Yerkovich v James [2024] QCA 159 (30 August 2024)

Last Updated: 30 August 2024

SUPREME COURT OF QUEENSLAND

CITATION:	Yerkovich v James [2024] QCA 159
PARTIES:	EILEEN ALICE YERKOVICH by her litigation guardian MELISSA MARIA JOY (appellant) v GINA KAARA JAMES (respondent)
FILE NO/S:	Appeal No 2535 of 2024 SC No 5670 of 2020
DIVISION:	Court of Appeal
PROCEEDING:	General Civil Appeal
ORIGINATING COURT:	Supreme Court at Brisbane – [2024] QSC 14 (Brown J)
DELIVERED ON:	30 August 2024
DELIVERED AT:	Brisbane
HEARING DATE:	23 July 2024
JUDGES:	Bond and Dalton JJA and Hindman J
ORDER:	Appeal dismissed with costs.
CATCHWORDS:	PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – JUDGMENTS AND ORDERS –AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS – ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER – where the respondent obtained default judgment against the appellant –where the appellant applied to set aside a default judgment – where the appellant argued that service was ineffective since the appellant was a person of impaired capacity – where the primary judge dismissed that application – where the appellant appealed on several grounds – whether the primary judge miscarried in finding that the appellant was not an impaired person Supreme Court of Queensland Act 1991 (Qld), sch 5 Uniform Civil Procedure Rules 1999 (Qld), r 290 Aziz v Prestige Property Services Pty Ltd [2007] QSC 265, considered Gibbons v Wright (1954) 91 CLR 423; [1954] HCA 17, considered Palmer v The Chief Executive, Queensland Corrective Services Commission [2009] QCA 296, cited
COUNSEL:	M T de Waard for the appellant P A Travis for the respondent
SOLICITORS:	Kelly Legal for the appellant Axia Litigation Lawyers for the respondent

[1] BOND JA: I agree with the reasons for judgment of Hindman J and the order proposed by her Honour.
[2] DALTON JA: I agree with the order proposed by Hindman J and with her reasons.
[3] HINDMAN J:

Issue in the appeal

[4] The appeal concerns whether the appellant was an impaired person within the meaning of r 109 of the Uniform Civil Procedure Rules 1999 (Qld) (‘UCPR’) on 15 May 2021 when the appellant was personally served with a proceeding filed by the respondent against the appellant in the Supreme Court of Queensland (in respect of which default judgment was eventually entered in favour of the respondent).
[5] Rule 109 of the UCPR provides:

“A document required to be served personally on a person with impaired capacity (the "impaired person") must be served instead on-

(a) the person who is the impaired person’s litigation guardian for the proceeding to which the document relates; or
(b) if there is no-one under paragraph (a) - a person who is entitled under rule 94(2) to be the impaired person’s litigation guardian for the proceeding to which the document relates; or
(c) if there is no-one under paragraph (a) or (b) - an adult who has the care of the impaired person.”

[6] The starting position is that at common law adults are assumed presumed to have capacity.^[1] That proposition is not in doubt.
[7] Schedule 5 of the Supreme Court of Queensland Act 1991 (Qld) provides that a person will have impaired capacity when they are, relevantly:

“...not capable of making the decisions required of a litigant for conducting proceedings ...”

[8] The underlying policy behind r 109 of the UCPR is plain. It would be unfair to allow service of a proceeding on a person not capable of making the decisions required of a litigant for conducting the proceeding. In the context of being served with a proceeding that would require timely decisions to be made by the served person such as:

(a) if legal representatives are to be engaged;
(b) if the proceeding is to be defended;
(c) the content of any defence to be pleaded.

Background

[9] The respondent, who resides in Australia, is the appellant’s adult daughter. The appellant resides in New Zealand and is an elderly person.
[10] In 1998 the appellant and respondent became the joint owners of residential property situated at Maleny. The respondent thereafter lived at the property (at least from time to time). The precise arrangements about the purchase of the property and the living arrangements are contentious between the parties.
[11] In 2011 the joint tenancy was severed and the respondent transferred her interest in the property to the appellant. The respondent continued to live at the property (at least from time to time). Again, the precise circumstances and arrangements about the transfer of the property and the ongoing living arrangements are contentious between the parties.
[12] In 2015 the respondent was requested by the appellant to vacate the property. The respondent did not vacate.
[13] On 18 March 2020 the respondent lodged a caveat over the property on the basis of an implied, resulting or constructive trust, and claimed a half interest in the property. There appears to have been a letter issued by the respondent’s solicitors to the appellant on 23 March 2020.^[2] It can be inferred that letter gave notice of the lodged caveat to the appellant.
[14] The appellant instructed solicitors practising in Queensland and disputed the respondent’s grounds of claim to an interest in the property. The appellant’s solicitors commenced corresponding with the respondent’s solicitors from 13 May 2020 when notice was given to commence proceedings to support the caveat.^[3] A second such notice was given on 19 May 2020.^[4] If such proceedings were not commenced within a specified time, the caveat would lapse.
[15] On the same day (19 May 2020), the appellant’s solicitors served a notice on the respondent requiring her to vacate the property.^[5] Reference was made to an earlier eviction notice in 2015.
[16] On 20 May 2020 the respondent’s solicitors wrote to the appellant’s solicitors stating, inter alia:

“We acknowledge that your client disputes the grounds of the claim however note that this appears to be based on instructions “on behalf” of your client. We are instructed that since last year, at the latest, your client appeared to be suffering a significant diminution in mental capacity and the fact that you appear to have no direct instructions from your client tends to support that diminution of capacity. We consequently query the basis of your assertion that the Caveat lodged by our client was improper and await your response.”

[17] On 21 May 2020 the appellant’s solicitors replied in these terms, inter alia:^[6]

“We have also received another letter from you dated 20th May 2020, in which you have made further suppositions about the capacity of Ms Yerkovich based on the wording of a letter which we wrote to your office. It would seem that you are content to rely on assumptions and suppositions based on scant details that could not meet any reasonable standard of evidence in order to draw into question a transaction which, on our instructions, your client entered into freely of her own volition without influence of any kind where the transfer of your client’s interest in the property was prompted solely because of the conduct of your client, in circumstances where your client received valuable consideration as explained hereunder.”

[18] That letter went on to demand that the respondent withdraw the caveat.
[19] On 27 May 2020 the respondent commenced the proceeding in the Supreme Court of Queensland.^[7]
[20] Correspondence between the two firms of solicitors, including without prejudice correspondence, ensued.^[8] In correspondence from the respondent’s solicitors dated 2 November 2020 express reference was made to the respondent having commenced the proceeding.^[9] There is no evidence that a copy of the filed proceeding was provided to the appellant’s solicitors. There was some suggestion that the respondent was going to amend the proceeding to include additional parties.
[21] Unrelated to the proceeding but at about the same time, two things were occurring in relation to the appellant. First, she was engaging with various medical practitioners in relation, primarily, to her continuing to drive. Second, the appellant’s now litigation guardian Ms Joy, who is the appellant’s granddaughter,^[10] was growing concerned about the appellant continuing to manage her own affairs.
[22] A consultation with a doctor (Dr Gane) about the appellant driving appears to have taken place on 5 June 2020.^[11] On the same day a Montreal Cognitive Assessment (MoCA) was carried out on the appellant with a score of 17/30 (normal is 26 or above).^[12] That needs to be considered in the context though of an earlier like assessment on 6 September 2017 of 19/30.^[13] Dr Gane determined an eye test should be carried out and a referral to an optometrist was made.
[23] The appellant attended at the optometrist appointment on 11 June 2020, apparently with no idea as to why Dr Gane had sent her there. Matters associated with driving ability were assessed.^[14]
[24] Dr Gane upon receiving the optometrist’s report on 12 June 2020 was concerned that the appellant did not know why she was attending at the optometrist. A referral to a geriatrician was made.^[15] The geriatrician’s report was dated 14 September 2020.^[16] He also carried out a MoCA, with a result of 19/30 (and apparently adjusted the prior score from 5 June 2020 to 18/30 on account of plus one for the appellant having less than 12 years of schooling). Other matters noted by the geriatrician included that:

“[The appellant] has had memory loss for uncertain duration. Her partner Laurie told me that this has been quite some time but is not significant. Reportedly there is no executive dysfunction, which include finances, appointments, and planning.

...

Upon being told that she should not be driving she reported that she has never been told about this, and uncertain as to why this has to be taken away.”

[25] The geriatrician noted cognitive impairment of the appellant and was to organise a CT scan of the appellant’s brain.^[17]
[26] Ms Joy made an application on 4 December 2020 to the New Zealand Family Court to be appointed the appellant’s property manager and welfare guardian. She set out the reasons she did so in an affidavit sworn 15 August 2023 in the proceeding. In that affidavit she set out observations made by her of the appellant over a period of years that suggested some cognitive decline in the appellant.^[18] In support of the application, Ms Joy signed various court documents lodged with the Family Court that included statements such as:

“4. Eileen Alice Yerkovich is 80 years old. She suffers from irreversible dementia and is unable to make appropriate decisions and judgements about all aspects of her health, care, property and welfare. She requires constant care to protect her from physical danger and to assist her in her daily needs.

