HIS HONOUR: In this matter, the Court has been asked to approve the settlement of proceedings commenced by Statement of Claim filed on 10 August 2017, in which the Plaintiff, who appears by his tutor, the NSW Trustee and Guardian, sought to set aside the transfer of real property in Queensland ("the Property") made by him in September 2013 in favour of the third and fourth Defendants. The first and second Defendants are the parents of the third and fourth Defendants. None of the Defendants is in any familial relationship with the Plaintiff.
In the Statement of Claim, the Plaintiff asserted that the transfer had been procured by the undue influence of the first and second Defendants. In the alternative, he asserted that the transfer of the Property was procured by unconscionable conduct of all Defendants. The Plaintiff sought an order that the Property be transferred back to him. He also sought consequential relief.
The four Defendants filed a single Defence on 21 November 2017. They admitted a number of paragraphs of the Statement of Claim (1, 3, 6, 8, 9, 10, 11, 13 and 14, 16 and 17). Importantly, they asserted that the Plaintiff, at the time of the Transfer, was "mentally capable of making his own decisions", had spoken to the first Defendant on a number of occasions since as early as 2011 about the transfer, and had decided to transfer the Property to the third and fourth Defendants to give effect to his intention already expressed in his Will made on 19 January 2006.
A copy of the Plaintiff's Will, made in 2006, is in evidence. The Will was duly executed and appears to have been professionally drawn. Indeed, one of the attesting witnesses is a solicitor and the other is a legal secretary. In Clause 2 of the Will, the first and second Defendants are named as the executors and trustees of the Plaintiff's estate. Clause 4 provides for a right of residence to the Plaintiff's father "in any home which I may own and [in] which I may be residing at the date of my death" for as long as he wished to reside therein, and following the termination of the right to reside, the "house property and the balance of my estate comprising the residue of my estate" was gifted "to such of my friends [the four Defendants were named] as attain the age of 18 years and survive me by thirty (30) days and if more than one has tenants in common in equal shares".
It can be seen from the terms of the Plaintiff's Will, that he and the Defendants appear to have had a close relationship for some time prior to the events involving the transfer of the Property.
It is necessary to state, albeit briefly, some background information that is known about the Plaintiff and the Defendants. During 2013, the Plaintiff had been living alone in Queensland, presumably in the Property. After some hospital admissions in Queensland during 2013, he moved to Canterbury, a suburb of Sydney, to stay with the first and second Defendants. Whilst staying there, he was admitted to Royal Prince Alfred Hospital, in November 2013, with confusion, decreased mobility, increased shortness of breath and jaundice. He was also reported to have multiple medical conditions, including chronic liver disease.
An application to the Guardianship Division of NCAT for both guardianship and financial management of orders in respect of the Plaintiff was made in late 2013 or early 2014. In the Reasons for Decision, delivered on 12 February 2014, it was noted that the Plaintiff had appeared by telephone accompanied by a solicitor, and that he had confirmed that, "[H]e had previously owned a home unit in Queensland and that he had inherited that property from his late mother". He is also said to have told the Tribunal that, in September 2013, he had transferred the title to that property to [the third and fourth Defendants], the children of [the first and second Defendants]. He is said to have outlined the circumstances surrounding that transfer and he confirmed that he had signed the Transfer document himself. He informed the Tribunal that he had not received any payment for the transfer of the Property. He also explained that he had no family members, or friends, other than [the first and second Defendants].
In relation to the execution of the Transfer, I have read a diary note of the Plaintiff's current solicitor, Mr G V Patterson, who had a conversation with Ms H R Terrace on 10 June 2016. She had witnessed the Plaintiff's signature on the Deed of Agreement dated 7 September 2013, which set out the terms upon which the Transfer of the Property was to take place.
Ms Terrace, at the time of the conversation with the Plaintiff's solicitor, identified herself as the Registrar at Southport Courthouse. She stated that she had a detailed recollection of the occasion when she had witnessed the Plaintiff's signature on the Deed and on an Enduring Power of Attorney. She stated that she was:
"… very conscious of the need for a person granting an enduring power of attorney to understand fully what they are doing … [and] works in the Guardianship Division and is conscious of the potential for abuse."
Ms Terrace also informed Mr Patterson that she had asked the Plaintiff to explain to her his understanding of the documents to be signed and what he was doing. He referred to the Defendants as "my family" and said that he would be living in the Property until he passed away. He also told Ms Terrace that he had no relatives, or other family, to whom he could leave the Property. He "looked her in the eye" when he was explaining his intentions. Ms Terrace was satisfied that he understood what he was doing.
It is also necessary to note there is evidence that in, or about, October 2013, the Plaintiff had been diagnosed with mild functional and cognitive impairments. There is sufficient evidence to suggest that he had some cognitive deficits.
