Owerhall v Bolton & Swan Pty Ltd
[2016] VSC 91
•11 March 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2015 04682
| EERIK JUHANI OWERHALL | Plaintiff |
| v | |
| BOLTON & SWAN PTY LTD (ACN 153 647 360) | Defendant |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 February 2016 |
DATE OF JUDGMENT: | 11 March 2016 |
CASE MAY BE CITED AS: | Owerhall v Bolton & Swan Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2016] VSC 91 |
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EQUITY – Application to set aside settlement agreement – Execution of agreement on advice of Solicitor engaged by plaintiff–Alleged unconscionable conduct – Plaintiff claimed special disadvantage due to intoxication by reason of medication taken – Whether special disadvantage known to the defendant – Whether defendant took unconscionable advantage of plaintiff ‑ Allegation of undue influence by plaintiff’s solicitor – Solicitor not a party to the transaction or this proceeding ‑ The principles relating to undue influence not applicable in the circumstances – Application dismissed ‑ Commercial Bank of Australia Ltd v Amadio, (1983) 151 CLR 447 ‑ Kakavas v Crown Melbourne Limited (2013) 250 CLR 392 ‑ Blomley v Ryan (1956) 99 CLR 362 ‑ Turner v Windever [2003] NSWSC 1147 (approved on appeal Turner v Windever, [2005] NSWCA 73 at [2]).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | - |
| For the Defendant | Mr J Sinisgalli, Solicitor Advocate | Ainslie Harding & Wood |
HIS HONOUR:
Introduction
The plaintiff applies for a declaration that a Deed entitled ‘Terms of Settlement’ entered into between him and the defendant on 21 May 2015 (‘Settlement Agreement’) is invalid and for an order that it be set aside.[1]
[1]Originating Motion filed 3 September 2015.
The application now before the court was initially made in the course of the hearing of a summons for taxation commenced by the plaintiff against the defendant on 2 February 2015.[2] That application was referred by the Costs Court judge to the judge sitting in the Practice Court pursuant to r 63.51 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’).[3] That rule enables the Costs Court to refer to a judge of the Court any question arising on a taxation.
[2]Proceeding S CI 2015 00420 (‘Costs Court proceeding’).
[3]Order dated 24 July 2015 in the Costs Court proceeding.
The reference came on before Bell J on 7 August 2015. He construed the reference as raising two questions. First, whether the plaintiff’s application to set aside the Settlement Agreement is within the jurisdiction of the Costs Court. Second, whether, if the Costs Court has that jurisdiction, the reference judge should determine that the Agreement should be set aside and direct the Costs Court accordingly.
On 7 August 2015, Bell J decided that the application to set aside the Settlement Agreement does not relate to the “assessment, settling, taxation or review of costs” and is, therefore, beyond the jurisdiction of the Costs Court.[4] His Honour ordered that the plaintiff’s application to the Costs Court was beyond its jurisdiction, but would be within the jurisdiction of the Court in a separate proceeding claiming declaratory or like relief in relation to whether it was binding on the plaintiff. He also made orders for the applicant to file and serve any such application by a certain date and made consequential orders, including that if the plaintiff does not make a separate application by the specified date or fails to prosecute it with due diligence, the Costs Court must treat the Settlement Agreement as binding upon the plaintiff.
[4]Owerhall v Bolton & Swan [2015] VSC 417.
The plaintiff duly commenced this proceeding by the date specified by Bell J and, in accordance with his orders, the matter came back before him on 10 September 2015. On that day, he ordered that the hearing and determination of the proceeding be referred to an Associate Judge pursuant to r 77.05(1) of the Rules.
The Originating Motion set out the basis of the application as:
(a) he signed the Settlement Agreement whilst intoxicated from the sedative effects of his medications taken to control his medical condition on the day it was signed;
(b) because he was intoxicated, and that was clearly visible at the time of the signing, he was unconscionably taken advantage of by the defendant and his own lawyer, who exercised undue influence on him; and
(c) before he signed the Settlement Agreement the defendant was well aware that he had made a complaint to the Victoria Police concerning the conduct of the defendant.
On 24 September 2015, the matter came on for directions for trial. By order made that day it was ordered that the affidavits filed in the Costs Court proceeding should be admitted as affidavits in this proceeding, and directions were made for the filing and service of further affidavits and Outlines of Submissions. On 25 February 2015, the proceeding was fixed for trial on the affidavits. Notice by any party for a deponent of any affidavit to attend for cross-examination was required. Somewhat surprisingly, neither party required any deponent of an affidavit to attend for cross-examination.
Self-Represented Litigant
The plaintiff is a self-represented litigant. A judge has a duty in relation to represented and unrepresented litigants alike to ensure that the hearing or trial is conducted fairly and in accordance with law.[5] It is a frequent consequence of self-representation that the Court must assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy.[6] What a judge must do to assist a litigant in person depends on the litigant, the nature of the case, and the litigant’s intelligence and understanding of the case.[7] The judge cannot be the advocate of the self-represented litigant, for the role of the judge is fundamentally different to that of an advocate. The judge must maintain the reality and appearance of judicial neutrality at all times and to all parties. The assistance must be proportionate in the circumstances — it must ensure a fair trial and not afford an advantage to the self-represented litigant.[8]
[5]MacPherson v The Queen (1981) 147 CLR 512, 523; Dietrich v R (1992) 177 CLR 292; Werden v Legal Services Board (2012) 36 VR 637, [53].
[6]Neil v Nott (1994) 68 ALJR 509, 510; 121 ALR 148, 150; Minogue v HREOC (1999) 84 FCR 438, [27]-[29] and [33] (‘Minogue’); Platcher v Joseph [2004] FCAFC 68, [104] (‘Platcher’).
