IDAMENEO NO 9 PTY UNITED v JOVAN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, MAHONEY and PRIESTLEY JJA 6 March 1991, 6 March 1991 [1991] NSWCA 298 CONTRACT — Option — sale of domestic dwelling to estate agent -whether "unjust" under Contracts Review Act 1980 — trial judge (Bryson J) finds "unjust" because (a) the agreed price was well below market value; (b) the company was without assets so that the parties were unequal in the obligation accepted by option and (c) the vendor bound himself to sell to the purchaser for 4 months for a consideration of $1 and the vendor did not understand the nature of the agreement he signed held (dismissing appeal) (1) The conclusions were open to the trial judge and, being in part based on his impressions of the vendor and his capacities in the English language, were immune from disturbance by the Court of Appeal. Jones v Hyde (1989) 63 ALJR 349, 351; Abalos v Australian Postal Commission (1991) 65 ALJR 11, 14 applied; (2) Upon the conclusions of fact made, the conclusion that the option was "unjust" was not shown to have been wrong. Observations by Kirby P on the care to be exercised in appellate review of a finding of injustice under the Contract Review Act because of the "open ended" nature of the criteria for orders under the Act. Observations by Mahoney JA on the need to consider the positions of both sides of the a contract impugned as unjust. WORDS AND PHRASES — "unjust". Contracts Review Act 1980. Kirby P The appeal before the court comes from orders made by Bryson J. It concerns a dispute which arose between the parties about an option granted by one of them to the other for the purchase of a domestic dwelling in Bayview Street, Gladesville. An option is signed for sale of a domestic dwelling: The dwelling is owned in his own name by Mr Jovan Bandeski (the respondent). It is the home in which he lives with his family. The respondent is a migrant to this country from Macedonia in Yugoslavia. He arrived here some twenty years ago. The option was granted by him to Idameneo No 9 Pty Limited (the appellant). The appellant is a company engaged in property development. It is controlled by Mr Jacobus Johannes van der Mark and Mrs Naomi Wilson. Mr van der Mark, himself a migrant from the Netherlands, is a real estate agent. His company was concerned in buying properties in the Gladesville area. On 24 August 1987, Mr van der Mark initiated contact with the respondent. He telephoned Mr Bandeski to enquire whether he was interested in selling his home. After a non-committal conversation, an appointment was eventually made, which was kept by Mr van der Mark and Mrs Wilson at the respondent's home on 27 August 1987. Despite what appears to have been certain discouragement on the part of the respondent's wife, Mr van der Mark conducted a lengthy and detailed inspection of the property. He opened discussion about a selling price. A price of $155,000.00 was finally agreed between him and the respondent. Mr van der Mark always asserted that this was a good price, being $10,000 above his opinion of the then market price. This assertion became a matter of contest during the trial. The evidence of Mr van der Mark was that he told the respondent that he intended to lodge a development application with the local government 2 UNREPORTED JUDGMENTS authority, and that he would pay the price agreed if, within the time fixed, he could secure the approval of the authority to the development of the property as he planned it. Mr van der Mark completed a printed option form which he had brought with him. He signed it in duplicate on behalf of the appellant. The forms were also signed by the respondent. Mr van der Mark then paid the respondent a consideration of $1 in coins, for the grant of the option. This was an action which Bryson J found was "totally incomprehensible" to the respondent. Lay people are not the only ones who find the law of consideration difficult to understand. Dixon CJ once described it as "a peculiar branch of the law". See Ballantyne v Phillott (1961) 105 CLR 399, 390. Before the conclusion of the evening the discussion turned to certain special terms which should be included in the option agreement. As a result of further conversation, certain amendments were included in the option forms. Most of them were written in by Mr van der Mark. However, certain of them were written on his copy by the respondent. It is necessary for my approach to this appeal to set out the incorporated amendments. For that purpose I include in these reasons the reproduction of the form in which the amendments are written in the hand of the respondent: Mr van der Mark thereafter departed from the respondent's home with Mrs Wilson. Subsequently, he arranged for the premises to be inspected by an architect, builder and surveyor. These steps were taken within the next succeeding fortnight or so. Meanwhile, the respondent discussed the option he had signed with a friend and compatriot, a real estate agent named Mr Malcolm. Mr Malcolm