Macura v Sarasevic

[2019] NSWSC 1409

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	Macura v Sarasevic [2019] NSWSC 1409
Hearing dates:	23, 24, 30 April and 3, 10 May 2019
Date of orders:	18 October 2019
Decision date:	18 October 2019
Jurisdiction:	Equity
Before:	Ward CJ in Eq
Decision:	1.   Declare that the parties have reached a settlement agreement as set out in the Short Minutes of Orders signed by the parties on 20 March 2018 (annexure A to the Notice of Motion filed by the defendants on 16 May 2018), and formalised in the Short Minutes of Orders signed by the parties’ solicitors on 23 March 2018 (annexure B to the Notice of Motion filed by the defendants on 16 May 2018) 2.   Order that: a.   the plaintiff receive by way of provision out of the estate of the late Milorad Adzic, a lump sum of $100,000; b. no interest be paid on the lump sum if paid within 28 days of the date of these orders; otherwise, interest is to be paid on any unpaid part of the lump sum, calculated at the rate prescribed for the payment of interest on unpaid legacies under s 84A(3) of the Probate and Administration Act 1898 (NSW), until paid in full; c.   the settlement sum of $100,000 referred to in Order 2(a) above (less the sum the subject of Order 5 below) be paid into court pending the resolution of the dispute as to costs between the plaintiff and his former solicitors, VC Lawyers and the determination of any claim by the defendants to set-off, as against the settlement sum, any amounts owing to the defendants by the plaintiff in respect of the occupation fee the subject of orders made earlier in these proceedings and the costs orders made in these proceedings; d.   the plaintiff vacate the unit situated and known as 8/7 Short Street, Liverpool (the unit at the Liverpool property), within 30 days of the date of these orders; e.   in the event that the plaintiff fails to vacate the unit at the Liverpool property within the time specified in Order 2(d) above, the defendants have leave to issue a writ of possession forthwith after that date. f.   there be no order as to the plaintiff’s costs of the proceedings, to the intent he will bear his own costs of the proceedings; g.   the defendants’ costs of the proceedings, up to and including 20 March 2018, calculated on an indemnity basis, are to be paid out of the estate of the late Milorad Adzic; h.   the cross-claim be dismissed; i.   no order as to costs of the cross-claim; j.   the balance of the statement of claim be dismissed; 3.   Order that the plaintiff pay the costs of the defendants of the proceedings from and including 23 March 2018 on the ordinary basis. 4.   Order that the plaintiff’s tutor, Lawrence Myers, indemnify the defendants for any costs payable by the plaintiff pursuant to these orders (and unpaid by the plaintiff) in respect of the defendants’ costs of the proceedings from 19 April 2019 to date. 5.   Order that the amount of $1,580 collected by the plaintiff from the occupiers of other units at the Liverpool property (as set out in the affidavit of Michelle Leahy affirmed 9 April 2019) be deducted from the settlement sum payable pursuant to Order 2(a).
Catchwords:	CIVIL PROCEDURE – Hearing – Adjournment – application by plaintiff during the hearing for adjournment to seek further medical evidence – consideration of principles in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 – consideration of the prejudice suffered to the parties and other litigants due to the delay – where there had already been multiple occasions for the plaintiff to obtain further medical evidence – application dismissed   CONTRACTS – capacity – mental incapacity – whether settlement agreement reached at a mediation should be set aside – whether the plaintiff had the requisite capacity to enter into the agreement – whether the defendants were aware that the plaintiff lacked capacity to enter into the agreement – held that the defendants did not have actual or constructive knowledge of incapacity on the part of the plaintiff to provide proper instructions or to agree to a settlement of the proceeding
Legislation Cited:	Civil Procedure Act 2005 (NSW), ss 3, 55-60, 73 Probate and Administration Act 1898 (NSW), s 84A(3) Succession Act 2006 (NSW), s 59
Cases Cited:	Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Dalle-Molle (by his next friend Public Trustee) v Manos [2004] SASC 102 Gibbons v Wright (1954) 91 CLR 423; [1954] HCA 17 Giles v Rooney (1996) 23 MVR 510 Hamod v State of New South Wales [2011] NSWCA 375 Hanna v Raoul [2018] NSWCA 201 Imperial Loan Co v Stone (1892) 1 QB 599 Masterman-Lister v Brutton & Co [2003] 3 All ER 162; [2003] 1 WLR 1511 Murphy v Doman [2003] NSWCA 249 Public Trustee (WA) v Brumar Nominees Pty Ltd [2012] WASC 161 Queensland v JL Holdings Pty Ltd (1996) 189 CLR 146; [1997] HCA 1 Sali v SPC Ltd [1993] HCA 47; (1993) 116 ALR 625 Wilton v Farnworth (1948) 76 CLR 646; [1948] HCA 20
Texts Cited:	N Seddon and R Bigwood, Cheshire & Fifoot, Law of Contract (11th Australian ed, 2017, LexisNexis)
Category:	Principal judgment
Parties:	Branco David Macura (Plaintiff) Dragan Sarasevic (First Defendant) Milena Mijatovich (Second Defendant)
Representation:	Counsel: B Levet (Plaintiff) J Bartos (Defendants)   Solicitors: AA Tees (Plaintiff) Jordan’s Law Practice (Defendants)
File Number(s):	2017/00336881
Publication restriction:	Nil

Judgment

1. HER HONOUR: This matter involves an application by the defendants, the executors of the Will of the late Mr Milorad Adzic (the deceased), namely, Fr Dragan Sarasevic and Ms Milena Mijatovich, brought by notice of motion filed 16 May 2018 and amended 23 April 2019, seeking a declaration pursuant to s 73 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) as to a settlement agreement reached at a court-annexed mediation held on 20 March 2018 in relation to these proceedings in the Family Provision List (2017/00336881). The plaintiff in these proceedings is Mr Branco Macura. Mr Macura now contends that he did not have capacity to enter into the said settlement agreement. (There are notable inconsistencies with the spelling of the names of parties in this matter. For example, sometimes in the court documents Mr Branco Macura’s name is spelt Branko, Fr Sarasevic’s name is spelt Saracevic and Ms Mijatovich’s name is spelt Mijatovic; however, nothing turns on this.)

2. The hearing of the present application was beset by delay in the service by Mr Macura of medical evidence relating to his claimed incapacity as at the date of the said mediation and by last minute adjournment (and other) applications brought on his behalf. Having acceded to various such applications, including for the appointment of a tutor to act on behalf of Mr Macura (in the circumstances to which I will refer shortly), I ultimately refused the last application for an adjournment to adduce further psychiatric evidence as to Mr Macura’s cognitive ability at the time of the mediation. That application was made at the close of the hearing of the evidence on the executors’ application. I proceeded to hear the parties’ closing submissions based on the evidence that had by then been adduced, before reserving my judgment on the substantive application. For the reasons that follow, I consider that the executors’ application for declaratory relief and consequential orders has been made good. I will make orders accordingly.

Background

3. The dispute which was the subject of the mediation leading up to the disputed settlement agreement involved a claim by Mr Macura against the estate of the deceased (in proceedings commenced by him on 7 November 2017) to the effect that the deceased had made him a testamentary gift (donatio mortis causa) of property owned by the deceased in Liverpool (the Liverpool property) or in the alternative that the executors are estopped by their conduct from denying the gift; and, if those claims failed, a claim by Mr Macura under s 59 of the Succession Act 2006 (NSW) (Succession Act) for provision out of the estate or notional estate of the deceased (that claim being based on an alleged same sex de facto relationship between Mr Macura and the deceased).

4. In a related proceeding (2017/00270488), also mediated as part of the 20 March 2018 mediation, another person (Ms Slavica Ristic) brought a separate claim under s 59 of the Succession Act for provision out of the estate or notional estate of the deceased. Both Mr Macura (who was described by Ms Ristic in the course of her evidence as the deceased’s driver) and Ms Ristic (who was for some time before the deceased’s death in receipt of a carer’s allowance in respect of the deceased and for part of the time also in receipt of a carer’s allowance as, and still claiming to be, Mr Macura’s carer) claimed to have been in a sexual relationship with the deceased prior to the deceased’s death (the respective alleged de facto relationships forming the basis for the respective, and in at least one sense competing, family provision claims).

