New South Wales Supreme Court CITATION : Sayer v Dahlan [2002] NSWSC 459 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 11425/01 HEARING DATE(S) : 23 May 2002 JUDGMENT DATE : 23 May 2002 PARTIES : Ms Jean Sayer Mr Abdulla Dahlan JUDGMENT OF : Davies AJ at 1 COUNSEL : Mr R R Stitt QC for the Plaintiff Mr T Baskerville for the Defendant SOLICITORS : Minter Ellison Lawyers for the Plaintiff Bud Cham & Associates Solicitors for the Defendant CATCHWORDS : Possession - whether contract unjust under Contracts Review Act - whether transaction should be set aside for unconscionability - no question of principle LEGISLATION CITED : Contracts Review Act 1980, s7, s9 CASES CITED : Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 DECISION : 1. The plaintiff is entitled to possession of the property situate at and known as 75 Watts Road, Kemps Creek in the State of New South Wales as being the whole of the property comprised in Certificate of Title Folio identifier 40/280505; 2. Leave granted to the plaintiff to issue a writ of possession to enforce the above order for possession; 3. Judgment for the plaintiff against the defendnat in the amount of $844,957.62; 4. The defendant to pay the plaintiff's costs. - 6 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Possession List Davies AJ Thursday, 23 May 2002 11425 / 01 Jean Sayer v Abdulla Dahlan Judgment 1 Davies AJ: This application seeks possession of a property situated at 75 Watts Road, Kemps Creek. At the time of purchase, it was a chicken farm. It is now apparently a run down farm and also the home of the defendant. 2 The property was acquired in about April 1996 by Mr Abdulla Dahlan, the defendant, in the circumstance that he and his wife and Mr and Mrs Turks owed money which had been advanced by a solicitor, Mr McDonald, on a development at Berala. That development had been unsuccessful and something like $300,000 was due. Mr and Mrs Turks were particularly at risk, as their home had been mortgaged by way of security. Mr McDonald suggested to Mr Dahlan that his best way out of the problem would be to enter into a new transaction and to earn money to pay off the debt. 3 Mr Dahlan has given evidence that he looked for potential investments. He suggested a one million dollar development project which Mr McDonald declined to finance. He then looked at a prime piece of land in Gosford, which Mr McDonald also declined to finance. He then found the chicken farm at Kemps Creek, which was advertised by Morrison Real Estate Agents. 4 Mr Dahlan negotiated a price with the real estate agent and he then approached Mr McDonald for finance. Mr McDonald obtained a valuation. Mr Dahlan put down a $1,000 holding deposit. The real estate agent had said the property had sound business potential and had development approval from Council. The agent said the chicken farm would earn an annual net income of $37,000. 5 It took Mr McDonald approximately one year to organise the finance but, ultimately, he did organise finance and he agreed to lend a total of $452,000 on two mortgages; the first mortgage for $285,000 and a second mortgage of $167,000, both over the property to be acquired. The purchase went ahead. Mr McDonald advanced the funds and paid necessary disbursements such as stamp duty. 6 Mr Dahlan took possession of the property. He entered into a contract with a chicken supplier and he produced chickens for two years. The supplier then declined to supply chickens because the sheds on the property were not in good order. The property remained in abeyance for at least a while thereafter. A full history of its subsequent use has not been given, but that seems not to be a relevant matter. 7 The defence of Mr Dahlan relied upon the Contracts Review Act 1980 and on the principles of unconscionability. The Contracts Review Act, in s 7, entitles the Court to grant relief where the contract or a provision of the contract was unjust in the circumstances relating to the contract at the time it was made. 8 The principal point which stands out in this matter is that there is nothing about the mortgages purchased, including the fact that they were secured on the land, which was unjust, taking into account the matters which are set out in s 9 of the Act. That is because the $452,000 was advanced and the property was purchased in Mr Dahlan's name. Mr Dahlan occupied it and he ran it. He took advantage of the advances made to him. There is no evidence that the interest rates were unfair. They appear to be fair and reasonable. 9 There is therefore no reason to find that any part of the mortgages was unfair having regard to the circumstances in which the mortgages were given, namely, that the money was lent for the purchase of the chicken farm, the farm was acquired and Mr Dahlan has been in possession ever since. 10 Mr Dahlan's defence also attacks the transaction itself. It is not clear to me that that can be done under the Contracts Review Act, for the transaction has taken place. Whether or not the provisions of the Contract Review Act or the principles of unconscionability are relied upon, Mr Dahlan seeks to avoid the transaction in the circumstance that he seeks to retain the benefit of the transaction. He seeks to remain the owner of the farm acquired with the moneys lent by Mr McDonald. 11 Counsel for Mr Dahlan, Mr Baskerville, said, in his final address, that the contract should be set aside and that Mr Dahlan offered to pay a sum of $500,000. There is no evidence before me to show whether $500,000 is a fair sum or not. 12 What is inherent in Mr Baskerville's submission is that Mr Dahlan proposes to retain the land. He proposes to retain the benefit of the land which he acquired with the sums lent by Mr McDonald. Neither equity nor the Contracts Review Act would permit that to occur. A person seeking to set aside a transaction may not retain the benefit acquired through the transaction. 