Taheri v Vitek

Taheri v Vitek - [2014] NSWCA 209 - NSWCA 2014 case summary — Zoe

[4]

HEADNOTE The appellant wife granted a power of attorney to her husband. Two years later, the husband signed his wife's name as well as his own, so as to guarantee the performance of his company's obligations as purchaser of land in Sydney. The sale did not proceed, and the respondent vendors sued the purchaser and the guarantors. The wife served an affidavit to the effect that she was unaware of the fact that her husband had purported to bind her to the contract. On the fourth day of the trial, the vendors settled with the wife, and the wife settled a cross-claim against her conveyancer. The vendor's claims against the husband and the company subsequently proceeded and the vendors obtained judgments which remain unsatisfied. After the settlement, the wife served evidence to the effect that she was aware of the contract and that she had been bound as guarantor. There were two hearings at first instance. At the first, Bergin CJ in Eq found that the vendors were induced to settle by the wife's fraudulent misrepresentation, and set aside the settlement. At the second, Rein J held that the wife was liable on the guarantee, either because of s 163B of the Conveyancing Act 1919 (NSW), or because she had ratified the act of her agent, or through estoppel. Held by the Court, dismissing the wife's appeals:

There was no error in the finding that the vendors relied on and were induced by the wife's fraudulent misrepresentation to settle with her: at [1], [23]-[26], [69]-[94]. Harvey v Phillips (1956) 95 CLR 235, Gould v Vaggelas (1985) 157 CLR 215, Barton v Armstrong [1976] AC 104, applied. BP Exploration Operating Co Ltd v Chevron Transport (Scotland) [2001] UKHL 50; [2003] 1 AC 197, Macquarie Generation v Peabody Resources [2000] NSWCA 361; [2001] Aust Contract Reports 90-121, followed.
The fact that the separate compromise between the wife and her conveyancer had not been set aside did not prevent rescission of the compromise between the vendors and the wife: at [1], [26], [95]-[104]. Alati v Kruger (1955) 94 CLR 216, applied.
Section 163B of the Conveyancing Act 1919 (NSW) did not exclude from the authority granted by the wife to her attorney actions which were to the benefit of the attorney and not to the benefit of the principal: at [1], [36], [121]-[132]. Spina v Permanent Custodians Ltd [2008] NSWSC 561; 13 BPR 25,463 approved Spina v Conran Associates Pty Ltd [2008] NSWSC 326; 13 BPR 25,435 and Perochinsky v Kirschner [2013] NSWSC 400; 16 BPR 31,481, disapproved Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 and King v Jones (1972) 128 CLR 221, applied
Principles governing the exercise of an agent's authority, and the relationship between actual authority, apparent authority and fiduciary duty, discussed: at [27]-[35], [112]-[117]. Day v Day [2013] EWCA Civ 280; [2014] Ch 114, Dimitrovski v Australian Executor Trustees Ltd [2014] NSWCA 68 considered
(Emmett JA not deciding) In any event, the wife had ratified the execution by her husband of the guarantee, and was estopped from denying that she had: at [1], [132]-[140]. McLaughlin v City Bank of Sydney (1912) 14 CLR 684, applied Leybourne v Permanent Custodians Ltd [2010] NSWCA 78, followed

[5]

