By a notice of motion filed on 15 July 2014 in the principal proceedings (numbered 2012/00259135) the defendant applies for orders to the effect that consent orders made on 12 November 2013, and an underlying agreement for compromise of the proceedings, be set aside.
Related proceedings (numbered 2014/00155924), commenced by the plaintiff upon an assumption that the orders of 12 November 2013 stand, await further consideration contingent upon the outcome of the defendant's motion. In those proceedings the plaintiff seeks, inter alia, orders under the Conveyancing Act 1919 NSW, section 66G, for the sale of land in the parties' co-ownership as a result of the consent orders made in the principal proceedings.
By a formal notation made by the Court in the principal proceedings on 17 June 2014, the plaintiff consented to the defendant making his application to set aside the orders of 12 November 2013 in the principal proceedings without the institution of fresh proceedings for that purpose.
Section 73 of the Civil Procedure Act 2005 NSW lends aid to the propriety of this procedure. Section 73(1)(a) provides an express statutory authority for the Court "to determine any question in dispute between [parties] as to whether, and on what terms, … proceedings have been compromised or settled between them." Section 73(1)(b) authorises the Court to "make such orders as it considers appropriate to give effect to any such determination."
These provisions do not limit the jurisdiction that the Court may otherwise have in relation to the determination of any such question: section 73(2). On the contrary, they enable the Court to proceed pragmatically in case management of an application to set aside a judgment or orders entered pursuant to a compromise: cf, Philips v Walsh (1990) 20 NSWLR 206 at 209F and 210C-F.
Accordingly, I accept that, as a matter of jurisdiction, practice and procedure, it is open to the Court to entertain the defendant's application (and, if proper grounds be established, to set aside the orders of 12 November 2013) by way of motion in the principal proceedings.
The grounds upon which the defendant invites the Court to set aside those orders are articulated in a document described as "Points of Claim" filed on 7 October 2014 in support of the motion.
The allegations pleaded by the defendant in that document have not been traversed in any form of pleading by the plaintiff. No "Points of Defence" have been filed, for example. Nevertheless, the parties agree that they are at issue. As regards material facts, the plaintiff denies the defendant's case, root and branch. The defendant does not contend that the absence of a formal traverse of the Points of Claim carries with it an implied admission of any kind.
[3]
THE DEFENDANT'S CASE ON HIS MOTION
The grounds pleaded by the defendant in the Points of Claim are several, and not entirely distinct. They overlap.
At the hearing of the motion the defendant, by his counsel, expressly abandoned a "non est factum" case pleaded in the Points of Claim. He accepted that an agreement for compromise (moreover, a contract) had been made, but he contended that it was voidable.
He contended that the contract for compromise and the consent orders founded upon it were procured by "unconscionable conduct" on the part of the plaintiff within the meaning of sections 20, 21 and 22 of the Australian Consumer Law (contained in Schedule 2 of the Competition and Consumer Act 2010 Cth and general law, equitable principles (Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 459-461).
He contended, further, that the contract for compromise underlying the consent orders was an "unjust contract" within the meaning of the Contracts Review Act 1980 NSW, section 7, having regard to the criteria set out in section 9 of that Act: Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41 at [76] and [106]-[109]; West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620.
[4]
THE PARTIES' JOINDER OF ISSUE ON THE MOTION
The plaintiff contended that the Contracts Review Act is not available to the defendant because a grant of relief under the Act is precluded by a section 6 (2) of the Act. The parties' contract of compromise was entered into "in the course of or for the purpose of… [an investment] business… " carried on by the defendant as a joint-venture with the plaintiff. The subject matter of the joint venture is land at Kogarah, some part of which has been owned by the plaintiff and the defendant in their personal names, and another part of which has been owned by them through a joint-venture company.
I here use the expression "joint-venture" only as a convenient, descriptive label, not as a designation of the parties' relationship routinely used by them. The principal point is that they, together, acquired investment properties for commercial gain and, having fallen out, pursued claims and counter-claims in this Court for the purpose of working out their respective entitlements.
Although the plaintiff contests the applicability of the Contracts Review Act, he accepts that negotiation of, and entry into, the parties' contract of compromise occurred within "trade or commerce", with the consequence that the prohibitions on "unconscionable conduct" for which section 20 and sections 21-22 of the Australian Consumer Law provide are capable of application to the facts of the case according to their terms.
Although reference has been made to sections 20-22, the case has been argued on the practical assumption that, if any of these provisions are available, the relevant provision is section 20 (1). It provides that "[a] person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time."
