the basis upon which they formed their views. A solicitor who gives a detailed and careful explanation to someone sitting on the other side of the desk might form the view that that person understood the transaction if the person remained silent during the explanation, looked at the solicitor during it, periodically nodded, and when asked at the end whether all that had been understood, also nodded. Alternatively, a solicitor might form that view on the basis that the person on the other side of the desk periodically asked questions that related to the subject matter. In the first of those situations, if the person on the other side of the desk had, unbeknown to the solicitor, a serious deficiency in brain functioning, the solicitor's conclusion might not be a reliable one, however honestly it may have been arrived at. In the present case, the evidence does not disclose on what basis Mr Hourigan and Mr Smith arrived at their respective views. 66 As well, Mr Hourigan arrived at his view about Mrs Daher's understanding the transactions in which he was involved only with the assistance of one or both of Mrs Daher's sons. 67 There is some evidence that illustrates the extent of Mrs Daher's capacity. When Helen was giving evidence about the extent to which Mrs Daher read a newspaper the evidence was: "… she likes the – the pick the differences section in the newspaper. Q. The? A. Pick the differences in – in the pictures. She likes that out of the newspaper. Q. She looks at the pictures? A. Yes." 68 In Helen's affidavit, when giving an example of Mrs Daher's ability to communicate, Helen said: "Georgette also speaks what I would describe as a "language of her own" . For example, when she uses the word "aspro" , that is, the Greek word for "white" this is a direct reference by Georgette to "milk" ." 69 These specific examples, given by a person whose interest was to give as favourable an account of Mrs Daher's capacity as she honestly could, provide no reason for qualifying or doubting the opinion expressed by Dr Mellick. 70 I would not uphold the grounds of appeal that attacked the judge's finding that Mrs Daher did not understand the transfers. SECOND GROUND – JONES v DUNKEL 71 Mr Sneddon submits that the judge was in error in failing to draw an inference adverse to Mrs Daher's case from the fact that she was present in court during the hearing, but was not called as a witness to give an explanation of her own intentions in entering the transactions. 72 In Jones v Dunkel (1959) 101 CLR 298 at 308, Kitto J's exposition of when a Jones v Dunkel inference might be drawn was: "… when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness … and the evidence provides no sufficient explanation of his absence." 73 Windeyer J, at 321, said: "Unless a party's failure to give evidence be explained, it may lead rationally to an inference that his evidence would not help his case." 74 In Payne v Parker [1976] 1 NSWLR 191 at 201 Glass JA identified the conditions for drawing a Jones v Dunkel inference from the fact that a witness has not been called. One of those conditions was "his absence is unexplained." 75 Mrs Daher was bringing the proceedings by a tutor. All the evidence recognised that she had difficulties in communicating concerning matters of any complexity. When Dr Mellick had tried to communicate with her in English and failed, there is no basis for believing that barristers or the judge in court would succeed any better. When Helen's evidence was that Mrs Daher spoke a "language of her own" in which even when Mrs Daher used Greek words a common substance of daily use, like milk, is not called by its correct Greek name, there is serious reason to doubt that even having Mrs Daher seek to give evidence through an interpreter would assist. In any event, the evidence of Dr Mellick led to the conclusion that she had difficulties in cognition, of a serious kind. The totality of these matters provides ample explanation for her not being called. I would not uphold the ground of appeal based on Jones v Dunkel. THIRD GROUND – CHALLENGE TO RETAINER How the Challenge Allegedly Arose 76 The Amended Statement of Claim alleged: "The plaintiff (being a disabled person) brings these proceedings by her tutor, Basil Daher …" 77 In the Defence to Amended Statement of Claim, Helen responded to that allegation by saying that she "does not admit that the plaintiff … is a disabled person for the purposes of requiring that proceedings be brought on her behalf." 78 At the hearing there were no submissions, on either side, directed to the question of whether Mrs Daher was a "disabled person", or whether Basil had been validly appointed as tutor. There was, however, both evidence and submissions related to the specific transactions that the plaintiff alleged were the product of undue influence or unconscientious conduct. 79 After the hearing had been concluded and judgment reserved, the judge's associate sent an email to the solicitors for each party at the judge's direction. The email pointed to the fact that the plaintiff sues by a tutor, and to the paragraphs of the pleading to which I have just referred, and continued: "This is not an issue which can be raised on trial. Any such question goes to retainer of the solicitors for the plaintiff and must be challenged in the appropriate way. Richmond v Branson & Son [1914] 1 Ch 968. It would follow that particular passages of the defence should be disregarded and the plaintiff accepted as a person under legal disability under the Civil Procedure Act 2005 . The definition of "disabled person" under the Supreme Court Rules is repealed. While the relevant date for appointment of tutor is the date of commencement of the proceedings the evidence in general does not appear to indicate change between the date of the impugned transactions and the commencement of the proceedings. The action will be relisted at 0930 on Thursday 5 June 2008 to provide an opportunity for any submissions arising from this note." 80 Argument on that topic took place on 11 June 2008. On that occasion counsel for Helen made both oral and written submissions about the appropriate manner in which a challenge to retainer could be conducted. The written submission recognised that in Richmond v Branson & Son [1914] 1 Ch 968 Warrington J had laid down a principle in the following terms (at 974): "But the real question is the authority of the solicitor. Is that a question which can be raised as a relevant issue in the action and at the trial? No authority has been cited in support of the affirmative of such a proposition, and, in my opinion, it is impossible, according to the ordinary practice and procedure of the Court, to justify that proposition. The business of this Court could not be carried on if one were not entitled to assume the authority of the solicitor unless and until that authority has been disputed and shewn not to exist in the proper form of proceeding, namely, a substantive application on the part of the parties concerned to stay the proceedings on the ground of want of authority." 81 The submission contended, however, that that principle was merely a procedural principle, and could be departed from in some circumstances. In particular, it was open to the court, in exercise of its discretion, to deal with a challenge to retainer in the course of the principal hearing, and it was open to the court to hold that in the present case the tutor's appointment was invalid or irregular. 82 In his judgment, Windeyer J referred to these matters, and continued: "The plaintiff must be taken to have been under incapacity when the proceedings commenced and the general thrust of the evidence is that her condition had not changed between the impugned transactions and the commencement of the proceedings. While I do not consider the question of requirement for a tutor can be argued in substantive proceedings, no argument was addressed to this during the hearing. Had it been raised without opposition it might have been appropriate to deal with it in some way as suggested in Australian Workers Union v Bowen (1946) 72 CLR 575, but as the real issue was the question of capacity when the transfers were signed, it seems unnecessary to go into this further. However, I remain of the view that a challenge to the requirement for a tutor is to be brought by challenge to retainer. I am satisfied on the evidence before me that if such a challenge had been mounted it would have failed." The Effect of the Pleadings in this Case 83 The Appellant submits, in substance, that the judge should have held that it had not been demonstrated that Mrs Daher was in need of a tutor, and that in consequence his Honour should have struck out or dismissed the action. To deal with that submission it is necessary to unpick several strands of principle. The first of them concerns the effect of the pleadings in this particular case. 84 The Supreme Court Rules 1970, in the form they had immediately before the coming into effect of the Uniform Civil Procedure Rules 2005 in August 2005, included the following definitions in Part 1, rule 8: " disable person means a minor or an incompetent person." " incompetent person means: (a) a person who is not a minor and who is: (i) incapable of managing his or her affairs, or (ii) incommunicate, or (b) a minor who has a curator." 85 The topic of the manner in which a disable person could participate in litigation through a tutor was dealt with in Part 63 Supreme Court Rules. The definitions to which I have just referred, and Part 63 itself, were repealed upon the commencement of the Uniform Civil Procedure Rules. 86 Section 3 Civil Procedure Act 2005 contains a definition: " person under legal incapacity means any person who is under a legal incapacity in relation to the conduct of legal proceedings (other than an incapacity arising under section 4 of the Felons (Civil Proceedings) Act 1981 ) and, in particular, includes: (a) a child under the age of 18 years, and (b) an involuntary patient or a forensic patient within the meaning of the Mental Health Act 2007 , and (c) a person under guardianship within the meaning of the Guardianship Act 1987 , and (d) a protected person within the meaning of the Protected Estates Act 1983 , and (e) an incommunicate person, being a person who has such a physical or mental disability that he or she is unable to receive communications, or express his or her will, with respect to his or her property or affairs." 