Sayer v Turk & Anor

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10513 of 2000 JEAN SAYER v NICHOLAS TURK & ANOR JUDGMENT 1 By an order of the Supreme Court in its Common Law Division, the plaintiff became the receiver of all property held by Ian Harley MacDonald (MacDonald) or by any other person on his behalf or that is recoverable by him. The order was made on 11 September 1996. It seems to be common ground that MacDonald was a solicitor who has been struck off and is presently both bankrupt and in prison. 2 The defendants are the registered proprietors of an estate in fee simple in the property known as 3 Darwin Close, Wakeley (the Property). They have resided in the Property since about September 1986. 3 The defendants had known Abdullah Dahlan (Dahlan) and his wife. Dahlan had been a long standing close friend of the first defendant. He was known to MacDonald. He introduced the defendants to MacDonald, who acted for them on the purchase of the Property. The defendants then entered into a mortgage (which had been arranged by MacDonald) to enable them to purchase the Property. 4 The defendants came to Australia from the Middle East in about March 1971. The first defendant worked for about 13 years as an accounts clerk. Later, he and Dahlan were involved in a taxi business. For the purposes of this business, money may have been borrowed from Esanda. By about 1990, the defendants and the Dahlans had reached a consensus to embark on a money making project. It seems a joint venture was contemplated. It involved the acquisition of land and its development. They needed finance for the project. For this purpose, they went to MacDonald. He was told that they were doing the project to make "some money". 5 It seems that he acted as solicitor for the parties and largely managed the project. His role involved the arranging of the finance for the project. The second defendant has said that Dahlan was in charge of "The building". He may have done some work in cleaning up the site. 6 It appears that the project was pursued in the context of the defendants having no assets (apart from their home) and neither of them being in employment (he was on sickness benefit). The position of the Dahlans is not entirely clear but it would seem that they had a need for money and may not have been in any position to offer any security. 7 Land at 135 Woodburn Street, Berala was acquired (the Berala Property). The joint venture involved the construction of four flats and a townhouse on the Berala Property. It seems that the contract with the original builder was terminated. Legal proceedings were brought against him. Further, it seems that the construction was completed by another builder and ultimately the units and townhouse were sold. Unfortunately, the project was not a financial success. 8 It should be added that at some stage during the project the joint venture was brought to an end and the defendants alone proceeded to completion of it. The evidence suggests the making of a commercial decision (inter alia in the light of the money that had already been expended). 9 The defendants have executed a number of mortgages (see inter alia Exhibit 1). Security was given both over the Property and the Berala Property. It appears that mortgages were executed from time to time as and when further finance was required. A particular mortgage was given over the Property on 18 July 1994 (the Mortgage). It secured an advance of $100,000 over the Property. The term was for two years. The mortgagees were Harold Impey and Edna Impey (the Impeys). It is common ground that MacDonald acted for the mortgagees. 10 In November 1997, the plaintiff became the registered proprietor of the Mortgage. There being default under the Mortgage, she brought these proceedings to recover possession of the Property. 11 The proceedings have had a chequered history. A number of solicitors have acted for the defendants. The present solicitors have but recently received instructions. 12 On 4 May 2001, the List Judge fixed the proceedings for hearing on 21 August 2001. On 16 August 2001, the defendants made an application for vacation of the hearing date. The application was refused. The application was renewed on the date fixed for hearing (21 August 2001). Counsel for the defendants informed the court that his instructions were limited to the making of the adjournment application. The defendants relied on affidavits sworn by each of them together with an affidavit from their present solicitor (Mr Grech). The renewed application was also refused. 13 Following the refusal of that adjournment application, counsel then appearing for both defendants sought further instructions. Subsequently, he advised the court that the first defendant was now consenting to a judgment in respect to the plaintiff's claim for possession and that the second defendant would be resisting the plaintiff's claim. The hearing of the claim against the second defendant then proceeded with the same legal representation. The affidavits relied on for the purpose of the adjournment application were not used in the hearing itself. 