GAC v CNT
[2013] QSC 127
•15 April 2013
SUPREME COURT OF QUEENSLAND
CITATION:
GAC v CNT [2013] QSC 127
PARTIES:
GAC (plaintiff)
v
CNT (defendant)FILE NO/S:
2630 of 2010
DIVISION:
Trial
PROCEEDING:
Claim
ORIGINATING COURT:
Supreme Court of Queensland
DELIVERED ON:
15 April 2013
DELIVERED AT:
Brisbane
HEARING DATE:
8, 9, 10, 11, 12 April 2013
JUDGE:
Henry J
ORDER:
The plaintiff recover as against the defendant possession of the land described as Lot 1 on RP76338 County of Stanley Parish of Bulimba and Lot 4 on RP92733 County of Stanley Parish of Bulimba being 837 Cavendish Road, Holland Park in the State of Queensland (“the property”);
The defendant vacate the property by 15 May 2013;
It is declared that pursuant to clause 26.4 of the separation agreement dated 29 January 2009 between the plaintiff and the defendant the plaintiff is required to pay the defendant the sum of $150,000;
The defendant pay to the plaintiff the sum of $104,160;
The defendant to pay the plaintiff’s costs of the action including reserve costs assessed on the standard basis;
The moneys due and owing by the plaintiff to the defendant be set off against the moneys owing by the defendant to the plaintiff;
The difference between the $150,000 and the $104,160 referred to in paragraphs 3 and 4 above namely $45,894, be paid by the plaintiff to Mckays Solicitors trust account by 15 May 2013; and
The sum of $45,894 held by McKays Solicitors is to be applied towards the payment of the defendant’s assessed costs with the balance if any to be paid to the defendant.
CATCHWORDS:
DE FACTO RELATIONSHIP – Property Settlement – Property Law Act 1974 (Qld) Pt 19 – where parties made a separation agreement – whether separation agreement was a recognised agreement under the Act
CONTRACT – Breach – Specific performance – Damages – where defendant did not comply with the terms of the separation agreement - where plaintiff claims specific performance of separation agreement and damages for breach of contract
EQUITY – Unconscionable bargains - Capacity to contract - Mental illness - Economic Duress - where defendant pleads her signing of the separation agreement was vitiated because she lacked legal capacity and was subject to manipulation, harassment, stress and emotional pressure from plaintiff - where defendant seeks leave to apply out of time for a property adjustment order
LEGAL PRACTITIONER – Solicitor and client – Confidentiality – where defendant pleads her signing of the separation agreement was vitiated because the plaintiff’s solicitor had a conflict of interest
Property Law Act 1974 (Qld) ss 265, 266, 272
Barton v Armstrong (1973) 2 NSWLR 598
Carindale Country Club Estate Pty Ltd v Astill and Others (1993) 115 ALR 112
Crescendo Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40
Gibbons v Wright (1954) 91 CLR 423
Jones v Dunkel (1959) 101 CLR 298
Louth v Diprose (1992) 174 CLR 621
Prince Jefri Bolkiah v KPMG (1991) 1 All ER 517
COUNSEL:
Sheaffe SW on behalf of the plaintiff
Wright BP on behalf of the defendantSOLICITORS:
Mckays Solicitors on behalf of the plaintiff
Gregg Lawyers on behalf of the defendant
HIS HONOUR: The plaintiff and defendant resided together in a defacto relationship from about March of 2003 until August of 2007, when they separated, terminating their defacto relationship. On the 29th of January 2009 at the conclusion of a settlement conference, at which each of the parties were legally represented, they signed a document purporting to be a recognised separation agreement pursuant to sections 265 and 266 of the Property Law Act 1974 Queensland ("the Act").
The recitals to that document provided inter alia:
"N [GC]and[CT] wish to end their financial relationship once and for all and to end all rights and claims of each against each other in respect of their jointly and separately held property.
O [GC] and [CT] intend that this agreement which is made after their defacto relationship has ended and which deals with all of their financial matters, is to be a "recognised agreement" within the meaning of section 266(1) of the Act and "separation agreement" within the meaning of section 265(1) of the Act."
Section 265(1) of the Property Law Act provides:
"(1) A separation agreement is an agreement –
(a) made by defacto partners –
(i) in contemplation of ending their defacto relationship; or
(ii) after their defacto relationship has ended; and
(b) dealing with all or some of the defacto partners’ financial matters.
Pursuant to section 272 of the Act a separation agreement is subject to and enforceable according to the law of contract, except as provided for under part 19 of the Act. If a separation agreement is a "recognised agreement" then the Court must not make a property adjustment order under part 19 inconsistent with the agreement provisions as to financial matters.
As to the meaning of "recognised agreement" section 266 provides:
“266. Meaning of recognised agreement.
(1) A recognised agreement of defacto partners is a co-habitation or separate agreement of the defacto partners that -
(a) is a written agreement; and
(b) is signed by the defacto partners and witnessed by a Justice of the Peace (qualified) or solicitor; and
(c) contains a statement of all significant property, financial resources and liabilities of each defacto partner when the defacto partner signs the agreement.
(2) Whether all significant property, financial resources and liabilities of a defacto partner are stated depends on whether the value of a property, financial resource or liability of the defacto partner that is not stated is significant given the total value of the defacto partner's stated property, financial resources and liabilities."
The agreement which was executed on the 29th of January 2009 is on its face an agreement made by defacto partners after their defacto relationship had ended and it deals with all or some of their financial matters. It is a separation agreement within the meaning of the Act. As to whether it complies with the meaning of a recognised agreement under the Act, it was in writing, it was properly witnessed and at least purports to contain a statement of all significant property, financial resources or liabilities of each defacto partner at the time of the signing of the agreement.
Whether it sufficiently states "all significant property, financial resources or liabilities" is in issue. The agreement otherwise complies with the requirements for a recognised agreement under the Act.
The agreement provided that the defendant would pay $1,000 per week against the existing mortgage relating to the home at Cavendish Road formerly shared by the parties for 12 months and would have an option to purchase the property to be exercised on or before 30 days prior to the end of the 12 month period.
As part of that arrangement if the option was exercised, the plaintiff would transfer the property into the defendant's sole name and the defendant would refinance the mortgage encumbering the property into her sole name and pay the plaintiff $200,000. The transfer would have been necessary because as part of the arrangements under the settlement agreement the property was transferred to the plaintiff who assumed responsibility for significant refinancing secured over the property.
If the defendant did not exercise her option then the plaintiff had an option to retain the property which, if exercised, would require the defendant to vacate the property and require the plaintiff to pay the defendant $150,000. The plaintiff complains the defendant failed to pay $1,000 per week for 32 weeks towards the existing mortgage up to the 29th of January 2010. The defendant did not exercise her option and the plaintiff gave notice of his intention to exercise his option, giving the defendant notice to vacate by no later than 15 March 2010. She did not vacate, indeed she is still in occupation.
The Claim
The plaintiff claims three primary forms of relief, namely:
1. specific performance of the agreement between the plaintiff and the defendant for the vacation of the property owned by the plaintiff.
2. payment of the sum of $1,000 per week for 32 weeks being monies due and owing or as damages for breach of contract.
3. damages for breach of contract in the sum of $1,000 per week from 15 March 2010 to date of judgment. Those damages would, in effect, be to recompense the plaintiff for the loss of rental of $1,000 per week during the period that the defendant has continued to remain on the property. Interest is not sought.
Defence and Counterclaim
The defendant resists the claims and counterclaims on several bases and also relies on those bases in support of her counterclaim.
The defendant pleads that her signing of the settlement agreement was vitiated by the effect of her psychological disorders known to the plaintiff which disabled her to the extent of being unable to fully understand the true meaning and effect of the purported settlement agreement and meant that she lacked legal capacity to execute the agreement – see amended defence paragraphs 4 to 6.
She further pleads that her signing of the agreement was vitiated by circumstances of manipulation, harassment, stress, emotional pressure and conflict which the plaintiff created and continually exposed the defendant to during the weeks and months prior to signing the agreement - see amended defence paragraph 7 to 30.
Further, she pleads her signing of the agreement was vitiated by the plaintiff's solicitor Mr Tavoularis acting for the plaintiff in circumstances where he allegedly had a conflict by reason of formerly acting for the defendant and his presence allegedly causing the defendant worry, anxiety and distress in circumstances where the plaintiff would or at least should have known of that effect and with the consequence that the defendant was overborne to the extent that she signed the agreement notwithstanding it allegedly prejudiced her - see amended defence paragraphs 31 to 37.
