Supreme Court New South Wales Medium Neutral Citation: Power v Power [2011] NSWSC 288 Hearing dates: 25 March 2011 Decision date: 14 April 2011 Before: Gzell J Decision: Exception to ademption for unauthorised act of agent applied. Devise did not adeem and could be traced into proceeds of sale. Catchwords: SUCCESSION - Wills, Probate and Administration - Construction and Effect of Testamentary Dispositions - devise of half interest in property - interest sold under power of attorney in lifetime of deceased - power of attorney subject to condition or limitation that could only be used upon treating medical practitioner certifying that deceased was no longer physically or mentally able to sign documents or look after her own affairs - whether letter that deceased may not be so capable sufficient - whether an exemption to the principle of ademption applied - whether acquiescence Legislation Cited: Powers of Attorney Act 2003 Conveyancing Act 1919 Cases Cited: Brown v Heffer [1967] HCA 40; (1967) 116 CLR 344 Earl of Shaftsbury v Countess of Shaftsbury [1716] 2 Vern 747 [23 ER 1089] Basan v Brandon [1836] 8 Sim 171 [59 ER 68] Oakes v Oakes [1852] 9 Hare 666 [68 ER 680] Jenkins v Jones (1866) LR 2 Eq 323 In re Slater (1907) 1 Ch 665 Re Viertel [1996] QSC 66; [1997] 1 Qd R 110 Johnston v Maclarn [2001] NSWSC 932 Johnston v Maclarn [2002] NSWSC 97 In re Hartigan; ex parte the Public Trustee (Supreme Court of Western Australia, Parker J, 9 December 1997, unreported) Mulhall v Kelly [2006] VSC 407 Ensor v Frisby [2009] QSC 268 Orr v Slender; Estate of Godfrey Raymond Orr [2005] NSWSC 1175; (2005) 64 NSWLR 671 Christensen v McKnight (Supreme Court of New South Wales, Hodgson J, 2 March 1995, unreported) Banks v National Westminster Bank plc [2005] EWHC 3479 (Ch) Ramsden v Dyson (1866) LR 1 HL 129 Texts Cited: Roper on Legacies, 4th ed (1847), William Benning & Co, Law Booksellers, Vol 1 Meagher, Gummow & Lehane's Equity Doctrines and Remedies, 4th ed (2002) Butterworths LexisNexis Category: Principal judgment Parties: Martin John Power (Plaintiff) Stephanie Christine Power (First Defendant) George Weir (Second Defendant) Representation: Counsel: RD Wilson (Plaintiff) M Gorrick (First Defendant) DM Flaherty (Second Defendant) Solicitors: Pritchard Law Group (Plaintiff) L Rundle & Co (First Defendant) Grahams Solicitors (Second Defendant) File Number(s): 2010/310498 Judgment 1Judith Christina Weir died on 6 December 2008. She executed her last will on 23 September 2003 naming the plaintiff, Martin John Power, her son-in-law, as executor and probate was granted to him. 2The will contained a specific devise of the deceased's half interest in a property at Wollongbar to her daughter, the first defendant, Stephanie Christine Power, the wife of the plaintiff. The residue of her estate the deceased gave to such of her grandchildren, George Weir, the second defendant, Thomas Weir, Patrick Weir and Melissa Power, as survived her and attained the age of 18 years as tenants in common in equal shares. 3On 20 June 2002, the deceased granted an enduring power of attorney to her son Andrew Michael Weir. 4The Wollongbar property had been held by the deceased and her husband as joint tenants but he severed the joint tenancy and predeceased her. 5On 27 July 2006, Ian Perkins as executor of the estate of the deceased's husband and Andrew Weir, pursuant to the power of attorney, executed a transfer of the Wollongbar property that was registered on 10 August 2006. 6Mr and Mrs Power were concerned that the transfer might adeem the specific devise of the deceased's interest in the Wollongbar property to Mrs Power but they did nothing to stop the transfer. Mrs Power said that she left all affairs of her mother in the hands of her older brother, Mr Weir. 7The power of attorney contained a condition or limitation in these terms: "This Power of Attorney shall only be used upon my treating Medical Practitioner certifying that I am no longer physically or mentally able to sign documents or look after my own affairs." 8Mr Weir took no legal advice before acting under the power of attorney. He spoke by telephone to Centrelink and the Department of Veterans' Affairs. He obtained a letter from his mother's treating medical practitioner, Dr Chiu, dated 27 January 2006 in the following terms: "I am the attending Doctor for this lady who resides in a nursing home. Over the last twelve months, we have noticed significant deterioration in her mental state and recent testing show [sic] that she is suffering from significant dementia. She has reached the stage which I feel that she may not be capable of looking after her own affairs." 9But on 1 July 2010, Dr Chiu wrote to Mr Power's solicitors in which he said: "Pertinent to your question with regard to Mrs Weir's soundness of mind in January 2006, I can only therefore refer you to the letter that I have provided for the family. I do remain of the opinion that around the date of the 27 January 2006, I considered that Mrs Weir may not be capable of managing her own affairs. Please do note my conditional wording of 'may not'. This refers to her mental state at that time. As far as whether it translates to her ability to sign documents or look after her own affairs as of January 2006, I am not able to comment without the necessary document [sic] to enable me to support or deny that probability. Suffice to say however, Mrs Weir has been observed to continually decline over the ensuing two [sic] years." 