Sholl Nicholson Pty Ltd v Chapman
[2001] VSC 430
•12 November 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 7238 of 1998
| SHOLL NICHOLSON PTY (ACN 052 098 012) | Plaintiff |
| V | |
| PHILIP ANDREW CHAPMAN as the legal personal representative of the Estate and Will of ELLEN AMELIA CHAPMAN deceased REGISTRAR OF TITLES | Firstnamed Defendant Secondnamed Defendant |
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JUDGE: | Balmford J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15, 18, 19 & 27 June, 8-10, 13-17, 20 & 29 August, and 21 September 2001 | |
DATE OF JUDGMENT: | 12 November 2001 | |
CASE MAY BE CITED AS: | Sholl Nicholson v Chapman | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 430 | |
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Plaintiff law firm’s claim for the payment of moneys said to be owed to it for work performed by it – whether the plaintiff has a caveatable interest over the title to the defendant’s property – where the title is charged with payment of those moneys, as security provided for outstanding and estimate future costs – The defence alleges inducement by the plaintiff to execute the deeds by unconscionable conduct, undue influence and duress, and seeks to have the deeds set aside.
Transfer of Land Act 1958 – section 89 A
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Crescendo Management v Westpac (1988) 19 NSWLR 40
Johnson v Buttress (1936) 56 CLR 113
Union Bank of Australia Ltd v Whitelaw [1906] VR 711
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr AW Sandbach | Sholl Nicholson Lasky Pty |
| For the Firstnamed Defendant | Mr AD Robertson | Russell Kennedy |
HER HONOUR:
The proceeding
In this proceeding, initiated by writ, the plaintiff seeks (in summary) payment of certain moneys claimed to be owing to it for work performed by it, as well as other orders, as to which see paragraph 24 below, relating to the title to a property said to be charged with payment of those moneys. A counterclaim was filed by the defendants on 31 August 2000, as to which see paragraph 4 below.
The plaintiff is a company which is an incorporated practitioner within the meaning of the Legal Profession Practice Act 1958 and the Legal Practice Act 1996. The solicitor who handled the matter in respect of which the moneys are said to be owing was Ms Head. Ms Head is now Ms Vosjan, and it is convenient to refer to her by that name. Her position in relation to the plaintiff company is described in paragraph 35 below.
On 6 November 1998, the date of filing of the amended writ, there were three defendants named, the firstnamed defendant being Ellen Amelia Chapman (“Ellen”), who has since died. The secondnamed defendant was her son Philip Andrew Chapman (“Philip”) in his personal capacity and the thirdnamed defendant was the Registrar of Titles (“the Registrar”).
On 11 May 2001 Master Kings ordered that unless Philip complied with certain requirements by 1 June 2001 his defence was to be struck out; there was to be judgment against him; his counterclaim was to be dismissed; and he was to pay the plaintiff’s costs as between solicitor and own client. He did not comply with the requirements. An application made at the outset of the hearing to have the order of Master Kings struck out was dismissed.
Philip remains a defendant to the proceeding, but only in the capacity of legal personal representative of Ellen. On 13 June 2001, by an order of Master Kings, the name of the firstnamed defendant (“the defendant”) was changed to “Philip Andrew Chapman as legal personal representative of the Estate and Will of Ellen Amelia Chapman, deceased”. The order recites that the Court sighted a copy of the Probate of the Will of Elaine Amelia Chapman granted by this Court in its Probate Jurisdiction on 16 March 2001 to Philip Andrew Chapman.
There was no appearance for the Registrar, who is now the secondnamed defendant.
By a letter of 17 May 2001 Russell Kennedy, on the instructions of Ellen’s estate as firstnamed defendant and of Philip (who was then still a party to the action in his personal capacity) as secondnamed defendant, advised the plaintiff that their clients would not be proceeding in respect of the counterclaim to the extent that it sought damages and/or compensation. Their clients would be relying on the defence which had been filed and in the event of the Court finding that the plaintiff had no caveatable interest, would be seeking an order that the caveat lodged by the plaintiff (see paragraph 17 below) be withdrawn. At the hearing, counsel for the defendant abandoned all grounds of defence save unconscionable conduct, undue influence and duress.
Outline history: the first deed and surrounding events
In April 1993 a company called Go-Tell Nominees Pty Ltd (“Go-Tell”), the directors of which were Mr and Mrs Ian Chapman (“Ian” and “Denise”), owned a property at Plenty known as “Blue Lake”. Ian is the son of Ellen and the brother of Philip. Negotiations were under way for the acquisition of Blue Lake by the Melbourne and Metropolitan Board of Works. That body was later succeeded by Melbourne Water, then by Melbourne Parks and Waterways and most recently by Parks Victoria. The distinction between the various bodies is not significant for present purposes, and it is convenient to refer to them collectively throughout this judgment as “Melbourne Parks”.
Melbourne Parks had offered the sum of $755,000 and costs by way of compensation for the acquisition of Blue Lake from Go-Tell. Ian and Denise considered that amount to be inadequate. In April 1993 they and Go-Tell retained the plaintiff to act for them in respect of the claim for compensation, and other matters including some ancillary litigation. The arrangement with the plaintiff was that Go-Tell, Ian and Denise would be unable to pay accounts as they were rendered, but would whenever possible meet the disbursements which would necessarily be incurred, and that there would be no payment of fees until the successful completion of the claim, when there would be what Ms Vosjan described as a “success fee” payable in addition to the fees. However, Ms Vosjan said that in the event no success fee was charged. Ian instructed Ms Vosjan that he and Denise and Go-Tell had borrowed money from a number of institutions, but also from friends and family members and were concerned to see those people repaid. There were both secured and unsecured creditors.
