Ah Sam v Mortimer

Background

1. Mr Mortimer moved to Stokers Siding with his then wife and their three children in about 1990. They were divorced in about 2000. In about 2010 he remarried; his current wife is aged 44, and they have two children, aged nine and eight.
2. An electrician by trade, Mr Mortimer had been a company manager and chief engineer. He had been employed in Sydney as a Manager for Metro Environmental Services. When he first moved to the Northern Rivers, he worked for Holiday Inn at Surfers Paradise, and then for Dreamworld, before returning to sub-contracting electrical and air-conditioning work. He agreed, in cross-examination, that in the course of his career, he had been required to sign contracts, [38] although he said that he had only ever been involved in one real estate transaction, 30 years previously. [39]
3. By the time of the 2019 transaction with Mr Ah Sam, Mr Mortimer had retired. His wife was employed as a kitchen hand. He was not eligible for a pension, and was accessing his superannuation to meet expenses, including to service the mortgage on the property, which secured $230,000. He had a number of health issues: he is an insulin-dependent diabetic; he had suffered a heart attack in December 2017; and his eyesight was deteriorating. According to Mr Mortimer, he could not read; he had been told that he was blind in the right eye; if he shut his left eye, his vision was "totally blurry"; his left eye was better, but he could not read a newspaper; he could read a computer screen by enlarging the font, but not a laptop; and his glasses did not help.
4. Following his heart attack, Mr Mortimer became concerned and stressed about his financial situation, including the circumstances of his young family, but he did not want to sell the property. He conceived, as a solution, the proposal which he advertised on Gumtree, which would enable him to pay off the mortgage. In response to the Gumtree advertisement, he had received 37 emails and twenty telephone enquiries. There had been a number of inspections, but only one offer, at a price of $250,000, which he said he rejected because he wanted $300,000. [40]

The inspection

1. Mr Ah Sam - who described himself as an investor, a successful businessman who had bought and sold properties internationally (in Australia, New Zealand, and the USA), [41] and a trained teacher (with both Bachelor's and Master's degrees in Science from the University of Auckland) [42] - saw the Gumtree advertisement and contacted Mr Mortimer by telephone in January 2019, asking a number of questions to ascertain whether an inspection was worthwhile. They arranged an inspection for 17 February 2019.
2. On 17 February 2019, Mr Ah Sam attended the property, and Mr Mortimer accompanied him on an inspection, which occupied some hours. According to Mr Ah Sam, he and Mr Mortimer, and possibly one of Mr Mortimer's children, walked all over the property.
3. According to Mr Mortimer, in the course of the inspection, Mr Ah Sam asked, "Why are you doing this?", and Mr Mortimer responded, "I'm running out of money and I can't get the pension, I am getting desperate and need to do something to raise money, I still have a mortgage". Mr Ah Sam asked, "How much is the mortgage?", and Mr Mortimer replied, "$220,000".
4. Also according to Mr Mortimer, he told Mr Ah Sam, "I've had some legal advice and I want to form a company with each owner having one share in the company and for the company to lease the land from the owners. I was told it would be a set-up fee of about $40,000". This referred to advice which Mr Mortimer said he had received from a solicitor in Murwillumbah. He also told Mr Ah Sam that he was having eye surgery on 21 February 2019, and had had a heart attack the previous year. He said that the surgery was important because he could not really see properly, and could not read anything. Mr Ah Sam asked, "How bad is your eyesight", and Mr Mortimer responded, "I can't read and I have bleeding behind the eyes". Mr Ah Sam asked if he could still drive, and Mr Mortimer told him he was concerned because he had to have a test in March to renew his licence.
5. Mr Ah Sam does not deny that these things might have been said, but says that he was not taking particular notice, as his focus was on the possibility of doing a deal, rather than on Mr Mortimer's issues. [43] He agreed that at some time - possibly during the inspection on 17 February 2019 - Mr Mortimer said something to the effect that he was running out of money and had to do something. [44] He also agreed that Mr Mortimer mentioned something about his eyesight, although he maintained that he understood that the appointment on 21 February 2019 was for a check-up, not for a procedure. [45] And Mr Mortimer undoubtedly referred to transferring the property to a jointly held company, as Mr Ah Sam included such a provision in the agreement when he drafted it.

