Appeal ground 2
20Counsel for Dr Raashed submitted that the Magistrate erred in making an order under s 7(1)(a) of the Contracts Review Act that Dr Raashed could not enforce a contractual term that the Husseins pay the balance of the contract of $50,063 in circumstances where her Honour had made a finding that in the absence of evidence of valuation it was not possible to determine whether the Husseins had suffered any financial loss pursuant to the contract, and if so to what extent.
21Both parties referred to the well known passage from House v The King (1936) 55 CLR 499 at 504-505 where Dixon, Evatt and McTiernan JJ in a joint judgment stated:
"... The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. ..."
22According to Dr Raashed, the test set out in House v The King forms the basis of the test required for an error of law. In support of that proposition he relied upon a recent decision of Hall J, US Manufacturing Co Pty Ltd v ABB Service Pty Ltd [2008] NSWSC 705, at [48] to [55]. Counsel for Dr Raashed also submitted that, because the Magistrate erred by making a finding of fact in the absence of evidence supporting that finding, there was an error of law so leave was not required.
23Counsel for the Husseins submitted that the plaintiff's analysis of House v The King was incorrect and that a number of the grounds of appeal, when properly analysed, did not raise a question of law. The Husseins submitted that the plaintiff must satisfy two criteria: firstly, that the appeal falls within the House v The King principle; secondly, that it involves a question of law. As relief afforded under the Contracts Review Act is discretionary, it is my view that Dr Raashed must satisfy this court that the appeal falls within the House v The King principle as outlined in Khoshaba.
24Counsel for Dr Raashed submitted that the magistrate failed to take into account relevant material and secondly, that the Magistrate's finding was "unreasonable or plainly unjust". The failure to take into account a material consideration is particularised as being that her Honour did not take into account the failure of the defendants to prove the value of the goods and goodwill they received under the contract.
25In making factual findings, the Magistrate did not accept Dr Raashed as being a witness of credit. Her Honour stated that he was evasive in many of his answers and referred to specific examples. Her Honour went further and found that Dr Raashed was not an honest or reliable witness. Her Honour made a finding that the Husseins' evidence was consistent and she accepted their evidence as evidence of truth (see judgment at [48] and [49]).
26I have reproduced the findings of fact in the judgment paragraphs [50] to [54] as it is these circumstances that underpin the Magistrate's determination as to whether relief should be granted under s 7(1)(a) of the Act and, if so, what relief.
27The Magistrate made the following findings at [50] where her Honour stated:
"I am satisfied on the balance of probabilities that:
The original partnership discussions were on a 50/50 basis
That Dr Rasheed (sic) was the author of both partnership documents. (See para 18 and 19 of this Judgment) I accept the defence submission that on the basis that these sums of money are known only to Dr Rasheed, and absent the suggestion that Mr or Mrs Hussain (sic) created the document.
That the contents of the container from Burma was stored in Dr Rasheed's containers in Sefton
That the Hussains owned a large proportion, of not all of the goods received from Burma
That Dr Rasheed suggested to the Hussains to purchase his business
That the contract was given to them only on 4 th September, 2007
That the Hussains did not inspect the contents of the containers on 3 rd September nor 4 th September, 2007
That when the Hussains had access to the container around 25 th August, 2007, it was for the purpose of storing the goods received in the container from Burma and not to inspect Dr Rasheed's goods which were already stored there.
That the Hussains did not in fact inspect Dr Rasheed's goods which were stored in that container.
It was not in the contemplation of any party at that time, that Mr and Mrs Hussain would purchase Dr Rasheed's business
That Dr Rasheed would not give them the keys to the containers unless they bought his business
That Dr Rasheed stated that he was going overseas for some time. ... The contract was given to the Hussains only on the morning of the 4 th September, 2007. The fact that the contract stated that the 2 nd instalment was to be paid to Dr Rasheed in early October, 2007 does not alter that fact that either way, without access to the keys to Dr Rasheed's containers at Sefton where the goods from Burma were stored, whether it be for 2 weeks or some other period the Hussains were unable to trade
That the Hussains were therefore unable to trade and unable therefore to obtain any income without access to the stock to trade
That there was no negotiation regarding the purchase price of $80,000."
