Bridgecorp Limited v P HC Auckland CIV 2011-404-001573 [2011] NZHC 1639 (28 October 2011)

Last Updated: 23 November 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV 2011-404-001573}

BETWEEN BRIDGECORP LIMITED Plaintiff

AND P Defendant

Hearing: 28 September 2011 and 14 October 2011

Appearances: B J Burt and J Learner for the Plaintiff in person the Defendant

Judgment: 28 October 2011

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

28.10.11 at 10:00am, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors/Counsel:

B Burt, Chapman Tripp, Auckland – [e-mail] / [e-mail]

_{Copy to: P Pa’u, Auckland – [e-mail]}

BRIDGECORP LIMITED V P HC AK CIV 2011-404-001573 28 October 2011

[1] On 18 March 2011 the plaintiff filed its proceeding and immediately sought entry of judgment against the defendant on the basis of an admission of claim the defendant had signed pre commencement of the proceeding. The matter was referred to Associate Judge Bell who directed the plaintiff to serve the proceeding and noted that the defendant had not been given any opportunity to contest the claim for entry of judgment against him.

[2] On 5 May 2011 a statement of defence was filed. By it the defendant acknowledged being a party to a deed of settlement but claimed the deed was invalid because he signed it under duress, as a result of undue influence, without taking legal advice and without legal representation, and whilst at the time suffering from a mental disorder which the plaintiff knew about, and at which time the deed represented a unconscionable bargain.

[3] In reply the plaintiff pleaded that it appeared from correspondence and communication that the plaintiff was receiving legal assistance and had taken legal advice; that the plaintiff was unaware the defendant was labouring under a mental disorder at the time.

_{The debt}

[4] The defendant and his uncle, Mr Galuvao were registered proprietors of a property at Bright Street, Kingsland, as tenants in common. Mr Galavao owned a three quarter share of the property and the defendant owned a quarter share.

[5] On 14 December 2004 the defendant forged his uncle‘s signature on an

enduring power of attorney in relation to the property, which named Mr Galavao as doner, and the defendant as donee.

[6] On 1 June 2006 the plaintiff obtained judgment against a Mr Suttie, the defendant‘s cousin, and soon after commenced a bankruptcy proceeding against Mr Suttie. The defendant then approached the plaintiff with an offer to settle matters on behalf of Mr Suttie. The proposal was for the defendant and Mr Galavao to pay a discounted amount to the plaintiff over a period of months and to secure payment of

that debt against the property. In return, the plaintiff would agree not to pursue Mr

Suttie in bankruptcy.

[7] On 13 September 2006 the defendant (on behalf of himself and as the purported attorney of Mr Galavao) executed a deed of assignment and an acknowledgement of debt (the 2006 deed) which required payment of the sum of

$50,000 plus interest, by 8 May 2007 and in consideration of which a third ranking mortgage over the property was granted in favour of the plaintiff.

[8] The mortgage fell into default and the plaintiff took steps to exercise its powers under the mortgage. On 9 December 2008 Mr Galavao brought a proceeding against the plaintiff, seeking to prevent it from exercising its power of sale over the

_{property, and claiming that the power of attorney had been forged by the defendant.}

[9] On 15 February 2010 the High Court held that Mr Galavao was entitled to a discharge of the mortgage over the property in respect of his three quarter share, but that the plaintiff held a valid security over the defendant‘s one quarter share of the property. The judgment also indicated that the plaintiff would be entitled to obtain an order for the sale of the property, in order to exercise its security over the

_{defendant‘s one quarter share.}

[10] Before final orders were issued by the Court Mr Galavao, the defendant and the plaintiff entered into the settlement deed which the plaintiff relies upon in its current proceeding against the defendant (the deed of settlement).

The deed of settlement

[11] It was executed on 21 September 2010. It referred to the 2006 deed by which the defendant agreed to pay the plaintiff $50,000 by 8 May 2007.

[12] It refers to Mr Galavao‘s claim that the defendant had forged a power of attorney in order to execute a mortgage over Mr Galavao‘s share of the property. The deed of settlement contains the defendant‘s acknowledgement of his indebtedness to the plaintiff in the sum of $58,173.99 together with interest at 10 per

cent from 8 July 2010, and as well for other charges totalling an additional

$10,000.00.

[13] The deed of settlement contains the defendant‘s acknowledgement of a

liability to pay $68,173.99 by instalment sums on certain detailed dates, and from 5

August 2011 to make weekly payments of $300 until the debt was cleared.

[14] The deed of settlement required strict compliance with payment obligations and for the total debt to be payable in full if there was a failure to make payment of any instalment by the prescribed date.

[15] The deed of settlement also provided for the defendant to execute an admission of claim in the form annexed to the deed which admission could not be filed unless there was a failure to make a payment. In the event of default the plaintiff was permitted without further notice to file the admission of claim and immediately to apply for judgment. Clause 12 of the Deed noted:

[The defendant] irrevocably authorises [the plaintiff] to file the admission of claim under Rule 15.16 of the High Court Rules, on behalf of [the defendant].