It seems that Ellen, Philip, and Macedonian Call Nominees Pty Ltd (“Macedonian”), an investment company apparently controlled by Ellen, were among the unsecured creditors of Go-Tell. Ms Vosjan said in evidence that there was proof of a debt of $700,000 to Macedonian and that Philip claimed $300,000 of which there was no proof. Philip’s evidence was that he believed he was owed a substantial amount, and Ian’s evidence was consistent with all three being unsecured creditors.
By July 1995 the creditors were threatening to liquidate Go-Tell. At this stage Melbourne Parks was prepared to pay one million dollars for Blue Lake. The mortgagees of Blue Lake, that is, the secured creditors, would have accepted that amount, which would have satisfied their claims. However, that would have left nothing for the unsecured creditors, who were owed some $2.6 million. Ms Vosjan recommended that an administrator be appointed to Go-Tell, with a view to its entering into a deed of company arrangement.
Negotiations with Melbourne Parks were continuing, but Ian and Denise had not reimbursed the plaintiff for its disbursements. At this stage some $80,000 was outstanding in costs and $80,000 in disbursements (being counsel’s fees, valuers’ fees and the like) and it was estimated that a further $100,000 in costs and disbursements would be incurred. Ms Vosjan discussed the position with Mr Sholl, a director of the plaintiff. Mr Sholl said in evidence that his fellow director was not prepared for the plaintiff to act further in the matter unless some security was provided for the outstanding and estimated future costs. Both directors had mentioned this to Ms Vosjan. Ms Vosjan said that she explained to Ian that she had spoken to Mr Sholl and the plaintiff was not in a position to continue to act unless they were offered some security for costs; and that Ian said that he was sure his mother and brother would help with that.
On 14 August 1995 a meeting was held at which Ellen executed a deed (“the first deed”), reciting that Go-Tell, Ian and Denise were indebted to the plaintiff for $160,890.42 outstanding costs and disbursements, that it was estimated that further costs and disbursements in the vicinity of $100,000 would be incurred, that the plaintiff was not prepared to continue to act unless some security for payment was given, and that Ellen was related to Ian and Denise, was a creditor of Go-Tell, and desired the plaintiff to continue to act for Go-Tell, Ian and Denise. Clause 1 of the operative part of the first deed read:
In consideration of Sholl Nicholson refraining from bringing proceedings against Go-Tell, Ian Chapman and Denise Chapman to recover the outstanding costs and disbursements and agreeing to continue to act for Go-Tell, Ian Chapman and Denise Chapman, Ellen Chapman Hereby Acknowledges that she is personally liable to Sholl Nicholson for the outstanding costs and disbursements and the further costs and disbursements.
By clause 3, Ellen charged in favour of the plaintiff her interest in the property known as 771 Canterbury Road Surrey Hills (“Canterbury Road”), which was her home; and authorised the plaintiff to lodge a caveat over the title to Canterbury Road.
A similar deed was entered into by Philip in identical terms, save that he charged no property.
On 4 September 1995 an administrator was appointed to Go-Tell and on 28 November 1996 the dispute as to the compensation to be paid for the acquisition of Blue Lake was settled by the administrator and Melbourne Parks for $2,050,000 and $250,000 costs. This amount enabled payment out of the secured creditors of Go-Tell and substantial payments to its unsecured creditors. The plaintiff had continued to act for Go-Tell on the instructions of the administrator throughout 1997 but the retainer ceased before the administration was completed. The total costs and disbursements of the plaintiff in respect of the Blue Lake matter were just under $400,000. In early 1997 $200,000 was paid to the plaintiff from the $250,000 paid towards costs by Melbourne Parks (the remaining $50,000 being applied to the costs of the administrator), and the balance of just under $200,000 was paid by the administrator, so that all the outstanding costs and disbursements of the plaintiff in relation to Go-Tell and Melbourne Parks were paid.
Outline history – the second deed and surrounding events
After the appointment of the administrator the plaintiff continued to act for Ian and Denise in their capacity as directors of Go-Tell until late 1996 and to render accounts for work done for them. The amounts evidenced in those accounts as incurred between January 1996 and October 1996 have not been paid. The evidence of Ms Vosjan is that the amount of $50,005.87 shown in the second deed as owing to the plaintiff (see paragraph 19 below) was made up of some $38,000 costs and $11,000 interest.
On 4 September 1995 caveat number T851254T (“the plaintiff’s caveat”) was lodged by the plaintiff as chargee on the title to Canterbury Road, pursuant to the first deed. There were two encumbrances on that title which had been lodged ahead of the plaintiff’s caveat, namely:
a mortgage registered on 21 December 1990 (“the mortgage”) to O & D Nominees Pty Ltd; and
a caveat lodged on 25 February 1992 by four named individuals as chargees.
On 24 April 1998 Read Kelly, the solicitors for the mortgagee of Canterbury Road, gave notice to the plaintiff as caveator of their client’s intention to sell as mortgagee, Ellen being in default under the mortgage. Ian contacted Mr Gray, a finance broker, who entered into negotiations for the refinancing by a fresh lender of the debts secured on Canterbury Road. Mr Gray put it to the plaintiff that, given the amount of Ellen’s debts, secured and unsecured, and the amount which the lender was prepared to advance, if the plaintiff wanted to be paid promptly out of that advance, it would be necessary for it to accept a lesser sum than was due to it. This was ultimately agreed and on 31 July 1998 a deed (“the second deed”) was executed by Ellen and Philip.
The second deed recited that, by the two deeds executed on 14 August 1995, Ellen and Philip had accepted liability for the costs and disbursements of the plaintiff; and that Ian, Denise, Ellen and Philip were jointly and severally indebted to the plaintiff in the sum of $50,005.87. It provided that the plaintiff agreed to accept $40,000 in full settlement if that amount were received “by 26 June 1998 or a later date subject to its agreement”, and that in consideration thereof, Ian and Denise (for themselves and Go-Tell), as well as Ellen and Philip jointly and severally released Sholl Nicholson from all claims.
