Turner (by his tutor Turner) v Wyatt

File Number(s): 2021/340511

Publication restriction: N/A

Judgment

1. These proceedings concern a dispute about a transaction in 2017 pursuant to which the plaintiff paid to the defendants a sum of $220,000 (on the plaintiff’s case) or $200,000 (on the first defendant’s case). The transaction related to a property in the Northern Territory that was owned by the first and second defendants at the time.

2. The plaintiff commenced the proceedings in the District Court of New South Wales in November 2021. The first defendant filed a defence on 20 April 2022 and a cross-claim on 28 April 2022. The second defendant failed to file a defence, and default judgment was entered against her in the District Court on 23 May 2022. The proceedings have continued against the first defendant since that time. On 16 August 2024, the proceedings were transferred to this Court after the plaintiff was granted leave to amend his statement of claim and defence to cross-claim to include claims for relief that exceeded the jurisdiction of the District Court.

3. The plaintiff’s primary case is that he made a loan of $220,000 to the defendants which was paid in two instalments in September and October 2017, that the purpose of the loan was to fund the defendants’ renovation of their property with a view to the defendants selling the property, that the loan was repayable on demand, and that the defendants failed to repay the loan in response to a demand made by the plaintiff on 19 October 2021.

4. After the first defendant filed his defence pleading that the plaintiff’s payment of $200,000 was made under a contract for sale of the property dated 26 September 2017, the plaintiff amended his claim to include an alternative case that his payments to the defendants totalling $220,000 were referable to such a contract which records the plaintiff as the buyer and the defendants as vendors and which stipulates a purchase price of $850,000 and a deposit of $85,000. The plaintiff’s alternative case is that the contract is void or voidable on the grounds of unconscionability by reason of the plaintiff’s psychiatric illness that was known to the defendants at the time the contract was signed.

5. In the further alternative (that is, if the payments were made under the contract for sale of land and it is not set aside), the plaintiff pleads that the defendants repudiated the contract by selling the property to a third party in 2020, and he accepts that repudiation and claims for the return of his $220,000 which the defendants have not refunded.

6. The plaintiff claims:

7. judgment against the defendants in the sum of $200,000; or

8. alternatively, a declaration that the contract for sale of land is void and of no effect, or an order rescinding the contract ab initio, and an order that the defendants repay the sum of $220,000 to the plaintiff; or

9. alternatively, an order against the defendants for repayment of the sum of $220,000 due to the alleged repudiation of the contract for sale of land.

10. I note that the claims for relief are expressed as being made against the defendants, notwithstanding that default judgment was entered against the second defendant before the plaintiff’s amendments which introduced his alternative claims described above.

11. The first defendant contends that there was no loan, and that the plaintiff paid $200,000 to the defendants as part-payment of the purchase price under the contract for sale of land which the defendants are entitled to retain following their termination of that contract in 2020 as a result of the plaintiff’s failure to complete. The first defendant denies the alleged unconscionability, and cross-claims for damages in the sum of $80,000, being the difference between the purchase price payable by the plaintiff and the price for which the property was later sold to a third party (after taking into account the sum of $200,000 paid by the plaintiff). The first defendant also relies on s 12 of the Limitation Act 1981 (NT).

12. The documentary evidence includes a contract for sale of land dated 26 September 2017 and a notice to complete issued by the defendants on 31 October 2017.

13. The psychiatric condition from which the plaintiff claims to have been suffering at the time of the transaction in 2017 deteriorated in the months leading up to May 2023 to the point where the plaintiff’s family members and the solicitors acting for him formed the view that he no longer had capacity to provide instructions in relation to the proceedings. That assessment is consistent with expert evidence of Dr Dayalan, psychiatrist, in a report dated 5 October 2023. Dr Dayalan opined that the plaintiff suffers from a chronic psychotic illness that impacts on his cognitive functions (concentration, memory, judgement and reasoning), and that he had experienced his first psychotic episode in April 2017 with repeated episodes since that time. The plaintiff’s brother signed a consent to act as his tutor in the proceedings on 26 June 2023. The tutor’s solicitor has deposed that the tutor does not have any interests contrary to the plaintiff in connection with the proceedings.

14. According to an affidavit sworn on 13 April 2026 by Mr Cristian Fuenzalida - the solicitor acting for the plaintiff’s tutor - the plaintiff has incurred legal costs of approximately $300,000 (including professional fees and disbursements, and including GST) to date. I note that the proceedings have been on foot for four and half years, and that a final hearing has been vacated twice – once in June 2023 as a result of the first defendant being granted leave to amend his defence, and once in March 2024 as a result of the plaintiff being granted leave to amend his statement of claim and defence to cross-claim.

15. In July 2025, the proceedings were listed for final hearing commencing 13 April 2026 with an estimated hearing time of six days. The estimated hearing time reflects the number of lay witnesses who will give competing evidence about the plaintiff’s mental state at the time of the transaction in 2017 and matters pertaining to the defendants’ knowledge of it, the expert psychiatric evidence, and expert property valuation evidence concerning the value of the property at the time of the transaction in 2017.