5. I was informed by the executors’ Counsel (Mr Bartos) that, according to Mr Macura, the deceased’s estate was valued at about $11 million (see T 3.18; 10/05/19) on the basis that the Liverpool property could be sold as part of a consolidated development parcel with a neighbouring property, but that there had been some enquiries made and that there was no interest in such a development, so that the Liverpool property was worth about $3.2 million and the executors had estimated the value of the estate overall at about $5.7 million. (In the submissions for Mr Macura on the present application it appears that he still contends that the estate is worth some $10 million.)

6. The deceased was not married and had no surviving issue. He was in his 90’s at the date of his death in 2016. Under the deceased’s Will, his estate is left to various nieces and nephews and their respective children. There has been no distribution to any of the beneficiaries.

7. The Liverpool property is a block of units on a single title. The deceased lived in one of the units (the location of which is said to have varied from time to time over the years). Mr Macura resided in another of those units (though from time to time, according to Ms Ristic, he slept in a bedroom in the deceased’s unit).

8. Mr Macura’s case is that he first commenced living at the Liverpool property as a tenant but that he then formed a sexual relationship with the deceased; and that the deceased promised him the Liverpool property or promised that he could live at the Liverpool property for the rest of his life rent-free.

9. Ms Ristic’s evidence in her family provision claim (arguably inconsistent with Mr Macura’s case) was that from 2010 until the date of his death she and the deceased were in a de facto sexual relationship (and that they intended to travel to Serbia and to purchase a house together). In cross-examination on the present application, Ms Ristic’s evidence of a sexual relationship with the deceased ultimately consisted of no more than that she and the deceased had “very close hugs” without wearing parts of their clothes (and even then there is some doubt as to whether any such relationship persisted to the date of the deceased’s death – her oral evidence being that the “very close hugs” did not continue for more than a period of about two years – see T 131-132).

10. As adverted to above, the mediation of both matters took place concurrently on 20 March 2018. The late Mr Grahame Berecry was the mediator. Each of Mr Macura and Ms Ristic (as also was the estate) was separately represented by independent legal representatives: Mr Macura by Mr Steven Cominos of Counsel and Mr Costa Vertzayias, a solicitor working as a consultant for the solicitor then on the record for Mr Macura (Mr Dion Vertzayias, who is Mr Costa Vertzayias’ son); Ms Ristic by Mr Kim Morrissey of Counsel and a solicitor; the executors by Mr Grant Carolan of Counsel and Mr Antony Sutton, solicitor.

11. At the mediation (leaving aside for the moment the issue now raised as to Mr Macura’s claimed incapacity and the effect of any incapacity that may be established on the efficacy of the settlement) agreement was reached for the settlement of the respective proceedings on the basis that each of Ms Ristic and Mr Macura was to receive a lump sum legacy of $100,000 from the estate. In Ms Ristic’s case, I understand that this has since occurred. Orders were made giving effect to Ms Ristic’s settlement on 29 March 2018.

12. Short minutes of order were prepared to record the respective parties’ agreements in the separate proceedings and were signed by the parties’ legal representatives on behalf of their respective clients following the mediation. In the case of Mr Macura’s proceeding, the signed short minutes of order included an order that Mr Macura vacate the unit occupied by him at the Liverpool property. Unhelpfully (at least in the sense that it led to considerable confusion and dispute – though any issue as to authenticity was ultimately abandoned by Mr Macura), it appears that only one set of short minutes was prepared at the mediation (notwithstanding that there were two sets of proceedings) and that a photocopy of those short minutes of order was executed with amendments to reflect the different sets of proceedings. Certainly, the short minutes of order as filed in the Macura proceeding were contained in a photocopy document that had been signed by Mr Macura.

13. In the short minutes of order signed in relation to Mr Macura’s proceeding, it was noted that the parties had agreed that there be no order as to Mr Macura’s costs “to the extent [sic; presumably meaning to the intent] he pay his own costs”; and that Mr Macura consented to the orders made in favour of Ms Ristic in her separate family provision proceeding. The settlement was thus inclusive of costs.

14. The short minutes of order in the Macura proceeding were signed by Mr Costa Vertzayias (bearing Mr Macura’s signature in various places) on 23 March 2018. However, no orders in terms of the short minutes of order were in fact entered in the Macura proceeding because, not long after the conclusion of the mediation, Mr Macura disputed the existence of a binding settlement agreement and asserted, in effect, that he did not have capacity to enter into the terms of settlement agreed on 20 March 2018. That was first communicated to the Family Provision List Judge, Hallen J, on 27 March 2018 (the matter having been listed for approval of the short minutes on 29 March 2018).

15. At about the same time as raising this issue, Mr Macura appointed a new solicitor to act for him (Mr Anthony Stewart of Stewart & Associates), a notice of change of solicitor being filed in the proceedings on 26 March 2018. There is presently a dispute between Mr Macura and his former solicitors, VC Lawyers, in relation to their fees; his former solicitors claiming an equitable “fruits of litigation” lien over the settlement sum – it being alleged that the agreement reached by them with Mr Macura at the mediation was that, of the $100,000 settlement sum, a sum of $70,000 would go towards Mr Macura’s legal fees. (For present purposes, this is a different issue to that raised by the executors’ notice of motion, although it might perhaps explain to some extent Mr Macura’s desire to set aside any agreement entered into at the mediation; in any event, it is relied upon in some of the submissions for Mr Macura on the present application as going to the perceived “unfairness” of the settlement reached at the mediation from Mr Macura’s perspective.)

16. On 29 March 2018, Hallen J directed Mr Macura to serve any evidence setting out the facts and circumstances going to the reasons why he contended he should not be bound by the signed short minutes of order by 4pm on 20 April 2018. Mr Macura does not appear to have complied with that direction.

17. By notice of motion filed 16 May 2018, the executors sought declaratory and other relief in effect to enforce the settlement agreement reached at the mediation. In support of that motion, the executors have served a number of affidavits: relevantly, an affidavit affirmed 15 May 2018 by Mr Antony Sutton, the solicitor who attended the mediation (with Counsel) for the executors; an affidavit sworn 6 June 2018 by the late Mr Grahame Berecry, who conducted the mediation; an affidavit sworn 25 June 2018 by Mr Costa Vertzayias, the consultant at VC Lawyers who attended the mediation while his son, the solicitor on the record for Mr Macura, Mr Dion Vertzayias, was overseas; an affidavit affirmed 2 July 2018 by Ms Milena Mijatovich, the solicitor for, and an executor of, the estate; an affidavit affirmed 17 October 2018 by Fr Dragan Sarasevic, the other executor; and an affidavit affirmed 30 November 2018 by Mr Grant Carolan, Counsel representing the executors at the mediation. Each of those persons had attended at the mediation (and each, other than Mr Carolan, was required for cross-examination on the present application).

18. Also served in the proceedings was an affidavit affirmed 9 April 2019 by Ms Michelle Leahy (a real estate agent) in which Ms Leahy deposed to certain matters in relation to the Liverpool property, namely as to receipt by Mr Macura of rents from other tenants occupying units in the property and steps taken by him in relation to the property – which evidence need not here be considered as it is not relevant to the issue presently for determination; namely, as to the existence and enforceability of a binding settlement agreement.

19. For the hearing of the present application, Mr Macura served affidavits affirmed by him on 23 May 2018 and 7 September 2018, as well as affidavits affirmed 10 May 2018 and 7 September 2018 by Ms Ristic and an affidavit affirmed 10 September 2018 by Dr Magdy Attia, Mr Macura’s general practitioner. Mr Macura subsequently sought leave to file, and rely upon, a number of further affidavits and to adduce other evidence, as I explain below.

First adjournment application

20. The executors’ motion for relief pursuant to s 73 of the Civil Procedure Act was initially listed (by Hallen J on 14 December 2018) for hearing for two days commencing on 13 February 2019. I am informed by Mr Bartos that, although Mr Macura’s solicitor was not present on that occasion, there had been communication between the parties’ legal representatives at the time as to the setting down of the matter for hearing and it is noted that the Court was not informed at that time (nor immediately thereafter) of any incapacity on the part of Mr Macura to attend a hearing in February 2019 notwithstanding that it now appears that, as at that time, Mr Macura’s general practitioner, Dr Attia, had already signed a medical certificate dated 3 December 2018 to the effect that Mr Macura would not be able to attend court for the next four months. (I refer to this certificate in more detail later in these reasons.)

