Van Doore (BY His Tutor the Protective Commissioner) v Mendez

In *Van Doore (by his Tutor the Protective Commissioner) v Mendez*, the New South Wales Court of Appeal considered an appeal concerning the enforceability of a settlement agreement reached in earlier proceedings. The appellant, Mr. Van Doore, who was under a guardianship order due to his mental incapacity, had entered into a settlement with the respondents, Mr. and Mrs. Mendez, in relation to a dispute over a property transaction. The Protective Commissioner, acting as Mr. Van Doore's tutor, sought to have the settlement set aside, alleging that Mr. Van Doore lacked the requisite capacity to enter into such an agreement at the time it was made.

The central legal issue before the Court of Appeal was whether the settlement agreement was valid and binding, notwithstanding Mr. Van Doore's admitted mental incapacity at the time of its execution. This required the court to determine the test for contractual capacity in the context of a settlement agreement, particularly when one party is under a guardianship order. The court also had to consider the principles governing the setting aside of such agreements, including whether the respondents were aware of Mr. Van Doore's lack of capacity and whether the agreement was fair and reasonable.

The Court of Appeal affirmed the principles that a person lacking contractual capacity may still be bound by a contract if it is fair and reasonable and the other party is unaware of the incapacity. However, the court found that the evidence did not establish that the respondents were unaware of Mr. Van Doore's condition. Furthermore, the court concluded that the settlement agreement was not fair and reasonable in the circumstances, particularly given the significant disadvantage Mr. Van Doore suffered. The court held that the Protective Commissioner was entitled to have the settlement set aside.