[16] The deed also provided that the mortgage registered in favour of the plaintiff

would provide security for the defendant‘s payment obligations.

[17] The deed bears the signature of the defendant. It was signed at the plaintiff‘s solicitor‘s office and the defendant‘s signature was witnessed by a staff member.

[18] The deed also bears the signature of Mr Galavao and notes that signature was witnessed by Mr R S Phillips, solicitor of Auckland.

[19] At that time or soon thereafter the defendant signed an admission of claim.

[20] Pursuant to High Court Rule 15.16(2) an admission of the cause of action may only be withdrawn with the leave of the Court. When this provision was drawn to the attention of the defendant the defendant filed a notice of application for leave

to withdraw his admission of the claim. His application largely reiterated his reasons given in his statement of defence for claiming that the deed was invalid.

Application to withdraw admission of claim

[21] The defendant was a qualified lawyer, he having been admitted to practice. To this time he has acted for himself and has filed his own documents including the statement of defence and application to withdraw the admission. He has also prepared lengthy affidavits of his.

[22] In one dated 7 July 2011, he deposes being:

... very unwell at the time of signing the admission. I was suffering from depression and post traumatic stress disorder. This illness and the medication that I was taking for it, seriously impaired my judgment and ability to consider the matter properly. I was not legally represented, and had not taken legal advice prior to signing the admission. Further, I was harassed and threatened by the lawyer for the plaintiff into entering into an agreement, on terms extremely favourable to the plaintiff, and this included my signing the admission. They kept threatening to sell our home, and asserting that the Judge would order a sale, because of indications he had given in court as well as a judgment from a case in Australia referred to in the first judgment. I was under enormous strain, and pressure from these threats, and the real prospect of our family home being sold, with me, my wife, my uncle and my two children being put out on the street.

[23] The defendant deposed he was a lawyer until late 2007. He said he worked from 1996 to 2004 without incident. Later he says he found out that from late 2004 he started to have ―a serious mental/psychological/psychiatric breakdown‖. He identified personal background reasons that may account for his condition. Although counselling was suggested he did not undertake it. He said he decided ―I thought I could just put it away‖. He recounts from 2004 factors identifying his ‗decline‘. It was at around this time he said he became subject of complaints to the Law Society.

[24] Attached to his affidavit is a psychiatric report from Dr Rob Shieff dated 23

January 2008 which, the defendant says, he gave to a senior manager of the plaintiff, he thinks in 2008. He took it to the plaintiff so that his proposal for payment could be discussed with the plaintiff‘s receivers.

[25] Dr Shieff‘s report noted:

[The defendant] presents in a truly awful predicament, battling with chronic Post-Traumatic Stress Disorder, together with a now Multiple Recurrent Major Depression.

... Today [the defendant] was a casually dressed, fit looking man. He sat very comfortably. He built a rapport quickly. His interpersonal behaviours were normal. His psychomotor state was unremarkable... [His] speech production and thought form were normal. He was insightful into the nature of his problems.

[26] After reviewing factors associated with the defendant‘s position Dr Shieff noted it was then about time to introduce an antidepressant medication.

[27] The defendant also annexed a copy of a report dated 21 September 2009 from a Dr Mike Louw, consultant psychiatrist. That document was prepared at the request of ACC for a psychiatric assessment to assist with the defendant‘s rehabilitation and to clarify why he was unable to work.

[28] Dr Louw‘s report refers to the psychology and psychiatric reports of others including that of Dr Shieff. Dr Louw noted that he informed the defendant that he was assessing him as a non-treating clinician. He stated ―there were no concerns about his confidence‖.

[29] Under the heading Mental State Examination, Dr Louw noted:

... There was no evidence of psychomotor retardation or agitation. His speech was spontaneous and fluent, of normal rate, rhythm and volume. His affect was appropriate and reactive and out of keeping with his mood which he described as low. Thought flow and form were normal... There were no obsessive or delusional ideas. There were no perceptual disturbances. Cognitively he prepared to be grossly intact, of high average intelligence, with fair insight and good judgment.

[30] Later in that report Dr. Louw noted:

The mental injury that is causing the current incapacity is a combination of

Post-Traumatic Stress Disorder and Depression.

[31] In a second report prepared upon a further request by the ACC for an assessment, Dr Louw reported on or about 11 February 2010, under the heading Mental State Examination:

He made good eye contact and was able to sit quietly throughout the interview. There was no evidence of psychomotor retardation or agitation. His speech was spontaneous, fluent and of normal rate, rhythm and volume. His affect was appropriate and reactive. His mood was described as low. Thought flow and form were normal. Content of thought was around his difficulties with taking responsibility, fatigue, low motivation and a sense of guilt that he was not working or helping his wife do more around the house. There were no obsessive or delusional ideas elicited. There were no perceptional disturbances. Cognitively he appeared grossly intact, of high/average intelligence with fair insight and good judgment.