13 Those are perhaps the main reasons why the defence must fail. 14 Mr Baskerville submitted that Mr Dahlan trusted Mr McDonald and that Mr McDonald put pressure on Mr Dahlan to enter into the contract. The only pressure of which evidence was given was that Mr and Mrs Dahlan and Mr and Mrs Turks owed $300,000 to Mr McDonald on a prior development and that Mr McDonald was entitled to exercise his rights under a mortgage and to seize or exercise the rights to obtain possession and ownership of the property occupied by Mr and Mrs Turks. That matter put pressure on Mr Dahlan; but it was a result of the fact of the failure of the earlier development. 15 The debt was owing and the mortgage over the house of Mr and Mrs Turks was in existence. There was nothing improper in Mr McDonald's suggesting that Mr Dahlan undertake some other business transaction with the view to obtaining funds to meet the liability. 16 Mr Baskerville also submitted that Mr Dahlan just relied upon Mr McDonald and left everything up to him. The evidence before me was that it was not Mr McDonald who thrust the chicken farm on Mr Dahlan. Mr McDonald took the position of financier and declined to advance moneys to Mr Dahlan unless he considered a particular project to be a satisfactory one on which moneys should be advanced. Mr Dahlan found the property and negotiated the price. He had to wait a year until Mr McDonald could proceed. 17 This is not a case where a solicitor simply thrust documents in front of a client (to use Mr Baskerville's terms) which the client could not understand, or in which the client signed documents not knowing the substance of the act. Mr Dahlan fully understood what the transaction was. He was mistaken as to its viability. 18 Mr Dahlan gave evidence that Mr McDonald had said to him: "You should buy the chicken farm and make it profitable. That is the only way to get yourselves out of the mess that you are in. Do this deal and it will save Nick and yourself. Without extra sheds, it's not viable, although carry on for six months or more and then I will arrange some more money for you to construct the two extra sheds in order that the business may generate more income to pay off some of the debt." That is the conversation relied upon. It does not indicate anything other than Mr McDonald himself was satisfied that the purchase was an appropriate venture. 19 Mr Dahlan relied on the fact that he had seen the chicken farm. He negotiated a price that he thought was appropriate. He spoke with the real estate agent about the project. He took into account the real estate agent told him that there would be an annual return of $37,000. He then told Mr McDonald that he thought the property was a suitable venture. 20 I cannot see anything in the above conversation that constitutes unconscionability or misleading and deceptive conduct on the part of Mr McDonald. I should also say that Mr Baskerville suggested, although there was no evidence of it, that there may have an ulterior motive on the part of Mr McDonald. He submitted in that context that Mr McDonald had in fact used trust funds which he ought not to have done and that Mr McDonald had been struck off. 21 This obviously is not a savoury history so far as Mr McDonald is concerned, but there is no evidence of ulterior motive. I see no evidence of it, implied or expressed. It seems to me on the evidence that Mr Dahlan took a proposition to Mr McDonald who thought it satisfactory and lent moneys accordingly. 22 Mr Baskerville submitted this was a venture into which Mr Dahlan should never have entered and that the fact that Mr McDonald paid the whole of the moneys and paid disbursements such as stamp duty showed that, in Mr Baskerville words, "the whole matter was a sham." It may be accepted in hindsight that Mr Dahlan should never have entered into the transaction. However, the transaction into which he entered was a transaction in which he had exercised his own judgment. Mr McDonald was satisfied, partly as a result of the written valuation report that he obtained, that it was a proper transaction. One cannot alter a contract under the Contracts Review Act or set aside a transaction because, in hindsight, it is found that the transaction into which a party has entered was an unwise commercial venture. 23 Mr Baskerville relied upon the fact that Mr McDonald acted for both mortgagor and mortgagee and that Mr Dahlan was given no separate advice. That may be so, but as I said, this is not a case where there was anything wrong with the terms of the mortgage or the interest or where the transaction was improper. This was not a case where Mr McDonald should have sent Mr Dahlan off to another solicitor for independent advice as to whether or not he ought to enter into the transaction. 24 The defendant's case has other problems. Many of the problems in the case reflect the facts considered in Citicorp v O'Brien (1996) 40 NSWLR 398 where the Court (Meagher JA, Sheller JA and Abadee AJA) set aside the judgment of a trial judge which had varied a contract under the Contracts Review Act. Their Honours held that the solicitor had no duty to inform the client about the financial prospects of the purchase or mortgage. Their Honours considered that the contract in that case was not unjust to the client, Mr O'Brien, not withstanding that the solicitor had a relationship to both the client and to Citicorp. 25 I am satisfied the elements of the claims have been proved. Mr McDonald's mortgage interests have been vested by order of the Court in the plaintiff, Jean Sayer. I am satisfied the sum of $844,957.62 is due and owing as at today's date. In the circumstances, the plaintiff has proved her case and I shall make the orders proposed by Mr Stitt, senior counsel for the plaintiff. 26 I make those orders. –oOo- Last Modified: 06/03/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.