28The Magistrate decided at [51] to [54] as follows:
"51 I am satisfied that at the time the contract was entered, the Hussains were in an unequal position during the discussions concerning the business. Dr Rasheed had made it clear that he would not give them the keys to the container unless they signed the contract. That without access to the containers, where the goods from Burma were stored, they were unable to trade and therefore unable to gain any income to support their family. I find, on the balance of probabilities that, pursuant to s 9(2)(a) Contracts Review Act 19080 that there was material inequality in the bargaining power between Mr and Mrs Hussain on the one hand and Dr Rasheed on the other.
52 I am satisfied on the balance of probabilities, pursuant to s 9(2)(b) that prior to or at the time the contract was made, that Mr and Mrs Hussain were not able to negotiate the contract conditions.
53 I am satisfied on the balance of probabilities that Mr and Mrs Hussain were denied an opportunity to get legal advice, having been given the contract only on the morning on which it was entered, and that there was urgency in entering the contract before Dr Rasheed left for overseas that same day (s 9(2)(h)).
54 I find that Mr and Mrs Hussain were given no choice but to agree to the terms of the contract drawn by Dr Rasheed and entered into by them on 4 th September, 2007. Dr Rasheed was due to go overseas that very day. Their goods from Burma were stored there. These good were their stock in trade. Dr Rasheed refused to give them the keys to the locked containers unless they entered into the contract, agreeing to the sale price and the instalment conditions. Without access to their stock the Hussains were unable to trade and therefore unable to generate any income. According, pursuant to s 9(2)(j)(i) I find that undue influence and undue pressure were exerted on the Hussains."
29The Magistrate had limited jurisdiction as to the relief she could grant under the Contracts Review Act . Section 32 of the Local Court Act provides that the Local Court may grant relief pursuant to s 7(1)(a) of the Contracts Review Act.
30Section 7(1)(a) of the Contracts Review Act reads:
"Principal relief
(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:
(a) it may decide to refuse to enforce any or all of the provisions of the contract".
31The task confronting the Magistrate in relation to considering what, if any, relief was to be granted is set out in S H Lock (Australia) Ltd v Kennedy (1988) 12 NSWLR 482 where Priestley JA stated at 492:
"Once a court finds a contract unjust in that sense, it is faced with the next and quite separate task, for which, the Act provides less guidance: the relief the court is empowered to give, is, if it consider it just to do so, to make appropriate orders "for the purpose of avoiding as far as practicable an unjust consequence or result". As I understand s 7(1), wide though the court's powers are to find a contract unjust, the remedies it may grant in respect of such injustice are strictly limited to avoiding an unjust consequence or result of the unjust contract. ..."
32On this topic the Magistrate made the following findings at [94] to [100]:
"94 What did the Hussains get for $29,937? The Hussains received the contents of both containers, which included the goods from Bangladesh and Dr Rasheed's goods. The list from 24th August, 2007 puts the value of the goods at $28,917, although the Hussains claim that that value was at wholesale price and they could not sell the goods for a profit. Some stock was not able to be sold. However, no stocktake was done soon after the contract and so it is not possible to determine the actual value of the goods obtained from Dr Rasheed and therefore it is not possible to determine whether the Hussains suffered any financial loss and if so, to what extent.
95 The Hussains did receive the 2 x 20' containers and received $3,000 when one was sold. They found one glass top freezer of the eight, which were part of the contract. If the valuation is correct (there was no cross examination of Dr Rasheed about the value of the Freezers) they may have lost $5,600.
96 In the absence of a valuation of the contents of the Bangladesh container it is not possible to determine whether the Hussains paid the 75% of the total value.
97 The Hussains received some business goodwill because they said that the business returned some $4-5,000 per week, although the return was not as expected. Dr Rasheed agreed that the $25,000 valuation of the goodwill with the business name Barakah International, was overvalued. He accepted that the goodwill should be less than that, particularly without his business name. However, in the absence of a valuation of the goodwill or the value of the business, it is not possible to determine any quantum of loss.
98 It is impossible to determine on the balance of probabilities, on the evidence available, whether the Hussains suffered any loss taking into account the amount paid ($29,937) under the contract to date.
99 Having found that the contract was unjust at the time the contract was made, justice dictates that some relief must be granted to the Hussains. To do otherwise would be wholly unjust, taking into account all the circumstances in this matter.
100 Accordingly, it is appropriate to grant relief under s.7 (1)(a) Contract Review Act, refusing to enforce the requirement that the Hussains pay the balance of $50,063.00 under the provisions of the contract. The $29,937 paid by the Hussains to Dr Rasheed is sufficient and no further amount need be paid under the contract."
