Teo & Anor v Twyford bht Cunningham

1. [1]

   These proceedings concern a contract for the sale of land located at Tanja, New South Wales (folio identifier 151/801737) (Property) entered into by the plaintiffs, Carolyn Teo and Raven Gibb-Kalvin Spirit, as purchasers, and the defendant, David Twyford, as vendor, on 15 February 2021 (Contract). The purchase price was $975,000 and the plaintiffs paid a 10% deposit.

2. [2]

   Before the Contract was to be completed, the defendant’s solicitor served a notice purporting to rescind, relying on cl 34 of the Contract, on the basis that the defendant had been assessed as a “mentally ill person” under the Mental Health Act 2007 (NSW) (Mental Health Act) during a recent admission to the Mental Health Unit (MHU) of South East Regional Hospital (Bega Hospital).

3. [3]

   The plaintiffs disputed the recission notice and issued a notice to complete which the defendant did not comply with.

4. [4]

   In these proceedings, the plaintiffs seek a declaration that the Contract is valid and enforceable and an order for specific performance. They did not press their alternative claims for damages or equitable compensation.

Issues, evidence and witnesses

1. [5]

   The issues for determination raise the proper construction of cl 34 of the Contract and consideration of the Mental Health Act, with the main issues being whether and when the defendant became mentally ill within the meaning of that Act and whether the defendant was entitled to rescind.

2. [6]

   It was common ground that an order for specific performance should be granted if the Court determines that the defendant was not entitled to rely on cl 34 and rescind the Contract.

3. [7]

   The plaintiffs contend that the defendant is not entitled to rely on cl 34 of the Contract and the recission notice is invalid because the defendant was already mentally ill when he entered into the Contract, the defendant’s mental health did not impede him from complying with his obligations under the Contract as vendor and the defendant took steps to trigger cl 34 by exaggerating his symptoms of mental illness.

4. [8]

   The defendant disputes these claims and maintains that the recission notice is valid.

5. [9]

   The plaintiffs read affidavits from the second plaintiff, Mr Spirit, and Guy Higgins, a real estate agent who operates a business in Tathra known as Guy Higgins Property Sales. Mr Higgins conducted the sale of the Property on behalf of the defendant. Mr Higgins was cross-examined, as was Mr Spirit. No issues of credit were raised and I accept their evidence.

6. [10]

   The defendant, who was represented by a tutor and subject to guardianship and financial management orders, did not give evidence. An affidavit from his tutor, Maurice Cunningham, was read without objection. Mr Cunningham has known the defendant for about 35 years. He is the defendant’s solicitor in these proceedings and the guardian and financial manager as appointed by the NSW Civil and Administrative Tribunal (NCAT).

7. [11]

   Mr Cunningham was cross-examined and submissions were made by the plaintiffs that he was a poor witness whose evidence lacked credibility. While I formed the impression that Mr Cunningham endeavoured to give his evidence in cross-examination truthfully and to the best of his recollection, there were inconsistencies and inadequacies which, in my view, undermined the reliability of his evidence. See, for example, his evidence about when he started acting for the defendant in relation to the Contract (referred to at [37] below), when he received documents and instructions, and his knowledge about the terms of the Contract, including cl 34 (referred to at [46], [72] and [80] below). On occasion, Mr Cunningham also came across as somewhat avoidant of answering direct questions, argumentative and advocating for the defendant (see, for example, at T72.20–35, T79.34–49, T81.17–50, T86.20–33). To the extent of any conflict, I have placed more weight on the contemporaneous documents and the inferences to be drawn from them than Mr Cunningham’s evidence.

8. [12]

   The parties also relied on expert evidence from two consultant psychiatrists: Dr Alice Dwyer for the plaintiffs and Dr Sam Calvin for the defendant. Both experts were cross-examined.

9. [13]

   The documentary evidence included extensive medical and other records relating to the defendant, including notes taken during his hospital admissions. None of the defendant’s treating doctors gave evidence.

10. [14]

    The parties relied on written submissions that were provided prior to and after the evidence had completed, as well as oral submissions at the hearing. I have had regard to all the facts contended for and the arguments advanced in the parties’ written and oral submissions.

The Contract

1. [15]

   The Contract is in a standard form and includes cl 34 as an additional provision, in the following terms:

2. [16]

   Clauses 19, 42 and 45 of the Contract deal with recission and completion as follows:

Relevant provisions of the Mental Health Act

1. [17]

   The Mental Health Act relevantly provides:

2. [18]

   Section 14 of the Mental Health Act is contained in Pt 1 of Ch 3, which deals with the requirements for involuntary admission, detention and treatment.

3. [19]

   Under the Mental Health Act, a person:

Factual matters and summary of the evidence

1. [20]

   The following facts are drawn from the affidavit, oral and documentary evidence. Unless otherwise indicated, I am satisfied of the following matters.

2. [21]

   The Property is a rural property of five acres and is located about seven kilometres north of the township of Tathra on the south coast of NSW. The defendant has owned and lived at the Property since about 1994 or 1995.

3. [22]

   Until 2021, the defendant was self-employed. He ran a beekeeping business and sold honey at various local markets, was involved in managing storage units in Bermagui and rented out the Property on Airbnb Australia Pty Ltd. The defendant worked closely with his father, who was a beekeeper, until his father’s death in 2019.

4. [23]

   In March 2018 and from late 2019 to early 2020, bushfires affected Tathra and the NSW south coast region. The defendant’s beekeeping business was adversely impacted by the bushfires and one of his friends died in the 2019–2020 bushfires.

5. [24]

   In about February 2020, the defendant engaged Mr Higgins, a real estate agent, to act for the sale of the Property. An agency agreement was signed but the Property was not advertised or put to market as, six or eight weeks later, the defendant told Mr Higgins that he did not wish to proceed with the sale.

6. [25]

   On 5 November 2020, the defendant was stopped by police while driving, charged with a drug driving offence, issued with a penalty notice, required to pay a fine of $581 and prohibited from driving for three months. Mr Cunningham gave evidence that the defendant wanted to appeal the charge but he ran the risk of being further suspended from driving for six months which would have impacted his attempts “to get his business back on the road after COVID”.

7. [26]

   In about November 2020, the defendant again approached Mr Higgins to sell the Property. At a meeting on 26 November 2020, the defendant signed an agency agreement and agreed to Mr Higgins’ suggestion that the Property be marketed with a view to selling at a public auction in February 2021. An auction of the Property was scheduled for 13 February 2021.

8. [27]

   Around this time, the plaintiffs were seeking to buy what the second plaintiff described as their “forever home” and were undertaking property inspections in the south coast region. The plaintiffs and their daughter had been living in a small town in the south coast since mid-2019. The plaintiffs inspected the Property, obtained a copy of the contract and undertook a pest and building report.

9. [28]

   On 13 February 2021, the auction of the Property took place. That day, the defendant gave Mr Higgins the following written instructions comprising of a typed letter which was completed by the defendant in handwriting (in italics):

10. [29]

    The plaintiffs were the highest bidder having offered $951,000. The defendant told Mr Higgins that he was not going to sell at that price and the Property was passed in.

11. [30]

    On 15 February 2021, Mr Higgins called the defendant and the second plaintiff to see if he could negotiate the sale of the Property. After undertaking another inspection of the Property, the plaintiffs made a revised offer of $975,000 that was accepted by the defendant. Mr Higgins arranged for the plaintiffs to sign the contract and drove to the Property, where the defendant signed a counterpart in the presence of two friends.

