Drill Investments Pty Ltd v Park
[2015] VCC 1439
•20 October 2015
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for publication |
AT MELBOURNE
COMMERCIAL DIVISION
EXPEDITED CASES LIST
Case No. CI-15-02187
| DRILL INVESTMENTS PTY LTD | Plaintiff |
| v. | |
| CHRISTOPHER JOHN PARK | Defendant |
---
JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 & 13 October 2015 | |
DATE OF JUDGMENT: | 20 October 2015 | |
CASE MAY BE CITED AS: | Drill Investments Pty Ltd v. Park | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 1439 | |
REASONS FOR JUDGMENT
---
Catchwords: Deed of settlement entered into at mediation – Husband of defendant a party to the deed – Husband assumed liabilities in relation to his wife’s obligations – No independent legal advice available to the husband – Whether the deed should be enforced against him.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Greenberger | S. Ostroburski |
| For the Defendant | In person | |
HIS HONOUR:
1Mr Park is sued for the balance of moneys owing to the plaintiff pursuant to a deed of settlement he signed as “guarantor” to resolve court proceedings by the plaintiff against his wife. The proceedings related to the default by her in paying the balance of $400,000 she had borrowed from the plaintiff which loan was partly secured by an unregistered mortgage over a residential property at Highett.
2Mr Park’s defence was that the Court should not permit the plaintiff to enforce the deed of settlement as to do so would be “unfair and unconscionable” in the circumstances, including the fact that he did not receive legal advice before he signed the deed, the deed contained terms which were unfair and could never be fulfilled and he was under extreme pressure that day to do whatever he could to save the family home.
3The issues for determination are:
a.has the plaintiff established the essential factual matters involved in the claim which were not admitted or were denied by Mr Park?
b.has the defendant made out defences of undue influence, unconscionability or duress?
c.If the plaintiff succeeds, what relief should be granted?
Factual background
4Mr and Mrs Park married in November 2011. Mrs Park (formerly known as Christine O’Hehir) works in retail fashion. In July 2012 she settled the purchase of shop premises in Mentone. To finance the purchase, she borrowed the sum of $400,000 from the plaintiff.
5The loan was secured by mortgages over the Mentone property and Mrs Park’s residence in Highett. The mortgage over the Mentone property was registered. The mortgage over the Highett property was not registered, although the plaintiff’s interest as mortgagee was noted by the lodging of a caveat. This was done to avoid the need to obtain the first mortgagee’s consent to the registration of the plaintiff’s mortgage.
6The mortgages were each dated 16 June 2012 and were executed by Mrs Park and the plaintiff. The due date for re-payment of the loan of $400,000 was 16 July 2013. The loan was not repaid.
7In September 2013, a solicitor, Ms Moorhouse-Perks, wrote to the plaintiff’s solicitor confirming that Mr Park was prepared to purchase the Mentone property from his wife for at least $400,000, subject to certain conditions including obtaining finance and as a means of paying out the amount owing to the plaintiff. No agreement was reached. There was some dispute as to whether Ms Moorhouse-Perks was acting for both Mr and Mrs Park (as the plaintiff contended) or simply for Mrs Parks (as she contended).
8The plaintiff then took steps to realise the securities. The Mentone property was sold in November 2013 for $320,000 leaving a shortfall of about $120,000 still owing to the plaintiff.
9The plaintiff commenced proceedings against Mrs Park by writ dated 4 April 2014. Mrs Park joined her former solicitor, Mr Chaim Geron as a third party. A mediation was arranged for 19 December 2014.
10The mediation was held at the offices of Marshall & Dent solicitors. Ms Heeps, an experienced commercial litigator with that firm, represented Mrs Park. Mr Park attended to support his wife. The plaintiff was represented by a director, Mr Barry Drill together with counsel and a solicitor, and Mr Geron represented himself. The mediator was a barrister.
11The mediation resolved by the execution of a deed of settlement signed by or on behalf of the parties by Mr Drill, Mrs Park, Mr Geron and by Mr Park (as “guarantor”). In addition, Mr Drill and Mrs Park signed consent orders dated 2 March 2015. These were to operate if the terms of the deed of settlement were not fulfilled and provided a consent to judgment against Mrs Park in the sum of $180,000.