Judgment

BATHURST CJ: I agree with Leeming JA.
EMMETT JA: These two appeals arise out of a contract for the sale of land at Redfern (the Property) made by the respondents, Peter Vitek and Shoshana Vitek, as vendors (the Vendors), and Estate Homes Pty Ltd (Estate Homes), as purchaser, on 15 September 2003 (the Contract). The appellant, Mrs Veeda Taheri, and her husband, Mr Siamac Taheri, were named in the Contract as guarantors of the obligations of Estate Homes under the Contract.
A dispute arose between Estate Homes and the Vendors, as a result of which, in 2005, the Vendors commenced proceedings in the Equity Division against Estate Homes and Mr and Mrs Taheri. The Vendors sought declarations that the Contract had been rescinded and that they were entitled to forfeit the deposit (the Vendor/Purchaser Proceedings). They also claimed damages. Estate Homes and Mr and Mrs Taheri brought a cross-claim against the Vendors and against Mr Bernard O'Donnell, who had acted on behalf of Estate Homes and Mr and Mrs Taheri in connection with the Contract. Mrs Taheri also filed a further cross-claim against Mr O'Donnell seeking damages for his alleged failure to advise her in relation to the guarantee.
In due course, the Vendor/Purchaser Proceedings came on for hearing before Barrett J. After several days' hearing, a compromise was reached between the Vendors, on the one hand, and Mrs Taheri, on the other, and between Mrs Taheri, on the one hand, and Mr O'Donnell, on the other. On 30 April 2009, Barrett J made orders by consent to the following effect: 1. Note the agreement that Mrs Taheri is to pay to the Vendors within 28 days the sum of $100,000 on account of the Vendors' costs; 2. Upon compliance with the agreement in paragraph 1, verdict and judgment for Mrs Taheri on the Vendors' summons; 3. Note the agreement between Mr O'Donnell and Mrs Taheri that Mr O'Donnell is to pay to Mrs Taheri within 28 days the sum of $50,000; 4. Upon compliance with the agreement noted in paragraph 3, verdict for Mr O'Donnell on Mrs Taheri's cross-claim; 5. All existing orders for costs in the proceedings as between the Vendors and Mrs Taheri and Mr O'Donnell be vacated.
At the end of the hearing of the Vendor/Purchaser Proceedings, Barrett J entered judgment for damages in favour of the Vendors against Estate Homes and Mr Taheri. Subsequently, Mr Taheri became a bankrupt and Estate Homes was de-registered. As a consequence, the Vendors have not recovered any of that judgment.
The Vendors thereafter commenced further proceedings against Mrs Taheri, Mr Taheri, Estate Homes and Mr O'Donnell (the Fraud Proceedings). In the Fraud Proceedings, the Vendors alleged that they had agreed to certain of the orders made in the Vendor/Purchaser Proceedings on 30 April 2009 in reliance upon false representations made by Mrs Taheri. Mr O'Donnell filed a submitting appearance in the Fraud Proceedings and took no part in them. Neither Mr Taheri nor Estate Homes took any part in the Fraud Proceedings.
On 18 June 2013, for reasons published on 20 May 2013, the Chief Judge in Equity ordered that the order made by Barrett J on 30 April 2009 for the entry of verdict and judgment for Mrs Taheri be set aside and that that part of the order made by Barrett J setting aside the existing costs orders as between the Vendors and Mrs Taheri be set aside. Her Honour ordered Mrs Taheri to pay the Vendors' costs of the Fraud Proceedings. Directions were given for the further hearing of the Vendor/Purchaser Proceedings as between the Vendors and Mrs Taheri.
The principal issue in the further hearing of the Vendor/Purchaser Proceedings was whether the form of guarantee contained in the Contract, in which Mrs Taheri was named as a guarantor, was binding on Mrs Taheri. It was accepted that Mrs Taheri had not in fact signed her name in the form of guarantee and that her husband had signed her name. The question was whether that signature was authorised by a power of attorney that had previously been granted by Mrs Taheri to her husband.
After a further hearing in the Vendor/Purchaser Proceedings, on the question of whether Mrs Taheri was bound by the guarantee, Rein J concluded that she was and entered judgment for the Vendors against her on 29 November 2013, for reasons given on 22 November 2013, in a sum of $1,191,519 (including interest), representing the loss suffered by the Vendors by reason of the repudiation of the Contract by Estate Homes.
By notice of appeal dated 1 July 2013, Mrs Taheri appeals to this Court from the orders made by the Chief Judge in Equity (the Fraud Appeal). By notice of appeal filed on 3 December 2013, Mrs Taheri also appeals from the orders made by Rein J (the Guarantee Appeal). The two appeals were heard together.
In the Fraud Appeal, the issues were whether the Chief Judge in Equity erred:

in concluding that the compromise of the claim by the Vendors against Mrs Taheri was induced by their reliance on representations made by Mrs Taheri in an affidavit sworn on 4 April 2007 and in a defence verified on 12 March 2007, both of which were filed and served in the Vendor/Purchaser Proceedings;
in concluding that the appropriate relief for fraudulent misrepresentation was the setting aside of the compromise, and the orders made under it, in circumstances where the compromise between Mrs Taheri and Mr O'Donnell remained on foot.

The issues in the Guarantee Appeal were whether Rein J erred:

in concluding that the signature of Mrs Taheri's name on the guarantee by Mr Taheri was authorised by the power of attorney;
in concluding that Mrs Taheri ratified the execution of the form of guarantee in her name by Mr Taheri;
in concluding that Mrs Taheri was estopped from denying that the guarantee had been signed with her authority.

[7]

There are signatures for each of Mr Taheri and Mrs Taheri in the form of guarantee. There are also signatures of witnesses. The witness for Mr Taheri is stated to be Mrs Taheri. The witness of Mrs Taheri's signature is indecipherable.