[7]Abram v Bank of New Zealand (1996) ATPR 42340, 42347; Minogue; Platcher; Tomasevic v Travaglini (2007) 17 VR 100, 130 (‘Tomasevic’).
[8]per Justice Bell in Tomasevic.
In Rajski v Scitec Corporation Pty Ltd,[9] Samuels JA said:
In my view, the advice and assistance which a litigant in person ought to receive from the court should be limited to that which is necessary to diminish, so far as this is possible, the disadvantage which he or she will ordinarily suffer when faced by a lawyer, and to prevent destruction from the traps which our adversary procedure offers to the unwary and untutored. But the court should be astute to see that it does not extend its auxiliary role so as to confer upon a litigant in person a positive advantage over the represented opponent … At all events, the absence of legal representation on one side ought not to induce a court to deprive the other side of one jot of its lawful entitlement … An unrepresented party is as much subject to the rules any other litigant. The court must be patient in explaining them and may be lenient in the standard of compliance which it exacts. But it must see that the rules are obeyed, subject to any proper exceptions. To do otherwise, or to regard a litigant in person as enjoying a privileged status, would be quite unfair to the represented opponent.
[9]Unreported, Court of Appeal, NSW, Full Court, No CA 146 of 1986, (16 June 1986), 14.
I have endeavoured to apply these precepts and provide to the plaintiff such assistance as is appropriate, both during the course of the trial and in the interpretation of the evidence and submissions he made.
The Evidence
The plaintiff relied on his affidavits of 2 February, 27 May, 5 August and 3 September 2015 and 24 February 2016.
The defendants rely upon the affidavit of Joshua Watson sworn 28 April 2015, Natalie Geros sworn 28 May 2015, Sofian Tay sworn 28 May 2015 and Michael Jonathan Kenny sworn 6 August 2015.
The plaintiff relied upon both his own affidavits and some of the affidavits filed on behalf of the defendant. In order to understand how he put his case for a declaration that the Settlement Agreement be set aside, it is necessary to have an understanding of the work that had been undertaken by the defendant which gives rise to it commencing a Magistrates’ Court proceeding to recover legal costs and to the plaintiff commencing his Costs Court proceeding.
The defendant is a firm of solicitors. It was engaged by the plaintiff in 2014 to act for him and two others, namely Sirkka Tuulikki Wendy Peltonen (‘Ms Peltonen’) and Sakary John Malmberg (‘Mr Malmberg’) in two proceedings in South Australia.
The first proceeding was a winding up application brought by Adbri Masonry Group Pty Ltd against Ecopave Australia Holdings Pty Ltd (‘Ecopave’) in the South Australian Supreme Court (Proceeding No 241 of 2014). The defendant was engaged to act for Ecopave on about 15 April 2015 and continued to act until Ecopave was ordered to be wound up on 25 June 2014.
The second proceeding was brought by C & M Masonry Pty Ltd against Ecopave, the plaintiff, Mr Malmberg and Ms Peltonen (Proceeding No SAD 34 of 2014) in the Federal Court of Australia, Adelaide Registry, towards the end of April 2014. The proceeding concerned what is said to be “a consumer protection action,”[10] and involved allegations against Ecopave of infringement of a trade mark. The defendant commenced to act in that proceeding on about 1 May 2014. The defendant engaged Victorian Counsel to assist and provide expert advice in relation to the Federal Court proceeding.[11] This proceeding was mediated on 29 July 2014 and settled on terms that involved the payment to the plaintiff, Mr Malmberg and Ms Peltonen of $42,500.00.[12]
[10]Affidavit of Joshua Watson sworn 20 April 2015 at [4].
[11]Affidavit of Joshua Watson sworn 20 April 2015.
[12]Affidavit of Joshua Watson sworn 20 April 2015 at [11]-[12].
The plaintiff paid some of the costs incurred in relation to the two South Australian proceedings. However, the defendant alleged that costs remained unpaid. On 3 October 2014, the defendant commenced proceedings in the Magistrates’ Court against the plaintiff, Mr Malmberg and Ms Peltonen claiming $21,158.24 as due for fees and disbursements, plus interest and costs. The plaintiff engaged a Jeff Tran of Coolabah Law (‘Mr Tran’) to act on his behalf in the Magistrates’ Court proceeding.
By letter dated 5 November 2014, Mr Tran wrote to the defendant setting out various argument in support of a proposal that each party withdraw their claims and bear their own costs.[13] The plaintiff relied on this letter, and particularly one passage in it, to allege collusion between Mr Tran and the defendant. The relevant passages is as follows:
We do not feel comfortable about making allegations against colleagues for unethical or unprofessional conduct and therefore urge your office to reconsider your conduct in the matter relating to the defendants. On the surface, by not following the Legal Profession Act 2004 and by sending Counsel’s invoice dated 26 June 2014 to the client on 23 July 2014 demanding immediate payment prior to the mediation on 29 July 2014 or counsel will not attend may lead to a conclusion of either unprofessional or unsatisfactory conduct.
[13]Exhibit EO-8 to the affidavit of the plaintiff sworn 2 February 2015 in proceeding 0420 of 2015.
The making of this claim in the Magistrates’ Court led the plaintiff to commence the Costs Court proceeding seeking a taxation of the costs claimed pursuant to s 3.4.38 of the Legal Profession Act 2004 (‘the LPA’). The plaintiff was self-represented in the hearings in the Costs Court. Despite being self-represented, by November 2014, the plaintiff had engaged a Mr Tran to act on his behalf.