87 Pursuant to section 11 Interpretation Act 1987, which makes a definition in a statute also apply to delegated legislation made under that statute, that definition also applies to the Uniform Civil Procedure Rules 2005. 88 Part 7, Division 4 Uniform Civil Procedure Rules (which runs from rule 7.13 to rule 7.18) describes the way in which persons under legal incapacity may participate in litigation. Rule 7.13 extends the meaning of "person under legal incapacity" that arises from the definition in section 3 Civil Procedure Act, for the purpose of that Division. Rule 7.13 says: "In this Division, person under legal incapacity includes a person who is incapable of managing his or her affairs." 89 Rule 7.14(1) requires a person under legal incapacity to commence and carry on proceedings by a tutor. The present proceedings were commenced in December 2006, and thus have at all times been conducted under the Uniform Civil Procedure Rules. Those Rules do not contain any concept of a "disable person". Neither the Supreme Court Rules 1970 nor the Uniform Civil Procedure Rules recognised any concept of "disabled person". 90 When the Amended Statement of Claim alleged the plaintiff was a "disabled person", and the Defence to the Amended Statement of Claim did not admit that the plaintiff was a "disabled person" that exchange of pleadings purported to raise an issue by reference to technical language. However that technical language had no legal content. It is as though the statement of claim had alleged "the plaintiff is an abcdefg", and the defence did not admit that allegation. 91 Further, the email from the judge's associate pointed out that there had been a change of definition, though it incorrectly proceeded as though there had once been a definition of "disabled person". However no submission was addressed to the significance of any such changes in definition when the matter was re-listed. 92 In my view the judge would have been justified for these reasons in regarding the relevant paragraph of the Defence to the Amended Statement of Claim as raising no issue in the proceedings. However, in case I am wrong in taking that view of the pleadings, I shall proceed as though the pleading had purported to raise an issue about the validity of Basil's appointment as tutor. Must a Challenge to Retainer be Litigated Outside a Trial? 93 The next question that arises is whether there is any principle that a challenge to retainer is legally incapable of being litigated in the course of a trial. Examining that question involves examination of Richmond v Branson & Son [1914] 1 Ch 968 and a line of authority that has considered it. Richmond v Branson 94 The procedural context in which Warrington J had made the statement in Richmond v Branson that I have quoted at para [80] above was factually close to the present case. It concerned a receiver who purported to sue on behalf of a person alleged to be incapable. The receiver sued in the name of the allegedly incapable person to recover some property of that allegedly incapable person. The defendants admitted that the allegedly incapable person owned the property, but did not admit the receiver's capacity to act for her. Warrington J said, at 974-975: "In my opinion the defendants, by alleging in their defence what is tantamount to a lack of authority on the part of the solicitors who instituted the action, have raised an issue which it is not competent to them to raise as an answer to the claim, though it is competent to them to raise it in other proceedings. On that ground the action is, in my opinion, undefended, and the plaintiff is entitled to the relief which she asks ..." 95 Even though the application to Warrington J had been to strike out the non-admission, he regarded it as unnecessary actually to strike it out. He said, at 975: "I must therefore give to the plaintiff the relief to which, upon the pleadings, I think she is entitled, not, in form, striking out the allegations which are objected to, but treating them as irrelevant, as not raising any issue between the plaintiff and the defendants, and making the order on the admissions in the defence …" 96 Richmond v Branson is thus squarely decided on the basis that a challenge to the authority of solicitors who have instituted an action cannot be raised by way of a defence to that action. The question for this Court is whether that is the law in New South Wales now. Daimler v Continental Tyre 97 In Daimler Company Limited v Continental Tyre and Rubber Company (Great Britain) Limited [1916] 2 AC 307 a company incorporated in England had all its shares bar one held by a German company or German people, and all its directors were Germans resident in Germany. When World War I was in progress, the company sued in the English courts to recover a debt. A question arose of whether that debt was recoverable, by virtue of the Trading With The Enemy Act 1914 (UK) (4 & 5 Geo V, c 87). The directors could not authorise the company to bring the action because they were enemy aliens, but the secretary, a naturalised Englishman, asserted he had been given authority before the war to bring action on behalf of the company, and had authorised the present action. 98 The majority in the House of Lords took the view that the action failed because the bringing of it had not been properly authorised. The majority reached that view notwithstanding that the question of the authority with which the litigation had been conducted arose in the course of the action, not in an interlocutory challenge to retainer. While Lord Atkinson at 327 agreed that the action had been begun without authority, he said nothing about the procedural means by which a challenge to solicitor's retainer should be brought. Lord Parker of Waddington (with whom Viscount Mersey and Lord Kinnear (317), and Lord Sumner (336) agreed), said, at 337: "It follows that this action was instituted without authority from the company, and in my opinion the Court having notice of the fact should have refused relief. It is true that a question whether the plaintiff's solicitor has or has not been validly retained is in general brought before the Court by motion to which the solicitor is made a party. But when the Court in the course of an action becomes aware that the plaintiff is incapable of giving any retainer at all, it ought not to allow the action to proceed. It clearly would not do so in the case of an infant plaintiff, and I can see no difference in principle between the case of an infant and the case of a company which has no directors or other officers capable of giving instructions for the institution of legal proceedings. This is more especially so when, by reason of all the shareholders (with one exception) being the King's enemies, no agent or officer capable of giving such instructions can be validly appointed." 99 Lord Parmoor at 355 said baldly: "The cases which decide the practice to be followed when an objection is made to the retainer of a solicitor do not apply. There is no reason why the objection raised in this case on behalf of the appellants could not be entertained at the trial as a defence to the action, and to refuse to entertain it might lead to serious injustice." Russian Commercial Bank 100 Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse [1925] AC 112 concerns some of the commercial consequences of the Russian Revolution. In 1914 a Russian bank gave a power of attorney to the manager of its London branch authorising him to act on its behalf in various matters including the bringing of litigation. The Russian bank deposited bonds in 1914 with the defendant, a French bank, as security for a financial facility. The Russian bank was nationalised following the Revolution, and its assets came to be vested in a government department. The finance facility that had been provided by the French bank was paid out, but the French bank refused to release the bonds. The manager who had been given the power of attorney in 1914 began proceedings against the French bank, in the name of the Russian bank, seeking return of the bonds and damages for their detention. The trial judge, Sankey J, gave judgment for the French bank, holding that the power of attorney to the London manager of the Russian bank had lapsed, either through frustration, or because the Russian bank itself had ceased to exist. That judgment was upheld by majority in the Court of Appeal: Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse [1923] 2 KB 630. There, Bankes LJ at 640-641 and Scrutton LJ at 654-655 held that it was open to challenge the authority by which the action was brought at the trial, notwithstanding that there had been no interlocutory application to stay the action. Atkin LJ dissented, holding that the Russian bank remained in existence and the power of attorney given to the London manager remained valid. However, he also held, at 671-672, that: "… even if there were a question of defective authority to sue, in my judgment it was not open to the defendants to raise the point as a matter of defence. The judgment of Warrington J in the case of Richmond v Branson appears to me to state the law in a matter of this kind, where the question is whether the action has been brought with the authority of an existing principal, himself capable of suing." (citation omitted) 101 Atkin LJ went on to quote the passage from Richmond v Branson that I have set out at para [80] above, and continued, at 672-673: "The Daimler Case does not appear to be inconsistent with this view. That was a case where no retainer could be given at all, and in such a case the Court may very well refuse to hear the action on being informed of the facts. This appears to be the ground of the decision in the joint opinion of Lord Parker and Lord Sumner. They say: "When the Court in the course of an action becomes aware that the plaintiff