Gordon Leslie Rowell as trustee of the Estate of Burnett Leslie Carlisle (deceased) v Michael Declan Heffernan
[2013] NSWSC 404
•22 April 2013
Supreme Court
New South Wales
Medium Neutral Citation: Gordon Leslie Rowell as trustee of the Estate of Burnett Leslie Carlisle (deceased) and others v Michael Declan Heffernan and others [2013] NSWSC 404 Hearing dates: 22 April 2013 Decision date: 22 April 2013 Jurisdiction: Equity Division Before: Sackar J Decision: The settlements recorded in the deeds of settlement dated 9 April 2013 and 16 April 2013 should be approved.
Catchwords: PROCEDURE - compromise of proceedings - person under legal incapacity - approval of settlement by the court - whether proposed settlement is beneficial to the interests of the first defendant. Legislation Cited: Civil Procedure Act 2005
Legal Profession Act 2004
Real Property Act 1900Cases Cited: Permanent Trustee Company Ltd v Mills (2007) 71 NSWLR 1
Fisher v Martin [2008] NSWSC 1357
Fairhurst v Fairhurst [2012] NSWSC 388
Institoris v Falconer [2012] NSWCA 298Category: Principal judgment Parties: Gordon Leslie Rowell as trustee of the Estate of Burnett Leslie Carlisle (deceased) (First Plaintiff)
Gregory William Rowell as trustee of the Estate of Burnett Leslie Carlisle (deceased) (Second Plaintiff)
Korburn Properties Pty Ltd (in liquidation) (ACN 001 818 379) (Third Plaintiff and Third Cross-Defendant to the Second Cross-Claim)
Michael Declan Heffernan, by his tutor Peter Allan Rowlands Clinch (First Defendant and Cross-Defendant to the First Cross-Claim)
Terry Panayi (Second Defendant and Second Cross-Defendant to the Second Cross-Claim)
Peter Panayi (Third Defendant and First Cross-Defendant to the Second Cross-Claim)
E Bruce Kennard & Co Pty Ltd (ACN 000 906 552) as trustee of the E Bruce Kennard & Company Pty Limited Superannuation Fund (Fourth Defendant and First Cross-Claimant)
Commonwealth Bank of Australia (ABN 48 123 123 124) (Fifth Defendant and Second Cross-Claimant)Representation: Counsel:
R Gration (Plaintiffs)
I Rugless, solicitor (First Defendant)
R W Evans (Second and Third Defendants)
I Rugless, solicitor, mentions appearance (Fourth Defendant)
A J McInerney SC (Fifth Defendant)
Solicitors:
Peter Kennedy Lawyers (Plaintiffs)
Clinch Long Letherbarrow Lawyers (First Defendant and Cross-Defendant to the First Cross-Claim)
McKells Solicitors (Second and Third Defendants)
Hartmann & Associates Solicitors (Fourth Defendant and First Cross-Claimant)
Gadens Lawyers (Fifth Defendant and Second Cross-Claimant)
File Number(s): 2011/416692
EX TEMPORE Judgment
Background
In the proceedings before me, the First and Second Plaintiffs and the Fourth Defendant have made claims against the First Defendant alleging, among other things, professional negligence, breach of various statutory duties imposed on solicitors, breach of trust and breach of fiduciary duty, arising out of conduct engaged in by the First Defendant during the time that he practiced as a solicitor.
The First Defendant's tutor, Peter Allan Rowlands Clinch, swore an affidavit dated 16 October 2012 in which he gives evidence that the First Defendant was employed as a solicitor by law firm Clinch Neville Long from around 20 July 1996 to 28 February 2003. Records from the Law Society of New South Wales indicate that the First Defendant was admitted as a solicitor on 30 October 1972 and continued to hold a practicing certificate to the year ended 30 June 2010.
Under cover of a letter dated 11 April 2013 from the solicitors for the First Defendant I received a deed dated 9 April 2013 executed by the First and Fourth Defendants setting out the settlement reached in respect of the cross-claim by the Fourth Defendant against the First Defendant (this is the First Cross-Claim in the proceedings). The First Defendant's solicitors sent further correspondence to my Associate on 17 April 2013, this time attaching an executed copy of a deed dated 16 April 2013 in settlement of the claims made by the First and Second Plaintiffs against the First Defendant. The parties to the settlement deeds agree that as the First Defendant is under a relevant legal incapacity, each of the two settlements reached require the approval of the court.