14 It was only during the hearing that it was discovered that the second defendant had not in fact filed any verified Defence. An unverified Defence purporting to be in the name of the first defendant having contents which may be read as applying to both defendants only had been filed. During the course of proceedings, leave had been given to file an Amended Defence. The leave was not exercised. The hearing continued on the basis that the second defendant would be in a position to file a verified Defence of the second defendant in court at 10.00am on 22 August 2001. 15 The evidence could be described as parsimonious. Both parties have tendered documentation. Both the first and second defendant have given oral evidence. Both have been cross-examined. 16 I have closely examined the demeanour of the witnesses during the giving of evidence. In assessing credibility, I have had regard both to demeanour and evidence. 17 Whilst this is a case which can be disposed of without making findings as to credibility, it may be helpful if I do record my observations. The second defendant gave the impression of being evasive. She was prone to dropping her voice during the giving of evidence. She was disposed to non-responsive answers during cross-examination. This saw interruption to her answers. She sought to give a presentation of limited understanding and knowledge. I gained the impression that her understanding and knowledge well exceeded her presentation. It may be putting it too high to say that she was quite shrewd, but she certainly manifested an awareness of what was going on. She did not need the services of an interpreter. 18 The second defendant was born in Jordan on 9 January 1949. She attended school to the age of 16 years. She did not learn English. She married the first defendant on 16 February 1969. 19 Since living in Australia she has learned some English. Her capacity has improved over the years (it is better now than it was in 1994). Her children (four) speak English in the home. She learned from them. She has a limited capacity to read English. 20 Largely, she has not been in employment. She is lacking in business experience. 21 The second defendant has signed a significant body of documentation. Her evidence is to the effect that she did not read what was signed by her. She said that she signed because her husband did. In chief, she said to the effect that this was an Arab custom. In later evidence, the second defendant conceded that she signed the documents because she had confidence in the first defendant. If her husband signed the document, she was satisfied that it was all right for her to sign (she was confident that it was a true document). She said that he was fluent in English and that he was familiar with money, finances and accounting matters. She said that the documents were not explained to her. She said that she did not know what a mortgage was and that she did not know that the documentation had anything to do with her home. She said that she knew that the Mortgage had something to do with the borrowing of money ($100,000) for the project. 22 It is not said that the second defendant is lacking mental capacity. It is not a case where it is said that she was acting under pressure from the first defendant. She knew that they were going to see MacDonald to get "some money from him" to do the project. She had knowledge of the project and its objectives. Largely, the first defendant opened correspondence from MacDonald and kept it in a file. She said that she did not read the correspondence (the first defendant conceded that they were kept fully informed). He said that he did "not exactly" show correspondence to his wife. However, there was discussion between them. It seems to be accepted that their respective state of knowledge was not dissimilar. She was aware that the purpose of going to MacDonald's office and signing documents was to obtain further finance for the project. She knew that it would have to be repaid. It was expected that it would be repaid out of profit. There may have been discussion between the defendants concerning the meaning or effect of the other mortgages (transcript p11). Her evidence is to the effect that she did not put her mind to the possibility of the project making a loss. Her evidence suggests that this may have been due to what had been said by her husband and Dahlan. 23 Both were very keen to paint a picture of MacDonald being very much in control (the first defendant described him as "the boss of the project" ). He was presented as the one who did everything and they did nothing. Although the correspondence from MacDonald presented a different picture (certain of it bore the signatures of both defendants), largely, they sought to convey an impression of ignorance and lack of involvement (all they did was sign documents). In cross-examination, the first defendant conceded that he had been kept fully informed and knew what was going on with the development. 