10Earlier in the letter Dr Chiu said he had been unable to access medical records held by Maranoa Nursing Home where Mrs Weir lived. 11The evidence as to the deceased's mental capacity as at 27 July 2006 when the Wollongbar property was sold is confused. In addition to Dr Chiu's letters the deceased scored 8 out of 30 on a mini mental state examination on 20 December 2005. On the other hand, she scored 21 out of 30 on 9 October 2006. 12Mr Power last saw the deceased in April 2006. She recognised him and knew that she was living in care but she did not understand matters of a conceptual nature such as his statement: "If they sell the house, it means that Stephanie won't get anything under your Will". The deceased said on a number of occasions: "We'll sue". She also said repeatedly: "That's not right". She repeated questions such as: "What about Melissa? How is she doing?". To which she received an explanation but would ask the question again some 20 minutes later. Her conversations were very disjointed. She would talk about a subject for a short time and then start talking about another subject. 13On the other hand, Mr Weir said that his mother discussed "her house" and "her things" with him. She asked for a valuation of the property, which Mr Weir spoke with his mother about on 4 March 2006. He told her that the house was valued between $400,000 and $430,000. She asked how much they paid for it and was told about $250,000. She said: "That's not a bad profit ... we need to sell it ... you and Lyn can't look after two houses ... Lyn has too much to do." 14Mr Weir said the property was listed for sale and an offer was received which he discussed with his mother. She asked how much and he said $420,000. She said how much did we pay for it. He said about $250,000. So it is about a $170,000 profit to which his mother said: "Well done. Did you accept it quick?" to which Mr Weir responded: "not until I talked to you about it" and the deceased responded: "Too right. Well do it quick and make sure the money goes into my bank account." 15For reasons which appear later in this judgment I do not have to decide whether on 27 July 2006 the deceased lacked the capacity to understand and approve the sale of the Wollongbar property. If I had to decide that issue I would not have found that the deceased lacked that ability. Not only was there the evidence of Mr Weir as to his conversations with the deceased about the sale of the property, and evidence that the deceased joined with him to sign documents to purchase a motor vehicle in January 2008, but also it was put to Mr Weir by counsel for Mrs Power that he had no reservations about the deceased's understanding of the sale price and purchase price of the property. He agreed. 16The Powers of Attorney Act 2003 commenced on 16 February 2004. Generally, it does not apply to powers of attorney executed before its commencement. But s 6(3) continues the operation of Part 16 of the Conveyancing Act 1919. It includes s 163B which was in the following terms: "(1) Subject to this section, an instrument (whether or not under seal) in or to the effect of the form in Schedule 7 confers on the attorney thereby appointed authority to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do. (2) The authority conferred by an instrument referred to in subsection (1) does not include: (a) authority to exercise or perform any power, authority, duty or function as a trustee conferred or imposed on the person executing the instrument, or (b) unless it is expressly conferred by the inst rument-authority to execute an assurance or other document, or do any other act, as a result of which a benefit would be conferred on the attorney appointed by the instrument. (3) Where an instrument referred to in subsection (1) specifies any conditions or limitations to which the authority conferred by the instrument is to be subject, the authority is so conferred subject to compliance with those conditions or limitations." 17The power of attorney granted to Mr Weir was in the form of Sch 7. In terms of the Conveyancing Act , s 163B(3) authority under the power of attorney was conferred subject to compliance with the condition or limitation that it was not to be used unless the deceased's treating medical practitioner gave a certificate that the deceased was no longer able to sign documents or look after her own affairs. 18The purpose of that condition or limitation was to protect the deceased from an invasion of her freedom to look after her own affairs until her doctor certified that she was no longer able to do so. The statutory purpose of s 163B(3) of the Conveyancing Act is to allow the donor of a power of attorney to limit its use. Consistent with that purpose, I am of the view that there must be strict compliance with the condition or limitation. If that were not the case, any medical opinion that the deceased was suffering dementia, it was getting worse and maybe she lacked the mental capacity to sign documents or look after her own affairs would suffice. That is what, in effect, Dr Chiu said in his first letter: "maybe" she was not capable of looking after her own affairs. 