Having reviewed the medical evidence in the Exhibit to the First Defendant's tutor's affidavit dated 16 October 2012, I am satisfied, and there does not appear to be any dispute, that the First Defendant is under a legal incapacity for the purpose of s 76 of the Civil Procedure Act. In a letter dated 17 August 2012, Dr Ronald Joffe, a neurologist of whom the First Defendant was a patient from 22 April 2008 to 22 September 2010, described the First Defendant as being "bewildered for much of the examination" during his first consultation on 22 April 2008. Dr Joffe diagnosed the First Defendant with Alzheimer's disease, and said that the First Defendant's condition would "certainly have been evolving over some 3 or 4 years prior to" his initial consultation in April 2008. Dr Joffe described the First Defendant during a later consultation on 22 September 2010 as "worsening" in condition and as having "no idea of what he is saying or doing...he doesn't understand anything much and his comprehension is awful". The First Defendant was a resident in retirement village in Chatswood and is, at present, a high care resident at BUPA Queens Park Care Facility in Waverley, suffering from advanced dementia.
Principles
The Civil Procedure Act 2005 s 76 provides:
76 Settlement of proceedings commenced by or on behalf of, or against, person under legal incapacity
(3) Except with the approval of the court, there may not be:
(a) any compromise or settlement of any proceedings to which this section applies, or
(b) any acceptance of money paid into court in any such proceedings,
as regards a claim made by or on behalf of, or against, a person referred to in subsection (1).
Subsection (1) refers to a person under legal incapacity. Section 3 defines a person under legal incapacity as:
any person who is under a legal incapacity in relation to the conduct of legal proceedings...and, in particular, includes:
(a) a child under the age of 18 years, and
(b) an involuntary patient, a forensic patient or a correctional patient within the meaning of the Mental Health Act 2007, and
(c) a person under guardianship within the meaning of the Guardianship Act 1987, and
(d) a protected person within the meaning of the NSW Trustee and Guardian Act 2009, and
(e) an incommunicate person, being a person who has such a physical or mental disability that he or she is unable to receive communications, or express his or her will, with respect to his or her property or affairs.
The principles for approval of settlements entered into by a person under a legal incapacity are well settled. For the court to grant approval it must be satisfied that it is beneficial to the interests of the person under the legal incapacity (Permanent Trustee Company Ltd v Mills (2007) 71 NSWLR 1 at [29] per Hammerschlag J; Fisher v Martin [2008] NSWSC 1357 at [29] and [41] per Rothman J). The compromise should be assented to by the tutor and legal advisors (Permanent Trustee Company Ltd v Mills at [29]), though it ultimately is for the court, not the parties, to determine whether the compromise is beneficial (Fisher v Martin at [29]). The authorities setting out these principles were summarised by Hallen AsJ (as his Honour then was) in Fairhurst v Fairhurst [2012] NSWSC 388 at [30]-[40], and subsequently approved by Allsop P in Institoris v Falconer [2012] NSWCA 298 at [2].
I will first deal with the settlement of the Fourth Defendant's cross-claim, and then with the settlement of the First and Second Plaintiffs' claims. However, I will only set out the factual background only insofar as necessary to determine whether to approve the aspects of the proceedings the subject of the settlements.
Settlement of the First Cross-Claim
In its cross-claim, the Fourth Defendant's claims against the First Defendant include:
(1) a claim for the sum of $50,000 plus interest and legal costs (totalling about $111,440.56);
(2) claims arising from the alleged breaches by the First Defendant of his fiduciary duty to the Fourth Defendant; and
(3) various other declarations and orders.
I will set out the facts as alleged in the cross-claim. The Fourth Defendant, which is the cross-claimant, E Bruce Kennard & Co Pty Ltd, is the trustee of the E Bruce Kennard & Company Pty Limited Superannuation Fund. E Bruce Kennard & Co Pty Ltd retained the First Defendant, Mr Heffernan, as its solicitor since at least 1987 to about late 2010. The Third Plaintiff, Korburn Properties Pty Ltd, is a mortgage service company established by Mr Heffernan. Both Mr Heffernan and his wife were the sole directors and shareholders of Korburn Properties Pty Ltd, and Mr Heffernan was its secretary.