12The deed of settlement provided for the payment of a settlement sum of $160,000, with a lump sum of $100,000 on or before 1 March 2015 and $60,000 payable by 12 monthly instalments of $5,000. Clauses 4 and 5 of the deed provided a process whereby Mr Park might, in respect of the Highett property, obtain refinance to pay out the existing indebtedness, including the lump sum payment of $100,000 to the plaintiff. Mr Park would take a transfer of the property from his wife into his own name.
13Part way into the mediation, Mr Drill and Mr Park had a private discussion by themselves. They reached a “handshake” agreement that $160,000 would be paid by a lump sum of $100,000 and 12 monthly instalments of $5,000.
14I limited the evidence I permitted the witnesses to give of the proceedings at the mediation. I considered this an appropriate exercise of the powers in s 131 of the Evidence Act 2008. I will canvass that evidence in some detail in due course.
15On 13 February 2015, Mr Park attended Mr Drill’s shop premises in Richmond. After a discussion, Mr Drill agreed that the plaintiff would accept the repayment of the settlement amount of $160,000 by a lump sum of $100,000 and the balance of $60,000 by monthly instalments of $2,500 over 2 years.
16Between 12 February and 6 March 2015, there was extensive email correspondence between the plaintiff’s solicitor, Mr Ostraburski, and Mr Park’s finance broker, Mr Daryn Heffernan and with Mr Park’s solicitor, Legoll Legal Practitioners.
17On 6 March 2015, Mr Drill gave Mr Ostraburski instructions to accept the immediate payment of $65,000 and the delivery the following day of a bank cheque for $15,000 and signed amended terms of settlement.
18On 6 March, the payment of $65,000 was made to the plaintiff, and in exchange Mr Park received a withdrawal of the caveat notifying the plaintiff’s interest as mortgagee of the Highett property. However, the sum of $15,000 was not paid and amended terms of settlement were not delivered. An offer to make the payment of $15,000, if the balance could be paid by monthly instalments of $2,000, was rejected by the plaintiff.
19The plaintiff lodged a further caveat over the Highett property. This was pursuant to clause 4 of the deed of settlement dated 19 December 2014 which mortgaged the Highett property to secure repayment of the “instalments” due under the deed of settlement.
20No instalments were paid to the plaintiff. The plaintiff by writ issued 6 May 2015 claimed the sum of $95,000 (the $160,000 settlement sum less the payment of $65,000) and other relief.
Mr Park’s Defence
21 In his defence dated 10 July 2015, Mr Park pleaded as follows:
“6A. The defendant further says as follows:
a.That he did not receive legal advice prior to signing the Deed of Settlement nor was he represented by a legal practitioner at the mediation;
b.That he did not form an opinion on whether the terms were reasonable and whether capable of being performed by him;
c.That he did not have the means, knowledge or expertise of the implications of defaulting the terms as contained in the Deed of Settlement;
d.That the terms were unfair and unconscionable and that he would not have entered into the Terms of Settlement had he obtained proper and timely advice”.
22 Mr Park said in his evidence that, at the mediation, he “felt extreme pressure in order to save the family home”. He “thought this was our only opportunity” and he “would have done everything on that day to save the family home”.
23 Mr Park said that if he had been “given time to seek proper legal advice, I wouldn’t have signed the terms of settlement”, and that “any lawyer looking at the document would not have allowed me to sign the document because parts of it, due to my financial circumstances, I could not fulfil. It would only be a matter of time before I failed” to meet the commitments.
24Mr Park said that “the circumstances of the mediation had a lot to do with the haste in which I signed” the terms, including the following matters:
a.it was the “last day of business for 2014”;
b.he “felt I was saving the family home and that I would do that and get it over and done with”;
c.the dispute and legal proceedings had “consumed our lives for the last 3 or 4 years”;
d.that “being uninformed and unrepresented, I probably did not know any better”;
e.he “felt under great distress on that date”.