If, as I accept, section 6 of the Contracts Review Act operates to preclude a grant of relief, and the requirement of the Australian Consumer Law that proscribed conduct occur "in trade or commerce" has been satisfied, the focus of attention naturally turns to the concept of "unconscionable conduct" under the Australian Consumer Law and upon an exercise of equitable jurisdiction.
This is the parties' principal battleground. The defendant contended, and the plaintiff accepted, that, if their contract of compromise were to be held to have been procured by unconscionable conduct on the part of the defendant, or indeed if the contract were to be held to have been an "unjust contract" able to be remedied under the Contracts Review Act, then not only could the contract be set aside but so too (upon an exercise by the Court of power under the Uniform Civil Procedure Rules 2005 NSW, rule 36.15 (1)) could the orders based on the contract.
UCPR rule 36.15(1) provides (with emphasis added) that "[a] judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith."
The defendant did not suggest that "illegality" taints either the consent orders or the contract of compromise under challenge. His case was that both the orders and the underlying agreement are materially affected by "irregularity" and a want of "good faith" insofar as they were procured by "unconscionable conduct" on the part of the plaintiff.
Counsel for the defendant did not accept that section 6 of the Contracts Review Act provides an answer to the plaintiff's claim for relief under the Act. Although I have held otherwise, in this judgment, I nevertheless address both: (a) whether the contract of compromise can be characterised as an "unjust contract" within the meaning of the Contracts Review Act; and (b) whether the contract and the orders based upon it can be said to have been procured by "unconscionable conduct" on the part of the plaintiff.
[5]
ELABORATION OF THE DEFENDANT'S CASE
In presentation of the defendant's case his counsel advanced the following foundational contentions:
1. at all material times on 12 November 2013 the defendant was suffering from a special disability, or disadvantage, as that concept is understood in equity cases such as Commercial Bank of Australia Ltd v Amadio.
2. that special disability or disadvantage took the form of a medical condition characterised by: (i) poor comprehension; (ii) depression; (iii) anxiety; and (iv) suicidal thoughts.
3. throughout the time the parties' contract of compromise was negotiated, and consent orders were made, the plaintiff (by his lawyers) had notice of this medical condition, save that (the defendant accepts) nobody (not the plaintiff, the plaintiff's lawyers or the judge who made the orders under challenge) had notice of his suffering suicidal thoughts.
4. the plaintiff took advantage of the defendant's special disability or disadvantage by inducing him to agree to the compromise and consent orders under challenge, knowing that he was suffering from a medical condition characterised by poor comprehension, depression and anxiety.
In advancing this case the defendant expressly disclaimed any suggestion of impropriety on the part of that the plaintiff's lawyers, through whom (and only through whom, not personally) he attributed unconscionable conduct to the plaintiff.
For the purpose of these proceedings, I accept, as the plaintiff appears to have done, that a finding of unconscionable conduct could be made without an associated finding of impropriety against any person.
[6]
ANALYSIS
The defendant placed substantial reliance on a contention that his medical condition (including suicidal thoughts) operated against a full participation by him - mind as well as body - in the processes of 12 November 2013 that led to the entry of consent orders.
Upon examination, this aspect of his case depends heavily upon an acceptance of his evidence about his subjective state of mind.
The defendant also relied heavily upon the fact that he was self-represented in the proceedings, and at court, on 12 November 2013.
This aspect of the case also requires cautious evaluation. The defendant was actively represented by solicitors in the proceedings until about 30 October 2013 (when they filed a notice of ceasing to act) and the defendant's evidence in support of his motion, in cross-examination, was that the solicitors ceased to act, not so much because he was impecunious, but because (on 17 September 2013) he had dismissed them, then believing that he could do without them in negotiation of a compromise of the proceedings in direct, personal negotiations. The plaintiff, his antagonist, is his brother.
It is neither necessary nor appropriate to explore the merits of the respective cases of the parties on the claim, and cross claim, the subject of the contract of compromise and orders presently under challenge. Both sides of the record have accepted that each side of that phase of the principal proceedings had a bona fide case to advance, and that the questions then in dispute between the parties were substantial. Evidence about the nature of those questions was adduced by both sides on the hearing of the defendant's motion, but both parties sought, and acquiesced in, orders under the Evidence Act 1995 NSW, section 136 limiting the use that could be made of it. It is to be read as an aid to understanding the nature of the parties' respective cases, not as evidence bearing upon the merits of those cases.
However the defendant's case on the motion may be formulated - whether by reference to the concept of "unconscionable conduct" or that of an "unjust contract" - it must ultimately fail for want of firm factual foundations. Neither the fact that he suffered from a medical condition rendering him prone to poor comprehension, depression and anxiety (for which he was treated by a doctor), nor the fact that he lacked legal representation or advice throughout 12 November 2013, is sufficient, in all the circumstances, to support findings warranting intervention of the Court to set aside the parties' contract of compromise or the Court's consent orders.