After the making various procedural orders by the Costs Court, the defendant proposed a settlement conference. On 22 April 2015, Ms Geros of the defendant received an email from Mr Tran that said that his clients were happy to attend the offices of the defendant for an informal mediation. Initially Mr Tran suggested 8 May 2015 as a possible date to hold the mediation. The date finally agreed was 21 May 2015 and the venue was the offices of the defendant in Richmond, Victoria. The Costs Court subsequently ordered by consent that a settlement conference be held on 21 May 2015.[14]
[14]Order made 21 May 2015 in proceeding 0420 of 2015.
There were exchanges between the plaintiff and his Solicitor, Mr Tran in the lead up to the agreement to hold the settlement conference that the plaintiff advanced as part of his case. On 5 May 2015, the plaintiff sent an email to Mr Tran in which he requested a change in the venue for the mediation away from the defendant’s offices to a neutral place.[15] The next day Mr Tran responded in the following terms:
It concerns me that you instructed me to agree to mediate at the respondent’s offices on 8 May 2015 and now you are giving me contrary instructions. I do not operate that way…
I advise that it is not crucial to change the venue and/or the time. First, to have a neutral place, you need to share one half of the fees which you have been instructing that you do not have. Secondly, I see no advantage in having the mediation rescheduled to days that I am not available. I have other commitments next week and I cannot drop them just like that.
Therefore, my advice is for you to attend my office tomorrow (Thursday) at 10.00am to go through the materials and prepare for the mediation on 8 May.
If you still insist on changing the time, then I am afraid I cannot act for you as I will not be available. Please let me know.
[15]Plaintiff’s affidavit of 27 May 2015 in the Costs Court proceeding, at [3], Exhibit EO-1.
It seems that the plaintiff became unwell on or about 7 May 2015 and sought to have the mediation scheduled for 8 May 2015 put off. To that end, he provided to Mr Tran by email a medical certificate from his GP regarding his inability to attend that mediation. In that email the plaintiff raised again his desire to have the mediation at a neutral venue partly because he did not want to risk having a relapse (attack) from the stress of having to visit the offices of the defendant and run into the same people that had been the cause of so much strife for him and his family. The plaintiff does not relate what the response was to this email and it does not appear in the evidence, but it may be assumed that the plaintiff accepted the desirability of holding the mediation at the offices of the defendant for the reasons that Mr Tran had previously given him.
The plaintiff produced his brief to Mr Tran as a part of his most recent evidence in support of his application (‘Brief’).[16] The Brief was described by the plaintiff as a living document because, although it was provided to Mr Tran on 5 May 2015 by way of instructions,[17] it referred to events that post-dated the settlement conference on 21 May 2015. The Brief was described as a brief of evidence in the Costs Proceeding. It contains an account of his complaints against the defendant in acting in the South Australian proceedings and in proceedings in the Victorian Civil and Administrative Tribunal (‘VCAT’) in a residential tenancies dispute. A variety of alleged acts of neglect by the defendant were said in the Brief to give rise to a claim for compensation of $34,980.00.[18] This included loss caused by the plaintiff being “caused” by the defendant to incur a credit card liability and damages for injury to, I think, his reputation arising from the conduct of a process server engaged by the defendant to serve documents on him.
[16]Plaintiff’s affidavit of 24 February 2016 at [9] and exhibit E-7.
[17]Plaintiff’s affidavit of 27 May 2015 in the Costs Court Proceeding at [3].
[18]See Plaintiff’s affidavit of 24 February 2016 at exhibit E-7 p.25.
The plaintiff’s evidence of his disability included that he is, and has since 2002 been, in receipt of a disability support pension.[19] Notwithstanding this, he was a director or secretary of Ecopave and involved in what he describes as a charitable foundation, the GEO320 Foundation Charity (‘Foundation’). He stated from the Bar table that Ecopave was a not for profit corporation in fact, if not formally.[20] Some of the evidence he gave about the circumstances giving rise to his complaints about the conduct by the defendant in connection with the litigation in South Australia and elsewhere referred to the defendant’s failure to follow up on an anticipated donation or investment from an investor from the United States of America, a Mr Mundi, who proposed to provide $1.5 million to the Foundation. In another part of his evidence this $1.5 million was to be provided to Ecopave so as to make it solvent.[21] This money was to be used in part to defray the defendants costs in the litigation,[22] as well as pay past salaries due to him by Ecopave.[23] This loss of salary to be derived from the investment or donation was said to be a loss suffered by him due to the negligence of the defendant. None of this was clear and all of it suggests a complete disregard of the separate corporate and, perhaps non-corporate, entities involved.
[19]Plaintiff’s affidavit of 5 August 2015 in the Costs Court Proceeding at [2] and exhibit EJO-1.
[20]See also Plaintiff’s affidavit of 2 February 2015 in the Costs Court Proceeding at [5].
[21]See Plaintiff’s affidavit of 24 February 2016, Brief of Evidence to Mr Tran, at exhibit E-7, para 9.
[22]See Plaintiff’s affidavit of 24 February 2016 at [3] and exhibit E-1.
[23]Plaintiff’s affidavit of 27 May 2015 in the Costs Court Proceeding at [5].
Before attending the mediation on 21 May 2015, the plaintiff suffered from an allergy attack (a rash and itching), associated with eczema from which he suffered, and says that he took five 10mg Phenergan so as to alleviate the effects of his condition. He says he normally takes one 10mg Phenergan tablet to bring his allergy under control.[24]
[24]Plaintiff’s affidavit of 27 May 2015 in the Costs Court Proceeding at [5].