25 Mrs Park said in her evidence that just before the mediation, her husband’s bank manager had informed him that there was “no possibility of receiving finance” and that when he introduced himself at the first session at the mediation, he told “the mediator and the whole room that, although he would like to help by refinancing [the Highett property], he was not able to”.
26 Mrs Park said that the amount claimed by the plaintiff, particularly his solicitor’s costs, was “shocking and unconscionable”. She said that at the mediation, she “thought we would be able to get the costs down so that Chris [her husband] would be able to get finance”. Mrs Park said that she said at the mediation she “wanted to settle on $100,000 which I thought was fair and reasonable”. She “wanted a solution without paying costs”.
27 Mrs Park said that her solicitor, Ms Heeps, had asked that Mr Park attend the mediation as her support person. During the mediation, Mr Drill had said that he “would like to speak with my husband alone”. She said, “I thought it was a good idea”.
28 After speaking with Mr Drill, Mr Park told Mrs Park and Ms Heeps that, “they had done a deal at $160,000” and that, “we shook on it”. Mrs Park said that she “was shocked” but as she “didn’t receive advice that the handshake deal was not solid” she thought, “I had to wear it”.
29 Ms Judy Heeps gave evidence that she prepared the deed of settlement dated 19 December 2014 and the minutes of consent orders signed that day. She said that Mrs Park was her client. She did not act for Mr Park and she did not offer him any legal advice. Ms Heeps said that she had observed Mr Park reading and “going over” the deed of settlement “a number of times”.
30 Mr Drill said that in his private conversation with Mr Park at the mediation, Mr Park had been “amicable” and “positive”. There was “no discussion as to whether Mr Park should seek legal advice”. Mr Drill and Mr Park “made a handshake agreement”. Mr Drill said he “didn’t know who would pay” the settlement sum. He said, “I assumed Mr Park would help his wife, but that was a matter for them”.
31 Mr Sam Ostraburski and Ms Heeps gave evidence that the mediation went for a number of hours. Mr Ostraburski said that a “handshake agreement” was reached in direct discussions between Mr Drill and Mr Park with the “final terms being sorted out by the solicitors, including Mr Geron”.
32 Mr Ostraburski sent an email to Mr Park’s solicitors on 6 March 2015, during the negotiations about varying the initial lump sum that would be paid to the plaintiff. The email read as follows:
“I am instructed by my client to agree to receiving a bank cheque for $80,000.00 to Drill Investments Pty Ltd and a Bank Cheque to S Ostraburski for $387.70 upon receipt of which I am instructed to hand over Withdrawal of Caveat.
I am further instructed that your clients must prepare and sign Terms of Settlement setting out the amendments and each of your client must obtain independent Legal advise [sic] prior to signing otherwise my client’s instructions are to seek Judgments and an Order on signed Terms of Settlement.”
33 Mr Ostraburski said that he suggested in March 2015 that Mr and Mrs Park “obtain independent legal advice” because “it had been brought up as an excuse”. On the other hand, Mr Ostraburksi said that, at the mediation, it was “not for me to suggest that [Mr Park] seek legal advice”.
34 There is no evidence of the advice Mr Park received in March 2015 from his solicitors, Legoll Legal Practitioners. Mrs Park was sent to RAM & Associates who responded, in part, to the email Mr Ostraburski had sent on 6 March 2015, as follows:
“Our client informs that she will not be able to afford $4,000.00 per month and has agreed to pay $2,000.000 [sic] per month along with $15,000.00 upfront payment as agreed by Mr Chris Park. We will not be able to advice [sic] her to commit for a repayment plan which she knows will not be able to pay due to her financial circumstances”.
Conclusions and application of the law
35 The principal question for determination is whether the circumstances in which Mr Park executed the deed of settlement provide sufficient reason for the Court to refuse to enforce the agreement.