It is clear from the form of the guarantee contained in the Contract that Mr Taheri did not purport to sign the form of guarantee on behalf of Mrs Taheri in the exercise of any power. In fact, however, prior to the time when Mrs Taheri's signature was placed in the form of guarantee, a power of attorney had been executed by her dated 24 July 2001 (the Power of Attorney).
The Power of Attorney is a printed form purporting to be signed, sealed and delivered by Mrs Taheri in the presence of a witness. The operative provisions of the Power of Attorney are as follows: 1. I appoint SIAMAK [sic] TAHERI ... to be my attorney ... to exercise, subject to any conditions and limitations specified in Part 2 of this Instrument, the authority conferred on him ... by Section 163B of the Conveyancing Act, 1919, to do on my behalf anything I may lawfully authorise an attorney to do. 2. In the exercise of the authority conferred on him ... by Section 163B of the Conveyancing Act, 1919, my attorney is ... authorised to ... do any ... act, whereby a benefit is conferred on him ... . 3. This general power of attorney is given with the intention that it will continue to be effective notwithstanding that after its execution I suffer loss of capacity through unsoundness of mind. Part 2 of the form of general power of attorney is blank.
On 4 April 2007, Mrs Taheri swore an affidavit in the Vendor/Purchaser Proceedings, which said, so far as presently relevant, as follows: 3. I believe that the information contained in this Affidavit is true. 4. I am instructed that the proceedings have been commenced against me by [the Vendors] arising out of a guarantee, which I purportedly gave pursuant to a contract for sale dated 15 September 2003 ("the Contract"). ... 6. I have been shown what purports to be my signature ... at clause 51 of the Contract. The signatures purporting to be my signatures are not my signatures. ... 10. I was aware that my husband was interested in purchasing the property that is the subject of this dispute. Until this dispute arose, that was the limit of my knowledge. Specifically, I was not aware that at any time prior to the Contract being entered into or after that date until this dispute arose that Estate Homes Pty Limited or my husband had entered into a contract, or that I was a guarantor of the purchase. … 15. I am not aware of my husband ever having used the Power of Attorney either prior to or subsequent to September 2003. 16. … I did not authorise my husband to give a guarantee on my behalf or place my signature on the Contract as guarantor. 17. I have never signed any consent to be a director or shareholder in Estate Homes Pty Limited. I have no interest in that company and say that it is my husband's business and I have nothing to do with it. I would, in the circumstances, have not given a guarantee for the performance of the obligations of that company.
In her amended defence in the original proceedings, which was verified on 12 March 2007, Mrs Taheri relied on the following facts and assertions: 1. [Mrs Taheri] denies that [the Vendors are] entitled to the relief claimed. ... 3. [Mrs Taheri] ... denies entering into the guarantee contained in Clause 51 of the Special Conditions [of the Contract]. 4. [Mrs Taheri] refers to Clause 51 of the Special Conditions contained in the Contract and says that the signature endorsed thereon purporting to be hers is a forgery. 5. Further, and in the alternative, [Mrs Taheri] says that the alleged guarantee was procured in circumstances which were unconscionable and which in equity should not be enforced. Particulars a. [Mrs Taheri] was not aware that she was required to enter into the guarantee contained in Clause 51 of the Contract. b. No explanation of the terms of the guarantee or the Contract was given to [Mrs Taheri]. c. The signature on the guarantee purporting to be that of [Mrs Taheri] is a forgery. 6. Further and in the alternative, [Mrs Taheri] says that if a guarantee was entered into as alleged, which is not admitted, it is an unjust contract within the meaning of the Contracts Review Act 1980 by reason of the circumstances in which any such Agreement was entered into. ... Particulars [Mrs Taheri] repeats the particulars to paragraph 5 above.
In the statement of claim filed in the Fraud Proceedings, the Vendors alleged that in her affidavit of 4 April 2007, Mrs Taheri had represented that:

She was not aware until March 2005 that Mr Taheri or Estate Homes had exchanged signed counterparts of a contract with the Vendors to purchase the Property.
She was not aware until March 2005 that in the Contract she was a guarantor of obligations of the purchaser.
She was not aware until March 2005 that Mr Taheri signed the Contract for her or in her name as guarantor.
She was not aware until at least March 2005 that Mr Taheri used the Power of Attorney to sign the Contract for her or in her name as guarantor.
She did not authorise Mr Taheri to sign the Contract for her or in her name as guarantor.
Until March 2005, the limit of her knowledge concerning the Property was that Mr Taheri was interested in purchasing the Property. The Vendors also alleged that, on 14 March 2007, Mrs Taheri represented in her verified defence that the signature on the Contract purporting to be her signature was a forgery and/or that she believed that the signature on the Contract purporting to be her signature was a forgery.