Even if, as the defendant deposes without direct, corroborative evidence, he was (subjectively) suffering from suicidal thoughts, the position remains the same. That is not only because neither the plaintiff's lawyers nor the presiding judge were aware of such thoughts, but because the objective evidence presently before the court grounds findings of fact (which I make) that the defendant fully comprehended the events of 12 November 2013 as they unfolded, and gave his fully informed consent to the contract of compromise he entered and the orders made by the Court to give effect to it.
The fact that the defendant was without legal representation or advice on the day in question is a factor to be taken into account in the making of these findings, but it is not an absolute impediment to their being made. The defendant was familiar with the subject matter of the proceedings being litigated, including the concept of a caveat over land. He had had the benefit of legal representation until recently. He had actively, and personally, engaged in settlement negotiations, including recent negotiations, with the plaintiff, his brother. Having made a conscious choice to "dismiss" his solicitors (in anticipation of a settlement, and to minimise further exposure to costs) he had the presence of mind to position himself to make an application for the final hearing of the proceedings to be adjourned. He obtained a medical certificate and researched the availability of legal aid, grounding an application he did make (but was not required to pursue) on 12 November 2013 for an adjournment.
When the presiding judge called the proceedings on for hearing he confidently announced his appearance in the following terms:
DEFENDANT: I am the defendant. I'm not legally represented today.
HIS HONOUR: Yes, so you'll be appearing for yourself.
DEFENDANT: Your honour, I can't afford to get legal representation because I've spent all my entire life savings on this case and I was going to ask the Court if this matter could be adjourned so that I can apply to Legal Aid. I do have a health issue as well. I'm not working. I have a medical certificate for your perusal if I may.
HIS HONOUR: So your application is that the proceedings be adjourned to enable you to make an application for legal aid.
DEFENDANT: Yes, sir.
HIS HONOUR: I'll have a look at the medical certificate. I'll hear from you in a moment, Mr Finnane [Counsel for the plaintiff]. Have you notified the other party, the plaintiffs [sic], that you are going to be making this application?
DEFENDANT: No, sir, I wasn't aware that I was supposed to, I thought this was supposed to be - (certificate shown to Mr Finnane).
HIS HONOUR: You were previously represented, I thought.
FINNANE: I don't object to that [the medical certificate].
HIS HONOUR: Yes, thank you, you were previously legally represented, I think, Mr Dimarti.
DEFENDANT: Yes, I was, your Honour.
The judge proceeded to invite the parties to engage in further settlement discussions before his dealing with the adjournment application.
In acquiescing to that course (perhaps reluctantly), the defendant manifested a capacity to speak up for himself.
An illustration of this may be found in the following interchange:
HIS HONOUR: … Mr Dimarti, in the circumstances it might be a very good idea for you to have some further discussion with the plaintiffs [sic] before I deal with your adjournment application, and I am prepared to afford the parties some time to do that.
DEFENDANT: Your honour, with respect, one of the reasons why I am also legally unrepresented today is because I was actually in discussion with the plaintiff for the last four weeks. I was given the impression that there could have been some kind of agreement or conciliation however that turned out to be nothing other than a waste of time and basically a game on his behalf in order to convince me not to seek legal representation for today. That had been in the last four weeks right up until last Friday when we had the last meeting at his solicitor's office so it was really never any intention there to reconciliate or to come to any agreement. I …
HIS HONOUR: Yes, well, I understand that, Mr Dimarti, but I propose to stand the matter down….
In dealing with processes of the Court on 12 November 2013, as in his appearance as a witness before me, the defendant exhibited a cool head and no appearance of a want of confidence.
On the hearing of his motion to set aside the parties' contract of compromise and the Court's orders, there was no cross examination of the three lawyers who dealt with him on behalf of the plaintiff in the events of 12 November 2013 leading up to the Court's orders. The effect of their evidence was that the defendant appeared to be normal in demeanour, rational in conduct, competent in the protection of his own interests. I accept their evidence. It is consistent with an objective assessment of the evidence generally.
Negotiations between the plaintiff's lawyers and the defendant were primarily conducted, on the plaintiff's side, by Ms Evans, solicitor. Her evidence as to the course of the negotiations was, in substance, accepted as correct by the defendant during the course of cross-examination of him on his affidavits. Over a negotiating period of about two hours, he extracted concessions from the plaintiff and, at the end of negotiations, pronounced the plaintiff's final proposal for settlement "fair".