12. [31]

    In cross-examination, Mr Higgins described the defendant’s demeanour at the auction as “excited”, “keen to sell” and “like most vendors… nervous”, and gave evidence that on the day he signed the Contract, the defendant was not uncomfortable at all, was grateful for Mr Higgins’ service, happy that they had got the highest possible price, appeared to be his normal self and did not appear to be under the influence of alcohol or drugs.

13. [32]

    It is common ground that the Contract exchanged on 15 February 2021.

14. [33]

    On 16 February 2021, Melinda Twyford, a solicitor at Clark Rideaux Solicitors who was acting for the defendant in respect of the conveyance, sent a letter to the plaintiffs’ solicitors, Webb Thom & Associates, responding to their request for requisitions on title.

15. [34]

    That day, a land tax certificate under s 47 of the Land Tax Management Act 1956 (NSW) and a foreign resident capital gains withholding clearance certificate were issued in relation to the Property and defendant.

16. [35]

    Also that day, Ms Twyford sent a letter to the defendant confirming that the Contract had been exchanged on 15 February 2021, the 10% deposit was paid and held in Mr Higgins’ trust account and completion was to occur on 29 March 2021. She requested that the defendant complete a discharge authority so she could arrange a discharge of the mortgage to ANZ, stated that the plaintiffs were entitled to a pre-completion inspection of the Property three days immediately before completion and attached Clark Rideaux Solicitors’ costs disclosure (Exhibit E).

17. [36]

    On or around 23 February 2021, Ms Twyford ceased acting for the defendant and Clark Rideaux Solicitors sent documents to Mr Cunningham as part of a handover to him in relation to the matter (Exhibit H).

18. [37]

    It is not clear why the defendant decided to change his solicitor. The change occurred following a conference between Ms Twyford and the defendant on 23 February 2021 and correspondence which was sent by Clark Rideaux Solicitors to the defendant that day in relation to advice sought by the defendant concerning his rights and obligations under the Contract and Clark Rideaux Solicitors’ continued retainer in circumstances where Ms Twyford was the defendant’s first cousin (Exhibit H). Mr Cunningham’s evidence did not explain the reason for the change. His oral evidence and affidavit sworn 15 October 2021, to the effect that he commenced acting for the defendant on 26 February, was inconsistent with an affidavit sworn 9 September 2022 which referred to being the defendant’s solicitor from 23 February.

19. [38]

    On 24 February 2021, the defendant saw Dr Muhammad Malik, a doctor at the Bluehouse Surgery who had treated the defendant in 2019 for knee pain.

20. [39]

    Dr Malik’s patient notes from that day record that the defendant was: in distress; teary; depressed; low mood; loss of appetite; few issues; been going downhill since father’s death and the bushfires last year; unable to make sound decisions recently; sold house in Tanja when did not want to sell it now in a mess and feels was the worst decision and states was not in right frame of mind when made the decision; nil suicidal ideations; nil homicidal ideations; has not slept for days; not eating; refusing hospitalisation; and suggest urgent psychologist review. Dr Malik wrote a referral letter to psychologist, Gayle Salt, in the following terms:

21. [40]

    On 25 February 2021, the defendant attended the funeral of a father’s friend. Mr Cunningham gave evidence that he had spoken to the defendant about the funeral, the defendant was “anxious whether he should go or not” and Mr Cunningham encouraged him to attend.

22. [41]

    That afternoon, the defendant presented himself to the emergency department at Bega Hospital and made a personal application for voluntary admission to a mental health facility under s 5(1) of the Mental Health Act.

23. [42]

    The defendant was admitted to the MHU at Bega Hospital as a voluntary patient. He was later detained as an involuntary patient, following examinations of the defendant by authorised medical officers, Dr Magodage Kalinga Mahiraj Abeyasinghe and Dr Timothy Berry, on 25 and 26 February 2021. Drs Abeyasinghe and Berry completed clinical reports as to the mental state of the defendant as a detained person under s 27(1) of the Mental Health Act which certified, in their opinion, that the defendant was a “mentally ill person”.

24. [43]

    The report by Dr Abeyasinghe dated 25 February 2021 states:

25. [44]

    Dr Berry’s report dated 26 February 2021 records the following: teary; distress re recent selling of house; flat affect; daily THC and alcohol; and suicidal ideation. Dr Berry concluded “low mood in context of substance dependence and recent financial stressors. Risk of suicide”.

26. [45]

    The MHU progress notes from assessments of the defendant on 25 and 26 February record that the defendant was not known to mental health services, self-presented to the emergency department seeking mental health input and reported worsening depression, suicidal ideation and plan, and a longer than 12 month history of trauma and mental state decline which commenced when his elderly father had a fall and suffered a fatal head trauma two years ago and from the bushfires and floods where the defendant was caught in the fires and his close friend was killed. They also record:

27. [46]

    In cross-examination, Mr Cunningham was asked but did not accept that he was the solicitor referred to in the hospital notes (at [45] above) (T73.31). He could not recall speaking to the defendant on 23, 24 or 25 February, said that he did not discuss the sale, rescission of the Contract or obtaining a report about the defendant’s mental illness with the defendant at that time and was not aware that the Contract included a clause that provided for a party to rescind if they became mentally ill (T73.31; T75.18; T90.49; T92.32; T143.43–144.13). Mr Cunningham’s evidence was not convincing having regard to the evidence of the handover to Mr Cunningham (at [36]–[37] above), the call between Mr Cunningham and the MHU (at [54] below) and the absence of any evidence from Ms Twyford.

28. [47]

    On 25 and 26 February, during the process of his admission, the defendant signed forms that nominated Ms Twyford (identified as his cousin) and Mr Cunningham (identified as his lawyer) as designated carers for the purposes of s 72 of the Mental Health Act and in relation to the use of his mobile phone.

29. [48]

    Mr Cunningham deposed that, on about 26 February 2021, he received a telephone call from the defendant’s mother who told him that the defendant had been admitted into the psychiatric ward at Bega Hospital and he should probably let the purchasers know as a courtesy as the defendant was not expected to be discharged until at least 8 March.

30. [49]

    Mr Cunningham said that, shortly after that call, he contacted Bega Hospital and asked to be made a contact person for the defendant and sent a letter to the plaintiffs’ solicitor, Mr Thom. There is no record of Mr Cunningham’s call to the MHU of Bega Hospital.

31. [50]

    Mr Cunningham’s letter to Mr Thom dated 26 February 2021 advised that the defendant had been admitted to Bega Hospital and Mr Cunningham was awaiting a further report but he had been informed, in all likelihood, that the defendant may be suffering a mental illness. The letter also records:

32. [51]

    The MHU progress notes prepared on 26 and 27 February 2021 record the following:

33. [52]

    On 2 March 2021, the plaintiffs wrote directly to Mr Cunningham in the following terms:

34. [53]

    Mr Thom sent a follow-up email to Mr Cunningham the following day.

35. [54]

    On 3 March 2021, at around 2.00pm, there was a phone call between Mr Cunningham and a Registrar of the MHU. The MHU progress note states:

36. [55]

    When asked about the call in cross-examination, Mr Cunningham could not recall the conversation with the Registrar other than he recalled asking for a medical report from a psychiatrist and referred to the “template of the Mental Health Act”.

37. [56]

    On 3 March 2021, Mr Cunningham sent two letters to Mr Thom. The first letter advised Mr Thom that the defendant was expected to remain at Bega Hospital MHU the following week, Mr Cunningham would pass on relevant information about the defendant’s diagnosis when received and also stated:

38. [57]

    Mr Cunningham’s second letter referred to his phone call with Bega Hospital and advised that he expected to receive a written report that classified the defendant as suffering a mental illness and he would seek to clarify by 8 March (the date on which it was expected the defendant would remain at the MHU) if the defendant was deemed to be mentally ill and if that meant activating cl 34.

