United Retail Group Pty Ltd v Barbara Bogdan
[2017] VCC 382
•7 April 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI- 15-02907
| UNITED RETAIL GROUP PTY LTD | Plaintiff |
| v | |
| BARBARA BOGDAN | Defendant |
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JUDGE: | Judge Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 April 2017 | |
DATE OF JUDGMENT: | 7 April 2017 | |
CASE MAY BE CITED AS: | United Retail Group Pty Ltd v Barbara Bogdan | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 382 | |
REASONS FOR JUDGMENT
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Subject: PRACTICE AND PROCEDURE
Catchwords: PRACTICE AND PROCEDURE – defendant a person under a disability – application for approval of settlement involving person under a disability – approval of settlement by trial judge under Order 15
Legislation Cited: County Court Civil Procedure Rules 2008 (Vic), Instruments Act 1958 (Vic)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D McAloon | Coulter Roache |
| For the Defendant | Mr D Harrison | Abernethy Dowd & Ryan |
HIS HONOUR:
Issue
1 This case concerns whether the plaintiff (“United Retail”) is entitled to the benefit of a guarantee and charge over the property at 39 Edward Street, Shepparton (“the property”) such that it can take possession of, and sell, the property in order to reduce a debt arising from the supply of goods and services to companies associated with the defendant’s son. The case has settled. However, because the defendant (“Mrs Bogdan”) is a person under a disability as contemplated by Order 15 of the County Court Civil Procedure Rules 2008 (Vic), the settlement will be effective only if it is approved by the court.
Background
2 Mrs Bogdan is 94 years old and will turn 95 on 1 May. She was widowed in 1992. Her doctor, Bassam Jallo of Delta Medical Centre, High Street, Shepparton, advised the court by letter dated 30 March 2017 that Mrs Bogdan has medical conditions including osteoporosis, hearing loss, multiple fractures and heart failure. He said that she was unfit to travel to Melbourne for the trial.
3 After the action commenced Mr Bogdan’s solicitor, Daniel Ryan of Abernethy Dowd & Ryan, visited Mrs Bogdan several times in connection with the proceeding. By affidavit sworn 25 November 2015, Mr Ryan said he was satisfied that, initially when he visited, Mrs Bogdan had sufficient understanding of:
(a) the subject matter of the proceeding to provide instructions for her defence; and
(b) her obligations to the court to act honestly and on a proper basis in connection with the proceeding.
4 Mr Ryan said that, in his view, it had become apparent subsequently that Mrs Bogdan’s age and physical infirmity were making her incapable of managing her affairs in relation to the proceeding. Mr Ryan said that he considered it was appropriate for a litigation guardian to be appointed for the defendant in the proceeding. While generally it is preferable that a family member be appointed as litigation guardian, Mr Ryan suggested that, in this case, it was not appropriate that her son John, her daughter in law Judith, or her grandson Mark be appointed because they were all involved in the transport business which gave rise to the claim by United Retail against Mrs Bogdan. Mr Ryan expressed a willingness to be appointed litigation guardian for Mrs Bogdan and swore he had no interest in the proceeding adverse to that of the defendant. Accordingly, on 16 January 2016 Mr Ryan was appointed litigation guardian for Mrs Bogdan.
Nature of the Claim
5 Mrs Bogdan is the registered proprietor of the property. Both before and after March 2010, United Retail traded as Riordan Fuels and supplied goods and services to JFB Transport (Shepp) Pty Ltd (“JFB Transport”) on credit and maintained and operated an account in relation to its trading relationship with that company.
6 In March 2010 United Retail, JFB Transport, Mrs Bogdan, John Bogdan and Mark Bogdan entered into a loan and credit agreement. Under the terms of the agreement, United Retail lent to JFB Transport $250,000. As part of the agreement John and Mark acknowledged and agreed that United Retail could have a first ranking mortgage over the property to secure the indebtedness of JFB Transport to United Retail. Mrs Bogdan also guaranteed the due and punctual performance of the obligations of JFB Transport under the agreement and agreed to accept personal responsibility for the company’s obligations under the agreement.
7 Mrs Bogdan did not herself sign any contractual documents. Rather, John used an Enduring Power of Attorney dated 18 June 2004 (“the Power of Attorney”) to sign the guarantee for his mother. John was made bankrupt on 30 June 2009 and Mrs Bogdan argued that by reason of section 125O of the Instruments Act 1958 (Vic), the Power of Attorney was revoked on John becoming bankrupt. Thus, she argued, the Power of Attorney was of no effect. She also contended that the Power of Attorney was invalid or inoperative because:
· the Power of Attorney could not lawfully be used to enable John to deal with his mother’s property for his own benefit – it was to enable him to act in the management of her affairs;
· United Retail knew, or should have known, that John was bankrupt and/or that John was not using the Power of Attorney as it was intended to be used – it was not being used for an authorised purpose regarding the management of his mother’s affairs.