The plaintiff produces evidence that the defendant was aware of his allergy and medical condition because during the time that the defendant acted for him the South Australian proceedings evidence was introduced about his condition to explain why documents were filed late. The condition is there referred to as chronic dermatitis.[25] The plaintiff also showed that the defendant was aware of his condition from material filed and referred to in a decision of a member of VCAT in a matter in which the defendant also acted for him in 2014.[26]
[25]Plaintiff’s affidavit of 27 May 2015 in the Costs Court Proceeding at [8] and exhibit EO-4.
[26]Plaintiff’s affidavit of 5 August 2015 in the Costs Court Proceeding at [7] and exhibit EJO-3.
The settlement conference occurred on 21 May 2015 and is described by the plaintiff as an informal mediation. The plaintiff had the written authority of Ms Peltonen and Mr Malmberg to participate in a mediation and enter into any agreement with the defendant relating to costs allegedly owed by them. The plaintiff attended with his Solicitor, Mr Tran, at about 10.00am at the offices of the defendant. Representing the defendant were Ms Geros and Mr Sofian Tay.
Ms Geros swears that before, during and after the settlement conference she was neither advised by the plaintiff nor by Mr Tan that the plaintiff was ill. She observed that the plaintiff appeared to be in good health, was alert, engaged, responsive and cognisant.[27]
[27]Affidavit of Natalie Geros sworn 28 May 2015 at [8] (‘Geros Affidavit’).
The plaintiff swears that at the commencement of the mediation whilst Mr Tran was outside the room attending “to matters”, he stated to Ms Geros that “You’re aware that I am disabled don’t you (sic), I shouldn’t really be here today as I’m not well.”[28] Ms Geros says in her affidavit that she agrees that the plaintiff told her that he was disabled but that he said nothing more. The plaintiff appeared to Ms Geros to be able-bodied and in good mental and physical health and she knew that he had his Solicitor with him.[29]
[28]Affidavit of plaintiff sworn 27 May 2015 (’27 May Affidavit’).
[29]Geros Affidavit at [21].
The plaintiff also swears that the defendant was well aware of his allergy and medical condition. In June 2014, the defendant had provided an affidavit referring to his condition for the South Australian Federal Court proceedings (for the purpose of obtaining an adjournment). At that time, he swore as to his chronic eczema.[30] Ms Geros in her affidavit agrees that she was aware that the plaintiff suffers from eczema but on the day of the settlement conference she did not observe any symptoms.
[30]27 May Affidavit at [8].
Mr Sofian Tay deposes that he was present at the settlement conference as a witness and that he observed that the plaintiff did not present with any visual physical disabilities. He walked and spoke “under his own power” and did not appear to be under the influence of any medication. He states his belief that the plaintiff:
(a) was alert and did not sound unduly stressed about entering into the Settlement Agreement; and
(b) did not appear to have any difficulty understanding the nature of the discussions and responded appropriately during the settlement conference.
This statement of belief, properly understood in the context of the affidavit as a whole, is mere surplusage. What Mr Tay gives in this part of the affidavit is an account of his observations. By contrast, later in the affidavit Mr Tay purports to give an inadmissible expert opinion which I ruled during the trial I would not admit into evidence.[31]
[31]Affidavit of Sofian Tay affirmed 28 May 2015 at [12].
The plaintiff also says that during the mediation at some point Mr Tran said to Ms Geros that “I generally do not want to go against colleagues in proceedings such as these”, so as to indicate that the plaintiff would be willing to enter into an amicable agreement to end the dispute. He also says that he instructed Mr Tran to pass on to the defendant the terms upon which he was prepared to resolve the proceedings in respect of a matter involving an accounting firm called Armstrong & Shaw Services (‘A & S’) but was told that it did not matter.[32] He says that Mr Tran and the defendant refused to allow him to take the draft Settlement Agreement home over the weekend so that he could consider it at his leisure but instead he was pressured by Mr Tran to conclude the agreement there and then by signing it.
[32]27 May Affidavit at [10]–[12]. A & S worked out of the same building as the defendant and he was referred to them by the defendant to assist him in obtaining credit to pay the defendant’s legal costs: see plaintiff’s affidavit of 24 February 2016 at [3].
In the course of the settlement conference, an agreement was reached to resolve the Magistrates’ Court proceeding by the defendant withdrawing that claim and by the plaintiff withdrawing the Costs Court proceeding and the complaint he and Mr Malmberg made about the defendant to Victoria Police. The Settlement Agreement contained mutual releases in relation to those matters and annexed signed minutes of orders pursuant to which both the Magistrates’ Court proceeding and the Costs Court proceeding were to be dismissed with no order as to costs.
The mediation concluded at about 2.00pm. The plaintiff then proceeded to drive Mr Tran to his office in Werribee and then went home to Point Cook. He says that he was driving under the influence of the Phenergan medication. When he arrived home at about 3.30pm he reflected on the mediation and upon regaining his faculties and sobriety was shocked to realise that he had signed the Settlement Agreement without first having taken time to “sleep on it”, which is something he would normally do. Whilst he was sobering up he realised that he had been “ambushed” by Mr Tran and the defendant (in collusion) into signing the Settlement Agreement on the spot whilst intoxicated by the medication and with his normal inhibitions reduced (his guard was down).