39. [58]

    Mr Cunningham deposed that, on about 7 March 2021, he spoke to the defendant by calling the MHU at Bega Hospital. He gave evidence that the defendant said words to the following effect: “I can’t cope with everything. I can’t go through with the sale. Can you help me”.

40. [59]

    Mr Cunningham deposed that, on 8 March 2021, he spoke to the defendant’s mother and recalled her saying that they were expecting the defendant to return home that day, he was “a little more settled but still very fragile and he keeps talking it’s all too much and the fires are coming back”.

41. [60]

    Later that day, the defendant was discharged from the MHU at Bega Hospital into the “care of family”. The discharge summary records that:

42. [61]

    On 8 March 2021, Mr Cunningham sent a letter to Mr Thom purporting to give notice under cl 34 to rescind the Contract (Clause 34 Notice). The letter noted that Mr Cunningham had not seen the psychiatrist’s report but it had been read to him, and went on to state:

43. [62]

    Mr Cunningham subsequently received a written report from Dr Ayodele Olatunji, a psychiatrist at Bega Hospital, dated 8 March 2021, which stated:

44. [63]

    In cross-examination, when asked who gave him instructions to issue the Clause 34 Notice, Mr Cunningham said:

45. [64]

    Mr Cunningham said that he believed the defendant’s statement, that “I can’t go through with the sale. Can you help me”, in conjunction with speaking to the defendant’s mother were sufficient instructions at the time for him to issue the Clause 34 Notice but accepted that the trigger for its issuance was really the medical report (at [62] above). He also said that he felt that the defendant was competent to give instructions to rescind as the defendant had been discharged from the MHU that day.

46. [65]

    The defendant submitted that the Court should find that Mr Cunningham was instructed to rescind the Contract by the defendant, referring to their telephone discussion at [58] above. Based on Mr Cunningham’s evidence, I am satisfied that he understood that discussion as sufficient instructions from the defendant to do what was necessary to get out of the Contract and Mr Cunningham gave notice to rescind on the basis of that instruction and upon receiving confirmation during a phone call with the MHU that the defendant had been admitted to the Bega Hospital MHU as a mentally ill person from 25 February to 8 March 2021.

47. [66]

    On 9 March 2021, Mr Cunningham sent a letter to Mr Higgins advising that he had given written notice to the plaintiffs’ solicitors under cl 34 of the Contract and requesting that arrangements be made for the refund of the deposit.

48. [67]

    On 9 March 2021, Mr Thom wrote to Mr Cunningham advising that the plaintiffs did not accept the recission under cl 34 of the Contract. In the letter, Mr Thom asserted there had been no evidence provided regarding the fact of or extent of any mental illness and asked for confirmation that the alleged recission was withdrawn.

49. [68]

    On 10 March 2021, Dr Malik wrote a letter addressed to “whom it may concern” in the following terms:

50. [69]

    On 15 March 2021, Mr Cunningham responded to Mr Thom’s 9 March letter advising that the Clause 34 Notice was not withdrawn and was to be relied on. Mr Cunningham’s letter referred to various documents as enclosed (which were not), including medical assessments from the Bluehouse Surgery and Dr Olatunji, the discharge summary from the MHU at Bega Hospital and the defendant’s mental health care plan.

51. [70]

    On 16, 17 and 18 March 2021, Mr Thom and Mr Cunningham exchanged further communications about the defendant, his mental health and the Clause 34 Notice, which culminated in Mr Thom advising Mr Cunningham on 18 March that the plaintiffs had lodged a caveat and an application for specific performance would be made if the Clause 34 Notice was not withdrawn.

52. [71]

    On 22 March 2021, the defendant was readmitted to the MHU at Bega Hospital. Prior to his admission, he had been receiving treatment from a clinical psychologist, who, in a letter to Dr Malik dated 23 March 2021, reported that the defendant presented with complicated PTSD following the bushfires and might benefit from hospitalisation to help with his suicidal thoughts.

53. [72]

    On 25 March 2021, Mr Cunningham sent a letter to Mr Thom and notified him that the defendant had been readmitted to Bega Hospital, the family was in the process of applying for guardianship and financial management orders, the Clause 34 Notice was maintained and that any specific performance application would be opposed. Mr Cunningham’s letter also referred to the withdrawal of the defendant’s solicitor who was first instructed for the conveyance and that Mr Cunningham did not have any “any files, materials or more importantly instructions in, what was, the conveyance”. That assertion was inaccurate. Mr Cunningham accepted in cross-examination that he must have had a copy of the Contract and known about cl 34 by then and it is apparent that he considered he had instructions from the defendant in relation to the Clause 34 Notice. Mr Cunningham’s explanation in cross-examination that he assumed he meant that did not have the full file was not convincing.

54. [73]

    The MHU progress notes of 26 March 2021 refer to a telephone call from Dr Abeyasinghe to Mr Cunningham during which Mr Cunningham requested a letter from the defendant’s treating team that he was suffering from a mental illness and unable to undertake normal daily activities due to his mental illness. Mr Cunningham did not give evidence about that conversation.

55. [74]

    On 29 March 2021, Dr Abeyasinghe wrote a letter to Mr Cunningham which stated:

56. [75]

    The MHU progress notes of 29 and 30 March 2021 record:

57. [76]

    On 30 March 2021, Mr Thom sent an email to Mr Cunningham attaching a notice to complete from the plaintiffs which required the defendant to complete the Contract in accordance with its terms on 15 April 2021 (Notice to Complete).

58. [77]

    On 31 March 2021, the Mental Health Review Tribunal held an inquiry under s 34 of the Mental Health Act. This followed an application made by Dr Abeyasinghe to the Tribunal for an Inpatient Treatment Order (IPO), which relevantly stated: it was believed that, as a voluntary patient, the defendant would request to be discharged from Bega Hospital prematurely, before his mental status stabilised; the defendant was suffering from a major mental disorder, namely Major Depressive Disorder; the defendant accepted he had some mental health issues but did not fully appreciate his symptoms; the doctors strongly felt that the defendant was trying to show a brave face in order to convince the treating team to get discharged; they were highly concerned about his current presentation; there were periods when the defendant appeared lucid and reactive; the defendant still felt extremely guilty about signing the Contract to sell the house; and he still experienced severe anxiety.

59. [78]

    On 31 March, the Mental Health Review Tribunal made a determination that the defendant was a mentally ill person under s 35 of the Mental Health Act and was required to be detained in Bega Hospital for further observation and/or treatment as an involuntary patient until no later than 28 April 2021. The Tribunal’s reasons stated:

60. [79]

    The MHU’s progress notes of 9 April 2021 record:

61. [80]

    During cross-examination, Mr Cunningham did not accept that he was the “lawyer friend” referred to in the notes and mentioned Ms Twyford when asked whether the defendant had any other lawyer friends.

62. [81]

    On 14 April 2021, Mr Cunningham sent a letter to Mr Thom disputing the validity of the Notice to Complete. In the letter, Mr Cunningham asserted that: the Contract was no longer on foot, relying on the Clause 34 Notice; the defendant became mentally ill for the purposes of cl 34 on or about 25 February, with the event of his illness arising after the Contract was entered into; the defendant was currently an involuntary patient in the Bega Hospital MHU; and Mr Cunningham had instructions to accept service of proceedings and, on instructions from the defendant’s family, he would be applying to NCAT for the appointment of a financial manager and guardian in relation to the defendant. Mr Cunningham also requested for the caveat lodged by the plaintiffs to be removed.