told the respondent that the price to which he had agreed, as set out in the option, was not the market price for the property. The respondent thereupon made an appointment to see a solicitor in order to receive advice on his position. At first there was no communication between the respondent or those representing him ton the one hand) and the appellant, Mr van der Mark and Mrs Wilson (on the other). Indeed, there was no indication for many weeks of any misgivings at all on the part of the respondent concerning the option agreement. In these circumstances, understandably, the appellant proceeded to lodge its development application with the local government authority for development approval. When the forty-day period for consideration of the application expired, an appeal was lodged to the Land and Environment Court seeking its approval in the place of that of the local authority. These steps showed clearly enough the vigour with which the appellant was pursuing its rights under the option agreement as it understood them. The appellant then caused a caveat to be lodged to protect the interest which it claimed in the land. This step, on 23 November 1987, provoked the solicitors then acting for the respondent to ask for a copy of the option form. Such a copy was sent to the solicitors on 2 December 1987. On 11 December 1987 the solicitors informed the appellant that the respondent had never intended to grant an option for the sale of his house. So far as the appellant was aware, this was the first time that a dispute as to the efficacy of the option had been communicated to it or to anyone acting on its behalf. On 15 December 1987 the appellant sent a notice to the respondent purporting to exercise the option. But for the relief which Bryson J granted it has not been contested that this was a valid exercise of the option. URJ IDAMENEO NO 9 PTY UNITED v JOVAN (Kirby P) 3 On 12 February 1988 the respondents by their new solicitors wrote to the solicitors for the appellant asserting that the respondent did not consider himself bound by the option. It was that assertion which led to the litigation which came before Bryson J and is now before this Court. Trial judge finds an unjust contract and grants relief: The appellant filed a summons seeking a declaration that the option had been effectively exercised by it and seeking an order for specific performance. The respondent filed a cross-claim which raised a number of grounds of resistance to the summons. The cross-claim asserted fraud on the part of the appellant. It asserted that the appellant - presumably by Mr van der Mark - had misrepresented the true nature and effect of the option. It was pleaded that the option document had been signed solely for the purpose of permitting a surveyor to enter the respondent's property. There was also a plea based upon s52 of the Trade Practices Act 1974 (Cth) alleging misleading and deceptive conduct on the part of the appellant. It may be assumed that the same particulars as were drafted in respect of the allegation of fraudulent misrepresentation supported that plea. A number of other grounds were pleaded both in the original cross-claim and in amendments later allowed at the trial. However, it is not necessary to notice them as the contest, as it was finally dealt with by Bryson J, related to the relief which was available to the respondent under the Contracts Review Act 1980. The contest in this Court has been similarly confined. The respondent sought relief under the Act, including relief by way of an order for the removal of the caveat. The appellant lodged no defence to this cross-claim. However, it appears that the parties acted upon the assumption that the issues were joined on the cross-claim. Bryson J dealt with the matter on that basis. In the result, his Honour provided relief to the respondent under the Contracts Review Act. Under the Act, he declared the contract was void ab initio. He dismissed the appellant's summons. But he denied the respondent the costs that would normally have followed on that dismissal. The appellant has appealed to this Court from the dismissal of the summons. The respondent originally filed a cross-appeal against the costs order. However, this was later abandoned. No notice of contention was filed in this Court seeking to support Bryson J's orders on any basis other than the Contracts Review Act. Accordingly, the appeal has been dealt with solely by reference to the issues found by his Honour and determined by him upon the application of that Act. The conclusions of inequality and injustice examined Bryson J held that the contract constituted by the option form was "very unequal and unjust". He explained that conclusion as being based upon three reasons. The first was his conclusion that the purchase price of the respondent's house was unjustly low. His Honour found that the value of the house at the time of the option was $200,000 or more. Secondly, he found that the appellant, a proprietary company, had no assets so that the