(2005) 14 BPR 26,639
Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153
(2007) ANZ ConvR 615
Tonto Home Loans Australia Pty Ltd v Tavares
FirstMac Ltd v Di Benedetto
FirstMac Ltd v O'Donnell [2011] NSWCA 389
Source
Original judgment source is linked above.
Catchwords
(2005) 14 BPR 26,639
Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153(2007) ANZ ConvR 615
Tonto Home Loans Australia Pty Ltd v TavaresFirstMac Ltd v Di BenedettoFirstMac Ltd v O'Donnell [2011] NSWCA 389
Judgment (2 paragraphs)
[1]
Judgment
These proceedings relate to the Estate of Mr Tomo Tomac who died on 5 July 2014 aged 86 years of age ("the Testator"). He left an estate worth approximately $1.7 million made up almost entirely by the value of the Ashfield house in which he lived.
The Testator made a will dated 11 March 2009 ("the 2009 Will") and another will later dated 12 August 2011 ("the 2011 Will").
The plaintiffs, William and Valnea Tomac, are two of the three children of the Testator. The third child, the defendant Mrs Antonia Papp ("Mrs Papp"), was a child of the Testator's late wife and was brought up as a child of the marriage of the Testator and his late wife.
By the 2009 Will Mr Tomac divided the net estate into three equal shares to William, Valnea and Mrs Papp- but the bequest to Mrs Papp was for her life only. The plaintiffs were appointed executors of the 2009 Will.
By the 2011 Will Mr Tomac left the whole of his estate to Mrs Papp. Mrs Papp is also named as the executor of that will. Mrs Papp has lived in the Ashfield house for many years and since her marriage to her husband Mr Antonio Papp she and her husband have resided there with the Testator until the Testator's death.
Mrs Papp sought to obtain probate of the 2011 Will but this was contested by the plaintiffs who had commenced proceedings seeking probate of the 2009 Will. The plaintiffs claim that the Testator did not have sufficient mental capacity to execute the 2011 Will, and that it was not properly explained to him.
Against the possibility that probate would be granted of the 2009 Will Mrs Papp filed a "Family Provision Act" ("FPA") claim and against the possibility that probate would be granted of the 2011 Will the plaintiffs also filed FPA claims.
On 7 September 2015 the probate proceedings (which includes Mrs Papp's FPA claim and the plaintiffs' FPA claims) were referred to mediation.
On 14 October 2015 a mediation of the two Supreme Court proceedings took place before Mr John Armfield of Counsel. The plaintiffs were represented by Ms Anne Gibbon of Counsel and Ms Janice Williams, solicitor. Mrs Papp was represented by Dr Elizabeth Peden of Counsel and Mr Maurice Marshan, solicitor.
An agreement for the settlement of the proceedings was reached and reduced to writing: see Annexure "A" to the affidavit of 6 November 2015 "the Settlement Agreement."
The Settlement Agreement was executed by the plaintiffs and by Mrs Papp on 14 October 2015.
On 21 October 2015 Mrs Papp indicated to the Court through a barrister that she was seeking independent advice about her position.
Mrs Papp admits that she signed the Settlement Agreement but contends that she is entitled by reason of the Contracts Review Act 1980 (NSW) ("CRA") to have the Settlement Agreement set aside. The basis of that contention is that she claims that she was suffering from a mental condition on the day of the mediation which affected her ability to comprehend the significance of the Settlement Agreement.
The plaintiffs seek to enforce the Settlement Agreement.
Mrs Papp in resisting enforcement of the Settlement Agreement relies on her affidavit of 30 November 2015, her husband's affidavit of 30 November 2015 and the affidavit of a psychiatrist Dr Adam Martin of 1 December 2015 whose report of 10 November 2015 is annexed to his affidavit.
The plaintiffs rely on their affidavits of 9 March 2016, and Ms William's affidavits of 6 November 2015 and 30 July 2016. There is also an affidavit of an independent solicitor Ms Madeline Joyce Reid of 4 November 2015 by which Ms Reid consents to act as an administrator.
Mrs Papp accepts that if, contrary to her contentions, the Settlement Agreement is not set aside, the orders which the plaintiffs seek in order to enforce the Settlement Agreement are appropriate.
Mr Ellison did not concede that it was open to Mrs Papp to raise the CRA in answer to the plaintiffs' Notice of Motion without formally commencing separate proceedings but I accept Mr Levet's submission that s.73(1)(a) of the Civil Procedure Act 2005 (NSW) and Dimarti v Dimarti [2015] NSWSC 97 Lindsay J [1]-[6] provide support for that course.
Mrs Papp claims in essence she was afflicted by anxiety and panic attacks during the day of the mediation and that when she signed the Settlement Agreement her will was overborne by panic created by the stressful situation. There are matters about which she deposes that could only be known to herself, her husband, Mr Marshan and Dr Peden. She does not assert that the plaintiffs were aware of the condition from which she claims to have been suffering or that they took advantage of her or acted improperly. The only conduct of the plaintiffs which might have relevance is that before the mediation formally began they indicated that they did not want Mr Papp to be present at the opening session of the mediation because they felt (or claimed to have felt) intimidated by him. There is no dispute that Mr Papp left the opening session and returned some 20 minutes to half an hour later by which time Mrs Papp and her lawyers were in their room and the plaintiffs and their lawyers were in their room. There is no dispute that Mr Papp remained with Mrs Papp for the rest of the day up to and including settlement.
Neither Ms Williams nor the plaintiffs were cross-examined on their affidavits. Ms Williams deposes to the following:
1. The mediation started at 10:00am and ended at approximately 5:15pm
2. Ms Williams made contemporaneous notes during the course of the mediation: see Annexure A to her affidavit. The notes record inter alia the offers made on behalf of the plaintiffs and Mrs Papp and a transcript of the offers became Exhibit B.
