Lampropoulos v Kolnik - [2010] WASC 193

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: LAMPROPOULOS -v- KOLNIK [2010] WASC 193

CORAM: SIMMONDS J

HEARD: 28-30 APRIL, 1, 4 & 5 MAY, 2-4, 7-10 SEPTEMBER 2009

DELIVERED : 30 JULY 2010

FILE NO/S: CIV 1578 of 2005

BETWEEN: PAMELA DENISE LAMPROPOULOS
Plaintiff
AND
LYNNE KOLNIK As Executor of the Will of GERALD THOMAS FOLEY
First Defendant
REGISTRAR OF TITLES
Second Defendant

Catchwords:

Contracts - Formation - Whether parties intended to be immediately bound - Memorandum of understanding in relation to an option providing for option agreement to be drafted

Contracts - Capacity to contract - Soundness of mind - Dementia - Whether party to contract suffering from dementia - Whether party to contract lacked contractual capacity - Whether other party ought to have known of incapacity

Unconscionable dealing - Whether party to contract suffering from special disadvantage - Whether special disadvantage sufficiently evident to other party - Whether other party took unconscientious advantage of special disadvantage

Legislation:

Nil

Result:

Action to enforce contract dismissed
Judgment for first defendant on counterclaim

Category: B

Representation:

Counsel:

Plaintiff:     Mr M J McCusker QC & Mr A Metaxas
First Defendant             :     Ms G A Archer SC & Mr S R Sirett
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Metaxas & Hager
First Defendant             :     Downings Legal
Second Defendant         :     No appearance

Case(s) referred to in judgment(s):

Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447
Crago v McIntyre [1976] 1 NSWLR 729
Edna May Collins by her next friend Glenys Lesley Laraine Poletti v May [2000] WASC 29
Ford by his tutor Watkinson v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 257 ALR 658
Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423
Giles v Rooney (1996) 23 MVR 510
Grainger v Williams [2009] WASCA 60
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
McLaughlin v Daily Telegraph Newspapers Co Ltd (No 2) [1904] HCA 51; (1904) 1 CLR 243
Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60
Niesmann v Collingridge [1921] HCA 19; (1921) 29 CLR 177
Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265
Turner v Windever [2005] NSWCA 73

SIMMONDS J:

Introduction

This is the trial of an action for relief by way of specific performance, damages and consequential relief. The first defendant has also made a counterclaim for declaratory and related relief.
The plaintiff claims as purchaser under an agreement to purchase a property by the sea at Mandurah. The agreement is said to be the result of the exercise of an option granted by an option agreement headed 'Memorandum of Understanding' (MOU). This was entered into with the registered proprietor of the property and subsequently varied by agreement deleting the provision in it for preparation of an option agreement. The first defendant is the executrix of the registered proprietor. The second defendant, the Registrar of Titles, is joined as the plaintiff seeks to have orders that will compel the second defendant to have her shown on the certificate of title to the land as its registered proprietor in place of the present registered proprietor.
The first defendant by her defence and counterclaim, as amended on the first day of the trial, says on its proper construction the MOU is nothing more than an agreement to agree. In any event, the first defendant says, the MOU called for an option agreement to be drafted by a stipulated date, which was not done. The first defendant also says the MOU was not varied as alleged.
Further, the first defendant says that at all relevant times the registered proprietor lacked the mental capacity to understand the nature and effect of the MOU and the variation alleged, and the plaintiff knew or ought to have known of that lack of capacity.
The first defendant also says that at all relevant times the registered proprietor was under a special disability in dealing with the plaintiff, with the consequence that there was an absence of any reasonable degree of equality between them. The first defendant says that the disability was sufficiently evident to the plaintiff to have made it prima facie unfair or unconscientious that the plaintiff procured or accepted the registered proprietor's assent to the impugned transaction. The first defendant says that the evident absence of any reasonable degree of equality between them cast a burden on the plaintiff to show the transaction was fair, just and reasonable, and that the plaintiff cannot discharge that burden.
The first defendant says that by reason of the matters just described the plaintiff is not entitled to the relief she claims, and a declaration should be granted that the MOU and the variation alleged 'be set aside'. Alternatively, that a declaration should be granted that the MOU and the variation alleged were voidable at the option of the first defendant by virtue of the registered proprietor's mental incapacity and that they were avoided on that basis. Furthermore, the first defendant says orders should be made for the withdrawal of the caveat the plaintiff lodged in respect of the interest she claims in the property and for damages in respect of the lodging of that caveat without reasonable cause, such damages to be assessed. The first defendant also seeks equitable damages, further or in the alternative, as well as orders for other relief.
I note that no argument was addressed to me with respect to the damages claims of either party.
There are three groups of issues in the trial in respect of which I must make findings.
One group of issues concerns the MOU. Here the issues are whether or not it was no more than an agreement to agree and, if not, whether it was varied so as to delete the provision calling for an option agreement.
The second group of issues concerns whether or not the registered proprietor lacked the mental capacity to understand the transaction when it was explained to him at the relevant times and, if he did, whether or not the plaintiff was aware, or ought to have been aware, of that lack of capacity.
The third group of issues concerns the first defendant's claim of unconscionable dealing by the plaintiff with the registered proprietor. Here the issues are whether or not the registered proprietor was under a special disability; and, if there was such a special disability, whether or not the special disability was sufficiently evident to the plaintiff to make it unfair that the plaintiff should benefit from the transaction with the registered proprietor. The plaintiff however, does not plead that the transaction was fair, just and reasonable.
I begin by setting out the background to the parties' claims, before describing the evidence they presented, and considering the issues in the trial. In doing so I will refer to the first defendant in her personal capacity as the first defendant, except as I will indicate.

Background: events leading to the signing of the memorandum of understanding on 23 February 2005

In February 2005 the plaintiff was a licensed real estate agent under the Real Estate and Business Agents 1978 Act (WA). She was employed as a real estate agent by Cairns Pty Ltd, trading as Realty Executives Keith Howe & Associates (Realty Executives). She had first been registered as a real estate agent in 1984.
In February 2005 Gerald Thomas Foley (Mr Foley) was 78 years old, having been born on 8 June 1926. He was living in a property on Curtin Avenue in Cottesloe (the Curtin Avenue home), which he had acquired from the estate of his mother.
In February 2005 Mr Foley was at all material times the registered proprietor of a property at 152 Ormsby Terrace in Silver Sands, being Lot 12 on Diagram 29948 and the whole of the land comprised in Certificate of Title Volume 1289 Folio 867 (the Property). The Property is located about 2 km from the central business district of Mandurah; it is rectangular in shape and level; it has an area of 809 sqm with a frontage of 20.11 m and a depth of 40.22 m; and it is separated from the beach by Ormsby Terrace and a foreshore reserve. The Property is, and at all material times was, vacant land on Ormsby Terrace and zoned residential.
Until 1986 Mr Foley had worked as a school teacher, and had at one time been the headmaster and a teacher at Meekatharra College.
In 1993 Mr Foley was made a crosswalk attendant (or traffic warden) for a crossing near Presbyterian Ladies College (PLC) and worked there mornings and afternoons on school days until 2005.
In the middle of 1995 the first defendant had rented a granny flat at the Curtin Avenue home. In the middle of 1996 the first defendant moved out of the granny flat to live in Mosman Park.
In March 2002, after having travelled overseas and having returned to Mosman Park, the first defendant moved back to the Curtin Avenue home.
In late June 2002 Mr Foley executed an enduring power of attorney dated 28 June 2002, appointing the first defendant and Mr Foley's sister Ms Marie Hunt his attorney.
On 19 July 2002 Mr Foley executed a new will replacing his previous will, executed 24 July 1998. The 2002 will named the first defendant as his executor; she was also the main beneficiary under the 2002 will.
On 19 February 2005 the plaintiff visited Mr Foley at the Curtin Avenue home. The plaintiff had for some time been looking to acquire property in the Mandurah area, and in particular had been interested in acquiring land in the locality of Ormsby Terrace. The plaintiff had identified Mr Foley as the owner of the property from her use of a database available to real estate agents.
During the visit on 19 February 2005 the plaintiff asked Mr Foley if he was interested in selling the property. He said he was not.
On 22 February 2005 Mr Foley telephoned the plaintiff.
The following day, 23 February 2005, and as a result of this telephone call, the plaintiff with her father visited Mr Foley again. At some time between 2.20 pm and 2.40 pm that day the three signed a document headed 'Memorandum of Understanding'.

Background: the Memorandum of Understanding

One of the issues in the trial requires me to identify the proper construction of the MOU. It is therefore appropriate to set it out at this point.
The MOU as it was in evidence before me (a copy is exhibit 1) was contained in a single sheet of paper and read as follows:
Pamela Denise Lampropoulos
[Post office box in Claremont]
23 February 2005
Mr Gerald Thomas Foley
[Address of Curtin Avenue home]
Dear Mr Foley
Memorandum of Understanding (MOU):
Option to purchase property situated at 152 Ormsby Terrace Silver Sands 6210 Western Australia
I confirm our discussion held on 23 February, 2005 regarding the option to purchase the property at 152 Ormsby Terrace, Silver Sands, Western Australia ('the property') and now set out the agreed terms.
1)An option to purchase the property is granted effective 23 February 2005.
2)In consideration for the granting of the option, an option fee of $300 (plus any applicable GST) will be payable on execution of the option agreement, by the relevant parties, such option agreement to be drafted by the option holder's solicitor within 21 days of execution of this 'MOU').
3)The expiry date of the option will be on or before 5pm WST 90 days from execution of this letter.
4)The exercise price of the option is to be $300,000 (inclusive of any applicable GST) less the GST inclusive amount of the option fee paid in point 2 above.
5)It is acknowledged that the Purchaser may exercise the Option in her own right or assign all or part of her interests under this document (and the Option) to another person or entity to enable the assignee to exercise the Option.
6)On the Purchaser exercising the Option, the Vendor must sell the property to the Purchaser on the terms and conditions set out.
7)The Purchaser is to pay all stamp duty payable on the Option agreement and the transfer of the Property if the Purchaser exercises the Option.
8)Each Party must bear its own costs with respect to the negotiation, preparation and execution of the Option agreement.
Signed for and on behalf of the Purchaser
Pamela Louise Lampropoulos
Witness
Signed for and on behalf of the Vendor
Gerald Thomas Foley
Witness
Under each of the 'Signed' legends and above the name appeared the respective signatures of the parties, while below the 'Witness' legend appeared the signature of the plaintiff's father, Mr Stephen Kikiros, in each case.
I note that the closing parenthesis at the end of the text in 2) above (that is, after 'execution of this "MOU"') is in the original document. It seems to me plainly an error, and I will disregard it.