The Vendors alleged that Mrs Taheri intended that they rely on those representations and that each of them was false. They also alleged that Mrs Taheri knew that the representations were false at the time she made them. They then alleged that, having been induced by, and in reliance on, one or more of the representations, they decided to sign "the Settlement Agreement" on 30 April 2009. The Vendors then alleged that, at the time that they signed "the Settlement Agreement", they were unaware that the representations were false or otherwise misrepresentations. There was in fact no settlement agreement signed by the Vendors on 30 April 2009, or at any time. Rather, the solicitors for the parties merely signed consent orders.
The Vendors also alleged that, on 30 April 2009, they relied on one or more of the fraudulent misrepresentations in consenting to an order that there be verdict and judgment for Mrs Taheri against the Vendors in the Vendor/Purchaser Proceedings and that a justice of the Supreme Court, relying on their consent, made the order that there be verdict and judgment for Mrs Taheri. They say that, in the circumstances, the order was made or obtained by fraud and should be set aside.

[8]

The Fraud Appeal

The essence of the first issue raised in the Fraud Appeal is whether the Vendors were induced by any of the statements contained in the affidavit or the verified defence. Mrs Taheri contends that the decision to settle was made as a consequence of a direction given by Barrett J, in the course of the hearing of the Vendor/Purchaser Proceedings, that the defendants would not be required to go into evidence until the Vendors had closed their case. She says that that direction put the Vendors at a forensic disadvantage, in that they had intended, through their legal representatives, to endeavour to establish, by cross-examining Mrs Taheri and her husband on the affidavits that they had sworn, that the form of guarantee had been signed on her behalf with her authority under the Power of Attorney. She says that the Vendors perceived that forensic disadvantage, in that they would be required to close their case with no direct evidence concerning the circumstances surrounding the signature on the form of guarantee.
Mrs Taheri contended that the Vendors, acting on the advice of their legal representatives, decided to enter into the compromise by reason of that forensic difficulty that they perceived. They were not in any way induced by the statements made by Mrs Taheri in her affidavit or in her verified defence. That is to say, Mrs Taheri contended that the Vendors did not in any way rely upon the truth of the alleged representations in making a judgment as to whether or not to continue against Mrs Taheri in the Vendor/Purchaser Proceedings.
Mrs Taheri's contentions do not depend upon rejecting any finding made by the Chief Judge on the basis of the credibility of the witnesses who gave evidence as to reliance and inducement. Evidence in that regard was given by Mr Segal of counsel, and each of the Vendors, Mr and Mrs Vitek. Mrs Taheri says that, even if everything said by those witnesses is accepted, a proper analysis of what they said indicates that there was no relevant reliance on the truth of the relevant representations, such as to have induced the Vendors to consent to the orders made by Barrett J.
I have had the considerable advantage of reading in draft form the proposed reasons of Leeming JA. While I have some reservations concerning the finding by the Chief Judge that the Vendors were induced to enter into the compromise in reliance upon the statements made by Mrs Taheri, I agree, for the reasons given by Leeming JA, that there was no error on the part of the Chief Judge in concluding that there was a causal connection between the representations made by Mrs Taheri and the decision by the Vendors to enter into the compromise. I also agree with his Honour's conclusions, for the reasons given by him, that the remedy of rescission was available, notwithstanding that the compromise between Mrs Taheri and Mr O'Donnell remained on foot.

[9]