From about 1992, at the request of Mr Heffernan, E Bruce Kennard & Co Pty Ltd agreed to lend money to various third persons introduced to it by Mr Heffernan. From about 2002, Mr Heffernan began lending money of E Bruce Kennard & Co Pty Ltd to various third persons without first discussing it or obtaining consent to each loan. Mr Heffernan also paid to himself commission from the interest earned on each such loan.
On about 13 December 2006, Mr Heffernan provided the sum of $50,000 from the assets of the E Bruce Kennard & Co Pty Ltd Superannuation Fund to his own company, Korburn Properties Pty Ltd. On or around the same day, Mr Heffernan's company lent the sum of $300,000 to Terry and Peter Panayi, the Second and Third Defendants (the Panayi Loan). There were four other contributories to the Panayi Loan (in various amounts).
The terms of the Panayi Loan were evidenced in writing, and in effect provided for the repayment of principal by one year, plus monthly payments of interest calculated by reference to outstanding principal from time to time. The loan was required to be secured by a second registered mortgage (the Panayi Mortgage) over various properties (the Panayi Properties) (the Permanent Trustee Australia Limited and then the Commonwealth Bank of Australia had the first registered mortgage on the Panayi Properties).
Also on about 13 December 2006, Mr Heffernan's company executed a declaration of trust in respect of the Panayi Mortgage, with itself as trustee, and the beneficiaries being the various five contributories to the Panayi Loan (including E Bruce Kennard & Co Pty Ltd). It was a term of the declaration of trust that Mr Heffernan's company would retain 2.5% per month of the principal amount of the loan outstanding (to be taken out of the monthly interest repayments made by Terry and Peter Panayi).
On about 16 March 2007 Mr Heffernan prepared a mortgage form to secure the Panayi Loan over the Panayi Properties and had the form stamped, but failed to register the Panayi Mortgage and did not obtain the consent of Permanent Trustee Australia Limited or the Commonwealth Bank to have registered a second mortgage on the title of the Panayi Properties. Terry and Peter Panayi have been underpaying in interest, and have not repaid the principal sum of the loan at all.
E Bruce Kennard & Co Pty Ltd alleges, among a multitude of other things, that Mr Heffernan stood to make financial gain from the transaction, did not obtain the consent of E Bruce Kennard & Co Pty Ltd before taking its money, poorly conducted the transaction by failing to ensure that Permanent Trustee Australia Limited or the Commonwealth Bank would consent to the registration of the mortgage over the Panayi Properties, failed to check that the improvements to the Panayi Properties were insured, and breached a number of duties imposed on solicitors by the Legal Profession Act 2004.
On the basis of these allegations, E Bruce Kennard & Co Pty Ltd, the First Cross-Claimant, seeks the sum of its contribution to the Panayi Loan, namely $50,000, plus outstanding interest to which it is entitled, plus legal costs.
I have reviewed Mr Heffernan's defence to this cross-claim. It is prefaced by a sensible acknowledgement that Mr Heffernan's tutor, who is responsible for the preparation for the defence, has only limited material available to assist him given Mr Heffernan's present incapacity. The most striking, but on reflection unsurprising, feature of the defence is that it consists almost entirely of either admissions of the allegations made in the First Cross-Claim, or a response that Mr Heffernan "does not know and cannot admit" the allegations made in the cross-claim.
Whatever evidence may ultimately be relied upon by E Bruce Kennard & Co Pty Ltd to support its claim against Mr Heffernan, it is difficult to see what evidentiary material, if any, Mr Heffernan can put on in response to challenge it, given his state of incapacity. It is likely that the contemporaneous documents would be conclusive.
Settlement of the claim by the First and Second Plaintiffs
In the Further Amended Statement of Claim, filed on 23 October 2012, the First and Second Plaintiffs, being Gordon Leslie Rowell and Gregory William Rowell as trustees of the Estate of Burnett Leslie Carlisle (deceased), make claims against Mr Heffernan which include:
(1) a claim for the sum of $160,000 in relation to the Panayi Loan / Panayi Mortgage, plus interest plus costs;
(2) a claim arising out of other financial transactions, for the amount of $336,604 which includes interest and costs; and
(3) various other declarations and orders.