21. On 31 January 2019, the matter first came before me, ex parte, in the duty list. Mr Macura had filed a notice of motion electronically on 30 January 2019 seeking an order that the hearing of the executors’ motion on 13/14 February 2019 be vacated. In support of that application, an affidavit sworn 31 January 2019 by Mr Macura was filed and reliance was placed on the affidavit affirmed 10 September 2018 by Dr Attia. I listed the matter for directions the following day and directed that the executors (who had not at that stage been served with the notice of motion) be notified of the application.

22. The basis on which the application for an adjournment was put at that stage was Mr Macura’s medical condition. Mr Macura deposed to having prostate and bone cancer; to having been diagnosed with post-traumatic stress disorder said to have been acquired as the result of his service with the Australian Army in Vietnam; to being on various medications; and to suffering from grief-related symptoms from the passing of the deceased (who he claimed was his de facto partner); as a result of which Mr Macura claimed to be too unwell to attend the hearing.

20. Pausing here, the executors pointed out (when the adjournment application was before me on 1 February 2019) that on 19 December 2018 (some two weeks after Dr Attia’s 3 December 2018 certificate), Mr Macura had been “well enough” to attend proceedings initiated by him in the NSW Civil and Administrative Tribunal (the Tribunal proceedings, to which I refer below) relating to issues relevant to the present proceeding.

21. I heard argument on the adjournment application in the duty list on 1 February 2019. The executors opposed the application, relying on a number of affidavits (an affidavit affirmed 31 January 2019 of Mr Paul Grech (a private investigator who had conducted surveillance of Mr Macura on 30 January 2019 and deposed to the various activities in which Mr Macura had engaged on that day); an affidavit affirmed 17 January 2019 of Mr Louis Schuster (a tenant at the Liverpool property); and an undated affidavit filed 1 February 2019 by Mr Allen Zarib (a managing agent for the Liverpool property); and tendering (not as evidence of the truth of their contents but for the fact that Mr Macura had deposed therein to particular matters) portions of affidavits affirmed or sworn by Mr Macura in the proceedings to that time ([12] and [13] of an affidavit sworn by him on 6 November 2017; [2] of his affidavit affirmed 23 May 2018; and [2] of his affidavit affirmed 7 September 2018).

22. Also tendered on that application were copies of documents produced under subpoena by the Commonwealth DPP relating to Mr Macura’s criminal record, correspondence subpoenaed from the Department of Housing, copies of Army records relating to Mr Macura and medical records from the Chris O’Brien Lifehouse where Mr Macura was being treated for cancer (Exhibits 4, 6-8), correspondence between the respective lawyers (a letter dated 19 October 2018 from Jordans Law Practice to Stewart & Associates – Exhibit 5), and clinical notes from Chris O’Brien Lifehouse and a letter dated 28 February 2018 from Chris O’Brien Lifehouse to Dr Attia (Exhibit 9).

23. In particular, reference was made by the executors to what was recorded in various clinical notes produced on subpoena in relation to Mr Macura’s treatment at the Chris O’Brien Lifehouse, including: a note dated 28 February 2018 in which, relevantly, it is stated that:

Feels well,

Good energy levels - walking, running,

Weight stable, good appetite

Nil pain

; a letter dated 28 February 2018 by Chris O’Brien Lifehouse to Dr Attia, consistently with the above clinical note, noting that Mr Macura had then been taking Enzalutamide (a drug for use associated with cancer) for four weeks without any side effects of concern and that he maintained good energy levels and was active with walking and running and that he denied any pain; and a further clinical note, dated 28 March 2018, relevantly stating:

2 months on enzalutamide,

Mild fatigue but otherwise well.

27. A certificate signed by Mr Macura’s oncologist at the Chris O’Brien Lifehouse, Professor Lisa Horvath, was also in evidence; that certificate stating that Mr Macura would have limited capacity to attend court (the executors noting that it was unclear, however, whether that was said to be because of his (in)capacity to give evidence or because of timing issues relating to his treatment; nor was it clear as to how long that situation would continue).

28. On that occasion, as adverted to above, I was advised of the recent commencement by Mr Macura of the Tribunal proceedings and was informed that in those proceedings he was claiming an entitlement to a lifelong tenancy in the Liverpool property, entitling him to occupy the whole of the building rent-free and to collect rent from other tenants (see T 11.45). I was informed that the Tribunal proceedings, which the executors had sought to have struck out as an abuse of process and on Anshun estoppel principles, had been stayed pending a determination of the proceedings in this Court (see T 12.16). (They have now been transferred to this Court.)

29. As also adverted to above, in evidence on the adjournment application was a medical certificate dated 3 December 2018 from Mr Macura’s general practitioner, Dr Attia. In that medical certificate, Dr Attia estimated that Mr Macura would be unable to give “proper evidence” for the next four months. Mr Macura, in his affidavit, deposed that he was undertaking a new course of treatment that was expected to last at least six months. Ultimately, the position of Mr Macura, as put forward by his current solicitor, Mr Tees, on the adjournment application, was that a four month adjournment was required while Mr Macura underwent the new course of (chemotherapy) treatment.

30. Issues were also raised for Mr Macura at that time as to the authenticity of the short minutes of order filed with the Court following the mediation (although, as noted, such issues were not ultimately pressed), apparently on the basis that what had been filed was a photocopy document.

31. By that stage (i.e., 1 February 2019), according to the court file, there had already been orders made by Hallen J, noting that Mr Macura had informed the Court on a number of occasions that medical evidence was to be served but not having served such evidence, to the effect that in the event that the medical evidence was not served by 4pm on 10 December 2018 Mr Macura would require the leave of the Court to rely on any medical evidence. (The only medical evidence ultimately served by Mr Macura by that time was the affidavit of Dr Attia.) Thus, by the time the matter first came before me, there was a history of default by Mr Macura in service of his medical evidence and he was under a “guillotine” order in that regard.

32. At [5] of his affidavit affirmed 31 January 2019, Mr Macura deposed to his attempts to obtain medical evidence from his treating doctor, Professor Horvath, who had not agreed to give evidence in the proceedings but had provided a medical certificate which confirmed that Mr Macura was being treated for cancer (as noted above).

33. During the course of oral argument on 1 February 2019, Mr Tees informed me from the Bar table that there had been “some significant problems obtaining proper instructions” (see T 17.33) but said that Mr Macura had been able to give him “sufficient instructions” for the production of the affidavit that had been filed on that occasion, though he (Mr Tees) was sceptical “as to whether we could go any further” (T 18.2). (Mr Tees there appeared to me clearly to acknowledge that he had not, thus far, seen it necessary to seek the appointment of a tutor on the basis of any perceived incapacity on the part of Mr Macura to provide instructions for the conduct of the proceeding.)

34. The executors’ position at that stage (which remains their position) was that Mr Macura’s evidence was unreliable (pointing to Mr Grech’s surveillance evidence which it was said indicated that Mr Macura was physically capable of driving a vehicle long distances, and walking and lifting items; and to evidence of Mr Macura’s criminal record and history of making false statements as to his army record and Vietnam war service – evidence admitted subject to relevance on the adjournment application). Complaint was also made as to Mr Macura’s interference with attempts by the managing agents to let the Liverpool property; and the unsatisfactory nature of the medical evidence relied upon for the purposes of the adjournment application was noted.

35. At the conclusion of the hearing of that adjournment application, I indicated that I did not propose, on the medical evidence that I had seen, to adjourn the hearing then listed for 13/14 February 2019 (not being persuaded that I had sufficient information as to the details of the chemotherapy treatment Mr Macura was then undertaking or as to the timeframe within which Mr Macura would be capable of attending and giving evidence if the then hearing dates were to be vacated) but that it would be open to Mr Macura, if so advised, to make a further application for an adjournment to the trial judge at the commencement of the hearing.

36. However, I also indicated that I might be prepared to vacate the hearing if that could be done on a basis that would remedy any prejudice to the estate by reason of the delay; and, in that regard, that I might be prepared to vacate the then hearing dates if, as a condition of the adjournment of the hearing, Mr Macura was required to pay an occupation fee to the estate in relation to the premises (which fee would be refunded to him if he were ultimately successful in the proceedings); and, if it were possible, for the matter to be listed in late April 2019. Mr Tees considered that course of action to be a reasonable outcome in his client’s interests and the upshot was that, after standing the motion over to 4 February 2019 for the executors’ instructions to be obtained, that was indeed what occurred: the hearing dates of 13 and 14 February 2019 were vacated and the hearing was re-listed to take place on 23 and 24 April 2019; with the making of orders for the payment by Mr Macura of an occupation fee in the interim (and the filing of an affidavit by Mr Macura as to rent collected in respect of the properties); orders with which, as it transpires, Mr Macura did not comply.