Later that day the plaintiff notified the defendant, the two courts and the two other defendants in the Magistrates’ Court proceeding that he was unwell when he entered into this Terms of Settlement and that:
the signing by me is hereby nill and void on the grounds that it occurred mistakenly due to me being I was medically unfit to attend and sign any agreement or have the opportunity to first consider the contents outside the defendant offices and in my own time and pace since I suffer from a disability (physical).’ (sic)
On 21 May 2015, the plaintiff obtained a medical certificate from Dr Janak Jayatilake of the Point Cook Medical Centre stating that:
This is to certify that [the plaintiff] is receiving medical treatment and for the period Thursday, 21 May 2015 to Thursday, 21 May 2015 inclusive he will be unfit to continue his usual occupation/study.
At 5.55am on 22 May 2015, the plaintiff emailed Ms Geros and Mr Tran the medical certificate stating that it supported the fact that he was unfit and under the influence of medication for his allergy conditions at the mediation and this explains his inadvertent and premature signing of the documents.[33]
[33]27 May 2015 Affidavit at [16] and Exhibit EO–7.
On 22 May 2015, Mr Tran sent an email to both Ms Geros of the defendant and the plaintiff advising that due to the emails from the plaintiff and the defendant he was in a position of a potential conflict of interest and was unable to continue to act for the plaintiff and, indeed, had received instructions from the plaintiff to end his retainer.[34] Ms Geros of the defendant responded that the medical certificate was unsatisfactory and not acceptable and that the defendant would contact the Court that day and request that the plaintiff be examined by two independent doctors. The email went on:
Further, after speaking with your lawyer yesterday on the telephone, he was not aware of any sickness and did not believe you were ill. We have recorded this telephone conversation and shall submit in evidence.
[34]27 May 2015 Affidavit at [17] and Exhibit EO–8.
The plaintiff responded that Ms Geros should let him know the details of the two independent doctors and where and when to attend for examination and that he would organise specialist from his side.[35] None of this occurred.
[35]27 May 2015 Affidavit at [17] and Exhibit EO–8.
On 23 June 2015, over a month after the mediation, Mr Tran emailed the plaintiff in relation to a number of matters but in the course of doing so stated:
I recommended you sign the Agreement as I believed that was the best outcome for you given the fact that (1) Your claims against Bolton & Swan were weak (for example, claiming GST when you had not paid GST); and (2) Any claim you may have regarding false information about your credit card application should be directed to the people/entity who filled out your application form for credit. You instructed me that Bolton & Swan merely referred you to A & S and that Bolton & Swan did not help you fill out your application form.[36]
[36]Plaintiff’s 5 August 2015 Affidavit at [8] and Exhibit EJO–4. The exhibit contains only an extract from the email because, it was said by the plaintiff from the Bar table without objection from the defendant’s representative, that the balance of the email was confidential or privileged.
Applicable Law
Justice Bell noted in his reasons for judgment in the Costs Court proceeding reference that because the Settlement Agreement constitutes a contract, an application to set it aside involves consideration of the grounds upon which a contract may be set aside.[37] This principle and those grounds were explained in the well-known decision of Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ in Harvey v Phillips:[38]
The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like.[39]
[37]Owerhall v Bolton & Swan [2015] VSC 417 at [14].
[38](1956) 95 CLR 235; see also Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273
[39](1956) 95 CLR 235 at 243-4.
Unconscionable conduct is a ground upon which an agreement can be set aside.[40]
[40]Mintel International Group Ltd v Mintel (Australia) Pty Ltd (2000) 181 ALR 78 at [35]; [2000] FCA 1410; National Australia Bank Ltd v Koller [2011] VSC 228.
Both parties referred to the principles to be found in Commercial Bank of Australia Ltd v Amadio (‘Amadio’).[41] The central principle is that whenever one party, by reason of some condition or circumstance, is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created, the innocent party may be relieved of the consequences of that conduct. In the application of this principle, it is necessary that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.[42]
[41](1983) 151 CLR 447 at 462; [1983] HCA 14; Kakavas v Crown Melbourne Limited [2013] HCA 25; (2013) 250 CLR 392; (2013) 298 ALR 35; (2013) 87 ALJR 708 (‘Kakavas’); Bridgewater v Leahy (1998) 194 CLR 457 (‘Bridgewater’).
[42]Amadio; Kakavas.
The High Court noted in Kakavas that the decisions in that Court in which claims for relief from unconscionable conduct had been litigated, illustrate the necessity for a close consideration of the facts of each case in order to determine whether a claim to relief has been established.[43]
[43]Blomley v Ryan (1956) 99 CLR 362; [1956] HCA 81; Amadio; Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61; Bridgewater v Leahy; Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51.
What is considered a special disability is probably not capable of any precise definition. A great deal will turn on the facts of the particular case. In these reasons it is not necessary or appropriate to undertake a review of the authorities. Suffice it to say that in Blomley v Ryan, Fullagar J set out, in an oft quoted passage, some of the possibilities in the following way:[44]
…The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other. It does not appear to be essential in all cases that the party at a disadvantage should suffer loss or detriment by the bargain.
[44]Blomley v Ryan (1956) 99 CLR 362, 405.
It is usually central to an application of the kind made in this case that the transaction is improvident, in the sense that it is made without adequate consideration or is entirely voluntary and ‘springing from no sensible motive’.[45] In Turner v Windever[46] Austin J summarised the principles applicable, compendiously, as follows:
[45]Wilton v Farnworth (1948) 76 CLR 646 at 655 per Rich J; Turner v Windever [2003] NSWSC 1147 at [103], approved on appeal in Turner v Windever, [2005] NSWCA 73 at [2].
[46][2003] NSWSC 1147 at [105], approved on appeal in Turner v Windever, [2005] NSWCA 73 at [2].
(a) the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the stronger party;
(b) the special disadvantage must seriously affect the weaker party's capacity to judge or protect his or her own interests;
(c) the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person);
(d) that party must take advantage of the opportunity presented by the disadvantage; and
(e) the taking of advantage must have been unconscientious.
