Written by Recently the NSW Court of Appeal dealt with a complicated family matter relating to the transfer of properties. In Turner v O’Bryan-Turner [2022] NSWCA 23 Mr John Turner was married to Wendy Turner, and they had two children. John also had two children from a previous marriage. John had dementia and had lost capacity, and Wendy had cancer with a prognosis of 6 months to live.
In 2016, in her capacity as John’s power of attorney, Wendy transferred three of John’s properties to herself and one of her sons as tenants in common in equal shares. She also made a will leaving her shares in those three properties to her other son. Then she transferred three other properties to herself and her two sons as joint tenants.
In 2018, John’s son from the previous marriage, Nick, commenced proceedings on behalf of John seeking relief in relation to the transfer of the properties.
They argued that Wendy and her and John’s two sons held their interests in the properties on constructive trust for John on the basis that they had received the interests in the properties in breach of Wendy’s fiduciary duty, and that they had assisted ‘with knowledge in a dishonest and fraudulent design’ on Wendy’s part.
Wendy and John’s sons relied upon s 42 of the Real Property Act 1900 as providing them with indefeasible title to their interests in the properties transferred to them. However, Nick (on behalf of John) argued that the in personam exception to indefeasibility applied because they were liable as third parties.
The Court held that Wendy had breached her fiduciary duty as trustee of John’s properties, and was liable to pay equitable compensation to John for the value of the properties that she transferred to herself and her sons in breach of her fiduciary duty to John.
Regarding the two sons of Wendy and John, the court held that the in personam exception to indefeasibility does not extend to proprietary claims made against alleged wrongdoers accused of having knowingly received trust property, but it does extend to wrongdoers who knowingly assist in a breach of trust. However, the court found that the two sons did not have the requisite ‘knowledge’ that the properties were transferred in breach of Wendy’s duty as John’s attorney, as their mother had told them she was acting in accordance with his will. The sons were thus not personally liable.