However, Mr Gray was unable to obtain the signature of Ellen to the documents required by the new lender within the time allowed by it. As a result, it was necessary to renegotiate the arrangement for refinancing and no payment was made to the plaintiff in terms of the second deed. The second deed was sealed by the plaintiff on 10 August 2001, during the course of the trial of this proceeding, but has never been executed by Ian or Denise.
On 10 August 1998 the plaintiff, as caveator, was notified by the Land Titles Office that Ellen had lodged an application for removal of the plaintiff’s caveat pursuant to section 89A of the Transfer of Land Act 1958, and that the caveat would lapse on 18 September 1998 unless the Registrar was notified that proceedings were on foot in a Court of competent jurisdiction to substantiate the claim of the caveator. The writ in this proceeding was issued on 17 September 1998 and on that date, having been notified accordingly, the Registrar indicated that no further action would be taken with Ellen’s application.
On 2 October 1998 the plaintiff, as caveator, was notified by the Land Titles Office of the lodging of a transfer V623948E of the mortgage over Canterbury Road from the current mortgagee to Lois Florence Lock and Jan Brix; and also of a transfer V623949B from Ellen to Philip of a half share in Ellen’s estate in fee simple in Canterbury Road (“the half share transfer”).
On 30 October 1998, at the instance of the plaintiff, Mr Justice Beach made an order restraining the Registrar from registering the half share transfer or removing the plaintiff’s caveat. That order was replaced by later orders, and the order now in force was made on 9 February 1999 and relevantly reads:
The Court Orders That: . . .
2.Until further order the Registrar of Titles not register dealing No V623949B nor take any step to remove caveat number T851254T from certificate of title volume 7021 folio 186.
No action was taken by the plaintiff in regard to the transfer of the mortgage, which appears to have been associated with the refinancing which was arranged by Mr Gray, and no doubt that dealing proceeded to registration.
The issue
In the statement of claim filed on 23 November 1998 the plaintiff seeks, in summary:
$51,454.42 under the first deed with statutory interest from 27 June 1998 until the date of judgement;
an injunction restraining Ellen and Philip from proceeding with the half share transfer in derogation of the plaintiff’s charge;
an injunction restraining the Registrar from registering the half share transfer; and
an order that Canterbury Road be sold out of court and the amount secured by the plaintiff’s charge be satisfied out of the proceeds of the sale.
The defendant’s case is that Ellen was induced to execute the first and second deeds by unconscionable conduct, undue influence and/or duress on the part of the plaintiff and accordingly that those deeds should be set aside. Other defences raised in the pleadings were abandoned and it is not necessary to consider them further.
Legal principles
There was little, if any, dispute between the parties as to the legal principles relevant to the establishment of the defence. The submissions of counsel were, by arrangement, put before the Court in written form. Counsel spoke to those submissions only briefly, and were generally concerned with the factual findings to be made on the evidence, rather than the law to be applied. The passages extracted below set out what in my view are the applicable legal principles.
Unconscionable conduct
As to unconscionable conduct, the leading case is Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, on which both counsel relied. In that case two elderly migrants who were unfamiliar with written English executed a mortgage and guarantee to secure the overdraft of a company controlled by their son. Mason, Wilson and Deane JJ, a majority of the High Court, found, in the words of Mason J at 467:
. . . if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A’s) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable.
Deane J said at 474-5:
The jurisdiction [of courts of equity to relieve against unconscionable dealing] is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that 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. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable:
. . .
Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogue[d]. In Blomley v Ryan (1956) 99 CLR at 405, Fullagar J listed some examples of such disability: “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”. As Fullagar J remarked, the common characteristic of such adverse circumstances “seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other”.
. . . Notwithstanding that adequate consideration may have moved from the stronger party, a transaction may be unfair, unreasonable and unjust from the view point of the party under the disability. An obvious instance of circumstances in which that may be so is the case where the benefit of the consideration does not move to the party under the disability but moves to some third party involved in the transaction. Thus, it is established that the jurisdiction extends, in an appropriate case, to relieve a guarantor of the burden of a guarantee of existing and future indebtedness.
His Honour went on to consider whether, in that case, the guarantors were, at the time they executed the mortgage and guarantee, under a relevant disability in dealing with the bank. He said at 475-6:
This question is best approached by a comparison of the relative positions of the bank on the one hand and [the guarantors] on the other.
Undue influence
“Undue influence” was defined by Hodges J in Union Bank of Australia Ltd v Whitelaw [1906] VR 711 at 720 in the following terms:
. . . equity recognises that persons possessed of the usual capacity to contract may, as a matter of fact, not be free agents, and may enter into obligations under the pressure of what it calls undue influence. “Influence”, as I understand the term in this connection, is the ascendancy acquired by one person over another. “Undue influence” is the improper use by the ascendant person of such ascendancy for the benefit of himself or someone else, so that the acts of the person influenced are not, in the fullest sense of the word, his free, voluntary acts.
In Johnson v Buttress (1936) 56 CLR 113 Latham CJ said at 119:
The jurisdiction of a court of equity to set aside gifts inter vivos which have been procured by undue influence is exercised where undue influence is proved as a fact, or where, undue influence being presumed from the relations existing between the parties, the presumption has not been rebutted. Where certain special relations exist undue influence is presumed in the case of such gifts. These relations include those of parent and child, guardian and ward, trustee and cestui que trust, solicitor and client, physician and patient and cases of religious influence. The relations mentioned, however, do not constitute an exhaustive list of the cases in which undue influence will be presumed from personal relations. Wherever the relation between donor and donee is such that the latter is in a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter, the presumption of undue influence is raised (Dent v. Bennet (1839) 4 My. & Cr. 269; 41 E.R. 105; see also Smith v. Kay (1859) 7 H.L.C. 750; 11 E.R. 299).