63. [82]

    On 15 April 2021, the defendant was discharged from the MHU at Bega Hospital. The MHU discharge summary notes refer to the defendant expressing feelings of regret, distress and anxiety over signing the Contract and that he felt he was groomed by the real estate agent and coerced while under the influence of cannabis and alcohol, and that the defendant was caught in the idea that losing the house meant “the end of everything, can’t see what will happen past that”.

64. [83]

    On 23 April 2021, Mr Thom wrote to Mr Cunningham noting that he had not yet seen any medical reports and querying how Mr Cunningham received instructions to rescind the Contract if the defendant was suffering from a “newly developed” mental health condition. He also offered to extend the settlement date for three months to see if the defendant’s mental position improved. There is no evidence of any response to Mr Thom’s letter.

65. [84]

    In May 2021, the defendant went to Sydney and stayed with Mr Cunningham. During that period, he was under the care and monitoring of the Prince of Wales Hospital Randwick Care Assessment Team and attended sessions with a psychologist, who, in a letter to Dr Malik dated 24 May 2021, reported that the defendant presented with severe symptoms of depression, anxiety and stress, and his testing scores suggested he was experiencing a severe mental disorder. The defendant continued to receive treatment from a psychologist on his return to Tathra, where he lived with his mother, and when he was in Sydney staying with Mr Cunningham.

66. [85]

    On 22 June 2021, Mr Cunningham lodged a guardianship application in relation to the defendant with NCAT.

67. [86]

    On 14 July 2021, the plaintiffs commenced these proceedings by Statement of Claim filed that day.

68. [87]

    On 20 August 2021, NCAT made guardianship and financial management orders appointing Mr Cunningham as the defendant’s guardian and financial manager of the defendant’s estate for 12 months (NCAT Orders). The NCAT Orders were reviewed and extended for a further 12 months on 23 August 2022.

69. [88]

    On 12 September 2021, the defendant, by his tutor, Mr Cunningham, filed a defence.

Expert medical evidence

1. [89]

   Dr Dwyer is a consultant psychiatrist, with a Bachelor of Medicine/Bachelor of Surgery (Honours) and Masters of Psychiatry. She has been a Fellow of the Royal Australian and New Zealand College of Psychiatrists since 2014 and a Visiting Medical Officer at St John of God Hospital and Medical Centre since 2015.

2. [90]

   Dr Dwyer was asked to provide a report and opinion as to the defendant’s mental health in the lead up to 15 February 2021 and whether he was mentally ill as defined in the Mental Health Act on or before entering into the Contract on 15 February 2021 based on the documents supplied, which relevantly included the documents referred to at [60], [62], [68] and [74] above.

3. [91]

   In her report dated 27 January 2022, Dr Dwyer opined that:

4. [92]

   During cross-examination, Dr Dwyer:

5. [93]

   Dr Dwyer conceded, appropriately, that a file review would be less comprehensive than a review with an examination of the patient (T41.15). However, it seems that Dr Dwyer was unable to examine the defendant because Mr Cunningham had refused the plaintiffs’ solicitor’s request to make the defendant available for examination by the plaintiffs’ medical expert on 2 November 2021 (Exhibit G).

6. [94]

   Dr Calvin is a forensic psychiatrist in private practice. He has a Bachelor of Medicine and Surgery, a Masters in Health and Medical Law and a Doctorate in Psychiatry. Dr Calvin is a Fellow of the Royal Australian and New Zealand College of Psychiatrists and registered as a specialist in psychiatry with the Australian Health Practitioner Regulation Agency.

7. [95]

   Dr Calvin assessed the defendant on 3 June 2022 via videoconference. He was provided with a range of documents, including Dr Dwyer’s report. Dr Calvin was asked to give his opinion by reference to a series of questions, including: what constitutes a mental illness under the Mental Health Act; whether the defendant was mentally ill for the purposes of the Mental Health Act prior to his admission to hospital; and when the defendant became a mentally ill person.

8. [96]

   In his report dated 16 June 2022, Dr Calvin opined that:

9. [97]

   Under cross-examination, Dr Calvin:

Parties’ submissions

1. [98]

   The plaintiffs’ case that the defendant is not entitled to rescind the Contract was put on three bases.

2. [99]

   First, they say that the defendant had to establish that he became mentally ill after the exchange of the Contract on 15 February 2021. They submit that the defendant did not become mentally ill, as defined in the Mental Health Act, after he entered into the Contract because the medical evidence is clear that the defendant was suffering from various mental illnesses, as defined in the Mental Health Act, in the two year period leading up to February 2021 and that position did not change after the Contract was exchanged.

3. [100]

   The plaintiffs submit that in determining whether the defendant became mentally ill, cl 34 refers to the definition of “mental illness” in s 4 of the Mental Health Act. They contend that cl 34 does not require a party to be a “mentally ill person” within the meaning of s 14 before a party may trigger the clause because cl 34 does not require the party to “become a mentally ill person”, it only refers to “become mentally ill” and the Mental Health Act defines “mental illness” separately from a “mentally ill person”.

4. [101]

   The plaintiffs submit that, in order to rely upon cl 34, the defendant must demonstrate he had “become mentally ill” after exchanging the Contract on 15 February 2021. They contend that cl 34 refers to the definition of “mental illness” in s 4 of the Mental Health Act.

5. [102]

   In support of their submission that the defendant was “mentally ill” prior to entering into the Contract, the plaintiffs relied on the referral letter from Dr Malik (at [39] above) and his report dated 10 March 2021 (at [68] above), the evidence from Drs Dwyer and Calvin and the defendant’s diagnoses of Major Depressive Disorder, PTSD and alcohol and cannabis use disorders which was said must have manifested over an earlier period of time and some years.

6. [103]

   It was submitted that the fact that the defendant’s mental illness was not diagnosed prior to 15 February 2021 does not negate that the defendant was likely to have been mentally ill. They argue that the defendant’s mental illness did not manifest in 10 days, such that the defendant was mentally ill at the time he signed the Contract, and the fact he was diagnosed as a “mentally ill person” on 25 February 2021 did not trigger cl 34.

7. [104]

   Second, the plaintiffs submitted that, even if the reference in cl 34 is to a “mentally ill person” (which is denied), the critical test for the purposes of invoking the right to rescind under cl 34 is whether the impediment prevented the party from carrying out their contractual obligations, referring to the observation of Davies J in Brennan v O’Meara (2009) 14 BPR 27,441; [2009] NSWSC 1374 (Brennan v O’Meara) at [40], such that the distinction between ss 4 and 14 of the Mental Health Act is irrelevant.

8. [105]

   The plaintiffs submitted that, unlike a purchaser who may become mentally ill and unable to work and/or obtain mortgage finance to fund the purchase price and who could genuinely claim that their mental illness amounted to an impediment to the fulfilment of their contractual obligations, the situation in this case is different as the defendant is a vendor who executed the Contract, provided instructions to his solicitor with respect to matters such as replying to requisitions on title, obtaining a land tax certificate, removing an existing caveat on title and issuing a notice to rescind, and signed several documents in the MHU whilst a “mentally ill person”, from which it may be inferred that the MHU staff assessed that the defendant was capable of understanding and signing such documents. The plaintiffs contended that the impediment must be greater for a vendor rather than for a purchaser given the nature of the outstanding obligations of each party and, in this case, there was no legal or practical impediment to prevent the defendant from fulfilling his contractual obligations under the Contract as the defendant, as vendor, was deemed fit for discharge on 8 March 2021 and had given Mr Cunningham instructions to rescind the Contract and accept service of proceedings.

9. [106]

   It was submitted that, given the few steps that were required to be undertaken by the defendant, as vendor, to complete the sale, in order to invoke cl 34 the defendant had to be incapable of giving instructions, which was not the case.