The defendant seeks a declaration that the purported settlement agreement was void ab initio relying on its pleading of the abovementioned three complaints, which it characterises as undue influence and duress giving rise to "non est factum due to her lack of actual, informed and voluntary consent to the purported settlement agreement" – see amended defence paragraph 38, counterclaim paragraph 2a.
She counterclaims in the alternative for a declaration that the purported settlement agreement is voidable at her election on the basis that the conduct of the plaintiff in attempting to enforce the settlement agreement against the defendant "as a person under a special disability" is inconsistent with equity and good conscience and an unconscionable exercise of legal right - see amended defence paragraph 39, counterclaim paragraph 2b.
Departing then from reliance on the abovementioned three complaints, she pleads the agreement was not a recognised agreement pursuant to section 266 of the Act because it did not contain a statement of all significant property, financial resources and liabilities and was not accompanied by sufficient and timely disclosure and would give rise to an unjust outcome - see amended defence paragraphs 40 to 54.
By reason of her complaints in respect of the purported recognised agreement, the defendant seeks a declaration that it is not a recognised agreement and an order setting it aside - see counterclaim paragraph 2(d)(ii)(iii).
She seeks leave to apply out of time for a property adjustment order - see amended defence paragraphs 54, counterclaim paragraph (d)(i).
The defendant also pleads that the plaintiff repudiated the purported settlement agreement by allowing a caveat to be placed over the property and also by reason of what appears to be an obscurely pleaded breach of clause 31 of the agreement whereunder it was agreed the plaintiff would not mortgage, pledge, secure or otherwise encumber the property for a period of 12 months from the date of the agreement - see amended defence paragraphs 55 to 64. Through its pleading, the defendant purports to elect to accept the alleged repudiation and terminate the agreement. Its counterclaim seeks a declaration that the defendant was at liberty to do so and is thus released from any further performance of her obligations under the agreement - see counterclaim paragraph 2(c).
While the primary ultimate relief sought by the defendant is leave to apply for a property adjustment order out of time and ultimately an order under part 19 adjusting the property between the plaintiff and the defendant, the defendant in the alternative seeks a declaration of constructive trust in respect of the property of the plaintiff and the defendant on the basis that the plaintiff's equitable interest in the property is 10 percent and the defendant's is 90 percent - see counterclaim paragraph 2(c).
Credibility
Before turning to the substance of those issues it is useful to consider generally the credibility of the most important two witnesses in the case, the plaintiff and defendant. Neither presented, in my view, as obviously dishonest witnesses. I had the impression each tended to downplay somewhat the adverse intensity of their own communication with the other. That is unremarkable in the circumstances.
Of greater importance though was the defendant's obvious inability to recall evidentiary detail. I accept that this was, to a large extent, a product of her psychological state in a historical sense, that is, I did not detect any indication her psychological state interfered with the process of her actually giving evidence in any material way. The substance of the problem lay in her difficulty in recalling past events reliably, doubtless because of the detrimental effect of her psychological disorders. The result was that she was unable to give reliable evidentiary detail in respect of material events, including matters of financial detail and, even more importantly, the events surrounding the making of the separation agreement.
It is unfortunate, given that disadvantage, that witnesses who may have assisted in providing more reliable evidentiary detail in support of her cause were not called. That is particularly so in respect of those witnesses who might have assisted her cause in providing more reliable evidence of the events surrounding the property agreement with which this case is pivotally concerned. Those witnesses were her then solicitor as well as her mother, each of whom, on the evidence, provided active assistance to her on the day.
Was the agreement a recognised agreement?
It is convenient to turn firstly to the complaint that the agreement was not a recognised agreement. The effect of that complaint is that the agreement did not contain a statement of all significant property, financial resources and liabilities and was not accompanied by sufficient and timely disclosure and would give rise to an unjust outcome.
As already mentioned, by reason of those complaints she seeks a declaration that it is not a recognised agreement and an order setting it aside. She also seeks leave to apply out of time for a property adjustment order. That application only arises for consideration if she is successful in avoiding the settlement agreement. If she fails in that regard the application would be rendered without purpose because a property adjustment order inconsistent with that agreement could not be made.
Turning to the substance of the defendant's submissions, it was contended that the effect of s 266 is to require the inclusion of valuations of all property, financial resources and liabilities in the agreement’s statement of all significant property, financial resources and liabilities. The submission is misconceived.
The reference in s 266.(2) to "value of a property, financial resource or liability" does not relate to the content of the statement referred to in s 266(1)(c) but rather to the consideration in s 266(2) of the question whether the relevant property, financial resource or liability not stated in the agreement was significant compared to the overall value of the party’s property, financial resources and liabilities.
The intractable threshold problem faced by the defendant is that its complaints as to what was not stated are without substance.
The defendant pleaded two specific omissions at paragraph 40(a) of its amended defence:
"The purported settlement agreement did not contain a statement of all significant property, financial resources and liabilities of each defacto partner when the plaintiff and defendants signed it.
Particulars:
(i) The debt owed jointly by the plaintiff and the defendant to the parents of the defendant in the sum of at least $447,951.17 was not included.
(ii) A development application jointly owned by the plaintiff and his brother in relation to a subdivision of their parent's property at 7 Ivanhoe Street, Annerley and 381 Ipswich Road, Annerley in the State of Queensland for the purposes of construction of apartments for on-sale ('The development application') was also not included."
Turning to the allegation of the debt jointly owed by the plaintiff and defendant to the defendant's parents in the sum of $447,951.17, I note that if the proposition be correct it would have been a matter for disclosure, not only by the plaintiff but also by the defendant, and on the face of the separation agreement it was disclosed by neither.
The plaintiff gave evidence that he had no knowledge at all of the pleaded allegation of this debt. He denied ever having received any money from the defendant's mother, indirectly or directly, or ever having any discussions about any such payment.
The defendant's evidence about this alleged loan bore some of the hallmarks of the disadvantage I alluded to earlier in relation to her ability to give reliable evidence when it came to detail. She explained the loan was from her parents from the sale of their Gold Coast unit. She claimed her mother had a document which evidenced the loan and what it was all about, but of course no such evidence was adduced because her mother, notwithstanding her occasional presence in the public gallery, was not called as a witness.
It emerged at a later stage of the defendant's evidence-in-chief that the loan was to her personally:
"Did you ever discuss the debt with [GAC]?‑‑ Yes, I did.
What did you tell [GAC]?‑‑ That mum and dad have propped up the business and that we've got to get some money back to them...
Okay. So the amount that was outstanding at the time of the settlement agreement, was that reflected at all in any of the statements that you've seen in the agreement?‑‑ All I can tell you is I know there was $447,000 that mum had told me to prop up the business while I wasn't well, while the business was running not as proficiently as what it was when I was better, and that's the only reason I spoke to [GAC]. I said, "I'm unwell, [GAC], I can't go to work, I can't make money, I have to get money off mum and dad...
What would you say when you spoke to him about it?‑‑ We have to get this money back to mum and dad.
And?‑‑ You caused where I am [GAC], so I'm running at a loss in my company because of you and I've had to borrow parents - money from my parents and they're pensioners, that are to be paid back." (T3-45, lines 22 to 26, 30 to 40 and 50 to 57.)
When asked for more detail the defendant had no idea when the loan went to her business, [S] Enterprises, or how many payments it consisted of.
The upshot is there is simply no evidence that the plaintiff owed the debt pleaded, from which it follows there was no failure to state that alleged debt on his part. The debt alleged is said to be a joint one. That has not been made out.
On the face of it there was a failure to disclose on the defendant's part relating to a loan that appears to have been solely for her benefit, or at least to her benefit through her business. But that is not the subject of a pleaded complaint.
It may very well be that the defendant's parents provided very significant financial assistance to her in the conduct of her business, particularly during the era when it started to fail with the onset of her psychological disorders, in combination with other financial difficulties. It may well be the loan was mentioned in the course of the settlement negotiations that occurred on the day the settlement agreement was reached. For example, the defendant recalls that during the settlement conference her mother made the comment that she would not be getting her money back. However, the specific complaint raised in the pleadings must obviously fail given the state of the evidence on the topic.
The other specific complaint about a failure to state all significant property financial resources and liabilities related to a failure to state “a development application” jointly owned by the plaintiff and his brother in relation to the subdivision of their parents' property.
The plaintiff and his brother formed a company, [H] Developments Pty Ltd in order to secure a loan for the development of land owned behind their parents' property with a view to developing an eight-unit residential complex.
While the plaintiff gave evidence of his company having done some paid work building kitchens and vanities, he received no benefit from his participation in managing the project through [H] Developments.