36 The evidence establishes that:
a.Mr Park was not forced or induced to sign the deed;
b.he is not a person who suffers from a particular disability which might affect his capacity to freely enter into the transaction or be subject to any particular influence;
c.he studied the document a number of times before he executed it;
d.he did not obtain any legal advice prior to executing the deed;
e.he apparently later made a complaint of his inability to obtain legal advice. Mr Ostraburski gave this as his reason for including the obtaining of independent legal advice as a requirement in his email dated 6 March 2015;
f.by the terms of the deed of settlement, Mr Park did not assume any obligations. The obligations only arose if he chose to take-up the option of refinancing the property and taking a transfer into his own name, after the caveat based on the mortgage his wife had given to the plaintiff had been withdrawn.
37 In my view, there are other relevant circumstances:
a.Mr Park had indicated, in the proposal advanced on behalf of Mr and Mrs Park by Ms Moorhouse-Perks in August 2013, that Mr Park was considering the option of taking a transfer of a security property (in that case the Mentone shop) after re-financing and discharging the existing liabilities;
b.Mr Park approached the mediation after seeking advice from his bank as to his capacity to refinance the existing securities affecting the Highett property;
c.Mr Park wished to save the family home and knew that Mrs Park did not have the financial resources or creditworthiness to resolve the outstanding debt to the plaintiff;
d.Mr Park went to see Mr Drill at his shop in Richmond in early March 2015 and negotiated an agreement to reduce the monthly instalment payments from $5,000 to $2,500 and to extend the period of the repayments from one year to two years;
e.Mr Park was able to refinance the Highett property in March 2015. The principal difficulty meeting the requirements of the deed of settlement appears to have arisen from the discovery of an additional liability of $25,000 to the first mortgagee which also needed to be discharged at that time.
38 Mr Greenberger, plaintiff’s counsel, submitted that, in the circumstances, Mr Park had taken the benefit of the deed. A withdrawal of caveat had been provided so that the property could be transferred into his name and, therefore, would no longer be an asset of his wife, available to meet her debts.
39 Mr Greenberger submitted that Mr Park had voluntarily attended the mediation. He entered into an agreement which he now asserts was imprudent, rather than the deed being a document he did not understand. The obligations Mr Park assumed by the deed were “potential” liabilities and required him to take positive steps himself to refinance the property and take a transfer, before he would have any liability under the deed.
40 Duress: Cheshire and Fifoot’s Law of Contract (10th Australian Edition) refers to duress as “unacceptable pressure being brought to bear by one party against the other before a contract is entered into, such pressure being a factor that compelled or forced the victim to enter into the contract”. The text, at paragraphs 13.1 and 13.2 sets out the elements of duress as follows:
“1. D has used a form of illegitimate pressure, physical, economic or psychological, in order to compel P to assent to a transaction;
2. that pressure left P with no reasonable alternative but to assent to the transaction; and
3. the pressure in fact caused P to assent to the transaction or was a cause of P assenting to it.
Once these elements are established, P may seek to have the transaction set aside…The effect of duress is to render a contract voidable, not void”.
41 In relation to the first element, there is no evidence to suggest that the plaintiff, in this transaction, used “illegitimate pressure” of any of the mentioned forms in order to compel the defendant to execute the deed. The pressure Mr Park felt, could not be said to have been applied by the plaintiff, but rather arose from the circumstances Mr Park found himself in, and his perception that the mediation was the “only opportunity” he had to save the family home.
42 Unconscionability: In Commercial Bank of Australia v Amadio (1983) 151 CLR 447, the High Court set out the circumstances in which a defence of unconscionability may arise through equity. Mason J, at page 462 stated that the doctrine, while unable to be precisely defined may be considered as arising “…whenever one party by reasons of some condition [or] circumstances is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created [the court will set aside the transaction]”.
43 Cheshire and Fifoot, at paragraph 15.6 set out the elements of unconscionable conduct as follows:
“1. the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-à-vis the stronger party, meaning that she or he is affected by some condition or circumstance that seriously compromises his or her capacity or opportunity to judge or protect his or her own interests in the transaction in question;
2. the stronger party must know of the special disadvantage (or know of facts that would raise that possibility in the mind of any reasonable person);
3. that party must take advantage of the opportunity presented by the special disadvantage; and
4. the taking of advantage must have been unconscientious in the circumstances”.