10. [107]

    The third and alternative basis was that whatever the defendant’s state of mental health was at the material time, the defendant admitted himself into the MHU and otherwise knowingly took steps to trigger cl 34 by claiming suicidal ideation and generally exaggerating his mental health to provide a ground to rescind the Contract. That submission was based on the contents of the medical notes and documents.

11. [108]

    The plaintiffs’ written submissions referred to various aspects of the medical notes which they submitted was clear evidence that the defendant admitted himself to engineer an outcome, namely a diagnosis that he was “mentally ill”, in order to trigger cl 34 and rescind the Contract, some of which are extracted in the “Factual matters” section above (see, for example, at [51] above). In particular, the plaintiffs relied on the following:

12. [109]

    The plaintiffs submitted that they did not embark upon a course of questioning the assessment process undertaken by the staff at the MHU lightly, recognising that it would generally be inconceivable that a member of the public might seek to gain admission in circumstances where their motives were not genuine. However, the plaintiffs submitted that, based on the evidence, the Court should conclude that the defendant used desperate means to rescind the Contract, by getting himself admitted to the MHU for that purpose, such that, putting the defendant’s pre-existing mental health to one side, the Court would conclude that the defendant fabricated the extent of his mental illness for an improper purpose and his defence should be dismissed.

13. [110]

    The defendant submitted that, upon becoming a mentally ill person within the definition of s 14 of the Mental Health Act after the Contract was entered into, either party was permitted to rescind the Contract under cl 34 from that date.

14. [111]

    The defendant submitted that the definition of a “mentally ill person” under s 14 of the Mental Health Act is the definition to which cl 34 refers. It was submitted that, by referring to “becoming mentally ill”, cl 34 is not relying upon the definition of mental illness in s 4 of the Mental Health Act because that definition:

15. [112]

    The defendant submitted that the only equivalent definition in the Mental Health Act to the term in cl 34 which refers to a party becoming mentally ill is the definition of “mentally ill person” in s 14 because:

16. [113]

    The defendant submitted that, having regard to the expert and lay evidence concerning his mental state at and around 15 February 2021, it is more probable than not that he was capable of executing the Contract even though he may have been masking, suppressing or using cannabis and alcohol to manage mental ill health arising from multiple tragic events in his life over a period of several years, but that he was not a “mentally ill person” in the period leading up to or on the date of exchange on 15 February 2021.

17. [114]

    The defendant relies on the evidence of Drs Calvin and Dwyer who were said to be largely consistent with each other as they both opined that a person may have a mental illness but not be a mentally ill person, with the latter concept concerning an assessment of the risk of harm in respect of a person with a mental illness and the need for care, treatment and control. The defendant says that, consistent with Dr Calvin’s description of a decompensation event, Dr Dwyer’s evidence was that a precipitating event could have occurred to the defendant just prior to his admission, with Dr Dwyer characterising the defendant as having a mental illness under the Mental Health Act. It was submitted that there were limitations to Dr Dwyer’s report (as described at [96(i)] above).

18. [115]

    The defendant also pointed to the fact that he was not known to any mental health services prior to the date of exchange of the Contract, he was not known by his general practitioner to have had any mental health problems before 24 February 2021 and he had not shown any symptoms of mental illness, referring to Mr Higgins’ evidence which is described at [31] above.

19. [116]

    The defendant submitted that the Court should find that he became mentally ill on or about 25 February 2021 relying, in particular, on the records of his admission to the MHU on 25 February 2021 and following.

20. [117]

    The defendant submitted that the medical and other evidence demonstrates that he was not capable of making decisions or signing documents, referring to the fact that he remained a person under guardianship and financial management orders.

21. [118]

    The defendant submitted that it is clear from the evidence that he still had to carry out various steps with respect to the sale and, because he had become mentally ill, he could no longer attend to those matters, noting that Mr Cunningham was not appointed to be his guardian or financial manager until August 2021. It was submitted that the facts of the present case are squarely within the position contemplated by Davies J in Brennan v O’Meara at [38], as here the defendant having become mentally ill caused a delay in the fulfilment of the contractual obligations.

22. [119]

    As to the plaintiffs’ claim of contrivance, the defendant submitted that there was a disproportionate reliance on notes prepared in a clinical setting for a purpose entirely removed from the proceedings and that the focus on utterances by and observations of the defendant over a period of months while he was in the MHU is largely irrelevant to the matters for determination by the Court. It was submitted that the plaintiffs minimised the fact that the defendant was admitted as a voluntary patient to the MHU on 25 February 2021 and the defendant emphasised that he did not “admit himself”, referring to Dr Dwyer’s evidence that to be admitted voluntarily to a public mental health unit signifies significant distress and concern from the staff that have examined that person and a significant presence of mental overwhelm.

23. [120]

    The defendant also emphasised that he was examined and certified as a mentally ill person shortly after his presentation to the emergency department and, in response to the plaintiffs’ reference to statements made by the defendant while in hospital, referred to Dr Dwyer’s evidence (at [92(h)] above) to the effect that people suffering from conditions of the nature suffered by the defendant were unlikely to be reliable narrators, could fail to have insight into their conditions and could be prone to a catastrophic style of thought pattern where minor or trivial matters are blown out of all proportion.

Consideration and determination

1. [121]

   Clause 34 of the Contract provides a right of recission to either party should either party, prior to completion, “become mentally ill, as defined by the Mental Health Act”.

2. [122]

   The parties’ submissions raise issues about the proper construction of cl 34 and questions of fact about whether and when the defendant became mentally ill.

3. [123]

   The issue of construction arises in the context where cl 34 of the Contract purports to incorporate a statutory definition for “mentally ill” from the Mental Health Act, and the Act provides distinct definitions for “mental illness” in s 4 and “mentally ill person” in s 14.

4. [124]

   The terms of the Contract are to be interpreted objectively by reference to the text, context and purpose of the Contract and what a reasonable business person would have understood them to mean. The Court is entitled to approach the task of construction on the basis that the parties intended to produce a result which makes commercial sense and avoids a construction that leads to capricious, unjust or unreasonable results: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; (2017) 343 ALR 58; [2017] HCA 12 at [16]–[17], referring to Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640; (2014) 306 ALR 25; [2014] HCA 7 at [35].

5. [125]

   Where, as here, the Contract has been drafted with a statutory definition in mind, the particular context must be considered before the Court can attribute to the parties an intention to use such terms in a different sense to that which they are used in a legislative context: L J Lewison and D Hughes, The Interpretation of Contracts in Australia (Thomson Reuters, 2012) at [5.16]; and Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [185].

6. [126]

   The text of a definition is also to be construed by reading the definition into the operative provisions rather than in isolation: Wiggins Island Coal Export Terminal Pty Ltd v New Hope Corporation Ltd [2019] NSWCA 316 at [39] and [118]; Kelly v the Queen (2004) 218 CLR 216; (2004) 205 ALR 274; [2004] HCA 12 at [103].

7. [127]

   The purpose and context of cl 34 is, as the parties accepted, to deal with events that are anticipated to cause an impediment or delay in the fulfilment of contractual obligations, namely death, becoming mentally ill and bankruptcy: Karfoal v Lorence at [13]; and Brennan v O’Meara at [37].