The Guarantee Appeal

Part 16 of the Conveyancing Act 1919 (NSW) dealt with powers of attorney at the relevant time. Part 16 included ss 158-163H. Section 159(1) relevantly provided that an attorney under a power may, in the exercise of the power, execute any instrument with his own signature and, where sealing is required, with his own seal, or do any other thing in his own name. As I have said, Mr Taheri purported to sign the guarantee with his wife's name.
Section 163B(1) relevantly provided that an instrument in or to the effect of the form in Sch 7 conferred on the attorney thereby appointed authority to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do. However, under s 163B(2), that authority did not include authority to execute a document, or do any other act, as a result of which a benefit would be conferred on the attorney appointed by the instrument, unless such authority was expressly conferred by the instrument. Schedule 7 contained a pro forma general power of attorney, in the same form as the Power of Attorney executed by Mr Taheri.
Prima facie, a power, however widely its general words may be expressed, should not be construed as authorising the attorney to deal with the property of his principal for the attorney's own benefit. Something more specific and quite unambiguous is needed to justify such an interpretation. The primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or others of his principal's property (Tobin v Broadbent [1947] HCA 46; 75 CLR 378 at 401). One question is whether that principle was modified by s 163B of the Conveyancing Act. That is to say, the question is whether authorising an attorney "to do on my behalf anything that I may lawfully authorise an attorney to do" (emphasis added) constitutes authority for the attorney to do things solely for his own benefit, where the principal derives no benefit.
In the present case, Rein J formulated the question to be resolved as whether Mr Taheri was effectuating Mrs Taheri's wishes in executing the guarantee in her name. His Honour considered that, on the evidence before him, Mrs Taheri's intention was "to support" the guarantee and that "she saw it as desirable to support her husband's venture and wished to support it". His Honour concluded that Mrs Taheri regarded the purchase of the Property as either "in her financial interest", or as something that she wanted "to support". His Honour concluded that Mrs Taheri permitted Mr Taheri to execute the guarantee in her name and that Mr Taheri was entitled to proceed on the basis that, in executing the guarantee in her name, he was acting on her behalf.
The effect of s 159(1) of the Conveyancing Act was that an attorney under power may, in the exercise of the power, execute any instrument with his own signature and with his own seal, where sealing is required. Under s 151(2), an instrument executed in accordance with s 159(1) is as effectual as if executed by the attorney with the signature and seal of the person giving the power. Under the general law, the correct mode in which an attorney should act is to express himself to act in the name of the principal and to sign, if signing is required, the name of the person giving the power (Clauss v Pir [1988] Ch 267 at 272). That may be said to be consistent with the principle that, where a person signs a written contract, that person is taken to be the contracting party unless it clearly appears that the contract has been executed as agent only (Cooke v Wilson (1856) 140 ER 65 at 69). The law of agency permits an agent to sign in the name of the agent, albeit that it appears that the agent is signing on the principal's behalf (see GE Dal Pont, Powers of Attorney (2011, LexisNexis Butterworths) at [7.8]).
The curious aspect of the execution of the guarantee in the present case is that the signature of Mr Taheri was purportedly witnessed by Mrs Taheri. It is now accepted that Mrs Taheri did not sign her name on the form of guarantee in either place. It cannot be suggested that, in signing Mrs Taheri's name as witness to his own signature, Mr Taheri was signing under the Power of Attorney. That tends to suggest that, when he wrote Mrs Taheri's name in two places in the form of guarantee, Mr Taheri was not intending to act as attorney under power. Rather, he was forging his wife's signature.
An argument had been foreshadowed on behalf of Mrs Taheri that "Mr Taheri had not used the Power of Attorney when he purported to sign the guarantee for and in the name of Mrs Taheri". That must be construed as an argument that, when he wrote Mrs Taheri's name as the purported signature on her behalf on the guarantee, Mr Taheri was not intending to act under the Power of Attorney. If that were the case, it may have been arguable that the guarantee was not binding on Mrs Taheri. However, that contention was apparently not advanced before Rein J and it was not advanced in this Court.
An important consideration in relation to the operation of the relevant provisions of the Conveyancing Act is that they are designed to avoid the necessity for a third party dealing with an attorney under power to enquire into the circumstances surrounding the exercise of the power by the attorney. The provisions are designed to ensure that a third party can deal with an attorney under a power with confidence, irrespective of whether the transaction is for the benefit of the principal or guarantor.
In considering the scope of the authority granted by a power of attorney, it is important to distinguish between the authority as between the attorney and the principal and the authority as between the attorney and third parties. That is to say, while the purported exercise of the power may be beyond the authority granted, as between attorney and principal, the exercise may nevertheless be binding on the principal. Where a purported exercise of the power is beyond authority, the attorney will have a liability to the principal to indemnify the principal for any obligation incurred in the name of the principal by the attorney that is outside the scope of the authority. Nevertheless, the third party will be entitled to enforce the obligation as against the principal.
I agree with Leeming JA, for the reasons proposed by his Honour, that Mr Taheri was authorised by Mrs Taheri to sign the guarantee on her behalf and that, by signing her name, he bound her to the obligations arising under the guarantee. In the circumstances, it is not necessary to deal with the questions of ratification and estoppel.

[11]