In the same case Dixon J (with whom Evatt J agreed) said at 134:
The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor's will or freedom of judgment in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the deliberate contrivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act. But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected. When they stand in such a relation, the party in the position of influence cannot maintain his beneficial title to property of substantial value made over to him by the other as a gift, unless he satisfies the court that he took no advantage of the donor, but that the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee. This burden is imposed upon one of the parties to certain well-known relations as soon as it appears that the relation existed and that he has obtained a substantial benefit from the other. A solicitor must thus justify the receipt of such a benefit from his client, a physician from his patient, a parent from his child, a guardian from his ward, and a man from the woman he has engaged to marry.
Duress
In Crescendo Management v Westpac (1988) 19 NSWLR 40 McHugh JA considered the authorities on the defence of economic duress. Samuels and Mahoney JJA, while agreeing with the ultimate finding of his Honour in the case before them, did not express a view on the conceptual basis of the defence. McHugh JA said at 45-46:
The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock. As his Lordship pointed out, the consequence is that the “consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind” (at 384). In the same case Lord Scarman declared (at 400) that the authorities show that there are two elements in the realm of duress: (a) pressure amounting to compulsion of the will of the victim and (b) the illegitimacy of the pressure exerted. “There must be pressure”, said Lord Scarman “the practical effect of which is compulsion or the absence of choice”
The reference in Universe Tankships Inc of Monrovia v International Transport Workers Federation and other cases to compulsion “of the will” of the victim is unfortunate. They appear to have overlooked that in Director of Public Prosecutions for Northern Ireland v Lynch [1975] AC 653, a case concerned with duress as a defence to a criminal proceeding, the House of Lords rejected the notion that duress is concerned with overbearing the will of the accused. The Law Lords were unanimous in coming to the conclusion, perhaps best expressed (at 695) in the speech of Lord Simon of Glaisdale “that duress is not inconsistent with act and will, the will being deflected, not destroyed”. Indeed, if the true basis of duress is that the will is overborne, a contract entered into under duress should be void. Yet the accepted doctrine is that the contract is merely voidable.
In my opinion the overbearing of the will theory of duress should be rejected. A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.
In their dissenting advice in Barton v Armstrong [1973] 2 NSWLR 598; [1976] AC 104, Lord Wilberforce and Lord Simon of Glaisdale pointed out (at 634; 121):
“… in life, including the life of commerce and finance, many acts are done under pressure, sometimes overwhelming pressure, so that one can say that the actor had no choice but to act. Absence of choice in this sense does not negate consent in law: for this the pressure must be one of a kind which the law does not regard as legitimate. Thus, out of the various means by which consent may be obtained — advice, persuasion, influence, inducement, representation, commercial pressure — the law has come to select some which it will not accept as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress or coercion.”
In Pao On v Lau Yiu Long [1980] AC 614, the Judicial Committee accepted (at 635) that the observations of Lord Wilberforce and Lord Simon in Barton v Armstrong were consistent with the majority judgment in that case and represented the law relating to duress.
It is unnecessary, however, for the victim to prove that the illegitimate pressure was the sole reason for him entering into the contract. It is sufficient that the illegitimate pressure was one of the reasons for the person entering into the agreement. Once the evidence establishes that the pressure exerted on the victim was illegitimate, the onus lies on the person applying the pressure to show that it made no contribution to the victim entering into the agreement: Barton v Armstrong (at 633; 120) per Lord Cross.
Submissions of the defendant: the first deed
The submission of Mr Robertson was that at the time of execution of the first deed:
·Ellen was in a position of special disadvantage vis à vis the plaintiff and this was known to the plaintiff who took unfair advantage of her position which constituted unconscionable conduct;
·the plaintiff had acquired an ascendancy over Ellen and made improper use of that ascendancy amounting to the exercise of undue influence; and
·the plaintiff employed illegitimate pressure amounting to duress to obtain Ellen’s execution of the deed.
In his written submissions Mr Robertson listed the following factors as indicative of that position:
As to unconscionable conduct, the following matters were known to the plaintiff:
(i)Ellen was at that time 82 years old, had been suffering from cancer for three years and had been widowed two years previously;
(ii)she was emotionally attached to Blue Lake;
(iii)she was under severe financial pressure due to the sale of various properties in order to assist and fund loans to Go-Tell and/or Ian and his interests;
(iv)she had little if any knowledge of the affairs of Go-Tell, Ian and Denise and/or the Blue Lake matter;
(v)she was inexperienced in relation to matters connected with the Blue Lake matter;
(vi)she was inexperienced in relation to the terms and subject matter of the first deed;
(vii)she lacked sufficient understanding of the meaning and effect of the terms of the first deed;
and the plaintiff took advantage of those matters in that:
(viii)the meaning and effect of the first deed were not explained to her properly or at all;
(ix)she was not afforded any or any adequate opportunity to read and consider the first deed prior to executing it;
(x)she was not afforded any or any adequate opportunity to obtain independent advice in relation to the first deed prior to executing it;
(xi)she was, on arrival at the office of the plaintiff on 14 August 1995, presented with the first deed and asked to sign it by Ms Head, the plaintiff’s agent or employee;
(xii)she was told by Ms Head that the first deed was “just a standard agreement to ensure that the plaintiff was paid out of the proceeds of sale of the Blue Lake property”;
(xiii)it was represented to her by Ms Head that the plaintiff’s fees would be paid out of the proceeds of sale of the Blue Lake property; and
(xiv)finally, that she was at the time of arrival and whilst these matters were explained and prior to executing the first deed, visibly upset, emotionally distressed and confused.
As to undue influence:
(xv)the plaintiff was in a position of ascendancy over Ellen in that it acted for Go-Tell, Ian and Denise with whom she had an association or to whom she was related;
(xvi)she was a creditor of Go-Tell;
(xvii)she had a financial interest in the outcome of the Blue Lake matter;
(xviii)she was not independently represented or advised;
(xix)she had no independent means or knowledge with which to ascertain or confirm the accuracy of the indebtedness represented by the plaintiff in the first deed; and
(xx)she relied upon the advice, information and representations provided by the plaintiff.