I will set out the relevant facts as alleged in the Further Amended Statement of Claim. The First and Second Plaintiffs are presently the trustees of the Estate of Burnett Leslie Carlisle (deceased) who died on 1 June 2003. Mr Heffernan was (but no longer is) a co-trustee of the Carlisle Estate together with a John Rhodes Bamfield. Mr Bamfield died on 4 December 2006, but Mr Heffernan did not appoint a replacement trustee until about 29 October 2009 when he appointed the First and Second Plaintiffs as trustees of the Carlisle Estate and retired himself.
The claims made by the First and Second Plaintiffs against Mr Heffernan relate to various transactions he entered into as trustee for the Carlisle Estate, without obtaining the consent of the beneficiaries of the Carlisle Estate, and which resulted in significant loss to the Carlisle Estate. I will briefly set out what is alleged in the Further Amended Statement of Claim was involved in each of these transactions.
Panayi Loan
The First and Second Plaintiffs make allegations against Mr Heffernan in relation to the Panayi Loan / Panayi Mortgage in very similar terms to the allegations made by the Fourth Defendant in its cross-claim against Mr Heffernan. To avoid repetition, I will not restate those allegations in full. In summary, on or about 13 December 2006, Mr Heffernan (as then trustee of the Carlisle Estate) provided the sum of $160,000 from the assets of the Carlisle Estate to Korburn Properties Pty Ltd. On the same day, Korburn Properties Pty Ltd then lent the sum of $300,000 (made up in part by the sum of $160,000 from the Carlisle Estate) to Terry and Peter Panayi. The loan to Terry and Peter Panayi was secured by an unregistered stamped second mortgage executed by Korburn Properties Pty Ltd and by Terry and Peter Panayi. The First and Second Plaintiffs have made claims against Mr Heffernan, on grounds almost identical to those made by the Fourth Defendant in its cross-claim, in respect of Mr Heffernan's conduct of this transaction.
In summary, the amount contributed to the Panayi Loan by the Carlisle Estate is $160,000 (instead of $50,000), and therefore the amount sought to be recovered by the Carlisle Estate in respect of the Panayi transaction is the entirely outstanding principal sum of $160,000 plus outstanding interest, plus costs.
Acquisition of the Kennard loan
On or about 7 July 2006, Mr Heffernan (as trustee for the Carlisle Estate) paid the sum of $102,000 from the Carlisle Estate to E Bruce Kennard & Co Pty Ltd, the trustee for the E Bruce Kennard & Co Pty Ltd Superannuation Fund. On or about 12 July 2006, he then signed a deed, assigning certain loans and corresponding mortgages totalling $102,000 from E Bruce Kennard & Co Pty Ltd to the trustees of the Carlisle Estate (Burnett Leslie Carlisle had died on 1 June 2003).
Mr Heffernan did not obtain the consent of the beneficiaries of the Carlisle Estate before making the assignment, nor did he procure the execution of the deed of assignment by E Bruce Kennard & Co Pty Ltd either before or after paying the sum of $102,000, nor did he register the transfer of any of the mortgages, nor did he enforce the repayment of the loans following their expiry. There are five debtors who together owed the amount of $102,000. Two of the debtors have provided repaid in full the principal amounts which they owed, being $29,000 and $6,000. However there has been no payment of interest. Therefore the total amount which remains owing to the Carlisle Estate is about $67,000 by way of principal, plus outstanding interest and costs.
Acquisition of the G Sommer-Jensen loan
On or about 31 March 2006, Mr Heffernan (as trustee for the Carlisle Estate) paid $40,475 from the Carlisle Estate to acquire a debt owed to the Estate of a late G Sommer-Jensen. The estate of the late G Sommer-Jensen was a contributory mortgagee in the amount of $40,000 to registered mortgage AC82196 held by Korburn Properties Pty Ltd (i.e. Mr Heffernan's company) as trustee for the contributories. That mortgage secured a loan of $100,000 from Mr Heffernan's company to a Mr Locksley James Finnegan and his daughter Kerry Finnegan. Mr Heffernan was also the executor of the late G Sommer-Jensen.