8. [128]

   In Brennan v O’Meara, Davies J observed that death and bankruptcy would not necessarily preclude completion but would involve considerable delays in moving the contract to completion, which supported the view that the words “mentally ill” must also entail a state of affairs that causes a delay in fulfilment of the contractual obligations. In construing a clause similar to cl 34 that did not define the term “mentally ill” by reference to statute or otherwise, His Honour considered that such a delay or impediment would occur if the mental illness was such that a Court needed to make a declaration and order under s 13 of the Protected Estates Act 1983 (NSW) or a guardianship order under s 25G of the Guardianship Act 1987 (NSW), and that in some cases the person may be mentally ill within the meaning of s 14 of the Mental Health Act, although he considered that it would not be necessary in all cases for a person to satisfy that definition: at [37]–[38].

9. [129]

   Davies J considered that the definitions of “mental illness” and a “mentally ill person” in ss 4 and 14 of the Mental Health Act provided a useful guide to the meaning of the undefined words “mentally ill” but he did not consider the requirements of those sections had to be met for the purpose of the contractual clause and it was sufficient to show, for example, that the person suffered from a mental illness as defined in s 4 without the added requirement in s 14 of a reasonable belief concerning care, treatment or control. On the other hand, it would not be sufficient for a person who wishes to take advantage of such a clause to point to a diagnosis that a party is suffering from a mental illness (within the meaning of the categorisation of mental illness in a manual such as DSM-IV) because such a mental illness may be of a nature or magnitude that does not cause any impediment to the fulfilment of the contractual obligations brought about by the entering into the contract: at [40]–[41].

10. [130]

    In Brennan v O’Meara, Davies J concluded that the party was not mentally ill within the meaning of the clause and could not rely on the right to rescind because his diagnosed condition (even assuming it was a mental illness) was causing no impediment to the fulfilment of his contractual obligations, noting that there was nothing in the evidence which suggested any inability to function or deal with his affairs or that he lacked any mental or emotional capacity to engage in, enter into, or complete business, commercial or legal transactions.

11. [131]

    In Brennan v O’Meara, Davies J also considered what was meant by the expression “become mentally ill”. He described the word “become” as indicative of a change of state and generally pointing to a transition that takes place between the date of contract and completion: at [50].

12. [132]

    In Coppa v Barnett, the term “mentally ill” was also not defined in the sale contract. Stevenson J adopted the approach from Karfoal v Lorence and Brennan v O’Meara and, by reference to the context to which the expression was used, considered that the mental illness must be of a nature that causes an inability, or at least an impediment, on the part of the relevant party to fulfil their contractual obligations. His Honour concluded that the party was not entitled to rescind as they were mentally ill at the date of entering into the contract and did not, thereafter, “become” mentally ill within the meaning of that expression.

13. [133]

    Stevenson J also said at [43]–[44]:

14. [134]

    I agree with the approach of Davies and Stevenson JJ as to the meaning of “become” mentally ill. To rely on cl 34 of the Contract, the defendant’s mental condition must have become or developed into one such that he was “mentally ill” (as defined by the Mental Health Act) after the Contract was entered into, namely on 15 February 2021, and before completion.

15. [135]

    As to the meaning of “mentally ill”, I am persuaded by the defendant’s submission that, on a proper construction of cl 34, the definition of “mentally ill person” in s 14 of the Mental Health Act is the definition to which cl 34 refers.

16. [136]

    I have come to this conclusion primarily for the reasons that I consider it to be the better construction based on an ordinary and natural reading of cl 34, which uses the expression “mentally ill”, the corresponding expression in 14 of the Mental Health Act and the purpose and context of cl 34.

17. [137]

    While there was force to the plaintiffs’ submission that a person may be mentally ill if they have a mental illness (within the meaning of s 4 of the Mental Health Act), as a matter of grammar and syntax, the s 4 definition of mental illness does not fit well if one were to read that definition into the operative text of cl 34. As the defendant contended, a person does not become “mental illness” or become “a condition that seriously impairs… the mental functioning of a person…”

18. [138]

    The constructional choice is whether cl 34 should be construed as providing a right to rescind in the event a party “becomes [a] mentally ill [person]” or “becomes a person with a mental illness”, as defined by the Mental Health Act. Clause 34 may not use the precise expression “become a mentally ill person” but, in my view, importing the definition of mentally ill person from s 14 into cl 34 better reflects the parties’ objective intention having regard to the language and purpose of the clause.

19. [139]

    Under the Mental Health Act, a person may have a “mental illness” (as defined by s 4) but not be a “mentally ill person” (as defined by s 14). The distinction is that a mentally ill person, in addition to suffering from a mental illness, is in need of care, treatment or control for the protection of the person or others from serious harm owing to their mental illness and, in contrast to a person with a mental illness but who is not a mentally ill person, may be detained in or admitted to a mental health facility on an involuntary basis. Sections 4 and 14 of the Act both describe the nature of the person’s mental condition by reference to the definition of mental illness, being a condition that seriously impairs, either temporarily or permanently, the person’s mental functioning and is characterised by the presence of any one or more of the symptoms referred to. The additional element in s 14 denotes that the person suffers from a mental illness of a more serious nature and magnitude than that defined in s 4, which can give rise to significant consequences for that person.

20. [140]

    In my view, the context in which the phrase “mentally ill” is used and the purpose of cl 34 also support a construction that refers to the definition in s 14. Section 14 sets a high bar for a party who seeks to rescind by relying on becoming mentally ill. The party must establish that they have both a mental illness within the meaning of s 4 and a need for care, treatment and control owing to that illness at the relevant time. This section is more consistent with and reflective of the requirement that a mental condition be of a nature and magnitude that would entail a state of affairs that causes delay or the inability for the party to fulfil their contractual obligations.

21. [141]

    Davies J in Brennan v O’Meara did not consider it necessary in all cases for a person to satisfy the definition in s 14 in order to be “mentally ill”. The difference here is that the parties have chosen to import a definition from the Mental Health Act that identifies what amounts to being “mentally ill” for the purposes of cl 34.

22. [142]

    Accordingly, I consider that cl 34 is to be construed as providing a right to rescind to either party should either party, after the date of the Contract and prior to completion, become a mentally ill person, as defined in the Mental Health Act, namely:

23. [143]

    The expression “become mentally ill” also suggests that the parties intended that the right to rescind could only be enlivened if, after the Contract was entered into and before completion, the party’s mental condition became or developed into a mental illness that seriously impaired their mental functioning (as defined in s 4) to such an extent that they were in need of care, treatment or control in accordance with [142(b)] above, reflecting the transition of a person who becomes mentally ill for the purposes of cl 34.

24. [144]

    In my view, it cannot be expected that the parties intended that the right to rescind under cl 34 would arise where the party had a pre-existing mental illness (within the meaning of s 4 of the Mental Health Act) prior to entering into the Contract but became a mentally ill person after entering into the Contract because there were reasonable grounds for believing the person needed care, treatment or control for the protection of that person or others from serious harm owing to their pre-existing mental illness. It is not the identification of the need for care, treatment or control that defines a person as becoming mentally ill for the purposes of cl 34. Rather, it is the development of the mental illness condition together with the identification of those matters.

25. [145]

    It follows, in my view, that, as a matter of construction, to enliven cl 34 and become mentally ill, a party must develop a mental illness (as defined by s 4) and meet the criteria in [142(b)] above after the date of the Contract and before completion.

26. [146]

    There was no real dispute that the defendant was a mentally ill person (within the meaning of s 14 of the Mental Health Act) after 15 February 2021 (T163.48; T164.43–4; T171.37).

27. [147]

    To the extent that this is disputed by the plaintiffs, including on the basis that the defendant’s mental illness was a contrivance, I reject that contention. The totality of the medical evidence satisfies me that, on and from 25 February 2021, the defendant was a mentally ill person and was suffering from a mental illness (as defined by s 4 of the Mental Health Act), namely Major Depressive Disorder, and also suffered from PTSD and alcohol and cannabis use disorders. In particular, the assessments by Drs Abeyasinghe and Berry (at [43]–[44] above), the fact that the defendant was detained as an involuntary patient in the Bega Hospital MHU during the period from 25 February to 8 March 2021 and the expert evidence from Drs Dwyer and Calvin establish that matter.