33Counsel for Dr Raashed highlighted the parts of paragraphs 94, 96, 97 and 98 of her Honour's reasons for judgment where she stated that she was unable to quantify the Husseins' loss in relation to the value of goods and goodwill they received under the contract. Dr Raashed submitted that these conclusions have been drawn without any evidentiary basis and without proper consideration of the range of options for relief available under the Contracts Review Act and that relief should not have been granted . Dr Raashed further contended that the magistrate did not grant the relief limited to the minimum required to do justice between the parties.
34Counsel for Dr Raashed referred to a passage from the recent decision of Verduci v Golotta [2010] NSWSC 506 where Slattery J at [53] had this to say:
"[53] An entitlement to relief is not made out merely because the circumstances relating to the transaction did not work out in favour of one party, a relevant principle which is consistent with the public policy in keeping parties to their bargains: Baltic Shipping Co v Dillon ("the Mikhail Lermontov") (1991) 22 NSWLR 1 at 9 per Gleeson CJ. Even if the court does find a contract to be unjust and warranting the provision of relief, the relief to be granted would be limited to the minimum required to do justice between the parties : S H Lock (Australia) Ltd v Kennedy ( 1998) 12 NSWLR 482. There should be a causative connection between the relevant injustice and the unjust consequence which requires relief to be granted: S H Lock (Australia) Ltd v Kennedy (1998) 12 NSWLR 482 at 492 per Priestley JA."
35Counsel for the Husseins submitted that a failure to take into account any purported failure of a party to prove certain facts is not a ground for challenging the exercise of discretion within the House v The King principles. The Husseins further submitted that it was plain that the Magistrate gave ample consideration to the issues of the value of goods and goodwill and further that the Magistrate did not consider that the absence of findings of fact as to the value of what the Husseins had received affected her view that, in all the circumstances, the dictates of justice required that some relief be granted.
36So far as what relief should be granted, the Magistrate analysed what the Husseins actually received for what they purchased. Pursuant to the contract, the Husseins were to receive the frozen stock, equipment and the goodwill of seller (excluding the trading name). Her Honour analysed what the Husseins got for $29,937 (the amount they paid) by referring to each item in seriatim . There was evidence of the value of the freezers, an acknowledgment by Dr Raashed that the goodwill was overvalued, but it was not possible to determine the quantum of the goodwill or of the contents of the container from Bangladesh. Her Honour took these matters into account. What her Honour was required to do was to exercise her discretion, where she considers it just to do so, to avoid as far as practicable an unjust consequence or result. It is my view that the Magistrate adopted the correct approach and concluded that, to avoid an unjust consequence or result of an unjust contract, the requirement that the Husseins pay the balance of the contract of $50,063 could not be enforced.
37Dr Raashed's next argument, under this heading, puts the same argument another way. Counsel submitted that the magistrate erred in drawing the conclusion that the amount paid was sufficient. According to counsel, such a conclusion would required a finding of fact, based on the evidence, that the value received by the Husseins was equal to the amount paid. Dr Raashed submitted that the Magistrate specifically found that the evidence was incapable of establishing that fact and in those circumstances, the Magistrate's conclusion was not supported by any evidence, suggesting a substantial wrong in the exercise of her discretion. I do not think so. Once again, the Magistrate was to exercise her discretion to avoid an unjust consequence or result of an unjust contact. That is the approach her Honour adopted.
38Next, Dr Raashed submitted that the Magistrate erred in saying that some relief must be granted and that the essence of discretionary relief is that the court is not bound to grant any relief at all. But this submission takes one sentence of the Magistrate's reasons out of context. The Magistrate had made findings that, at the time when the contract was entered into, the Husseins were in an unequal position. Prior to the contract being entered into the Husseins were not able to negotiate the contract conditions, were denied the opportunity to get legal advice and were denied access to their stock in trade unless they signed the contract. Further, Dr Raashed had conceded that the Husseins paid too much for the goodwill. Hence, the Magistrate decided, in those circumstances, that some relief must be granted.
39The Magistrate, in her reasons at [13] referred to the three-stage process in Khoshaba , in which the final stage, namely the granting of relief, is to be undertaken "if necessary". This process was adopted by the Magistrate.
40Finally, under this ground of appeal, Dr Raashed submitted that this is a case where the Husseins could, and did, make out procedural injustice as that term has been used in cases such as West v AGC (Advances) Ltd (1986) 5 NSWLR 610, but not substantive injustice . Again, it was a discretionary decision of the Magistrate and she was entitled, in the circumstances outlined, to grant the relief that she did.