The pleaded complaint is factually wrong in that the development application was by [H] Developments Pty Ltd, a company, not the plaintiff and his brother, individuals.
It is doubtful whether a development application is of itself a property or a financial resource or liability of a kind that requires stating. Further, and in any event, I note that the company which was responsible for the development application was referred to in the settlement agreement at schedule B which referred to the plaintiff's property, financial resources and liabilities, in particular, at paragraphs 1.4.2, 1.4.2.1, 2.3, 2.3.1, 3.1.3, 3.1.3.1, 3.1.3.2 (Exhibit 1 at tab A, pages 22 and 23).
The defendant knew generally that the plaintiff and his brother had started [H] Developments and wanted to do a unit development at the back of their parents' property. I do not detect any sign in the evidence of that activity being kept secret.
The defendant's pleadings also complain that the valuations of the development application were not provided. I note that by letter dated 9 May 2008 - see Exhibit 1, tab F, page 10 - the plaintiff's solicitors disclosed the circumstances of the development application which was being pursued by the plaintiff and his brother on behalf of his parents. It was explained that the plaintiff's parents would pay back what was borrowed for the development by selling some of the units.
Consistently with the evidence led in the trial, the letter's implication was that no benefit or value was flowing to the plaintiff through his participation in the development.
Some significant time in the trial was absorbed with exploration of evidence relating to the development. It smacked of a fishing expedition. There were no revelations. There was some exploration of the fact the development application was varied, the implication being that heralded some background mystery but it transpired that was done simply to correct the erroneous inclusion of the defendant's parents' house in the initial development application.
There was also exploration of the manner in which [H] Developments invoiced the defendant's parents for two components, one being the GST component of the project described, as construction costs, and the other the non-GST components of the project described as a management fee.
Exhibit 11 in the trial, a letter from McDuff Accountants, explains that the management fees were used to pay for expenses relating to construction of the units, including council fees, bank charges, interest payments and other payments which did not attract GST. In short, there was no evidence whatsoever of any benefit flowing to the plaintiff as an individual in relation to this development.
On the whole of the evidence, it is obvious the plaintiff's contribution to the development was done in consequence of family love and devotion.
The amended defence also pleads a lack of disclosure of the plaintiff's directorship of [C] Pty Ltd and its financial records. Section 266 of the Act, in fact, requires no such disclosure in advance. Its focus is on what is disclosed in the agreement itself.
I infer this complaint about disclosure relies to some extent upon clauses 11 and 62 of the agreement which involved, in a general sense, an assertion that there had been disclosure.
In any event, it appears that, at least by the time of the settlement agreement, there had been disclosure relating to [C] Pty Ltd for it is specifically mentioned in the agreement's schedule B at 1.4.1 and 3.1.2 (exhibit 1, tab A, pages 22 and 23). The upshot is that complaint is without substance.
The defendant also complains the agreement's recitals were incorrect, in particular, that recital D purports to claim that the plaintiff and the defendant made equal contributions to the purchase/mortgage of the property, and recital G purports to claim that the plaintiff and the defendant were both in good health at the time of the signing of the agreement.
A complaint in relation to recital D is in issue and it is a topic to which I will shortly return. As to the recital that the plaintiff and defendant were both in good health, it would be wrong if what it was intended to mean was a reference to mental health, however that complaint is subsumed by the broader question of whether the defendant's mental disorder vitiated the agreement. Other than in that context it is, in my view, immaterial.
Unjust settlement?
The amended defence goes on to complain at paragraph 42 that the enforcement of the settlement agreement would result in prejudice and injustice for the defendant and the pleadings then purport to identify some features thereof.
One of them is a complaint about a significant disparity in the contributions to the purchase and mortgage costs relating to the Cavendish Road property. The plaintiff gave evidence that the purchase price of the property was $530,000 and the mortgage was about $421,000. The defendant pleaded and the plaintiff admitted that of the combined $143,000 value of the deposit and stamp duty required for the purchase of the Cavendish Road property the defendant paid $128,000 and the plaintiff contributed no more than $15,000.
There was some variability in the recollection of those figures on the part of the defendant. She recalled in evidence that the contribution made by her was in the order of $136,000 plus stamp duty and that the plaintiff's contribution was somewhere between $7,000 and $15,000. Those amounts are sufficiently close to the amounts which, in any event, are not in dispute in the pleadings as to make that an inconsequential aspect of her evidence.
The plaintiff gave evidence that he made up the disparity in the initial contribution by renovation work done to the kitchen, the painting of the interior and exterior, rendering, painting the roof, doing work in relation to the pool, putting in a new bar, and working on the fence. He also gave evidence of doing some renovations to the defendant's parents' unit on the Gold Coast and to two of her shops. He valued his contribution towards the renovation of the Cavendish Road property at $63,185.86. He claimed to have spent $4,748 on the defendant's mother's unit at the Gold Coast and $17,562 on renovation work to the defendant's two shops.
The defendant gave evidence that she paid mortgage payments on the property but acknowledged that the plaintiff did pay some mortgage payments once his business improved at some stage, apparently after the initial purchase of their Cavendish Road property.
Regretfully, there was a failure to properly explore this aspect with the plaintiff when he gave evidence. In the circumstances I approach the defendant's evidence on this aspect, vague as it was in any event, with some circumspection. If there was a body of evidence establishing that the defendant had been responsible for the significant majority of the mortgage payments made at least during the currency of the relationship one would have expected more detailed evidence to be adduced from her and, moreover, for it to be properly explored with the plaintiff when he gave evidence. It was not.
My impression then, on the imprecise state of the evidence, is that in the end result, while the defendant may have contributed the overall majority to the property by way of purchase price and subsequent mortgage repayments, the disparity in comparison to the contribution of the plaintiff was not significant.
The evidence was also in an unsatisfactory state as to what payments had been made towards the property since separation. I note a loan account statement in respect of the plaintiff's mortgage over the Cavendish Road property shows for the period ending 28 February 2013 a total balance outstanding of $951,334.33 and refers to an immediately overdue payment of $6,722.81. The defendant claims that she has paid moneys to the plaintiff's bank account and that she also later paid him in cash. This evidence appeared to relate more so to the payments that would have been required under the separation agreement rather than to the topic of what mortgage repayments were made after separation but before the settlement agreement.
To add to the confusion relating to that distinction the plaintiff was asked in cross-examination whether any mortgage payments were paid by the defendant to him in cash and he said, "Never." One assumes that was a reference to the regular payments that were supposed to be made under the settlement agreement. Unfortunately no more specific details than that were put to him on this topic.
According to the defendant, she fell into arrears only to the extent of three months' worth of payments which at $1,000 a week gives rise to an arrears of $12,000 on her evidence. The plaintiff gave evidence that the defendant only made five months' worth of payments of rent pursuant to the settlement agreement at $4,000 per month totalling $20,000. He explained she stopped paying after that but some years later started paying again, apparently by payments made into the trust account of the plaintiff's solicitors pursuant to a Court order. Those payments totalled $81,840 with the last payment of $4,000 having been made on the 4th of January 2013 (see the affidavit of Michael James Cope, Exhibit 5).
The separation agreement required the defendant to pay $1,000 per week. She has remained in possession of the property after the lapse of the initial year and the plaintiff asserts she should have continued to pay $1,000 per week during her continued occupation until now.
Thus, as Exhibit 4 explains, she ought to have paid $1,000 per week for 206 weeks, a total of $206,000, whereas she has only paid a total of $104,840 leaving a balance owing of $104,161. That summary is, of course, founded upon evidence adduced on the plaintiff's behalf.
I accept that evidence. It was certainly more specific than the evidence proffered against it, and again, the expectation that the defendant, or at least those acting for her might have been in a position to adduce more detailed evidence about her claims as to what has been paid was not met.
Dealing further with some of the miscellany of complaints in the part of the pleadings currently under consideration, it was pleaded at paragraph 40(d)(v) that the schedules to the purported settlement agreement were served only upon the defendant's then solicitors not the defendant, were only served at or about 10.20 a.m. on the day prior to the execution of the purported settlement agreement and were not sighted by the defendant at any time prior to her signing of the purported settlement agreement.
Those allegations appear to be with foundation. The defendant gave evidence that she saw a draft agreement about a week before the settlement meeting occurred. That would be unremarkable. For instance, Mr Tavoularis, a solicitor for the plaintiff, recalled that there was movement backwards and forwards of the draft agreement at least once and probably twice between the solicitors in advance of the settlement conference.