She is easily confused and very forgetful.
She is not competent to manage her own affairs ad cannot understand and foresee the consequences of decisions relating to her own personal care, welfare and property due to her irreversible dementia.”^[19]

[27] It appears Ms Joy was aware of the proceeding at the time of making her application, even though it had not then been served. She swore in an affidavit dated 4 December 2020 in support of her application that:

“[The respondent] is bitterly estranged from [the appellant]. She is living in Australia and I do not have her contact details. She is embroiled in court proceedings in Queensland against [the appellant] over a property which [the appellant] owns.”^[20]

[28] The report of a registered medical practitioner supporting Ms Joy’s application was provided by Dr Elliott, dated 8 November 2020 (prior to the application being filed). Dr Elliott was a family practitioner at the medical centre the appellant usually attended. He saw her once only, on 2 October 2020, an appointment of some 20-30 minutes, before providing his report. That report indicated that the appellant had a total and permanent lack of competence to manage her own affairs in relation to property, personal care and welfare.^[21] It indicated that the appellant suffered from a cognitive defect,^[22] and that if a solicitor were appointed to explain the nature of Ms Joy’s application for appointment of a property manager and welfare guardian that the appellant would not be able to understand the advice and would not understand the purpose of Ms Joy’s application.^[23]
[29] The relevant Family Court determining Ms Joy’s application appointed a lawyer highly experienced in such matters for the appellant (Ms Jones) who reported in a report dated 12 February 2021, after having met the appellant, that in her submission “there is no evidence of behaviours that would indicate the level of lack of competence under the Act”.^[24] She recorded her observations of the appellant. She considered that the appellant had capacity and could care for herself and conduct her business. However, she did recommended more testing of the appellant be undertaken.^[25] She reported having spoken to the reporting doctor (Dr Elliott) and said that his concerns primarily related to the appellant driving. She reported that the appellant herself was strongly opposed to Ms Joy’s application and considered herself competent to manage her own affairs.
[30] Ms Joy’s application was subsequently withdrawn on 23 February 2021.^[26] A further like application was not made until a much later date – 15 September 2022.^[27]
[31] By correspondence dated 30 April 2021 the respondent’s solicitors asked the appellant’s solicitors if they had instructions to accept service of the proceeding, failing which personal service of the proceeding on the appellant would be effected.^[28]
[32] By correspondence dated 7 May 2021 in reply the appellant’s solicitors wrote, inter alia:^[29]

“Please note that Kelly Legal has not been retained by Mrs Eileen Yerkovich for the purposes of defending or otherwise responding to the litigation commenced by your client in this matter.

We therefore do not hold current instructions to otherwise respond to your letters.”

[33] No indication was given in any of the appellant’s solicitors’ correspondence about concerns held as to the appellant’s capacity, or that they were acting on instructions from any person other than the appellant.
[34] On 15 May 2021 the appellant was personally served with the proceeding in New Zealand.
[35] The proceeding was not defended. Default judgment was obtained by the respondent before Justice Applegarth on 12 November 2021.^[30] Orders were made, including for the appointment of statutory trustees to sell the property. Stays of the appointment orders were made, presumedly to permit the parties to reach some other agreement before the statutory trustees acted.^[31] No other agreement was reached and the property was sold by the statutory trustees, and proceeds distributed around January 2023.
[36] Not until 21 July 2023 did the appellant, through her litigation guardian,^[32] advise she intended to seek to set aside the default judgment.
[37] The appellant filed an application, determined by the learned primary judge on 9 February 2024, to have the default judgment and orders of Justice Applegarth set aside on the basis, inter alia, that the default judgment was irregularly entered because the appellant was an impaired person and service had not been effected on the appellant in accordance with r 109 of the UCPR. That is the decision the subject of the appeal.

When is a person of impaired capacity

[38] The respondent contends that the learned primary judge properly identified the test to be applied as to whether a person is an impaired person for the purposes of r 109 of the UCPR as whether the person has capacity to understand the nature of the transaction (in this case, service of a proceeding) when it is explained to the person.
[39] The respondent says that test arises from cases such as Aziz v Prestige Property Services Pty Ltd^[33] and Gibbons v Wright^[34] in which cases references were made to the capacity of a person to understand the nature and effect of the transaction when it is explained to the person.
[40] Whilst the learned primary judge did at [47] state the following (emphasis added):

“While [the appellant’s] short term memory was shown in the MoCA to be a deficit, that does not, as Professor Morris stated in cross-examination necessarily lead to a conclusion that with prompting she would not have been able to understand matters and communicate in that regard. Thus, in relation to the Statement of Claim, not remembering it had been served does not necessarily mean that upon being reminded of it and its content Ms Yerkovich may not have been able to comprehend and give instructions in relation to it.”