Application made on 17 April 2019

37. The matter next came back before me on 17 April 2019 on an application by Counsel appearing for Professor Horvath to set aside a subpoena to give evidence that had been served on her on 10 April 2019 by Mr Macura’s solicitor. The subpoena as issued was returnable on 23 April 2019 (at which time Professor Horvath had a long standing personal arrangement to be outside the jurisdiction and was not likely to be contactable by telephone). I indicated on that occasion that arrangements would be made to accommodate the inability of Professor Horvath to give evidence when the matter was listed for hearing on 23/24 April 2019 (by listing the matter at a later time, convenient to Professor Horvath and the Court, after her return to Sydney).

38. It was only at that stage (and in the absence of any representation by the executors on that occasion) that Mr Tees informed me that, on the evening of Monday 15 April 2019, “certain matters” had come to his attention and to the attention of Counsel in the matter as to the “mental health and capacity” of Mr Macura and that an appointment had been arranged with a psychiatrist on the morning of 17 April 2019, the outcome of which, Mr Tees said, would determine whether or not Mr Macura had capacity “from here on in to provide [us] with adequate instructions” (T 6.2) (my emphasis). It should be noted that it was still not then suggested that there was any doubt as to Mr Macura’s ability up to that point to provide instructions. Also raised at that stage, for the first time, was the possibility that Mr Macura’s legal representatives might not be able to continue to represent Mr Macura; Mr Tees informing me (T 6.5):

The other issue that arose is that there are certain matters which he has deposed to which, to the knowledge of the legal representatives, are most likely untrue, in which case, we would not be able to represent the plaintiff if he was to persist in putting forward that evidence.

39. That was a reference, as I understood it, to issues as to the alleged falsification of Mr Macura’s Army records or war service (a matter that had been raised when Mr Tees appeared before me back in February 2019 but in relation to which he said he had not been able to make adequate enquiries before the then recent conference with Counsel who I was informed by Mr Tees was a “reserve Army officer and a legal officer in the Army”) (see T 6.24).

40. The executors’ legal representatives had, regrettably, not been notified of the application then before the Court on 17 April 2019 so were not privy to the disclosure of these purportedly fresh concerns on the part of Mr Macura’s legal representatives as to his capacity. That led to the matter coming back before me on 18 April 2019 (this time with notice being given in advance upon my direction, to the executors’ Counsel of that listing).

Application on 18 April 2019 for appointment of tutor

41. On 18 April 2019, Mr Tees filed an application for the appointment of a tutor to represent Mr Macura in the proceedings. In support of that application, an affidavit that Mr Tees had affirmed on 18 April 2019 was filed. To this affidavit, Mr Tees annexed an email to Dr Napper, a psychiatrist, sent on 15 April 2019, in which Mr Tees said, among other things:

… It was established that all Mr Macuras [sic] assertions as to service in the Australian Army and Vietnam are most likely false and it would appear he maintains this story/account of his life even when confronted with information that demonstrates that it is false/incorrect.

He appeared unable to admit this and maintained his incorrect account of his life history.

42. Mr Tees annexed a report dated 17 April 2019 from Dr Napper in which Dr Napper opined that Mr Macura “is not fit to provide his solicitor with instructions for Supreme Court proceedings”.

43. Pausing here, Dr Napper had seen Mr Macura in November 2018 and had at that time diagnosed a panic disorder based on what Mr Macura had told him of his experience in Vietnam (including that he had served in Vietnam, that he was captured by the Viet Cong, that he was tortured for ten days by being put in a water cage – none of which, it is now conceded, is true). It does not appear that Mr Tees had seen fit at that stage to draw to Dr Napper’s attention the discrepancies or inconsistencies that had by then already been raised as to Mr Macura’s account of events – see below.)

44. I admitted the evidence as to Mr Macura’s capacity (Dr Napper’s report) for the limited purpose of dealing with the application for the appointment of a tutor and made clear to Mr Tees that if reliance was sought to be placed on that medical evidence in the substantive proceedings then he would need to make Dr Napper available for cross-examination by the executors.

45. Ultimately, there was no opposition by the executors to the appointment of a tutor provided that this did not lead to an adjournment of the substantive hearing dates fixed for 23/24 April 2019. I concluded at that time that the proposed tutor (a “semi-retired” solicitor, Mr Lawrence Myers) should be appointed as Mr Macura’s tutor on the basis of the evidence that Mr Macura had a persistent delusion as to his Vietnam war service that made him incapable of providing proper instructions in relation to the conduct of the proceedings going forward (and, significantly, that his solicitors would otherwise have been unable to continue to act if Mr Macura persisted in maintaining certain matters in his affidavit that they had discovered to be false). That conclusion involved no finding as to Mr Macura’s capacity to give instructions in relation to the proceedings at any earlier time.

Hearing on 23/24 April 2019

46. It was against that background that the hearing of the executors’ application commenced on 23 April 2019. On that occasion, an amended notice of motion was filed by the executors, the only substantive change to which being in relation to the costs of the notice of motion now sought to be withheld out of the settlement sum the subject of the agreement reached at the mediation.

47. I was informed (and there is no dispute as to this) that Mr Macura had not complied with the orders made in February 2019 in relation to the payment of an occupation fee (T 3.30). There was some dispute as to his compliance with the order for provision of an affidavit as to his collection of rent for the property.

48. On that occasion, Counsel appearing for Mr Macura (Mr Levet) informed me that there was now no contest as to the whereabouts of the original short minutes of order signed at the mediation (see T 8.30; T 9.11); that there were assertions in Mr Macura’s affidavits as to his military service that were not read as to the truth of those assertions (though it was said that they would be relevant in respect of any submission made as to his capacity) (T 10.47); and it was conceded that: the assertions made by Mr Macura as to having served as a member of the Australian Army were false; his assertions as to having served in the Vietnam War were false; his assertions as to having been conscripted were false; the discharge document that Mr Macura had tendered in his affidavit was false, and was a forged discharge document; and that Mr Macura was not entitled to any of the medals or awards that such a discharge document claimed on his behalf. Concessions were also made as to the criminal record of Mr Macura that the executors sought to tender (see T 37). (That criminal record includes offences involving dishonesty on Mr Macura’s part not limited to his war service record. For completeness, I note that in his oral evidence on the present application Mr Macura proffered explanations to some extent of that criminal record.)

The 20 March 2018 mediation

49. The various lawyers at the mediation who gave affidavit evidence of what had occurred on that occasion were: Mr Costa Vertzayias, Mr Carolan, Mr Sutton and Ms Mijatovich, each of whom was cross-examined. (There was no evidence from Mr Cominos, Mr Macura’s Counsel.) Mr Berecry, the mediator, had sworn an affidavit deposing to events at the mediation but due to his subsequent death was obviously unable to be cross-examined on that affidavit. Each of Mr Macura, Ms Ristic and Fr Sarasevic also gave evidence, and was cross-examined, as to his or her recollection of events on 20 March 2018.

50. In summary, the evidence as to what occurred at the mediation was as follows.

Mr Grahame Berecry (the mediator)

51. In his affidavit sworn 6 June 2018, Mr Berecry deposes that at the commencement of the mediation he: informed the parties that it was a voluntary process and they could “terminate the mediation at any time for whatever reason”; recommended that the parties should “consult with their legal team about any issue which causes them concern which could include any health issue that is causing them stress or other manifestations of illness”; and asked the parties if they had any questions.

52. Mr Berecry deposes that he does “not remember any conduct or mannerisms by Mr Macura which would indicated [sic] that he was under great stress and that he was not following what I was saying” and that Mr Macura was “quiet right throughout the mediation” which is “not unusual, particularly in family provision mediations”.

53. Mr Berecry states that he has no recollection of Mr Macura vomiting (as Mr Macura deposes he did) either in the mediation room or elsewhere during the mediation, explaining that “[t]hat would have been quite a dramatic event that I would most likely remember if it happened”.

54. According to Mr Berecry, there was “nothing remarkable” about Mr Macura’s conduct at the mediation and Mr Macura appeared “to be a quiet person who was under some stress”, (which he considered to be a “bedfellow of mediation”).