Background: from the execution of the memorandum of understanding to the purported exercise of the option on 7 April 2005

On 23 February 2005, after the execution of the MOU, Mr Foley in a telephone conversation with the first defendant informed her that he had sold the Property. At this time the first defendant was living in Sydney.
Still later that day, the first defendant telephoned the plaintiff and left a message on her home answering machine. The first defendant also contacted Mr Bernard John West, who was Mr Foley's accountant and a friend of his.
The plaintiff says that the next day, 24 February 2005, she met with Mr Foley at the crosswalk where he was working outside PLC, paid him $300 in cash and handed him a letter. That letter in full text is, as printed from the plaintiff's computer, exhibit 2; a copy, signed by the plaintiff, is exhibit 3, which lacks the provision for Mr Foley's signature in the legend at the foot of exhibit 2.
Exhibit 2 reads as follows:
P D Lampropoulos
PO Box ***
CLAREMONT WA 6910
24 February 2005
Mr Gerald Foley
*** Curtin Avenue
COTTESLOE WA 6011
Dear Mr Foley
Option To Purchase ‑ 52 Ormsby Terrace, Silvery Sands
I enclose copy signed and stamped option agreement for your records.
When I presented it to the Office of State Revenue they told me that it was an agreement in its own right and was stampable.
Accordingly it seems that no further document is required.
I expect to have my finance in place in the near future and, in accordance with normal real estate practice, will settle within 28 days of exercising the option.
I confirm that with this letter I have paid the option fee of $300. Please sign the enclosed copy letter acknowledging receipt.
Please let me know if you have any queries.
Your sincerely
Pamela Lampropoulos
I, Gerald Thomas Foley, acknowledge receipt of the option fee of $300.
The first defendant denies or does not admit that any such meeting took place.
Also on 24 February 2005, the first defendant telephoned Realty Executives, as well as the plaintiff. Mr West telephoned the plaintiff and the Real Estate and Business Agents Supervisory Board (REBA). Subsequently REBA conducted an investigation into the plaintiff's conduct in the transaction with Mr Foley.
Also on 24 February 2005 the plaintiff lodged a caveat against the title to the Property. On the form for the caveat the plaintiff claimed an estate or interest 'in fee simple as option-holder', and did so by virtue of 'an option to purchase dated 23 February, 2005'.
By letter dated 15 March 2005 (exhibit 5A) to the plaintiff, the firm of solicitors acting for Mr Foley informed the plaintiff that in their view the 'purported option' was 'nothing more than an agreement to agree', and that Mr Foley would not be proceeding with the transaction, adding he
wishes to return the $300 given to him by you on 24 February 2005. Would you please kindly advise us as to which address you would like us to forward this amount to.
By a letter dated 24 March 2005 (exhibit 5), referring to their letter of 15 March 2005, those solicitors stated that they enclosed a cheque in the amount of $300 'to reimburse you for the money you gave Mr Foley on 24 February 2005'. It is not in contest that the plaintiff did not accept that cheque.
On 7 April 2005 the plaintiff gave notice purporting to exercise the option under the MOU. The notice was in the form of a letter addressed to Mr Foley at the Curtin Avenue home, in the following terms (exhibit 9):
PO Box ***
CLAREMONT WA 6910
7 April 2005
Mr Gerald Thomas Foley
*** Curtin Avenue
COTTESLOE WA 6011
Dear Mr Foley
NOTICE OF EXERCISE OF OPTION
I refer to the Option to purchase the property at 152 Ormsby Terrace, Silver Sands dated 23 February 2005.
I hereby exercise the option.
I confirm that settlement will be effected 28 days from the date hereof.
Yours sincerely,
PAMELA DENISE LAMPROPOULOS
The plaintiff's signature appeared above her name.

Background: events subsequent to the purported exercise of the option on 7 April 2005

By letter dated 2 May 2005 (exhibit 11) to the plaintiff, the firm of solicitors acting for Mr Foley informed the plaintiff that Mr Foley was not required to proceed to settlement.
On 21 June 2005, on the application of the first defendant made on 9 June 2005, the State Administrative Tribunal appointed the first defendant guardian for Mr Foley.
On 12 July 2005 Mr Foley resigned from his position as a crosswalk attendant.
On 17 October 2007 Mr Foley died.
On 12 December 2007 probate of the 2002 will was granted to the first defendant.

The evidence in the trial

I leave aside for the time being the substantial body of documentary evidence in the trial.
The plaintiff's witnesses were Dr Lloyd Thalay Singam, Dr Jonathon Keith Laurie Foster, Ms Heather Christine Sharp and Mr Kikiros, as well as the plaintiff herself.
Dr Singam was a consultant geriatrician employed by the State Department of Rehabilitation and Aged Care who had visited Mr Foley in the Curtin Avenue home in August 2002 and again in March 2005, acting in each case on a referral from a Dr Ryan, who was Mr Foley's general practitioner.
Dr Foster was a consultant neuropsychologist with between 19 and 20 years clinical experience, and he had held positions as a neuropsychologist in universities in the United Kingdom and Canada as well as Australia. On a referral dated 29 September 2008, Dr Foster prepared a report dated 19 November 2008 (exhibit 22) on Mr Foley, relying on documents provided to him.
Ms Sharp was a supervisor, customer centre at Landgate, who testified as to the delays in the appearance of sales of properties in the Landgate system. That appearance would make the sale prices accessible to searchers.
The witnesses for the first defendant were Mr George Kennington Nichols, Mr John Nielsen Cleary, Mrs Megan Deanne Pickering, Dr Warwick Claxton Black, Dr Stephen Jay Proud, Mr George Karakiozakis, Dr Louise Doreen Hayward, Mrs Susan Joy Jordan, Mrs Anne Patricia Coles, Mr John Charles Stewart Coles, Mr Rodney John Higgins, Mr Peter Robert Fryer, Mr West, Mr Warwick Victor Webb and Mr Gregory Rossen, as well as the first defendant herself.
Mr Nichols and Mrs Coles were former students of Mr Foley at Meekatharra Primary School, overlapping for one year in 1957, who met with him for meals in or about December 1997, January 1998, November 2000, December 2003 and April 2005. These occasions sometimes included others. Mr Coles was the husband of Mrs Coles and he was at the meals in 1998, 2000 and 2005.
Mr West was an accountant who had known Mr Foley since the late 1940s. He was a regular visitor at the Curtin Avenue home and had done Mr Foley's taxes for 20 years until 2005, when the first defendant took over that task.
Mr Cleary had lived in a home adjoining the Curtin Avenue home between September 1999 and October 2006. Over the period September 1999 to when Mr Cleary was hospitalised following a serious accident in August 2001, he and Mr Foley had many conversations. Beginning in 2004 Mr Cleary began to work from home and saw 'a lot more' of Mr Foley.

Mr Karakiozakis was an on‑road assessor with the Traffic Warden State Management Unit attached to the Western Australian Police from early 2002 until the end of 2007. As part of his role with the Unit he visited traffic wardens employed by the Unit to assess their competency in performing their duties at their crosswalk. In the course of the performance of his role on various occasions between 2002 and 2005 he visited the crossing near PLC where Mr Foley worked and observed his behaviour. One of those visits was in June 2005.
Mr Fryer was a training and operations officer with the Traffic Warden State Management Unit attached to the Western Australia Police from 1996, and had first met Mr Foley in 1998 when he went to Mr Fryer's office. He had contacted Mr Foley in October 2004 following his failure to attend to crosswalk duty at the Perth Royal Show, and again in June 2005, following his failure to attend a meeting with Mr Fryer which Mr Fryer had arranged with him by telephone the previous day.
Dr Black was a psychiatrist who had worked in that capacity between 2002 and 2003 at the Bentley Elderly Mental Health Service and since 2003 had been in private practice. He had met with Mr Foley on a number of occasions in 2005, initially on a referral from Dr Ryan, as well as on a number of occasions in 2006.
Dr Hayward was a clinical psychologist who had been in private practice since 1996. She met Mr Foley on three occasions in May 2006 to prepare a cognitive assessment of him.
Dr Proud was a psychiatrist who between 1998 and 1999 had been the Director of North Metropolitan Psychiatric Services for Older Persons; Director of WA Training Program in Old Age Psychiatry; and Psychiatrist to the Neurosciences Unit of WA. Since 1999 Dr Proud had been in private practice. By letter dated 7 July 2006 (exhibit 71) he had provided a report to the then solicitors for Mr Foley following a clinical interview of him on 8 June 2006. He provided further reports to Mr Foley's solicitors but did not meet with Mr Foley again.
Mrs Jordan was a social worker at Sir Charles Gairdner Hospital, who had held that position between 1987 and 1990 and since 1993. She conducted visits to elderly persons, usually at the request of their general practitioner, to assess the elderly person's psychosocial needs, including their needs for community services and alternative care. She accompanied Dr Singam on his visit in August 2002 with Mr Foley in the Curtin Avenue home. In June 2005 she visited Mr Foley in the Curtin Avenue home again, this time with a Ms Hope Rosenberg, a senior occupational therapist from Sir Charles Gardiner Hospital, as a result of a request from the first defendant and consultation with Dr Singam. In October 2005 Mrs Jordan again visited Mr Foley in the Curtin Avenue home, this time alone, as a result of another request from the first defendant, and consultation with Dr Ryan, Dr Singam and Ms Rosenberg.
Mrs Pickering was employed by The Aged Persons Support Service (TAPSS) as manager from 1985 until 15 July 2005. In that capacity she worked with volunteer workers to help elderly people remain in their homes as long as possible, by arranging domestic assistance and gardening maintenance. She had known of Mr Foley and had seen him working at the crossing at PLC, but had not met him prior to him becoming a client of TAPSS in about 2000. She interviewed him then to make arrangements for him. He visited TAPSS on a regular basis to pay his account, and Mrs Pickering visited Mr Foley at the Curtin Avenue home on two occasions before the discontinuance of Mr Foley's use of TAPSS services. He discontinued his use of TAPSS services after about 18 months. Mrs Pickering went to see him in late 2002 or in 2003 after that discontinuance.
Mr Higgins was an inspector with the Real Estate and Business Agents Supervisory Board (REBA) between 1989 and 2007. In that capacity on 4 March 2005 he had visited the Curtin Avenue home and interviewed Mr Foley in the course of his investigation of a complaint by the first defendant against the plaintiff in respect of her transaction with Mr Foley in relation to the Property.
Mr Rossen was a licensed real estate agent who in 2003 had been retained by the first defendant (as Mr Foley's attorney) and by Mr Foley to sell two blocks of land of his in Ivanhoe Street in Morley. The land was successfully auctioned on 29 June 2003. He had met Mr Foley on about five occasions in that year in relation to that matter.
Mr Webb was a certified practising valuer who, after an inspection of the Property on 2 September 2009 and consideration of certain sales evidence, prepared a retrospective valuation report (exhibit 106) as at 23 February 2005.

