New South Wales Supreme Court CITATION : Smith v Smith [2006] NSWSC 1162 HEARING DATE(S) : 6 November 2006 JUDGMENT DATE : 6 November 2006 JURISDICTION : Equity JUDGMENT OF : Campbell J EX TEMPORE JUDGMENT DATE : 11/06/2006 DECISION : Capacity presumed. Orders for specific performance made. CATCHWORDS : EVIDENCE – burden of proof, presumptions, and weight and sufficiency of evidence – presumption of capacity PARTIES : Rodney Nelson Smith - Plaintiff Bruce Edward Smith - Defendant FILE NUMBER(S) : SC 4476/06 COUNSEL : A Lakeman; J Dalziell - Plaintiff No Appearance SOLICITORS : Maquarie Law - Plaintiff No Appearance - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J MONDAY 6 NOVEMBER 2006 4476/06 RODNEY NELSON SMITH v BRUCE EDWARD SMITH JUDGMENT – Ex Tempore 1 HIS HONOUR: Were it not for one complication this would be a very straightforward application for specific performance of a contract for sale of land. 2 On 26 May 2006 the plaintiff and the defendant entered a contract whereby the vendor agreed to sell to the plaintiff a property located at 223 Myall Street Dubbo, being the land in Certificate of Title Volume 36/241998, for a price of $143,000. There was provision in the contract for completion to take place on the 56th day after the contract was entered, that is on 21 July 2006. 3 The property was listed with a real estate agent, Mr Mines. It had been so listed since December 2005. Mr Mines had a conversation with the vendor in December 2005, in the course of which the defendant told Mr Mines that he would talk to another real estate agent as well. 4 The property had not been occupied for many years. The plaintiff's offer was the best offer that Mr Mines received. The actual price eventually settled on was negotiated between the parties. 5 The defendant, who lives in a rural location outside Dubbo, came into town when requested by Mr Mines. Mr Mines was not in his office at the time. The signature of the vendor on the contract was witnessed by another real estate agent in the office where Mr Mines worked. Contracts were then exchanged. 6 On 30 May 2006 the plaintiff's solicitor sent a stamped transfer to the defendant's solicitor. 7 Around 11 June 2006, Mr Mines and his wife attended the vendor's home. Mr Mines gives evidence that: "The defendant vendor was at home and was in a cordial mood and we discussed the forthcoming settlement date". 8 The parties arranged for settlement to occur on 14 July 2006, even though under the contract it was not required until 21 July 2006. On 7 July 2006 Mr Mines went out to the defendant's home again. This time, he found the defendant to be very hostile. Mr Mines was apprehensive for his safety, and did not get out of the car. He has not attempted to go back to the defendant's house since then. 9 In the course of the working through of the transaction, there was, it seems, some contact between the vendor and his solicitor. On 5 May 2006 the defendant's solicitor wrote to the plaintiff's solicitor saying that he advised: "… that the purchaser may have access to the property after exchange, the vendor only grants the purchaser access on the basis that the keys are collected and dropped off on a daily basis. The vendor does not agree to treat the termites in fence prior to completion." 10 In the course of inspecting the property, the purchaser found some problems with leaking water pipes. That led to the question of how the expenses connected with repairing the leaks should be paid. On 8 June 2006 the defendant's solicitor wrote to the plaintiff's solicitor saying: "The vendor has given mixed instructions, but I consider that in the best interests of the Vendor we should proceed with the sale and allow your client $900.00 on settlement. Would you please let me have a copy of the quote for the plumbing repairs which should indicate the location of the pipes. The vendor appears to have doubts if there are pipes in the place previously indicated." 11 The settlement fixed for 14 July did not take place. The defendant's solicitor said that he had a signed transfer, but did not have the Certificate of Title, and that that Certificate of Title was in the defendant's possession. The settlement was postponed to 21 July 2006. 12 On 21 July 2006 the settlement did not occur, once again. 13 On 31 July 2006 the plaintiff's solicitor issued a Notice to Complete, requiring settlement to take place on 16 August 2006. 14 On 16 August 2006 settlement once again did not occur. The solicitor for the defendant wrote to the solicitor for the plaintiff saying: "I refer to your letter of 15th instant and unfortunately there have been no developments towards settlement. I have had no contact with my client. I have spoken to the Ethics Society of the Law Society and at its suggestion the Guardianship Tribunal. As a result I am contacting a local Health Authority. I think it most unlikely that settlement will occur today or later without some sort of assistance from local authorities. This present settlement is one issue for my client but his later welfare is also a continuing concern. I request that assuming settlement does not occur you leave the contract on foot at least until I can assess results through the local Health Authorities." 15 Proceedings for specific performance of the contract were begun shortly thereafter. The proceedings have been expedited. 16 In the course of the proceedings, there has been continuing difficulty for the plaintiff in effecting service of documents on the defendant. The gate leading to the defendant's house has at all times that service of documents has been attempted, been locked. The plaintiff has attempted to serve the summons, various affidavits, and two different notices of motion in these proceedings, by leaving documents in the mailbox, also writing a letter to the defendant enclosing the documents, and also serving documents on the defendant's solicitor. 