I do not consider that she was in fact propounding the test to be applied in the terms that the respondent submits. But if she was, she was in error.

[41] The references to “when it is explained to the person” in the cases mentioned are no more than case specific applications of a more generally expressed principle.
[42] The generally expressed principle is found in Gibbons v Wright at 437 where the Court held (emphasis added):

“The learned Chief Justice was clearly right in treating the validity of the instruments in suit as depending upon the possession by Ethel Rose Gibbons and Olinda Gibbons of a degree of understanding relative to the nature of that which they were doing. The law does not prescribe any fixed standard of sanity as requisite for the validity of all transactions. It requires, in relation to each particular matter or piece of business transacted, that each party shall have such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation.”

[43] In this case the express words of Schedule 5 of the Supreme Court of Queensland Act 1991 (Qld) do in fact prescribe a fixed standard of sanity as requisite for personal service on a person to be permitted. A person will have impaired capacity (for the purpose of service of proceedings) when they are not capable of making the decisions required of a litigant for conducting proceedings. That will at least include the matters mentioned at [5] above. A person will not be capable of making such decisions if they do not recall that they have been served with proceedings.
[44] No gloss on the express words in Schedule 5 of the Supreme Court of Queensland Act 1991 (Qld) is required. Whether a person is “capable” in the terms prescribed is to be assessed by reference to the facts as found, not on some possibly false basis that the person has the benefit of external assistance at or about the time of service they do not in fact have.
[45] In some cases (not dealing with service of proceedings but the entering into of certain transactions) on the actual facts, where a competent person has been able to assist the relevant person in an appropriate way, the relevant person might in fact have capacity to make a particular decision.
[46] But in the hypothetical case of a person who has no short term memory ability, who will forget having been served with a proceeding immediately upon putting the document down, it simply cannot be that the person has capacity because if a competent person had been assisting the relevant person at the time of service, they could have assisted the relevant person to respond appropriately to the service of the proceeding. That would be an entirely unreasonable construction of impaired person for the purposes of r 109 of the UCPR and is not supported by the generally expressed principle set out above or the express words in in Schedule 5 of the Supreme Court of Queensland Act 1991 (Qld).
[47] The reasoning in Aziz v Prestige Property Services Pty Ltd is properly applied to this case by way of analogy only. That case concerned whether a potentially impaired person understood the effect of a decision to enter into a transaction, here the case concerns whether a potentially impaired person understood the need, and was in fact able, to take steps to engage in the proceeding, including to avoid default judgment, after service of the proceeding on her.

Was the appellant an impaired person

[48] Whether the learned primary judge erred or not in the principle to be applied, what she was required to do, and as a matter of substance did do, is look to the evidence available to determine whether it persuaded her that in fact at about the time of the service of the proceeding (15 May 2021) the appellant was not capable of dealing with the proceeding. The onus was on the appellant to so persuade the learned primary judge.
[49] The appellant does not contend that relevant matters were ignored by the learned primary judge, that irrelevant matters were considered, that relevant factors were not given appropriate weight, etc. No factual findings of the learned primary judge are challenged. Instead, the submission appears to be that the weight of the evidence favoured the conclusion that the learned primary judge should have been persuaded that the appellant was an impaired person.
[50] The parties to the appeal agree that the learned primary judge, despite having heard oral evidence from witnesses, was in no better position than this Court to assess the evidence. I agree. Accordingly, as required, I will conduct a “real review” of the evidence given at first instance and of the learned primary judge's reasons for judgment to determine whether I am satisfied that the learned primary judge erred in concluding that the appellant was not an impaired person.
[51] The learned primary judge accepted that at the time of service the appellant was suffering from short term memory loss and a level of cognitive impairment. I agree. The learned primary judge said that was not sufficient of itself to conclude that the appellant was an impaired person for the purposes of the UCPR. I agree. I do not accept the appellant’s submission that a person with short term memory loss is incapable of having the relevant capacity. The situation is more nuanced.
[52] Professor Morris’ evidence, and the learned primary judge, appreciated that nuance, recognising that some difficulties, even many difficulties, experienced by a person do not necessarily lead to a conclusion of the person being an impaired person for the purposes of r 109 of the UCPR. There is no error in the learned primary judge giving weight to Professor Morris’ evidence. I likewise give it significant weight; although it was a retrospective desktop analysis, Professor Morris had strong expertise and conducted a thorough review of available materials.
[53] Not only do I not see any error in the learned primary judge’s reasons, I would reach the same conclusion myself. I am not persuaded on the available evidence that about the time of service, the appellant was an impaired person within the meaning of r 109 of the UCPR.
[54] There is no doubt that there are several pieces of evidence leading up to personal service being effected on the appellant that would cause reasonable speculation as to whether the appellant was an impaired person about the time of service. See at [19] to [24] above. Insofar as the evidence is at times prior to the date of service, I would have no hesitation in inferring that over time the appellant’s capacity is likely to have diminished. That inference is supported by the fact that the appellant has further deteriorated and now has a litigation guardian acting for her.
[55] But there is evidence pointing the other way, supporting that the appellant did have the required capacity at the relevant time - see at [21] (comments of partner), [26] – [30] above. There is also the evidence of Professor Morris. I think it is particularly telling that:

(a) the appellant, via her solicitors, at the very least by November 2020, knew that the proceeding had been filed;
(b) that knowledge appears to have been communicated to Ms Joy;
(c) there was no suggestion by the appellant’s solicitors that they were instructed by any person other than the appellant – note in particular the detailed matters set out in the appellant’s solicitor’s correspondence of 21 May 2020 in response to the respondent’s claim;^[35]
(d) no person from the appellant’s solicitors gave evidence that supported that the appellant lacked capacity at relevant times – capacity is an issue about which solicitors generally will be very cognisant;
(e) when the respondent’s solicitors asked the appellant’s solicitors if they had instructions to accept service of the proceeding, the response was not that they no longer acted for the appellant at all, or that the appellant did not have capacity and so could not provide instructions, it was in the terms set out at [32] above.

[56] In my view there was insufficient evidence from which it could be concluded on the balance of probabilities that the appellant upon being served with the proceeding was in fact not capable of dealing with it (which would also require her to recall being served). Such evidence could have come from further lay or expert witnesses (or a combination of both) – the appellant’s solicitors may have been able to give relevant evidence. Further evidence going to the appellant’s more likely than not lack of ability to recall being served with a proceeding, or being able to make decisions in that regard was required if the appellant was to satisfy the onus on her.
[57] Nor do I consider that the appellant’s failure to defend the proceeding can be inferred to be a consequence of the appellant’s impaired capacity. It is equally consistent with the real possibility that the appellant did not wish to engage in litigation against her daughter and was content in the circumstances of the proceeding having been commenced, to have ownership of the property revert to how it had originally been purchased – noting the terms in which the appellant’s solicitors had communicated at [29] above.
[58] The ground of appeal is not made out.

Disposition of the appeal

[59] I would order that the appeal be dismissed with costs.

^[1] Palmer v The Chief Executive, Queensland Corrective Services Commission [2009] QCA 296 per Keane JA, with whom Muir and Chesterman JJA agreed.

^[2] Referred to in ARB 297.

^[3] ARB 288.

^[4] ARB 290.

^[5] ARB 292-293.

^[6] ARB 267.

^[7] BS5670/20.

^[8] See paragraphs 15-17, ARB 268.

^[9] ARB 315.

^[10] Daughter of the respondent’s sister. Ms Joy is resident in New Zealand.

^[11] ARB 633.

^[12] ARB 632.

^[13] ARB 631.

^[14] ARB 635.

^[15] ARB 636.

^[16] ARB 637.

^[17] The result of the CT scan was noted by Dr Elliott as being normal.

^[18] Affidavit commencing at ARB 165; note particularly paragraphs 11-21.

^[19] Application for property order – ARB 400. See to like effect the affidavit of Ms Joy at ARB 407.

^[20] ARB 409.

^[21] ARB 178-180.

^[22] ARB 413.

^[23] ARB 414.

^[24] The relevant test under that Act is different to that relevant here.

^[25] ARB 181-182.

^[26] ARB 442.

^[27] ARB 444 and 447.

^[28] ARB 318.

^[29] ARB 320.

^[30] ARB 57.

^[31] ARB 58 (paragraph 11), ARB 59, ARB 60.

^[32] Having been permanently appointed in February 2023 (and temporarily before then).

^[33] [2007] QSC 265 (Lyons J) (‘Aziz v Prestige Property Services Pty Ltd’).

^[34] [1954] HCA 17; (1954) 91 CLR 423 (Dixon CJ, Kitto and Taylor JJ) (‘Gibbons v Wright’).

^[35] ARB 297.

Subsequent Judicial Consideration0