It appears moreover that a working draft was in existence by 5 January 2009 for, on that date, Mr Tavoularis forwarded by email a copy thereof to the plaintiff's lawyers (see Exhibit 7).
I note for completeness that at paragraph 43 of the amended defence there appeared a complaint that the plaintiff had wasted and dissipated on average $2,000 to $3,000 per week during the relationship on gambling. Such evidence as there was on this topic again failed to support the pleaded complaint. The plaintiff acknowledged in cross-examination that he gambled at the casino but there was some confusion in what was being put to him. It was seemingly based on a untendered record from the casino. In the upshot, there was an acceptance that he had won or lost an amount of about $12,000 in total.
Paragraph 44(c) of the amended defence refers to a present value of the Cavendish Road property of $1,650,000. The defendant gave evidence that she thought on the day of settlement it would have been worth about $1.4 million, although no foundation was led for how she came by that belief. In any event, the tendered evidence suggests, based on valuations since acquired, that it would have been worth about $1.2 million.
Rounding out this area of the amended defence, I turn to a consideration of the complaint, in effect, that the agreement gives rise to a prejudicial outcome or an unjust outcome.
Part of that complaint was, it was explained in submissions by counsel for the defendant, relevant really only to an assessment of hardship in the context, if it became relevant, of me considering whether or not leave should be given to allow an application for a property adjustment order to proceed out of time.
Nonetheless, the complaint also appeared to relate in a general sense to fact finding, the inferential argument of the defendant being that if one looked to the actual outcome it tended to bespeak such a manifestly prejudicial or unjust outcome as to tend to support its other complaints about the circumstances of the agreement being reached.
However, on an analysis it does not appear to be an outcome that can be characterised in that way at all. The settlement statement, Exhibit 1 Tab A page 28, reveals a favourable disbursal of the $950,000 that was borrowed by the plaintiff to refinance the property in his own name. He testified that some $561,191.45 paid to Suncorp Metway was to pay off the initial home loan in respect of the Cavendish Road property, and also to pay off a further loan for about $130,000 that had been taken out for the benefit of the defendant's business. He testified the disbursal of $120,525.95 to Factotum Pty Ltd was to repay a further loan that had been obtained for the benefit of the defendant's business. He explained a further disbursal of $30,000 was a repayment of a loan made to the defendant by his brother. That evidence suggests that the defendant gained to her benefit through the settlement agreement via the repayment of various loans which had been made for her benefit a total of about $280,000.
In addition the settlement also involved a payment of $176,455.58 made to her lawyers for her benefit. That would appear to give rise to payments made for her benefit excluding the repayment of the initial mortgage in respect of the Cavendish Road property of about $456,000.
In return the plaintiff was paid $60,000 and gained ownership of a property worth about $1.2 million but the responsibility for a mortgage debt in relation to that property of $950,000-odd.
In essence he gained a $60,000 payment plus equity of about $250,000, a total of about $310,000. However, it will be recalled that it was a term of the settlement that his exercise of the option required payment of $150,000 by him to the plaintiff, having the consequence of reducing the aforementioned benefit to him back to $160,000. This is substantially less than the material benefit delivered to the plaintiff through the settlement agreement.
That analysis suggests that the settlement agreement negotiated by and on behalf of the defendant was reasonably favourable to her in all the circumstances.
Repudiation?
The defendant pleads the plaintiff repudiated the purported settlement agreement by allowing a caveat to be placed over the property. Through its pleading it purports to elect to accept this alleged repudiation and terminate the agreement.
This aspect of the pleadings turns to a large extent on clause 31.3 of the settlement agreement. It is instructive to note the entirety of clause 31:
"CNT and GAC agree that in consideration of the property settlement herein for a period of 12 months from the date of this agreement:
"31.1 CNT shall not lodge a caveat over the
relationship property;
31.2 GAC shall not sell transfer or otherwise dispose of the relationship property; and
31.3 GAC shall not mortgage pledge secure or otherwise encumber the relationship property."
It will be noted that clause 31.1 specifically refers to a caveat in respect of the defendant whereas clause 31.3, which relates to the plaintiff, does not.
The pleaded complaint is that the plaintiff allowed a caveat to be placed over the property in breach of clause 31.3. Clause 31.3 did not, on its face, prevent such an occurrence which, in my view, could not have come within the meaning of "mortgage pledge secure or otherwise encumber." However, even if it did there is no evidence that the plaintiff allowed the caveat to be placed on the property at all. To the contrary the evidence suggests that it was placed over the property by Union Fidelity Capital Funding Pty Ltd on the 8th of May 2009. That particular institution had apparently taken steps towards the provision of a loan to the parties which did not proceed. Exactly why Union Fidelity felt entitled to lodge a caveat as late as the 8th of May 2009 is unclear on the evidence, but I accept it is plainly not an event that the plaintiff would have wanted to occur. The pleading that he allowed the caveat to be placed over the property has not been made out on the facts.
I note for completeness that there was no evidence that the placing of that caveat over the property interfered in any way with any attempts by the defendant to seek to refinance with a view to acquiring the property in the first 12 months after the settlement agreement. Indeed, she advanced no evidence of having made any such attempt at all.
Lack of capacity due to psychological disorders?
The defendant pleads that her signing of the settlement agreement was vitiated by the effect of her psychological disorders. It is pleaded her disorders which were known to the plaintiff and disabled her to the extent of being unable to fully understand the true meaning and effect of the purported settlement agreement with the consequence that she lacked legal capacity to execute the agreement.
Evidence was adduced from her treating psychiatrist, Dr Greig Richardson. He was not treating her as at the time of the settlement agreement but has been treating her for some time since. His initial report of 3 March 2013, Exhibit 13, opined that she has been suffering from significant depression and anxiety since 2005. She was functioning successfully in her business with [S] Pty Ltd but upon the first breakdown of her relationship with her fiancé, when it transpired there had been infidelity on his part, she developed a significant depressive condition for which she required treatment.
Dr Richardson noted that she was developing symptoms of depression as early as 2004 when she began to experience a degree of obsessional concern about her business and was anxious about how other people viewed her. Her symptoms intensified with the revelation of the infidelity the following year, it seems. Dr Richardson noted there was a continuation of the relationship until 2007 when again there was a discovery relating to infidelity.
He opined that the defendant has suffered from a chronic major depressive illness with obsessive compulsive symptomology and significant concomitant anxiety that has rendered her incapable of fully functioning in the workplace, effectively for the last four years. That opinion was in his report of 2010.
In that same report he expressed the view that the prognosis for the defendant was poor in that her condition had been present for the past five years and she had not shown significant improvement despite multiple input from therapists and psychiatric review. In his initial report he opined:
"It is my opinion that at the time of the separation agreement being signed approximately 12 months ago that [CNT] was significantly distressed. [CNT] was taking medication and had no significant amelioration of symptoms such that it is my opinion that the signing of these documents at that time was done without her full awareness and capacity to rationalise and understand the nature and significance of the documents she was signing. I do not believe she could appreciate the true meaning or effect of those documents. [CNT] states that her mother, who was extremely concerned about her, was the principal person assisting her with what she believed was her best possible interests in order to facilitate the resolution of her legal concerns."
In Dr Richardson's supplementary report of the 4th of April 2013, Exhibit 19, he differed from an opinion he understood had been expressed by Dr Chalk, a witness engaged, by the plaintiff's solicitors. Dr Richardson opined that at the time that Ms T entered into the separation agreement in 2009 her medical condition rendered her vulnerable such that she would not have been fully capable of acting in her own best legal interests, and would have had significant difficulty with decision-making such that significant prompting would have been required to facilitate the process. He reiterated again he did not believe that at the time the defendant could appreciate the true meaning or effect of the documents she signed.
On the whole of Dr Richardson's evidence I do not regard him as meaning that the defendant had no appreciation of the meaning or effect of the documents, but rather that she would not have had a detailed, as distinct from a general, appreciation of the nature of the documents.
Dr Richardson also opined in his supplementary report that at the time of the agreement the defendant's awareness and judgment and capacity to understand the nature and the implications of the agreement would have been jeopardised by both medication and her chronic depressive state mixed with anxiety symptomology. He later explained in evidence that by jeopardised he meant put at risk. Properly, he refrained from expressing an opinion as to whether, as a matter of fact, that risk manifested itself or not.
In the course of his evidence before me, he expressed the view that even though the defendant was not psychotic or suffering an illness that rendered her in tern with having a distorted relationship to reality, he certainly believed she was significantly distressed and may even have had a significant compromise in terms of her capacity to realise the implications and nature of what she was signing (T3-60L59-T3-61L6).