The telephone calls

1. Between 17 and 20 February 2019, Mr Ah Sam prepared a written agreement. Indeed, Mr Ah Sam says that he prepared two versions which were identical, except that in one the price was $200,000 and in the other it was $250,000. In addition to the price, the agreement contained a number of other terms which were not mentioned in the Gumtree advertisement, and which were prima facie disadvantageous to Mr Mortimer - in particular that settlement was deferred for twelve months, and the price was payable as to $100 on the signing of the agreement, as to $12,400 within 30 days before settlement, and the balance on settlement, while Mr Ah Sam would be entitled to occupy the second house on the property from 1 October 2019.
2. According to Mr Ah Sam, these terms of the agreement (including that he would occupy the second [two-bedroom] house, that the property would be transferred to a company in which they had equal shareholdings, that settlement would be in cash without a mortgage in about a year to enable him to realise assets, and that the initial deposit would be $100) were "agreed to during our discussions over several days in person and by phone". More specifically, he says that he read the agreement - omitting the price - over the phone to Mr Mortimer on 20 February 2019, and that Mr Mortimer approved it; [48] and that on the morning of 21 February 2019 he again rang Mr Mortimer to confirm that he was happy with the agreement. [49]
3. Mr Mortimer denied that the agreement had been read to him over the phone, [50] or that they had discussed the terms to which reference has been made. Although he agreed that he had been advised by a solicitor before he advertised the property for sale to set up a company in which each owner would have one share - a provision which was reflected in the agreement prepared by Mr Ah Sam - he denied that Mr Ah Sam had said that he would draw up an agreement. [51]

The agreement

1. On the morning of 21 February 2019, Mr Mortimer drove himself from Stokers Siding to the casino at Broadbeach, and arrived early at the rear entrance to the casino. Mr Mortimer says he was stressed about his imminent eye procedure, and that he was also worrying about a meeting he had arranged for the following day with Centrelink to see if he was eligible for a pension. He said that Mr Ah Sam arrived late. They found a place to eat at a restaurant in the casino. According to Mr Mortimer, they chatted about the eye procedure, and Mr Ah Sam asked if he would be able to see after the operation, to which Mr Mortimer responded that it could only help because of how poor his vision was, as he could not read anything. Mr Ah Sam suggested that he would be better off selling the whole property and buying a unit on the coast; Mr Mortimer acknowledged the advantages of that course, but said that he liked living on the land, as did his children. Mr Ah Sam also asked about the tenant, and said he would be able to help get her out of the house quickly, in less than the 90-day notice period.
2. According to Mr Mortimer, he was becoming anxious about getting to the hospital in time, when Mr Ah Sam "pulled out his papers", said there was no need to go to solicitors "at this point" because if they were going to work as partners they had to trust each other, and said "I am putting my trust in you that we will work together and be able to work things out and then we need to go to a solicitor". He continued, "I've done up this agreement and if you sign it you can get her [the tenant] out in 14 days". Mr Mortimer said, "I can't read anything", to which Mr Ah Sam responded, "It's what you want and what you advertised". Mr Mortimer said, "I'm not sure, I've got this operation today", and Mr Ah Sam replied, "Trust me, I won't cheat you, this will get rid of the tenant and it's what you want. If you let me stay in the caravan I will work with you to get the tenant out. I won't be able to go to the beach each day for my swim but it will be worth it for you and your family. I know how to do this, I've done it before".
3. According to Mr Mortimer, he asked "Can you read it to me, I can't see or read anything". Mr Ah Sam appeared to read the agreement, and said "It's an agreement between you and me, the price for the property is $300,000 as you have advertised, we are going to form a company and work together to improve the property and make this beautiful for your children" (in cross examination, Mr Mortimer maintained that Mr Ah Sam told him the price was $300,000, and that he trusted Mr Ah Sam when he told him that). [52] Mr Mortimer did not respond. Mr Ah Sam continued "It's just an agreement for us to work things out. It's just between you and me. I really want to work with you on this and I don't want you to lose this opportunity. This will help get the tenant out and it will help you get the pension, this will get you out of debt". Again, Mr Mortimer says that he did not respond. Mr Ah Sam said "You can take off the ad now and you only deal with me and you won't have other people pestering you and it will just be us working together. I really want to work with you on this project", and "I don't want you to make the mistake of getting a buyer that has to have a loan, then you are back where you are now. I am a cash buyer".