Austin J added to these criteria that once ingredients (a), (b) and (c) are established, and the improvidence of the transaction is shown, the plaintiff's task is made easier by an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage.[47]
[47]Turner v Windever [2003] NSWSC 1147 at [106],
There is no duty under the general law, at least in the absence of a fiduciary obligation, to take steps to inquire, in another party’s interest, into the possibility that a disability may exist. A party is to be judged on the basis of the facts which were actually known to it. It is not necessary, however, that there be full knowledge of the special disability. It is enough that the party has sufficient awareness to be placed on inquiry so that ignorance of the special disability may be characterised as wilful.[48]
[48]Laws of Australia, online edition, Thomson Reuters, paragraph 35.9.310.
If the stronger party is put on inquiry, it is sufficient to establish liability that no inquiry was made. In Amadio, Mason J[49] expressed the view that it was inconceivable that the possibility did not occur to the bank manager in that case that the Amadios’ introduction to the transaction was “due to their inability to make a judgment as to what was in their best interests, owing to their reliance on their son, whose interests would inevitably incline him to urge them to sign the instrument put forward by the bank.”[50]
[49]as he then was.
[50]Amadio, 466-467; Laws of Australia, online edition, Thomson Reuters, paragraph 35.9.310.
Similarly, Deane J thought it sufficient to ground an exercise of the equitable jurisdiction that the special disability was “sufficiently evident to the stronger party to make it prima facie unfair or “unconscientious” that he procure or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it.”[51] His Honour went on to say that “[i]t would, at least by that stage, have been plain to any reasonable person, who was prepared to see and to learn, that he was put on inquiry.”[52]
[51]Amadio, 474: Deane J applied that test to the facts at 477; Laws of Australia, online edition, Thomson Reuters, paragraph 35.9.310.
[52]Amadio, 479; Laws of Australia, online edition, Thomson Reuters, paragraph 35.9.310.
Proof that the dominant party took advantage of the disability in question is necessary. It must be shown that the dominant party had a “predatory state of mind” and that it obtained the benefit of its bargain with the weaker party by unfair exploitation of that party’s evident weakness.[53] This may be established by proving the dominant party had actual knowledge of the weaker party’s special disadvantage or by proving that the dominant party was wilfully ignorant of it.[54]
[53]Kakavas, [161]; Laws of Australia, online edition, Thomson Reuters, paragraph 35.9.310.
[54]Laws of Australia, online edition, Thomson Reuters, paragraph 35.9.310.
The concept of constructive notice, which is applicable to ordering the priority of competing interests in property, does not have a place in establishing knowledge for the purposes of the doctrine of unconscionable dealing.[55] Accordingly, while heedlessness of, or indifference to, the best interests of the other party to a transaction will not amount to taking advantage, it may consist in proceeding with the transaction, knowing, or having been put on inquiry, that the weaker party’s disability prevented that party from judging what was in his or her best interests and doing nothing to ameliorate that disability.[56]
[55]Kakavas, [150]–[158].
[56]Amadio, 466–7 (Mason J), 479 (Deane J); Louth v Diprose (1992) 175 CLR 621, 638 (Deane J); Laws of Australia, online edition, Thomson Reuters, paragraph 35.9.310.
Submissions and Consideration
In his Originating Motion the plaintiff asked the Court to determine a number of questions which, inferentially, he contended arose from the facts of his case. These questions, together with my short answers, are:
(a) was the plaintiff under a special disadvantage at the time he entered into the Settlement Agreement? Answer – possibly;
(b) did the defendant have prior knowledge of that disadvantage? Answer – No;
(c) was the defendant’s conduct towards the plaintiff unconscionable as defined by the unwritten law and/or the Competition and Consumer Act2010 (Cth), Schedule 2 (‘Australian Consumer Law’)? Answer – No;
(d) was the plaintiff under presumed undue influence of his Solicitor when he was advised to enter into and sign the Settlement Agreement? Answer – No; and
(e) should the Settlement Agreement be declared invalid and be set aside? Answer – No.
The plaintiff relied upon the proposition that he was under a special disability in dealing with the defendant and the defendant took advantage of that disability and thereby behaved unconscionably in procuring or accepting his signature to the Settlement Agreement. His disability was his medical condition of suffering from eczema or a dermatological condition, and being intoxicated by the effects of the medication he had taken on the day the settlement conference took place. He submitted that in those circumstances, the onus is cast upon the defendant, as the stronger party in an unequal bargaining position, to show that the transaction was fair, just and reasonable. He quoted from the reasons of Gibbs CJ in Amadio as follows:
A transaction will be unconscientious within the meaning of the relevant equitable principles only if the party seeking to enforce the transaction has taken unfair advantage of his own superior bargaining power, or of the position of disadvantage in which the other party was placed. The principle of equity applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands: Blomley v Ryan,[57] per Kitto J and see at pp 405–406, per Fullagar J.
[57](1956) 99 CLR 362 at 415.
He submitted that it was clear from his evidence, to which I have referred, that the defendant must have known of his medical condition and thus of his special disadvantage, including the medications that he was required to take to control his condition.
In order for the plaintiff to set aside the Settlement Agreement for the defendant’s unconscientious conduct, he must show that the defendant knew of his special disadvantage or that it was sufficiently evident to the defendant make it prima facie unfair or “unconscientious” that it procure or accept the plaintiff’s assent to the Settlement Agreement in the circumstances.[58]
[58]Amadio, 474: Deane J applied that test to the facts at 477.