He was asked whether or not the defendant's want of capacity would have been obvious to those observing. He indicated that the defendant would have wished to present well and try to follow the due processes with the assistance of her lawyer and mother, but given the significant nature of her medication, despite presenting well, her medication could have affected her conscious awareness, her level of understanding of the complex nature of what she was entering into, and such impairments might not have been immediately obvious to other people (T3-65L52-T3-66L5).
He agreed that as to whether or not there was some significant diminution of awareness or capacity to rationalise and understand and as to whether that would have been obvious, much would turn on what was being said to her and, more importantly, what her replies were on the day (T3-66L40).
In cross-examination, his attention was drawn to the content of Exhibit 10 in this trial. That exhibit was a letter of the 16th of January 2009 by the defendant to the plaintiff's brother acknowledging her indebtedness to the plaintiff's brother for a $30,000 loan. In that letter she said, inter alia:
"Upon the refinance of the matrimonial home of [GAC] and [CNT], and on the title being transferred to [GAC], all monies owing to Daniel will be paid in full. This letter is legal and binding, and a formal letter will be sent to [GAC] by my solicitor, Rodd Stockley of Stockley Furlong Solicitors, confirming the above."
Dr Richardson candidly conceded it appeared from the content of that letter that she clearly understood the purport of the settlement conference and the agreement to be reached there (T3-75L38).
In re-examination, when that topic was revisited, in an attempt to explore the possibility that she might have been clear in her mind about these matters at the time of writing that letter but less so by the date of the settlement agreement, Dr Richardson was less than enthusiastic in taking up that line of reasoning. He acknowledged an argument could be maintained, given fluctuations in state, that there may have been a material change, but candidly acknowledged that the letter did appear to be, "Quite clear and well organised, and stated the facts without any apparent confusion." (T3‑80L20).
Psychiatrist Dr Chalk was called by the plaintiff. His report at Exhibit 1, tab E pages 85-86, opined:
"There is little doubt in my view that this lady was during this period under significant stress and suffered from a depressive illness of quite substantial magnitude. She has been on a variety of medications over time…There is certainly no suggestion this lady suffered from a psychotic illness that would deprive her of the capacity to understand the nature of the transactions to which she was entering. I am of the view that this lady may well have been able to understand the general nature of the transactions to which she was agreeing, and I note that her mother was present and that she was also legally represented. Whilst she may have been anxious to get the matter over, and her capacity for concentration significantly impaired it does not appear that her depressive illness was of such moment as to prevent her from having some understanding of the nature of the transactions into which she was entering."
In the course of his oral testimony he opined:
"I think that my opinion in regards to that is very clear, that I think that whilst this lady may well - was undoubtedly unwell at the time and that her capacity to understand was undoubtedly stretched, I don't think that - and it may have been impaired, I don't think that she was deprived of any capacity…I think there's no doubt that this lady was chronically depressed, and I have no doubt that in the circumstances she was very anxious, but I don't agree that she wouldn't have been aware of what she was signing and the nature and the implications of that. So in other words, whilst her mental processes may have been slowed I don't think that they were impaired to the extent where she couldn't understand what she was signing or take cognisance of that” (T2-60L40-51, T2-61L2-10).
In my view, there was ultimately little separating the material aspects of the opinions of both psychiatrists. Dr Chalk's opinion necessarily acknowledged the prospect that there may have been some impairment of understanding, just as on the whole of Dr Richardson's evidence I interpret his view as being that there may have been some impairment of the understanding of detail, but not of the general understanding of what was occurring.
The parties agree that the relevant principle in the present context was stated in Gibbons v. Wright (1954-1954) 91 CLR 423 at 437, namely:
"The law does not prescribe any fixed standard of sanity as requisite for the validity of all transactions. It requires in relation to a 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."
In the circumstances of this case I have no hesitation in concluding on the whole of the psychiatric evidence that notwithstanding the likelihood that there would have been some degree of impairment of the defendant's capacity to understand the detail of what was occurring on the day she nonetheless was capable of understanding the general nature of that which she was agreeing to. I am fortified in reaching that conclusion as a matter of fact by the evidence that she had the benefit of the support and advice of her mother for the bulk of the day and by the fact that she was assisted by the advice of a solicitor acting in her own best interests on the day.
The challenges confronting the defendant in respect of this area of her case do not end there. Her complaint extends to the plaintiff having knowledge of the extent of her psychological disorders. That was no doubt pleaded by reason that ordinarily in circumstances such as this it would be necessary for the special disability to be sufficiently evident to the other party to the agreement to make it prima facie unfair or unconscionable that the other party procure, accept or retain the benefit of the disadvantaged party's assent to the transaction - see Louth v Diprose (1992) 174 CLR 621.
The topic of the plaintiff's knowledge was explored with him. He recalled taking the defendant to Greenslopes Hospital in about 2005 at a time when she stopped eating and was not drinking but said he was unaware that she was examined or treated by a psychiatrist in that era. He was aware of her having a fear of flying which had caused her some psychological concern historically.
In cross-examination he admitted having seen medication of the defendant in the bathroom but explained he did not know what the medication was. He explained in cross-examination that when he first saw the reports relating to the defendant's psychological disorders at a time when the parties were preparing for the current litigation, it was a big shock to him.
As against this the defendant says that he took her to various appointments in relation to examination or treatment for her psychological condition. She gave evidence that she told him of her diagnosis of OCD and depression and anxiety. She said in the visit to Greenslopes Hospital she was present when the plaintiff was told that her conditions were OCD, depression and massive anxiety.
I note, however, that a report by Dr Lockwood in 2007, Exhibit 15, recorded her as having told Dr Lockwood that she had not told the plaintiff or her friends about her symptoms. The defendant suggested Dr Lockwood must have misunderstood. While Dr Lockwood's report was tendered in evidence Dr Lockwood was not called.
On balance I think it is likely the plaintiff did know the defendant was on medication for psychological disorders. He may not have known, or at least absorbed, the technical descriptions of her diagnoses but I conclude he was generally aware of her significant psychological decline commencing with the events of 2005. However, there is certainly no evidence to suggest that he was of the belief that her disorders were so great as to interfere with her capacity to settle their dispute in an informed way, particularly when given the benefit of legal advice and support of her mother.
Ultimately the evidence of what transpired on the day of settlement during the actual process by which the agreement was reached provides the best potential evidence of the extent to which, if any, the defendant was materially disadvantaged by her psychological conditions.
Other than the defendant, her mother and her solicitor Mr Stockley, would be well placed to have given evidence of any want of understanding. They were not called. Their absence has not been explained; indeed the defendant's mother was present on occasion in the public gallery during proceedings. They were plainly relevant witnesses who, if the defendant's case is correct, could have materially advanced it.
The plaintiff correctly submits the circumstances call for an adverse inference against the defendant pursuant to the principal discussed in Jones v Dunkel (1959) 101 CLR 298.
In the circumstances I infer from their absence that their evidence could not have advanced the defendant's case. That said, I note that even without that adverse inference the defendant's arguments founded upon her psychological disadvantage were, in any event, doomed to fail for the reason that she likely did have an adequate understanding. Further, such evidence as was advanced about the events of the day supports that conclusion.
The plaintiff gave evidence that in the course of the day there were offers and counter offers but that he did not end up settling for what he had walked in intending to settle for. This suggests that the conference proceeded in a way well known to the law, with each side engaging in a degree of give and take in the course of negotiations. Such a process is inherently unlikely to have occurred unless, as the day progressed, instructions were being obtained from the defendant. The implication that she sufficiently understood what was going on in order to provide such instructions is irresistible.
The plaintiff testified that he did not speak to the defendant during the course of the settlement conference and only caught a brief glimpse of her when the door to the room she was in opened quickly. In short there is no concern that by his mere presence there, there was some overwhelming of the defendant's will.
The plaintiff gave evidence that to his knowledge there was no objection on the day of settlement to his knowledge about the matter proceeding or not on account of the defendant's lack of mental stability. Solicitor Mr Tavoularis gave evidence that no one indicated in any way to him that day that the defendant was in any way ill or incapacitated.
The defendant's evidence that "she couldn't understand what was going on in the whole day" needs to be approached with considerable caution given the balance of the evidence about what occurred that day. She acknowledged she did not ask her solicitor or her mother for the day to be adjourned to some other date when she might be feeling better. She acknowledged that she had lots of breaks during the settlement conference and that when she asked for a break she would get it.