Mr Costa Vertzayias (the solicitor attending the mediation with Mr Macura)

55. In his affidavit sworn 25 June 2018, Mr Costa Vertzayias deposes that, in his introductory remarks at the mediation, Mr Cominos said words to the effect:

As you’re all aware from the evidence that has been served, Mr Macura has terminal cancer.  Out of consideration for his condition, I don't intend to enter into any vigorous debate about factual or legal matters in this room with Mr Macura present.  I will give a short summary of our position and after the parties break up to go to their respective mediation rooms, I can have any discussions around disputed matters with Mr Carolan.

56. Mr Vertzayias deposes that he sat next to Mr Macura during the opening remarks from all the parties at the mediation and that he was able to observe Mr Macura’s reactions during this time, and that:

[a]t no time did he appear in distress, sweating, shaking, dizzy or otherwise physically or emotionally unwell. He did not vomit. On the contrary, he appeared totally at ease.

57. Mr Vertzayias continues in his affidavit to depose that:

Mr Macura did not need to leave the main mediation room due to any physical ailment from which he was suffering at the time. He left at the time the initial remarks of all the parties concluded accompanied by me and Mr Cominos [Mr Macura’s Counsel] and went to his own separate mediation room as is customary in the mediation process. He walked unaided by me, was steady on his feet and did not appear in any way dizzy. …

58. In relation to Mr Macura’s behaviour, movements and physical condition throughout the day, Mr Vertzayias deposes that Mr Macura: appeared in good spirits and good physical health; was not sweating, shaking, dizzy or vomiting; did not report any ill effects; and ate “heartily” his lunch in the mediation room. According to Mr Vertzayias, Mr Macura left the building once for approximately 45 minutes to get “fresh air”, on the advice of Mr Vertzayias and his Counsel. Mr Vertzayias deposes that Mr Macura also went to the bathroom “once or twice for a very short time” (i.e., only a few minutes) and appeared in good health and physical condition on each occasion.

59. Further, Mr Vertzayias deposes that: he did not observe Mr Macura talk to Ms Ristic during the mediation; Mr Macura engaged in discussions with Counsel and Mr Vertzayias throughout the day as well as “lucid and lively” discussions with the mediator and made “lucid and reasoned arguments in support of his claim for provision from the deceased’s estate”. (No indication as to the content of those discussions, from which Mr Vertzayias’ conclusions as to lucidity could be tested, was provided.)

60. Mr Vertzayias deposes that Mr Macura “apparently accepted” an offer of $100,000 (inclusive of costs) at settlement by saying “that’s ok” and was shown an A4 sized page containing handwritten consent orders written by the Counsel for the executors which he read through. According to Mr Vertzayias, Counsel for Mr Macura (Mr Cominos) then:

… slowly read through each of the proposed orders on the sheet of paper. At the end of each order he gave a short explanation of its effect and then asked Mr Macura “Do you understand?”. Each time and after each order was read and explained to him, Mr Macura said words to the effect of “Yes I understand”. Mr Macura then signed the consent orders.

61. During this period, Mr Vertzayias states that Mr Macura appeared “lucid, alert and was not in any physical or emotional distress. He appeared to understand exactly what was happening and the effect of the document he was signing”.

62. Mr Vertzayias says that Mr Macura told him he had driven to the mediation (which is consistent with the evidence of both Mr Macura and Ms Ristic) and that he would drive himself home at the end of the mediation (although according to Ms Ristic that did not happen).

63. In cross-examination, Mr Vertzayias’ evidence was that the gravity of Mr Macura’s situation was brought to his attention that day when he heard Mr Cominos say that Mr Macura had “terminal cancer” (T 16.18) but that, until then, he was unaware of the gravity of Mr Macura’s health (see T 17.29) and was unaware that Mr Macura was about to die (T 18.3).

64. Mr Vertzayias was cross-examined about various matters going to the preparation of the matter for mediation and as to what a reasonably prudent solicitor would have done in preparation for or at the mediation. The relevance of that cross-examination was said to go to a contention that Mr Macura was inadequately legally represented (see T 20.39). That contention is not to the point. This is not a claim against Mr Macura’s legal representatives for negligence in relation to the preparation of the matter for hearing or for mediation (or as to the adequacy of advice given at or relating to the mediation). Rather, the case, as put for Mr Macura, is that he did not have capacity to enter into the terms of settlement on the day of mediation and that the “plaintiffs” (as stated in oral submissions, although in context it is clear that this must be a reference to the executors) were “at least on notice that he was physically unwell”; and that in all the circumstances the terms of settlement were unjust and attracted a residual discretion on the part of the Court to set those terms of settlement aside (even if not satisfied as to the fact of incapacity or as to the knowledge by the other side, the executors of any such incapacity) ( see T 9.40-10.13). That cross-examination was also put as going to the credit of the witness (Mr Vertzayias) (T 21.36ff) in circumstances where it was said for Mr Macura that the solicitor’s evidence (as an officer of the Court) was put to establish that Mr Macura would have known the nature of the settlement and appeared to understand the settlement (and it was suggested that there was an attempt to bolster his credibility by the wearing of a particular lapel pin).

65. I address the submissions as to credit in due course. Suffice it here to note that I permitted some latitude in the cross-examination of Mr Vertzayias on this topic but, ultimately, how well-prepared or otherwise Mr Vertzayias was at the mediation is not relevant to the issue of capacity; nor is it relevant to the issue (critical in the present case) as to whether the executors had the requisite knowledge of any such incapacity.

Antony Sutton (solicitor appearing for the executors at the mediation)

66. Mr Sutton was cross-examined as to the mediation. He also affirmed an affidavit on 15 May 2018; however, the affidavit did not outline the events that took place at the mediation. Under cross-examination, he recalled that: there were brief introductory speeches at the mediation; Mr Cominos mentioned that Mr Macura had a condition (but could not remember the detail Mr Cominos went into in that regard); and said he believed the condition was cancer. Asked whether he heard Mr Cominos say that the cancer had returned and that Mr Macura was on medication and unwell that day, Mr Sutton said “[y]es, and I remember Mr Berecry accommodating that” (T 35.47). He agreed that he was aware that Mr Macura was unwell and on medication and that Mr Macura might have to leave from time to time (and said that Mr Berecry made it very clear that Mr Macura could leave at any time he wanted). He could not say whether Mr Cominos had indicated that it was terminal cancer but said he understood it was cancer and that it was serious.

Mr Grant Carolan (Counsel appearing at the mediation for the executors)

67. In his affidavit affirmed 30 November 2018, Mr Carolan (who, as already noted, was not required for cross-examination) deposes that Mr Macura’s counsel said that Mr Macura was being treated for prostate cancer and was on medication and may need to take a break during the day. However, he also deposes that Mr Macura did not show any signs of discomfort or ill health during the initial (joint) session in the conference room.

Ms Milena Mijatovich

68. In her affidavit affirmed 2 July 2018, Ms Mijatovich, a defendant in the proceedings and the solicitor for the estate of the deceased, deposes: that she sat opposite and diagonally across from Mr Macura at the commencement of the mediation; that Mr Macura did not look ill; that his face was not flushed and sweaty, but pale; that he was neatly dressed; and that he was listening to Mr Berecry “intently”. According to Ms Mijatovich, Counsel for Mr Macura (Mr Cominos) stated in the initial session that Mr Macura was not feeling too well as his cancer had returned and he was on medication but would still participate in the mediation.

69. Cross-examined as to her recollection of the mediation, Ms Mijatovich affirmed her evidence that Mr Macura on the day of the mediation looked pale (but rejected the assertion put to her that he looked “abnormally so”) (T 28.37); she recalled that Mr Cominos had said that the cancer had returned and that Mr Macura was on medication (T 29.14); she also accepted (when put to her in these words) that something was said to the effect that Mr Macura “might leave the room when any argy bargy commenced”. (Pausing here, it is not insignificant to note that there might have been any number of reasons as to why Counsel for Mr Macura might have considered it in his client’s interests for Mr Macura not to be present during all of the mediation sessions with other parties – not least if it were considered that Mr Macura (or others) might become emotional or that there might be “argy bargy”. A statement of the kind attributed to Mr Cominos by each of the legal representatives, made at the outset of the mediation, to the effect that Mr Macura had cancer (or, indeed, terminal cancer) and was ill or unwell; or that he might leave the room, is not sufficient in my opinion to put anyone on notice of any mental incapacity on Mr Macura’s part.)