is incapable of giving any retainer at all, it ought not to allow the action to proceed. It clearly would not do so in the case of an infant plaintiff, and I can see no difference in principle between the case of an infant and the case of a company which has no directors or other officers capable of giving instructions for the institution of legal proceedings." There the only persons controlling the company were personally incapacitated from giving instructions to sue because they were alien enemies. Here the position is entirely different; the administration is ex hypothesi in the hands of a friendly government, who could undoubtedly direct an action to be commenced in the name of the existing Bank. They are in the position of ordinary principals, and I have never heard of any plea having been formulated which would entitle the defendant to raise at the hearing a defence that, though the plaintiff had the right to sue, he had not in fact authorized the particular action. If it were a valid plea, one would expect to find some trace of it in the books during the last 500 years." (citations omitted) 102 The view of Atkin LJ was upheld in the House of Lords at [1925] AC 112, concerning both the existence of the Russian bank, and whether the authority by which the action was brought could be raised as a defence and litigated in the final hearing. Viscount Cave (with whom Lord Sumner agreed) said, at 130: "My Lords, I do not think that it is open to the defendants to raise this question by way of defence to the action. If the defendants desired to dispute the authority of Mr Jones to commence these proceedings in the name of the plaintiff company, their proper course was to move at an early stage of the action to have the name of the company struck out as plaintiff and so to bring the proceedings to an end. The decision of Warrington J to that effect in Richmond v Branson & Son is not affected by the decision of your Lordships' House in Daimler Co v Continental Tyre and Rubber Co , where the alleged plaintiff was incapable of giving any retainer at all." (citations omitted) 103 Lord Atkinson said, at 148: "I also concur in opinion with Atkin LJ: (1) that on the authority of Richmond v Branson & Son the point of want of authority to sue is not open to the respondents as a defence to this action …" (citation omitted) Banco de Bilbao v Sancha 104 Banco de Bilbao v Sancha [1938] 2 KB 176 was litigation brought, at the time of the Spanish Civil War, concerning entitlement to control the London branch of a Spanish bank. A new board had been appointed to the bank in accordance with law proclaimed by one of the factions in the war. That board authorised the bringing of action in the name of the bank seeking to take control of the London branch from managers who had been appointed by the former board. Success in the action depended upon whether the new board was recognised by English courts as entitled to act in the name of the company. That question was litigated in the course of the trial of the action. The judgment of the Court of Appeal, delivered by Clauson LJ, criticised the parties for so doing, at 192-193: "It is necessary to observe that the parties appear to have carried on the litigation in obliviousness of the principles laid down in the House of Lords in Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse , where their Lordships approved and adopted as good law the judgment of Warrington J in Richmond v Branson & Son . Those principles may be summarized for the present purpose as follows: Where the answer to an action consists of a denial by the defendant that the action is really the action of the person or corporation whose name appears as plaintiff, and an assertion that the action is really the action of a person or body claiming without legal justification to represent the named plaintiff, this answer cannot be set up as a defence in the action: this answer must be set up by taking steps to satisfy the Court, before the action comes on for trial, that the truth is as the defendant alleges, and, if the defendant succeeds in so satisfying the Court, the result will be not that the defendant will succeed in defending the action, but that he will succeed in having the action struck out or stayed, the costs incurred being thrown not on the nominal plaintiff whose name has been wrongfully used, but on the solicitor who has taken upon himself to represent to the Court that he is retained by the proper organ or representative of the plaintiff to urge the plaintiff's suit before the Court. The principle having been laid down by the House of Lords, it is superfluous to justify it; but the inconveniences of disregarding the principle are well illustrated by the present case. The disregard of the principle has resulted, as a matter of form, in a judgment being pronounced which technically appears to estop the plaintiff bank from setting up against their mere servants, the defendants, that the bank are, as they obviously must be, free as a matter of law to terminate at will their servants' agency. In this particular case there is, of course, no fear of the present defendants ever setting up such a point; but it is most undesirable that the records of the Court should be in such a form as to enable such a point to be plausibly set up. The fact is that where, as in the present case, the defendants are mere servants of their master, the bank, they can never have any just title to defend an action by their master, the bank, to enforce termination of their agency. The only case that the agent can possibly have must be, not that he has a defence to the action, but that the action is not the master's action at all, but the action of some one who poses as the master but is not really the master." (citations omitted) 105 The Court of Appeal went on to consider the merits of the question of who was entitled to act on behalf of the bank, but returned to procedural question at the end of their judgment, at 196-197: "The appeal thus fails. Notwithstanding the irregularity of the proceedings in the Court below, no purpose would be served by making any other order in this Court save an order dismissing the appeal." John Shaw & Sons v Shaw 106 In John Shaw & Sons (Salford) Limited v Shaw [1935] 2 KB 113 the English Court of Appeal considered an action for debt that had been brought in the name of a company against two of the directors of that company. The question of whether those directors who had authorised the bringing of the action in the name of the company had authority to do so was litigated in the course of the trial. On the appeal, counsel for the company submitted (at 121) that: "Having let the actions go to judgment without raising the point it is too late now for the appellants to say that they were commenced without authority. The proper course for the appellants to take was to apply at an early stage by motion to have the actions stayed". 107 Greer LJ took the view that the directors who had authorised the bringing of the action had authority to do so, but also expressed his view about the preliminary question of whether the court could entertain the question of authority at all. He said, at 130-132: "In my judgment neither Lord Cave nor Lord Atkinson nor Atkin LJ, by what they said in Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse intended to lay down as a rule of law that when it is clear from the evidence given in an action that the supposed plaintiff did not authorize the bringing of the action, the Court is bound to allow the action to go on to judgment, and thereby allow judgment to be obtained in favour of a person or company, ex hypothesi not present in Court and not asking for a judgment, or against a person or company who have not been served with process and have never instructed any one to appear on their behalf. I understand Daimler Co v Continental Tyre and Rubber Co to be a decision to the effect that where the Court is informed of facts which prove conclusively that the solicitors had no authority to bring the action, the action should be struck out. The want of authority was established by the failure of proof that the Continental Company had before the war clothed the English secretary with authority to commence actions on their behalf, and the incapacity of the enemy directors in whom authority to bring actions was vested after the war had begun, made it clear to demonstration that the action was unauthorized. In Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse the Court held that the evidence established that the English representative of the Russian corporation had authority to bring the action, but Lords Cave and Atkinson and Atkin LJ went beyond what was necessary to decide the case and expressed the opinion that the point of want of authority could not be raised by way of defence, but ought to be raised by notice of motion to stay or dismiss the action. These observations do not, in my judgment, mean that if the facts actually put in evidence prove that the solicitors commenced the proceedings without any authority from the named plaintiff, the Court ought to ignore those facts, and give judgment in favour of or against a party who ex hypothesi is not present in Court. In my opinion the Court has inherent jurisdiction to say "as it is clearly established that the action has been brought by solicitors who were not authorized by the named plaintiff to bring it, we will strike it out." They would not then be entitled to award costs against the nominal plaintiff, nor would they as a rule make any order that the solicitor should pay the costs, but would leave these matters to be determined on a motion to which the solicitors would be parties. On the other hand, if the question of authority were left in doubt, the right course for the Court to take would be to try the action, and give judgment according to the evidence, leaving the losing party to apply to set aside the judgment on the ground that he had never authorized the action or the defence, as the case might be." (citations omitted) 108 Slesser LJ concluded that the action was not validly authorised, but also expressed a view on the procedural