She described the activity of her mother and solicitor on her behalf as being active. For example, the following questions and answers occured in examination-in-chief:
"On the day that you signed the agreement did you think anything was missing from the agreement?---I believe things were missing but I can't think on the day that they were, but I remember talking to my Mum saying, 'There has to be things missing out of there, Mum, for this to' - I just can't really recall. I just remember being extremely upset and - sorry, can you repeat it? Sorry, sorry."
"It's okay, just have a moment if you like?"---"I just didn't believe everything was in there but I - my head couldn't get around it to - on the day because I didn't - wasn't understanding what was going on and what Rod was coming back and forth with. I just - my mother was there and she tried to explain things to me and I just, at the end of the day, felt - I don't know what the word would be - just done over and I didn't think everything was in the document" (T3-49, L10-27).
Despite the qualifications inherent in that set of answers it is plain that both her solicitor and her mother were active in supporting and advising her on the day. Mr Tavoularis also confirmed that there were various “backwards and forwards” conferences during the day between the solicitors for each side.
The defendant did not profess a particularly detailed recollection at all of the issues that were negotiated on the day although she certainly remembered that one of them was her not wanting to lose her home. She gave evidence of having a strong emotional attachment to her home, as if it were a sanctuary to her.
As to the activity of her mother, she acknowledged that her mother was listening throughout the day and explaining to her what was going on in relation to the back and forth negotiations. She gave evidence that her mother advised her to sign the agreement which she ultimately did sign.
As to her solicitor, Mr Stockley, while the defendant did not deign to call him, a certification by him appeared within the settlement agreement itself - see Exhibit 1, Tab A, page 27. He certified therein:
"...that in relation to an agreement in writing proposed to be entered into between [CNT] and [GAC] (hereinafter called "the parties") I advised [CNT] (hereinafter called "my client") independently of [GAC] and before the time at which my client signed the agreement as to the following matters:
1. the effect of the agreement on the rights of my client;
2. the advantages and disadvantages at the time that the advice was provided to my client of entering into the agreement."
The defendant agrees that her ultimate signing of the agreement was consistent with the advice she was given by Mr Stockley.
All of this evidence, in my view, even without the adverse inference pursuant to Jones v Dunkel demonstrates, consistent with the psychiatric opinion as analysed earlier, that the defendant had an adequate general understanding of the nature of the agreement that was negotiated and agreed to that day.
Pressure by Plaintiff?
The defendant pleads that her signing of the agreement was vitiated by circumstances of manipulation, harassment, stress, emotional pressure and conflict which the plaintiff created and continually exposed the defendant to during the weeks and months prior to signing the agreement - see amended defence paragraphs 7 to 30.
There is a mixture of conduct relied upon in support of this aspect of the pleaded amended defence. Firstly, there was a focus upon the alleged abandonment by the plaintiff of a number of refinance attempts with the consequence that there was a significant disadvantage occasioned to the financial position of the defendant. The implication suggested on the defendant's behalf is that this was part of an orchestrated campaign. In my view, the evidentiary substance falls short of sustaining such a conclusion.
The plaintiff gave general evidence that the loan repayments for the proposed loans were in the order of about $8,000 interest a month. He explained he had spoken to family and friends who said it would be ridiculous at a time when they were separated for him to jump into a loan that big without having finalised any settlements between them. In cross-examination the plaintiff had no recollection of the parties having actually turned up for execution of the loan documents before he withdrew. Later in cross-examination he explained he could not recall whether it was once or twice that a loan arrangement had not gone ahead. Regretfully the precise circumstances of just what he had failed to do in respect of the two separate occasions alleged by the defence were not put to him.
The plaintiff could not recall when it was put to him that he had assured the defendant he would be present to sign a proposed loan from Jigsaw Finance.
The defendant's recollection was that there was an initial attempt to secure a loan through Jigsaw Finance for the National Mortgage Company which, despite signing pre-approvals, the plaintiff did not ultimately execute. She gave evidence that the second alleged reneging on the part of the plaintiff in respect of the pursuit of another loan related to Union Fidelity. Again, it was asserted in evidence by her that the plaintiff had signed pre-approval documents but did not ultimately execute the loan agreement. She explained the loan through Factotum referred to earlier was a loan that was secured between these two attempts at other finance. Somewhat undermining the defendant's theory about a deliberate campaign to apply pressure she acknowledged that the plaintiff did sign the Factotum loan agreement.
Against that background, I have difficulty in accepting that the plaintiff told the defendant he was never going to sign.
It is unfortunate that the plaintiff was not tested in some greater detail about the detail of each of these abandoned refinance attempts, particularly given the defendant's perception that his explanation, which was advanced in evidence, might be adequate once but not twice. However, his general explanation of being advised against assuming responsibility for a major loan without finalising the separation agreement was in my view credible and not exposed as implausible to the limited extent that it was tested at all in cross-examination.
There is no reason to conclude the plaintiff was engaged in some deliberate campaign to apply pressure, and indeed such a conclusion would be at odds with his apparent conduct in assisting with the provision of a loan by his brother in the lead up to the ultimate settlement agreement. The preferable and more obvious conclusion on the whole of the evidence is that there was simply a change of heart because of the shifting and increasingly difficult circumstances he was confronting financially.
The amended defence identifies a number of other complaints in the present context which were either not made out or not pursued in evidence. These include allegations of threats of legal proceedings by lawyers acting on behalf of Factotum Pty Ltd at paragraphs 25(a) and (b) of the amended defence, and allegations that she was confronted with claims against her by the Commonwealth Bank and by her lawyers at paragraphs 26(a) and (b) of the amended defence.
Focusing more particularly on allegations of harassment, the defendant gave evidence that there were a number of phone calls by the plaintiff to her, the frequency of which increased significantly in the lead up to the separation agreement. In dealing with this feature of the evidence I note that this aspect was not specifically pleaded, and rather seems to be raised by way of indirect inference from the content of paragraph 29 of the amended defence. The failure to put the plaintiff on proper notice of the allegations through the pleadings in this regard ultimately is of no consequence given my decision.
The plaintiff claimed that in the last few months leading up to settlement he and the defendant might have spoken once or twice a day, and he asserted they would have rung each other about an equal number of times. He acknowledged they may have fought during these calls, but asserted that he was being as amicable as he could be. He denied that his number of telephone contacts would have been 30 in a day, but said he would accept that if that is what records showed.
The defendant claimed that the plaintiff harassed her 1076 times in daily phone calls telling her, "You better sign this." Phone records which were tendered on her behalf, Exhibit 16, demonstrate, on my Associate's count, 244 calls placed to her two different mobile numbers by the defendant's phone, 148 of which were recorded as being 30 second calls. The 30 second calls are the lowest period of call category in the records, and the probability is that most of those would have been calls that diverted to message bank. The records certainly support the inference that the plaintiff was active in seeking out the defendant, but when regard is had to the numbers I have just identified from the records and to the fact that those records canvas several months, the number of contacts itself is not remarkable.
The defendant agreed that she too had sent some vitriolic text messages to the plaintiff. The defendant complained that in the plaintiff's calls to her he would threaten that he would take the house and that she would have nothing. Specifically, she complained that there was a call on the night of the 28th of January 2009, the night before the settlement conference, in which he said, "If you don't fucking sign tomorrow, you fucking druggie, you will lose everything. You will lose your shop, you will lose everything. You better sign everything over to me."
I accept that the plaintiff did contact the defendant repeatedly, and on the night before the settlement agreement. I accept that at times there was likely unpleasantness, and that the plaintiff was likely encouraging the defendant to settle their dispute. However, I do not accept that the plaintiff threatened the defendant in any unlawful or illegitimate sense or that he engaged in conduct which overwhelmed the defendant's will.
In Crescendo Pty Ltd v. Westpac Banking Corporation (1988) 19 NSWLR 40 at 47 McHugh JA, as he then was, observed:
"The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract, and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate. Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct, but the categories are not closed. Even overwhelming pressure not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress."
His Honour went on to cite the following passage from Barton v. Armstrong (1973) 2 NSWLR 598; 976 Appeal Cases 104:
"…in life, including the life of commerce and finance, many acts are done under pressure, sometimes overwhelming pressure, so that one can say that the actor had no choice but to act. Absence of choice in this sense does not negate consent in law: for this the pressure must be one of a kind which the law does not regard as legitimate. Thus, out of the various means by which consent may be obtained - advice, persuasion, influence, inducement, representation, commercial pressure - the law has come to select some which it will not accept as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress or coercion."
In my view, such limited evidence as there is of pressure being exerted through the phone calls and otherwise by the plaintiff falls substantially short of constituting illegitimate pressure. It did not involve unlawful threats. It did not amount to unconscionable conduct.