As to duress:
(xxi)she was told by Ms Head that if the first deed was not signed then and there, the plaintiff would cease to act for Go-Tell, Ian and Denise and therefore would not meet with the Minister for Planning in relation to the Blue Lake matter the next day.
All of those matters are relied on in relation to each ground, some with more emphasis than others in the context of a particular ground.
The meeting on 14 August 1995: the execution of the first deed
Evidence as to the meeting on 14 August 1995 was given for the plaintiff by Mr Sholl and Ms Vosjan, and for the defendant by Philip, Denise and Ian. There is considerable conflict in the evidence, some of which is no doubt attributable to the lapse of six years between the meeting and the trial of the proceeding.
Ms Vosjan was until 30 June 1995 an employee of the plaintiff but since 1 July 1995 has been a consultant. She agreed under cross-examination that as a consultant to the plaintiff at the time of the meeting of 14 August 1995, she had a personal financial interest in this proceeding. The consultancy arrangement involved her paying a license fee to the plaintiff including a payment for the use of the plaintiff’s support staff. Fees paid by clients for work performed by her on or after 1 July 1995 would be paid to the plaintiff directly and then remitted in full to her. All of the work done on or after that date relating to the Blue Lake matter and to the Chapmans was performed by her, save for six hours performed by Mr Lasky, who was then an employee of the plaintiff, and for whose services the plaintiff was paid. Thus, in so far as the claim of the plaintiff relates to fees for work done on or after 1 July 1995, it is, in effect, the claim of Ms Vosjan. She agreed that she had not told any of the Chapman family of this.
It is not in issue that Ms Vosjan ran the meeting, but there is conflict in the evidence as to who was present. Mr Sholl said that he was there throughout, and this was confirmed by Ms Vosjan. He said that the other persons present were Ellen, Philip and Ian; and that the meeting started at around eleven and finished after lunch, because they had to wait for his fellow director to return from lunch and attest the affixation of the seal of the plaintiff.
Mr Sholl said that he had had no involvement in the file, and the matter had been run by Ms Vosjan from when it came to the office. She was a very experienced commercial litigator and did not need to be supervised. Mr Sholl was asked why, if that was the case, he had found it necessary to attend the meeting, and he said that it was because he and his fellow director were concerned about the need to obtain security for the outstanding costs and disbursements already incurred, amounting to over $160,000. He was there to ensure that the meeting went ahead and everything was to the satisfaction of his fellow director and himself.
Ms Vosjan’s file note of the meeting does not mention Mr Sholl’s presence, but her evidence was that he was present. Philip said that he only appeared at the end of the meeting when documents were being executed, as did Ian and Denise.
The evidence of Mr Sholl as to what occurred at the meeting is largely corroborative of the evidence of Ms Vosjan, and it is for this reason that it is necessary to reach a finding as to whether he was present throughout the meeting. On balance, I think the more probable conclusion is, despite the lack of reference to him in the file note, that he was present, but because he took no part in the discussion, the Chapmans in retrospect overlooked his presence and confused him with the fellow director who came in near the end of the meeting to attest the affixation of the seal of the plaintiff to the first deed. I note that the seal is attested by Leon Sholl and David Nicholson. None of the Chapmans made any reference to the presence of Mr Nicholson at any stage of the meeting. Mr Sholl was understandably concerned to obtain security for the outstanding costs and disbursements incurred since April 1993, by far the greater part of which would have been incurred before 1 July 1995 and would thus be owing to the plaintiff itself, not to Ms Vosjan.
Mr Sholl said that Denise was not present at the meeting on 14 August 1995, and so did Ms Vosjan. Ms Vosjan described a meeting on 4 September 1995 at which the directors of Go-Tell, that is, Ian and Denise, were present and the appointment of an administrator was discussed. She said that “in this time period”, an expression which was undefined, that was the only meeting Denise attended. Philip said that Denise was present on 14 August, as did Ian.
Denise herself said that she was present at the meeting. She said that she had been to three or four meetings at the office of the plaintiff, but she had been told that there was only one meeting at that office at which Ellen had been present, namely the meeting on 14 August 1995. That statement was not contradicted by any other witness. She distinctly remembered Ellen at a meeting which she had attended at the office of the plaintiff, and explained that she remembered what clothes Ellen had worn at that meeting, and what she had thought at the time about those clothes. Her recollection on matters connected with her presence at the meeting was in that and other ways entirely specific and credible, and I regard her as a witness of truth. I find that she was present throughout the meeting; it would seem from her evidence that she took little if any part in the discussion, and it may be that, as with Mr Sholl, her presence was, in retrospect six years later, forgotten by some who were there.
I now turn to consider the evidence relating to the matters listed as (i) to (xxi) in paragraph 33 above as establishing a defence in respect of the first deed.
Items (i) to (vii) and (xiv)
It does not appear to be in issue that, as set out in item (i), at the time of the meeting on 14 August 1995, Ellen was 82 years old, had been suffering from cancer for three years and had been widowed two years previously. Both Mr Sholl and Ms Vosjan said that they thought at the time that she was in her seventies. Both said that they had no knowledge of her illness. Ms Vosjan knew that she was a widow, but thought that her widowhood dated from 1989. Mr Sholl did not know that it was recent. Philip said that “everyone knew” that she had cancer; and that at one time, unspecified, she had worn a wig as a result of the chemotherapy, but that he could not tell the difference between her own hair and a wig. She was under medication at the time of the meeting. Ian and Philip both said that a tumour on the side of her face was visible at the time.
No medical evidence was tendered; Mr Robertson mentioned medical reports among the discovered documents but did not place them before the Court. However, the issue as to this item is not whether Ellen was ill, but whether her illness was known to the plaintiff at the time of the meeting.