(a) The power of attorney and the execution of the guarantee

On 24 July 2001, the appellant, Mrs Veeda Taheri, appointed her husband Mr Siamac Taheri as her attorney. Her written submissions dated 14 March 2013 before Bergin CJ in Eq refer to her having been formerly married to Mr Taheri, but continue to refer to her as Mrs Taheri. These reasons follow the same course.
The instrument signed by Mrs Taheri authorised Mr Taheri to exercise the authority conferred on him by s 163B of the Conveyancing Act 1919 (NSW) "to do on my behalf anything I may lawfully authorise an attorney to do". The power expressly included executing documents or doing any other acts whereby a benefit was conferred on him. The third of the five matters raised on appeal is the construction of s 163B.
Section 163B of the Conveyancing Act was repealed in 2004, but was given continuing operation by s 6(3) and Schedule 1 of the Powers of Attorney Act 2003 (NSW). The power of attorney was registered on 16 August 2001. (Former s 163(2) of the Conveyancing Act and current s 52 of the Powers of Attorney Act are (speaking generally) to the effect that most conveyances and deeds if executed by power of attorney only have "force or validity" if the instrument creating the power has been registered.)
By contract for sale of land dated 15 September 2003, the respondents, Mr Peter and Mrs Shoshanna Vitek, agreed to sell lots 22-26 created by a deposited plan in respect of land on Elizabeth St, Redfern in inner Sydney to Estate Homes Pty Ltd, a company whose sole director and shareholder was Mr Taheri. The deposit was $50,000 and the completion date was 12 months from the date of contract. Estate Homes was required to lodge a development application within 60 days of contract, and the purchase price for the land was determined by a formula whose effect was that the price would be at least $2,600,000 but could be more depending upon the floor space ratio achieved by any development consent.
Clause 51 of the Special Conditions contained guarantees of Estate Homes' obligations to be executed by Mr and Mrs Taheri. Its form was, on its face, a little unusual. Although included within the special conditions as pages 20-23, there was a separate space within those conditions for husband and wife to execute it, as a deed. Nothing turned upon the form of the guarantees, nor was any point taken about the way in which the signatures were witnessed.
Mr Taheri signed his own name on page 22 within the special conditions in the space provided. Writing purporting to be the signature of Mrs Taheri ("V Taheri") was inscribed in the space provided on page 23. It was ultimately found at trial that Mr Taheri had written his wife's name, so as to appear that it was her signature, on the document. That finding was not challenged on appeal.
Omitting details which are not presently relevant, Estate Homes did not complete in accordance with the contract, the Viteks served a notice to complete, and commenced proceedings against Estate Homes and Mr and Mrs Taheri in March 2005.

[12]