The evidence in this case is clear. Despite the plaintiff reminding Ms Geros of his general disability, there is no probative evidence to suggest that the defendant knew he was intoxicated by his medication on the day of the settlement conference. All the evidence of the defendants, un-contradicted and not the subject of any testing by cross-examination, supports the position that the plaintiff was apparently in full possession of his faculties.
The evidence of Ms Geros and Mr Tay is that the plaintiff was not apparently suffering from any disability in the course of the mediation. He appeared to be looking in good mental and physical health and he had the assistance of his Solicitor, Mr Tran. There is no evidence that he told any representative of the defendant that he had taken Phenergan tablets before attending the mediation, nor that he was affected in any particular way by having taken medication.
The evidence can lead to no other finding than that the defendant was unaware that the plaintiff was under the influence of medication on the day the Settlement Agreement was entered into. The defendant agrees that it was aware of his eczema or dermatological condition generally. But that is not knowledge of his particular condition on the day. There was nothing in the plaintiff’s demeanour or communications with the defendant’s representatives, or his own Solicitor, which ought to have alerted the defendant to the particular disabling condition he claims affected his judgment on the day.
It is, as the defendant submitted, significant that the plaintiff was able to drive Mr Tran home that day after the mediation. Moreover, the medical evidence, such as it is, does not establish any particular disability at the settlement conference. The certificate of the plaintiff’s General Practitioner merely states that on the day of the entry by the plaintiff into the Settlement Agreement he ‘will be unfit to continue his usual occupation/study’. The plaintiff’s own evidence is that the Settlement Agreement was signed by him on the advice of his Solicitor.
The plaintiff accepted that he had to show the defendant had a “predatory state of mind” and that it obtained the benefit of the bargain by unfair exploitation of the plaintiff’s evident weakness.[59]
[59]Kakavas, [161]; Laws of Australia, online edition, Thomson Reuters, paragraph 35.9.310.
Even assuming some general knowledge by the defendant of a special disadvantage by reason of his medical condition, in the context of this case, it must be established that an exploitative advantage was taken by the defendant of the plaintiff’s condition on the day of the settlement conference. There is no reason to think that to be the case. The plaintiff was represented at the settlement conference by his own Solicitor who had shown by his previous correspondence to be acting steadily in the plaintiff’s interest. The letter written by him on 14 November 2014[60] shows an acute appreciation of the issues to be raised both in the Magistrates’ Court proceeding and in the Costs Court proceeding.
[60]See para 18 above.
There is no evidence that the defendant deliberately set out to ensure that the plaintiff signed the Settlement Agreement knowing that the plaintiff was suffering from any special disadvantage or that he was under a misapprehension or was mistaken in doing so. From the defendant’s perspective, the plaintiff signed the Settlement Agreement after going through it alone with his Solicitor. The Solicitor witnessed the plaintiff’s signature.
It is also relevant to observe that the Settlement Agreement was in substance the same as Mr Tran had proposed in his letter of 14 November 2014, namely that each party withdraw their claim and bear their own costs. The material, and particularly the plaintiff’s own Brief to Mr Tran, shows that it is very likely that the defendant gave up more than the plaintiff.
An examination of the defendant’s claim for costs due and the plaintiff’s defence to that claim[61] makes it very difficult to come to any conclusion that the transaction was unfair to the plaintiff or in any measure improvident. It might be that by reason of an alleged failure of the defendant to give a costs disclosure document to the plaintiff pursuant to s 3.4.9 of the LPA that there could be no recovery until an assessment under Division 7 of that Act (as the plaintiff claimed in his defence to the Magistrates’ Court claim), and that he had claims for breach of contract or negligence against the defendant (as was claimed in the Brief). But there was considerable uncertainty as to whether the assessment of the costs in the Costs Court proceeding would have reduced the costs and a reading of the Brief prepared by the plaintiff for Mr Tran shows that the plaintiff’s complaints were in many respects weak or difficult, if not impossible, to substantiate.
[61]Affidavit of Michael Jonathan Kenny sworn 6 August 2015 in the Costs Court proceeding.
In my view there is no basis, presently established, for any contention that the Settlement Agreement was improvident for the plaintiff to enter into. In my estimation on the material presented in evidence, including the Brief, the Settlement Agreement was fair and reasonable as between the parties.
Thus, the evidence to which I have referred above does not clearly establish that the plaintiff suffered from the disability he claims on the day of the settlement conference. It is possible that he did. But the objective evidence given by the defendant’s witnesses suggests the contrary. It is, however, unnecessary to decide whether he did in fact so suffer, because it is certainly the case that it was not evident to the defendant that he was affected by the medication he had taken.
The plaintiff submitted, in support of the conduct of the defendant being predatory, a list of instances where it appeared the defendant had failed or refused to act properly for his benefit. These instances, it was said, supported his contention that the defendant unconscientiously took advantage of his disadvantage, in the sense that the defendant had a predatory state of mind of the kind referred to by Mason J in Amadio.
These instances all related to matters of “mere allegation” that all occurred long before the settlement conference. Such things as alleged false billing and invoicing forcing the plaintiff to acquire credit, making a false Magistrates’ Court costs claim (which he described as a malicious prosecution), failing to attend the Federal Court mediation in South Australia in July 2014, failing to prosecute a VCAT claim he said he had arising out of a residential tenancy dispute, failing to provide a costs agreement in advance of acting for him in 2014 and other remarkable alleged misdeeds, none of which have been established either in this proceeding or elsewhere.