It is convenient to consider item (xiv) at this stage. Philip was asked whether Ellen exhibited any signs of distress or concern at the meeting, and said more than once that “she was very stressed”, but said nothing as to whether this was apparent.
Ian said that his mother was approaching tears in the latter part of the meeting, but no other witness said anything of the kind. I did not find Ian to be a credible witness. He consistently failed to answer the questions put to him, but rather would, until directed to answer the question, rehearse at length, fluently and obsessively, old grievances as to matters arising from the acquisition of Blue Lake which had no relevance to this proceeding. It appeared to be impossible for him to do otherwise. I could not accept Ian’s unsubstantiated evidence on any matter of significance.
Ms Vosjan expressly denied that Ellen was “distraught and close to tears” or that she was distressed, confused or upset, anxious or fearful. She said that Ellen was happy to execute the first deed, and was gracious and appreciative. She was well groomed and presented as fit and healthy. Mr Sholl said that she “looked pretty well” and was relieved, happy and grateful. I cannot find item (xiv) to be established.
As to item (i), I find that, while Mr Sholl and Ms Vosjan were aware that Ellen was elderly and widowed, they were not aware of her illness, or of her being under stress.
As to item (ii), there is no evidence whatsoever to suggest that Ellen was emotionally attached to Blue Lake.
As to item (iii), Mr Sholl and Ms Vosjan both said that they had no knowledge that Ellen was under severe financial pressure, and there is no evidence on which I could find that they had any such knowledge. She was not a client of the plaintiff. The first deed included a recital to the effect that Ellen desired the plaintiff to continue to act for Go-Tell, Ian and Denise (see paragraph 13 above), but she had no other connection with the plaintiff, and there was no reason why the plaintiff should have been aware of her financial position, save that she was a creditor of Go-Tell.
As to items (iv) to (vii), there is no evidence to establish that Ellen lacked knowledge or experience or understanding of these matters, and thus it cannot be said that the plaintiff was aware of any such lack of knowledge on her part. I note the evidence of Philip that until Ellen became ill she “was interested in the day to day proceedings” relating to Go-Tell and Blue Lake, although she would not have understood the technical matters relating to the zoning of the Blue Lake property. Ms Vosjan said that Ian had told her that Ellen was more than happy to offer security for the plaintiff’s costs, and wanted the plaintiff to continue to act for Go-Tell. That evidence was put as evidence of what was said rather than evidence of its truth, but is relevant to the issue of what was known to the plaintiff about Ellen’s understanding of the terms of the first deed. Ian’s evidence was that he had told Ms Vosjan that Ellen and Philip “would be open to any reasonable request”.
Items (viii) to (xiii)
The establishment of items (viii) to (xiii) relies on the evidence of what occurred at the meeting. Item (xxi) also relates to the meeting, but is for convenience considered separately at paragraphs 64 and following below. It is to be remembered that the reason for the attendance at the meeting of Ellen and Philip, so far as the plaintiff was concerned, was to provide security for the plaintiff’s costs and disbursements which had been incurred by Go-Tell, Ian and Denise. Ellen and Philip attended the meeting at the request of Ian.
The evidence of Philip is that Ian rang him in the mid morning of 14 August 1995, and asked him to bring Ellen to a meeting at the office of the plaintiff that morning. He had been working as a design engineer in Indonesia or Malaysia, had returned a few days before, and had not spoken to Ian since returning. He had not heard that the plaintiff needed money in order to take the Blue Lake matter further. In cross-examination Philip said that it was because his mother was ill that he had “come back from Indonesia to attend this meeting”. He later expressly denied this and said that at that time he was coming back every month because he was on 30 day work permits. It was put to him still later that Ian had rung him and asked him to come home in order to provide security for the plaintiff’s costs. In reply he said that this was not the case, and that he had come back “because it was my scheduled leave”. There are thus three inconsistent statements by Philip as to the reason why he had returned to Australia at the time of the meeting on 14 August.
Ian’s evidence on this point was equivocal. He said that Ms Vosjan had indicated that she needed some security for the legal costs, that he would have told Ellen and Philip that there was a need to come to a meeting in the plaintiff’s office, that he might well have said to them that the matter of legal costs was going to be raised, and that their support in some way would be raised, but that he had not wished to pre-empt anything that Ms Vosjan was going to say.
There is no other evidence relating to the question of whether Ian had made Ellen and Philip aware before attending the meeting that the purpose of that meeting was to arrange for them to give security for the costs and disbursements. However, if it was the case, which seems unlikely, that Ellen and Philip were not aware of that purpose, there is no evidence that either Mr Sholl or Ms Vosjan realised that they were not so aware. It would have been reasonable for Mr Sholl and Ms Vosjan to assume that Ian had explained to his mother and his brother that they were being asked to attend the meeting for that purpose. In any case, the inconsistencies, set out in the previous paragraph, in Philip’s evidence as to the reason for his return to Australia, cast doubt on his claim that he and Ellen were unaware of the purpose of the meeting.
The evidence of Ms Vosjan is that at the meeting she gave an overview of the Blue Lake situation, explained the problem with the mortgagees (see paragraph 11 above) and recommended that an administrator be appointed to Go-Tell. She said that she had prepared multiple copies of a discussion paper setting out several possible scenarios to do with the compromise of debts owing to Ellen and Philip and other unsecured creditors, and that she read through and spoke to that document, with copies for all present.