The amendment and occupation

1. The evidence is confusing as to Mr Ah Sam's attendances at the property after 21 February 2019, and in particular whether he did so on one or more occasions prior to moving into a caravan there on or about 4 March 2019. It seems likely that he did so on two occasions: one when he paid the deposit and made amendments to the contract, and a second when he moved some of his personal property into a container and shed.
2. According to Mr Mortimer, it was not until some days after his eye procedure that he was able, with the aid of a magnifying glass, to read the document, and realised that the price in it was not $300,000 but $250,000, that the document also wrongly described the property as 84,000 acres when it was 86 acres, and that it was also incorrect in some other less significant respects. [73] He was angry, and telephoned Mr Ah Sam to tell him he was not happy and that the document was not as he had represented it. In particular, he did not want to wait twelve months to get his money. Mr Ah Sam assured Mr Mortimer that he would get his money, said his money was tied up in investments, and said that he would come out so they could talk. Mr Mortimer told him not to. Mr Ah Sam called back, and when Mr Mortimer said that he did not want to deal with him anymore, he became aggressive and said they had a contract, that he would put a caveat on the property, and that Mr Mortimer would never be able to sell it. Mr Mortimer says that he panicked and allowed Mr Ah Sam to come to the property that afternoon. Mr Mortimer said he felt scared, and that he had been an "idiot" and a "failure". Whenever Mr Mortimer raised his concerns about the agreement, Mr Ah Sam would forcefully say "You've signed it. I'll sue you and you will lose everything". However, Mr Mortimer says that Mr Ah Sam then said, pleasantly, "Listen, I've got to pay my deposit and just do all the right things so get your agreement out and we will fix it up". Mr Mortimer complied, and Mr Ah Sam gave him an envelope, which he did not open. Mr Ah Sam wrote "PAID" on the agreement, and Mr Mortimer initialled it. Mr Ah Sam then wrote something else on the agreement, which he could not read, and asked that Mr Mortimer initial it too, which he did. By this time, it was fairly dark. Mr Mortimer's solicitor later opened the envelope, and found it to contain two $50 notes.
3. According to Mr Ah Sam, on 23 February 2019 he telephoned Mr Mortimer to say that he was coming to pay the deposit, and then went to the property and did so, which was recorded and initialled as received on the agreement; and the date for him to occupy in Special Condition 1 was changed from 1 October 2019 to 15 April 2019. [74]

Subsequent events

1. Mr Ah Sam says that after 15 March 2019, Mr Mortimer started calling him names and assaulting him, which Mr Mortimer denies. [84] Mr Mortimer also denies Mr Ah Sam's allegation that he hired a "hit man" to run Mr Ah Sam down. [85] According to Mr Mortimer, Mr Ah Sam has taunted him and his family, and refuses to leave. Mr Mortimer says that Mr Ah Sam has made a complete nuisance of himself, and that he has no clue what he is doing on the property: "he is doing lots of stuff but just making a mess". Mr Ah Sam maintains that his ongoing occupation of the property has been in accordance with his rights and responsibilities under the agreement, and that he has undertaken a large amount of work on the property, especially the second house, by way of improvements. [86]
2. At his wife's insistence, Mr Mortimer consulted a solicitor on 24 April 2019, who said that he would probably seek an apprehended violence order. Meanwhile, Mr Ah Sam made an application for apprehended violence orders against the Mortimers, which were returnable on 29 May 2019. While disputing any need for them, the Mortimers, on advice, consented to interim orders.
3. As has been foreshadowed, these proceedings were instituted on 26 June 2019. Relevantly, the Statement of Claim included the assertion that at the meeting at the casino on 21 February 2019, Mr Mortimer could not see clearly, that Mr Ah Sam falsely represented that the price stated in writing was $300,000, as in the Gumtree advertisement, and that Mr Mortimer was unaware of that provision, which was not read to him.
4. On 9 August 2019, Mr Mortimer's solicitor wrote to Mr Ah Sam, asserting that he had a bare licence to occupy and no entitlement to any recompense for any work purportedly done on the property, and that he was required to vacate by 12 August 2019, and also making an offer to attempt to resolve the matter. Mr Ah Sam responded by email on 12 August 2019, indicating he was prepared to engage in discussions, but that he would not vacate the property as it was his home, and that in the event of a court hearing he would represent himself.
5. On 13 August 2019, Mr Ah Sam wrote to Mr Mortimer's solicitor, indicating that he would proceed to court if a solution could not be found, as "God was on his side", he was in the right, and he had had successes in litigation against the US Government and the "Hawaii State". He warned that Mr Mortimer would be well advised to withdraw his Supreme Court action, and that he would be seeking compensation of $50,000 for his time and money in making the improvements to the property. He also suggested that he might buy Mr Mortimer's 50% interest, observing that "With his health problems, may be best to sell now before it is too late". Discussions between the parties followed, but no resolution could be found. On 15 August 2019, Mr Mortimer's solicitor reiterated that Mr Ah Sam was there under a bare licence and that he was not entitled to any compensation.