17 The matter was due to come before the court on 19 September 2006. On 14 September 2006 the solicitor for the defendant wrote a letter to the Registrar of the Court, saying: "This case is listed for further mention at the Supreme Court Queens Square, Sydney on Tuesday 19th September 2006 at 9.30am. I request that this letter might be placed before the presiding Judge or Registrar at the proceedings on 19th September 2006. The defendant Bruce Edward Smith is mentally ill and he is not capable of giving instructions to any person on his legal position. I acted for Mr Smith in the preparation of a contract for the sale of a house property at 223 Myall Street, Dubbo which is overdue for completion but the defendant is in default and the purchaser is seeking specific performance and damages. The contract was exchanged in the office of the selling agent and I did not have a personal interview or contact with the defendant until after the contracts were legally binding on the parties. It was immediately apparent that the defendant was mentally ill and at a later meeting with him I became alarmed at the depth of his mental illness. I rang the Ethics Section of the NSW Law Society who referred me to the Guardianship Tribunal. I spoke to the Guardianship Tribunal who indicated they could not take action unless there was a reference to the Tribunal by some authority. They referred me to the Aged Care Assessment Team (ACAT) at Dubbo who were not prepared to take action without reference from authority. The defendant would be approximately 65 years of age. I contacted the selling agent Mr Mines who drove out to the residence of the defendant which is a small rural block of 25 acres and somewhat isolated. The defendant lives alone. The agent was threatened and left hurriedly in his motor vehicle and will not return without the presence of a police officer. I am not prepared to go to the property because I am aware of the mental state of the defendant and I do not know if he has access to firearms on the property. I contacted the brother of the defendant who also lives in Dubbo but he was not prepared to approach the defendant. I wrote to the plaintiff's solicitor on 16th August 2006 after discussions regarding the mental state of the defendant and I enclose a copy of that letter herewith. I am not able to appear in the proceedings without instructions from the defendant and I hope that the Guardianship Board would take some action should this matter be referred to them by the Supreme Court. I have genuine fears for the welfare of the defendant and for the safety of any person who might approach him in an unguarded manner. I am not aware if the defendant has notice of the Court proceedings by way of service of documents and whether he would comprehend them if he had." 18 By that time the plaintiff had made application for expedition. The matter came into the Expedition List, before the Chief Judge, on 22 September 2006. On that day, as on all days when this matter has been before the court, including today, the defendant was not represented, and did not appear when called. The Chief Judge stood the matter over to 27 October 2006. 19 Meanwhile, the defendant's solicitor was endeavouring to have members of the defendant's family talk to him concerning completion of the contract. The defendant has, it seems, a brother, and a sister. 20 The matter came back before the Chief Judge on 27 October 2006. On that occasion his Honour made a note, as follows: "I am satisfied that the plaintiff has done all that in the circumstances could be expected of him to bring the matter to the attention of the defendant. I am satisfied within the meaning of r 10.26 that the defendant has been keeping house and in light of the analogous provision in clause 20.6 of the standard form of contract he has been properly served. I fix the matter for hearing before Campbell J on 6 November 2006; the plaintiff to post to the defendant a note of today's order. Costs of this application will be plaintiff's costs in the cause." 21 The evidence establishes, clearly, the entering of the contract, and its breach. It is appropriate, apart from the question that has been raised concerning the capacity of the defendant, to make an order for specific performance. 22 I have set out in this judgment the entirety of the material which is before me on the question of the defendant's capacity. There is no medical evidence that suggests he has any lack of capacity. While the defendant's solicitor has expressed an opinion as to the defendant's mental state, the letter that expresses that opinion does not state any basis on which the opinion has been formed, or give any indication of how it is that the writer has any qualifications to express the opinion. There is no identification of the type, or symptoms, of mental illness that are said to have been manifested. 23 Against that, there is evidence of the defendant having contact with his real estate agent in an apparently regular way, up to the meeting on 7 July 2006. 24 The defendant has family, who would be in a position to take action if in their view any question of the defendant's capacity arose. The relevant authorities seem to have been contacted by the defendant's solicitor, and have declined to act on the basis of the information available to them. Months have now elapsed since these proceedings were started, and since the allegation of lack of capacity was first raised. In all these circumstances, it seems to me that the appropriate course is to apply the usual presumption of capacity that applies to any adult: Heydon, Cross on Evidence, 7th Australian edition, para [7090] and cases there cited, Campbell J, "Some Aspects of the Practical Operation of Litigation Relating to Deceased Estates" (paper to NSW Young Lawyers, 23 August 2006, accessible in speeches section of NSW Supreme Court website). I shall proceed on that basis. 25 For those reasons, there will be an order for specific performance, together with appropriate consequential relief. 26 I make orders in accordance with draft orders which I initial and date today's date. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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