Ms Vosjan said that she raised the question of security for the costs and that Ellen and Philip had said that they had offered security in the past and were happy to do so again and wanted to see the Blue Lake matter through to its conclusion. She told them that they should feel free to obtain independent legal advice before signing the document, and they said that this was not necessary. She had prepared three documents, the first deed, the deed for execution by Philip (see paragraph 14 above) and a similar deed for execution by Macedonian (the company referred to in paragraph 10 above). She had prepared multiple copies for all present, and she read through each line of the first deed and explained it, outlining what Ellen would have to pay by way of costs in best and worse case scenarios. She said that Ellen said that she would sign the first deed and did so. The Chapmans were very gracious and appreciative. The mood of the meeting was buoyant. Ellen agreed with Ian that she had been closely monitoring progress in relation to Blue Lake. Ian said that he had lost the company seal of Macedonian and he took away the deed for execution by Macedonian. However, in the event it was never executed or returned. Ms Vosjan denied having said that the first deed was just a standard agreement to ensure that the plaintiff was paid out of the proceeds of Blue Lake. Mr Sholl’s evidence was consistent with that of Ms Vosjan.
Philip swore an affidavit in this proceeding on 16 June 2000 in support of an application (which was successful) to set aside a default judgment obtained against him on 21 May 1999. In that affidavit he deposed that at the meeting of 14 August 1995, after informing those present about the state of the negotiations with Melbourne Parks, Ms Vosjan produced some documents and said that they were a standard agreement to ensure that the plaintiff was paid out of the proceeds of sale [scilicet of Blue Lake]. He asked whether they had to sign the documents then, and she replied to the effect “You don’t have any option. If you’re not willing to sign, I won’t be seeing the Minister tomorrow”. He told his mother that they had no option but to sign, but that the monies would be paid out of the proceeds. Ms Vosjan handed a document to him, folded in such a way that he only saw the second page, which he signed. The same thing happened with his mother’s document. He was not given any opportunity to read the document before signing, and believed that the same applied to his mother. Ms Vosjan did not explain the content or effect of the document.
Philip gave oral evidence consistent with the contents of the affidavit. He said that no further explanation of the documents which he and his mother signed was given other than what was set out in the affidavit. It was not suggested that he and his mother should consult another solicitor. Nothing was said about lodging a caveat on the title to Canterbury Road. The documents were not read out. He and his mother were stressed because they were likely to be thrown out of the house in Canterbury Road. He said, “We had to get a settlement before, or get this meeting to go ahead the following day, otherwise the house would have gone.”
The basis for the last statement is not clear. The demands of the mortgagee over Canterbury Road came to a head in 1998 and are relevant to the question of the second deed (see paragraph 18 above). It appears that the point being made by Philip was that he and Ellen were concerned that if the plaintiff did not continue to act for Go-Tell, the amount obtained for Blue Lake would be insufficient to enable Go-Tell to pay its unsecured creditors, including Ellen and Philip, and thus Ellen would be unable to meet the payments to the mortgagee of Canterbury Road, which would then exercise its power of sale. However, Philip’s evidence was that by August 1998 he had been servicing that loan for “quite some time” and that by that date any default would have been only for “a small amount”. There is no detailed evidence as to the situation with regard to that mortgage in August 1995. If being “thrown out of the house” by the mortgagee was imminent, nothing done by the plaintiff was likely in the short term to produce funds which would change that situation. It may be that in giving his evidence Philip was confusing the position in August 1995 with the position in July 1998. There is no reference in the affidavit cited in paragraph 58 above to the likelihood, in August 1995, of being “thrown out of” Canterbury Road. I also note Philip’s evidence set out in paragraph 53 above that he had not come home because of any concern about a forced sale of Canterbury Road. I conclude that in his evidence on this point Philip was gilding the lily.
Philip was shown a copy from the court book of the discussion paper referred to in paragraph 56 which Ms Vosjan said that she had read out, spoken to and distributed at the meeting. He said that he had never seen it before. It was put to him that the court book had been sent to his solicitors in November 1999 and he was asked whether he had read the court book in anticipation of the trial. He reiterated several times that he had never seen the document before. It would be difficult to understand how solicitors or counsel could have acted for Philip in this proceeding without showing him that document.
The evidence of Denise, save as to the issue of her own presence at the meeting, was extremely brief. However, she said that at the meeting there were documents which Ms Vosjan was showing and explaining to Philip and Ellen. She said that much of her recollection of the meeting was affected by subsequent discussions.
Ian said more than once that in addition to the documents produced by Ms Vosjan at the meeting and signed by his mother and brother, similar documents were produced and signed by himself and Denise. However, no copies of any such documents were put before the Court by either party, and this evidence would appear to be a fabrication. He said that Ms Vosjan had outlined the position in regard to Blue Lake, and had then said that unless the deeds were executed there would be no meeting with the Minister the next day. He volunteered that the contents of the deeds were a surprise; that “we” (undefined) had not known what kind of request was going to be made. This seems unlikely in view of his other evidence (see paragraph 54 above).
Item (xxi)
Philip said that the matter which made him consider it urgent to sign the deed on 14 August was a threat by Ms Vosjan that if he and Ellen did not sign she would not attend the meeting with the Minister for Planning to be held the next day. In saying this, Ms Vosjan had raised her voice and became heated. He said that that threat was the only reason why he signed the deed. The reason why Philip executed the deed is, of course, not relevant for present purposes. However, his evidence (see paragraph 58 above) was that, having been convinced for this reason to sign the deed himself, he told his mother that she had no option but to do so and she signed the deed. Thus, if his evidence is accepted, it could be said that Ellen executed the deed as a result of the statement said to have been made by Ms Vosjan. The defendant’s case thus puts considerable emphasis on the issue as to the meeting with the Minister, what was said about it and why it was important.