The memorandum of understanding: the parties' cases

On the parties' pleadings and submissions, this was the question whether or not the MOU was nothing more than an agreement within the third class described in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, 360 (Dixon CJ, McTiernan & Kitto JJ), which is to say a case where the intention of the parties was not to make a concluded option agreement at all unless and until they had executed a formal agreement.
The description in Masters of the three classes of case, of the implications of membership of each of the classes of case and of the approach to determining of which class a particular case is a member, is as follows (91 CLR (360 ‑ 362), referring to among other authorities Niesmann v Collingridge [1921] HCA 19; (1921) 29 CLR 177):
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller [(1878) 3 App Cas 1124] when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: ' ... as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed' [(1151)]: see also Sinclair, Scott & Co Ltd v Naughton [(1929) 43 CLR 310, at 317]. A case of the second class came before this Court in Niesmann v Collingridge [(1921) 29 CLR 177] where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made 'on the signing of the contract'. Rich and Starke JJ observed [(184 ‑ 185)] that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox CJ, held that there was no difficulty in decreeing specific performance of the agreement, 'and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion' [(185)] : see also O'Brien v Dawson [(1942) 66 CLR 18, at 31].
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor etc of the Poor of Kingston‑upon‑Hull v Petch [(1854) 10 Exch 610; 156 ER 583]. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker [(1950) 80 CLR 304] or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter … . Lord O'Hagan said: 'Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made' [(1149)]. And Lord Blackburn said: 'parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement' [(1152)]. So, as Parker J said in Von Hatzfeldt‑Wildenburg v Alexander [[1912] 1 Ch 284, at 289] in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.
The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape: Farmer v Honan [(1919) 26 CLR 183]. Nor is any formula, such as 'subject to contract', so intractable as always and necessarily to produce that result: cf Filby v Hounsell [(1896) 2 Ch 737]. But the natural sense of such words was shown by the language of Lord Westbury when he said in Chinnock v Marchioness of Ely [(1865) 4 De GJ & S 638; 46 ER 1066]: 'if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation' [(646)]. Again, Sir George Jessel MR said in Crossley v Maycock [(1874) LR 18 Eq 180]: 'if the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce' [(181 ‑ 182)].
The plaintiff says that the MOU falls into the first class. However, in my view this cannot be squared with cl 2 of the document, and I would not accept this classification.
Alternatively, the plaintiff says the MOU falls into the second class, the performance of the obligation as to payment of the option fee in cl 2 being conditional on execution of the option agreement to be drafted by the plaintiff's solicitor within 21 days after execution of the MOU. However, the plaintiff also says, the MOU was varied by agreement on 24 February 2005, the day after the execution of the MOU, by the deletion of the provision in cl 2 for the parties to enter into an option agreement and by making the option fee payable forthwith. The proposal to vary the MOU was made by the letter dated 24 February 2005, hand‑delivered to Mr Foley on 24 February 2005, and accepted by his conduct in accepting the option fee.
The first defendant says the MOU fell into the third class of case, pointing in particular to the lack of any express provision for the time of execution of the option agreement once it had been drafted by the plaintiff's solicitor, as well as the absence of any express provision for the time of settlement of any sale resulting from the exercise of an option.
The first defendant further says that, if the MOU fell into the second class, it was not varied as the plaintiff contends. And, as no option agreement was drafted by the plaintiff's solicitors within 21 days of execution of the MOU, or indeed at all, any contract resulting from the MOU failed.
The issue that arises if the MOU fell into the second class, whether it was varied to remove the limitation on payment in cl 2 and make the option fee payable forthwith, is returned to below.
In my view the MOU fell into the second class. My reasons for so finding are based upon the language of cl 2 of the MOU.
That language is of a condition of the obligation to pay the option fee, on the drafting and execution of an option agreement, in the same way the language of offer purportedly accepted in Niesmann made the obligation to pay the first instalment of the purchase price of the land conditional 'on the signing of contract', the next instalment three months 'afterwards' and the balance three years 'from the date of signing contract': Niesmann (180) (Knox CJ). It is true that the MOU spells out matters as to the drafting of the contract in greater detail, by stipulating the drafter and the time for drafting, than in the document in Niesmann. However, that point of difference appears to me, if anything, to make it less likely the parties had not reached a concluded bargain for an option unless and until they had executed the option agreement so drafted.
There is no language in the MOU making the option conditional on or subject to the execution of an option agreement to be drafted.
It is also true that the document in Niesmann began with its signatory stating he did 'hereby give' a 'firm offer', and concluded '[v]alue received for option sixpence' (180). Both matters were referred to in the judgments in terms indicating those features were significant in finding that a concluded agreement arose when the offer was accepted: Niesmann (182) (Knox CJ) and (184) (Rich and Starke JJ). There is no such language and no such payment here.
However, the language of the MOU, cl 1, is that '[a]n option to purchase the property is granted effective 23 February 2005', which I consider to be no less indicative of a concluded bargain than the language of 'firm offer'. The provision for payment of the option fee in the MOU, cl 2, is not the support for the conclusion that a concluded bargain had been reached, that provision for immediate payment would have provided. However, there is express provision for the duration of the option in the MOU, cl 3, and for the assignment of the interest of the 'purchaser' under the option, cl 5, unlike the position in Niesmann. Both in my view add further support for the view that the MOU was intended to be a concluded bargain for an option.
It is true that, as the first defendant notes, there is no express stipulation in the MOU as to the time for execution of the option agreement, nor the time for settlement of any resultant sale of the land. I accept that 'absence of agreement upon all possible subjects of negotiation may point to a difficulty as to intention to be bound, as well as to a difficulty about certainty of terms': Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60 [36] (Keane JA), [1] (McMurdo P) and [64] (Atkinson J). My attention was drawn in the cross‑examination of the plaintiff to the provisions in a form of option agreement from the Real Estate Institute of Western Australia (exhibit 15) in respect of the time for settlement and other respects without any counterparts in the MOU.
However, there was no submission put to me that there was an issue of insufficient certainty of terms in this case. I note that both features I have described, the absence of a time for execution of the further document provided for, and the absence of a time for settlement, also characterised Niesmann.
I consider that the language of the MOU does not indicate, as the correspondence in Moffatt was seen not to suggest, that 'further negotiation was regarded as essential by the parties': Moffatt [30] (Keane JA). Rather, as in Moffatt (referring to Niesmann), the MOU 'contemplated the execution of a further contract as the means whereby the bargain which they had concluded would be implemented': Moffatt [30].
Thus, I conclude the MOU was a concluded bargain in the second class in Masters v Cameron.

The memorandum of understanding: whether or not it was varied

I have previously described the parties' cases in relation to this issue.
I have concluded that the MOU was varied by the deletion of the provision in cl 2 for the parties to enter into an option agreement and by making an option fee of $300 payable forthwith. I have so concluded on the basis of the following two matters.
The evidence of the first defendant is that on her visit to Perth between 8 and 17 March 2005 she found on the kitchen table of Mr Foley a letter (exhibit 16) from the plaintiff to Mr Foley dated 24 February 2005, in the form of exhibit 2, but with indications at the bottom that a portion had been torn off, underneath the signature of the plaintiff. That letter, as has been seen, said that 'with this letter I have paid the option fee of $300'.
I have previously referred to the letters from the solicitors for Mr Foley and his attorney (the first defendant) dated 15 March 2005 (exhibit 5A) and 24 March 2005 (exhibit 5) concerning the return of $300 said to have been given to Mr Foley on 24 February 2005. While the circumstances in which payment was made are in contest, as will shortly be seen, there does not appear to be any contest that Mr Foley did receive $300 from the plaintiff.
It was the plaintiff's evidence that in the afternoon of 24 February 2005, when she had gone with her father Mr Kikiros to the crossing near PLC where Mr Foley was working, she had told him that the 'State Revenue Department' had told her 'this option agreement' was 'enforceable' and so there was 'no need for a further agreement', to which Mr Foley replied, 'In that case, that's okay'. She had then counted out $300 in cash and handed the cash to Mr Foley in an envelope, which he accepted. She had also presented a copy of the letter dated 24 February 2005 to Mr Foley for signature of that portion providing for his signature, which he had said he would not sign as he had been told not to sign anything. After she had said to him 'Don't you want to sell the land?', he added, 'No, it's not that. They're laughing at me.' She had then torn off the bottom of the letter comprising the part providing for his signature and left him with the balance of the letter.

There is evidence to the same effect from Mr Kikiros.
It was put to me for the first defendant that I should not believe the evidence of the plaintiff and of Mr Kikiros as to the circumstances under which the letter was provided to Mr Foley. My attention was directed to the plaintiff's admission that she had been mistaken in her examination‑in‑chief when she said that the letter was prepared the evening of 24 February 2005, which of course would have been, on her testimony, after the time she had provided the letter to Mr Foley; and to her evidence in re-examination that she prepared it in the evening of 23 February 2005, when on her testimony it was on the following day that she received the advice, referred to in the letter, from the Office of State Revenue. My attention was also directed to what were said to be inconsistencies between her affidavit (exhibit 25) in support of an extension of an interlocutory injunction to restrain the removal of her caveat in respect of the Property and her evidence at the trial: in the former she had sworn that she had 'sent' the letter to Mr Foley ([3]; see also [30]). In cross‑examination, her attention was drawn to this matter, which she was unable to explain. My attention was further directed to the identity of the evidence of the plaintiff and her father Mr Kikiros, as to the words ascribed to Mr Foley replying to the plaintiff's inquiry as to whether he did not want to sell the Property, as suggestive of their conforming their evidence. Both rejected any such suggestion.
Finally, it was put to me that it was not easy to see how the circumstances she described could have occurred at the time she testified they began, at about 2.40 pm or 2.45 pm, so as to give enough time for her, on her evidence, to then drive her father home and proceed into the city, from where she made a telephone call to her father at 2.58 pm before lodging the caveat at 3.18 pm. There would not have been enough time if Mr Foley had only just arrived at the crossing so as to permit the circumstances she described to have unfolded, given the range of the two times, 2.54 pm and 2.55 pm, put to her in cross‑examination as shown in the diary notes that had been compiled by her father of his observations, sometimes with the plaintiff, of Mr Foley's arrivals at the crossing in the afternoon on other occasions.
Below I indicate my assessment of the credibility of the plaintiff and Mr Kikiros. For the reasons given there I have concluded I do not accept all of their evidence as reliable. In the present connection, I do not consider I need to determine whether or not their version of the circumstances under which the letter was provided to Mr Foley should be believed. That is because I find from the terms of the letter (in particular, 'with this letter I have paid the option fee of $300'; its reference to provision for signature of 'the enclosed copy letter'); its discovery at the home of Mr Foley in March 2005; and its presentation (the tearing off indications), that the letter was indeed provided to and accepted by Mr Foley on, or not long after, 24 February 2005 with payment of $300 as the option fee, if not in the circumstances described by the plaintiff and Mr Kikiros. I also note that it was not in contest that the letter, although without the signing provision, was faxed by the plaintiff to her employer, Mr Robinson, at 1.19 pm on 25 February 2005 (part of exhibit 17).
On that finding, in my view, a variation of the MOU is made out by the deletion of the provision in cl 2 of the MOU for the parties to enter into an option agreement and by making an option fee of $300 payable forthwith. That variation included that the option fee became an amount of $300 (that is, varying the reference in cl 2 of the MOU to 'plus any applicable GST').
It was not put to me that there was any failure of consideration for such a variation. In any event, it seems to me there was good consideration on both sides, in the payment of the $300, and in the release of the plaintiff from the burden on her of the condition in cl 2 (the plaintiff's solicitor to prepare the option agreement) read with cl 8 (the parties to bear their own costs of the preparation of the option agreement).