[32] It is to be noted that Dr Louw‘s report on this occasion was very similar to

that of his earlier report.

[33] The defendant‘s evidence is that one of these reports was shown by the defendant to a representative of the plaintiff at about the time there was a negotiation for a settlement in the outcome of the Court‘s judgment upon Mr Galavao‘s application. It is to be inferred that the defendant was at that time providing evidence of his reasons for his failure to make the payments due under the 2006

Deed.

[34] The defendant says he was suffering from post-traumatic stress disorder and depression at the time he entered into the deed of settlement and signed the

_{admission of claim. Regarding his reasons for signing those documents he stated;}

To be honest, I do not know why I signed the agreement taking over Jason

Sutti e‘s debt. I remember Jason (my first cousin) approaching me very distressed that he would be made bankrupt. He and I are very close, and he was distressed that bankruptcy would destroy his international career as a sportsman, (and international travel), and wreck his business and family... Looking back it was a crazy, stupid, brainless thing to do. We were getting nothing out of it, and the debt was not ours. Jason promised that it would get sorted, and for some reason which I can‘t explain, I signed it.... For some reason, in my demented way of looking at life, I thought the thing would go away and I could forget about it.

[35] He said that when the plaintiff began to chase him for payment he told them he had been very unwell and that was the reason he had not made any payments. At the request of the plaintiff he provided copies of medical information including Dr Shieff‘s report. Later he was telephoned by the plaintiff and informed he would be given time to make regular payments. He deposed:

I was relieved that we had some time, and in good faith, made the payments, with the help of [his wife], family and some casual work I was able to do.

[36] He said that when the plaintiff moved to sell his home ―I fronted up and told my uncle what I had done. I also recently told [my wife]. Both of them were very upset and distressed. I told them I was trying to sort it out and not to worry. I would do something to sort it out‖.

[37] He recalls that in the outcome of his uncle‘s case to the High Court he had discussions with Mr Burt solicitor for the plaintiff. He recalls Mr Burt informing him that the plaintiff would pursue an intention to sell the property. He then spoke to his uncle and his wife. He continued with email correspondence wherein Mr Burt affirmed the plaintiff‘s intention to sell the home. He said:

I did not know what to do. I was still very unwell at the time... I was under severe stress and distress. The situation seemed hopeless. [My wife] was also very upset when she read the emails, and it appeared that [the plaintiff] would be able to sell our home – despite the judgment saying that my uncle was not liable. While we could not understand the conflict in position, we had no reason to doubt the threats that were being made. I had to save our home. I was sure that in time, and with a huge amount of effort, we could get this sorted. I proposed... payment terms which now appear hopelessly optimistic. I was desperate to propose anything – or agree to anything – to stop them from going through with their threat to sell our home. I was under immense strain. [My wife] had only just been bankrupted in early 2008 because of me, and we spent nights awake, distressed about the situation I had created.

Finally agreement was reached, and I set out a settlement statement. There was no negotiation over the terms I recall. I think my uncle‘s lawyers required changes to protect his position, but I was unrepresented. I was almost penniless. We had not funds for a lawyer, and with [my wife‘s] bankruptcy because of me, we had no hope of raising money, for a lawyer or to pay the debt. The settlement was presented to me as a take it or leave it situation. If I didn‘t take the deal and sign the admission, the house would be sold. I got even more unwell with the pressure of this, and tried to buy time so I could... try and get my bearings... I increased my medication so I could control the anxiety attacks, but that only made thinking harder. I found it hard to get out of bed, and then they asked me to go in and sign the Deed and Admission, I told them I was taking advice, when I clearly was not, because I could not get out of bed, or leave the house... My judgment was so impaired at the time that I just gave in and signed the documents. I went in and signed the Deed and Admission at the offices of Chapman Tripp. The Deed was witnessed by Mr Burt‘s secretary. I just wanted to get it over with. I could not bear the stress associated with the threats to sell our home. It had gotten so bad, that I just wanted to end it all. Permanently. The thought of abandoning [my wife] and the kids held me back...

I believe that [the plaintiff] took advantage of my weak, deteriorated, mental/psychiatric state, to pressure/induce me into agreeing to a Deed that was patently unfair, and to terms that I was going to find impossible to meet. I did however try in good faith, to meet the payments, and we did meet the first few. There was lots of good faith on our part. There was however the constant threats even after the Deed had been signed to sell our home should there be any default.

[38] The defendant states that emails from Mr Burt conveyed incorrect information and ―was the type of bullying, threatening correspondence that forced me into signing the deed, and the admission in the first place‖.

[39] An affidavit sworn by the defendant‘s wife states that:

[The defendant] was ―very unwell‖ when he signed the deed of settlement and the admission. She added ―while he was on a strong dose of anti depression medication, and receiving counselling at the time, I do not believe he was thinking rationally. He was unwell, and was not thinking straight. He was not sleeping well at the time, and he was always tired. I think he just signed these documents just to make the threats and the problems go away, another symptom of his illness I believe...‖.