question, at 145-146: "In my view, the reasons for the conclusion of the House of Lords and of Atkin LJ in the Russian Bank case and of Warrington J in Richmond v Branson were that in those cases questions of fact on which it needed to be decided whether there was or was not authority had to be considered, and the Court declined to go into such matters of evidence except upon a substantive motion. But the rights of the Court in its inherent jurisdiction to stay actions which would be an abuse of its process if they are not properly upon the record, either because the plaintiff was not existent at the time of the issue of the writ or because they are satisfied on the facts that he had not authorized the proceedings, has so far been undoubted, and this, altogether apart from the desire of either party, if the facts are before the Court. Where the Court may properly come to a conclusion on sufficient or admitted evidence that there is no action properly before it, it may well think it right to act in accordance with that inherent jurisdiction, to refuse to proceed, and the difference which has been sought to be found between the case where no retainer could be given at all, and the case where what is still in dispute is whether in fact there was or was not authority to give one is not a difference in principle, but a difference of expediency, depending upon whether a Court is or is not so informed of the facts that it does or does not think it right to come to a conclusion on the matter as a question of law. In the present case, as I have said, the facts which have been found by the learned judge are before the Court; they show, to my mind, a complete absence of authority of the company to sue in this action. In other words, I have come to the conclusion that the company is not before the Court at all, and that, therefore, for this reason, the appeal succeeds and the action must be struck out; but as there is no one who is before the Court who can be made liable for costs, the appellants if they desire costs must pursue such other remedies in other proceedings on this head as they may think advisable." (citations omitted) 109 Roche LJ arrived at the same result on the procedural question as Greer LJ had done, but by a different route, at 147-148: "I agree with both the Lords Justices as to the result of the decided cases and particularly of the Daimler case and of the Russian Commercial Bank case. The principles to be derived from them are that such an objection to a right to sue as is here taken should be taken not at the trial but by an interlocutory motion or summons; that if such procedure is not adopted the Court need not, and ordinarily should not, entertain such an objection at the trial as if it were a defence. If it were otherwise, then for reasons pointed out by Warrington J in Richmond v Branson , the position of the Court would be well nigh intolerable. Nevertheless, as appears from the decision in the Daimler case, if want of capacity or authority to sue plainly appears at any stage the Court may then strike out the action. It was argued for the respondents that the application of the latter principle was limited to objections based upon want of capacity to sue and did not extend to objections based upon want of authority to sue. I see no reason for such limitation of the powers of the Court, and in my opinion the argument is not well founded. When it clearly appears that there is want of authority to sue, e.g., if an admission in that sense were made in the course of the hearing, the same result in my opinion ought to follow and the action in question ought to be struck out. In the present case the defendants did not proceed by motion or summons but pleaded the matter in their defences, and the learned judge, apparently without objection from the plaintiffs, adjudicated upon the matter at the trial, and reached an affirmative conclusion adverse to the defendants, as has Greer LJ upon the hearing of the appeals. Speaking for myself, I do not find materials for reaching such an affirmative conclusion, and before feeling myself able to adhere either to the opinion of the trial judge and Greer LJ or to the contrary opinion of Slesser LJ, I should require more information as to several facts which, as it seems to me, might make all the difference in the decision of a point where the balance rests so even." (citations omitted) 110 After discussing the deficiencies in the evidence concerning the authority of the directors to bring the action, he concluded, at 148: "In short, in my opinion, this is a case where, apart from the nicety of the matters of law and constructions involved, the Court has not, with regard to matters of fact, the information necessary for a decision whether effect should be given to this objection of the defendants to the competence of the actions. The onus was upon the defendants and they have failed to satisfy me clearly or at all that the objection is a good one." AWU v Bowen 111 Australian Workers' Union v Bowen (1946) 72 CLR 575 arose when the plaintiffs in a previous action had been ordered to pay the costs of the defendants in that action, the Australian Workers' Union (AWU) and several of its members. The retainer of the solicitor who had acted for the defendants in the previous action extended only to the conduct of that action. Notwithstanding that, he issued a bankruptcy notice against Mr Bowen, one of the plaintiffs in the previous action. The solicitor issued that bankruptcy notice in the name of all the defendants, but without the authority of two of them. Mr Bowen did not comply with the notice. Later, that solicitor issued a bankruptcy petition to Mr Bowen in the name of all the defendants, again without the authority or knowledge of two of them. Before the hearing of the petition one of the plaintiffs paid all the costs that the plaintiffs collectively had been ordered to pay to the defendants, and thus the petition was dismissed. There was, howevere, no evidence that the defendants who had authorised the issue of the bankruptcy notice and petition had offered any indemnity to the other two defendants. (That was a relevant matter because of an argument that one of several joint creditors can be compelled to lend his name to an action to enforce the joint debt if offered a sufficient indemnity for costs to which the use of his name might expose him). One of the grounds upon which the bankruptcy judge dismissed the petition was that the bankruptcy notice was invalid because it had not been issued on behalf of all the judgment creditors. Hence he held that the petition failed, because failure to comply with the notice was not an act of bankruptcy. A separate ground on which the bankruptcy judge dismissed the petition was that a petition itself must be presented by all the people to whom the judgment debtor owed the judgment debt, and that requirement had not been satisfied. He reached those conclusions because the question of the authority of the solicitor to issue the bankruptcy notice and petition had been litigated at the hearing of the petition. 112 The AWU appealed to the High Court against dismissal of the petition. The majority in the High Court held that both the bankruptcy notice and the petition were invalid because the judgment debt upon which they were based was one owed to all the defendants jointly, and all joint judgment creditors must join together in issuing a bankruptcy notice, and a petition, before either document is valid. 113 Though the appeal was dismissed by a 4:1 majority (Latham CJ, Rich, Dixon and Williams JJ, Starke J dissenting), the reasons of the judges in the majority did not produce a clear statement of principle about the circumstances in which it is possible for a challenge to retainer to be litigated in the course of a final hearing. Latham CJ at 583-584 held that the bankruptcy notice was invalid because it was not issued with the authority of all judgment creditors, and the petition was for the same reason irregular, " … and was prima facie rightfully dismissed upon the ground that it was founded upon an invalid bankruptcy notice and upon the further ground that all the joint creditors entitled to the judgement debt were not petitioners. Under the wide provisions of the Bankruptcy Rule 172 both of these objections were open to the debtor upon the hearing of the petition." 114 Bankruptcy Rule 172 provided at the time: "Where a debtor intends to show cause against a petition, he shall file a notice with the Registrar specifying the statements in the petition which he intends to deny or dispute, and transmit by post to the petitioning creditor and his solicitor, if known, a copy of the notice three days before day on which the petition is to be heard." 115 Thus the reasoning of Latham CJ concerning why it was possible for questions of the authority of the solicitor to issue the petition to be gone into on the hearing of the petition itself depends on Rule 172. It does not apply outside the context of bankruptcy proceedings in which there is a rule not relevantly different to Rule 172. 116 Rich J proposed dismissing the appeal on the ground on which the bankruptcy judge had relied. Rich J also said, at 584: "No doubt substantive applications might have been made to test the validity of the bankruptcy notice and the adequacy of the solicitor's retainer to issue it but the objections to both these matters in these respects were discussed at the hearing and satisfactorily disposed of by observations from the Bench." 