Resolution

1. The primary judge summarised Mr Mortimer's case on the issue of unconscionability as follows: [87] "[41] The plaintiff submits the defendant took unconscientious advantage of his special disability, namely his 'poor to very poor vision on 21 February 2019' and 'heightened sense of anxiety' on the day. He submits the defendant knew of his weaknesses in health and financial status and gained an advantageous transaction as a result, having purported to read the agreement to the plaintiff but in terms that did not resemble the original Gumtree advertisement or the document the plaintiff actually signed (Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Blomley v Ryan (1956) 99 CLR 362; Bridgwater v Leahy (1998) 194 CLR 457). [42] The plaintiff submits the defendant attended the meeting on 21 February as a successful businessman driving to have the contract signed by the plaintiff for an interest in land, a business venture and a place to live rent free. He submits the defendant acted rapidly in finalising the deal, reflecting his rapaciousness and the fact he had been put on notice of the plaintiff's procedure that day which would ameliorate the problems with his eyesight. [43] The plaintiff submits the court should accept Dr Walker's evidence that the plaintiff's eyesight was poor and his reading vision was correlatively so, although not measured on 21 February 2019 (citing Dasreef v Hawchar (2011) 243 CLR 588). [44] The plaintiff further submits the court should not accept the defendant's evidence that he did not know about the plaintiff's health and vision impairment because the plaintiff had told him about his eye impairments on 17 and 21 February 2019 and could not read their written agreement on the day it was signed."
2. His Honour summarised Mr Ah Sam's case relevantly as follows: [88] "[53] The defendant submits that the 21 February 2019 agreement is binding and enforceable. He submits the parties have acted on the contract in that the plaintiff accepted the defendant's $100 deposit and let him onto the property on 5 March 2019 and the defendant has made substantial improvements to the property. [54] He submits that the agreement was not the result of unconscionable conduct and that he did not take advantage of the plaintiff. He says he was not aware of the plaintiff's poor eyesight and believed the plaintiff was strong, healthy, smart, well-educated and financially secure. He submits he and the plaintiff were in a similar position, for example being of similar ages and work backgrounds. He also submits that the agreement is a simple document. [55] The defendant denies that he guided the plaintiff's hand to sign the agreement and submits the signature shows no evidence of being forced or guided by him. He also submits that Dr Walker's evidence should be rejected for example because all the reports he considered (except for one concerning a meeting he had with the plaintiff on 15 February 2019) postdate 21 February 2019 and no eye test was undertaken on that date. [56] The defendant submits that the plaintiff is attempting to kick the defendant out and take advantage of the work he did on the property, as he was required to under Special Condition 3 of the agreement."