16. If the hearing proceeds, the plaintiff will incur further significant costs. The solicitor acting for the plaintiff’s tutor has made inquiries which have led him to conclude that, if the plaintiff succeeds at final hearing, he will be unlikely to recover the judgment and costs order in his favour against the first defendant, who has no significant assets. Accordingly, the plaintiff will most likely be worse of financially if the hearing proceeds, irrespective of the outcome. Whether the plaintiff succeeds or fails at final hearing will depend on, amongst other things, the cross-examination of lay witnesses about evidence relevant to the defendants’ knowledge of the plaintiff’s condition at the time of the transaction, and issues of credit that are likely to arise concerning those witnesses.

17. In those circumstances, the plaintiff and the first defendant have agreed, subject to the approval of the Court pursuant to s 76 of the Civil Procedure Act 2005 (NSW), to settle the proceedings on terms that the plaintiff agrees to discontinue his claims, the first defendant agrees to discontinue his cross-claim, the plaintiff and the first defendant each bear their own costs of the proceedings, and mutual releases as between the plaintiff and the first defendant. The terms are set out in a proposed Deed of Release and Settlement in the form emailed to my Associate on the afternoon of 13 April 2026.

18. The Court is now asked to approve the settlement pursuant to s 76. The plaintiff’s tutor should assent to the proposed settlement and there should be opinions from his legal advisers that they consider the settlement to be beneficial to the plaintiff’s interest. However, the Court will consider for itself whether that is so, and will only grant approval if it forms the view that the proposed settlement is indeed beneficial to the interests of the plaintiff. [1]

19. In support of the application for approval, the plaintiff’s tutor relies on an affidavit of his solicitor Mr Cristian Fuenzalida sworn on 13 April 2026 and the documents exhibited thereto, together with a confidential opinion dated 10 April 2026.

20. Mr Fuenzalida’s affidavit establishes that the plaintiff’s tutor assents to the settlement. Mr Fuenzalida’s confidential opinion is to the effect that he considers the proposed settlement to be in the best interests of the plaintiff in the circumstances described above. That opinion is not conclusive, but is entitled to be given substantial weight in the absence of anything to suggest that the tutor is motivated by anything other than concern for the best of interests of the plaintiff (his brother) and in the absence of anything suggesting that the solicitors are acting other than in accordance with their genuine assessment of the present state of the proceedings, the plaintiff’s prospects of success and the range of prospective legal outcomes, and their bona fide assessment of the present financial position of the first defendant and the resulting financial consequences of those prospective legal outcomes.

21. Given the documentary evidence of a contract for sale of land and the factual contest between lay witnesses about the plaintiff’s illness and the defendants’ knowledge of it as at the date of that contract, there is an inherent risk that the plaintiff might not succeed in his claims and the first defendant might succeed in his cross-claim if the proceedings were to go to trial. Despite those risks, I consider that the plaintiff’s claim, and his defence of the cross-claim, have reasonable prospects of success. In determining whether a proposed settlement is for the benefit of a party to the proceedings who is under legal incapacity, the Court ordinarily looks to whether there is sufficient prospect of obtaining a judgment more favourable than the proposed settlement to outweigh the value of the certainty reflected in the proposed settlement. [2] In the present case, the likelihood that the plaintiff will not succeed in recovering any judgment and costs order that may be entered in his favour against the first defendant, and so will be financially worse off if he proceeds to final hearing even if he ultimately wins, is of central importance. Having regard to the plaintiff’s reasonable prospects but the inherent risk that he may not succeed at final hearing, and having regard to the likely financial detriment to the plaintiff that would flow pursuing the claim to final hearing even if he did succeed, I am of the view that the proposed settlement is beneficial to the plaintiff’s interests in the circumstances that now exist.

22. For those reasons, I made orders on 13 April 2026 approving the settlement in terms of the draft Deed of Settlement and Release pursuant to s 76 of the Civil Procedure Act and granting leave to the plaintiff and the first defendant/cross-claimant to file the notices of discontinuance provided for in the Deed following execution of the Deed.

23. I record for the avoidance of doubt that the evidence presented to the Court in support of the application for approval of the settlement does not provide a basis for me to form a view about the period of time during which the first defendant has lacked significant assets and whether the solicitor acting for the plaintiff (in the period up to June 2023) and for his tutor (in the period since June 2023) could reasonably have made the assessment as to the recoverability of any judgment in the plaintiff’s favour referred to at [13] above at an earlier point in time before the plaintiff had incurred legal costs and disbursements totalling $300,000 in respect of his claim to recover $220,000.

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Endnotes

Permanent Trustee Company Ltd v Mills (2007) 71 NSWLR 1; [2007] NSWSC 336 at [19]-[29].

Stojic v Stojic [2019] NSWSC 23 at [32].