contract represented by the option agreement was grossly unequal. In practical terms, the respondent would not have been able to enforce the option against the appellant had the appellant declined to comply with its provisions. Unless those controlling the appellant chose to put assets into the company, process by the respondent against the appellant would have been futile. Thirdly, Bryson J held that, as between the execution of the option and the expiry of the period of four months, the respondent had placed himself under a 4 UNREPORTED JUDGMENTS significant disability. He had done so for a consideration of a mere dollar in coins. His Honour described this aspect of the transaction as "ridiculous". He said that if the effect of the contract had been understood by him, the respondent would not have entered into it. In these circumstances, Bryson J found the respondent on the day on which he signed the contract had subjected himself to unjust consequences against which the Contracts Review Act gave him relief. Bryson J explored whether he should fashion an order which would provide for the payment by the respondent of the costs which had been incurred by the appellant between the date of the execution of the option and the date of the first notice by the respondent to the appellant of the fact that he intended to contest it. However, his Honour found that he could not justly do so. He therefore voided the contract ab initio. However, as I have said, he deprived the respondent the costs of the trial. Explaining this unusual order he said: "The defendant found his way into difficulty by not recognising his own limitations and his behaviour was not that of a reasonable man". Elsewhere in his reasons his Honour referred to the unreasonableness of certain aspects of the conduct of the respondent. He was careful to make and record findings on his way to his ultimate conclusions. Those findings involve determinations which depend, in part at least, on the impressions which Bryson J had of the witnesses before him and of the truthfulness and reliability of their evidence. His Honour rejected the respondent's allegation of fraud on the part of Mr van der Mark. He did not believe that Mr van der Mark had set out deliberately to deceive or mislead the respondent. To the contrary, he found that Mr van der Mark was clear-headed, logical and with a clear perception of the interests of the parties. He said, in the only criticism which he expressed of Mr van der Mark, that the contract was clearly disadvantageous to the respondent and that this would have been realised by Mr van der Mark. On the other hand, his Honour found that the conduct of the respondent was unreasonable. Nevertheless, while acknowledging the weaknesses of the evidence of the respondent's friend, Mr Malcolm (who was not a valuer), he accepted the estimate which Mr Malcolm had placed upon the value of the houses in the vicinity and of the value of the respondent's property at the time the option was signed. Criticisms of the factual bases of the conclusion of injustice The quality of Mr Malcolm's evidence was criticised by the appellant. Indeed it was criticised by Bryson J. However, notwithstanding the criticisms to which his Honour was fully alive, he accepted Mr Malcolm's estimate that the value of the respondent's home in August 1987 at the time the option was signed was more than $200,000. In my opinion it was open to his Honour to accept Mr Malcolm's evidence in that regard. He was not a layman. He had relevant experience and expertise. The finding is unassailable. Most importantly, his Honour found that the respondent had over-estimated his ability in the English language. He pointed out that the respondent's first language was Macedonian. That language is written in the Cyrillic and not the Roman script. The respondent's capacity of written English, the language in which the option was expressed, was clearly limited. This is shown, I believe, by the incorporation of the added terms in the option in imperfect spelling and writing, as is demonstrated by the section of the option agreement showing the respondent's handwriting which I have incorporated in these reasons. URJ IDAMENEO NO 9 PTY UNITED v JOVAN (Kirby P) 5 Bryson J concluded that the respondent did not understand the contract which he had executed sufficiently to understand the very adverse effects which it had upon his interests. He stated: "I am satisfied that practically nothing of Mr van der Mark's explanation of the document actually communicated itself to Mr Bandeski." The appellant urged that the respondent should have been disbelieved by Bryson J because of the way in which he had persisted in a statement that the words inserted in the option were "In Sell" (ie If Sell). This statement was consistent with one aspect of the cases pleaded and presented at the trial. This was that the document was understood by the respondent as nothing more than an authority to permit a surveyor to enter the respondent's property. However, such