3. Mr Armfield's notes of the settlement are found at p.13 of Ms Williams' affidavit.
4. The course of offers (from Exhibit B) were:
FIRST OFFER FROM PLAINTIFF TO DEF 11AM
1.40% to DEF/30% & 30% to PL
2. Independent administrator
3.2009 will
4.No trust
5.Each party pay own costs
SECOND OFFER FROM DEFENDANT TO PL AT 11.20AM
1. 2011 will
2. Everyone's costs from estate
3.Independent administrator
4.Division 80% to DEF /20% to PL
THIRD OFFER FROM DEFENDANT TO PL AT 12.10AM
1. 60%toDEF/40%toPl
2. 2011 will
3. Independent administrator
4. Pay own costs
FOURTH OFFER FROM PLAINTIFF TO DEF, TIME NOT SPECIFIED -(BOTTOM PAGE 3)
1.45%toDEF/55%toPl
2.Independent administrator
3.Pay own costs
4.Interim distribution from moneys from Public Trustee to allow AP & H (husband) to move out of house- within 2 weeks of (probate) Court orders. Cheque to agent for bond and 6 months' rent, money to be brought into account when final distribution
5.WT and VT will within 4 weeks prepare house for sale max-$ 20,000.00 receipts to be provided
FIFTH OFFER FROM DEFENDANT TO PL, 1.20PM
1.45% to PL/55% to DEF. 2009 will
2.Independent administrator
3.Pay own costs
4.Order for possession - 3 months to vacate after Probate/G/A
5.$ 20,000.00 without conditions- I month after grant of administration
6.Distribution of contents of property as per schedule
SIXTH OFFER FROM PLAINTIFF TO DEF, 1.50PM
1.45 % to DEF/ 55 % to PL
2.2009 will
3.Independent administrator
4.Remain in property up to one month from date of orders to provide time to find alternative accommodation. By agreement the costs of the bond and six months rental to secure accommodation plus $ 3,000.00 moving costs to a maximum of $ 20,000.00 to be advanced from moneys held by the Public trustee, such amount not to be required to be brought to account in a final distribution.
5.Return of the following items :-(6 weeks-25/11/2015)
6.Advance of $ 20,000.00 to WT and VT for the purpose of cleaning and renovating the property for sale from Public Trustee, receipts to be produced.
SEVENTH OFFER FROM DEFENDANT TO PL, TIME NOT SPECIFIED
1.52.5% to DEF/47.5% to PL
2.Independent administrator
3.Own costs
4.$ 20,000.00 without conditions
5.Possession 8 weeks from (today) date of order
6.Still in process of deciding contents
7.Renovations $ 20,000.00
Solicitor rang other Solicitor who agreed to act as administrator
EIGHTH OFFER FROM PLAINTIFF TO DEF, TIME NOT SPECIFIED
1.51%toDEF/49%toPL
2.-7. As above agreed.
Settled as per terms of mediation.
It will be observed that:
1. In contrast with the plaintiffs' opening position of 60% to them and 40% to Mrs Papp, and Mrs Papp's position of 80% to her and 20% to both the plaintiffs, the position on settlement ended up as 51% to Mrs Papp and 49% to the plaintiffs.
2. The fourth and subsequent offers and counter offers all addressed the question of how long Mr and Mrs Papp would have in the property before being required to vacate and the offers from the plaintiffs at 1:50pm and later (and Mrs Papp's response) involved the plaintiffs agreeing to advance money to Mrs Papp to enable her to clean up the property (on Ms Williams' affidavit) or to take up alternative accommodation (on Mrs Papp's understanding).
3. The Settlement Agreement reflected the terms of the eighth offer made on behalf of Mrs Papp which was accepted orally and then reduced to writing first as a note of the mediator and then in the Settlement Agreement.
Mr Tomac says at paragraph 11 of his affidavit:
"I am familiar with Anna's demeanour, having spent many years interacting with her. On 14 October 2015 it was my observation that Anna's demeanour was no different from usual. She appeared composed, calm and behaved appropriately when issues were raised by the speakers. I saw no indication that she was other than her usual self"
Ms Tomac says that on 14 October 2015 Mrs Papp appeared to be calm and confident as usual at the initial opening meeting and that she did not notice any difference from Mrs Papp's usual demeanour when Mrs Papp left the venue after the terms were signed. She also says (as does her brother) that she has never observed Mrs Papp unable to cope.
In her affidavit Mrs Papp deposed to a number of matters concerning the day of the mediation:
1. She is 53 years of age and has been in receipt of a Disability Support Pension due to health problems namely cerebral palsy, asthma and chronic sinusitis.
2. When her mother passed away in 2011 she began to "experience stress and anxiety" which she says she has continued to suffer since then.
3. Dr Peden told her shortly before the mediation was about to start that the other side did not want Mr Papp in the room and that "he would have to leave" the explanation given to her was that the plaintiffs say that he is aggressive and she "began to feel palpitations" in her chest and "feelings of panic" and that she said to Dr Peden and Mr Marshan words to the effect:
"If my husband can't stay with me then I would like to go home. I am not comfortable being in the same room with them. I need my husband there to support me. My brother is a bully."
Mrs Papp says that Mr Marshan said that Mr Papp had to go whereupon Mr Papp left and Mr Marshan said:
"Calm down it's alright. We are here."
Mrs Papp says she continued to experience feelings of panic and did not see her husband again for about half an hour.
1. That Ms Gibbons (the plaintiffs' barrister) said in her presence words to the effect:
"Antonia would be better off going to work than staying at home on a pension,"
and that hearing that comment:
"stressed me, and made me panic more."