Mr Heffernan did not obtain the informed consent of the beneficiaries of the Carlisle Estate before purchasing the debt from the estate of the late G Sommer-Jensen. On about 18 January 2011 the Carlisle Estate received payment of the $40,000 in respect of the principal amount of the debt it had purchased, but it received only part of the interest in respect of that loan. The mortgage AC82196 was discharged on 14 December 2010.
Therefore the claim in respect of this transaction is essentially for outstanding principal in the sum of $475, outstanding interest, and costs incurred.
Acquisition of Weinert interests in loan to Snells
On about 15 December 2008, Mr Heffernan (as trustee for the Carlisle Estate) paid from the Carlisle Estate the sum of $65,000 plus interest of $1,460 to a Mr William John Weinert and a Mrs Margaret Mary Weinert to acquire their interest (65/98th interest) in a loan secured by an unregistered second contributory mortgage. The other contributors to the loan were E Bruce Kennard & Co Pty Ltd (20/98th interest) and Korburn Properties Pty Ltd (13/98th interest). The mortgagors were a Kenneth Ross Snell and Vivienne Deborah Grace Snell, and the mortgage was over the land at folio identifier 30/816078. The mortgagors had, on around 22 April 1998, sold the land to third parties who had no notice of any interest in the land arising under the unregistered second mortgage.
By acquiring for the Carlisle Estate Mr and Mrs Weinert's interest in an unregistered second mortgage when the land the subject of the mortgage had already been sold to purchasers who had acquired it without notice of that unregistered interest, Mr Heffernan is alleged to have caused loss to the Carlisle Estate.
The Carlisle Estate has not received any repayments in respect of this loan. The claim in respect of this transaction is for the entirely outstanding principal sum of $66,460, plus interest, plus costs incurred.
Acquisition of Weinert interest in loan to Hudson
On or about 15 December 2008 Mr Heffernan (as trustee for the Carlisle Estate) paid $105,000 to Mr and Mrs Weinert to acquire their interest in registered mortgage 3192724 over land held by a Michael Robert Hudson at folio identifier 40/4842. Mr Heffernan failed to register the transfer of the interest in the mortgage to the Carlisle Estate from Mr and Mrs Weinert, failed to take steps to enforce the Carlisle Estate's rights under the mortgage to receive interest payments, and failed to take steps to seek repayment of the principal amount when it fell due.
On about 17 March 2011, Mr Hudson discharged mortgage 3192724 and paid $97,650 to the Carlisle Estate by way of principal and $4,912.82 by way of interest. Therefore in respect of this transaction there remains owing to the Carlisle Estate the principal amount $7,350 and some interest.
Loan of funds from Carlisle Estate to Mr Jay with Ultimo unit as security
On about 5 September 2005 a Mr Patrick Jay retained Mr Heffernan as his solicitor to act on the mortgage of a unit in Ultimo which Mr Jay owned to secure a loan of $98,200 provided to Mr Jay from the Carlisle Estate. The purpose of the loan was to enable Mr Jay to acquire a property in Wisemans Ferry for $95,000.
By a mortgage dated 13 October 2005, Mr Jay mortgaged his Ultimo unit to Mr Heffernan (and Mr Bamford, both acting as trustees for the Carlisle Estate). The mortgage document is unstamped, and was only registered on 2 August 2010 (as AF619619) with effect from 13 October 2005. Mr Heffernan did not obtain the consent of the beneficiaries of the Carlisle Estate before lending the sum of $98,200 to Mr Jay. At the request of Mr Jay, mortgage AF619619 was varied to extend the date of repayment of principal from 14 October 2007 to 14 October 2009.
Mr Jay did not pay the principal sum by 14 October 2009, and therefore by a notice pursuant to s 57(2)(b) of the Real Property Act 1900 served on Mr Jay on 12 July 2010, the First and Second Plaintiffs demanded repayment of the principal sum on or before 12 November 2010. Mr Jay failed to make repayment. A notice pursuant to Commonwealth consumer protection legislation was also issued requiring payment of the principal sum by 23 December 2010. Again, Mr Jay failed to make repayment.