117 Dixon J, at 590, said concerning the bankruptcy notice: "Upon an application, therefore, by them or by the respondent, the bankruptcy notice might have been set aside. As the authority of the solicitor who obtained it was in question, it would seem that an independent application would have been the more regular way of attacking it: see Banco de Bilbao v Sancha , [1938] 2 KB 176 at p 192, to which Williams J, referred in this court. But in the Federal Bankruptcy court that question was gone into upon the hearing of the petition without objection …" 118 Williams J said, at 592: "Formerly when a solicitor instituted proceedings in the name of a plaintiff without authority, the plaintiff was bound by what was done and his remedy was against the solicitor who had wrongly used his name. But after it had been held at common law that a defendant who had paid the amount of a judgment to a solicitor, not having the authority of the creditor to issue the writ, was liable to pay the creditor all over again, it became the practice at common law and subsequently in equity, to allow either the plaintiff or the defendant to move the court for an order to stay or strike out the proceedings and for an order that the solicitor pay the costs of the plaintiff (including any costs for which he had become liable to the defendant) and the costs of the defendant ( Reynolds v Howell (1873) LR 8 QB 398; Fricker v Van Grutten [1896] 2 Ch 649). The proper procedure for a defendant who wishes to challenge the retainer of the solicitor for the plaintiff is to file a substantive motion and not to raise the want of authority by way of defence to the proceedings ( Richmond v Branson & Son [1914] 1 Ch 968; Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse [1925] AC 112 at p 130; Banco de Bilbao v Sancha [1938] 2 KB 176 at p 192. I think that the issue of a bankruptcy notice which is a process of the Court comes within the principle of these cases and that the respondent should have raised the question in this manner. But it was held in John Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113, that the Court has inherent jurisdiction to stay or strike out the proceedings at whatever stage the facts establish want of capacity or authority to sue. In the instant case no objection was taken to the procedure. If it had been taken, the petition could have been stood over to enable the respondent to launch a substantive application. It is now too late to take the objection." 119 Williams J regarded as a sufficient reason for the petition to be dismissed that it was founded upon an invalid bankruptcy notice. Having made that finding, he continued, at 594: "It therefore becomes unnecessary to discuss the objections that were raised to the validity of the petition or to decide whether the appellant should have leave to amend the petition." 120 In other words, Williams J did not decide whether the trial judge had acted correctly in allowing the question of the solicitor's authority to issue the petition to be litigated on the hearing of the petition itself. 121 In these circumstances AWU v Bowen does not provide any binding precedent, that could be applied to the circumstances of the present case, concerning whether it is possible for the question of the authority of a solicitor to issue process initiating litigation to be decided at the final hearing of that process. However, the fact that, even after Williams J had drawn their attention to authority suggesting that there must be a substantive application challenging retainer, both Dixon J and Rich J were unconcerned about the trial judge having decided in the course of hearing the petition whether the solicitor for the petitioner was validly retained, and did not make any reference to the special provisions of Rule 172, provides a significant persuasive precedent that such a course of action is not in principle impossible. Anthanasopoulos v Moseley 122 In Anthanasopoulos v Moseley [2001] NSWCA 266; (2001) 52 NSWLR 262 the Court of Appeal dealt with four appeals to the Supreme Court from the Local Court, that had been removed into the Court of Appeal. 123 The cases arose from a business practice of NRMA – its Courtesy Car Programme. Under that Programme a motorist whose vehicle was insured with NRMA would be provided with a replacement vehicle free of charge for 14 days if (amongst other conditions) the motorist's vehicle was damaged in an incident in which the motorist was not at fault. NRMA provided the vehicle even though it had no obligation to do so under the terms of its insurance contract with the motorist. 124 In the Local Court, solicitors instructed by NRMA brought multiple proceedings, each naming an NRMA-insured motorist as plaintiff, against the drivers responsible for damaging the vehicles of those NRMA-insured motorists. Each of the proceedings sought to recover the cost of the replacement vehicle provided under the Courtesy Car Programme. 125 In the four cases that became the subject of Anthanasopoulos, the insurer of the defendant denied liability on the ground that the plaintiff had suffered no loss because a replacement vehicle had been provided by NRMA gratuitously. There was no issue on the pleadings about whether NRMA was entitled to be subrogated to any rights that the insured motorists might have against the defendants. 126 As Beazley JA recorded at [20], the Magistrate "considered that the question of subrogation was outside the scope of the actions before him. He was correct in that view." 127 Ipp AJA (as his Honour then was), in remarks with which Handley JA and Beazley JA agreed, noted that the subrogation issue was "outside the scope of the case" and continued, at [90]-[92]: "… I would add however, that this consequence follows largely by reason of the omission on the part of the appellants in each case to raise subrogation as an issue at the trials of the four actions, the subject of this appeal. Beazley JA has pointed out that, although the parties to each proceeding were the owners of the vehicles involved in the collisions, the cases were being prosecuted by NRMA, their insurer. NRMA was asserting that, pursuant to the doctrine of subrogation, it was entitled to recover the costs incurred in respect of the courtesy cars supplied by it. The involvement of NRMA in this way was not an issue that was raised, as an arguable defence, for consideration by the magistrate. In Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380 I pointed out at 387 that: "Although no allegation as to the right of subrogation has to be made in the statement of claim, the defendant may raise the absence or inadequacy of that right in its defence; it is then for the insurer to justify its right to proceed in the name of the assured." At the trial, it was perhaps open to the respondents to assert that, in reality, the cases were being brought by NRMA, and not the respondents themselves, and NRMA was not entitled to so prosecute the actions. I make no comment on the merits of such an argument, but merely point out that the issue, not having been raised at the trial, was an issue properly regarded by the magistrate as falling outside the scope of the case." 128 Before the trial judge Mr Sneddon relied on those remarks as providing support for the possibility of a challenge to retainer being litigated in the course of a final hearing. In my view they are of no assistance to Mr Sneddon. First, the remarks were obiter dicta. Second, they say nothing about the correct procedural course that should be followed once a defendant in its defence has challenged the entitlement of solicitors acting in the name of the plaintiff, but on the instructions of an insurer, to do so. It is always open to a plaintiff against whom such a defence is raised to move that it be struck out and litigated by a separate motion. It is also open to the court of its own motion to direct that that the issue be decided by a separate substantive motion. I do not understand those dicta as showing an intention to depart from the long-established procedural principle that there should ordinarily be a separate challenge to retainer, that has been recognised in both the House of Lords and the High Court. Le v Williams 129 Both before the trial judge and in the Court of Appeal the appellant relied on a decision I gave in Le v Williams [2004] NSWSC 645; [2005] NSW ConvR ¶56-109. At [48] I said: "It may be – I do not need to decide – that this point should properly have been taken in the Local Court, by way of a motion seeking to stay those proceedings on the ground that the solicitors acting there in Mr Williams' name were not really retained by him or otherwise entitled to sue in his name : Richmond v Branson & Son [1914] 1 Ch 968 at 974; Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse and Others [1923] 2 KB 630 at 671 – 672 per Atkin LJ (dissenting, but whose view was upheld on appeal: Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse and Others [1925] AC 112 at 130, 148); Australian Workers' Union and Others v Bowen (1946) 72 CLR 575 at 586, 589, 590, 592; Harry S Bagg's Liquidation Warehouse Pty Ltd and Others v Whittaker and Others (1982) 44 NSWLR 421; Knox Street Apartments v Roger Percival Flexman & Another [2002] NSWSC 102. When the matter has been argued before me, and the amount of money at stake is not large, I think it is preferable to deal with the substance of the point, and ignore the procedural niceties." 