Fr Sarasevic

70. In his affidavit affirmed 17 October 2018, Fr Sarasevic, a defendant in the proceedings and executor of the deceased’s estate, deposes that he did not observe anything remarkable about Mr Macura, who did not display any signs of illness or distresses in the initial session in the conference room or later in the common area when the parties had gone into the separate rooms.

71. That evidence, in my opinion, is of limited use since in cross-examination Fr Sarasevic was unable to give any useful evidence as to the events in question. He variously did not remember or did not recall what was said; or did not understand the questions put to him. I do not place any weight on his affidavit evidence as to the events that took place on 20 March 2018.

Mr Macura

72. In his affidavit affirmed 23 May 2018, Mr Macura deposes that when he first arrived at the mediation room he started to have one of his “common ‘panic attacks’”. He deposes that:

I felt very unwell with profuse sweating and a headache and frankly I was struggling to stay on my feet, [sic] I was having hot flushes and I felt very confused. This happened when we were all in the mediation room, at the beginning of the mediation at [XXX] together. The Barrister for Branco Steven Cominos said “Branco is not feeling very well at all he cannot sit down here he has to go to another room”. While there I vomited in the toilet and I was very unsteady on my feet. …

73. As to the settlement document, Mr Macura deposes that he could not read the handwritten piece of paper (presumably the short minutes) that he was told by his Counsel to sign without any explanation of the document provided by Counsel. Mr Macura deposes that, after signing the handwritten document, Counsel walked out of the room with it and appeared to return with a “different” document which had the added “very dark print (paragraph 4)”. He deposes that:

At the mediation on 20 March 2018 after a few hours I was shown a piece of paper in handwriting that at the time I found very hard to read, especially as I was ill at the time on the day.

74. In his affidavit affirmed 7 September 2018, in response to parts of the affidavit evidence filed on behalf of the executors regarding the mediation, Mr Macura deposes as follows.

75. In response to the affidavit of Mr Berecry, Mr Macura says he vomited twice in the toilet and not in the presence of others. (Pausing here, this means that this evidence is not corroborated and depends solely on acceptance of Mr Macura’s assertion.)

76. In response to the affidavit of Mr Vertzayias, Mr Macura disagrees with Mr Vertzayias’ description of what occurred at the mediation. Mr Macura says he told Mr Vertzayias he was feeling unwell throughout the day and that Mr Vertzayias said nothing. In relation to discussing the written advice of his Counsel, Mr Macura says he has no recollection of that occurring or it being read to him slowly but, in any event, was “too ill properly [to] understand such advice and discussion at that time”. (That evidence, in effect, is Mr Macura’s submission as to incapacity.) Mr Macura says he did not drive his car to or from the mediation that day. (Ms Ristic’s evidence supports the latter part of this but is inconsistent with the former.)

77. In response to Ms Mijatovich’s affidavit, Mr Macura responds that he could not listen intently or concentrate on what was said at the mediation because he was feeling unwell. That evidence is no more than an assertion on Mr Macura’s part.

78. In cross-examination, Mr Macura maintained that he had told his Counsel (Mr Cominos, who gave no evidence at this hearing) at the mediation that he was not well; and that he felt like vomiting all the time. There was the following exchange:

Q.    Do you recall Mr Berekri [sic; Berecry] saying at the mediation that once parties reach an agreement they can’t change their minds later?

A.    I can recall several things he mentioned but I can’t remember all of them, I can’t remember nothing about that, but they on the beginning, as I say, send me to another room and I try to struggle to on my feet because of this one hour before I take these tablets, and the Professor Horvath insist I have take four once and I couldn’t argue with her.

…

Q.     Mr Macura, I’m putting to you that at the mediation you did not sweat profusely, you didn't have hot flushes and you didn’t struggle to stay on your feet?

A.     I think your side is morally wrong what you say, sir.  You can go up and you check on Internet this medication, it’s a five‑page side effect, and me I’m not a‑‑

79. Pausing here, no issue was taken by either side as to any adverse inference arising from the fact that Mr Cominos did not give evidence.

80. As to the course of the mediation, there was the following evidence by Mr Macura in cross-examination by Mr Bartos:

Q.     Yes, all right.  After the initial session you went into a separate room with Mr Vertzayias and Mr Cominos?

A.     I went on very beginning other room, almost ‑ straight away when we come together to the room.  There was a few people there sitting, mediator across from me, Ms Milena somewhere other side and other people I can’t remember.

Q.     You went into a separate room after the initial session with Mr Vertzayias and Mr Cominos?

A.     He was there in the room, yes.

Q.     Yes, and you stayed with them for the whole day until the mediation was complete‑‑

A.     Only ‑ no, when I complained‑‑

Q.     ‑‑apart from the time you went to the‑‑

A.     ‑‑and I don’t feel well, because this medication takes effect after a little while, and I told him I am not well but he don’t say anything.

Q.     I put it to you that you didn’t say that and during the time you were with Mr Vertzayias and Mr Cominos you had discussions about your case?

A.     There was a discussion with a Mr – what’s name that you mentioned earlier?

Q.     Mr Cominos?

A.     Cominos, yeah, he come‑‑

Q.     Mr Vertzayias?

A.     ‑‑then my lawyer didn’t come but the Cominos come.  I don’t know what his capacity is but he did come, yes, he was sitting on my left side.

Q.     During the time you were there during the day there were negotiations taking place and offers being put by you and there were then offers being put by the executives?

A.     I told them I don’t feel well, I want to go home.  They say, you can’t go.  I told, they don’t hear, they don’t say anything.  They just want to go on with the thing.

Q.     Mr Macura, I put it to you that is not correct.  You were there during the whole day and negotiations were taking place?

A.     There was negotiation taking place, yes.  What they did over there, other room, I don’t know, I’m not aware, but my complaint was from very beginning in the morning, not the end of the day.

81. As to the settlement reached at the mediation, the cross-examination included the following:

Q.     Ultimately you were advised of Ms Ristic’s settlement, you were told that she settled for $100,000?

A.     There were some figures here were mentioned, I can’t remember what was the figure.

Q.     Then Mr Cominos sought your instructions whether you would settle on the same terms as Ms Ristic plus vacate the building?

A.     Can’t recall what he say.  I just want to go home that time and nobody keep telling me this ‑ I can’t recall what it was.

Q.     I put it to you that Mr Cominos sought your instructions and you agreed with those instructions?  Sorry, you agreed to give those instructions?

A.     I didn’t give instruction he got me the piece of paper.  I couldn’t even ‑ I don’t know whether it was his bill.

Q.     I put it to you that Mr Cominos came back.  He told you that the offer was accepted and then he brought a piece of paper and explained to you each of the terms and you said, “That’s fine” in relation to each of the items and that you signed it?

A.     There was two different paper.  I sign one which was in my name I think.  It was a strange piece of paper and that later on appear what I didn’t sign on originally and it appear different things on it.

Q.     I only have a photocopy of that document but that’s your signature there isn’t it?

A.     Okay, can I answer the question.

Q.     Yes.  No, I’m asking you is it‑‑

A.     When I sign it wasn’t ‑ when I sign it wasn’t this here, it wasn’t there, it wasn’t this and that should be somewhere the document.

Q.     Yes, all right.  Is this your signature Mr Macura?  Sorry, I apologise the‑‑

A.     Appears my signature but wasn’t that piece of paper I think.  It wasn’t in those lines, it wasn’t written I have to evacuate unit 8.  Did not appear when I sign and what I recall is two different paper.

Q.     Mr Macura I put it to you that in fact you signed the document as it is and there was nothing added afterwards?

A.     In my recollection that’s not true.  Those three things did not appear I sign or they related with.

Q.     Mr Macura, you say that you were so incapacitated as a result of the medication that you couldn’t think straight, you couldn’t follow what was being said.  But you are able to say quite clearly what was in the document?

A.     Yes, when you show me, yes, I recall it.

Q.     So you had that flash of clarity at that particular point in time did you?  That you were able to see what was written on the document and now you say that those things which are the things you identified ‑ so you say the document which you signed didn’t have Branco Macura on there?

A.     When I sign this wasn’t there, wasn’t this and wasn’t that [pointing to my observation to his name where appearing on the document].  Definitely, well in my recollection.

BARTOS: The witness is pointing to‑‑

WITNESS: My name.