(b) The 2005 proceedings

The three defendants, Estate Homes and Mr and Mrs Taheri, were all originally represented by John Hertz and Associates. Mrs Taheri was the third defendant. They filed a joint defence, which was verified by Mr and Mrs Taheri. They also brought a cross-claim against the Viteks and their former solicitor, Mr Bernard O'Donnell, who had acted on the conveyance.
An affidavit sworn by Mr Taheri was served in October 2006, in which he said that when he received the contract, his wife was in Melbourne. His evidence was: "I relied upon a power of attorney from my wife to authorise me to be able to sign my wife's name on the contract which I did. It was my understanding that I could sign her name when required on the contract. I did not know nor did I understand that I had to disclose on the contract when placing her signature on it that I was doing so pursuant to the power of attorney, nor did I consider whether it was appropriate for me to rely upon the power of attorney to place my wife's signature on the contract as a guarantor."
Some two months later, in December 2006, Mrs Taheri made an affidavit in support of an application for leave to file an amended defence and second cross-claim. Her evidence was that she had been advised by Mr Hertz that she should be separately represented. She also said that "My signature as guarantor is not my signature". In due course, leave was granted to Mrs Taheri to file the amended defence and second cross-claim, which alleged that Mrs Taheri was unaware of the guarantee, did not sign it, did not authorise the signature that was purportedly hers, and did not receive any advice from Mr O'Donnell.
Mrs Taheri's verified amended defence denied that she had entered into the guarantee contained in clause 51 of the special conditions and alleged that the signature endorsed on the contract purporting to be hers was a forgery, and that if a guarantee was entered into, it had been procured in circumstances which were unconscionable and should not be enforced in equity, or alternatively it was an unjust contract within the meaning of the Contracts Review Act 1980 (NSW).
So far as the materials in the appeal books disclose, the original defence and cross-claim prepared by Mr Hertz and filed on behalf of Estate Homes and Mr and Mrs Taheri was never amended to exclude Mrs Taheri. However, the Court was told without objection that the parties treated Mrs Taheri's second cross-claim as superseding, so far as she was concerned, the claim in the first cross-claim made by all three defendants. That acknowledgement was properly made; were it not so, the compromise made on 30 April 2009 would not have been effective to remove Mrs Taheri as a party to the litigation.
Mrs Taheri also swore an affidavit (on 4 April 2007) in the following terms: "6. I have been shown what purports to be my signature on pages 22 and 23 at clause 51 of the Contract. The signatures purporting to be my signatures are not my signatures. ... 10. I was aware that my husband was interested in purchasing the property that is the subject of this dispute. Until this dispute arose, that was the limit of my knowledge. Specifically, I was not aware at any time prior to the Contract being entered into or after that date until this dispute arose that Estate Homes Pty Limited or my husband had entered into a contract, or that I was a guarantor of the purchase. … 14. In about July 2001, my husband and I agreed to purchase a unit in joint names. At that time, I was regularly travelling overseas. Our solicitor at the time suggested that in these circumstances I should give a Power of Attorney to my husband. I subsequently followed her advice. After the purchase, I forgot about the Power of Attorney. 15. I am not aware of my husband ever having used the Power of Attorney either prior to or subsequent to September 2003."
The proceedings brought by Mr and Mrs Vitek were heard before Barrett J in April 2009. On the fourth day of the hearing, prior to the close of the plaintiffs' case, the Viteks settled their claims against Mrs Taheri, and Mrs Taheri settled her claim against Mr O'Donnell. Consent orders were made in the following terms (which were handwritten, and signed by the parties' lawyers; some minor errors of syntax have been corrected): "1. Note the agreement between the third defendant to pay the plaintiffs within 28 days the sum of $100,000 on account of the plaintiffs' costs. 2. Upon compliance with the agreement noted in paragraph 1 verdict and judgment for the third defendant on the plaintiffs' Summons. 3. Note the agreement between O'Donnell and the third defendant (second cross claimant) to pay the third defendant the sum of $50,000 within 28 days. 4. Upon compliance with the agreement noted in paragraph 3 verdict for O'Donnell on the second cross claimant's Cross Claim. 5. All existing orders for costs in the proceedings as between the plaintiffs, third defendant and O'Donnell are vacated."
The trial was adjourned. Mr Taheri sought to amend his defence and relied upon an affidavit of Mrs Taheri sworn on 7 September 2009, referring to the consent orders and the payment by Mrs Taheri to the Viteks.
Shortly before the resumed hearing in February 2010, Mr Taheri's solicitor served a further affidavit of Mrs Taheri sworn on 9 February 2010. In that affidavit Mrs Taheri said that when she had sworn her affidavit on 4 April 2007, she was "very stressed, emotional and crying" and had believed that it accurately set out the position. She then said that in July and August 2003, she was aware that her husband was interested in purchasing a property suitable for redevelopment. She said that they drove past the property in Elizabeth St, Redfern and her husband told her that "he was in the process of negotiating to purchase that property". She said that: "6. I was aware during that period my husband would require finance for a development and it was my intention to assist him by providing security over properties which I owned to enable him to obtain finance. 7. I refer to paragraph 10 in my affidavit and say that it was not correct for me to say I was not aware until this dispute arose that the contract was entered with the plaintiffs or that I was a guarantor. 8. It is my recollection that my husband said to me some time shortly after 15 September 2003 in effect 'the contract to purchase the Elizabeth Street property has been exchanged. The vendors wanted both of us to sign a guarantee for Estate Homes. I signed your name using the power of attorney'. I said 'why did you do that?' He said 'they would not proceed with only my signature, I had to do it'. I was very angry with my husband when he told me that."
When on 16 February 2010 counsel for Mr Taheri advised that Mrs Taheri's affidavit of 9 February 2010 would be read, senior counsel then appearing for the Viteks immediately indicated that there would be a challenge to the validity of the settlement. In the meantime, the trial proceeded against Estate Homes and Mr Taheri.
Barrett J, by a reserved judgment, found in favour of the Viteks and entered orders including judgment against Estate Homes and Mr Taheri: [2010] NSWSC 237. There is no dispute that Mr and Mrs Vitek have not recovered any of the judgment debt from Estate Homes (which is now deregistered) or Mr Taheri (who declared himself bankrupt shortly after the proceedings against him were concluded).
Barrett J said at [109] and [114], in relation to the evidence given by Mrs Taheri on affidavit and cross-examination, that: "The very clear and unambiguous position taken by Mrs Taheri - and the position to which other parties obviously had regard when assessing the question of settling with her - was that the signature on the guarantee purporting to be hers was not placed there by her and was placed there without her consent. … The only conclusion that can be drawn from Mrs Taheri's quite startling evidence is that, although she was aware from shortly after exchange of contracts that her husband had placed her name on the guarantee and she accepted that he, as her attorney, had authority to bind her in that way, she persisted for several years with the allegation that her name had been written by her husband without her authority, that she was not bound by the guarantee and that her signature was a forgery. She allowed that false position to pertain up to and beyond the point at which other parties to these proceedings decided to settle the claims involving her."
In order to address one of the Viteks' arguments in favour of the "partial rescission" sought and obtained by them, it is convenient to reproduce his Honour's reasoning dismissing the cross-claim brought by Estate Homes and Mr Taheri against Mr O'Donnell at [191]-[193]: "Counsel for Estate Homes and Mr Taheri submitted that the court should make a number of findings as a basis for a conclusion that the pleaded breach of retainer (and a corresponding breach of a duty of care in negligence) was committed by Mr O'Donnell. The findings concerned Mrs Taheri's absence from the 19 August 2003 meeting, oversight or other default by Mr O'Donnell in not sending the usual requisitions, failure of Mr O'Donnell to draw attention to the restrictive covenant and the s 149 certificate, absence of any communication to Mr O'Donnell by Mr Taheri before exchange of contracts of the latter's awareness that the property had been used as a petrol station and fabrication by Mr O'Donnell of the handwritten notes of 19 August 2003. All these matters have been determined adversely to Estate Homes and Mr Taheri in the findings on credibility. In summary, I am satisfied that Mr O'Donnell gave advice as he says he did, particularly at the meeting of 19 August 2003, that he thereby performed his retainer fully and diligently and that he was not guilty of any breach of a duty of care in negligence. As between Estate Homes and Mr Taheri on the one hand and Mr O'Donnell on the other, there will be an order that the cross-claim be dismissed."