130 Mr Sneddon relied on those remarks to support a submission that in the present case it was a matter of procedural discretion whether a challenge to retainer was raised by preliminary motion, or at the hearing of an action. In deciding whether that conclusion can properly be drawn from the remarks, they need to be seen in the procedural context in which they were made. 131 Ms Le, while a tenant of a home unit owned by Mr Williams, caused a fire there which damaged various fittings inside the home unit. The insurer of the body corporate replaced the damaged fittings. Ms Le and Ms Williams agreed to share equally certain costs that were not covered by the insurance. Ms Le paid the amount she was obliged to pay under that agreement, and obtained a release from Mr Williams. Then the insurance company, using the name of Mr Williams, began proceedings in the Local Court against Ms Le, seeking to recover from her the amount it had expended in making good the damage to the fittings in the unit. The proceedings I heard were brought in the Supreme Court by Ms Le against Mr Williams, seeking declarations to the effect that she had paid all she was obliged to pay to Mr Williams, and restraining him from continuing the Local Court proceedings. One of the bases on which she sought the injunction was that the solicitors for the insurer were not entitled to be subrogated to any rights that Mr Williams had against her. I held that, whether or not the insurer was entitled to be subrogated to Mr Williams' rights, it had Mr Williams' consent to bring the action in his name, which was sufficient authority for the insurer to bring the Local Court proceedings in Mr Williams' name. It was at that stage of the judgment that I made the remarks that Mr Sneddon relies upon. 132 Thus, Le v Williams is not an example of a challenge to the retainer of the solicitor to bring particular proceedings being litigated at the final hearing of those self-same proceedings. Rather, it was a case where the authority of a solicitor to bring one set of proceedings was decided at the final hearing of a different set of proceedings. It can be a discretionary reason for refusing an injunction that an adequate remedy is available elsewhere. The remarks I made amounted, for practical purposes, to deciding that, even though the question of the authority of the solicitors could (and perhaps should, from the point of view of proper ordering of the business of the Local Court) have been litigated in the Local Court, I would not regard that possibility as a reason for declining to deal with the point on the application for an injunction. The remarks provide no support for it being a matter of procedural discretion whether a challenge to the retainer of a solicitor to bring a particular piece of litigation is brought by a motion in those proceedings or is litigated at the final hearing of those proceedings. 133 It has been accepted in this Court that a challenge to retainer is not a matter of defence to be disposed of at a trial: United Service Insurance Co Ltd (in liq) v Lang (1935) 35 SR (NSW) 487 at 496-497 per Jordan CJ (with whom Halse Rogers and Street JJ agreed). It has likewise been accepted that the appropriate way of bringing a challenge to retainer is by a substantive motion to have proceedings stayed, brought as soon as the party aggrieved becomes aware of the matter: United Service Insurance at 497; Inglis v Moore (No 2) (1979) 25 ALR 453 at 464; (1979) 46 FLR 470 at 481 per Davies J. 134 However, there have also been cases where a challenge to retainer has been conducted in the course of a hearing. One such case was SBBH v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 684 at [7] per Mansfield J, where no objection was taken to the retainer issue being argued at that stage. A particularly strong case from Mr Sneddon's point of view is Hillig v Darkinjung Pty Ltd (No 2) [2008] NSWCA 147, a case where the validity of the solicitor's retainer depended upon complex questions concerning the validity of corporate resolutions. In considering whether to order the solicitor to pay the costs of proceedings in which it was held that solicitor had not been validly retained because the resolutions were invalid, McColl JA (with whom Beazley and Giles JJA agreed) said at [54]-[57]: "… The issues on the three applications were so intertwined that it was appropriate for the primary judge not to resolve the … Interlocutory Process challenging Mr Cunliffe's retainer until he had heard all of the argument and then, having regard to his conclusions, to dismiss it. … … where the party represented is a defendant, and the question whether the defendant can retain a solicitor lies at the heart of the proceedings, a court would not readily order the solicitor to pay the costs of the proceedings even when the effect of its conclusion is that those the solicitor represented were not authorised to retain him or her. A solicitor placed on notice of a challenge to retainer would do well to determine, as Zimmerman demonstrates, whether the client's authority to retain him or her can be objectively determined. Where that cannot be done, the court must be anxious to ensure that an order that the solicitor bear the costs is appropriate in all the circumstances. Those circumstances include, in my view, the public interest that citizens have legal representation for the purposes of the conduct of litigation: Orellana-Fuentes v Standard Knitting Mills Pty Ltd [2003] NSWCA 146; (2003) 57 NSWLR 282 (at [96]) per Ipp JA (Spigelman CJ and Handley JA agreeing). In my view, Mr Cunliffe was entitled to proceed on the basis that the efficacy of the Resolutions and the question whether Darkinjung could retain him, was an issue of law which should properly be determined by the Court and that the defendants should have legal representation for the purposes of that contest. Accordingly I would not exercise the UCPR 42.3(d) power against him in relation to the trial." 135 In other words, in Hillig this Court decided that not merely a permissible, but the proper course for the trial judge to take, in the circumstances of that case, was to permit the issue of retainer to be litigated at the final hearing. In light of that decision, it could not be the law that a challenge to retainer must always be litigated in the course of a substantive motion challenging retainer, that is argued prior to the final hearing. 136 I respectfully agree with the conclusion in Hillig. The Court is now required to organise its business in a way that facilitates the just, quick and cheap resolution of the real issues in the proceedings: section 56 Civil Procedure Act. If, as in Hillig, the issues involved in deciding whether a solicitor is validly retained are dependent on complex questions that also arise at the hearing, the just, quick and cheap disposal of the real issues may require the question of retainer to be dealt with in the course of a final hearing. As well, one can envisage situations where the question that is involved in a final hearing is a question of law that can be argued quickly, so that it would be wasteful to require the parties to come to court on one day to argue about retainer, and on another day to argue about the issue involved in the final hearing. In such a case, a single hearing in which the challenge to retainer and the final hearing are heard concurrently may be appropriate. Further, sometimes the basis on which a question concerning a solicitor's retainer arises might become known only immediately before or in the course of a hearing, and in such a case it might be appropriate to permit the challenge to be argued at the final hearing rather than have the parties incur the delay and extra cost involved in adjourning the final hearing. 137 Recognising that it is sometimes possible for a question of retainer to be argued at the same time as a final hearing does not involve rejecting the view that has long been adopted, that there are often powerful reasons for arguing the question of retainer in advance, and promptly after it becomes known that there is reason to challenge the retainer. 138 Litigation proceeds on the basis of the court, and the other parties, assuming that the person purporting to act as solicitor for a party has authority from that party to bring the litigation and do the actions that are incidental to the conduct of the litigation. It is that assumption that is the basis of the ostensible authority of a solicitor concerning litigation. A challenge to retainer is a challenge to that assumption. It is often important that it be dealt with promptly after it is known that the challenge exists, lest the court and the parties engage in a charade of purporting to decide issues between parties to litigation when one of those parties is not really there. 139 Hearing a challenge to retainer at the same time as a final hearing involves the final hearing being conducted on a hypothetical basis, that the case being presented in the name of the plaintiff is the case that the plaintiff would present, if it were to be held that the solicitor purporting to act for the plaintiff really had authority to do so. Allowing a hearing to proceed on that sort of hypothetical basis has an inherent risk, that the court needs to assess in light of the facts of the individual case before it, of the hearing involving an abuse of process. Further, a trial judge would often be wary about compulsive powers of the court, like subpoenas or discovery, being used in the name of a plaintiff when there was an unresolved question about whether the solicitor purporting to act for the plaintiff was in truth authorised to do so. Another factor that often tends to favour the separate resolution of challenges of retainer is that, if the party who makes the challenge wishes to claim that the solicitor whose retainer is challenged should pay costs connected with the action, the solicitor must be made a party to at least that application, even though the solicitor personally is not a party to the action itself. It may be that, even in cases where the parties consented to a challenge to retainer being dealt with a final hearing, considerations like these would lead the court, in giving directions, to require that issue be litigated in advance of the final hearing. Ultimately, whether a challenge to retainer should be heard at the same time as a final hearing is a question of management of the individual case, in the decision of which the judge is guided by section 56 Civil Procedure Act. 140 For these reasons, I accept Mr Sneddon's submission that it is in principle possible for a challenge to retainer to be decided at the same time as a final hearing. However, that is not enough to lead to the conclusion that the trial judge made an error in the present case, of a type that would result in his decision being reversed. An important assumption in Mr Sneddon's argument is that, by the Defence to the Amended Statement of Claim, a challenge to retainer was adequately raised. That assumption is directly contrary to the decision of Warrington J in Richmond v Branson that it is not possible for a challenge to retainer to be brought by defence. 141 In my view, that decision of Warrington J continues to state the law in New South Wales. The reason why that is so depends upon the role of pleadings in litigation. 