44 At paragraph 15.6, Cheshire and Fifoot refer to the judgment of Mason J in Amadio at page 462 where it was stated that, in deciding whether a person is at a “special” disadvantage, “inequality of bargaining power does not alone suffice”. It therefore cannot be said that Mr Park’s lack of “knowledge or expertise”, or the fact that he did not have legal advice at the time of entering the agreement, was unconscionable on the part of the plaintiff.
45 Undue influence: Cheshire and Fifoot at paragraph 14.1 note that undue influence is concerned, not so much “with unacceptable pressure being brought to bear on an individual to coerce them to enter a contract”, but rather, “preventing the other party from taking unconscientious advantage of a position of dominance or ascendancy: a capacity to unfairly persuade rather than pressure”.
46 As stated above, there is no evidence to suggest that Mr Park was persuaded in any way by the plaintiff when he signed the Deed of Settlement. Although Mr Park may have viewed this transaction as the only way in which he could save the family home, this cannot be said to involve the plaintiff exercising influence over the defendant which, “in the opinion of the court, prevents Mr Park from exercising an independent judgment over the matter in question” (See Ashburner’s Principles of Equity, 2nd ed, 1933, at page 299 quoted in Cheshire and Fifoot at paragraph 14.2.)
47 Statutory remedies: Cheshire and Fifoot note at paragraph 14.1 that the Australian Consumer Law and other statutes “provide additional ways of redressing conduct that may be broadly termed abuse of the dominant position, unconscionable or exploitative”. For the reasons already stated, I consider that reliance upon these statutory remedies would not assist Mr Park.
48 I consider that the defences raised by Mr Park have not been made out. The circumstances of the transaction do not justify the denial of the plaintiff’s rights to enforce the terms of the deed against Mr Park. I am otherwise satisfied that the plaintiff has made out its claim against Mr Park and that the plaintiff is generally entitled to the relief it seeks.
Proposed orders:
49 In the circumstances, I consider the plaintiff is entitled to orders as follows:
1.Judgment for the plaintiff against the defendant:
a.that the defendant pay to the plaintiff the sum of $95,000 together with statutory interest from 1 April 2015 to 20 October 2015 of $5,178.15, total judgment $100,178.15;
b.for a declaration that the plaintiff has a caveatable interest in the property at 8 McFarlane Court Highett more particularly described in Certificate of Title Volume 8834 Folio 025 (“the Highett property”), as described in caveat no. AL743478G;
c.for a declaration that the plaintiff has an equitable charge over the Highett property to secure the amount of $60,000 being part of the judgment sum;
2.Provided the defendant on or before 4pm on 27 October 2015:
a.executes and returns to the plaintiff’s solicitor the draft registrable mortgage enclosed with the letter dated 24 September 2015 from the plaintiff’s solicitor to the defendant’s solicitors, or a further copy which he must request and obtain from the plaintiff’s solicitor;
b.notifies the plaintiff’s solicitor in writing that he has engaged a real estate agent to sell the Highett property by public auction to be held no later than
6 December 2015 and provides a copy of the executed engagement to the solicitor; andc.keeps the plaintiff’s solicitor informed in writing, at least once every week of every offer received to purchase the property and any other advice received from the estate agent in relation to the sale of the property
execution upon the judgment in paragraph 1(a) is stayed until 5pm on 9 December 2015. If the property is sold, and written evidence of that fact is provided to the associate to His Honour Judge Anderson, a further order for a stay of execution shall be made “on the papers”, until further order, or until application is made by a party to discharge the stay and that application is granted by the Court.
3.The defendant must pay the plaintiff’s costs of the proceeding, including any reserved costs, to be assessed by the Costs Court on a standard basis in default of agreement.
4.If the defendant fails to comply with paragraph 2(a), reserve liberty to the plaintiff to apply to the Court, upon notice to the defendant for an order that the Registrar of the Court execute the draft registrable mortgage on behalf of the defendant..
- - -
Certificate
I certify that these 11 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 20 October 2015.
Dated: 20 October 2015
Olivia Bramwell
Associate to His Honour Judge Anderson
0
1
0