1. What must have been the opening session lasted for "about 20 minutes" according to Mrs Papp and she felt very stressed:
"because Antonio was not there to support me. Antonio returned about 5 minutes later, but by that stage I was so stressed and continued to be stressed for the remainder of the day."
1. Mrs Papp says that after lunch she heard the mediator saying to Dr Peden and Mr Marshan words to the effect of:
"The 2011 Will was not done properly. Your client should settle 50/50 with her brother and sister"
Mrs Papp in her affidavit said she told the mediator in the presence of Mr Marshan and Dr Peden:
"No I am not prepared to do that"
1. Mrs Papp says that at one point there was discussion between Mr Marshan and Dr Peden about their holidays and their children's schooling. Mrs Papp says of this:
"This made me feel anxious and stressed as I felt they were not paying proper attention to my case."
1. Mrs Papp says that:
"At some stage during the afternoon, I heard Dr Peden say to Mr Marshan 'Ill have to leave early. I have a Court hearing in Melbourne tomorrow and I don't want to miss my flight.'"
1. I set out the balance of Mrs Papp's affidavit paragraphs 23-29:
[23] At this point I became more anxious. I could feel palpitations in my chest and I felt faint. I said to my husband: "I want to go home because this doesn't seem right to me I feel like my body is shutting down." I turned round and said the same thing to Mr Marshan and Dr Peden.
[24] I have only a vague memory of the rest of the Mediation. I recall Dr Peden saying: "I'm going to miss my flight, I have to go." And then leaving.
[25] I don't recall a great deal of what happened after that. I recall a document being placed in front of me and Mr Marshan saying: "Just sign it. It's alright."
[26] At that stage I needed to be anywhere except that room. I would have done anything, said anything or signed anything if it meant I could get out of that room. I remember signing the paper.
[27] I recall leaving the Mediation with my husband a short time later. As I left I began to feel stressed and remembered signing something.
[28] I recall parts of the car trip home with Antonio telling me what had happened. I recall feeling very stressed. The next day I was still feeling very stressed and Antonio took me to see my general practitioner. My general practitioner was not there but I saw another Doctor who prescribed some medication for me.
[29] Before I entered the Mediation, it was my intention to attempt to maintain the terms of the 2011 Will. I was prepared to give a very small amount of money to each of my brother and sister for them to go away and cease their action. I at no stage intended to agree to a sale of my late father's home in which I have resided for many years with my husband. I would rather have gone to court for a hearing than come to an agreement which resulted in the sale of the home. I do not know how it was that I came to sign the agreement. I say that my will and intent was overborne by panic created by the stressful situation."
Mr Papp in his affidavit says:
1. That Dr Peden said to him in the presence of his wife that the plaintiffs did not want him present (at the opening session) and that his wife responded as Mrs Papp deposed. He says that Mr Marshan said:
"There is no need to be scared. Elizabeth and I will be present"
or words to that effect and that Mr Marshan asked him to leave and have a coffee and return in 20-30 minutes. He says he left and
returned at approximately 10:35am. Mrs Papp told him that the plaintiffs' solicitor had told her that she was better off going to work,
"I observed my wife become anxious and start to panic,"
he says since 2011 his wife has suffered from stress and panic attacks and he is:
"familiar with her tone of voice and demeanour when she is panicking,"
and he says he formed the view that she started to panic when he was asked to leave.
1. That the mediator said:
"The 2011 Will was not done correctly. Your client should settle 50/50 with the other side,"
and that his wife replied immediately saying,
"No, I'm not prepared to do that."
1. He confirms that Dr Peden and Mr Marshan discussed holidays and their children's schooling and that Dr Peden told Mr Marshan she would have to leave early as she had to catch a flight to Melbourne.
2. He says that:
"At this point my wife appeared to be becoming more and more anxious,"
and that she whispered to him,
"I want to go home because this doesn't seem right to me. I feel like my body is going to shut down,"
and that she then said the same thing to Dr Peden and Mr Marshan.
1. That Mr Marshan then said:
"You'll be fine, don't worry."
1. Mr Papp says that he then said to Mr Marshan and Dr Peden:
"I've known my wife for 9 years. What'll happen if she has a breakdown. She is showing signs she is not coping"
Mr Papp does not depose to any response from Mr Marshan or Dr Peden.
1. That at 4pm Dr Peden said to Mr Marshan when an offer of 51/49 was made (by the plaintiffs):
"Deal with it. I'm going to miss my flight. I have to go."
1. He says that Dr Marshan referred to the $20,000 offer "to rent a place or put a deposit on a house" and that Mr Marshan said to Mrs Papp:
"There is a provision that you can have $20,000 immediately to rent a place or put a deposit on a house. Don't worry I will write a letter to the bank to try and get you a loan to purchase a home" (paragraph 22).
1. He says that when Dr Peden said she had to leave he observed his wife become more anxious,
2. that he said three times to his wife:
"Don't sign it. Think about it with a clear head. There isn't any hurry,"
1. that Mr Marshan raised his voice to his wife and said:
"Just sign it. It's alright,"
1. that,
"My wife appeared to be bewildered. She did not acknowledge me. She appeared to be dazed. I saw her sign the papers. The mediation then concluded. As we were leaving, my wife said to me 'I think I did a mistake. I'm not sure what I've done."
The evidence is that on the day following the mediation Mrs Papp went to see her doctor. Her usual doctor (Dr Kochan) was not there so she saw Dr Kumaran who prescribed medication for her. Mrs Papp says that she did not take any of the medication prescribed.