Capacity: the law and the parties' cases

On the parties' pleaded cases the issue is whether or not Mr Foley lacked the capacity to contract on 23 February 2005 when the MOU was entered into, and on the date of the variation of the MOU.
I begin by noting that, while there is reason to distinguish between those two dates in relation to the issue of what the plaintiff knew or ought to have known, the evidence did not support any reason to distinguish between Mr Foley's capacity or lack of it on those two dates, and it was not put to me I should so distinguish.
The law in relation to the issues of mental capacity is not in contest.
The party contending that a contract is liable to be set aside for incapacity bears the burden of proving the absence of mental capacity: McLaughlin v Daily Telegraph Newspapers Co Ltd (No 2) [1904] HCA 51; (1904) 1 CLR 243, 272 (Griffith CJ). The courts accept that '[a] person may be incapable due to mental disturbance at one time but quite capable at another': Edna May Collins by her next friend Glenys Lesley Laraine Poletti v May [2000] WASC 29 [54] (Owen J), where his Honour went on to say:
In such a case, the dicta of Griffiths CJ in McLaughlin ... at 277, is apposite:
'It is not disputed, however, that when it is once established that a person is of unsound mind the burden of making out that a particular transaction took place during a lucid interval is cast upon the person alleging the fact.'
However, it is not enough for a party to show an absence of mental capacity. In addition, that party must show the other party knew or ought to have known of that absence: Collins [68] (Owen J); and see Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423, 441 (Dixon CJ, Kitto and Taylor JJ). I will deal with the latter issue separately, below.
Mental capacity for this purpose is 'such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation': Gibbons (437). This capacity is
relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of that transaction when it is explained (438).
That implies 'different standards of sanity required for the validity of different transactions': Crago v McIntyre [1976] 1 NSWLR 729, 739 (Holland J).
In Gibbons the court said that the 'nature of the transaction'
means in this connection the broad operation, the 'general purport' of the instrument; but in some cases it may mean the effect of a wider transaction which the instrument is a means of carrying out (438).
In Gibbons the meaning 'in some cases' appears to have been illustrated by the facts of the case itself, where the instruments in question were mortgages and a transfer of land executed by three joint tenants. These had the effect of changing their interests from those of joint tenants to tenants in common. The 'nature of the transaction' was not or not simply the 'direct effect of the instruments according to their terms' but 'the resultant severance of the joint tenancy' (439).
In this case, it was not suggested that the meaning 'in some cases' had any application. To discharge her burden of proof as to the mental incapacity element, it was common ground that the first defendant had to show that Mr Foley was incapable of understanding the 'broad operation' or 'general purport' of the MOU.
It was not suggested there was any difference for this purpose made by the variation, although I note that the variation serves to emphasise the character of the MOU as an option agreement, rather than itself a contract of sale. This characterisation of the MOU, in my view, assumes some importance in the analysis required to resolve the present issue.
The first defendant's pleading is that at all material times, including the signing of the MOU on 23 February 2005, Mr Foley was suffering from 'dementia', and that 'as a consequence of his dementia [Mr Foley] lacked the mental capacity to understand the nature and effect of the [MOU]'.
The first defendant also pleads that by reason of those matters the MOU was 'void and of no legal effect or alternatively voidable'.
However, as Gibbons shows, the effect of contractual incapacity of which the other party knew or ought to have known is that the contract is voidable and not void. The latter is the effect of the state of affairs to which a successful plea of non est factum relates: see Gibbons (442 ‑ 444); and Ford by his tutor Watkinson v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 257 ALR 658 [71] (Allsop P & Young JA) and [134] (Sackville AJA). It appears not to be relevant to making good a plea of non est factum whether or not the other party to the contract was aware or ought to have been aware of the state of affairs to which the plea relates.
While, as Ford [71] indicates, the pleas of contractual incapacity and non est factum may be made in the same case, I did not understand there to be any reliance on non est factum in this case of pleaded mental incapacity. For a plea of non est factum relying on mental incapacity, Crago (737), quoted with approval in Ford [74], states that
the mental incapacity must be such as to deprive its victim of an understanding of what he is signing so that his mind cannot go with his signature.
There was no pleading of such incapacity in this case, and no attempt in argument to suggest that such incapacity was made out on the evidence.
I also note that it is not in dispute that if the MOU was voidable, it was avoided by the letter dated 2 May 2005 (exhibit 11).
Finally, the first defendant pleads that by 23 February 2005, when the plaintiff visited Mr Foley at the Curtin Avenue home, she knew or ought to have known that he lacked the mental capacity to understand the nature and effect of the MOU; and that by 24 February 2005 the plaintiff knew or ought to have known that he lacked the mental capacity to understand the nature and effect of the MOU and the letter dated 24 February 2005. In each case particulars are pleaded.
I deal with the issue of the plaintiff's knowledge or reason to know below, where I consider those particulars.

Capacity: the evidence and my findings

The evidence as to the capacity of Mr Foley in February 2005 was of a medical and a non‑medical kind.
There was evidence from two psychiatrists, a neuropsychologist and a psychologist as to whether or not, on the material available to them, they found that by February 2005 Mr Foley was suffering from dementia with effect on his capacity to understand the nature and effect of the MOU. The psychiatrists were Dr Black and Dr Proud, the neuropsychologist was Dr Foster and the psychologist was Dr Hayward. All of them, except Dr Foster, were able to rely on, as part of the material available to them, the results of having met with Mr Foley. Dr Black met with him relatively close to February 2005, on 4 and 19 April 2005, as well as on other later occasions including 24 June 2005; Dr Hayward saw him on 3, 10 and 17 May 2006; and Dr Proud interviewed him on 8 June 2006.
There was also evidence from Dr Singam of the result of a neuropsychological test he had performed on Mr Foley on 15 March 2005 during a visit at the Curtin Avenue home; and documentary evidence of analysis by Dr Cardaci of results from scans Dr Cardaci performed on Mr Foley's brain on 4 May 2005.
There was in addition evidence from other medical practitioners as to whether or not, on the material available to them, Mr Foley was suffering from dementia at various times in 2002.
The non-medical evidence included evidence from Mrs and Mr Coles and Mr Nichols, from Mr Cleary, from Mr West, and from the plaintiff and the first defendant. They testified as to what they observed as to Mr Foley's behaviour in February 2005 (Mr West, the plaintiff, Mr Kikiros and the first defendant); in April 2005 (Mr and Mrs Coles and Mr Nichols); and from 2004 onwards (Mr Cleary). They also testified as to what they had observed as to his behaviour at earlier times, except in the case of the plaintiff and Mr Kikiros, both of whom had first met Mr Foley in February 2005.
There was also evidence from Mr Higgins of what he observed of Mr Foley on 4 March 2005; from Mr Fryer of his dealings with Mr Foley in October 2004, and 14 and 15 June 2005; and from Mr Karakiozakis of what he observed on 14 June 2005 of Mr Foley's behaviour while he was working at the crossing near PLC.
There was, further, evidence from Mr Rossen as to what he observed as to Mr Foley's behaviour in mid-2003, as well as evidence from Mrs Pickering of her observations of him on a day in late 2002 or 2003.
And there was physical evidence of, or in relation to, actions of Mr Foley in 2002 and 2005.
The evidence from the plaintiff, Mr Kikiros and the first defendant as to what they observed of Mr Foley will need to be separately assessed as there are questions as to its credibility in each case, particularly as to that of the witnesses with direct interests in the matter, the plaintiff and the first defendant.
On the remaining evidence, I have found that Mr Foley was suffering from dementia in February 2005 when he entered into the transaction represented by the MOU and later when the MOU was varied, and that the effect of that condition was that he did not have the capacity to 'understand the nature of that transaction when it is explained': Gibbons (438). My reasons for those findings follow.
I first consider the medical evidence before turning to the non-medical evidence. I then turn to the evidence of the plaintiff and Mr Kikiros, and that of the first defendant, in the course of which I consider the credibility of their evidence.