142 That role is to define issues between the parties to the action. Uniform Civil Procedure Rule 6.1 (1) says: "Except by leave of the court , a party may not take any step in proceedings (including any appearance in court) unless the party has filed a statement of claim or summons in the proceedings or has entered an appearance in the proceedings." 143 UCPR 6.2 (1) says: "Subject to these rules, the practice notes and any other rules of court, a person may commence proceedings in the court by filing a statement of claim or a summons." 144 UCPR 6.12 (1) says: "A statement of claim or summons must specifically state the relief claimed by the plaintiff ." 145 UCPR 7.1 (1) says: "A natural person may commence and carry on proceedings in any court, either by a solicitor acting on his or her behalf or in person." 146 UCPR 7.24 (1) says: "Every act, matter or thing which, by or under the Civil Procedure Act 2005 or these rules or otherwise by law, is required or allowed to be done by a party may be done by his or her solicitor ." 147 UCPR 14.14 (2) says: "In a defence or subsequent pleading, a party must plead specifically any matter: (a) that, if not pleaded specifically, may take the opposite party by surprise, or (b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable, or (c) that raises matters of fact not arising out of the preceding pleading." 148 UCPR 14.26(1) and (2) say: "(1) An allegation of fact made by a party in a pleading is taken to be admitted by any opposite party required to plead in response unless: (a) in the pleading in response, the opposite party traverses the allegation, or (b) a joinder of issues under rule 14.27 operates as a denial of the allegation. (2) A traverse may be made by denial or by a statement of non-admission, either expressly or by necessary implication, and either generally or as to any particular allegation." 149 As is shown by the parts of the rules that I have emphasised, all these rules presuppose that there is a person who is the plaintiff in litigation, who makes allegations in the statement of claim, to which the defendant responds in a defence. An allegation by the defendant to the effect that "the person named as plaintiff is not making any allegations at all in the document that has been filed as the statement of claim, because that person has given no authority of the statement of claim filed" is a type of allegation that does not fit within the universe of discourse, or the framework of assumptions, within which the pleading rules relating to a defence operate. 150 It is a clear abuse of the process of the court for someone to bring litigation, supposedly in the name of a particular person, when there is no authority from that particular person to bring the litigation. A court will deal with an abuse of process of that kind once it is established that a supposed plaintiff has not given authority for the litigation to be brought. The appropriate way of bringing that sort of abuse of process to the attention of the court, and establishing the facts underlying it, if there is any doubt about them, is usually by a notice of motion seeking to strike out the statement of claim or to stay the action. However, if in the course of litigation it becomes clear to the court that its process is being abused in this way, it will act of its own motion to bring the abuse to an end. It may be that the abuse comes to the attention of the court only in the course of a final hearing, either incidentally as evidence emerges, or as a result of the counsel appearing before the judge agreeing either expressly or by their conduct to litigate the question of whether the action is authorised, and the judge not intervening to require that issue to be decided before the rest of the case proceeds. What is in substance happening then, though, is the argument of a motion challenging the retainer, not the deciding of an issue that can properly be raised by a defence in an action. 151 The case law that I have discussed is consistent with this analysis. It will be recalled that Richmond v Branson concentrated closely on what allegations it was permissible to make in a defence. Likewise Atkin LJ, Viscount Cave and Lord Atkinson in Russian Bank, and Clauson LJ in Banco de Bilbao held it was not possible to raise a challenge to retainer by a defence. By contrast, Lord Parker in Daimler did not put the matter in terms of what could be raised as a matter of defence – rather he put it in terms of what the court should do once it became aware that an action was being run in the name of a corporation that was incapable of giving a retainer. I recognise that Lord Parmoor in Daimler talked about the objection then before him being entertained at the trial "as a defence", but he was the only judge in Daimler who said that, and an unreasoned diktat like the one I have quoted at para [99] above is not persuasive. Like Lord Parker in Daimler, the language of the judges in John Shaw was not cast in terms of what matters can be raised as a defence, but rather in terms of how the court deals with an abuse of process once it is aware of it. Indeed, Roche LJ said that if an objection to the right to sue is not taken by a preliminary motion "the Court need not, and ordinarily should not, entertain such an objection at trial as if it were a defence." (emphasis added) – thus recognising that it is not actually a defence. The objection to the authority of the solicitor who purported to appear for the petitioners in AWU v Bowen appears to have been gone into at the trial either consensually, or under the extended powers of Bankruptcy Rule 132. 152 The important difference between what can be raised as a defence, and what can be raised by a motion challenging retainer, is shown by the consequences of a defendant succeeding in what is alleged in those two different forms of process. Success in a defence entitles the defendant to a judgment against the plaintiff, that gives rise to an estoppel by judgment preventing the plaintiff thereafter denying the truth of the defence so established. Success in a motion challenging retainer results in the action being struck out or stayed. It creates no estoppel against the nominal plaintiff, because the nominal plaintiff was not a party to the litigation. It is unthinkable that a court's processes could operate to raise an estoppel by judgment against someone who the court has itself decided was not a party to the litigation from which the estoppel arose. 153 Thus, even if a generous construction is given to the pleadings so that they are treated as purporting to raise an issue about whether Mrs Daher needed a tutor (and hence whether the solicitor acting on Basil's instructions had authority to act for Mrs Daher), that "issue" is one that cannot properly be raised by a defence. An issue about whether the solicitor for the plaintiff had a valid retainer could have been available for decision by the judge only if the parties had by their conduct at the trial litigated what was in substance an informal challenge to retainer. I turn to that question. Did the Parties Litigate a Challenge to Retainer? 154 Mrs Daher manifestly did not fit within paras (a)-(d) of the definition of "person under legal incapacity" in Section 3 Civil Procedure Act (quoted at para [86] above). Thus, the only way in which she could be a person under legal incapacity was if she was incommunicate, in the way referred to in paras (e) of the definition, or was a "person who is under a legal incapacity in relation to the conduct of legal proceedings", who did not fit within any of paras (a)–(e) of the definition, or was a person who was incapable of managing her affairs within the meaning of Rule 7.13 Uniform Civil Procedure Rules. 155 There is a well-established body of law about what is involved in deciding that a person is not capable of managing his or her own affairs for the purposes of the Protected Estates Act 1983: Re GHI (a protected person) [2005] NSWSC 581; (2005) 221 ALR 589 at [4]-[21]. It involves giving consideration to the ability of a person to deal with the variety of circumstances that make up "the ordinary routine affairs of man". No such inquiry was carried out in the course of the present case, notwithstanding that there were some incidental scraps of evidence that would bear upon such an inquiry. No submissions were made to the judge concerning the application of any such test. 156 There is a question of construction about whether the notion of being not capable of managing one's own affairs that is appropriate for the Protected Estates Act also applies to the definition of "person under legal incapacity" in the Civil Procedure Act and Uniform Civil Procedure Rules. One reason why it might be argued that there is a difference is that the effect of a person being found to be not capable of managing their own affairs under the Protected Estates Act is that someone else takes over the conduct of all their affairs, while the practical effect of being not capable of managing their own affairs under the Civil Procedure Act and Uniform Civil Procedure Rules is that someone else takes over the conduct of only a specific piece of litigation. Another reason why it might be argued that there is a difference is that, pursuant to section 13 Protected Estates Act, the estate of a person becomes subject to management only after the court has become satisfied that a person is incapable of managing his or her affairs, while the appointment of a tutor is effective without any formal instrument of appointment or any order or decision of a court (UCPR 7.15(1)), subject only to the filing of the tutor's consent to act as tutor, and a certificate signed by the tutor's solicitor to the effect that that tutor does not have any interest in proceedings adverse to the interests of the "person under legal incapacity" (UCPR 7.16). In relation to somewhat, but not totally, analogous rules of court in England, Chadwick LJ has said, in Masterman-Lister v Brutton & Co [2002] EWCA Civ 1889; [2003] 1 WLR 1511; [2003] 3 All ER 162 at [66]: " … there was no requirement, as such, in the rules for the filing or consideration of medical evidence. If the rule is to work in practice, the test of mental capacity should be such that, in the ordinary case, the need for a next friend or guardian ad litem should be readily recognized by an experienced solicitor." 