24 This is a case in which potential witnesses have not been called. Neither the Impeys nor MacDonald have given evidence. The second defendant contends that the plaintiff should have called MacDonald and that inferences should be drawn by reason of the failure to call him. The matter was not fully argued. The application of the rule in Jones v Dunkel (1959) 101 CLR 298 requires the satisfaction of a number of matters. In this case none of these were really addressed. In particular, it was not demonstrated that he was a witness which the plaintiff might be reasonably expected to call. 25 When the hearing resumed at 10.00am on 22 August 2001, counsel for the second defendant sought to file in court a Defence and Cross-Claim. By that time, he was in the course of making submissions. On the previous day, the case had proceeded on the basis that the claim for possession was being defended on principles of unconscionable conduct. Reference was made only to the principles in Commercial Bank of Australia v Amadio (1983) 151 CLR 447 and Garcia v National Australia Bank Ltd (1998) 194 CLR 395. Contrary to what had been said on that day, the proposed Defence and Cross-Claim sought to agitate additional matters. Firstly, it was sought to look to ss 42 and 43 of the Fair Trading Act 1987 (the Act). Secondly, it was sought to rely on a plea of non est factum. After further time consuming debate, following a concession from counsel for the plaintiff that he could not say that he would be prejudiced by the additional matters, leave was given to file the Defence and Cross-Claim. 26 Submissions then continued. At the conclusion of the oral submissions, counsel for the second defendant was given leave to make written submissions on or before 12 noon on 23 August 2001. This was given to enable counsel to conduct further research and provide authority, if possible, for certain of the submissions that had been orally made. 27 It is convenient to first deal with the case sought to be made pursuant to s 42 of the Act. This was founded on a representation allegedly made in or about 1990 to the effect that there was no financial risk associated with the borrowing of the money. It was alleged that the representation was made by the Impeys through their solicitor (MacDonald). 28 The second defendant gave oral evidence that in the beginning or "when we start the project" MacDonald had said to the effect that they were on a winner ( "I can give you 100 percent you're going to win" ). Similar evidence was not sought to be adduced from the first defendant. There was some uncertainty as to precisely when this was said to have taken place. However, it seems to be accepted that it had to have been made at an early stage in the office of MacDonald when the other joint venture members were present (probably about 1990). 29 It is unnecessary to devote much time to this matter. It was abandoned during the course of submissions. 30 It may have failed for a number of other reasons (failure to satisfy the requirements of sub-section (1) ), but in any event it was doomed to failure because of factual untenability. On any view, any such representation had to have been made some years prior to MacDonald being retained to act for the Impeys in the Mortgage transaction (about July 1994). This factual problem was conceded by counsel for the second defendant in submissions. 31 During the course of submissions, the case founded on Garcia was also abandoned. The High Court has said that the principles applied in Yerkey v Jones begin with the recognition that the party seeking relief is a volunteer. On the evidence before this Court, the second defendant was not a volunteer (she received a benefit) and this was conceded by her counsel. 32 In submissions, the claims for relief under the principles of Amadio and s 43 of the Act were not differentiated. General submissions were made in relation to both of them. Accordingly, save for certain observations relating to statutory requirements, they can be dealt with similarly. The onus is borne by the second defendant. 33 There was a failure to address the relevant statutory requirements. Sub-section (1) of section 43 provides that a supplier shall not, in trade or commerce, engage in conduct that is, in all the circumstances, unconscionable. It is difficult to see how the Impeys could be said to be "suppliers" in "trade or commerce" in the sense required by the Act. These problems were merely glossed over. As things stand, I am left unsatisfied that s 43 has application in the circumstances of this case. Leaving that matter aside, I now return to what was argued. 34 The circumstances of this case are unusual. It is unnecessary to engage in any great detail to effect a disposition of the remaining defences and the Cross-Claim. 35 It appears that four persons (one of which was the second defendant) voluntarily embarked on a joint venture. It was a commercial project pursued for the purpose of making profit for all four of the members (the second defendant was not in the position of a surety). It seems that all of them lacked financial resources. They approached MacDonald to arrange the finance and provide other services. He was made aware that they were doing the project to make money. Largely, the management of the project seems to have been left to MacDonald. MacDonald arranged finance and provided other services in relation to the project. Ultimately, the project was completed and the units and town house were sold. The joint venture did not produce a profit. Instead, there was a significant loss. MacDonald had kept the defendants informed as to the progress of the project. 