Specific performance

1. Mr Mortimer's alternative case was that if there was a binding agreement, then Mr Ah Sam was in breach of essential terms of the agreement because he had not paid the amounts due under it (being the "further deposit" of $12,400 payable within 30 days before settlement, and the balance purchase money payable on settlement), and had thereby repudiated the contract, which Mr Mortimer terminated by an email sent by his solicitor to Mr Ah Sam on 16 March 2020. Having concluded that the agreement was void for unconscionability, his Honour did not have to, and did not, resolve this issue. However, the status of the contract is relevant to Mr Ah Sam's appeal from his Honour's dismissal of his cross-claim for specific performance.
2. It is not in dispute that Mr Ah Sam did not pay the "further deposit" by 30 January 2020 or at all, nor the balance of the purchase price by 1 March 2020. The email sent to the defendant by the plaintiff's solicitor on 16 March 2020 was relevantly as follows: "In these proceedings you are relying on a one page agreement purporting to sell half the property at 177 Adcocks Rd Stokers Siding and form a company. This agreement had the following conditions being: 1. Initial deposit of $100. We acknowledge that amount was paid by you. 2. Further deposit of $12,400 within 30 days before settlement 3. Cash on Settlement for the balance with the settlement date being listed as "on or before 1 March 2020". We are now 16 March 2020. You have not paid the additional deposit amount of $12,400. In NSW the payment of a deposit is a fundamental condition of a contract for the sale of real estate. We assert you have breached a fundamental term of the contract. At 16 days past the 1 March 2020 settlement date, we believe you have breached a fundamental term of the contract by not endeavouring to arrange completion. You will note our Statement of Claim alleges the one page document was entered into unconscionably. At the hearing we will also allege you have breached your own contract by the non-payment of the deposit and the failure to attempt to list for settlement. It is our belief you have failed to pay the monies and list for settlement due to you being impecunious. If you disagree please advise where the funds for either the contract you are relying on are coming from or where the funds for your proposed offer are coming from."
3. The plaintiff's Amended Statement of Claim, of 12 June 2020 (filed 16 June 2020), relevantly inserted the following claims for relief: "1. Declaration that the instrument entitled Real Estate and Sale Agreement purportedly between the defendant and the plaintiff bearing dated 21 February 2019 is validly terminated pursuant to the notice of the defendant dated 16 March 2020. 2. Declaration that by reason of the breaches of defendant under Real Estate and Sale Agreement dated 21 February 2020, is terminated, cancelled and of no effect."

Compensation

1. The question of compensation arises only if Mr Ah Sam fails on unconscionability: if the agreement stands, then he was performing work on a property of which he was a purchaser, as the agreement contemplated he would, and no question of compensation would arise. If, however, the agreement is held void for unconscionability, as in my view it rightly was, then there is a question as to whether he is entitled to compensation for his time, labour, and expenditure on the property in the interim.
2. As the primary judge recognised, [101] referring to what had been said by Deane J in Amadio, [102] an order setting aside a transaction on the ground of unconscionability will, in an appropriate case, be made conditional upon the party obtaining relief doing equity. In this case, Mr Ah Sam claimed that he had expended time, money, and labour on the property. As to this, his Honour said: "[137] The plaintiff [sic, defendant/cross-claimant] claims he has spent large sums of money on the property. I do not accept that evidence. There is no proof of such except for receipts totalling some $3000. The fact that he painted the house he lived in and renewed its iron roof is minor in the scheme of things given he was living there rent free."
3. I would be prepared to accept that, in principle, "doing equity" required Mr Mortimer, as a condition of relief, to compensate Mr Ah Sam for any benefit which Mr Mortimer had gained under the impugned transaction. That is not necessarily the same as compensating Mr Ah Sam for all his expenditure; in the context of an unconscionable transaction, equity does not require that the defendant be compensated for all expenditure referable to the transaction, though it might require compensation to the extent that the plaintiff has benefitted from it.
4. There was, as the primary judge said, scant evidence of Mr Ah Sam's expenditure. Before us he referred to images, at least some of which he had provided to the primary judge, showing improvements he said he had made to the house which he occupies, the nursery, and the gardens, as well as the removal of farm rubbish. However, unexplained by further evidence, the images are of very limited evidentiary value. Moreover, there was no evidence of the critical matter, which was the extent to which his labour and expenditure had enhanced the value of the property, so as to confer a benefit on Mr Mortimer.