Other evidence relevant to the application to withdraw admission

[40] In its preparation for the hearing before me the plaintiff obtained a report from Dr A R Fraser, psychiatrist. Dr Fraser notes having been asked to provide an independent expert opinion as to whether it could be concluded from the psychiatric reports of Dr Shieff and Dr Louw, that:

(a) The defendant was unable to make rational judgment; or

(b) At the time he entered into the deed of settlement the defendant‘s

decision-making ability was impaired as a result of: (i) Any illness from which he was suffering; or (ii) Any medication he was taking.

[41] Relevant extracts from Dr Fraser‘s report note:

Dr Louw saw [the defendant] on 10 September 2009. In paragraph 3 of the report he wrote ―there were no concerns about his competence‖. Although this was in the context of consenting to the process of an interview and a report to ACC, with consequently limited confidentiality, it indicates that Dr Louw was confident that [the defendant] had the ability to understand and then exercise his judgment in an autonomous fashion.

... I do not consider that the three psychiatric reports [of Drs Shieff and Louw] can be automatically presumed to describe [the defendant‘s] state of mind in August 2010. It may be presumed from Dr Louw‘s report of September 2009 that there had been no improvement with treatment after first seeing Dr Shieff. Consequently, it may be possible to assume that he remained in the same sort of state for almost the next year, despite more assertive treatment, including sessions with a very experienced and able clinical psychologist, Dr Anne Galloway, as well as a different antidepressant medication.

...

In the absence of other clinical information, I will accept [the defendant‘s]

contention that he was unimproved...

[42] Dr Fraser then considered whether the defendant‘s judgment was impaired to the extent that he could not fully appreciate the consequences of entering into the deed of settlement and executing the admission of claim. He said:

In my opinion the observations of both psychiatrists during their interviews do not support such a conclusion at the time of their assessments.

[43] Dr Fraser referred to parts of the reports of Drs Shieff and Louw, some of which I have already repeated. Confirming those Dr Fraser commented:

While [they] could support [the defendant‘s] contention that he was unable to make the decisions involved in agreeing to the settlement deed and admission of claim, there are some inconsistencies. Not the least, is that having made that assessment of his ability, and then making such accommodations in the management of his financial affairs he then attempted to deal with this on his own... In summary it is my opinion that these reports do not support [the defendant‘s] contention that his judgment was seriously impaired on August 2010.

[44] A day or two prior to the hearing before me the defendant filed a further psychiatric report, this from Dr G Newborn dated 20 September 2011. In it Dr Newborn was asked to address the findings of Dr Fraser and to offer an opinion about whether the defendant was suffering from post-traumatic stress disorder and a major depressive episode in August 2010; and if he was would that have affected his

ability to make decisions and exercise judgment ―in the presence of perceived stressors‖.

[45] Dr Newborn notes that he met the defendant on 12 September 2011 for approximately 90 minutes. In addition he had read copies of medical and specialist reports and as well the defendant‘s affidavit dated 7 July 2011.

[46] Dr Newborn reported:

... On the basis of probability, it is therefore likely that because there was evidence at specialist assessment in February 2010 [by Dr Louw], which was not dissimilar to the state in 2008 [per Dr Shieff], and because similar symptoms were present in September 2011 [when observed by Dr Newborn] that a similar state is likely to have existed in August 2010.

[47] Dr Newborn then states:

The issue therefore arises as to whether the state in August 2010 could have had any influence on [the defendant‘s] function, and in particular his ability to engage in cognitive processes and make decisions.

The answer to this based on probability is yes.

[48] Dr Newborn then explains his reasons for drawing those conclusions by reference to observations regarding the defendant‘s demeanour in consultation, by comparison to that observed (or not observed) in the reports of Drs Shieff and Louw. Dr Newborn noted he was not aware of the time of the day when the defendant signed the deed of settlement. He said the functioning of a person experiencing major depressive episodes shows they function much worse earlier in the day than later in the day.

[49] Dr Newborn commented, to explain any apparent difference between his conclusions and those Dr Fraser, that he Dr Newborn had the advantage of observing the defendant which enabled his opinion to be put into a more appropriate context.

Issues

[50] Initially it was clear these were confined to the defendant‘s claims of medical

and related reasons demonstrating that his will and good judgment were overborne

when he signed the deed of settlement and the admission. In brief he says he was suffering from a significant illness due to this and the threats and pressure from the plaintiff and its representatives. Also and at the core of his claim is that the deed was an unconscionable bargain i.e. much worse than was reasonable in the circumstances.