a reconstruction of events was inconsistent with other evidence given by the respondent concerning his understanding of the document. It was impliedly rejected by Bryson J. It is true that his Honour made no express findings about the credit of the respondent on this issue. However, he did say, in unmistakable terms, that he found as a fact that the respondent did not understand what he was signing. The conclusions are immune from appellate disturbance The High Court of Australia has said repeatedly and unanimously that this Court is not authorised to set aside findings of a trial judge which are based on the advantage which a trial judge enjoys in seeing the witnesses give evidence, except in very limited circumstances which do not apply here. See, for example, Jones v Hyde (1989) 63 ALJR 349 at 351, Abalos v Australian Postal Commission (1991) 65 ALJR 11 at 14. In these circumstances and having regard to the finding which Bryson J recorded, which is in turn supported by his Honour's findings about the ability of the respondent in the English language, it is my view that this Court would not be authorised to disturb the conclusion which his Honour reached. It was based, in part, on the impression he had as to the respondent's knowledge, capacities and understanding, derived from the impression which the respondent gave as a witness. The appellant complained that his Honour had failed to acknowledge the perspective of the appellant concerning the justice of its transaction with the respondent, when considering whether the Contracts Review Act was available in this case. He had not, for example, referred to the fact that the appellant was dealing as a bona fide purchaser; the fact that in its opinion it was paying some $10,000 above the market price; and the fact that it had to secure the local council's approval before it would be willing to proceed with the purchase, thereby justifying the four month option. Reading Bryson J's reasons as a whole I do not believe that his Honour overlooked any of these considerations. From the start to the finish, his Honour acknowledged the propriety of the actions of Mr van der Mark, at least as those actions might be viewed looked at from the perspective of the appellant. However, he concluded nonetheless that the resulting contract was unjust in the circumstances in which it was made. The very open-ended criteria which are laid down by the Contracts Review Act afford reasons why this Court should be particularly cautious in substituting a different opinion about the injustice of the contract for that reached by the trial judge. At least in the circumstances of this case, and in the findings of fact which his Honour made about the capacity of the respondent and the value of his property, I do not believe that it has been shown that his Honour was wrong to 6 UNREPORTED JUDGMENTS conclude that the contract was unjust. On the contrary, within the framework of the decisions on the facts which his Honour reached, it is my opinion that his Honour's conclusion was right. Orders Accordingly, I would propose that the appeal be dismissed. The appellant must pay the respondent's costs of the appeal. Mahoney JA I agree with what has been said by the President. I would add only two things: one, I would reiterate for myself what has been said by the President, namely, that the fact that this contract was held to be unjust within the terms of the Contracts Review Act 1980 is not due in any significant respect to acts of Mr van der Mark. The fact that within the terms of the legislation it is described as unjust does not imply any wrongful conduct on his part. The second matter to which I would refer is that mentioned in argument by Mr Murr; in determining whether a contract is unjust within the terms of the Act it will be necessary at least ordinarily for there to be an examination of the position of both sides of the contract so that a judgment as to "unjust" or not can be arrived at. What this would involve will no doubt require consideration in an appropriate case. However, I do not think that the facts of this case require that the Court to into this matter in detail. I agreed with the orders proposed. Priestly JA On the facts found by Bryson J it seems to me inevitable that he came to the conclusion now the subject of the appeal. On the facts he found the option agreement was unjust within the meaning of the Contracts Review Act, and had the unjust consequence of obliging the respondent to sell his land at an undervalue. Counsel for the appellant in a forceful argument, which I thought was very capably put, recognised the need to overthrow some of his Honour's factual conclusions if the appeal were to have any chance of success. Stated in an over-simplified way the two main submissions about factual matters were that his Honour was wrong in finding the respondent did not understand the nature of the document he signed in August 1987, and was also wrong in finding that the price at which the respondent became obliged to