Capacity: the medical evidence

Of the medical practitioner, neuropsychologist and psychologist witnesses, Dr Black, Dr Proud, Dr Singam, Dr Foster and Dr Hayward, all but Dr Singam gave an opinion as to whether a diagnosis of dementia could be given for Mr Foley in February 2005, and on the impact, if any, of any dementia diagnosed on the capacity to understand legal transactions.
It appears to have been common ground that all of those witnesses who gave such an opinion were able to proffer expert evidence in those regards, in the sense that there was a field of specialised knowledge in which such opinions fell; that they had by reason of specified study, training or experience become expert in such diagnosis and determination; that the facts observed or assumed on which their opinions as to Mr Foley were based were (with the qualifications addressed below) admissibly established; and that they had shown how the field in which they were expert applied to those facts so as produce the opinions they proffered: see Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 [85] (Heydon JA), referred to in Grainger v Williams [2009] WASCA 60 [53] - [54] (Martin CJ). I consider that such common ground was justified on the evidence before me.
There was, however, sharp contest as to the weight I should assign to their respective opinions, particularly in respect of the evidence of Dr Black and Dr Foster. In due course I will focus particular attention on them.
Dr Black did a report (exhibit 62) for the then solicitors for the first defendant dated 22 April 2005. He also saw Mr Foley on 24 June 2005 and reported on this to Mr Foley's general practitioner, Dr Ryan, in a letter dated 28 June 2005 (exhibit 52). Further, he had Dr Cardaci do a test of blood flow in the brain of Mr Foley on 4 May 2005, and Dr Cardaci's report to Dr Black (exhibit 59), as well as Dr Cardaci's further report to the solicitors for the first defendant dated 9 March 2009 (exhibit 60), were admitted by consent.
Dr Black's report of 22 April 2005 (exhibit 62) was the subject of examination‑in‑chief directed to its references to results of tests Mr Foley completed, identified with 'MMSE' and 'Camcog‑R' instruments.
It was agreed between the parties that the MMSE is the Mini Mental State Examination, which is a standardised instrument used to measure cognitive function. It appears to have been common ground that cognitive function for this purpose is an intellectual process by which one becomes aware of, perceives or comprehends ideas. It involves all aspects of perception, thinking, reasoning and remembering.
However, there were some differences on the evidence of the medical experts as to whether or not the MMSE measured matters relevant to the assessment of capacity to understand a document like the MOU.
It was also agreed between the parties that the Camcog is the Cambridge Cognitive Function Examination, and is the cognitive and self-contained part of the Cambridge Examination for Mental Disorders of the Elderly (CAMDEX). The Camcog is a standardised instrument used to measure the extent of dementia, and to assess the level of impairment of cognitive function. The Camcog‑R is the revised Cambridge Cognitive Function Examination. I note that in the examination‑in‑chief reproduced below, the first defendant's counsel referred to 'Camcog' results where in fact it is evident from exhibit 62 that the results are identified with the administration of the Camcog‑R. At other points in the transcript it erroneously refers to 'Cancog' tests and scores.
In his examination‑in‑chief, Dr Black said this (ts 982 ‑ 986):
Can I then take you to your own assessment, so going back to your report, still on page 622? You did a CamCog and you say that revealed an MMSE of 25 and 30 and a CamCog of 73 of 105?---Correct.
Can you just explain what you mean by saying, 'The CamCog revealed an MMSE score'?---I mean, essentially what I'm saying is that was the sum total score. So there are a series of questions obviously that one asks that entails, you know, showing someone some pictures, asking them to recall them, asking them to do various other tasks, and what I tend to do during the course of the examination is I actually enter the data into a computer program so that I can provide a summary at the end so someone doesn't have to wait for three or four weeks before they get their results because, as you might appreciate, it can be an anxiety provoking thing. So the sooner you can provide that information ‑ well, that's the way I tend to try to do it.
All right?---So that's the sum total score and, generally speaking, a score of less than 81 is considered to be indicative of or suggestive of significant cognitive impairment.
You specifically recorded some of the difficulties that he had later down the page, but can I just ask you about the paragraph immediately below the heading Current Cognitive Assessment? So that paragraph. The last sentence says:
'It should be noted that the CamCog is a more comprehensive test than the MMSE and the apparent discrepancy with the MMSE score is a reflection of the MMSE's inadequacy in identifying executive dysfunction?'
---That's correct.
What do you mean?---Execution dysfunction is primarily ‑ I mean, higher order thinking; sort of, you know, processing, planning. There are a range of elements that kind of, when one is doing an assessment, fall into that category. A mini mental state examination is just a simple ‑ it's so crude, in my opinion, it's hardly worth doing; just a simple ‑ 30 questions and the scores can vary, often by chance, in my opinion. I don't put any weight on the mini mental state examination. I mean, if a GP rang me up and said, 'Look, I've got this patient that's got a mini mental state examination of,' I wouldn't sort of hang my hat on it.
You talk about, in the next paragraph down, about six lines down, 'tests of verbal and ideational fluency were impaired'?---Mm.
What do you mean?---Essential what that's referring to is the speed of information processing. So verbal fluency, I mean, there are various tests for verbal fluency but in say a situation like this it might be, you know, sort of, 'Think of all the animals you can think of,' in a particular time frame, and so one has to kind of generate information, and typically, I suppose, if someone's cognitive processes are in tact they might be able to start thinking, 'Okay, well, kangaroos, well, they come from Australia so therefore,' and they can think of a bunch of other things. Someone who is struggling to be able to kind of process information in that way may just kind of hit a blank and just won't be able to provide the information or it just comes out very slowly, and so they tend to do rather poorly. It's part of ‑ that test is often considered to assess executive function. And ideational fluency is, you know, sort of the ability to come up with ideas, and so the specific test in this case is, you know, you put to the patient, if, say, 'If you were given an object,' and you give them an example, say a piece of paper, 'and can you tell me how many things you could think' ‑ 'that you could do with this piece of paper within say 90 seconds,' and so you know, you could make a square up into a ball, turn it into a paper plane, cut it up into a doyley, you know, you can do whatever, you know, the ideas can be as fanciful as you like, and then you might give the example, 'Okay, the object that I want you to tell me about is a bottle,' and surprisingly, I mean, you had to come up with about eight answers to get, you know, to get an optimal score, but he really struggled with thinking about what you could do with a bottle.
Okay?---And sometimes people tend to perseverate so they might say, you know, where you could put, you know, orange juice in it, you could put lemonade in it, and that's not - it's just that basically it's the same answer.
In the next paragraph down you talk about his word finding difficulty. How did that reveal itself?---I mean, just generally when he was trying to speak, I mean, just couldn't find the words for particular concepts or particular things he was trying to say. That's also considered to be part of the executive side of memory. It often benefits from prompts so probably all of us can be assisted in that way, but obviously there comes a point where it becomes quite problematic and in his case it was quite problematic, that he really struggled; it took a lot of effort to get information that I needed, basically.
Can I take you now to page 627, which is page 9? Now, in the second paragraph you say, 'The presence of dementia is established on the following grounds,' and you list some things that you took into account?---Mm.
What were the most important things?---I think, as much as anything, the deterioration over time, and his, you know, the presence of those multiple cognitive deficits in multiple domains, if you only had, you know, sort of difficulties in one particular area of functioning, then one would question, is this dementia or not, is it just mild cognitive impairment, but, you know, he was exhibiting significant difficulties in a number of domains and just not processing things, and I mean, as I referred to in there, he thought I was an ophthalmologist, and I mean, one would think that if you go to a psychiatrist office it's very different to an ophthalmologist office and most people would probably clue in eventually that the absence of all the ophthalmological equipment, that there's something amiss. And then you come back and it would be the same thing again. He still thought I was an ophthalmologist and was surprised that I knew so much about him when I was supposed to be interested in his eyes. So, I mean, he really had significant difficulties in kind of making sense of what was going on around him.
In terms of the deterioration that you've referred to, are you referring to the deterioration revealed by the psychiatric tests or by the reports of his functioning over time, or both?---Well, I think, I mean, certainly the tests themselves, not only the score, but the way in which he answered the questions, was very revealing. Also, I mean, if looking at past documents and so on, I mean, it would seem to me that there was a deterioration, I mean, it's possible that when I wrote this report that some assumptions were made, but he couldn't give me details about - I mean, he wouldn't have had the capacity to, you know, make an enduring power of attorney, I mean, he didn't now what bank accounts he had and so on an so forth, you know, didn't know what property he owned, you know, so - and that would have been a significant deterioration from where he was at one point in his life where he seemed like he was a very shrewd investor.
Now, you did get some information from various sources about how he had been functioning at home and much of that came perhaps first-hand or second-hand through Lynne Kolnik. If you hadn't had any of the information from Ms Kolnik would that have affected your opinion?---I still would have been concerned. I think there was enough, I mean, there was more than ample information there and the facts of the matter were that at the time that Lynne was living interstate, from memory, so he actually had very little support at home, and, you know, that was a concern to me given his level of functioning, and, you know, I can't go to his home and that was one of the reasons why, you know, I asked Dr Singam if an assessment could be arranged to see how he was actually functioning at home, because at the end of the day, in my opinion, as much as anything the occupational therapy assessment's probably the most important thing.
I mean, one can come up with a diagnosis of Alzheimer's disease or some other process but at the end of the day what I need to know as a clinician is what can the person do, what can't they do, are they going to leave the gas on, are they going to burn the house down, can they cook a meal, can't they cook a meal, can they wash themself, can't they wash themself, you know, are they going to get lost, you know, those sorts of things. It's the very practical things really that are of most importance really, you know, as a clinician. But all these other things are just important in making the preliminary diagnosis to kind of guide prognosis and possible treatment.