BARTOS: Part of the document in the top left‑hand corner with the name Branco Macura.  At the bottom the white bit, white part which says Slavica Ristic and the parts which are in a darker pen and namely paragraph 4 isn’t it, “The plaintiff is...of today’s date.”

Q.     You say that wasn’t there?

A.     It wasn’t there in my recollection.  That was there up to it.

Q.     Do you say this word “his” and “him” wasn’t there either?  The ones which are in a darker colour, in a bold script?

A.     I can only recall one, two, three.

Ms Ristic

82. In her affidavit affirmed 10 May 2018, Ms Ristic deposes that Mr Macura had a “panic attack” when everyone was in the mediation room at the commencement of the mediation. (I pause here to note that that evidence is not corroborated by any independent witness – particularly, the mediator. It is not plausible that someone in Mr Berecry’s position would not have noticed and commented on a panic attack of the kind that Mr Macura and Ms Ristic describe – i.e., with symptoms including hot flushes, profuse sweating, dizziness, unsteadiness or inability to stand, scratching his face or the like.)

83. Ms Ristic describes Mr Macura at the mediation as: sweating profusely; red in the face; vomiting; dizzy; unsteady on his feet; confused; and unable to talk properly. She deposes that Mr Macura told her he felt unwell, had a terrible headache, and felt numbness in his face. Further, she states that Mr Macura: told her he was unable to read the document he signed; was told by his Counsel it was “his bills for working”; and was pressured by his Counsel to sign it.

212. Had it been necessary to determine for the purposes of the present application, I would have held that it had not been established on the balance of probabilities (whatever be the position now) that Mr Macura lacked capacity on 20 March 2018 to give instructions in relation to, and to enter into, a compromise of his claims in the substantive proceedings.

213. I also have grave suspicions, as noted above, that the 19 March 2018 letter purporting to be from Dr Attia is not authentic; and the fact that Mr Macura relied upon such a letter (and on his account obtained such a letter the day before the mediation) speaks to a level of cognitive ability inconsistent with the incapacity case he is now seeking to run.

214. That said, it is not necessary to make any final determination on that issue because, in my opinion, even if there was such an incapacity, it has not been established that the executors knew (or, if that be the relevant test, ought to have known) of that incapacity.

215. As submitted for the executors, knowledge of the incapacity on the part of the other party to the agreement (here the executors) is required to set aside an agreement entered into under a relevant incapacity. It has been debated whether actual or constructive knowledge of the incapacity is required; however, the weight of authority favours the conclusion that actual knowledge is required (see Public Trustee (WA) v Brumar Nominees Pty Ltd [2012] WASC 161 (Public Trustee v Brumar); and Cheshire & Fifoot, Law of Contract (11th Australian ed, 2017, LexisNexis) (Cheshire & Fifoot, Law of Contract) at [17.53]).

216. In Gibbons v Wright, the Court stated (citing Lopes LJ in Imperial Loan Co v Stone (1892) 1 QB 599 (Imperial Loan Co v Stone) (at 441)) that:

… “A contract made by a person of unsound mind is not voidable at that person's option if the other party to the contract believed at the time he made the contract that the person with whom he was dealing was of sound mind. In order to avoid a fair contract on the ground of insanity, the mental incapacity of the one must be known to the other of the contracting parties. A defendant who seeks to avoid a contract on the ground of his insanity, must plead and prove, not merely his incapacity, but also the plaintiff's knowledge of that fact, and unless he proves these two things he cannot succeed". [footnotes omitted]

228. In Giles v Rooney (1996) 23 MVR 510 (Giles v Rooney), the applicant sought to set aside a judgment entered by consent on the basis that new medical evidence showed he suffered diminished mental capacity at the time of settlement. Malcolm CJ (Kennedy & Rowland JJ agreeing) rejected the applicant’s submission that the principle in Imperial Loan Co v Stone, as approved in Gibbons v Wright, extended to constructive knowledge. His Honour saying (at 513) that in his opinion that stated the principle more widely than it was stated and accepted by the High Court in Gibbons v Wright. His Honour went on to say:

In any event, the solicitors for the respondents in this case knew no more at the material time than that which was disclosed in copies of medical reports which had been forwarded to them, none of which said anything about the applicant's capacity to instruct his solicitors or understand any contractual transaction that he might be called upon to consider. Indeed, those reports contained nothing which could even be said to have cast any doubt upon such capacity. It would be surprising if the respondents’ solicitors could be held to have the requisite knowledge when nothing of relevance to the issue was communicated to them by the applicant's own solicitors.

229. In Public Trustee v Brumar, the Public Trustee, as the named executor of the deceased person’s estate, refused to perform a contract for the sale of land which the deceased had entered shortly before his death. Issues as to the deceased’s capacity and the validity of the contract were contested before Pritchard J.

230. Her Honour summarised the position in the case law (from [91]):

Although the underlined passage suggests that the court accepted the possibility that constructive knowledge of the mental incapacity of the other party might suffice, neither in Imperial Loan Co v Stone, which set out the principle approved by the court, nor in the court’s later discussion of the principle and the reasoning behind it, was there any reference to the possibility of constructive, as opposed to actual, knowledge of the mental incapacity of the other contracting party being sufficient to render the contract voidable. For example, the court noted that “what [a plea of mental incapacity] asserts is that the state of his mind was such that if the other contracting party was aware of it he ought not to be allowed to insist upon the contract”.

The Full Court of this court in Giles v Rooney expressed the view that the High Court’s statement of the principle was confined to actual knowledge and did not encompass cases where the other party ought to have known of the incapacity.

In other cases, however, it has been accepted that constructive knowledge of the mental incapacity will suffice. In Ashton v Melbourne Money Pty Ltd, Teague J read the reasons of the court in Gibbons v Wright as indicative that constructive knowledge would suffice. In reaching that conclusion, his Honour relied upon the underlined words in the passage cited above. As for what was required to establish constructive knowledge, his Honour relied on observations made by Mason J and Deane J in Commercial Bank of Australia v Amadio.

Similarly, in Collins, Owen J held that it was not necessary to prove actual knowledge of the incapacity, but rather that constructive knowledge would suffice. His Honour also concluded that considerations of the kind discussed by Mason J in Commercial Bank of Australia v Amadio would be relevant in determining that question. His Honour did not discuss in any detail the observations by the High Court in Gibbons v Wright, and his Honour’s attention does not appear to have been drawn to the decision of the court in Giles v Rooney.

The question whether actual knowledge or constructive knowledge is required before a contract will become voidable arose for consideration in the context of a contract for the sale of land in Lampropoulos v Kolnik. In that case, Simmonds J noted the decision of the Full Court in Giles v Rooney but “took the law to be that it was sufficient if the other party ought to have known of the mental incapacity”. More recently, in a case involving a gift [Stone v Registrar of Titles [2012] WASC 21], Simmonds J again accepted that constructive, rather than actual, knowledge of the mental incapacity would suffice to render the contract voidable.

There is considerable persuasive force in the proposition that if the evidence establishes that one party ought to have known that another contracting party is incapable of understanding the nature of a contract, a contract should be voidable. However, having regard to the observations of the High Court in Gibbons v Wright, to which I have referred above, and in view of the decision of the Full Court of this court in Giles v Rooney, and with respect to those who have reached a different conclusion, I am unable to accept that anything other than actual knowledge of the incapacity will suffice to render a contract voidable.

[footnotes omitted]

231. Ultimately, the issue as to whether actual or constructive knowledge is what is required was not determinative in that case, as her Honour found on the balance of probabilities that the plaintiff had sufficient mental capacity to enter into the transaction in question (a contract for sale of real property) but that, even if he did not, the first and second defendants had no actual or constructive knowledge that he might not have had the requisite mental capacity to enter into the contract (see the conclusion at [110]).