Dr Kumaran's medical certificate is in the following terms:
"This is to certify that I have examined Mrs Antonia Papp today. She consulted me in 15 October 2015. She was very anxious at the time of consultation. She was prescribed Diazapam 2mg to help control her anxiety" (see Annexure A of Mr Papp's affidavit).
Dr Adam Martin is a psychiatrist. He was retained by Mrs Papp's solicitors to provide an expert report. The report, dated 10 November 2015, is annexed to Dr Martin's affidavit.
Dr Martin was asked to provide an opinion on a number of questions namely:
"Required Contents of Report
Could you please, as a matter of urgency, provide us with a medical report. Could your report please address the following questions:-
1. Diagnosis of any mental condition currently suffered by our client.
2. If the diagnosis is a mental disorder, then the cause of such mental disorder.
3. Any recommended treatment.
4. Prognosis.
5. Whether, in your opinion, our client was in a position to fully comprehend the effect of the legal proceedings as at 15 October 2015.
6. Whether our client was in a position to give instructions to her legal representatives as at 15 October 2015 to settle such legal proceedings.
7. Whether our client presently fully comprehends the nature of legal proceedings.
8. Whether our client is currently able to give effective instructions in relation to any ongoing legal proceedings.
9. In the event that our client has a mental disorder, any recommendations you may have for its management.
10. Any other matters you consider relevant.
We enclose herewith a copy of the Expert Witness Code of Conduct of the Uniform Civil Procedure Rules Schedule 7. Please confirm in your report that you have read such Code of Conduct and agree to be bound by it.
As the matter is before the court on 16 November 2015, could you please let us have a copy of your report as a matter of urgency."
Dr Martin noted that Mr Papp was present during his interview with Mrs Papp. Much of what Dr Martin records in the history is the same as that deposed to by Mrs Papp in her affidavit. She did tell Dr Martin that:
"her solicitor had not explained the facts of the matter adequately and not represented her properly. She said that she had felt 'pressured' to sign after the five hour hearing. She said that her husband had informed her that she was going to have a panic attack but that 'her lawyers didn't really care.'"
Mrs Papp told Dr Martin that at the time she signed the document she had been experiencing an anxiety attack- that she was "shaking" and telling her solicitor she was anxious and that:
"he laughed and 'said just sign it,' expressing the view that they just wanted it over and done with."
Dr Martin summarised the account as follows:
"essentially she gave an account of having signed an agreement when not in an appropriate mental state, where she felt vulnerable, fatigued and unduly pressured and where she was not adequately represented given her anxious mental state and where she said that essentially she felt 'overwhelmed following the lengthy proceedings'"
(p.3)
Mrs Papp told Dr Martin that she was currently taking St John's Wort (which he described as an over-the-counter herbal remedy for anxiety and depression). He notes that Mrs Papp had been prescribed medication for anxiety attacks but that she had not taken it. He notes that Mrs Papp had not seen a psychologist or psychiatrist for treatment. She told him that she had developed "anxiety symptoms in the aftermath of her mother's death." She said that she had never been admitted to a mental health unit or that she had ever deliberately self- harmed or attempted suicide (p. 3). On p. 4 he described her mental state on examination:
"She presented as a person of stated age who was reasonably kempt. She interacted appropriately during the interview She was co-operative. She maintained good eye contact. In speech, she was mildly pressured and had to be interrupted at times, and asked to slow down in order that I could take down historical details She presented as anxious, distressed and she was quite labile, being tearful at times although also able to smile appropriately occasionally In thought content, she expressed distress at her proneness to anxiety and panic in the context of her feelings of being overwhelmed by the stressful nature of the legal proceedings. For instance, she said that the night before this appointment that papers were attempted to be served at her house at 8.30 in the evening and she felt extremely distressed when she found out about this. She expressed a sense of distress at reported conflictual relationship with her siblings and she appeared pre-occupied by her sense of injustice around this. She was adamant that she had been highly distressed and anxious at the time of the family provision proceedings which she stated affected her judgment at the time.
No psychotic phenomena were noted. No acute cognitive deficits were noted and she presented as alert, orientated and able to concentrate on the process of today's interview, which took place over one hour. She showed reasonable memory for recent and past events from what I could ascertain. Formal neuro-cognitive testing was not undertaken and is outside my area of expertise. I thought she displayed reasonable insight."
Dr Martin diagnosed Mrs Papp as having:
"an unspecified anxiety disorder and that she has an array or various anxious symptoms including a predisposition to panic attacks in certain stressful situations and has underlying increased tension, fatigue and worry"
and he said:
"5. It is difficult to know absolutely how her capacity to fully comprehend the effect of the legal proceedings was on 15 October 2015 [sic]. However, given her account, which appeared genuine and consistent, I think it is reasonable to form the opinion that she would have been likely to have been vulnerable, and in the context of panic symptoms and increased anxiety that she would not have fully understood exactly what was occurring. That is, in my view it is plausible and probable that she did not exercise sound judgement given the circumstances described above. This obviously relies on her being a truthful and accurate historian, but on the face of the available information, I have no reason to doubt her account and as noted above, she presented as a genuine historian who objectively looked highly distressed and anxious.
6. Again, given the above account, I think it is plausible and probable that her capacity to give instructions to a legal representative was significantly impaired, in the context of her heightened anxiety and panic symptoms.
7.I think Mrs Papp does understand the gist and framework around the nature of the legal proceedings to an adequate level. She certainly appeared aware of the salient issues which you have outlined in your letter of instruction and was able to recall and describe the important issues during today's interview."
8. The impression I formed was that Mrs Papp probably is currently able to give effective instructions to you in relation to ongoing legal proceedings. I think it is highly likely that she will continue to present as anxious at times although I think that if given appropriate breaks and with an appropriate support person that she will be able to instruct her lawyer adequately.