Also as part of this aspect of the pleadings, it is alleged that the settlement agreement was signed generally in a rushed context.
In that regard reference was made to a letter of the 27th of January 2009 in which there was reference, inter alia, to there being simply too much urgency to use valuable time in lengthy communications. That letter recorded that the solicitors for both parties were of that view.
Exhibit 8 in the trial was an e-mail of the 15th of January 2009 in which Ms Wright for the plaintiff informed Mr Stockley for the defendant of the plaintiff's preparedness to assist with the advancing of moneys and procuring of a further loan to assist the defendant subject to the moneys advanced being repaid from settlement moneys. While, on the one hand, this letter confirms that the defendant did have pressing financial commitments, it, on the other, also demonstrates that properly considered, not rushed, negotiations were occurring.
The plaintiff also gave evidence confirming that the settlement meeting was brought on by both parties, not just the plaintiff. She said:
"It was brought on both parties. One was me. My solicitor had contacted the other side due to my medical conditions and that I couldn't work as much, and Pacific Fair had closed down and I needed some sort of - form of income. So we tried to keep the main shop open that I started with 13 years ago when I had a brilliant company, but the separation agreement arose because I was backed into a corner and two loans weren't signed and therefore all I had - all I could do was - to get money was to refinance on the house that I bought with [GAC], mainly me, and we had to refinance on the home so I could get some money to try and keep my business and pay my creditors" T2-71 L30-42.
Her description of her expectation of what events the conference would have involved suggests she obtained just that which she had hoped for. She said:
"I expected that when I got there that ...Rod Stockley would go from room to room and we could try and sort out some arrangement because of everything that was going on with the business and my own life and - and paying the creditors off and keeping my shop and that's what I was hopeful for."
I appreciate, of course, the import of her evidence is that she did not keep her own shop but that evidence discloses that the style of communication and the purpose behind it that was to unfold on the day is consistent with that which she expected.
Conflict in solicitor acting?
As part of the pleading in combination of some of the matters I have mentioned, the defendant's pleadings introduced another, namely that the signing of the agreement was vitiated by the plaintiff's solicitor, Mr Tavoularis, acting for the plaintiff in circumstances where he allegedly had a conflict, by reason of formerly acting for the defendant, and his presence allegedly caused the defendant worry, anxiety and distress in circumstances where the plaintiff would or at least should have known of that effect with the consequence that the defendant was overborne to the extent she signed the agreement, notwithstanding that it alledgedly prejudiced her. Again, the evidence fell considerably short of the allegations heralded by the pleadings of the defendant.
Mr Tavoularis gave evidence of having previously acted for the defendant in a lease matter over a decade earlier. That related to the setting up of the lease for her first shop, for her business known as [S] Enterprises. Mr Tavoularis explained the lease negotiations had long passed.
The defendant gave evidence that Mr Tavoularis not only set up the lease of her city shop initially but also acted for her in an unfair dismissal case. She acknowledged though that it was conducted in the main by another lawyer or paralegal in Mr Tavoularis' firm. Mr Tavoularis had a vague recollection of the defendant having approached him back in the lease era in relation to some kind of unlawful dismissal matter. The defendant's recollection was that the unlawful dismissal case which related to her alleged unlawful dismissal was a few months prior to the occasion when Mr Tavoularis acted for her in securing the lease.
She claimed to have cried in Mr Tavoularis' presence when discussing the unlawful dismissal case with him. The evidence generally suggested that it was an unremarkable event in that she was likely distressed by the circumstances of her unlawful dismissal. I did not have the impression from the evidence that that event had given away some particularly confidential knowledge about her psyche.
Mr Tavoularis explained in cross-examination that in the era when he dealt with the defendant she was an upbeat and savvy client, not depressed, not down and out, and not in trouble with landlords. He denied learning anything material in relation to the future financial viability of [S] from her, explaining that the defendant would only have discussed her finances in very general terms such as referring to her family's backing in support of her. I note the defendant's case did not ever put any particular detail as to just what useful confidential information had been conveyed to him in the era when he had acted for her.
The amended defence complains that there was a threat made by the plaintiff to the defendant to the effect that Mr Tavoularis knew her back to front, and that accordingly she was "fucked". The pleading alleged this threat was made on the 21st of June 2010. It appears to be common ground that what was intended was the year 2009, not 2010. However, the evidence given by the plaintiff was that this alleged conversation occurred not in June but rather in January, only two days before the separation agreement. It is a significant inconsistency with what was pleaded.
While I am prepared to accept there may have been reference to the fact that Mr Tavoularis was acting and that that reference may have occurred on occasion when the plaintiff and defendant were talking, I do not accept that there was a threat of the kind pleaded. In reaching that conclusion I do not consider the issues in isolation but have regard to the body of evidence beyond the defendant's testimony that deals with the fact that Mr Tavoularis was plainly acting in the matter.
The defendant claimed she had no knowledge that Mr Tavoularis was going to turn up to the settlement negotiations. She did not, however, produce the e-mail pleaded at paragraph 31C of the amended defence in which there was allegedly a request made on the defendant's behalf for Mr Tavoularis to withdraw. There was, however, other evidence produced suggesting there was no difficulty as between the parties with Mr Tavoularis acting.
On the 6th of January 2009 the defendant's then solicitor, Mr Stockley, wrote to the plaintiff's solicitors to check whether there was any objection to Mr Stockley acting for the defendant given he had, in the past, acted for the defendant and plaintiff combined (Exhibit 1 Tab F page 34). By response of 19 January 2009 (Exhibit 1 Tab F page 35) the plaintiff's solicitors confirmed the plaintiff consented to Mr Stockley acting for the defendant and in turn mentioned the prior involvement of Mr Tavoularis in acting for the defendant in relation to a lease matter about 11 years ago. That correspondence inquired whether there was any objection to Mr Tavoularis being involved in the de facto property settlement negotiations. By letter dated 22 January 2009 Mr Stockley advised, "We have instructions from our client that she has no objection to your firm continuing to act in this regard" (Exhibit 1 Tab F page 36).
Further, on 27 January 2009 Mr Tavoularis forwarded an e-mail to Mr Stockley, the contents of which reflect that solicitors for both parties were actively engaged in working toward settlement and were well aware that Mr Tavoularis would be attending the settlement conference. See Exhibit 6. That e-mail concluded:
"I further confirm that we are all (you, [CNT], me, [GAC] and Ms Sue-Ellen Wright) to meet at your office at Toowong (Suite 4, Ground Floor, 41 Sherwood Road) at 10 a.m. this Thursday 29 January 2009, to finalise the document."
Mr Tavoularis denied knowledge of any e-mail dated the 22nd of June 2009 asking him to withdraw and as already mentioned no evidence was adduced as to the existence of such an e-mail.
The evidence then supports the conclusion which I make, that to the extent there was potentially any concern about Mr Tavoularis acting the defendant waived objection to, that is to say agreed to, Mr Tavoularis' continued role in the matter.
The plaintiff and Mr Tavoularis both gave evidence that they were not aware at any stage of any objection being raised to Mr Tavoularis' presence at the settlement conference. Mr Tavoularis explained that had he been aware of such an objection he would have taken the cautious course and not remained there. I accept that evidence.
As to any real effect that Mr Tavoularis' presence on the day in question had, it needs to be borne in mind that he had no material dealings with the defendant in any event. He gave evidence that his only conversation with the defendant on the day of settlement was when he took the document in for final signing to Mr Stockley at about 9 in the evening. He explained he said "Hello" to the defendant in doing so, and then walked out. He acknowledged there was one stage earlier in the day when he had walked by Mr Stockley's office and had sighted the defendant there.
The defendant laid claim to suffering an instant panic attack when she saw that Mr Tavoularis was present at the settlement conference, however on the whole of the evidence the settlement conference then proceeded for 10 to 12 hours. There was no serious suggestion pursued that the panic attack lasted all of that 10 to 12 hours.
The defendant claimed she objected to Mr Tavoularis being present, communicating that fact to Mr Stockley. According to her Mr Stockley went off, inferentially to speak with the other side and then returned, telling her that if Mr Tavoularis did not stay the meeting would not go ahead. She properly acknowledged, of course, she did not witness what was actually said between Mr Stockley and Mr Tavoularis.