Loan of funds from Carlisle Estate to Mr Jay with Pyrmont unit as security
Mr Jay also owned a unit in Pyrmont. On about 3 August 2005 he retained Mr Heffernan to act as his solicitor on a mortgage of his Pyrmont unit to secure an advance of $103,602 from the Carlisle Estate. The advance was to enable Mr Jay to purchase a property in St Albans for $100,000. Mr Heffernan paid the sum of $103,602 to Mr Jay from the Carlisle Estate. Mr Jay mortgaged his Pyrmont unit in favour of Mr Heffernan and Mr Bamford (acting as trustees for the Carlisle Estate). The mortgage bears the date 13 September 2005 and is registered as AB835612. Mr Heffernan did not obtain the consent of the beneficiaries of the Carlisle Estate before entering into this transaction.
It appears that Mr Jay later entered into a contract for the sale of his Pyrmont unit, and on settlement on 17 April 2008, received $103,745. It appears that also on the settlement date, Mr Jay substituted in place of the mortgage to the Carlisle Estate (i.e. mortgage AB835612) an equitable mortgage, which was formed by the deposit of title deeds for properties in Lower Macdonald and St Albans and by a mortgage in personam against Mr Jay (together, Equitable Mortgage). Mr Heffernan released mortgage AB835612 (i.e. the mortgage against the Pyrmont unit in favour of the Carlisle Estate) without receiving payment of any of the monies secured by that mortgage. The Equitable Mortgage was due to expire on 13 September 2009.
Mr Jay failed to pay to the Carlisle Estate the principal sum of $103,745 secured by the Equitable Mortgage on 13 September 2009. The First and Second Plaintiffs issued a notice to Mr Jay on 20 November 2010 pursuant to certain Commonwealth consumer protection legislation demanding payment of the principal sum of $103,745 plus interest, by 23 December 2010. Again, Mr Jay failed to pay by that date.
Mr Jay repays principal sums plus interest
Eventually Mr Jay paid, by three instalments, the total sum of $202,145 to the Carlisle Estate to discharge in full his liabilities under the Equitable Mortgage and under mortgage AF619619. However, the First and Second Plaintiffs seek to recover from Mr Heffernan considerable legal costs they have incurred in investigating and attempting to recover the amounts owed to them by Mr Jay.
Mr Heffernan's defence
Mr Heffernan's defence to the First and Second Plaintiff's claims is styled similarly to his defence to the cross-claim. It again, understandably, consists almost entirely of either admissions or merely an expression of his inability to admit.
Overall summary of loss allegedly caused by Mr Heffernan
In the Fourth Defendant's cross-claim against Mr Heffernan, the Fourth Defendant alleges that the total amount of the loss it has suffered as a result of Mr Heffernan's conduct in relation to the Panayi transaction is about $111,440.56. This consists of the Fourth Defendant's contribution of $50,000 towards the loan (none of which has been repaid), unpaid interest, and legal costs.
In the First and Second Plaintiffs' claims against Mr Heffernan, the total amount of the loss allegedly suffered as a result of Mr Heffernan's conduct in relation to about seven transactions:
- Panayi Loan / Mortgage: Outstanding principal of $160,000, plus interest plus costs.
- Acquisition of Kennard loan: Outstanding principal of $67,000 plus outstanding interest plus costs.
- Acquisition of the G Sommer-Jensen loan: Outstanding principal of $475, outstanding interest, and costs incurred.
- Acquisition of Weinert interests in loan to Snells: Outstanding principal of $66,460, plus interest, plus costs incurred.
- Acquisition of Weinert interest in loan to Hudson: Outstanding principal amount of $7,350 and some interest.
- Loan of funds from Carlisle Estate to Mr Jay (two transactions): Legal costs.
The total amount of the loss (i.e. outstanding principal, interest and costs) suffered by the Carlisle Estate is alleged to be $496,604, as at 12 December 2012.
Terms of settlement
In relation to the settlement of the cross-claim, the terms of the settlement deed provide for the payment by the First Defendant of $70,000 to the Fourth Defendant (clause 2.1) in exchange for, first, satisfaction of all of the Fourth Defendant's claims against the First Defendant (clauses 2.5 and 7.1), and secondly, the acquisition by the First Defendant of all of the Fourth Defendant's interest in the mortgage to Terry and Peter Panayi (clause 2.2). The settlement is on terms that the parties bears their own costs. Effectively, this means Mr Heffernan pays $70,000 in settlement of a $111,440.56 claim.