9. In relation to ongoing management, as noted above, I think it would be reasonable for her general practitioner to review medication and to prescribe an antidepressant once other medical causes of anxiety have been excluded. I think she should be referred to see a psychologist for cognitive behavioral therapy aimed generally around managing anxiety and specifically at how she might deal with the ongoing legal issues."
I summarise various matters from the evidence (other than medical evidence) which are not in dispute:
1. The defendant's four offers (like the plaintiffs' offers) all involved a division of the estate that could only be put into effect by the sale of the property in which Mr and Mrs Papp reside: T20-T21.
2. The plaintiffs' offer which was accepted produced a result for Mrs Papp that was a considerable improvement for her on the provisions of the 2009 Will because:
1. The 2009 Will gave her a life interest only, in one third of the net estate and by the Settlement Agreement she is to receive a 51% both legal and beneficial interest in the net estate.
2. The plaintiffs, by the 2009 Will, had control of Mrs Papp's one third share and are executors of the estate but by the Settlement Agreement an independent solicitor acceptable to both parties (Ms Reid) is to be appointed.
1. Mrs Papp was aware of what is in (2)(a)-(b) when she signed the Settlement Agreement: T22.22.
2. Mrs Papp at all stages of the mediation had present with her Mr Marshan a solicitor who she had known for a number of years and whom she regarded as a friend: T22.11.
3. Mrs Papp had Dr Peden present with her at all stages of the mediation including the acceptance of the eighth offer but not at the point when Mrs Papp signed the Settlement Agreement who she had met with several times for the purposes of the case: T17.36-39, 22.16.
4. That although Dr Peden said she had to leave, on Mrs Papp's evidence she did not leave until after Mrs Papp had accepted the eighth offer: T17.25-30.
5. Mrs Papp at all stages of the mediation, except the opening session, had her husband present with her: T14.37-40, T27.10-17.
6. Mrs Papp understood at all relevant times that there could in the forthcoming Court case be no certainty that the 2011 Will would be accepted as valid and that even if it was she would have to succeed in defending the plaintiffs' FPA claims: T23.7-T24.6 and see T13.13-34.
7. Mrs Papp was aware that to take the case to trial would involve further costs for her beyond the estimate of $80,000- $85,000 incurred to that point: T25.3-7.
8. Mrs Papp can read English and Mr Marshan went through with her the document which she signed: T18.24-32.
9. Mrs Papp was endeavouring to get the best possible settlement if the case was going to settle: T24.5-10 and see T20.1-3, and she accepted at T10.42 that she was told that she could not have everything she wanted if there was to be a settlement.
Mrs Papp does not claim that the Settlement Agreement was in any respect induced by unconscionable, harsh or oppressive conduct (or indeed any conduct) on the part of the plaintiffs. Further there is nothing to indicate that the settlement was anything other than a very appropriate settlement of litigation the outcome of which was uncertain and one outcome of which would have been far less advantageous to Mrs Papp than the settlement she succeeded in obtaining at the mediation.
A further significant matter is that it is not suggested by Mr Levet that the plaintiffs were aware of any of the matters of which Mrs Papp complains other than that it was their request that Mr Papp not be present in the opening session a request which Mrs Papp's lawyers acceded to.
Clause 2 of the 2011 Will is expressed as follows:
"PROVIDED she survives me I APPOINT my daughter Antonia Elsa Papp of 24 Hilltop Avenue Blacktown in the state of New South Wales Executrix and Trustee of this my Will and GIVE DEVISE AND BEQUEATH after payment of all my debts funeral and testamentary expenses including all death estate and succession duties payable upon or in consequence of my death and subject thereto the whole of my estate of whatsoever kind and wheresoever situation."
The absence of identification of the intended beneficiary might explain the mediator's comment (if he did make such a comment as Mr and Mrs Papp allege).
The relevant sections of the CRA for present purposes are the following:
S. 7 Principal relief
(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:
(a) it may decide to refuse to enforce any or all of the provisions of the contract,
(b) it may make an order declaring the contract void, in whole or in part,
(c) it may make an order varying, in whole or in part, any provision of the contract,
(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that:
(i) varies, or has the effect of varying, the provisions of the land instrument, or
(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.
(2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order.
(3) The operation of this section is subject to the provisions of section 19
S. 9 Matters to be considered by Court
(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of:
(a) compliance with any or all of the provisions of the contract, or
(b) non-compliance with, or contravention of, any or all of the provisions of the contract.
(2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following:
(a) whether or not there was any material inequality in bargaining power between the parties to the contract,
(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation
(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract,
(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract,
(e) whether or not:
(i) any party to the contract (other than a corporation) was not
reasonably able to protect his or her interests, or
(ii) any person who represented any of the parties to the
contract was not reasonably able to protect the interests of any party whom he or she represented,
because of his or her age or the state of his or her physical or mental capacity,
(f) the relative economic circumstances, educational background and literacy of:
(i) the parties to the contract (other than a corporation), and
(ii) any person who represented any of the parties to the contract,
(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed,
(h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act
(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect,
(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act:
(i) by any other party to the contract,
(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or
(iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract,
(k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and
(l) the commercial or other setting, purpose and effect of the contract.
There are a number of Court of Appeal cases which provide guidance on the interpretation and application of the CRA: West v AGC (Advances) Ltd (1986) 5 NSWLR 610 ("West"), Antonovic v Volker (1986) 7 NSWLR 151 per Samuels JA Kirby P agreeing p.157 C-D, Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41; (2005) 14 BPR 26,639 ("Khoshaba"), Nguyen v Taylor (1992) 27 NSWLR 48 ("Nguyen"), Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296 ("Elders"), Beneficial Finance Corp Ltd v Karavas (1991) 23 NSWLR 256, Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 at p.420, Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; (2002) 11 BPR 20,841, Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389; (2011) 15 BPR 29,699. In addition to these cases there is a decision of Dimarti to which Mr Levet made reference.