[51] When the defendant filed his submissions for this hearing it was clear the focus of his case changed, to the extent that he argued that the admission he signed was not one for which this Court could give consideration to set aside pursuant to Rule 15.16 and therefore was not one for which the defendant needed to make application to withdraw. It follows, the defendant submits, that in order for the plaintiff to rely on the admission for the purposes of seeking judgment, the plaintiff must first demonstrate to the Court that the admission was filed and served in accordance with Rule 15.16(1); that if the plaintiff cannot satisfy the Court that the admission is one to which Rule 15.16 applies then the plaintiff cannot rely upon the admission to support a claim for judgment in the pre-emptive manner that Rule

15.16 allows. Consequently and alternatively it is only if the plaintiff satisfies the Court that the admission is one for appropriate consideration under Rule 15.16, need the Court consider the defendant‘s application to withdraw the admission.

Rule 15.16

15.16 Admission of cause of action

(1) At any time after a party has been served with a notice of proceeding, that party may file and serve (separately from the party's pleadings) an admission of all, some, or part of the alleged causes of action on all other parties to the proceeding.

(2) An admission can be withdrawn only with the leave of the court.

(3) When an admission is filed and served under subclause (1), a party on whom the admission is served may seal judgment on the cause of action admitted, without prejudice to that party's right (if any) to proceed on any other cause of action.

(4) An admission under subclause (1) relating to any cause of action in which a sum of money is claimed must state the exact amount admitted.

(5) Any judgment entered on an admission filed and served under subclause (1) may, upon application, be set aside by the court if—

(a) the plaintiff, being under a duty or obligation to the defendant not to enter judgment on the admission, acted contrary to that duty or obligation in entering judgment; or

(b) the plaintiff, in entering judgment, acted fraudulently, unconscionably, or in wilful or reckless disregard of the defendant's rights.

(6) Upon an application under subclause (5), the court may direct that a proceeding be brought to determine whether judgment was wrongfully entered.

(7) This rule does not affect rule 8.15.

[52] Also relevant for our purposes are rr 8.15 and 15.15. They provide:

8.15 Judgment on admission of facts

A judgment or order may be made on an admission of facts under

Rule 15.15.

15.15 Judgment on admission of facts

(1) If a party admits facts (and the parties‘ pleadings were otherwise), any other party to the proceeding may apply to the Court for any judgment or order upon those admissions the other party may be entitled to, without waiting for the determination of any other question between the parties, and the Court may give any judgment or order on the application as it thinks just.

(2) This rule is not affected by Rules 15.16 and 15.17.

[53] As the commentary to McGechan‘s High Court Rules at 1 – 1726 mentions an application under r 15.15 is to be made by interlocutory application, supported by affidavits, detailing the admissions relied upon, and the circumstances in which they are made, if those admissions are not pleaded or otherwise already before the Court.

[54] The commentary notes that the rule aims to save time and unnecessary costs by enabling a party to apply for judgment or an appropriate order upon admission of facts made by another party to the proceeding, whether in that parties‘ pleading ―or otherwise‖.

[55] Regarding r 15.16 McGechan‘s commentary notes at 1 – 1727 the provision entities a party to seal judgment to the appropriate extent where all, some or part of its causes of action are admitted. It also provides for withdrawal of the admission only with leave, and for the circumstances and manner in which any judgment entered may be set aside.

[56] The rule provides for the filing and service of the admission on all other parties, separately from the parties‘ pleading. Rule 15.16 details the duties and obligations of the plaintiff and the defendant at the time of entry of judgment. The process does not affect r 8.15 which provides for a judgment order on an admission of facts under r 15.15.

[57] Rule 15.16 provides for the filing and serving of an admission at any time after a party has been served with a notice of proceeding. In accordance with r 1.3 a notice of proceeding is a notice filed under r 5.22 being a notice in prescribed form for the purpose of alerting a defendant to his/her rights and obligations.

[58] Rule 15.16(1) refers to the admission of claim being filed and served by the party providing the admission.

[59] Rule 15.16(3) enables the party on whom the admission is served, to seal the judgment on the cause of action admitted.

[60] The issue raised by the defendant in connection with r 15.16 is that his admission was signed on 21 September 2010, i.e. before the plaintiff‘s proceeding was filed on 18 March 2011. The defendant submits r 15.16 can only apply where an admission has been filed and served after the proceeding has been filed and a notice of proceeding has been served. Also, the defendant submits the rule only applies when the defendant has filed and served the admission. In this case the admission was filed by the plaintiff at the same time it filed its statement of claim and notice of proceeding. The defendant says that pursuant to r 15.16(3) that a plaintiff could only seal a judgment after an admission had been filed and served under sub clause (1) i.e. when served by a defendant after he in turn had been served with the parties‘ proceeding.

Considerations

Does rule 15.16 preclude the plaintiff from relying upon the defendant’s admission,

in the particular circumstances of this case?

[61] The defendant contends that the provisions of r 15.16 are prescriptive. Mr Burt for the plaintiff contends the provisions are permissive. The answer lies in the review of the purposes for which clause 15.16 was drafted.

[62] This hearing concerns the circumstances in which a signed admission of claim was filed at the same time as was the proceeding against the defendant. The defendant contends that in the particular circumstances r 15.16 process is not available to the plaintiff.