28. [148]

    I also accept the defendant’s submission that he continued to suffer from a mental illness and was a mentally ill person subsequent to his first admission and discharge from the Bega Hospital MHU. The following evidence satisfies me of those matters: Dr Dwyer’s evidence about the prematurity of the defendant’s discharge from the Bega Hospital MHU on 8 March 2021 (at [92(d)] above); the fact that the defendant was readmitted to the Bega Hospital MHU on the recommendation of his treating psychologist (at [71] above); the fact that the defendant was detained as an involuntary patient during his second admission until 15 April 2021; the contents of the letters and reports from treating psychologists and doctors following the defendant’s second admission which characterised him as experiencing a severe mental disorder (see, for example, at [84] above); and the fact that the defendant was made subject to the NCAT Orders as a result of his mental illness.

29. [149]

    The more difficult question is whether the defendant was mentally ill before 15 February 2021. More precisely, did the defendant suffer from a mental illness (as defined in s 4 of the Mental Health Act) before he entered the Contract, such that he did not become mentally ill for the purposes of cl 34?

30. [150]

    Having carefully considered the totality of the evidence and the submissions of the parties, I am not persuaded by the plaintiffs’ submission that the defendant was mentally ill because he had a mental illness (as defined by s 4 of the Mental Health Act) before he signed the Contract. I am satisfied, on the balance of probabilities, that the defendant was not mentally ill when he entered into the Contract on 15 February 2021 and he became mentally ill after that date. This is for the following reasons.

31. [151]

    First, there is no evidence that the defendant had been diagnosed with or treated for any mental illness or other mental health condition prior to 24 February 2021. The defendant was not known to the Bluehouse Surgery, Dr Malik or any mental health services as having reported any symptoms of mental illness or any other mental health problems before that time.

32. [152]

    Second, the referral letter from Dr Malik does not, in my view, indicate that the defendant suffered from Major Depressive Disorder for 12 to 24 months before his first admission to the Bega Hospital MHU. It refers to the defendant having “acute severe depression and anxiety”, which Dr Malik stated “stems” from his father’s death two years ago and later with the bushfires. The letter may refer to the reported causes of the defendant’s depression but it does not say that the depression existed for that period and should not be read in that way.

33. [153]

    Third, there is an absence of evidence of the defendant actually exhibiting any symptoms of mental illness prior to 24 February 2021. Dr Dwyer gave evidence that the defendant did not, at any time, exhibit any delusions, hallucinations or serious disorders of thought form, consistent with the MHU progress notes and other medical reports and letters which did not record such matters.

34. [154]

    The evidence also does not refer to actual instances of severe disturbances of mood or repeated instances of irrational behaviour which would suggest that the defendant’s mental functioning was seriously impaired, either temporarily or permanently, prior to 15 February 2021. The defendant continued to work on his various businesses, dealt with Mr Higgins and then entered into the Contract on 15 February 2021. He was functioning reasonably well and seemingly unimpaired by his underlying symptoms that led to his later diagnosis as a mentally ill person and having a mental illness of Major Depressive Disorder.

35. [155]

    I do not accept the plaintiffs’ submission that the defendant’s drug driving charge in November 2020 was symptomatic of irrational behaviour, consistent with the defendant having a mental illness. While the evidence suggests that the defendant used cannabis regularly, his charge of driving while having cannabis in his system was an isolated event. In any event, it is difficult to characterise regular cannabis use as irrational behaviour having regard to its “common occurrence” in society, as the defendant submitted.

36. [156]

    Mr Higgins’ evidence did not, in my view, raise any matter that suggested the defendant’s mental functioning was seriously impaired or that he was suffering from a mental illness before he entered into the Contract on 15 February 2021. Mr Higgins, who had known the defendant for 30 years, described him as an astute businessman who ran three businesses, “forthright” and “exacting in what he wanted and what he didn’t want” when he met him in December 2020, “excited” and “keen to sell” on the day of the auction, “not intoxicated” and “very comfortable” when signing the Contract, and “happy that he had obtained such a high price” on 15 February 2021 (T27.22–3; T29.10–11; T30.36; T30.43; T32.27–50; T33.1–2).

37. [157]

    I am unpersuaded by the plaintiffs’ submission that the defendant’s behaviour leading up to the exchange of Contract was illogical and bordered on irrational, raising the possibility of the defendant being mentally ill.

38. [158]

    It is apparent from the evidence that the defendant changed his mind about selling the Property, asked for a higher price than Mr Higgins had recommended and was somewhat reluctant to sell on the day of the auction. The contents of the MHU progress notes also suggest that the defendant may have had “vendor remorse” and put the Property on the market to “get his motivation back to do the house”. However, as the plaintiffs’ counsel accepted during closing submissions, many people put their house on the market, try and get a high price and have remorse (T175). Such conduct is not, in my view, so out of the ordinary as to be characterised as irrational behaviour or indicative of a person’s mental functioning being seriously impaired and the existence of a mental illness (as defined in s 4 of the Mental Health Act).

39. [159]

    Fourth, the MHU assessments and progress notes record, and Drs Dwyer and Calvin opine, that the defendant was diagnosed on 25 February 2021 with a mental illness of Major Depressive Disorder, which Dr Dwyer described as characterised by a severe disturbance of mood, and that the defendant also had PTSD and alcohol and cannabis use disorders.

40. [160]

    Dr Calvin candidly accepted that it was difficult to determine exactly when the defendant become mentally unwell, he may have been suffering from Major Depression from a time prior to February 2021 and he may have had an undiagnosed mental illness prior to 25 February 2021. He explained that the defendant’s symptoms were probably not apparent because he repressed his emotions and coped by alcohol and cannabis intake.

41. [161]

    However, Dr Calvin’s evidence that there appeared to be a gradual decline in the defendant’s mental state, that the defendant’s Major Depressive Disorder was secondary to the PTSD that stemmed from the bushfire events and that the death of his family friend was likely the event that led to the defendant’s acute psychiatric condition of depression and him becoming a mentally ill person shortly before his admission on 25 February 2021, was compelling. I prefer it to Dr Dwyer’s opinion that the defendant was likely to have been mentally ill prior to entering into the Contract.

42. [162]

    In my view, Dr Calvin’s opinion was more consistent with the evidence (outlined at [151]–[158] above) than Dr Dwyer’s. Her opinion that the defendant was likely to have been mentally ill (which was based on the s 4 of mental illness) before 15 February 2021 was based on the defendant’s suicidal ideation amounting to a severe disturbance of mood and yet she accepted that it was not clear when his suicidal ideation first arose.

43. [163]

    Dr Dwyer’s acceptance that a precipitating event could have occurred prior to the defendant’s admission (T55.33–4), that men in rural areas can go on for years before “things have absolutely fallen apart” (T55.25) and that someone with mild Major Depressive Disorder may not have severe impairment of their mental functioning or serious impairment and may be able to function reasonably well (T47.25–9), was also consistent with the defendant’s mental condition changing after he signed the Contract to a condition that seriously impaired his mental functioning and Dr Calvin’s opinion that the defendant became mentally ill shortly before 25 February 2021, as outlined at [161] above.