8 During the course of the relationship between United Retail and JFB Transport, the latter defaulted upon its obligations under the March 2010 agreement and failed to make payments owing to United Retail. At the time the writ was issued in June 2015, United Retail claimed the amount outstanding was approximately $2.16 million.
9 In the period before November 2011 United Retail supplied goods and services to GV Logistics Pty Ltd (“GV Logistics”) on credit and maintained and operated an account with GV Logistics in respect of its trading relationship with that company.
10 On about 16 November 2011, United Retail entered a loan agreement with GV Logistics whereby the latter borrowed $750,000 and agreed to a timetable for the repayment of the loan. GV Logistics, John and Mark agreed that United Retail should have a first ranking mortgage over the property to secure the principal sum and the trading account.
11 Also, Mrs Bogdan unconditionally guaranteed the due and punctual performance by GV Logistics of its obligations under that agreement and agreed to become personally liable for the performance of those obligations by GV Logistics.
12 Again, Mrs Bogdan herself did not sign any documentation. Rather, John used the Power of Attorney to sign the applicable documents on behalf of his mother.
13 Mrs Bogdan contended that the Power of Attorney was inoperative and of no effect in the context for the same reasons as those alleged in respect of the obligations of JFB Transport to United Retail.
Compromise
14 On 31 March 2017, the parties entered into written terms of settlement which take effect subject to the court’s approval of the compromise. As deposed to by Mr Ryan, the terms of settlement provide in essence that:
(a) the plaintiff within a specified time pay $5,000 to the solicitors for the defendant to be disbursed or retained by them in payment of costs incurred by Mrs Bogdan in connection with this litigation;
(b) the plaintiff’s proceeding be otherwise dismissed with no order as to costs;
(c) the plaintiff withdraw or provide notices of withdrawal in relation to two caveats it has over the property;
(d) the plaintiff deliver up to Mrs Bogdan any executed mortgages given over the property in its favour and the duplicate certificate of title of the property.
In short, United Retail abandoned its claim against Mrs Bogdan and paid her $5,000 towards the costs of this litigation.
Legal Principles
15 Before the court approves the compromise of a claim to which a person under a disability is party, it must be satisfied that the compromise will benefit that person. The major consideration is the extent of the risk that, if the litigation proceeded to judgment, the outcome would be less favourable than what is offered in the proposed compromise. The court will hesitate to withhold its approval where that risk is not insignificant. Courts often attach weight to the opinions of the person’s legal advisors and in some cases the litigation guardian.
Application of Legal Principles
16 Mr Ryan has sworn in an affidavit that, in his opinion, the compromise is for the benefit of Mrs Bogdan. Mr Ryan has quite properly advised the court that due to the quantum of the settlement and time constraints between the making of the settlement and the beginning of the trial, he did not obtain an opinion from an independent lawyer about the benefit of the compromise. While it is not a requirement of the Rules of Court to obtain an independent opinion, it is common practice. However, it seems to me that it is but one factor to take into account in deciding whether or not to approve the compromise.
17 During the hearing I asked Mr Harrison, Counsel for Mrs Bogdan, if there were, in his view, any disadvantages to Mrs Bogdan if the court approved the compromise. He said that if the defence succeeded, Mrs Bogdan might hope to obtain an order for costs of the proceeding to be taxed on an indemnity basis due to the weakness of the plaintiff’s case. To that extent, Mrs Bogdan might be worse off if the court approved the compromise.
18 Although I accept Mr Ryan’s advice that Mrs Bogdan has incurred legal costs and disbursements in excess of $5,000 I consider that, more broadly, the settlement is for Mrs Bogdan’s benefit and should be approved. I reach this conclusion for several reasons.
19 First, the plaintiff’s claim is for $280,000. This is a substantial sum, being United Retail’s assessment of the value of the property at the time it issued proceedings. Mr Ryan believes the property has probably risen in value since then.
20 Secondly, there will be substantial costs and expenses incurred in running the trial to judgment.
21 Thirdly, the outcome is uncertain but is potentially very detrimental to Mrs Bogdan.
22 Fourthly, for United Retail to abandon its claim is a substantial benefit. The cessation of the litigation means that Mrs Bogdan will incur no further costs, will face no more uncertainty about the outcome of the action, and need not worry about the fate of the property.
23 I consider that I do not have to require an independent legal opinion about the proposed compromise. I accept Mr Ryan’s evidence that there was limited time available to obtain a written advice. In my view, there is a major difference between the approval of, for example, a claim by an injured child for substantial personal injuries, and this case, where the person under a disability is the defendant and the claim is against them. The abandonment of the trial is a substantial benefit and Mrs Bogdan will recover some costs. It would be extremely unwise for Mrs Bogdan to proceed with the litigation primarily in the hope of recovering more of her costs.
Conclusion
24 In conclusion, I approve the compromise reached between United Retail and Mrs Bogdan and will make orders largely in the terms agreed by the parties.
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