[63] Case authority on the use of r 15.16 and its predecessor r 471(4) of the High Court Rules 1985 usually reviews situations where, post filing of a proceeding the parties have reached an arrangement for the settlement of their dispute which is recorded in writing and which contains a separate admission of liability. Usually in consideration of that settlement and the admission the plaintiff undertakes not to file the admission unless there is some default in the payment arrangement. Usually any dispute arising from any judgment obtained focuses upon a defendant‘s claim there was no breach of arrangement or if there was there was justification for same.

[64] In many respects this case is similar to those for which r 15.16 is more usually associated. The difference here is that the admission was signed prior to the proceeding being filed.

[65] Pursuant to r 15.16(5) the Court can set aside a judgment entered on an admission when a plaintiff being under a duty or obligation not to enter judgment, did so in breach of that duty or obligation. The defendant submits that to permit a plaintiff to file an admission which predates the filing of the proceeding, would, contrary to r 15.16, permit a claim for judgment contrary to the provisions of that rule.

[66] I will first consider whether in the circumstances of this case r 15.16 is available to the plaintiff for the purpose of obtaining a judgment upon the defendant‘s admission. If it is then I will consider whether the defendant‘s application to withdraw the submission should succeed, bearing in mind the onus for proof of same will then lie upon him to show whether there has been a breach of r

15.16(5) and if there has not been whether there is some other basis e.g. the Court‘s

inherent jurisdiction, for not permitting the use of the admission in the manner r

15.16 contemplates.

Whether r 15.16 is available to plaintiff in circumstances of this case

[67] The rule contemplates the situation where a plaintiff files a proceeding against a defendant who, upon receipt of that claim, files an admission with respect to the whole or part of that claim. However, the rule also contemplates a settlement between the parties while the proceeding is on foot. Then, usually the defendant makes a promise to pay in consideration for which a signed admission of the claim or part of it is made.

[68] In this case the settlement including the defendant‘s promise to pay at the signing of the admission occurred pre commencement of the proceeding. But, it is clear that the completion of the admission was intended to enable a judgment to be obtained in exactly that same way as if the arrangement had been reached post filing of the proceeding.

[69] Pre execution of the deed of settlement the plaintiff solicitors forwarded a copy of the deed of settlement together with a copy of a draft statement of claim and an admission of claim which the defendant was advised would form part of the security for his payment obligations. Those were signed and were to be held pending performance of the defendant‘s repayment obligations.

[70] Pre default of those obligations the defendant was fully aware of the circumstances in which his liability would arise, he having given consideration for the promise made. Effectively he had already been served with the nature of the proceeding which later was formally served upon him. I accept the submission that

there is no reason in principle why the promises and obligations of the parties ought not to be considered as effective as if the proceeding was already on foot.

[71] In the form expressed the rule contemplates an admission being filed after service of a proceeding. In principle I see no reason why it cannot in appropriate circumstances permit the filing of an admission where proceedings are clearly contemplated and where an admission would be filed to obtain judgment in circumstances involving formal proof.

[72] Rule 1.6 of the High Court Rules allows for cases not provided for. It permits a Court to dispose of a process as nearly as it can if similar cases are provided for by the rules.

[73] In this case, I consider there is no prejudice to the defendant in allowing in his admission for there remains to him an ability to apply to have the admission withdrawn. Also there is an ability to apply to have a judgment set aside.

Whether leave to withdraw the admission ought to be granted

[74] The defendant relies upon his mental disorder and on claims of oppressive and unconscionable conduct by the plaintiff as reasons for his signing the admission. These grounds do not appear to fall within the scope of r 15.16(5).

[75] Probably the defendant‘s grounds for a defence do not provide him with a route for relief pursuant to r 15.16. However they could be arguable upon an application to set aside a judgment entered pursuant to the provisions of 15.16.

[76] In the circumstances I will deal with the application as one upon which the defendant is entitled to be heard upon his application to withdraw the admission.

[77] I have already reviewed the essence of the defendant‘s concerns with those factors affecting his judgment at the time he signed the admission and the deed of settlement.

[78] By the 2006 deed the defendant purchased the plaintiff‘s rights under the judgment it had obtained from Mr Suttie. The deed required interest to be paid at 10 per cent until the debt was repaid; the payment of solicitor/client costs; and required

_{a mortgage over the subject property.}

[79] The deed of settlement was negotiated in the outcome of Mr Galavao‘s application to prevent the plaintiff from relying upon the mortgage to the extent it purported to bind Mr Galavao. In the outcome of that case it was clear that the mortgage could not be relied upon to secure payment from Mr Galavao. However, it was clear that recourse to the defendant‘s interest in their property could still be pursued by way of application for sale. In is in that background of things the parties began their negotiations with a view to settlement, short of the selling the home.