36 The second defendant's claims for relief are founded on the contentions that:- 1. MacDonald in the course of his retainer acquired certain knowledge; 2. There were deficiencies in the manner in which he carried out the retainer (including failure to advise and explain and to not afford an opportunity to obtain independent advice); and 3. Because he was also their solicitor in relation to the Mortgage, the Impeys had imputed notice of this knowledge and the deficiencies. 37 During oral submission, counsel for the second defendant was unable to point to any authority which lended support for the third contention. Indeed, he was unable to do little more than simply advance the contentions. The subsequent written submissions identified certain decided cases. Some of them were said to lend support to the second defendant's submissions. In my view those authorities do not assist her. There was also reference to an authority which did not support her submission (inter alia Royal Bank of Scotland v Eldridge (No 2) 1998 4 AER 705 at 721). Despite these written submissions, the court was still left to decide a crucial matter which had not been fully argued. 38 Before I proceed further, I should mention that there were other problems which were not really addressed (inter alia by at least July 1994 it may have been reasonable for MacDonald to have taken the view that the second defendant had a sufficient understanding of documentation signed by her and did not need independent advice). 39 The Mortgage was given at a time when the project had been on foot for some years. There were separate retainers. Presumably, the retainer had by MacDonald from the Impeys was simply to lend funds on adequate security. The Impeys could be described as innocent parties. There is a lack of evidence both as to their actual knowledge or indeed in respect of any other matter. It is not said that MacDonald was under any duty to inform them. In respect of each retainer there were legal professional privilege considerations. There is authority for the view that knowledge acquired in the course of a retainer for one client does not come to the same solicitor as knowledge in his capacity as solicitor for another client. A duty is owed to each client alone. Accordingly, it is said that the other client is not fixed with imputed notice of what the solicitor learns in the course of advising the first client. In the light of the limited argument, it seems to me to be the preferable view. 40 In the circumstances, I am not satisfied that it could be concluded that inter alia whatever knowledge was had by MacDonald should be imputed to the Impeys. Further, I am not satisfied that any unconscionable conduct has been demonstrated. In the circumstances, I am of the view that the onus has not been discharged and that any claim for relief under either the principles of Amadio or the Act fails. 41 There remains the defence of non est factum. All that has been said in support of this defence was that the second defendant did not know that she was signing a mortgage and/or that the document related to her home. Execution of the Mortgage has been admitted. It is not said that she was unaware that what she signed was a document having legal consequences. It has not been shown that the Mortgage was signed in the belief that it was radically different from what it was in fact. The authorities demonstrate that it is a plea which must necessarily be kept within narrow limits. There is a heavy onus on a defendant who seeks to establish the defence. There has to be an absence of carelessness ( Petelin v Cullen 132 CLR 355 at 359-360 and Child v Commonwealth Development Bank [2000] NSWCA 256). In this case, no explanation was sought by her (from either MacDonald or anyone else) even though she had opportunity to do so. I am not satisfied that this defence has been made out. 42 This is a case where the defendants have received the benefit of the moneys advanced pursuant to the Mortgage. The moneys were used in the project. There has been substantial default in respect of both principal and interest. There was no offer to repay any moneys as a condition for the granting of relief. I consider that in a case such as this the imposition of terms would have been relevant to the granting of any discretionary relief. 43 In my view, the defences raised by the second defendant fail and the Cross-Claim should be dismissed. 44 I direct the entry of judgment against both defendants for possession of the land described in (a) of paragraph 10 of the Statement of Claim for Possession. I refer the question of leave to issue a Writ of Possession to a Registrar. The defendants are to pay the plaintiff's costs to date. The exhibits may be returned. **********

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