I should mention that I have read the affidavit of Mr H Alameddine, the Defendants' solicitor, who points out that when one considers all of the available medical evidence the deceased's condition in September 2013 is not conclusive, and, in any event, does not "assist the Plaintiff's case that he lacked capacity to transfer the relevant property".
In addition, Mr Alameddine states that the Defendants will be able to establish that they have spent approximately $100,000 on renovations to the Property as well as $30,000 on "strata, council and water levies". (Although not adverted to in his affidavit, there is some evidence that the first and second Defendants had contributed something in the order of $10,000 to assist the Plaintiff in paying expenses that he had been unable to pay).
Finally, I should mention that I have read a very detailed affidavit made by Mr Patterson, who has discussed the proceedings, and conferred with, the legal officer of the tutor, the NSW Trustee and Guardian, in relation to the settlement of the proceedings. In that affidavit, Mr Patterson states:
"24. TAG is concerned that, should the case run to trial, there will be consistent evidence from the four Defendants, adverse to the Plaintiff's case, when the Plaintiff himself may be incapable of giving evidence.
25. There is a risk that, should the case run to trial and the Defendants be successful, the Plaintiff will be liable for his own and the Defendants' costs, which would diminish his remaining financial resources considerably.
26. The costs to be paid by the Plaintiff will not exceed $33,000.00 inclusive of GST and all disbursements.
27. In my respectful view, the proposed settlement is in the interest of the Plaintiff and I recommend it. I have conveyed advice in those terms to Ms Sherlock. I am instructed by Ms Sherlock and believe that TAG is of the view that there is a tangible benefit to the Plaintiff in having disputation over the Property resolved. TAG seeks the approval of the proposed settlement on the basis that it is in the interests of the Plaintiff, as he will receive a not insignificant financial benefit, which will not reduce his social security entitlements."
I should also mention, for completeness, that I have read a further affidavit of Mr Patterson, filed in Court, and sworn on 21 March 2018, which identifies the Plaintiff's costs and disbursements, inclusive of GST, of $33,000. He states that there has been "a discount of one-third of my unbilled work in progress to date not including any fees for today". Mr Patterson has indicated that he will cap the Plaintiff's total exposure for costs and disbursements to that sum. (I am satisfied that the costs and disbursements incurred by the Plaintiff are reasonable and proportionate in all the circumstances.)
With that short background, I turn to the way in which the matter is to be resolved by the parties. The terms of the settlement have altered slightly because the Court expressed some concern about one of the original terms which related to the payment of part ($32,500) of "the Settlement Sum" ($92,500) being paid by instalments of $3,250 per year.
Following the solicitor for the Defendants obtaining instructions, the Court was informed that the Settlement Sum would be paid, as to $60,000 within 21 days of the approval of the settlement, and the balance ($32,500) within 12 months of the date of the approval by the court. Interest on the outstanding amounts, calculated at 3 per cent per annum is to be paid, calculated from the day on which the settlement is approved. The parties are also to sign a Deed of Settlement which will cover other matters upon which agreement has been reached.
If the amount the subject of the proposed settlement is approved by the Court, and if the estimate of the Plaintiff's costs and disbursements proves accurate, the Plaintiff will receive slightly less than $60,000, albeit that $32,500, plus interest, will not be paid until 21 March 2019.
In Rappard v Williams [2013] NSWSC 1279, I dealt with the principles applicable to approval of a compromise by the Court. At [100] - [102], I wrote:
"Section 76 of the Civil Procedure Act provides:
'(1) This section applies to proceedings commenced by or on behalf of, or against, any of the following persons:
...
(b) a person who, during the course of the proceedings, becomes a person under legal incapacity,
(3) Except with the approval of the court, there may not be:
(a) any compromise or settlement of any proceedings to which this section applies, or
(b) any acceptance of money paid into court in any such proceedings,
as regards a claim made by or on behalf of, or against, a person referred to in subsection (1).
(4) If an agreement for the compromise or settlement of any matter in dispute in any such proceedings is made by or on behalf of a person referred to in subsection (1), the court may approve or disapprove the agreement.
(5) An agreement disapproved by the court does not bind the person by whom or on whose behalf it was made.
(6) An agreement approved by the court binds the person by whom or on whose behalf it was made as if he or she were of full capacity and (if it was made by some other person on his or her behalf) as if that other person had made the agreement as his or her agent.'
In Fairhurst (bht NSW Trustee and Guardian) v Fairhurst [2012] NSWSC 388, I wrote at [29] - [40]:
"The section applies to all proceedings by, or against, a person under a legal incapacity and irrespective of the nature of the claims made by, or against, that person.