157 Whatever may be the outcome of that particular question of construction, there is another question of construction concerning whether being "under a legal incapacity in relation to the conduct of legal proceedings" requires the incapacity to exist concerning legal proceedings generally, or concerning the particular legal proceedings in relation to which the appointment of tutor is made. And whatever may be the outcome of that enquiry, there is a question of what is involved in being "under legal incapacity" in relation to whatever legal proceedings, or type of legal proceedings, is the relevant one. (Chadwick LJ suggests one answer in Masterman-Lister at [58].) None of those questions of construction was argued at the hearing. Nor were they argued on the appeal, so I express no opinion now concerning the correct answer to any of them. 158 No submissions were made at the trial about whether in fact Mrs Daher, at the time proceedings were commenced, met the test for being incapable of managing her affairs within the meaning of the Protected Estates Act, or in any other more limited sense that might be applicable to the definition of "person under legal incapacity" as it applies in the Civil Procedure Act and Uniform Civil Procedure Rules. No submissions were made at the trial about whether the limitations on her ability to communicate were such that she fell within para (e) of the definition in the Civil Procedure Act of "person under legal incapacity". No submissions were made at the trial about whether she was "under a legal incapacity in relation to the conduct of legal proceedings", within the meaning of the chapeau of that definition. While there were some items of evidence that could bear upon those questions, and they were tendered for a purpose other than elucidating those questions. 159 In all these circumstances I conclude that the parties did not consensually litigate any question about whether Mrs Daher was in a condition where it was appropriate for a tutor to be appointed. In those circumstances, the judge was right not to deal with any such question. Onus of Proof 160 Further, when a challenge to the retainer of a solicitor is made, the onus of proving that the solicitor lacks authority lies on the party who asserts that lack of authority: Hawksford v Hawksford [2005] NSWSC 463; (2005) 191 FLR 173 at [33]-[55]; John Shaw & Sons (Salford) Ltd v Shaw at 132 per Greer LJ (quoted at para [107] above), 148 per Roche LJ (quoted at para [110] above); Banco de Bilbao v Sancha at 192 (quoted at para [104] above); Wood v Inglis [2008] NSWSC 1147; (2008) 68 ACSR 420 at [20]-[21] per Barrett J; MultitecFMB (Asia Pacific) Pty Ltd v Han [2008] NSWSC 1339; (2008) 68 ACSR 106 at [28] per Sackville AJ; Nichols v Lee [2008] NSWSC 1243 at [17] per McCallum J. In Bowen v Bowen (1873) IR 7 Eq 251 at 252 Sullivan MR said that "it was the settled practice that a proceeding must be assumed, until the contrary is shown, to have been taken by a solicitor with proper authority." If what is in substance a challenge to retainer were to be brought in the context of a final hearing, there is no reason to believe that the onus would fall any differently to the way it would fall if the same challenge were made by a motion heard before the final hearing. 161 Even if the parties were treated as having raised an issue about whether Mrs Daher was a person concerning whom a tutor could be appointed, Helen would bear the onus of showing that Mrs Daher was not someone who was incapable of managing her own affairs. On such evidence as there was in the case concerning Mrs Daher's capacity at the time of commencement of proceedings, and in particular the evidence of Dr Mellick, one can say that, whatever the outcome of the various questions of construction which I have earlier alluded might be, there is (at the least) room for serious doubt about whether Helen had discharged the onus on her. Without an answer to those questions of construction, it is not possible for me to express a view about whether the conclusion of the judge that "I am satisfied on the evidence before me that if such a challenge had been mounted it would have failed" is right. However it is not necessary to decide whether the judge's conclusion in that respect is right, as there are other reasons for concluding that the judge was not in error in failing to decide whether Mrs Daher's mental state was such as required the appointment of a tutor. 162 When the grounds of appeal related to the three matters I have already dealt with in this judgment, it is unnecessary to discuss the principles by reference to which relief is granted on the basis of undue influence or unconscientious conduct, or the similarities and differences between circumstances where there is undue influence and circumstances where there is unconscientious conduct. Was the Issue of Challenge to Retainer Raised on the Appeal? 163 I have read the reasons of Giles JA, but respectfully do not agree that the submissions on the appeal were as limited as his Honour understood them to be. The Notice of Appeal included a ground as follows: "His Honour erred in holding that the plaintiff's pleading that she is "a disabled person" was "a matter of significance" , when: (a) The principle enunciated in Australian Workers Union v Bowen (1946) 72 CLR 575 is to be the opposite effect, than as held by his Honour. (b) The defendant did argue the question of breach of retainer on 11 June 2008, at his Honour's direction. (c) The evidence as a whole before his Honour, coupled with Mrs Daher's failure to give evidence, established that the plaintiff's tutor, son, failed to discharge his onus of proof on the question of incapacity." 164 The written submissions that were made to Windeyer J when the matter was re-listed on 11 June 2008 included: "It is open to the Court, in addition to refusing to set aside the transactions sought to be impugned, to hold that in the events as they happened, the tutor's appointment was invalid or irregular, particularly in light of the want of objection by the plaintiff as to adherence to the principle in Richmond at 974: see Bowen 72 CLR 592.8 per Williams J; cf also John Shaw & Sons [1935] 2 KB 113 (cited in Bowen 72 CLR 592)." 165 If the tutor's appointment was invalid, the necessary consequence is that the action that the tutor has purported to commence in the name of the disabled person should be struck out. 166 Mr Sneddon's written submissions on the appeal included a submission: "His Honour was also incorrect in his conclusions … including that 'While I do not consider the question of requirement for a tutor can be argued in substantive proceedings, no argument was addressed to this during the hearing' … as this was argued on 11 June 2008 at his Honour's request …" (original emphasis) 167 His written submissions both in chief and in reply incorporated by reference the written submissions he had made to the trial judge on 11 June 2008, that were included in the appeal papers at 123-126 of the Black Appeal Book. 168 Mr Sneddon's oral argument before the Court included: "What Bowen stands for, we submit, is … the opposite which his Honour held because Bowen stands for the proposition is that if the ordinary rule under Richmond is you challenge it before final suit. No question about that. But if it goes to final suit without objection of the tutor, then it doesn't lie in the tutor's mouth to complain that it can't be raised at the final hearing. … If they wanted to they [the Respondent] could have applied to have that part, para 3, of the defence struck out under Richmond . They were at liberty to do that. They didn't do that. What the High Court was saying, we submit, in Bowen is that if it gets to a final hearing and if it [is] appropriate to dealt with it there, then it doesn't lie in the tutor's mouth to complain. That's what I set out at black 123-126." 169 My understanding of Mr Sneddon's submission was that he complained not only that the explicit reasoning of the judge contained an error in the way in which it dealt with the question of challenge to retainer, but also that the judge had omitted to deal with the substance of the challenge to retainer when it had been adequately raised before him. I set out the substance of his submission, as I understood it, in the first sentence of para [83] above. Orders 170 I propose that the appeal be dismissed with costs. It is also desirable to make orders to deal with the interlocutory regime that was established by orders of Allsop P made 7 July 2008. Those orders included: "The Orders of his Honour Mr Justice Windeyer made on 25th June 2008 in relation to his Honour's Reasons for Decision pronounced on 19th June 2008, save for Orders 4 and 5, be stayed pending the outcome of this Appeal." 171 Allsop P also made an order restraining the defendant until further order from dealing in any way with the Newport land or any interest therein. 172 While the making of final orders in this appeal will bring the stay to an end, it is appropriate for the sake of clarity for the order of the Court to include a note to that effect. As well, the injunction needs to be modified to enable effect to be given to this decision. Thus, the orders I propose are: (1) Appeal dismissed with costs. (2) Note that the stay ordered by Allsop P on 7 July 2008 concerning orders below in the present proceedings ceases upon the making of these orders. (3) Vary order 2 made by Allsop P on 7 July 2008 to read: Order that the Appellant by herself, her servants and agents or otherwise be restrained from selling, mortgaging, leasing or otherwise dealing in any way with the land comprised in folio 33/381014 and known as 26 Ocean Avenue, Newport, New South Wales or any interest therein, save for the purpose of carrying out orders 3 and 6 made by Windeyer J on 25 June 2008. (4) Order (3) hereof be dissolved upon compliance by the Appellant with orders 3 and 6 made by Windeyer J on 25 June 2008. 173 MACFARLAN JA: I agree with Campbell JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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