[80] On 18 March 2010 the defendant‘s barrister wrote to the plaintiff‘s solicitor advising of an offer to pay the plaintiff‘s debt at $300 per week. In response on 31

March 2010 the barrister was advised that the plaintiff‘s receivers would require a full and sworn statement of the defendant‘s assets, liabilities, income and expenditure in order to properly assess his offer.

[81] A month later on 29 April 2010 the defendant wrote to his barrister and to the plaintiff‘s solicitor advising he had ―pretty much completed the statement of assets and liabilities and income and expenditure‖. He added that he had resumed part time consultancy work ―after successfully receiving medical/psychiatric treatment‖. He added that he had made substantial repayments of his mortgages. He offered to start making weekly payments as a sign of good faith.

[82] On 14 May 2010 the plaintiff‘s solicitor wrote to the defendant requesting additional information concerning the defendant‘s interest in trusts (if any) and details of the payments made and arrangements entered into to satisfy his other debts over the previous two years. The solicitor added that that information was requested

―as soon as possible, so that the receivers may make a decision on your proposal‖.

[83] The plaintiff‘s solicitor wrote again on 29 May 2010 stating:

We have not yet received your statement. Would you please forward it to us as a matter of urgency. Otherwise, the receivers will have to consider realising their security in the Bright Street property.

[84] On 22 June 2010 the plaintiff‘s solicitor wrote again, to the defendant and to his barrister. The solicitor noted they still awaited the defendant‘s statement of financial position; they said almost three months had elapsed since it was first

_{requested; that without it the defendant‘s proposal could not be assessed.}

[85] The letter also noted that the Court required final submissions [upon Mr Galavao‘s application to release the mortgage from his property share] within 10 days. The solicitor noted that the plaintiff‘s interests as mortgagee of the defendant‘s quarter share would enable Bridgecorp to seek an order pursuant to s 339(1) of the Property Law Act 2007 for the sale of the property and division of the proceeds of sale. He added:

In the circumstances, there can be little doubt that the Court would consider that [the plaintiff] is entitled to such relief, as there is no other way in which [the plaintiff] can release its security.

[86] Two days later the defendant sent his statement of financial position. When receiving it the plaintiff‘s solicitors noted it did not contain the additional information previously requested.

[87] In responding the plaintiff‘s solicitors advised an offer of payment of $300 per week was rejected. It suggested alternatives of an offer of a lump sum payment or of the payment of a material sum then with ongoing instalments for a reduced balance. It invited the defendant to advise whether either of the options was feasible.

[88] In response, on 16 July 2010 the defendant wrote to the plaintiff‘s solicitor, and copied in his barrister on a proposal for monthly instalments totalling $26,000 over six months, together with weekly instalments of $300 to begin meanwhile. His conditions were that it would be in full and final settlement of the plaintiff‘s debt; that interest and penalties would not be charged; that an agreement be reached in relation to legal fees and other charges; and that the receivers would take no further steps regarding the home whilst the terms of the agreement were complied with.

[89] On 22 July 2010 the plaintiff‘s solicitor responded agreeing to the defendant‘s proposed terms and enclosing a draft of the deed of settlement and advising that a draft statement of claim and an admission of claim to form part of the security for payment, would be forwarded also.

[90] Later and after receipt of the settlement/security documents the defendant responded, again copying in his barrister, by email advising that he would take advice over the weekend in relation to the documents.

[91] The following Tuesday, 27 July 2010 the defendant wrote to the plaintiff‘s solicitor, again copying in his barrister, stating he was ―happy with the deed‖. He also requested: ―Can you provide that once payment in full is made that your client will sign a discharge of mortgage in registrable form‖.

[92] In my view it is, by reference to that email chain that the Court can better assess the defendant‘s assertions of bullying and oppressive conduct. I consider the defendant‘s claims to vastly overstate the position. The deed of settlement allowed him from 2010 until 2012 to pay off a debt the defendant had already agreed to pay in 2006.

[93] The defendant claims the defendant‘s solicitor was untruthful. I assume he is referring to a statement suggesting the property may still be at risk even though Mr Galavao‘s three quarter share in it was not. If so, then there is nothing untruthful about that statement.

[94] The history of the email correspondence indicates forbearance and patience by the plaintiff. The outcome was a satisfactory one notwithstanding the defendant‘s health concerns at the time. Rather than providing a detriment the deed of settlement was of benefit to the defendant. It gave him more time to pay a debt he defaulted on three years earlier. Before the deed of settlement the defendant was facing the potential of losing his home. The deed gave him some security to avoid that possibility notwithstanding that he now says in affect he had no means to meet payments in terms he promised.

[95] As acknowledged to me in the course of his submissions the defendant agreed he had no basis on any grounds at all to challenge the provisions of the 2006 deed. The consequences of this acknowledgment are clear i.e. if for the reasons he portrays the deed of settlement cannot be enforced then the 2006 deed remains enforceable. That would mean the cost to the defendant of that deed being enforced would significantly exceed the cost of enforcing his responsibilities pursuant to the deed of settlement. It follows that rather than him having suffered a detriment, the deed of settlement provides him with a benefit.