He also relied upon the doctrine of undue influence to maintain that as between him and Mr Tran there was a presumption of undue influence.[62] The decision on which he relied was a decision that involved a transaction between the solicitor and his client, in which case the Court views the transaction with suspicion and applies a presumption that that the other’s will was unduly overborne by the confidence he placed in the confidant (solicitor), so that the burden falls on the solicitor to prove that in all the circumstances the dealings were at arm’s length and that the other’s will was in no way overborne by the relationship of confidence.[63] That is not this case. There was no transaction between the plaintiff and his solicitor, Mr Tran, there was no claim made against Mr Tran, and he was not a party. The presumption of undue influence as advanced by the plaintiff does not apply here.
[62]Westmelton (Vic) Pty Ltd v Archer & Shulman [1982] VR 305.
[63]Westmelton (Vic) Pty Ltd v Archer & Shulman [1982] VR 305 at 312-3.
In order to make the principles relating to undue influence applicable to the circumstances of this case, the plaintiff alleged that the defendant had acted in concert with Mr Tran in inducing him to sign the Settlement Agreement on the day of the mediation. In support of this allegation of collusion he relied upon the letter referred to above[64] in which Mr Tran had said he does not feel comfortable about making allegations against colleagues for unethical or unprofessional conduct. He also refers to the fact that he alleges Mr Tran said something to the same effect in the course of the mediation, also referred to above.
[64]At paragraph 18 above.
There is no evidence of any undue influence by the defendant on the plaintiff. It is not open for the plaintiff to contend that the defendant and Mr Tran colluded in reaching the Settlement Agreement or pressuring the plaintiff to sign it on the day of the conference. The letter from Mr Tran to the defendant dated 14 November 2014 does not sustain the contention that there was collusion. Nor does the evidence that Mr Tran said something in the course of the conference to the effect that “I generally do not want to go against colleagues in proceedings such as these.” The statement in the letter “[w]e do not feel comfortable about making allegations against colleagues for unethical or unprofessional conduct” was introducing the threat of making just such an allegation and would have been taken that way, as the solicitors were no doubt aware that the alleged failure to give a costs disclosure document can constitute unsatisfactory professional conduct or professional misconduct by virtue of s 3.4.17(4) of the LPA. Far from being an indicator of collusion, it was the announcement of a threat to make a complaint to the Legal Services Commissioner.
The defendant submitted that even if the Settlement Agreement is set aside as between the plaintiff and the defendant, there remained a valid and enforceable agreement as between the defendant and Ms Peltonen and Mr Malmberg. As Bell J said in his reasons for judgment on the reference from the Costs Court,[65] only the plaintiff is seeking to have the Settlement Agreement set aside. The two other defendants in the Magistrates’ Court want it to be implemented. I do not need to consider the implications of this proposition as I am not persuaded that the plaintiff’s entry into the Settlement Agreement was the product of any unconscionable conduct of the defendant and, in any event, it is not established to be improvident.
[65]Owerhall v Bolton & Swan Pty Ltd [2015] VSC 417 at [4].
The defendant also relied upon the decision of the High Court in Taylor v Johnson[66] where it was said by Mason CJ, Murphy and Deane JJ:
The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension.
[66](1983) 151 CLR 422 at 432.
Perhaps the focus of the defendant on the concept of a unilateral mistake is a product of the difficulty in determining the proper basis of the plaintiff’s application. Whatever may be the motivation for the submission of the defendant that the mistake allegedly made by the plaintiff falls to be considered by reference to the principles explained in the decision of the High Court in Taylor v Johnson, I can find no room for the application of the concepts in this case. There is simply no suggestion that the plaintiff was operating under a misapprehension about either the content or subject matter of the Settlement Agreement nor that the defendant was aware, or even ought to have been aware, of it and took advantage of that misapprehension.
The plaintiff also relied on s 20 and 21 of the Australian Consumer Law. The doctrine of unconscionable conduct as it is expressed in these statutory formulations is sufficiently flexible to provide relief for a party in the absence of actual or constructive knowledge of that party’s special disadvantage on the part of the party seeking to enforce a contract. However, it is necessary for the plaintiff to establish that the defendant had engaged in conduct which involved a deliberate act that is morally repugnant and is irreconcilable with what is right or reasonable.[67] Inequality of bargaining power is not enough.[68]
[67]ACCC v Allphones Retail Pty Ltd (2009) 253 ALR 324 at 113, cited in National Australia Bank Ltd v Koller [2011] VSC 228, at [82].
[68]ACCC v Allphones Retail Pty Ltd (2009) 253 ALR 324 at 113, cited in National Australia Bank Ltd v Koller [2011] VSC 228, at [82].
I do not consider that there was any deliberate act of the defendant that was morally repugnant or irreconcilable with what is right and reasonable, and no inequality of bargaining power. Thus there was no conduct of the defendant that could be classed as taking unconscientious advantage of the plaintiff. There is, in my view, no basis upon which s 20 or 21 of the Australian Consumer Law may operate.
Finally, the plaintiff has produced no evidence from Mr Tran to support his assertion that he signed the Settlement Agreement under pressure or as a result of a mistake. Not only is the inference open that the evidence of Mr Tran would not assist him[69] but there is positive evidence advanced by the plaintiff that Mr Tran considered the settlement to be in the plaintiff’s interests to enter into and that the plaintiff was not suffering from any disability at the time he signed the Settlement Agreement.[70]
[69]Jones v Dunkel (1959) 101 CLR 298.
[70]Plaintiff’s affidavit of 5 August 2015 at [8].
Conclusion
In the result, I am not satisfied that the plaintiff has established any ground to declare the Settlement Agreement invalid or to order that it be set it aside.
I will order that the proceeding be dismissed with costs.
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