I have been assisted by the summary of the law found in Covell & Lupton's Principles of Remedies (6th edition, Lexis Nexis 2015) at 16.4-16.7.
There was no dispute by Mr Ellison that the Settlement Agreement is a contract which comes within the purview of the CRA. Mr Ellison contended that the Court must first determine whether the contract in question is "unjust" or "unfair" unconscionable, harsh or oppressive but he conceded that "unjust in circumstances relating to the contract at the time it was made" appears to permit the Court to view the contract as "unjust" within the meaning of the CRA even if it is not shown to itself be unfair harsh, or oppressive in its terms. Another question of principle is whether an order can be made even where the other party to the contract in question has had no role in creating what is claimed to be the unjustness. Karavas per Meagher JA at p.277, Elkofairi at [78] and Nguyen p.55B per Kirby P. and p.71D per Sheller JA indicate that the Court can do so, and semble Meagher JA at p.61F.
The Court in Nguyen applied a dictum of Meagher JA in Karavas:
"There is jurisdiction under the Act to make orders in favour of a party to a contract who proves that at the date of the contract he suffers from a relevant disability even though the other party to the contract is unaware of that disability, although in general it would be unsound to exercise the jurisdiction in those circumstances."
In Khoshaba Basten JA (with whom Handley JA agreed), formulated a two-stage approach to claims under the CRA once the primary facts have been determined i.e:
1. determine whether the contract is unjust (an evaluative judgment as to whether the facts satisfy a statutory description),
2. if the contract is found to be unjust determine whether the relief available under the CRA should be granted (a discretionary determination),
and see Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2007) ANZ ConvR 615 per Brereton J at [51], a case to which Mr Levet referred in this context.
Thus in Nguyen, whilst the Court came to the conclusion that the contract was unjust because it gave the vendor no opportunity to get out of the contract within 30 days as the vendor's real estate agent had told him he could, the Court unanimously denied relief to the vendor as a matter of discretion. The two reasons for that refusal were:
1. The other party to the contract were entirely innocent of the unjustness.
2. The plaintiff had very likely alternative remedies against the real estate agent.
The following principles can be derived from West:
1. The CRA is "beneficial legislation" to be "interpreted literally:" West per Kirby P p.611, McHugh JA at p.631, Hope JA at p.618
2. The Court can consider circumstances which were not known to the other contracting party but:
1. The Court cannot have regard to any injustice arising from the circumstances that was not reasonably foreseeable at the time the contract was made.
2. While knowledge of a circumstance by the other party "is not a condition precedent to the consideration of that circumstance, his lack of knowledge may render the circumstances of less materiality than it would if he was aware of it" (West p.620).
1. A contract can be unjust because of the way it operates, or because it imposes an unreasonable burden on the claimant when it was not reasonable for the protection of the legitimate interest of the other party: McHugh JA p.620 (Hope JA p.618)- i.e what might be labelled "substantive injustice." A contract may be unjust because in the circumstances the claimant "did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract" p.620F- i.e. what might be labelled "procedural injustice."
2. In relation to procedural injustice "if a contract or one of its relevant provisions is neither unfair nor unreasonable so far as the applicant is concerned it is difficult to see how the existence of inequality in bargaining power or lack of independent advice, for example, can render the contract or a provision of the contract unjust:" West p.621C per McHugh JA.
3. The CRA regulates contracts not transactions: West per McHugh JA p. 621E.
4. Lack of independent advice or the fact that the contract was not in the interest of the applicant is insufficient: West p.621F per McHugh JA.
5. The CRA makes it plain that whether or not the contract or any provision of it is unjust "requires an examination of the position and rights of the party against whom relief is claimed:" West p.626D per McHugh JA.
The citation in 45 above provides some support for Mr Ellison's contention referred to in [41] above but I accept that it does not necessarily follow and Nguyen seems to support the contrary view. I shall proceed on the basis that the CRA does not preclude relief from being given merely because the contract itself is not in any way unfair or unjust.
In West McHugh JA said:
"I do not think that, as between AGC and Mrs West, it was unjust that AGC should obtain the mortgage even if Mr Young has exerted undue influence on her. AGC was not responsible for Mr Young's conduct and had no ground for suspecting that he was exerting any pressure or undue influence on her": p. 627A.
In Tonto Allsop P. (with whom Bathurst CJ And Campbell JA concurred), emphasising the importance of public interest said:
[269] The public interest is the subject of particular reference in the CRA , s 9(1). One aspect of the public interest recognised early is keeping people to their freely entered bargains: Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9. By stating the importance of this aspect of the public interest shortly, I should not be thought to be consigning it as a matter of mere note only. It is fundamental, indeed it inheres in the CRA itself. It is an aspect of society that is of vital importance. As Story J said, writing extra-judicially ("Contract" (1832) 9 Encyclopaedia Americana 156), "confidence in promises is ... essential to the existence of social intercourse among men ...". Its strength as an operative legal norm that can be seen as fundamental is directly related to circumstances which give it strength - the just and free circumstances that give rise to the bargain. As Finn J said, writing extra-judicially in "Unconscionable Conduct" (1994) 8(1) Journal of Contract Law 37 at 49, if parties are to be held to their bargains once made, the law should act with vigour to promote the conditions necessary to make the freedom of contract effective, free and just.