Conclusion

1. My conclusions may be summarised as follows:
2. The primary judge did not err in declining an adjournment and proceeding to take the evidence on 14 and 15 September 2020.
3. The primary judge did not err in requiring and permitting the plaintiff to further amend the Statement of Claim to bring it into conformity with the case that had been conducted, after the evidence had closed, and the amendment occasioned Mr Ah Sam no material prejudice.
4. Although the conduct of proceedings remotely, using imperfect technology, presented challenges for all parties, it is not apparent that it operated prejudicially to the appellant, nor that it resulted in any injustice to him.
5. The matters referred to by Mr Ah Sam that amount to complaints that in his Honour's final judgment the primary judge rejected Mr Ah Sam's evidence and made strong adverse findings about him do not suffice to demonstrate bias, while the complaints relating to matters that occurred during the hearing are not such that a fair-minded lay observer might reasonably have apprehended that the primary judge might not bring an impartial mind to bear on the resolution of the proceedings.
6. It has not been established that the primary judge was in error in concluding that the agreement was procured by unconscionable conduct on the part of Mr Ah Sam and was therefore voidable in equity. His Honour's conclusions depended on findings of disputed facts, expressly based at least in part on demeanour, where the evidence was largely word against word, given by witnesses whom his Honour heard and saw.
7. There was no error in his Honour's conclusion that Mr Ah Sam had not shown that any amount should be payable to him by way of compensation in the context of the agreement being avoided for unconscionability.
8. It follows that in my opinion the appeal should be dismissed, with costs. With that, the stay of execution of the writ for possession will lapse.

Endnotes

1. As alleged in the Statement of Claim, although 2020 being a leap year, 30 days before 1 March 2020 is apparently 31 January 2020.
2. Mortimer v Ah Sam [2020] NSWSC 1763 at [91] (Sackar J) ("Primary judgment").
3. Tcpt, 15 September 2020, p 64(1)-(20).
4. Tcpt, 8 October 2020, pp 141(43)-142(44).
5. Tcpt, 8 October 2020, p 145(20)-(40).
6. Tcpt, 8 October 2020, p 148(12)-(37).
7. Tcpt, 8 October 2020, pp 150(25)-151(28).
8. Primary judgment at [5]-[6].
9. (1994) 181 CLR 41 at 74 (Deane J); [1994] HCA 30.
10. Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 344 [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ), 363 [83] (Gaudron J); [2000] HCA 63; R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 256 (Barwick CJ, Gibbs, Stephen and Mason JJ); [1976] HCA 39.
11. See most recently Charisteas v Charisteas; [2021] HCA 29; (2021) 95 ALJR 824 at 828 [12] (Kiefel CJ, Gageler, Keane, Gordon and Gleeson JJ).
12. Primary judgment at [138], [156]-[157].
13. Muriniti v Lawcover Insurance Pty Ltd (No 2) [2018] NSWCA 311 at [185] (Bathurst CJ, Beazley P and White JA); Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88; (2016) 332 ALR 128 at 172 [233]-[234] (Ward JA; Basten JA and Emmett AJA agreeing); Knaggs v Director of Public Prosecutions [2007] NSWCA 83; (2007) 170 A Crim R 366 at 387 [95] (Campbell JA; Mason P and Tobias JA agreeing).
14. Cf, in the administrative law context, Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 [2003] HCA 30; (2003) 77 ALJR 1165 at 1182 [99] (Kirby J).
15. See Vakauta v Kelly (1989) 167 CLR 568 at 573 (Brennan, Deane and Gaudron JJ), 579 (Dawson J), 588 (Toohey J); [1989] HCA 44; but cf Michael Wilson & Partners v Nicholls (2011) 244 CLR 427 at 446 [67] (Gummow ACJ, Hayne, Crennan and Bell JJ); [2011] HCA 48.
16. At [31] (Primary judgment at [5]-[6]).
17. Primary judgment at [35].
18. In the "Type of Claim" section on the cover page.
19. Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 185 [14], 190-191 [27], 192 [30] (French CJ), 208 [81], 211 [93], 212-213 [96]-[97] (Gummow, Hayne, Crennan, Kiefel and Bell JJ); [2009] HCA 27; Tildesley v Harper (1878) 10 Ch D 393 at 397 (Bramwell LJ; Baggallay LJ agreeing), 397 (Thesiger LJ; Baggallay LJ agreeing).