Mr Stockley was, of course, the person who was in a position to give direct evidence of what was communicated to Mr Tavoularis and what the response was. Certainly Mr Tavoularis did not give evidence supporting the defendant's hearsay version of what occurred, and the defendant chose not to call Mr Stockley. Consistent with my earlier inference I infer Mr Stockley could not have given evidence supporting the defendant's hearsay version of that interaction. The upshot is the only admissible evidence of what was said by Mr Tavoularis to Mr Stockley is the evidence of Mr Tavoularis and it does not involve any acceptance of the heresay allegation made by the defendant.
I detect no evidence of impropriety in Mr Tavoularis having acted in the matter. The question of whether he should continue was positively raised between the parties, and appears to have been assented to. Moreover, such evidence as there is does not suggest a basis for any concern on the part of an objective observer.
In Prince Jefri Bolkiah v. KPMG (1991) 1 All ER 517 at 527 it was observed:
"The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter, the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its substance. Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (1) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented, and (2) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff it is not a heavy one."
Obviously that quote in the present context would be read as requiring the burden of proof being on the defendant.
There was no evidence advanced of any detail relating to any alleged confidential information, let alone evidence advanced that it might have been relevant to the negotiation of the settlement. Had there been an attempt to restrain Mr Tavoularis from acting, that attempt would have failed.
In Carindale Country Club Estate Pty Ltd v. Astill and Others (1993) 115 ALR 112 at 118 Drummond J observed:
"In my opinion, a solicitor is liable to be restrained from acting for a new client against a former client if a reasonable observer aware of the relevant facts would think that there was a real as opposed to a theoretical possibility that confidential information given to the solicitor by the former client might by used by the solicitor to advance the interests of a new client to the detriment of the old."
His Honour went on to observe:
"…it has long been recognised that a solicitor who, with the best will in the world, is determined not make use of one client's confidential information for the benefit of another client may still subconsciously draw on that information to the disadvantage of the former."
I am conscious of the possibility that there may have been some information which Mr Tavoularis received when acting for the defendant over a decade earlier of some tangential relevance to the ultimate property settlement, but given the lapse of time and given the absence of any evidence laid on of any detail about such information it is a bridge too far, in my view, to conclude that there was any difficulty whatsoever with Mr Tavoularis acting. In any event, even if there had been some concern, that was adequately addressed by the communications between the parties raising the issue and the parties resolving to continue without objection being made to Mr Tavoularis' continuation in the matter.
One of the evidentiary high points, it seemed, of any confidential information conveyed about financial matters at a time when Mr Tavoularis acted for the defendant was her evidence, "I'm sure I said to him 'I hope [S] does very well.'" That is a prime example of the complete absence of any detail suggesting a concern about confidential information which could conceivably been relevant in the modern era having been disclosed to Mr Tavoularis over a decade earlier.
Combined effects?
The defendant seeks a declaration that the purported settlement agreement was void ab initio, relying on its pleading of the above three complaints relating to the psychological aspects, the alleged campaign of pressure, and the conflict issue, which it characterises as undue influence and duress giving rise to "non est factum due to her lack of actual informed and voluntary consent to the purported settlement agreement."
I have dealt with each of those three complaints separately but even considered collectively, in a cumulative sense, they are incapable of sustaining the conclusions sought. The reality is that the defendant's financial choices had been increasingly limited because of the financial decline of her business and her own personal affairs. The choice she made in signing the settlement agreement was sensible and the product of her own realisation that she had little financial choice but to have her solicitor negotiate a reasonable settlement outcome. The settlement outcome was reasonable. She generally understood it and was aided in her understanding of it by the advice of both her lawyer and her mother. The complaints of undue influence, duress, and a lack of informed and voluntary consent are, on the whole of the evidence, demonstrably unsustainable.
The plaintiff counter-claimed in the alternative for a declaration that the purported settlement agreement was voidable at the defendant's election on the basis the conduct of the plaintiff in attempting to enforce the settlement agreement against the defendant (as a person under a special disability) was inconsistent with equity and good conscience and an unconscionable exercise of a legal right. That aspect of the counter claim must fail for the same reasons I have already given.
Conclusion
In the circumstances, the counter claim must fail and the plaintiff's case must succeed.
I have already reviewed the financial evidence in respect of events between the agreement and now in order to identify the quantum of the plaintiff's damages and monies due and owing. She owes $104,160, but the plaintiff owes her $150,000 under the agreement. The difference is $45,894. It will be necessary for that to be paid by him within one calendar month. As to the appropriate orders for specific performance in the circumstances of this case, the appropriate course is to order the plaintiff's recovery of the land and the defendant's vacation of the property. I will give her one month's grace to do so.
Before perfecting my orders I will hear the parties submissions as to costs and, in particular, the proposed means of payment of the $45,894.
HIS HONOUR: The plaintiff seeks costs to be paid on a standard basis, at least up until costs incurred as at 21 March 2013 on the close of business of that date. It seeks indemnity costs for costs incurred thereafter by reason of the content of an offer to settle, albeit not one made under the rules, that is a Calderbank offer contained in Exhibit 22. That offer granted the defendant an option to purchase the property at a price equal to the unpaid portion of the mortgage, and in the event that option was not exercised contemplated vacation of the property on service of notice by the defendant on a payment of $50,000 being made by the plaintiff to the defendant on the day on which she vacated the property.
It is submitted by the plaintiff that the effect of that offer in simple terms was an offer to settle for $50,000 which effectively beats the outcome to the defendant in the amount of $45,894 as explained in my earlier reasons.
The defendant submits the offer is not that simple, contained as it is in a broader document contemplating a variety of possible events.
The defendant also submits that in any event the parties should bear their own costs in accordance with the ordinary assumption implicit in section 341 of the Property Law Act. The plaintiff submits that section has no application whatsoever to the present proceeding. In my view, that is generally correct, although not completely so.
It is clear enough that at least part of what was argued before me in support of the relief sought in the counter claim was an application for leave to apply out of time for a property adjustment order. On any view, though, it seems that was an extremely limited part of the overall proceedings in terms of those features of the proceedings that are likely to have attracted a significant outlay of cost.
A proper exercise of my discretion in the circumstances of this case is, in my view, to give weight to the reality that even in relation to a proceeding under Part 19 of the Property Law Act section 341 does contemplate the taking into account of circumstances justifying making a costs order. That category of circumstances is not closed in that section 341(4)(g) refers to "any fact or circumstance the Court considers the justice of the case requires to be taken into account."
Given the extremely limited aspect of the case that can be described as a proceeding under Part 19, I am minded to award costs in favour of the plaintiff, however in considering my discretion and the albeit minor influence of that part of the proceeding that can be described as being a proceeding under Part 19, I am inclined to the view that I ought not order indemnity costs in light of the Caldebank offer, but, on the other hand, in making an order for costs on the standard basis, I ought not limit that order to only part of the proceedings and instead make it an order generally. That
exercise of the discretion, in my view, meets the justice of the case.
The practical effect then will be that there will be an order against the defendant to pay costs assessed on the standard basis.
In short the plaintiff misses out on costs on the indemnity basis in the light of its offer, but, on the other hand, secures costs for the whole of its proceeding albeit only on the standard basis.
The other issue is the question of the appropriate order to be made to allow for the fact that the plaintiff will still have to pay the defendant a sum of money, namely $45,894, but then as against that will be owed by the defendant an amount of costs pursuant to my order. I agree the appropriate course is to ensure that there is a set off and to construct a mechanism by which the money is paid to the plaintiff's solicitor's trust account in order that it be applied towards payment of the defendant's assessed costs. Obviously if the assessed costs fall short of that amount whatever the balance may be would then be onpaid.
Orders
HIS HONOUR: Accordingly, my orders are as follows:
The plaintiff recover as against the defendant possession
of the land described as Lot 1 on RP76338 County of Stanley Parish of Bulimba and Lot 4 on RP92733 County of Stanley Parish of Bulimba being 837 Cavendish Road, Holland Park in the State of Queensland ("the property").
The defendant vacate the property by 15 May 2013.
It is declared that pursuant to clause 26.4 of the
separation agreement dated 29 January 2009 between the plaintiff and the defendant the plaintiff is required to pay to the defendant the sum of $150,000.
The defendant pay to the plaintiff the sum of $104,160.
The defendant to pay the plaintiff’s costs of the action
including reserve costs assessed on the standard basis.
The moneys due and owing by the plaintiff to the
defendant be set off against the moneys owing by the defendant to the plaintiff.
The difference between the $150,000 and the $104,160
referred to in paragraphs 3 and 4 above namely $45,894, be paid by the plaintiff to McKays Solicitors trust account by 15 May 2013.
The sum of $45,894 held by McKays Solicitors is to be
applied towards the payment of the defendant's assessed costs with the balance if any to be paid to the defendant.
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