The jurisdiction of the court and its procedure is protective in nature. It is akin to the inherent parens patriae jurisdiction of the court under the common law. Relevantly, the Court must act so as to protect the interests of infants: Yu Ge v River Island Clothing Pty Ltd [2002] NSWSC 28; (2002) Aust Torts Reports 81-638 at [28].
In Permanent Trustee Co Ltd v Mills [2007] NSWSC 336; (2007) 71 NSWLR 1, Hammerschlag J said, in relation to such approval:
"[29] The principle is that for the Court to grant approval for a compromise to be entered into by the disable person it must form the view that it is beneficial to his or her interests. The compromise should be assented to by the tutor and there should be opinions from his or her legal advisers that they consider it to be so: Re Birchall. The Court will consider for itself whether the compromise will be beneficial to the disable person: Re Ley's Trusts [1964] 1 WLR 640."
In Fisher (by her tutor) Fisher v Marin [2008] NSWSC 1357, Rothman J said:
"[29] The jurisdiction of the Court is protective in nature and the overriding principle is that the Court will base the approval or disapproval upon the formation of an opinion that the agreement is or is not beneficial to the interests of the person under the incapacity. It is for the Court, not the parties, to determine whether the compromise will be beneficial to the person under an incapacity: Re Ley's Trusts [1964] 1 WLR 640;Permanent Trustee v Mills [2007] NSWSC 336.
...
Ultimately, the principle that I apply is whether the settlement that has currently been reached (and the amount thereof) is in the interests of the plaintiff. In that regard, bearing in mind the risk that, liability being in issue, the plaintiff would receive nothing from any hearing that may occur, the test may be described as whether the risk to the plaintiff, of losing that which is already agreed, is outweighed by the possibility of receiving more if the matter were to go to hearing."
In Elderfield (by her litigation guardian Visentin) v Transport Accident Commission (TAC) [2010] VSC 116; (2010) 55 MVR 206, Robson J referred to these two NSW decisions, and accepted the test laid down by Rothman J in Fisher quoted above. At [20], Robson J went on to say:
"In my view that question is relevantly answered by deciding whether or not, in my opinion, the certainty of obtaining the compromise sum is significantly outweighed by the uncertain prospect of obtaining more by rejecting the compromise after taking into account the risk of obtaining less."
In Stephens-Sidebottom v State of Victoria (Department of Education and Early Childhood Development) [2011] FCA 893, Tracey J said:
"[12] In determining whether to sanction a compromise under O 43 r 9 the court is concerned only with the benefit of the disabled person: see Gillespie v Alperstein [1964] VR 749. In forming the necessary judgment significant weight will be given to the opinions of the applicant's legal advisers and, in some cases at least, the views of the applicant's tutor. In Re Barbour's Settlement [1974] 1 All ER 1188 at 1191, Megarry J, speaking of an application made on behalf of a minor, said that:
Second, there is the important matter of the minor's benefit. When the court is asked to give its approval on behalf of minors to a compromise of a dispute, the court has long been accustomed to rely heavily on those advising the minors for assistance in deciding whether the compromise is for the benefit of the minors. Counsel, solicitors, and guardians ad litem or next friends have opportunities which the court lacks for prolonged and detailed consideration of the proposals and possible variations of them in relation to the attitudes of the other parties and the apparent strength and weakness of their respective claims. When the matter comes before the court, the terms of settlement are in final form and the time for consideration is of necessity less ample. The court accordingly must rely to a considerable extent on the views of those whose opportunities of weighing the matter have been so much greater. Expressing a view on whether the terms of a proposed compromise are in the interests of a minor is a matter of great responsibility for all concerned."
It is clear from s 76 that the jurisdiction to sanction a compromise or settlement is broad and general. It is not confined in any way, and the Court is not given any guidance about how to exercise the power. Not unnaturally, the section does not provide any criteria by reference to which the court should approve, or should decline to approve, the compromise or settlement.
Nor is it useful to purport to lay down an exhaustive list of the criteria by reference to which an application for the approval of a settlement ought to be determined. Whether or not to approve the settlement will be fact specific and determined on its own merits.
It is not the role of the court asked to approve a settlement or compromise to decide whether the outcome of the settlement or compromise is the one that it would have made, but, rather, whether it (as a settlement or compromise) ought to be approved. The court is requested by the parties to exercise its independent judgment on the question whether or not to approve the proposed compromise or settlement. The purpose of court approval is, principally, to protect the person under legal incapacity.
Yet, the power given to the court should also been seen as a facultative one, since except with the approval of the court, there may not be any compromise or settlement of any proceedings to which the section applies and only when the settlement or compromise is approved does it bind the person by whom, or on whose behalf it was made, as if he, or she, were of full capacity and (if it was made by some other person on his, or her, behalf) as if that other person had made the agreement as his, or her, agent.