Ms Vosjan said that Ian had already had one meeting with the Minister on 31 July 1995 and the Minister had indicated that he would be happy to meet with Go-Tell’s lawyers. Mr Garde QC had advised that there would be no harm in approaching the Minister to discuss the possibility of improving the underlying zoning of the Blue Lake property. A meeting was arranged for 23 August, which was subsequently adjourned to 11 September at the instance of the Minister. As at the date of the meeting on 14 August, however, the scheduled date for that meeting with the Minister was 23 August. No such meeting had ever been arranged for 15 August. She said that in the course of giving an overview of the situation with regard to Blue Lake at the meeting on 14 August she mentioned the meeting arranged for 23 August and its purpose. In her affidavit in reply to Philip’s affidavit cited in paragraph 58 above she described Philip’s evidence as to what occurred at the meeting as “a blatant fabrication”. The issue is whether Ms Vosjan said that if the deeds were not executed she would not attend that meeting with the Minister the next day. She was not asked directly whether she had in fact said anything of that kind.
Mr Sholl was not asked about anything said as to the meeting with the Minister.
Denise said that Ms Vosjan had said that if certain documents were not signed that day there would be no meeting with the Minister the next day. Ian had told her the day before the meeting on 14 August that that meeting had been arranged. I have said that I regard Denise as a witness of truth; but I have already noted in paragraph 62 above her evidence that much of her recollection of the meeting was affected by subsequent discussions.
Ian confirmed Philip’s evidence that Ms Vosjan had stated that if the deeds were not executed that day she would not attend the meeting with the Minister the next day. I have set out in paragraph 46 above my view of Ian’s credibility.
It is not in issue that a meeting with the Minister had been arranged and subsequently took place. Neither party produced evidence from the Minister’s office as to the arranged or actual date of the meeting. Ian was asked whether he had made enquiries of the Minister’s office on this point, and answered that he had done so, but that he did not recall the reply. Asked again, he said “I may well have that information. I may well discover that”, but nothing further was produced. That question was not put to Ms Vosjan.
It was put to Philip that he did not enquire of Ms Vosjan as to what had happened at the meeting with the Minister, and he said that he left all that to Ian. It was put to Ian that he would have been keen to speak with Ms Vosjan on 15 August to find out what had happened and he said that he believed that he would have rung her that day or she would have rung him, but he could not recall the details of that conversation. Given the importance placed by the defence on the question as to the date arranged for the meeting, that evidence is surprising.
The defence filed in this matter on 19 February 1999, which does not appear to have been prepared by a solicitor, makes no reference to this issue. It is relied on, however, in the amended defence filed by the solicitors for the defendant on 31 August 2000.
It is relevant here to refer to the unchallenged evidence of Ms Vosjan set out in paragraph 12 above, that she had told Ian that the plaintiff could not continue to act for the Chapmans and Go-Tell unless security was provided for the outstanding and future costs, and the evidence of Mr Sholl on that issue set out in paragraphs 12 and 37 above.
It seems to me highly probable, in all the circumstances, that at the meeting Ms Vosjan said something to the effect that if the deeds were not executed the plaintiff would not be able to continue to act for Go-Tell, Ian and Denise; and that one result of that would be that the meeting arranged with the Minister (which was to be a meeting with legal advisers, that is, with herself and Mr Garde QC) would not go ahead. The evidence before the Court concentrated on the question of whether or not the meeting had been arranged for the next day, 15 August, albeit that dispute was conducted only on the basis, on both sides, of assertion and counter-assertion, with no independent evidence from the Minister’s office. The question of the date proposed for the meeting does not appear to me to be significant in the overall scheme. If the meeting had been organised for nine days ahead, as is the evidence of Ms Vosjan, a statement to the effect that if the deeds were not signed the meeting would not take place would still have carried with it a degree of urgency as to the need to execute the deeds.
However, even if it were established that Ms Vosjan made the statement attributed to her by the defence, I would not regard that as amounting to illegitimate pressure so as to constitute duress in terms of the manner in which that expression was considered in the passage from Barton v Armstrong cited in paragraph 31 above.
It will be apparent from the foregoing that I prefer the evidence of the plaintiff’s witnesses to that of the defendant’s witnesses as to what took place at the meeting, save that I accept the evidence of Denise as to documents, which is set out in paragraph 62 above. That being so, I find items (viii) to (xii) and (xxi) are not established. As to item (xiii), it may well have been the general expectation at the time that the fees would ultimately be paid out of the proceeds of sale of Blue Lake; but it should have been apparent that there could be no certainty on that point.
Items (xv) to (xx)
It is not in issue that the plaintiff acted for Go-Tell, Ian and Denise, or that Ellen was through Macedonian a creditor of Go-Tell and thus that she had a financial interest in the outcome of the Blue Lake matter (items (xv), (xvi) and (xvii)). However, none of those facts establishes that the plaintiff was in a position of ascendancy over Ellen in terms of the authorities cited in paragraphs 28 to 30 above. Nor does the evidence establish any of the relationships giving rise to a presumption of undue influence.
I have accepted the evidence of Ms Vosjan and Mr Sholl that Ellen was offered the opportunity to obtain independent legal advice (item (xviii)). There is no evidence that she had no independent means or knowledge with which to ascertain or confirm the accuracy of the indebtedness represented by the plaintiff in the first deed (item (xix)). In any case she was accompanied at the meeting by her two sons, one of whom was one of the relevant debtors, and by her daughter-in-law, who was another. There is no evidence that she relied to any relevant extent upon the advice, information and representations provided by the plaintiff (item (xx)). Indeed, the emphasis in the case for the defendant is that she executed the deed because of the advice given to her by Philip that she had no option but to do so, because of the threat that Ms Vosjan would not attend a meeting with the Minister the next day, a matter with which I have already dealt. I cannot be satisfied that the execution of the first deed was the outcome of such an actual influence over Ellen’s mind that it could not be considered her free act.
Conclusion
For the reasons set out in paragraphs 33-77 above the submissions of Mr Robertson set out in paragraph 32 must fail. That being so, there is no ground on which to set aside the first deed. The estate of Ellen is thus liable, by virtue of the first deed, for the costs of Ian and Denise referred to in paragraph 16 above. There will be judgment for the plaintiff. I invite submissions from counsel as to the orders to be made.
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