19The condition or limitation did not require a medical opinion. It required certification. The formality associated with that requirement added to the protection of the deceased that the power of attorney would not be used prematurely. 20In my judgment, Mr Weir had no authority to act under the power of attorney to sell the Wollongbar property as there had not been compliance with the condition or limitation to which its authority was subject. 21The Powers of Attorney Act contains a provision with respect to the effect of ademptions of testamentary gifts by attorneys under enduring powers of attorney. But that provision does not apply to a power of attorney granted before 16 February 2004. The question whether or not the specific devise of the interest in the Wollongbar property adeemed is thus governed by consideration of the general law of ademption. 22In Brown v Heffer [1967] HCA 40; (1967) 116 CLR 344 at [5]; 348 the High Court said that ademption of a specific gift by will occurs where the property the subject of the gift is at the testator's death no longer his to dispose of. An ademption occurs also where the property has been so dealt with that by the rules of equity it must be considered at the death as having been converted into other property. 23But there are exceptions. In Earl of Shaftsbury v Countess of Shaftsbury [1716] 2 Vern 747 [23 ER 1089] the deceased devised all his household goods and furniture that should be in his house at Ryegate on his death to his wife. The Earl went to sea and appointed his steward to do as he thought fit. He got the landlord of the house to accept a surrender of the lease and he removed the goods to another house. He wrote an account to the Earl who approved it. It was held that the bequest adeemed and did not pass to the Countess. 24The court declared, however: "that if the goods had been removed by fraud or practice, on purpose to disappoint the legacy, or by a tortious act, unknown to the testator, that might have entitled her to relief." 25Thus, in Basan v Brandon [1836] 8 Sim 171 [59 ER 68] where an agent disposed of the property the subject of a bequest outside the terms of his authority and without the knowledge of the testator, it was held that the gift had not adeemed and could be traced into the reinvestment. 26There is no ademption if the thing that is given is still in the estate in substance although changed in name and form ( Oakes v Oakes [1852] 9 Hare 666 [68 ER 680]. 27An exception was recognised in Jenkins v Jones (1866) LR 2 Eq 323. A testator bequeathed his farming stock in his possession at his death. The specific legatee was the son of the testator and his executor. His mother was the executrix. Together they gave up possession of the farm, sold the farming stock and deposited the net proceeds in a bank fund where it remained until the death of the testator. Sir J Stuart VC said of the exception to ademption at 328: "But quite another consideration arises, where, after the testator has given a specific thing, and without his knowledge, perhaps against his wishes, or tortiously, another person has sold it or has done enough to wholly alter its character." 28In In re Slater (1907) 1 Ch 665 at 671 Cozens- Hardy MR said that the law then was that where a change occurred in the nature of the property, ademption would follow unless the case could be brought within the principle of Oakes . 29Thomas J in Re Viertel [1996] QSC 66; [1997] 1 Qd R 110 at 111 posed the question whether or not an ademption was effected when a sale was lawfully made by an attorney who was ignorant of the terms of the will when the testatrix was likewise ignorant of the action of the attorney and when the intention of the testatrix to benefit the devisee never altered. His Honour, after a thorough consideration of the authorities, answered the question on the basis that there was no ademption. 30In Johnston v Maclarn [2001] NSWSC 932, Young CJ in Eq referred to Roper on Legacies , 4 th ed (1847), William Benning & Co, Law Booksellers, Vol 1 at 333-334 where four exceptions to the general rule of ademption are mentioned. His Honour approved an exception where a breach of trust has been committed or any trick or device practised with a view to defeating the legacy, citing Shaftsbury and where, without the testator's knowledge, there has been a disposal of the subject matter of the gift without the testator's authority, citing Basan . 31In Johnston v Maclarn [2002] NSWSC 97, Young CJ in Eq returned to the question of exceptions to the principle of ademption. It was noted, again, that there is an exception where it can be shown that the property ceased to be a part of the testator's estate because of the unauthorised action of an agent citing Basan. His Honour went on to refer to Jenkins and Stuart VC's statement at 328 that there was an exception where the annihilation had taken place without the testator's knowledge, even if it had occurred with implied authority. His Honour went on to say that although it was a tad difficult to reconcile the cases with principle, citing Slater , they remained good law. His Honour approved the conclusion reached by Thomas J in Viertel . 