232. The reasoning of Pritchard J was recently referred to by the Court of Appeal in Hanna v Raoul [2018] NSWCA 201. There, an elderly widower had entered into a deed and transfer in respect of real property to his nephew (the transfer being subject to a life estate in the widower’s favour). The primary judge had found that the deed and transfer were not binding on the parties, holding (inter alia) that the transferor lacked capacity to enter into the transaction. On appeal, Beazley P, as Her Excellency then was, (Macfarlan and White JJA agreeing) found that the primary judge had erred in finding that the transferor lacked capacity to enter into the deed and transfer, as he understood the broad operation or general purport of the transaction (see at [47]-[63]). As to the circumstances in which a transaction entered into by a person without the requisite capacity is voidable, her Honour there observed (at [51]) that:

It is also necessary, for a transaction entered into by a person without the required capacity to be voidable, that the other party to the transaction have knowledge of the incapacity: see Gibbons v Wright at 441. It should be noted that there is an unresolved question whether actual knowledge of the incapacity is required or whether constructive knowledge is sufficient: see Public Trustee (WA) v Brumar Nominees Pty Ltd [2012] WASC 161 at [90]–[96]. …

233. The authors of Cheshire & Fifoot, Law of Contract express the proposition as follows: “[an] incapacitated party will be able to avoid the contract if that person can show that he or she was suffering from such a degree of mental disability at the time of making the contract that he or she was incapable of understanding it and that the other party was aware, or ought to have been aware, of this” (my emphasis) (see at [17.53] and the authorities cited at fn 204). As to the second element, the authors note that it is not clear whether constructive knowledge is sufficient, but suggest that, an approach of actual knowledge only may “not be consistent with the approach to this issue in unconscionability cases where a constructive knowledge test is adopted”.

234. In the present case, I am not persuaded that the executors had actual or constructive knowledge of incapacity on the part of Mr Macura to provide proper instructions or to agree to a settlement of his proceeding. The highest to which the evidence points is that the executors knew that Mr Macura was suffering from a serious illness, that would sooner or later prove to be terminal; and that Mr Macura might not remain in (or might have to leave) the main mediation room at times during the mediation (or for the joint mediation session). A statement that Mr Macura was “unwell”, assuming for present purposes that this was what was said (some versions putting it simply as that his cancer had returned and he was on medication), tells one nothing about his mental health or capacity to give instructions. (Even if it had been the case that Mr Macura had needed to leave the mediation room to vomit in the bathroom once or twice, this still would not tell one anything about his state of mental health.)

235. I do not accept that the evidence establishes that Mr Macura was exhibiting at the mediation the signs that he says (i.e., hot flushes, sweating or dizziness) but even if he had that would not in my opinion put the executors on notice of a mental incapacity. Someone can be physically ill (for a variety of reasons) but still capable of providing instructions.

236. As to the fairness or otherwise to Mr Macura of the ultimate settlement and his complaints, in effect, that it was foist upon him by his Counsel, the former depends on an assessment of the merits of his claim in the principal proceedings; the latter is unsubstantiated by any independent evidence (and inconsistent with the professional obligations of his Counsel and the fact that the experienced mediator appears not to have had any such concerns).

237. As to the former, Mr Macura’s Counsel virtually conceded that the only claim Mr Macura might now be able to make good would be the family provision claim. The likelihood of that cannot here be assessed. It is, however, not irrelevant to note the inconsistencies between Mr Macura’s evidence and that of Ms Ristic; and the likelihood that this would cause difficulties in establishing his claim (indeed one might perhaps infer, from the fact that experienced family provision counsel were involved in the matter at the time of mediation, that the settlement reflected at least to some extent their independent assessment of the prospects of the family provision claim).

238. As to the latter, complaints by Mr Macura as to his lawyers’ conduct of the mediation or in preparation for the mediation are not matters for which the executors are responsible; and would need to be pursued in a very different context.

239. Finally, insofar as Mr Macura’s Counsel emphasised the observation of Latham CJ in Wilton v Farnsworth (as being the “only quote” that might possibly support his position – T 7.19; 10/05/19), those observations were made in a very different context – where the donee of a gift was the “moving spirit” in the transaction of gift. Here, it is inapt to characterise the executors as the “moving spirit” in the settlement negotiations – the parties were participating in a private mediation. No doubt the mediation agreement required them to act in good faith but there is nothing to suggest that the executors did not do so.

240. This is not a claim of unconscientious conduct; nor must the executors establish that Mr Macura understood the substance of what he was doing before moving to enforce a settlement agreement reached in the course of a mediation where he had the benefit of independent legal representation.

Conclusion

241. For the above reasons, the settlement agreement reached at the mediation should not be set aside and, in substance, the relief sought by the executors pursuant to s 73 of the Civil Procedure Act 2005 (NSW) should be granted (and hence the orders in substance as sought by them in their notice of motion should now be made). There is, however, an application by notice of motion filed by Mr Macura’s former lawyers in relation to the lien claimed by them for their legal fees which will require determination prior to the payment out of any of the settlement sum to Mr Macura. Moreover, the executors have sought to set-off as against the settlement sum the moneys payable by Mr Macura pursuant to the occupation fee ordered in respect of the Liverpool property and any costs orders made in their favour in respect of these proceedings. I will make directions for those matters to be heard when these reasons are published. As it is, I will simply make provision for there to be a set-off as against the settlement sum of the moneys that, on the evidence, Mr Macura collected by way of rent or occupation fees by other tenants during the period in which the executors were entitled to receive any such moneys (quantified by Ms Leahy at $1,580).

242. As to costs, the position of costs of the proceedings up to the date of the mediation is to be dealt with in accordance with the settlement agreement reached at the mediation. However, the costs of the present application should follow the event, as is the general rule; and therefore there should be an order that Mr Macura pay the costs of the proceedings from 23 March 2018 (that being the date on which the short minutes of order that he subsequently disputed were signed). Furthermore, in circumstances where Mr Macura’s financial position (according to his evidence) is unlikely to enable the executors to recoup their costs from him, and hence there would be a further drain on the estate by reference to these proceedings; and where the tutor appointed to act for Mr Macura consented to do so knowing that he might be personally liable for costs (and presumably gave the instructions that led to the hearing being prolonged beyond that date), I consider that the tutor should indemnify the executors for any costs payable by Mr Macura (and unpaid by him) in respect of the proceedings from 19 April 2019.

243. Accordingly, I make the following orders:

1. Declare that the parties have reached a settlement agreement as set out in the Short Minutes of Orders signed by the parties on 20 March 2018 (annexure A to the Notice of Motion filed by the defendants on 16 May 2018), and formalised in the Short Minutes of Orders signed by the parties’ solicitors on 23 March 2018 (annexure B to the Notice of Motion filed by the defendants on 16 May 2018)

2. Order that:

1. the plaintiff receive by way of provision out of the estate of the late Milorad Adzic, a lump sum of $100,000;

2. no interest be paid on the lump sum if paid within 28 days of the date of these orders; otherwise, interest is to be paid on any unpaid part of the lump sum, calculated at the rate prescribed for the payment of interest on unpaid legacies under s 84A(3) of the Probate and Administration Act 1898 (NSW), until paid in full;

3. the settlement sum of $100,000 referred to in Order 2(a) above (less the sum the subject of Order 5 below) be paid into court pending the resolution of the dispute as to costs between the plaintiff and his former solicitors, VC Lawyers and the determination of any claim by the defendants to set-off, as against the settlement sum, any amounts owing to the defendants by the plaintiff in respect of the occupation fee the subject of orders made earlier in these proceedings and the costs orders made in these proceedings;

4. the plaintiff vacate the unit situated and known as 8/7 Short Street, Liverpool (the unit at the Liverpool property), within 30 days of the date of these orders;

5. in the event that the plaintiff fails to vacate the unit at the Liverpool property within the time specified in Order 2(d) above, the defendants have leave to issue a writ of possession forthwith after that date.

6. there be no order as to the plaintiff’s costs of the proceedings, to the intent he will bear his own costs of the proceedings;

7. the defendants’ costs of the proceedings, up to and including 20 March 2018, calculated on an indemnity basis, are to be paid out of the estate of the late Milorad Adzic;

8. the cross-claim be dismissed;

9. no order as to costs of the cross-claim;

10. the balance of the statement of claim be dismissed;

3. Order that the plaintiff pay the costs of the defendants of the proceedings from and including 23 March 2018 on the ordinary basis.

4. Order that the plaintiff’s tutor, Lawrence Myers, indemnify the defendants for any costs payable by the plaintiff pursuant to these orders (and unpaid by the plaintiff) in respect of the defendants’ costs of the proceedings from 19 April 2019 to date.

5. Order that the amount of $1,580 collected by the plaintiff from the occupiers of other units at the Liverpool property (as set out in the affidavit of Michelle Leahy affirmed 9 April 2019) be deducted from the settlement sum payable pursuant to Order 2(a).

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Amendments

23 October 2019 - [6] - text in brackets deleted

Decision last updated: 23 October 2019