Below I consider the evidence of what Mr Foley was able to do in about February 2005.
Later in his examination‑in‑chief, Dr Black said the following, in regard to his conclusion in exhibit 62 as to Mr Foley's capacity to enter into a transaction like the MOU in February 2005 (ts 994 ‑ 995):
You say after that question is asked, 'Does Mr Foley have the capacity,' that you hope the answer has been answered above and in the earlier parts of your report you talk about what Mr Foley's capacity was. Can you be more specific in relation to a document that purported to set out a transaction relating to the sale of property, what his capacity was as at February 2005?---I think ‑ I noticed ‑ I mean, one of the issues was - you know, there were mini mental state examination scores and so on, but I think it would've been more interesting if there had been a CamCog done at that time. I really just don't put a lot of stock on the mini mental state examination score. I doubt there would have been much difference in his cognitive processing in that time. There was no evidence of any acute process that would explain, you know, a precipitous decline. I mean, if he had had a stroke ‑ and sometimes people do have, you know, small strokes, you know, in critical parts of their brain. It doesn't happen very often but it can lead to a change in cognition, but there was certainly nothing to indicate that.
So what he had in 2002 was a couple of CamCogs of, I think, 83 and 86, and then yours in April 2005 of 73. So what do you say his capacity - in your opinion obviously. You can't be definite but in your opinion what would his capacity have been in February 2005?---I mean, based on my assessments - I mean, I think the fact that he ‑ I mean, I suspect ‑ I mean, I notice a comment by Dr Foster and, I mean, I say this respectfully that ‑ I can't remember the exact term but about, I guess, where kind of someone might kind of fall in the IQ scale. I suspect he was a very bright man and I think, you know, coming from, you know, the era that he did, I mean, sometimes opportunities are available to some that may not be available to others. I mean, he seemed like a very shrewd investor which I think indicates that he was of more than average intelligence and, you know, if I compared what I was seeing at that time ‑ I mean, he couldn't tell me which bank accounts he had. He couldn't even remember, you know, how many properties he owned which interestingly he even kind of, 'That's kind of strange, isn't it, that I don't know that?' So he was at least astute enough to recognise that it was strange that he didn't know significant things; whereas he knew he had built up quite a portfolio in the past, he couldn't tell me where the money came from; you know, couldn't give me exact details about how money got into bank accounts. He couldn't tell me ‑ I mean, he really couldn't tell me very much at all about any of that and so I suspect that, you know ‑ I mean, I suppose when I asked him later, you know, about what he thought was going to happen in the future, I mean, for someone who I suspect ‑ I would find it almost incomprehensible to think that he wouldn't have understood how a court worked. He really could not give me an indication of how a court would work, so that there would be lawyers on each side, that there would be a judge, what those people do, you know. He couldn't give me any information and I think, given his processing ability, I mean, really I don't think he would have had the capacity. There's no way that if someone had asked, without any of this in question, 'Does this man have the capacity to complete an enduring power of attorney?' I would have said no, and if someone had asked me, 'Would it have been the same a few months before?' I would have said no.
In other words, he didn't have the capacity, not that your answer would have been the same?---Yes; that he didn't have the capacity, yes, at either point.
The reference to Camcog scores in 2002 of 83 and 86 was to the scores on tests using the Camcog‑R test administered by a Dr Wilson in February 2002 and September 2002 respectively, which were considered in his report to Dr Ryan of 17 September 2002 (exhibit 97). Dr Wilson was a consultant geriatrician, and there is evidence as to the significance of his scores from Dr Hayward which I reach below.
I do not consider Dr Black's evidence in the respects quoted was shaken or qualified in his cross‑examination.
However, senior counsel for the plaintiff put to me there were four sets of reasons to approach his evidence with particular caution.
One set of reasons was from Dr Black's report to the Health Insurance Commission (exhibit 63), in a letter of the same date (22 April 2005) as exhibit 62. As he acknowledged in his evidence, at two different points in the letter, Dr Black incorrectly referred to a score by Mr Foley on the MMSE that he had administered. The score was reported as 23, whereas shown in exhibit 62 was a score of 25. Dr Black explained the incorrect reference as a 'typographical' error (ts 999), in a document a 'large portion' of which was taken from the report of 22 April 2005 (exhibit 62) (ts 1291). However, in cross‑examination he appeared to qualify the characterisation of the incorrect reference as a typographical error, by indicating he could not 'recall what happened at the time' (ts 1291). He also testified as follows (ts 1291):
Can I suggest to you, it was done deliberately so that the Health Insurance Commission would permit you to give a prescription for the Reminyl drug? Do you agree or not?---I can understand why you would draw that conclusion.
Yes, and is that conclusion correct?---I can't recall what I did at that time.
Well, to say that it was inadvertent, would you agree, cannot be correct in that this letter is taken from the Williams and Hughes letter but in two respects it has been changed to show 23 instead of 25?---Certainly I would question that if I was reading the letter.
Further, in relation to another difference between the two letters of 22 April 2005 (exhibit 62 and 63), his testimony was as follows (ts 1293):
No, but why would you do that? Was it for the purpose of ensuring that the HIC would be prepared to authorise the scrip?----I guess that would have been the general intention but I probably didn't need to provide that much information. I mean, this is ‑ - ‑
You may not have needed to provide it but you did?---I did, yes.
You did it for a purpose. It was clearly deliberate, wasn't it?---It was that I put that in there. Obviously, it was deliberate that I wrote it in there.
Yes, and it was done for a purpose and the purpose was to attempt to convince the HIC that it should authorise the scrip, wasn't it?---It was, but I doubt they would have factored that into the equation.
Another set of reasons to approach Dr Black's evidence with caution, advanced by senior counsel for the plaintiff, was the failure of Dr Black to keep a record of the terms of the questions to and answers by Mr Foley in the Camcog‑R test, from which it would be possible to perform a check of the score Mr Foley had been given. Dr Black testified that a computer program produced the questions: a hard copy of the section on 'Executive Function' of the manual for the Camcog‑R which indicated the questions in the computer program in that section was made exhibit 87. When Mr Foley answered, Dr Black entered the response directly into a computer, without recording the response, and he was able to produce only a summary of the scores on the different parts of the test, rather than the score for individual questions. Dr Black testified it was not his practice at the time to keep other records, but accepted that he could see 'the wisdom in doing that' (ts 1289).
Still another set of reasons to approach Dr Black's evidence with caution, put to me by senior counsel for the plaintiff, was what was said to be Dr Black's failure to reveal certain MMSE results for Mr Foley. The result of 29 out of 30 was on the MMSE administered by Dr Black on 24 June 2005, as indicated by his letter dated 28 June 2005 to Mr Foley's general practitioner, Dr Ryan (exhibit 52). In his letter dated 14 November 2005 to the Health Insurance Commission regarding Mr Foley (exhibit 68), Dr Black reported another result, of 26 out of 30, on the MMSE he administered on 14 November 2005, and did not refer to the result of 29 out of 30 on the test administered on 24 June 2005. Dr Black explained that he had not done so as it was 'irrelevant' (ts 1294), because the Health Insurance Commission was concerned only to see whether there had been a two point improvement in score.
A final set of reasons to approach Dr Black's evidence with caution, put to me by senior counsel for the plaintiff, was that he had shown pre‑judgment of the issues as appeared from two sources. One was an email of 20 April 2005 to a solicitor in the firm acting for the first defendant who had indicated he looked forward to the report (apparently exhibit 62) in which Dr Black said 'the situation appears open and shut' (ts 1288). That was, however, after seeing Mr Foley twice, in preparation for the writing of the report of 22 April 2005 (exhibit 62). The other source was the references in that report to matter which Dr Black accepted in cross‑examination was 'totally irrelevant' (ts 1290), and such references were indeed deleted from what became exhibit 62. That matter included 'geriatric or elder abuse' (ts 1290).
I consider that of these sets of reasons, the first and the fourth were not altogether satisfactorily explained in the evidence I have referred to. However, Dr Black's evidence, including the explanations he gave for all four sets of matters, was that of an expert witness who appreciated the need to give an opinion based on a comprehensive assessment of Mr Foley, including the need to reflect further on Dr Black's initial assessment of him (see ts 1075). At the same time, the first and fourth sets of reasons highlight the need to assess all of the evidence relating to Mr Foley's competence as at February 2005 and for me not to assign predominant weight to Dr Black's opinion in the face of conflicts in the evidence.
In that last respect I note the evidence of the SPECT scans and their analysis by Dr Cardaci, which Dr Black had requested after his report of 22 April 2005 (exhibit 62). There was no challenge to Dr Cardaci's expertise to do the scans and analyses described in those reports, and indeed the expert called by the plaintiff, Dr Foster, agreed that he was 'eminently qualified' in the relevant field of expertise, nuclear medicine.
It is common ground between the parties that 'SPECT' refers to Single Photon Emission Controlled Tomography.
In the report of 4 May 2005 (exhibit 59) Dr Cardaci described the performance and analysis of the SPECT scan as follows:
DESCRIPTION:
Injection of tracer was given with the patient resting quietly in a dimly lit room. The reconstructed images show moderately severe and moderately extensive reduction in perfusion in the posterolateral temporal lobes, more marked on the left side than the right, extending into the parietal lobes bilaterally. Moderately severe hypoperfusion is seen extending anteriorly into the temporal lobes. The frontal lobes show relative preservation of perfusion although focal reduction in activity is seen in the right orbitofrontal cortex. The dorsolateral prefrontal cortices show only relatively mild irregularities compared to the parieto‑temporal abnormalities. On the 3D quantitative assessment there is marked hypoperfusion in the cingulate gyrus, particularly in its posterior portion.
INTERPRETATION:
The study shows sever resting abnormalities of cerebral blood flow predominantly involving the temporal and parietal lobes, and posterior cingulate gyrus, and these findings are highly suggestive of Dementia Alzheimer's Type, as being the cause for the patient's cognitive decline. Although the appearances are asymmetric, this certainly is compatible with this diagnosis. There are no features to suggest a vascular dementia, and the relative preservation of frontal lobe perfusion would be against a frontotemporal neurodegenerative process.
In the report of 9 March 2009 (exhibit 60) Dr Cardaci appeared to indicate the possibility of 'vascular disease' as follows:
When analysed using the statistical package, the visual impression of blood flow abnormalities in these areas is confirmed. The distribution of abnormality, in the context of a patient with declining cognitive function, is most consistent with a diagnosis of early Alzheimer's‑type dementia. The appearances, however, are not specific and other pathology (eg vascular disease) could also give these appearances and the findings must be interpreted in the context of the patient's clinical history and examination findings. Alzheimer's‑type dementia has been associated with characteristic patterns of alterations in cerebral blood flow which typically involve the posterolateral temporal cortices, parietal cortices, and posterior cingulate gyrus. These findings in the more advanced stages are generally symmetric and progress over time. The finding of asymmetric involvement in these regions is not unusual in the early stages of Alzheimer's‑type dementia.
Dr Black was asked to comment on the later report's references to vascular disease, and responded, as follows (ts 992 ‑ 993):
What is the significance of vascular involvement in a person's condition, whether if you think they might have dementia or Alzheimer's? What's the significant of vascular involvement?---Well, really I mean it's partly a prognostic one. Vascular dementia, I mean, it covers a pretty broad range of processes, so I mean some people - I mean eventually if you live long enough you will have small vessel ischaemia, which is essentially the kind of the - the tiniest vessels in the core of your brain will eventually start to sludge up, and because of the - or you know, get blocked - and because there are circuits that run between the core of your brain and the front part of your brain, so they're running on a circuit, it doesn't - I guess if you think of it like a rubber band, it doesn't matter whether you cut the core or cut it at the centre or the front, you're going to end up with similar sorts of symptoms. Often the difference is though, if you have lots of vascular damage at the core of your brain or if you have - you can have a relatively small amount of vascular damage at the core of your brain, that will equate to a fairly large amount of vascular damage in the front part of the brain because the circuits are densely packed in the core and tend to fan out in the frontal lobes. But in terms of the significance, I think what Dr Cardaci is referring to is that it would be difficult to be absolutely definitive as to whether this is, you know, absolutely definitely Alzheimer's picture or whether there's a possibility that there's a vascular component. I think it's important to note though that I think he also refers to that, you know, you need to kind of correlate it with clinical findings. I mean there were no vascular risk factors. I mean other than the cognitive impairment, Mr Foley was a remarkably healthy man, and ‑ but as I said, you know, as we age everyone will start to have some of that. But I mean predominantly, if I had to go by my clinical judgment I'd say predominantly it's an Alzheimer's-type picture. That's my kind of clinical opinion.
I return below to the evidence before me as to the limitations of evidence of this kind relating to Alzheimer's disease. I should also note that the evidence does not itself relate to cognitive function, a matter to which I also return.
However, in my view the evidence in the reports of Dr Cardaci (exhibit 59 and exhibit 60) offers support for Dr Black's opinion that, as at 23 February 2005, Mr Foley was suffering from dementia.
I turn then to the evidence of Dr Hayward.
Dr Hayward saw Mr Foley on 3, 10 and 17 May 2006, on each occasion with the first defendant, and wrote a report dated 29 September 2006 for the solicitors for the first defendant (exhibit 24).
Her report (exhibit 24) indicated that Dr Hayward administered a test (the Wechsler Test of Adult Reading, or WTAR) of pre‑morbid (or pre‑disease or injury) function as well as a test (the Wechsler Adult Intelligence Scale ‑ 3rd edition, or WAIS‑III) of current level of intellectual function, and tested his visuospatial perception. She also attempted to use a test (the Wechsler Memory Scale ‑ 3rd edition, or WMS‑III) to assess his memory and to use a test (the Delis‑Kaplan Executive Function System, or D‑KEFS) to assess his executive function. In her examination‑in‑chief, she testified as to the results of that testing as set out in her report as follows (ts 1141):
And then you have got a summary in which you say his test profile is grossly abnormal and reveals severe cognitive impairment?---That's correct.
And then you refer to, 'Some few other learned skills such as single word reading and word knowledge remain relatively intact although they are still not at the level they would have been premorbidly'?---That's right.
And then over to the top of page 10 in the first paragraph you detail the areas of significant problems?---Yes.
And that included executive function?---Yes.
When you use the expression 'executive function,' Dr Hayward, what do you mean?---Those functions which are often attributed to the frontal lobes but can - problems in those areas can be caused by problems in other parts of the brain, if you like, that talk to the frontal lobes and communicate with them. By 'executive functions,' they range from basic functions such as the ability to sustain and divide attention through to obtaining problem-solving, reasoning type skills.
What sort of daily activities, if any, would require executive functioning?‑‑‑Certainly anything novel, anything new, and also multistep activities where you have got to do a number of things, but mostly in the earlier stages problems with executive function will show when people really can't come up with something to do in the face of a new problem or a new situation.
Dr Hayward also testified as to the significance of the Camcog‑R results of 83 and 86, reported by Dr Wilson in 2002 (see exhibit 94 and exhibit 97), as follows (ts 1156 ‑ 1157: her references to the CamCog results are to CamCog‑R results, I have concluded):
Would you agree that comparing what appears to have been his condition in 2002, mid‑2002, with his condition as you saw him, there has been quite a marked decline?---Yes. I mean the CamCog had problems, but, yes, there has been certainly a marked decline in that three-year period.
Whether he was suffering from any degree of cognitive impairment then is not clear, is it?---If he got 86 ‑ I know there's some dispute; one is 86 and one is 83 - that's actually not a significant difference on the CamCog, to people at the time many would suggest there was mild cognitive impairment. They particularly found that in areas of new learning and some impairment in executive function.
There were a number of criticisms of Dr Hayward's report made by Dr Foster which it is convenient to review briefly here. When I consider those criticisms with Dr Hayward's responses to them, responses which I find reasonable ones, the criticisms do not individually or in combination cause me to conclude I should reject her opinions, nor do they cause me to give them significantly less weight.
Dr Foster testified that Dr Hayward had relied on second and third hand opinion in her report. However, her answer, that it was necessary to rely on information from as many suitable sources as possible, particularly 'somebody who has known him for a reasonably long time to see whether or not you have got a sudden onset, for instance, and whether it's slow and progressive' (ts 1144), appears to me to meet this concern. This is subject to evaluation of that person, the first defendant, on whom she particularly relied, which I provide below.