32Viertel was followed in In re Hartigan ; ex parte the Public Trustee (Supreme Court of Western Australia, Parker J, 9 December 1997, unreported); in Mulhall v Kelly [2006] VSC 407 and in Ensor v Frisby [2009] QSC 268. 33On the other hand, in Orr v Slender; Estate of Godfrey Raymond Orr [2005] NSWSC 1175; (2005) 64 NSWLR 671, Nicholas J at [18]; 675 referred only to the exception where it can be shown that the property ceased to be part of a testator's estate because of the unauthorised action of an agent or by a tortious act unknown to the testator. His Honour did not refer to Viertel although it was cited in argument but that is explicable, as the decision appears to have been determined with respect to the proper construction of s 163B of the Conveyancing Act . 34In Christensen v McKnight (Supreme Court of New South Wales, Hodgson J, 2 March 1995, unreported), the court took the view that a devise would have been adeemed but for the effect of the Protected Estates Act . His Honour said that while there were statements in Slater that might suggest that the intention of a testator is irrelevant to ademption, it is clear from the Australian cases that the intention of the deceased as disclosed by will is relevant. 35Viertel was not followed in Banks v National Westminster Bank plc [2005] EWHC 3479 (Ch) where Judge Rich QC at [29] said that he accepted Thomas J's view that Jenkins had not been overruled, but said that it was not authority for the proposition for which counsel contended. It was, he said, authority only for what was adumbrated in Shaftsbury , namely, that if the subject-matter is extinguished by fraud or by tortious acts unknown to the testator then an ademption would not follow. 36There is conflict in the authorities but the trend seems to be to recognise the further exception articulated by Thomas J in Viertel . In the end I find it unnecessary to express a concluded view on the subject because I have decided that the exception of the unauthorised act of an agent applies in this case. 37Under s 139B of the Conveyancing Act the authority bestowed upon Mr Weir by the power of attorney was subject to a certificate from Dr Chui. 38I have already found that Mr Weir had no authority to act under the power of attorney to sell the Wollongbar property as there had not been compliance with the condition or limitation to which its authority was subject. 39In the second Maclarn decision, Young CJ in Eq held at [17] that there is an exception to the principle of ademption where it can be shown that the property ceased to be a part of the testator's estate because of the unauthorised action of an agent. 40That is the position in this case. 41In my judgment there was no ademption of the specific devise to Mrs Power and the devise may be traced into the proceeds of sale of the deceased's half interest in the Wollongbar property. 42As at 15 September 2010, $185,308.63 in an account with St George Bank represented what remained of the proceeds of sale. It is the amount representing what is left of the proceeds of sale of the deceased's half share in the Wollongbar property at the date of judgment that will pass to Mrs Power in substitution for the specific devise in the deceased's will. 43It was submitted that Mrs Power had acquiesced in allowing the Wollongbar property to be sold and equity should not allow her to take the benefit of an exception to the ademption principle. 44In Meagher, Gummow & Lehane's Equity Doctrines and Remedies , 4 th ed (2002) Butterworths LexisNexis at 1043-1044 [36-090] the learned authors point out that the term "acquiescence" is used in different senses. 45It may refer to the type of estoppel of which Ramsden v Dyson (1866) LR 1 HL 129 is an example. There it was said that if a stranger begins to build on land supposing it to be his own, and the real owner, perceiving his mistake, abstains from setting him right, and leaves him to persevere in his error, a court of equity will not afterwards allow the real owner to assert his title to the land. 46That is not the situation in this case. That meaning of acquiescence does not arise here. 47Acquiescence can also apply to the action of a plaintiff over a long period of time, with full knowledge of his rights, refraining from exercising his rights in circumstances where it can properly be inferred that he had abandoned them. 48Mrs Power had no right to prevent her brother selling the Wollongbar property. She did not refrain from preventing Mr Weir selling over a long period of time and she did not have full knowledge of her rights; she mistakenly thought that the devise to her would adeem. 49The term can also be used in respect of the type of laches that involves prejudice to the defendant or to third parties. 50Again, Mrs Power did not sit by for a long period of time to the prejudice of the grandchildren of the deceased and she was not aware of her entitlement to the devise. She thought it had adeemed. 51I reject the submission that Mrs Power acquiesced in the sale of the Wollongbar property. 52I direct the parties to bring in short minutes of order reflecting my reasons. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 April 2011