44. [164]

    As to the plaintiffs’ submissions regarding impediment and whether the defendant was entitled to invoke the right to rescind under cl 34 as vendor, I am not persuaded that the critical test in this case is whether the defendant’s mental illness prevented him from carrying out his contractual obligations under the Contract and completing the sale. In my view, the critical test under this Contract is whether the defendant became mentally ill, as defined by the Mental Health Act, after the Contract was entered into, noting that the definition of “mentally ill person” which I have adopted concerns a mental condition of a nature and magnitude that could be expected to entail a state of affairs that would cause an impediment for the party to fulfil their contractual obligations.

45. [165]

    Further, and as the defendant submitted, impediment in the sense described in the authorities includes a state of affairs that causes delay to the regular completion of the Contract and does not require complete impediment to completion (T177.28–34).

46. [166]

    In any event, I am satisfied that the defendant’s mental illness caused him to be impeded in the relevant sense.

47. [167]

    Considered objectively, the fact that the defendant was detained as an involuntary patient in the Bega Hospital MHU is powerful evidence that the defendant was unable to fully manage his affairs and lacked the mental and emotional capacity to engage in and complete business and legal transactions. I do not take anything about the defendant’s capacity in that regard from the fact that the defendant signed pro forma documents while in the MHU nominating designated carers and agreeing to a phone usage policy. The call with Mr Cunningham on 7 March could not, in my view, be described as the defendant providing clear and coherent instructions indicative of someone who had the mental and emotional capability of dealing with all of the matters required to finalise the Contract.

48. [168]

    Unlike the position in Brennan v O’Meara, the evidence does not suggest that the defendant was managing his affairs after he was discharged on 8 March. The documents record that the defendant considered going back to work after his discharge but did not do so before he was readmitted to the MHU on 22 March. As the defendant submitted, the medical and other evidence demonstrated that the defendant remained incapable of making decisions or signing documents even at the hearing, given he remained subject to the NCAT Orders.

49. [169]

    The steps required to be taken by the defendant as vendor may have been less than those required of the plaintiffs as purchasers. However, they were not just “menial tasks” such that all that was left for the defendant to do was to accept payment of the balance of the purchase price. Amongst other things, the steps included notifying the mortgagee that the Property had been sold, applying for a discharge of mortgage, arranging for access to be given to the Property for inspections, disconnecting services, giving instructions in relation to payments upon settlement and dealing with the deposit. In my view, it is not an answer that the defendant could (and should) have arranged for Mr Cunningham to carry out those tasks. This is particularly as Mr Cunningham was located in Sydney, he had not yet been appointed the defendant’s guardian or financial manager and doing so would necessarily have involved some considerable delay in finalising the sale.

50. [170]

    That leads me to the plaintiffs’ submission about contrivance. In oral closing submissions, plaintiffs’ counsel submitted (165.49–166.11):

51. [171]

    The plaintiffs’ counsel said that, even though he says it was a contrivance, he does not suggest that the defendant was feigning having a mental illness and submitted that the defendant ought not be rewarded for carrying out the contrivance and making statements, all of which he says suggested inconsistent behaviour throughout the defendant’s stay at the MHU (T166.38–43).

52. [172]

    He submitted that it did not make a difference if the defendant was a mentally ill person for the purpose of the Mental Health Act because the defendant should not be allowed to rely upon cl 34. He submitted that there was no spontaneous mental breakdown, the defendant contrived to get to the MHU and had discussed it prior, which “opens the door to deceit and to the manipulation… of the circumstances”, and that by a wrongful act he was seeking to engineer and premeditate a course of action that meant the defendant fell within a definition and, as a matter of public policy, he should not be allowed to take advantage of that (T172.36–174.15).

53. [173]

    It is apparent from the MHU clinical notes that the defendant and Mr Cunningham wanted a report to support the defendant’s claim that he was mentally ill for the purposes of rescinding the Contract and that the defendant reported concerns about the sale of the Property and his capacity being affected when he signed the Contract on 15 February 2021. There are also aspects of the clinical notes which reflect a change in what the defendant was reporting in relation to his mood, feelings and the stressors that led to his admission. The clinical notes do paint a picture that the defendant may have been motivated as part of his admission to the MHU to obtain a diagnosis in order to trigger cl 34.

54. [174]

    However, in my view, the plaintiffs place too much emphasis and seek to draw too many inferences from the contents of the MHU progress notes about the defendant’s state of mind and mental health, particularly the statements to the effect that he was not well when he signed the Contract, he was concerned about the Property and he wanted to obtain a letter or report from a doctor about his mental health.

55. [175]

    As Dr Dwyer explained in cross-examination, patients with a mental illness are not reliable narrators of their histories and can fail to have insight into their condition. She also gave evidence that a person suffering from Major Depression, complex PTSD and alcohol and cannabis withdrawal (as the defendant was) is prone to a catastrophic style of thought pattern where minor or trivial matters are blown out of all proportion (T55.40–56.8). Dr Dwyer’s evidence was persuasive in the context where the defendant had been diagnosed with a mental illness that was assessed by various medical practitioners to be of a nature that seriously impaired his mental functioning and required him to receive care, treatment and control owing to that illness.

56. [176]

    Further, and to the extent that the plaintiffs’ submission seeks a finding to the effect that the defendant falsified symptoms, fabricated the extent of his mental illness, engaged in conduct that involved deceit, contrivance or otherwise would disqualify him from raising and relying on his mental condition for the purposes of cl 34 of the Contract, I reject that contention. I leave to one side that the plaintiffs did not plead deceit or that the defendant engaged in some form of wrongful act by presenting himself for admission to the MHU on 25 February 2021.

57. [177]

    More significantly, the preponderance and consistency of the medical evidence recording the defendant as having a serious mental illness, the length of his admissions to the Bega Hospital MHU as a detained/involuntary patient and the making of the NCAT Orders undermines the plaintiffs’ contention that the defendant falsified symptoms, fabricated and exaggerated the extent of his mental illness, otherwise engaged in any deceit or took advantage of his mental illness in an improper way so as to engineer a particular outcome or disqualify him from seeking to invoke cl 34 and rescind the Contract.

58. [178]

    The plaintiffs’ submissions may have had more force if the defendant had not been admitted to the MHU or had been there on one occasion for, say, a few days. Instead, the defendant was diagnosed with and has been treated for a serious mental illness since his admission to the MHU on 25 February 2021 and was sufficiently unwell and incapable such as to be made subject to the NCAT Orders.

Conclusion and orders

1. [179]

   For these reasons, the plaintiffs’ application for declaratory relief and specific performance is refused. The plaintiffs’ deposit should be returned and their caveat should be removed if it remains on title.

2. [180]

   Given the outcome, I see no reason why the usual order that costs follow the event should not apply and have ordered the plaintiffs to pay the defendant’s costs of the proceedings. If either party seeks a different costs order, they have leave to notify my Associate by email within 7 days of this judgment of the costs order they seek together with a short outline of submissions (of no more than three pages) and an agreed date for submissions in response, with a view to the issue of costs being determined on the papers.

3. [181]

   In light of the confidentiality orders made on 30 September 2022 in respect of documents produced by Bega Hospital which form part of the Court book and annexures to the experts’ affidavits, I will provide the parties with an opportunity to review these reasons and identify any redactions sought prior to publication.

4. [182]

   Accordingly, the Court makes the following orders and directions:

   1. (1)

      Dismiss the plaintiffs’ statement of claim filed 14 July 2021.

   2. (2)

      Direct the defendant to confer with the plaintiffs about any redactions to be made to the public version of these reasons and to send to the Associate of Henry J an agreed version of these reasons for publication by 4.00pm on 7 December 2023.

   3. (3)

      The plaintiffs are to pay the defendant’s costs of the proceedings as agreed or assessed.