[270] Another aspect of the public interest is the advancement of the protection, which the CRA manifestly intends to give, to those not able fully to protect themselves and to those preyed upon by dishonesty, trickery and other forms of predation. The Peden Report (J R Peden Harsh and Unconscionable Contracts: Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales , 1976) said that the reference to public interest "would direct the courts' attention to the underlying purpose of the Bill, namely to prevent unjust dealings which offend against community standards of business morality": J R Peden The Law of Unjust Contracts (Butterworths, 1982) at 122.
I think that s.9(2) by specifically referring to the public interest requires that the Court must, in deciding whether or not a contract is unjust, take into account the public interest. I think it is clear from Tonto that it is a factor to be considered in every case. Where there has been dishonesty, trickery or other forms of predatory conduct the public interest in seeking that bargains are upheld is likely to weigh far less than where there has been no such conduct. I accept that in Nguyen the Court saw the innocence of the respondent as relevant to the discretion rather than the unjustness of the contract but the statute requires all of the circumstances to be considered in determining the s.9 issue. West I think demonstrates the importance of looking at whether the contract itself has any unfair or harsh terms and whether if there has been any procedural unfairness to the applicant the other party was responsible for, or aware of, that conduct.
There is a second element to the public interest which is relevant to this case. As the High Court has remarked Courts are keen to encourage settlement of proceedings. Mason CJ referred to "the public interest in the finality of litigation" see Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300; [1993] HCA 6 at p.302 a dictum to which reference was recently made in Mbuzi v AGL Retail Energy Ltd [2016] FCA 590 at [31] per Edelman J.
There has been over the last 30 years a most significant push towards early resolution of cases and a massive increase in the use of mediation. I think that it is a very real disincentive to acceptance of mediation as a process to permit a party who agrees to a resolution and signs settlement documentation to be able to resile from the agreement as a result of matters for which the other party had no responsibility and no knowledge. Parties to a mediation ought be able to be confident that if the opposing party, represented by lawyers, makes an offer through his or her barrister or solicitor that the offer can be accepted and reduced to writing and which when signed will be final.
In Dimarti Lindsay J was dealing with a defendant who had entered into a compromise agreement and sought to have that agreement and orders made pursuant to it set aside in reliance on the CRA. Lindsay J noted at [29] that the parties had agreed that both sides of the dispute had a bona fide case to advance and that it was neither necessary or appropriate to explore the merits of the claim and cross-claim which had been settled by the agreement. His Honour rejected the defendant's case saying inter alia:
"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."
I should add that I do not read Lindsay J, by saying what he did at [29], as treating as irrelevant the terms of the agreement which one party seeks to set aside; rather he was saying that it is not necessary to examine how strong the respective claims of the party were that were the subject of the Settlement Agreement (and in part because the parties had conceded as they do here, that they each had bona fide claims).
There was no point on which Mrs Papp was demonstrated to have given false evidence. There are however a number of matters which lead me to doubt the veracity of her and her husband's version of what occurred at the mediation:
1. She claims that she suffered an anxiety or panic attack on that day and that she had suffered anxiety since 2011 yet,
1. she has never seen a doctor prior to 15 October 2015 about anxiety,
2. she told Dr Martin that she took St John's Wort but there is no indication of when she took that and she does not assert in her affidavit that she has been taking that herbal remedy nor has she described in what circumstances and when and for what period she has been taking it.
3. She says that she was affected by anxiety on 14 October 2015 and Dr Martin accepts that she was, partly because she says so but also because of the effect he could observe on 9 November 2015. Nevertheless he concluded as at 9 November 2015 that she was able to properly instruct her solicitors and Counsel.
4. There is no independent evidence of her having suffered a panic attack, shaking or palpitations or having claimed to be suffering from such symptoms.
5. She has seen no doctor or psychologist (other than Dr Kumaran on 15 October 2015) before the mediation or after the mediation and she did not take the medication which Dr Kumaran prescribed.
6. The plaintiffs' unchallenged evidence undermines Mrs Papp's claims about her observable state.
1. Dr Martin expressed the view that Mrs Papp was able as at 9 November 2015 to give effective instructions in relation to the legal proceedings. Having regard to her performance in the witness box I have no doubt that she was able on the day of the hearing before me to properly instruct her solicitors and Counsel. It is difficult to conclude that were she able to do so on Monday 5 September 2016 and on 9 November 2015 she was not able to do so on 14 October 2015 when it is clear that she has taken no prescription medication nor had any treatment between then and now. It is likely that her appearance on 5 September 2016 and being subject to cross-examination was stressful for her but she was able to answer questions and indeed embark upon a forceful expression of her position and her view about the plaintiffs: (see T11.15-24, T12, T21 ). I accept that she may have found the mediation stressful and even that she may have been anxious but the real question is whether she was so affected by the stress and anxiety as a result of a condition that she could not properly make decisions about the settlement offers and most particularly the last offer made by the plaintiffs accepted by her through her lawyers and then recorded in an agreement.
2. She asserts that she always intended to uphold the 2011 Will. That contention is quite inconsistent with the offers that were made on her behalf at mediation, and see T23.15 - T24.10. At T17.25-35 Mrs Papp said in relation to the eighth offer from the plaintiffs, "we fought for it, yes but yeah, they had to go into it otherwise it would not finish."
3. The fact of the offers made on her behalf (and not said to be made without her instructions) undermines her contention that her anxiety was an impediment to her giving fully informed consent to the settlement: see T29.15-28 where she agreed that she had negotiated a deal after a number of hours of discussion T14.17-19.
4. She asserts that she had decided to leave the mediation because of her anxiety but she did not do so. Her explanation for not doing so is that her solicitors told her not to worry. Similarly later in the day she says she wanted to leave but the fact is she did not do so. A desire to leave the mediation if there were such a desire is not necessarily indicative of panic or anxiety but is consistent with frustration at the pace of negotiation.