sell the property was an undervalue. For the first of these factual submissions, Counsel relied upon what he said were a number of inconsistencies which appear in the respondent's evidence. He also pointed to the fact that although his Honour did not say so in so many words, he obviously did not accept a number of factual assertions made by the respondent. However, in order to persuade the Court to interfere with the central finding of his Honour concerning the respondent's lack of understanding of the option agreement, it would be necessary for the Court to be persuaded that there were other features of the evidence before the Court which were so strong that this Court would have to accept that the trial judge was wrong in disregarding those and coming to the conclusion that he did. I do not see amongst the various matters relied upon by the appellant's Counsel any which taken separately or cumulatively give such strength to the contrary view on the factual matter to that adopted by his Honour as either to be persuasive to my mind that his Honour may have been in error or, which is probably the more accurate way of putting it in regard to this kind of ground of appeal, that this Court would be entitled within the accepted approach of appellate courts in coming to a different conclusion from his Honour. URJ IDAMENEO NO 9 PTY UNITED v JOVAN (Priestly JA) 7 Apart from the matters that have been mentioned, evidence was given by Mr Malcolm which bore to some extent upon this question of the respondent's understanding of the option at the time he signed it. Mr Malcolm was the estate agent who had originally sold the respondent's property to him and had known him for about twenty years at the time of the trial. It is plain from a number of remarks made by his Honour in his reasons that he regarded Mr Malcolm as a generally reliable, although not necessarily very logical, witness. On this aspect of the case, Mr Malcolm - whose evidence was given in the respondent's case - said in answer to cross-examination by the appellant's then Counsel that the respondent was relying on him (that is Mr Malcolm) for his business communications in part. He also said that the respondent had rung him and told him that something had happened to him and his property, to which Mr Malcolm responded by asking him whether he had signed anything. When he said yes to that, and Mr Malcolm asked him did he know what it meant, the respondent had answered "I don't". That evidence is evidence of the kind which taken from the other features of the case seems to me to have afforded ample ground for his Honour to have arrived at the factual conclusion on this issue that he did. In regard to the question of the undervalue, Counsel pointed to a number of inconsistencies in the appraisal evidence of Mr Malcolm. Again, although his Honour made no express findings, it seems quite clear from the way he expressed his reasons that in considering questions of value of the property, he placed reliance on what he called Mr Malcolm's instinctual method of valuation or appraisal whilst recognising his inability to support the views he expressed in any particularly logical fashion. Mr Malcolm had said in his evidence in cross-examination that at the time when the respondent first spoke to him about the option, which appears to have been shortly after he signed it, that he had spoken to him about whether $155,000 was a proper price. The cross-examiner then asked him "What did you say about it', and he answered "That would not be the market price". That expression of opinion was in evidence and was something upon which the Court was entitled to place some weight in light of the judge's view of Mr Malcolm generally, and it went to the value of the property as at the time of the granting of the option. Later evidence by Mr Malcolm going to the question of value at the time of the exercise of the option and subsequently, seems to me to have been proper material for his Honour to use in arriving at an opinion that the contract price once the option had been exercised, was less than the then market value. The inconsistencies to which Counsel point in Mr Malcolm's evidence and justification of his appraisals had some force, but went more to showing that Mr Malcolm's evidence could only be relied upon in a general rather than in a very particular way than to show that the judge was in any way in error in accepting his evidence in the general way in which he did. The questions of law which would need to be discussed if there were any disturbance of the trial judge's factual findings do not arise in the view that I take about those factual findings. It follows in my opinion that the appeal must be dismissed with costs. The order of the Court that that the appeal is dismissed. The appellant must pay the respondent's costs. Counsel for the Appellant: DH Murr 8 UNREPORTED JUDGMENTS Solicitors for the Appellant: Lang Gellert and Noonan Counsel for the Respondent: JB Maston Solicitors for the Respondent: conway MacCallum