What happens in a case of buyer's remorse?

Wednesday 23 November, 2022

Mediation can be a cost effective and timely way to resolve a dispute by reaching an agreement between the parties. But what happens if a party has a case of buyer’s remorse and regrets what they’ve agreed?

That’s the question that the High Court looked at in the case of Remnant v Mills[1]. The parties went into the mediation very far apart: Ms Renmant sought more than $1,800,000.00 and Mr Mills said her entitlement was approximately $154,500.00. 

The parties reached agreement at mediation, but problems arose in the implementation of the agreement. Mr Mills failed to pay $709,375.05 that he owed to Ms Remnant under the agreement. 

Ms Remnant applied to the High Court to recover the debt, and Mr Mills applied to the Family Court to set the agreement aside. To set the agreement aside, Mr Mills had to show that there was a direct connection between the terms of the agreement and the serious injustice which he said would result from giving effect to the agreement. 

Mr Mills said that he had a reasonably arguable case to set aside the agreement in the Family Court. In particular, Mr Mills submitted that giving effect to the agreement would cause serious injustice because:

• He suffered from a mental impairment at mediation; and
• The agreement conferred on Ms Remnant a benefit greater than her legal entitlement.

Ms Remnant, on the other hand, argued that Mr Mills had no arguable defence to her claim and that the High Court should grant summary judgment of her application.

The Court agreed with Ms Remnant, finding that Mr Mills was not significantly mentally impaired at the mediation, and that he negotiated the agreement fully informed of his position and priorities, and that he understood the terms of the agreement:

• Mr Mills’ evidence did not support a finding that his judgement was affected during the mediation:

“There is no evidence Jeffrey demonstrated signs of fatigue, exhaustion, confusion or, indeed, any mental impairment at all to anyone present at the mediation. …I have no doubt Jeffrey felt some level of stress but the mediation process is by its nature stressful.  Mediation requires parties who are in conflict, and often with entrenched views, to meet in person, listen to each other’s point of view and act constructively to explore options for settlement. Heather also experienced stress, the process was at times highly emotive and she, like Jeffrey, wanted to get it over with.”

• Mr Mills’ evidence in the Family Court proceeding was to be that he signed the agreement because he wanted to bring the stress of the unresolved litigation and the mediation to an end:

“He could have refused to settle at any stage of the mediation and taken the risk of an adverse Court decision but the desire for finality and certainty were plainly important to him. He says he was prepared to pay a premium to resolve matters.”

• Mr Mills’ lawyer had advised him that a High Court hearing was likely to last seven to 10 days and to cost $100,000.00 to $200,000.00, which are factors that the Court expected Mr Mills and his lawyer would have discussed when considering whether to sign the agreement.
• Mr Mills’ lawyer didn’t give evidence. The Court said that this failure “is so surprising and vital that the only inference that can be drawn is that he observed nothing about Jeffrey’s manner over the course of the mediation that suggested Jeffrey suffered from an impairment.

The Court also rejected Mr Mills’ argument that the agreement was unfair because Ms Remnant would receive more than her legal entitlement. The Court said that parties to mediation do not expect the outcome to necessarily reflect what a Court would decide, as:

“To achieve a settlement, they will almost always have to make some and often significant compromises.  They cannot complain if, due to prioritizing avoidance of cost and risk or achieving certainty, they receive less than might otherwise have been the case.”

Finally, the Court said that there had been no change of circumstances that meant the agreement had become unfair or unreasonable.

An important lesson for parties to take from this case is that it is difficult to undo agreements made at mediation. To avoid regretting an agreement later on, being prepared for a mediation is crucial.  In particular, this means:

• Getting clear advice on your legal position so that you understand the strengths and weaknesses of your case and the range of acceptable outcomes.
• Being aware that new information may come out during the mediation which can change the range at which you should settle.
• Understanding what your alternatives are to reaching agreement at mediation.
• Knowing what the costs are likely to be if there’s no agreement. For example, if the alternative is a hearing in Court, the costs could involve legal costs, filing and hearing fees, and expert witnesses. There also may be the risk of paying court costs to the other party if you are unsuccessful, and of having to contribute to the cost of a lawyer appointed to assist the Court or lawyer for child.
• Considering the effect of ongoing litigation in terms of delay and stress.

[1] Remnant v Mills [2020] NZHC 3414, [2020] NZFLR 680, 2020 WL 10319037