[96] The defendant has endeavoured to make some payments in terms of the deed of settlement. On occasions he has fallen in default and has been granted an indulgence. I see nothing in the evidence to support the defendant‘s claims of oppressive behaviour.

[97] Although the defendant claims he was without legal advice when he signed the deed of settlement he appeared to convey the impression to the plaintiff that legal advice was being obtained. Noteworthy is the fact that the defendant copied in his barrister and also Mr Galavao‘s solicitor during that email chain I have referred to.

Health issues

[98] The defendant does not suggest these were responsible for the decisions he made when signing the 2006 deed.

[99] Psychiatric reports identify significant mental health issues. None suggests the defendant did not know what he was doing at all at relevant times. Rather the Court is invited to infer that except for his health issues he would have better been able to deal with the decision making pressures he faced. Even then the reports of the psychiatrists do not suggest that mental illness affected the defendant‘s decision making ability or his appreciation of the consequences of entering into the settlement date. Dr Shieff referred to speech production and thought form being normal, that the defendant was insightful into the nature of his problems. Dr Louw referred to thought flow and form being normal and of the defendant having fair insight and good judgment.

[100] Although Dr Newborn considered the defendant was likely to be in the same state of mental health when he signed the deed of settlement as when earlier he had consulted with Drs Shieff and Louw he added it may depend on whether or not the deed of settlement was signed in the morning or in the afternoon.

[101] Dr Newborn‘s report was prepared on the basis of a presentation specifically for the purpose of informing this Court about the likelihood of the defendant being affected by mental health issues when the deed of settlement was signed about 14 months earlier. Significantly he noted the defendant was occasionally distracted,

―sometimes by his own thoughts and sometimes by extraneous stimuli, and seemed to lose track of what was being discussed‖. He identified an element of

―distractibility‖. In doing so his observations differed from those of Drs Shieff and Louw. However, Dr Newborn did state that ―apart from the intentional issues with distractibility, there was no evidence of any current severe cognitive impairment‖.

[102] It is not for this Court to weight conflicts of evidence with a view to resolving issues in dispute. Nevertheless it is clear I think there is no sufficient evidence that the defendant‘s decision making ability was affected. Clearly there was no detriment suffered by him in the process. He had, it seems, recourse to legal advice. But in any event he has for much of his adult life practised as a lawyer. His correspondence with the plaintiff‘s solicitor indicates a clear understanding of issues to be balanced when he made the commitment he did. Indeed his initial offer initiated the settlement process.

[103] Initially the defendant used the reports of Drs Shieff and Louw for the purpose of explaining his defaults in payment arrangements. Latterly he has sought recourse to psychiatric reports for the purpose of claiming that his cognitive processes were adversely affected by mental illness.

Summary

[104] I considered that to adopt a prescriptive view of r 15.16 would unduly limit processes designed to avoid delays and costs if admissions could not be used in this

way. Encouragement ought to be given to enable recourse to the settlement process to circumvent recourse to the proceedings process.

[105] The defendant relies upon r 15.16 to require the admission to be filed and served by the provider of an admission after that person has received notice of the proceeding. But, that provision intends that a defendant receive full details of the claim against him before he signs an admission. In this case the defendant did receive that notice in the form of the deed of settlement and in a copy of the statement of claim identifying precisely what was due from him. The deed of settlement informed the defendant when the entire debt may become due. It advised him the admission would be filed if he failed to meet payment of same.

[106] Therefore in this case the purpose of the service provisions in r 15.16 has been fulfilled.

[107] In my judgment r 15.16 is available for the filing of the defendant‘s

admission in the circumstances of this case.

[108] Issues of health and claims of bullying behaviour by the plaintiff ‘s solicitor inadequately support claims of reasons why the defendant‘s admission of claim ought to be set aside. Probably they do not provide sufficient basis for an application at all under r 15.16. Regardless, if they did or if they were heard upon an application to set aside a judgment obtained upon the filing of an admission, they would fail also. Those claims are not borne out by an assessment of the relevant correspondence between the parties. Contrary to his claims the defendant was treated reasonably and respectfully. Whilst his psychiatrists have identified mental health issues none suggest he was not aware or did not understand the purposes for which he agreed to meet the payments that he owed. Moreover the obligations he undertook by the deed of settlement were clearly of a benefit to him and not to his detriment as he claims.

[109] In circumstances where a defendant has resolved by agreement issues of a clearly identified claim against him and when that defendant signs an admission of claim in circumstances where it is clear a proceeding will be filed and his admission

will be offered in support of judgment by formal proof then that admission may be filed even though at the time the proceeding claiming that judgment has not been served.

Judgment

[110] The application to set aside the admission is dismissed.

[111] The plaintiff is entitled to its judgment in terms of the admission of the defendant it has filed.

[112] Costs upon the setting aside application are fixed on a 2B basis, plus disbursements, and are payable to the plaintiff.

Associate Judge Christiansen