I note that the matter to which those remarks were addressed, the lack of provision for more than one fee earner in item 23(a) of the 2006 Determination (which is also true of the 2008 Determination), is addressed in the corresponding item, item 24(a) of the Legal Practitioners (Supreme Court) (Contentious Business) Report and Determination 2010 (the 2010 Determination). However, I do not consider that those remarks indicate the view of the Chief Justice that a fairly arguable case to be put before a taxing officer, to the effect that the bill to be taxed should tax out at more than the limits under item 23(a) of the 2006 and 2008 Determinations by reason of the involvement of other fee earners, should always or even usually be found. Rather, in my view those remarks indicate such a case could more readily be found than might otherwise be the case.
Counsel for the plaintiff put to me that there was no evidence that, at the time of the mediation, other fee earners than the one item 23(a) provided for attended that mediation, and so no order could or should be made. However, I note that a judge may proceed in the absence of detailed evidence, at least where he or she as the trial judge is able to draw on their own experience of the case as a matter of 'impression' (see EDWF Holdings 2 Pty Ltd [7]; Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union [No 4] [2006] WASC 317 (S) [13] (Le Miere J)). It is less clear whether the judge may proceed in the absence of any evidence that (in a case like this one) other fee earners attended the mediation, the position in which I find myself. However, in my view in a case where a judge can readily identify the need for such attendance because of the unusual difficulty, complexity or importance of the matter, the judge would be able to make a special costs order of the kind sought here. In my view I am able to make such an identification, for the reasons I reach below.
Counsel for the plaintiff put to me that it would indeed be an unusual case where there was a need for fee earners, other than as provided for by item 23(a), to attend the mediation. As counsel put it, mediation is not the trial but more in the nature of a negotiation enterprise, which I took to indicate that no conclusion as to the need for fee earners to attend a mediation could be drawn from the likely need for them at trial. However, in my view Tranchita properly understood recognises that such a conclusion may well be drawn. I accept that in that case, as counsel for the plaintiff put to me, there were multiple plaintiffs and defendants and complex claims, which made mediation unusually complex. However, an inadequacy resulting from unusual complexity is not the only reason why a special costs order might be made. Indeed it is clear on the authorities that 'unusual' in Legal Practice Act 2008 s 280(2) qualifies 'difficulty', but not 'complexity' or 'importance': see Heartlink (S) [17]; and SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S2) [106] (Roberts‑Smith J). In view of the significance of mediation to the court as explained in Tranchita, and its role not only in resolving disputes but also in narrowing issues, there is no reason not to apply to it the same approach as to costs matters in relation to the trial. Whether, in the particular circumstances of the mediation in question, involvement of fee earners, other than as provided for by item 23(a), was in fact appropriately and reasonably required would of course be for the taxing officer, not for me. I consider that, for the reasons elaborated on below and as a matter of impression, inadequacy has been shown.
As to whether there was inadequacy as the result of unusual difficulty, complexity or importance of the mediation, see Verdell Pty Ltd v F & G Nominees Pty Ltd [2002] WASC 58 (S2) [14] ‑ [15] (Wheeler J) on the former O 66 r 12. On this authority, it seems to me I can draw on my experience as the trial judge to understand the issues likely to have been involved in approaching the mediation which may have made necessary the involvement of fee earners other than as provided for in item 23(a), being issues which may have made that mediation one of unusual difficulty, complexity or importance. On the continued relevance of Verdell see my decision in Computer Accounting and Taxation Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S) [118] ‑ [120]. With respect to a mediation, however, it seems to me that my appreciation of the issues in the case (substantive and forensic) should be approached by reference to those issues as they likely were at the date of the mediation, not at the later date of the trial. At the same time the issues as at the trial may indicate what were likely to have been the issues as at the date of the mediation. The former issues so indicating were particularly the substantive ones of unusual difficulty and complexity represented by the question whether or not the MOU was merely an agreement to agree to which I have previously referred. The forensic issues so indicating were the ones of unusual difficulty and complexity represented by whether or not at the relevant times it could be shown Mr Foley lacked capacity and the plaintiff knew or ought to have known this, in circumstances where Mr Foley, by the time of the mediation, was suffering from severely impaired cognition, but it was likely the evidence as to his condition at the earlier time of the execution of the MOU was not clear. Further, the matter of any resolution of the dispute at the mediation was of importance not only to the parties to the litigation, but also to the third parties who were the beneficiaries under Mr Foley's will other than the first defendant.
I have concluded that a case of inadequacy because of the unusual difficulty, complexity and importance of the subject matter of the mediation has been made out such that the special costs order sought by proposed order 2(a) should be made.

Proposed order 2(b): removal of the limits on getting up for the trial and on the trial

Order 2(b) of the defendant's minute is as follows:
That the taxation be performed on the basis that:
…
(b)the limit on items 16 and 19 of the Scale be removed …
I took this proposed order to be sought under Legal Profession Act 2008 s 280(2)(c). The reference to 'Scale' I took to be to whichever of the 2006, 2008 or 2010 Determinations was relevant to the work in question.
Item 16 relates to getting up and is identical in both the 2006 Determination and the 2008 Determination. The 2010 Determination would appear to have no application to work of that nature in this case. The identity is save for the maximum amount shown. The written submissions for the plaintiff state that the order sought as to this item is 'conceded', but also state that the court should set such upper limit 'as appropriate having regard to the scale allowance of $39,650', which is the (higher) maximum in the 2008 Determination.
At the hearing before me counsel for the plaintiff clarified the concession. Counsel said that the special costs order was not opposed. However the court should, if it were able to do so, set a limit on the amount claimable (see Legal Profession Act 2008 s 280(2)(b)). As I indicated at the hearing, I do not consider I am able to set such or any particular limit. I now explain why I reached that conclusion.
The Sirett affidavit annexes a spreadsheet containing entries the deponent identifies as work covered by item 16. The total of the amounts concerned is substantially larger than that provided in item 16 in the 2008 Determination. Whether, if the item 16 limit were removed, the first defendant's costs would tax out at anything like that amount would be a matter for the taxing officer, not for me. However, I consider I may take account of the affidavit of a legal practitioner, like the Sirett affidavit, in arriving at an opinion as to inadequacy and that makes it difficult for me to conclude that a limit of the sort counsel for the plaintiff contended for should be set: see Green v Wilden Pty Ltd [2005] WASC 83 (S) [182] (Hasluck J).
As to the removal of the limit in item 16, I have formed the opinion with the two components described in Heartlink (S) [11], having regard to the Sirett affidavit and the nature of the substantive and the forensic issues in this case as I have characterised them in relation to proposed order 2(a).
I note that the special costs order sought does not make clear whether the limit as to hours spent or the hourly rates of the fee earner concerned or both is to be removed. Special costs orders to uplift all or any limits in relevant Determinations may be sought: see CAT (S) [123] and authorities there cited. Counsel for the first defendant confirmed it was the prescribed limit on hours, not those on hourly rates, that was to be removed. In my view of the materials before me and my knowledge of the matter in the proceedings a special costs order to remove such limits would be appropriate.
Item 19 relates to the trial, and it is only item 19 in the 2008 Determination that would appear to be relevant. However, I note that by reason of the date of delivery of the judgment in the action, 30 July 2010, that it is the counterpart to item 19(g) (attending on reserved judgment) in the 2010 Determination, item 20(g), which appear to be relevant to that work. From this point, my references to item 19 should also be taken to include item 20(g).
The Sirett affidavit supplies invoices of senior counsel for the trial which in sum show an amount substantially in excess of the total of the amounts for senior counsel in item 19 of the 2008 Determination. Again, whether if the limit for senior counsel were removed the first defendant's costs would tax out at anything like that amount would be for the taxing officer, not for me.
Counsel for the plaintiff submitted that a special costs order with respect to item 19 should not be made as it was in substance an application for indemnity costs without an evidentiary foundation. That foundation, counsel put to me, should be a costs agreement. None, and no evidence as to one, had been provided to me.
However, the application in respect of item 19 is not put on the basis of an indemnity cost order, and I do not consider that the application is in substance of that kind. For the bases on which indemnity costs orders are made: see Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10] (Pullin JA & Kenneth Martin J). None of those bases are invoked here. It seems clear that the matters of any costs agreement and its effect on the taxation of costs in this case would be for the taxing officer, not for me: see Hancock Family Memorial Foundation Ltd v Porteous [2000] WASC 61 [5] (Anderson J), considered in SDS Corporation (S2) [64] ‑ [68].
As to the limit in item 19, I have formed the opinion with the two components described in Heartlink (S) [11], having regard to the Sirett affidavit and to the nature of the substantive and forensic issues in this case as I have characterised them in relation to proposed order 2(a).
I note that the special costs order sought does not make it clear whether the limits in item 19 as to hours worked or hourly rates, of which fee earner or earners, is to be removed. Counsel for the first defendant confirmed at the hearing before me that it was the removal of limits on hours, not hourly rates, of the fee earners referred to in item 19 that was sought. In my view of the materials before me, and my awareness of the matters in the proceedings, a special costs order to remove such limits is appropriate.