The second settlement deed, which was executed by the First and Second Plaintiff and Mr Heffernan, may be described as being divided into two parts. The first part is the payment by Mr Heffernan of $160,000 to the Carlisle Estate in exchange for acquiring the Carlisle Estate's interest in the Panayi Loan or Panayi Mortgage, whatever its value may be. The second part is the payment of $244,378 by Mr Heffernan to the Carlisle Estate as satisfaction for the claim of $336,604. The deed also requires Mr Heffernan to pay $17,000 to the First and Second Plaintiffs' solicitors on account of Counsel's fees. I note however, that the deed makes no provision for the payment of the solicitors' fees by Mr Heffernan.
Accordingly, the terms of the deed provide for a total payment of $404,378 (clause 2.1) plus $17,000 (clause 2.2) by Mr Heffernan in exchange for, first, satisfaction of a claim for $496,604 (clauses 2.7 and 7.1), and secondly, the value (if anything) of the Carlisle Estate's interest in the Panayi Loan (clause 2.3). The deed makes further provision for the distribution of any amounts recovered in the proceedings. I do not envisage these provisions exposing Mr Heffernan to further liability.
Given the prima facie strength of the claims by the First and Second Plaintiffs and by the Fourth Defendant against Mr Heffernan, I do not think it is insensible for some provision for costs in favour of the First and Second Plaintiffs and the Fourth Defendant to be made in each of the deeds of settlement. The overall position is that Mr Heffernan pays $491,378 to settle what appear on the state of the pleadings to be strong claims totalling $608,044.60.
Conclusion
In light of the medical reports to which I have referred, it may be possible that at least some of Mr Heffernan's mistakes were a result of his mental deterioration. However, even if that is true, it does not detract from the strength of the claims made against Mr Heffernan; if anything, it would support the inference that he was prone to making mistakes of the nature alleged against him. The factual background set out in the recitals to each of the two deeds of settlement signed by Mr Heffernan is largely in consonance with the facts as alleged in the relevant pleadings. I also add the observation that a number of the allegations made against Mr Heffernan cause real concern and are overwhelmingly likely, if proven true, to have the effect of seriously tarnishing his reputation.
As Mr Heffernan has reached settlement in respect of each aspect of his involvement in these proceedings, no written submissions have been prepared on his behalf. Mr Ian Rugless, a solicitor at Clinch Long and Letherbarrow acting for Mr Heffernan, has, in letters dated 11 and 17 April 2013, indicated his assent to each of the two settlements and has expressed the view that the settlements are commercially beneficial to his client. Having regard to the state of the pleadings as previously described, to the available evidence, to what would inevitably and understandably be the state of the evidence if the matter proceeds, to the prima facie strength of the claims against Mr Heffernan, and taking into account all the risks and all the circumstances, it is my view that the settlements recorded in the deeds of settlement dated 9 April 2013 and 16 April 2013 are beneficial to Mr Heffernan's interests, and should be approved.
I therefore make the following orders by consent, in relation to the proceedings between the First and Second Plaintiffs and the First Defendant:
(1) The Proceedings between the First and Second Plaintiffs and the First Defendant be dismissed.
(2) No order as to costs with the intent that the First and Second Plaintiffs and the First Defendant will bear their own costs in relation to the Proceedings between them.
(3) The Court approves the terms of settlement and the release contained in the Deed dated 16 April 2013, executed by the First and Second Plaintiffs and the First Defendant.
I also make the following orders by consent, in relation to the cross-claim by the Fourth Defendant against the First Defendant:
(1) First Statement of Cross-Claim filed 16 April 2012 be dismissed.
(2) No order as to costs with the intent that the Cross-Claimant and Cross-Defendant will bear their own costs of the First Cross-Claim and in the Proceedings between them.
(3) The Court approves the terms of settlement and the release contained in the Deed dated 9 April 2013, executed by the Cross-Claimant and Cross-Defendant.
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Decision last updated: 23 April 2013
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