Thereafter, in moving towards the parties' invitation to the judge to make orders by consent, the defendant executed several documents: (a) a three page, handwritten document styled " Heads of Agreement", the final clause of which (relating to removal of caveats) was added at the prompting of the defendant; (b) a typed, three page document entitled "Short Minutes of Order" for presentation to the judge; (c) a Memorandum of Transfer of a half share in land in favour of the plaintiff, to restore ownership of the land to the parties as tenants in common in equal shares; and (d) a Withdrawal of Caveat form.
When the parties returned to court after the finalisation of this documentation they presented the Short Minutes to the judge, who noticed the absence of formal orders dismissing the plaintiff's statement of claim and the defendant's cross-claim.
After an interchange between the judge and counsel for the plaintiff, the following exchange took place between the judge and the defendant:
HIS HONOUR: Mr Dimarti, do you understand everything in this document that you signed [the Short Minutes]?
DEFENDANT: Yes, I do, your Honour.
HIS HONOUR: And do you understand that it will bring these proceedings to an end?
DEFENDANT: Of course.
HIS HONOUR: Yes, well, in that case whilst not referred to in this document I assume you have no objection to my formally dismissing your statement of cross-claim?
DEFENDANT: Sure.
HIS HONOUR: Yes, you understand that that will happen as part of this?
DEFENDANT: I understand.
HIS HONOUR: Yes, very well….
Notwithstanding that they had all had had an opportunity to read the medical certificate tended by the defendant to the Court, each of the plaintiff's three lawyers and the judge appears to have accepted that he was fully in command of himself, competent in dealing with business transacted with them respectively and fully acquiescent in the orders ultimately made by the Court. It was open to them, acting reasonably, to take that stance.
Having had the benefit of observing the defendant give evidence in support of his motion, I see no reason for taking a different view. Certainly, he sought to advance his cause by pleading a degree of incapacity, including a continuing exposure to depression, anxiety and poor comprehension. However, he presented as a competent, intelligent and alert witness.
Counsel for the plaintiff would have me find that the defendant is a dishonest, manipulative man who engaged in a series of Machiavellian manoeuvres associated with the events of 12 November 2013. It is not necessary for me to make any finding of that nature, and I am not minded to do so. Suffice to say, that I do not accept evidence of the defendant to the effect that: (a) he lacked comprehension of the events of the day in question; and (b) his consent to its outcome was less than fully informed. My findings are to the contrary effect.
[7]
The Defendant's Medical Certificate
It may be, as the plaintiff contends, that the medical certificate dated 8 November 2013 presented to the Court and the plaintiff's lawyers by the defendant on 12 November 2013 was obtained by the defendant without a full and frank disclosure to his doctor of the purpose for which he required it. However, there is no necessity for me to go so far as to find that as a fact.
The certificate is expressed in terms that display no consciousness on the part of the doctor that it was required to ground an application for adjournment of court proceedings. His notes (Exhibit P1) suggest that he proceeded under a misapprehension that it was required for an unrelated purpose. Those same notes, in the context of the whole document of which they form part, also lack a sense of urgency one would reasonably expect from the medical practice that maintained them had the doctor consulted by the defendant on 8 November 2013 been told, or had he been suspicious, that the defendant was harbouring suicidal thoughts.
Be that as it may, the medical certificate issued to the defendant on 8 November 2013 expressly recorded that he was receiving medical treatment for his condition, and it stopped short of expressing an opinion that the defendant was too ill to deal with court proceedings.
Its terms were not such, in fact, to deflect those with whom the defendant dealt on 12 November 2013 from their independent, personal assessment (which I infer, from the evidence as a whole, that they each made) that he was capable of managing his affairs on that day.
[8]
The Defendant's email of 14 November 2013
It may be, as the plaintiff contends, that an exchange of emails dated 14 November 2013 between the plaintiff's solicitors and the defendant provides corroborative evidence of the fact (as I have found) that the defendant was in full command of himself on 12 November 2013. The defendant's email certainly took the plaintiff's solicitors to task for their lodgement of a fresh caveat on the title to property the subject of the parties' compromise, albeit a caveat ostensibly designed to protect the plaintiff's interests under the compromise.
Counsel for the defendant submitted that, properly construed, the email demonstrates a want of understanding on the part of the defendant because: (a) he referred to caveated land as "my property", when the property in question was in the course of being transferred from the defendant's sole name to the names of the plaintiff and the defendant as co-owners; and (b) he threatened not to "comply" with the orders made by the Court, but to "return" to court if the caveat recently lodged by the plaintiff was not removed, despite the fact that, by signing documents at court on 12 November 2013, the defendant had substantially done everything required of him to comply with the orders made on that day.
