Australia: Supreme Court rejects duress argument made following mediation

Summary

St.George and Ian Craig Press engaged in a mediation. At the conclusion of the mediation, a settlement deed was executed by the parties.

Unbeknownst to St.George, Mr Press included the letters "V.C" in small type next to his signature – apparently an abbreviation for the Latin phrase - vi coactus - by which Mr Press alleged that he meant that he was signing the deed under duress.

As part of the settlement deed, Mr Press executed consent orders in favour of St.George which St.George agreed not to file with the Court if Mr Press carried out certain actions.

Mr Press failed to carry out those actions and St.George sought to file the consent orders. The filing of the consent orders was opposed by Mr Press. St.George made an application pursuant to section 73 of the Civil Procedure Act for an order enforcing the settlement reached at mediation.

Kemp Strang acted on behalf of St.George in this matter which was heard by his Honour, Justice Fagan on 7 June 2017 with judgment entered in favour of St.George on the same day.

Key facts

St.George provided various facilities to Mr Press which were supported by a mortgage over real property.

Events of default were committed under the facilities and St.George commenced proceedings for debt and possession of the property.

Mr Press filed a defence and cross-claim against St.George in the proceedings seeking, among other orders, to have the mortgage set aside.

The parties attended a mediation on 27 September 2016 and agreed to resolve the disputes between them in the proceedings.

A deed of settlement was signed at the mediation which contemplated that Mr Press would, among other things, repay the debt owed to St.George by 31 March 2017. In the event that Mr Press complied with his obligations under the deed, St.George agreed to discontinue the proceedings against him. However, if Mr Press failed to comply with his obligations under the deed, he agreed to give vacant possession of the property to St.George and authorised St.George to file a consent order which provided for judgment in favour of St.George and possession of the property.

The deed also included the following terms:

  1. Mr Press acknowledged that he entered into the deed "fully and freely after considering the terms in it" and "after receiving legal and financial advice regarding the terms and conditions" of the deed; and
  2. there was a cooling off period which allowed Mr Press to rescind the agreement at any time in the 8 days following the mediation.

Mr Press did not exercise his cooling off rights and subsequently failed to repay the debt owed to St.George by 31 March 2017. St.George filed the consent orders with the Court on that day.

Prior to the consent orders being entered by the Court, Mr Press alleged that, among other things, he had repaid the debt owed to St.George by way of tender of a Promissory Note and that the consent orders and the deed had otherwise been signed under duress. He said that the perceived duress was evidenced by the initials "VC" next to his signature on each of those documents. VC is an abbreviation for a Latin maxim "vi coactus" meaning having been compelled. Mr Press also alleged that the threat of being dispossessed from his property meant that he only agreed to enter into the deed with St.George because he felt that he had no other option and was compelled to do so.

St.George filed a notice of motion seeking orders to give effect to the settlement between the parties.

The Judgment

Fagan J determined that the claims made against St.George in relation to the Promissory Note were preposterous and dismissed those claims.

In order to make out a claim of duress, it is necessary to show that there has been threatened or actual unlawful conduct. Financial pressure is not sufficient to amount to duress.

Fagan J found that Mr Press did not execute the deed under any pressure, let alone under the pressure of actual or threatened unlawful action. Under cross-examination, Mr Press agreed that he had read the deed before signing it and understood that he could "walk away from the deal" during the cooling off period under the deed. He determined that Mr Press would have likely exercised his right to rescind within the cooling off period if he had been subject to any illegitimate pressure during the mediation.

In addition, his Honour found that Mr Press' ongoing promises to repay the debt by 31 March 2017 and the fact that he complied with a number of his other obligations under the deed were inconsistent with the alleged duress.

Further, his Honour found that where an allegation of duress is made, it is necessary to describe the action and words of the person who is making unlawful threats or acting in an unlawful manner. It is not enough to simply state that a person "was under duress". To sustain a finding of duress, it is necessary to put into evidence details of the unlawful conduct.

Fagan J considered that the meaning of the initials "VC" next to Mr Press' signature on the deed and consent orders was not a matter of common understanding amongst legal professionals and the layman and found that Mr Press had acted disingenuously at the mediation in noting his signature in this manner without notifying St.George of his intentions during the mediation or in later correspondence with St.George and/or Kemp Strang.

As a result, Fagan J declared that the proceedings had been settled between the parties pursuant to the terms of the deed and entered judgment in favour of St.George for debt and possession of the property.

Key Points You Need to Know

The decision affirms that:

  1. Conduct capable of constituting duress is limited to threatened or actual unlawful conduct.
  2. Financial pressure does not amount to duress. The pressure must be one of a kind which the law does not regard as legitimate.
  3. The Court has ample power to confirm terms of settlement where a party seeks to renege on promises made by them in a deed.

The decision is comforting to financial institutions that engage in mediation with their customers and others who seek to end litigation by way of mediation. Whilst there is undeniable pressure in mediations, that pressure will not in and of itself give rise to a defence of duress at a later time.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Kemp Strang has received acknowledgements for the quality of our work in the most recent editions of Chambers & Partners, Best Lawyers and IFLR1000.

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