Where someone opposes the approval of the settlement, her, or his, reasons for opposition may provide "a convenient focus" (see, Jessup J in Darwalla Milling Co Pty Ltd v F Hoffman La Roche Ltd (No 2)) [2006] FCA 1388; (2006) 236 ALR 322, at [39]) by reference to which the court will consider whether to approve the settlement. Similarly, that no one opposes the settlement, in the interests of the person under the legal incapacity, may, in some circumstances, also be relevant.
Section 77(2) of the Civil Procedure Act 2005 provides that money recovered in any proceedings on behalf of any of a person under legal incapacity, is to be paid into court. However, s 77(3) empowers the court to order that the whole, or any part of, such money not be paid into court, but be paid instead to such person as the court may direct, including, if the person is a protected person, to the manager of the protected person's estate."
What I said was applied by Allsop P (as his Honour then was) in Institoris by his next friend Maria Institoris v Falconer [2012] NSWCA 298, at [2] and by Sackar J in Gordon Leslie Rowell As Trustee of the Estate of Burnett Leslie Carlisle (dec'd) v Heffernan [2013] NSWSC 404, at [7]."
What was written by Hamill J in Pallier v Solomons (No 1) [2014] NSWSC 1214, at [9], is of some importance also:
"The question that I have to determine is whether the compromise is beneficial to the interests of the plaintiff. Unless I am affirmatively satisfied that the settlement or compromise is for the plaintiff's benefit I should withhold such approval. See, for example, Fairhurst v Fairhurst [2012] NSWSC 388 and Rhodes v Swithenbank [1889] 22 QB 577. This in turn involves a consideration of the prospects of the plaintiff receiving a greater award of damages at the conclusion of a full hearing."
I also bear in mind the additional factor identified in Scandolera v State of Victoria (2015) 331 ALR 525; [2015] FCA 1451, in which Mortimer J wrote, at [29]:
"… since the approval of a settlement will bind the party under the disability and bring the litigation to an end, the Court should consider the advantages and disadvantages of the litigation continuing not only in terms of whether the applicants might secure a more advantageous award from the Court at trial, but also issues such as the prospects of an appeal and the costs and pressures imposed on [the plaintiffs] if the litigation were to continue [to trial]."
Finally, I note what has been written by Lindsay J in AEW v BW [2016] NSWSC 905, at [26]:
"Approval of settlement of a claim made on behalf of a legally incapacitated person is within the province of a court, and may be within the province of a person formally appointed to manage the affairs of the incapable person, upon an exercise of protective or analogous jurisdiction. A curial power to approve such a settlement (e.g., under CPA s 75 or the inherent jurisdiction of the Supreme Court) is essentially protective in character and, for that purpose, comprehensive in scope…"
After considering the affidavit evidence and the tendered documents, I am prepared to approve the proposed settlement. I am satisfied that it is in the best interests of the Plaintiff to resolve the proceedings on the terms proposed. Relevant matters leading to this conclusion, in the present case, include the likely cost and complexity of the proceedings if they proceed; there is a real dispute about the facts; the value of the Property, even now, is modest and if the Defendants are able to establish what was spent by them, the amount in issue will be reduced even further; the date of any trial is likely to be some months away; and finally, and importantly, the result of the Plaintiff's case is uncertain, whereas there is certainty in obtaining the settlement sum.
In the circumstances, the Court:
1. Orders that the settlement of the claim by the Plaintiff, who is a person under a legal incapacity (a person with a financial manager), be approved, pursuant to s 76(4) of the Civil Procedure Act 2005 (NSW).
2. Orders that the Defendants pay to the Plaintiff the amount of $92,500.
3. Orders that the amount of $92,500 be paid:
1. As to $60,000 within 21 days of today, and
2. As to $32,500 on or before 21 March 2019.
1. Orders that no interest be paid on the lump sum of $60,000 if it is paid within 21 days of today; but if not so paid, interest calculated at the rate of 3% p.a. will be paid on any unpaid part thereof from that date to the date of payment in full.
2. Orders that interest be paid on the lump sum of $32,500 calculated at the rate of 3% p.a. from today.
3. Orders, pursuant to s 77(3) of the Civil Procedure Act 2005 (NSW) that the moneys due to be paid to the Plaintiff be paid to the NSW Trustee and Guardian, his financial manager.
4. Notes that the tutor of the Plaintiff and its advisers have considered the compromise and consider it to be beneficial to, and in the interests of, the Plaintiff.
5. Notes the agreement of the parties that they will enter into a Deed of Settlement and Release, as amended, referred to in the affidavit of Mr G V Patterson sworn 20 March 2018, within 7 days of the date hereof.
6. Orders that the proceedings otherwise be dismissed.
7. Makes no order as to the costs of any party to the intent that he, and they, will bear his, or their, own costs, respectively, of the proceedings.
[3]
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Decision last updated: 26 March 2018