Read in context, and making due allowance for the defendant's then lack of legal representation, I am inclined to the view that his counsel's construction of his email is not correct. A reference to "my property" was not wholly misplaced in context of a contrast between separate properties in personal and corporate names; the recent history of ownership of the land; or the defendant's continued residence on the land subject to a transfer. A reference to compliance with orders made by the Court, in conjunction with a threat to return to court, is not wholly misplaced as embodiment of a threat to return to court to obtain orders to enforce those already made. No looseness of language on the part of the defendant in his email can detract from the overall force of his adherence to the arrangements negotiated on 12 November 2013.
[9]
The Defendant's Continuing Residence
During the course of argument on the defendant's motion his counsel seized on:
1. the absence of any provision in the consent orders of 12 November 2013, or in the underlying inter partes documentation, securing for the defendant a continuing right of residence in a granny flat on the land the subject of an order (on 12 November 2013) for the transfer of title from the name of the defendant to the names of the plaintiff and defendant as tenants in common in equal shares; and
2. an oral assurance given to the defendant by the solicitor for the plaintiff, in negotiations leading to the parties' compromise, that the plaintiff was content for the defendant to continue to live in the granny flat.
This point was not earlier taken by the defendant in his Points of Claim or in written outline of submissions. It emerged during oral argument on the motion.
The absence of any written provision confirmatory of the oral assurance was said, for the defendant, to be indicative of the defective character of the agreement for compromise underlying the challenged consent orders: either the compromise was induced by a misrepresentation or, more generally, unconscionable conduct on the part of the plaintiff, or the resultant contract was unfair for want of a significant term.
No application was made by the defendant for an order that the Heads of Agreement, or any other documentation, be rectified to record whatever might be said to represent the parties' true agreement touching upon the defendant's right of residence on the subject land.
The plaintiff says that no express provision relating to the defendant's continued right of residence was necessary because, as a co-owner of the land with the plaintiff, the defendant had, and has, a continuing right to enjoy possession of it, subject to such (if any) rights the parties might respectively have to an accounting upon sale of the land.
Passing reference was made to Forgead v Shanahan (1994) 35 NSWLR 206, dealing with the character of adjustments that might be made between co-owners of land when, pursuant to section 66G of the Conveyancing Act 1919 NSW, orders are made for the appointment of trustees for sale.
There is nothing in the defendant's point. An extract of the evidence about the oral assurance given to the defendant by the solicitor for the plaintiff includes (in paragraph 28 of her affidavit sworn 30 July 2014) the following:
"… [The plaintiff] is happy for you [the defendant] to continue to live in the property where you are, collect the rents and use that for the mortgage [over that property]… You [the plaintiff and the defendant] can talk about selling or doing whatever you want with the [two properties the subject of the principal proceedings] later and hopefully your relationship can improve. …"
If the defendant has any continuing right of residence in the granny flat in which he lives, independent of his interest as a co-owner of the subject land, it was determinable by mutual agreement or, absent agreement, upon reasonable notice.
However, I find that the parties did not include any express statement about the defendant's "right of residency" in the granny flat in documentation of their agreement for compromise because they regarded it as part of the give-and-take involved in their management of a joint investment, not a distinct, separate contractual term. The parties did not record their arrangement about the defendant's continued residency in the granny flat because, I find, they each regarded it as an incident of their co-ownership of land rather than a separate entitlement.
In any event, there is no basis upon which, in relation to his continued occupancy of the granny flat or more generally, the defendant can be said to have been taken advantage of or induced by unconscionable conduct to enter into a contract, "unjust" or otherwise.
[10]
CONCLUSION
It is not necessary to dwell at length on these subsidiary topics because I am satisfied, on the evidence of the events of 12 November 2013, that the defendant, in charge of himself, gave his fully informed consent to the business transacted that day.
In summary, I am not satisfied that there is any factual foundation for the defendant's challenge to the compromise agreement made by the parties or to the consent orders consequentially made. I am, on the contrary, affirmatively satisfied that the defendant understood the events of 12 November 2013 as they unfolded, and that he gave his fully informed consent to the orders made at day's end.
Accordingly, I order that the defendant's notice of motion filed on 15 July 2014 (in the proceedings numbered 2012/00259135) be dismissed.
Prima facie, the costs of the motion should follow the event. However, I will allow the parties an opportunity to be heard on the question of costs, bearing in mind a necessity for directions to be given in the related proceedings numbered 2014/00155924.
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Decision last updated: 20 February 2015