5. Mr Papp says he told Mrs Papp to think about the Settlement Agreement before signing it: T39.16-47, but Mrs Papp did not say in her affidavit that he told her that.
6. There is no evidence from Mr Marshan or Dr Peden corroborative of Mrs Papp's claim that she and her husband told them she was experiencing a panic attack, or debilitating anxiety. Mr and Mrs Papp's' evidence is that Mr Marshan and Dr Peden effectively ignored Mrs Papp's condition even when she was, on her evidence, shaking and on Mr Papp's evidence that he said to them "look at her she is having one of those- look I know her and I don't think she is fit to be signing anything" T30.6-26. I find that unlikely. I should add that the allegations involve a serious breach of professional obligation on the part of Mr Marshan and Dr Peden and to make findings of such conduct would require persuasion to a level that takes into account their seriousness. Were I however to accept that Mr Marshan and Dr Peden were informed of, and did not take heed of, Mrs Papp's proclaimed discomfort and unfitness to proceed that could give rise to claims against them - a matter relevant on discretion.
7. Mrs Papp when asked about whether a settlement involves a compromise said, "Yes. Well, I had to do it because you know they just wouldn't let it go. That is the problem" T20.5-8.
8. Mrs Papp in her affidavit referred to the mediator's comments but she did not actually say she was influenced by them. Under cross-examination she said that Mr Marshan and Dr Peden told her that "the only way out is this way" and she asked Mr Marshan "is it ok to sign it" and "so I signed it thinking he knew better than I did. That makes me upset:" T18.40-45 and see T30.35. She also spoke of her trust in Mr Marshan and Dr Peden: T22.20. Such reliance is a quite different matter to a claimed inability to properly consider the proposed settlement.
9. Whilst Mrs Papp claimed in her affidavit that she could recall little from what occurred at the mediation Mr Ellison elicited a number of concessions about what had occurred during the course of the day.
10. What is recorded by Dr Martin and referred to at [31] is not contained in her affidavit and nor is the evidence she gave in cross- examination at T30.6-13.
There is no doubt regret by Mrs Papp, that she agreed to settle because she felt afterwards and on further reflection that she could have successfully resisted the plaintiffs' claims or even that she ought to have resisted those claims whatever the outcome.
The matters to which I have referred in [34]- [36] [53] -[55] leave me unpersuaded that Mrs Papp had a condition which precluded her from giving proper consideration of the settlement proposal and giving instructions to, and understanding the advice of, her solicitors.
The failure of Mrs Papp to establish that she was not able to properly consider whether to enter into the Settlement Agreement by reason of a mental condition leads inexorably to the conclusion that she is not entitled to have the Settlement Agreement set aside pursuant to the CRA. I shall however consider the matter on the basis that she has established that she was overcome by panic and or anxiety and was not able to properly consider the effect of the settlement.
Even accepting Mrs Papp's evidence that she experienced a panic attack and was not properly able to consider the effect of the settlement I am not persuaded that the Settlement Agreement was unjust in all the circumstances relating to the contract because of the following matters which s.9 requires to be considered:
1. the plaintiffs had no knowledge of her anxiety problem,
2. the plaintiffs were entitled to understand that the offers which were made by them to Mrs Papp and offers made by Mrs Papp to them were properly considered and the subject of appropriate advice and assistance to Mrs Papp. The need for the plaintiffs to move from their opening position to 51:49 and with other terms favourable to Mrs Papp would have generated an impression that Mrs Papp was well advised and actively protecting her position,
3. Mrs Papp had legal representation- not only a solicitor but also a barrister,
4. there is nothing to indicate that there is any unfairness in the Settlement Agreement itself and there was no suggestion to the contrary. It appears on its face reasonable giving Mrs Papp a result considerably better than the position she would have been in if the 2011 Will was not upheld. Further the Settlement Agreement clearly reflected what had been proposed by the plaintiffs by their eighth offer and accepted by Mrs Papp,
5. there was absolutely no inequality of bargaining power,
6. the provisions were all the subject of intense negotiations with the benefit of legal advice,
7. it was entirely practical for Mrs Papp and those advising her to reject or have altered any of the provisions,
8. Mrs Papp was literate and understood what was offered by her and what was contained in the Settlement Agreement,
9. no undue influence was exerted by anyone on Mrs Papp,
10. there was no dishonesty, deception, trickery or predatory conduct on the part of anyone and the public benefit considerations strongly favour the conclusion that the contract was not 'unjust' within the meaning of the CRA.
11. The public interest considerations to which I have earlier referred favour the conclusion that the Settlement Agreement should stand.
If I am in error in concluding that in all the circumstances of the case the Settlement Agreement is not unjust, then I would for the same reasons articulated in [57] above not exercise my discretion in this case to set aside the Settlement Agreement. That was the approach of the Court of Appeal in Nguyen (and the trial judge in that case) and whilst in that case the applicant had been misled by his vendor whereas here the applicant relies on her mental state I think that similar considerations apply: i.e. the plaintiffs had no knowledge of the condition of Mrs Papp nor had they taken advantage of Mrs Papp by accepting her offer and there is nothing harsh or unconscionable or unfair about the Settlement Agreement. Mrs Papp, unlike Mr Taylor in Nguyen, had the benefit of legal representation throughout the day.
It follows that Mrs Papp's application to set aside the Settlement Agreement should be dismissed and the orders sought by the plaintiffs for enforcement should be made.
Mrs Papp should pay the plaintiffs' costs of the plaintiffs' Notice of Motion as agreed or assessed.
[2]
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Decision last updated: 15 October 2016