Proposed order 2(c) and order 2(d): running transcript and allowance for the fees of senior counsel and counsel at trial

Order 2(c) and order 2(d) of the first defendant's minute are as follows:
That the taxation be performed on the basis that:
…
(c)the obtaining of a running transcript was justified;
(d)the taxing officer be directed to make allowance for the fees of senior counsel and counsel at trial …
I took these orders to be sought under Legal Profession Act 2008 s 280(2)(a). The plaintiff conceded both of them. I would make them.

Proposed order 2(e): additional allowances for preparation by senior counsel and other fee earners

Order 2(e) of the first defendant's minute is as follows:
That the taxation be performed on the basis that:
…
(e)the taxing officer be directed to make additional allowances for the preparation of senior counsel, counsel and the lawyers for the defendant, due to breaks in the trial including weekends and that such allowance[s] be additional to any allowance otherwise available …
I took this order to be sought under Legal Profession Act 2008 s 280(2)(d). Counsel for the first defendant acknowledged that what was sought was permission for the taxing officer to determine that an allowance for refreshers should appropriately and reasonably be made beyond those implicitly allowed for in the daily hearing rates in the 2008 Determination item 19. Counsel referred me to breaks in the trial which, as I understood the submission, were such as to require greater time for refreshers than was allowed for in the 10 hours per hearing day in that item in the 2008 Determination. I noted from the Sirett affidavit invoices of senior counsel showing hours worked which included weekends and other hours exceeding the hours provided for in item 19. Again, whether, if the permission were given, the first defendant's costs would tax out at anything like the amount resulting from the additional hours shown would be for the taxing officer, not for me.
At the hearing counsel for the first defendant confirmed that the proposed order should be modified to make clear both that only permission to make allowance for refresher work was sought, and that only to the extent the taxing officer determined an allowance should appropriately and reasonably be made beyond 2008 Determination item 19. Counsel for the plaintiff indicated he would not oppose the order so framed, provided that the order was expressed to refer only to senior counsel and counsel. That restriction was on the basis that only those two classes of fee earners were recognised in taxations as appropriately and reasonably doing work of a refresher kind. I note the support to be gained for that proposition (by implication) from Civil Procedure in Western Australia [66.11.12] (as at 12 November 2010). In my view that is an appropriate limitation on the special costs order sought here. However, it is also my view that work that was appropriately and reasonably done in aid of counsel's refreshers by other fee earners is within items 16 and 19 in the 2008 Determination.
I note that the proposed order does not clearly indicate whether it relates to hours worked for senior counsel and counsel, or their hourly rates. Counsel for the first defendant confirmed at the hearing that it was hours worked, not hourly rates, for which the allowance was sought.
I have formed the opinion with the two components described in Heartlink (S) [11], having regard to the Sirett affidavit and the nature of the substantive and the forensic issues in this case as I have characterised them in relation to proposed order 2(a) with the modifications I have indicated. I would make that order so modified.

Proposed order 2(f): additional allowance for closing submissions

Order 2(f) of the first defendant's minute is as follows:
That the taxation be performed on the basis that:
…
(f)That the taxing officer be directed to make additional allowances (to those otherwise available for the fees of senior counsel, counsel and the lawyers for the defendant) in preparing submissions for the closing of the trial between the parties …
I took the proposed order to be sought under Legal Profession Act 2008 s 280(2)(d). Counsel for the first defendant acknowledged that what was sought was permission for the taxing officer to determine that an allowance should appropriately and reasonably be made for work done on the closing submissions by those three classes of fee earners beyond that implicit in the allowance in the 2008 Determination, items 19 and 16. Counsel again referred me to the invoices of senior counsel annexed to the Sirett affidavit showing hours worked beyond those allowed for in item 19; I also took counsel to be referring me to the spreadsheet annexed to that affidavit for work done for getting up including work done after the trial commenced. I return below to the inclusion of preparing closing submissions under item 16, removal of the limit on which I have earlier considered. Again, whether, if the permission were given, the first defendant's costs would tax out to include additional costs by any or all of the three classes of fee earners would be for the taxing officer.
At the hearing counsel for the plaintiff indicated to me he would not oppose the order being made if it were framed in terms of a permission to make allowance for work done of that sort, to the extent the items in the 2008 Determination did not already permit this, but with reference only to the work of senior counsel and counsel, not other fee earners. In the view of counsel for the plaintiff, special reference should only be made to the work of counsel. Counsel for the first defendant submitted that if such a change were made to the proposed order, the first defendant would still be in a position to claim costs of other fee earners under item 16, getting up. In my view that is a correct understanding of the scope of item 16. Whether a claim that such work by reference to that item was appropriately and reasonably done would of course be for the taxing officer, not for me.
I note that the proposed order does not clearly indicate whether it relates to hours worked for senior counsel and counsel, or their hourly rates. Counsel for the first defendant confirmed at the hearing that it was hours worked, not hourly rates for which the allowance was sought.
I have formed the opinion with the two components described in Heartlink (S) [11], having regard to the Sirett affidavit and the nature of the substantive and the forensic issues in this case as I have characterised them in relation to proposed order 2(a). I would make the order sought in proposed order 2(f), with the modifications I have indicated.

Proposed order 4: time from which interest on costs would run

Order 4 of the first defendant's minute with corrections made at the hearing is as follows:
Interest to run on costs incurred from the date of payment of those costs on the substantive issues in the action.
Counsel for the first defendant, as I understood him, confirmed that this proposed order was intended to apply to costs paid before judgment; for costs paid on or after judgment, the rule I reach next would apply.
It appears to be established for this state that, at least as a general rule, interest runs on judgment sums from the date of the judgment, and this includes interest on costs, even although the taxation of costs will occur later. This is the 'incipitur' rule. The rule that interest runs on costs from the date of the certificate of costs, which is the 'allocatur' rule, does not apply in this state. See Civil Judgments Enforcement Act 2004 (WA) s 8(1) read with s 3 'judgment sum'; and Hamdan v Widodo [No 2] [2010] WASC 6 (S) [9] and [13] (Johnson J). Judgment for this purpose is the judgment for costs, which in this case would be the judgment dated 30 July 2010 (see order 5). See Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398, 416 (Lord Ackner).
It is also established in this state that pre-judgment interest on costs cannot be recovered under Supreme Court Act 1935 (WA) s 32. That provision empowering the court to award pre‑judgment interest does not apply to costs: Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 [115] (McLure J; Anderson & Steytler JJ agreeing). However, that provision would permit the award of pre‑judgment interest on costs where they are recovered as damages on a cause of action, such as costs paid to a solicitor which would have been avoided if the solicitor had not breached the solicitor's duty of care and skill as pleaded: see Olympic Holdings Pty Ltd v Lochel [2004] WASC 61 for such an award. On the same basis s 32 would appear to permit the award of pre‑judgment interest on costs where indemnity costs are recovered as damages on a cause of action for the tort of abuse of process: see as to the possibility of such an award under Federal Court of Australia Act 1976 (Cth) s 51A, the counterpart of Supreme Court Act s 32, Flower & Hart v WhiteIndustries (Qld) Pty Ltd [2001] FCA 370 [33] (Full Court: Drummond, Dowsett & Hely JJ). However, there is no suggestion in this case of any cause of action for damages in the form of costs to be awarded, let alone the pleading of one.

At the same time, it might be argued that Supreme Court Act s 37(1) providing that the 'costs of and incidental to all proceedings' are to be 'in the discretion of the Court or judge' (emphasis supplied) gives the court a discretion to order pre-judgment interest on costs. Arcus Shopfitters, as I understood the judgment of McLure J, left open whether that provision, or indeed any other source of power, such as the court's inherent jurisdiction, gave the court such jurisdiction: see [115]. Her Honour also said this at [116]:
Even if the Court has the jurisdiction to award interest on costs incurred in conducting the action I am not persuaded that the trial Judge erred in the exercise of his discretion. It is currently the case that, absent misconduct by a party, a successful litigant is not compensated for all costs directly incurred in the conduct of the proceedings. There are sound policy reasons for this approach relating to the dynamics of securing an early settlement of proceedings. There is even less justification for compensating a litigant for indirect costs in connection with proceedings such as financing costs. There is nothing in the circumstances of this litigation that would justify the respondent receiving all of its direct costs much less its financing costs. I would also dismiss this ground of the cross-appeal.
Circumstances warranting the exercise of any discretion to award pre‑judgment interest on costs might be that there is an award of indemnity costs: see Lai v Tiao (No 2) [2009] WASC 22 (S) [73] (Johnson J). However, in this case there is no claim for indemnity costs.
Finally, as to whether or not there is a power to award pre‑judgment interest on costs, or at least whether or not the court should readily make such an award, I have noted the submission of counsel for the plaintiff that such a power or at least its ready exercise would give rise to difficult questions whose answers would be expected to add significantly to the costs of a taxation. Those questions would seem to be ones that arise where, as might be expected, differing proportions of the costs paid in respect of different work were allowed on the taxation. For those difficulties, and a solution, see Lahoud v Lahoud [2006] NSWSC 126 [84] ‑ [86] (Campbell J). This solution appears to be that followed in New South Wales for orders under Civil Procedure Act 2005 (NSW) s 101(4) and s 101(5), which state that the court 'may order' interest on any amount payable under an order for costs as from the date or dates on which the 'costs concerned were paid' or 'such later date as the court may order'. See Quick R, Quick on Costs, looseleaf, vol 2 [4.10234] (as at Update 55). Of course there is no corresponding legislative provision to Civil Procedure Act 2005 (NSW) s 101(4) and s 101(5) in this State.
However, I do not consider that I need to answer the question whether or not I have jurisdiction to award pre-judgment interest, as, approaching the matter on Arcus Shopfitters [116], I do not consider that there are circumstances warranting the exercise of any such jurisdiction.
Thus, I would not make proposed order 4, except in terms of the incipitur rule, which as I understand it was the order Johnson J made in Hamdan [No 2]: see [13].

Proposed order 3: the costs of this application

Order 3 of the first defendant's minute is as follows:
The Plaintiff pay the costs of this application to be taxed as part of the overall bill.
Of course the court has the power to make such an order under its general discretion as to costs in O 66 r 1(1). However, in my view the first defendant has not been successful in respect of all the orders she sought. Applying the approach in Wheeler (574), and having regard to the level of success the first defendant did enjoy, I would order the plaintiff pay 75% of the costs of the present application, to be taxed as part of the overall bill.

Conclusion

I will hear from the parties as to the final orders to be made.