[13]

Separate proceedings were commenced by Mr and Mrs Vitek in October 2010 to set aside the consent orders made by Barrett J on 30 April 2009. This accorded with the practice recommended in Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691. The Viteks joined Messrs Taheri and O'Donnell. Bergin CJ in Eq recorded at [29] that Mr O'Donnell had filed a submitting appearance and Mr Taheri had taken no active step in the proceedings. The Viteks also purported to join Estate Homes, but the company had been deregistered.
The amended statement of claim in the 2010 proceeding sought what was described as "partial rescission": orders setting aside the agreement reflected in the consent orders made on 30 April 2009, and the orders, "to the extent they affect the [Viteks] and [Mrs Taheri]". In that event, orders were sought listing the remainder of the 2005 proceedings for directions (with the intention that Mrs Taheri's liability on the guarantee be determined). Mrs Taheri's defence denied that partial rescission was available, including on the basis that the parties could not be restored to their previous positions unless the settlement between Mrs Taheri and Mr O'Donnell was also rescinded.
Mr and Mrs Vitek identified, inter alia, the following five representations made by Mrs Taheri in her affidavit of 4 April 2007 served in the proceedings: "She was not aware until March 2005 that the second or third defendant had exchanged signed copies of a contract with the plaintiffs to purchase the Property. She was not aware until March 2005 that in the contract she was a guarantor of obligations of the purchaser. She was not aware until March 2005 that the second defendant signed the contract for or in the name of the first defendant as guarantor. She was not aware until at least March 2005 that the second defendant used the Power of Attorney to sign the contract for or in the name of the first defendant as guarantor. … Until March 2005 the limit of the first defendant's knowledge concerning the Property was that the second defendant was interested in purchasing the Property."
It was alleged that Mrs Taheri intended the plaintiffs to rely on the representations, that each was false at the time the representation was made to the knowledge of Mrs Taheri, and that the plaintiffs "induced by and in reliance on one or more of the representations" decided to sign the consent orders. The principal evidence on which the Viteks relied was that of their solicitor Mr Roth and their counsel Mr Segal. It will be convenient to address that evidence when dealing with the grounds of appeal below.
The 2010 proceeding was heard over four days in March 2013. By a reserved judgment, Bergin CJ in Eq rescinded those paragraphs (1, 2 and part of 5) in the agreement which concerned the Viteks and Mrs Taheri, and set aside the court's orders to the same extent, and ordered that the Viteks pay to Mrs Taheri the amount of $100,000 plus $32,246.58 in interest. It is sufficient for the purposes of this appeal to note that her Honour found that each of the five representations reproduced above were made, and made fraudulently, by Mrs Taheri, and that they induced the Viteks to settle their claim against Mrs Taheri.
By a reserved judgment following a two day trial in October 2013, Rein J determined the balance of the 2005 proceedings. His Honour found that Mrs Taheri was liable on the guarantee, and entered judgment against her. His Honour found that she did not herself sign the guarantee: at [10]-[14], and noted that it was common ground that in that event Mr Taheri had signed it in her name. His Honour nevertheless found that Mrs Taheri was liable on the guarantee so executed, on four bases: (a) the power permitted her attorney to confer a benefit wholly upon himself, (b) even if there was a restriction upon the power confining its exercise to actions in the interest of or for the benefit of the grantor, the exercise of the power was in any event directly or indirectly in Mrs Taheri's interests, (c) even if there were no power, Mrs Taheri ratified the execution of the guarantee by her husband, and (d) in the further alternative, Mrs Taheri was estopped from contending that she was not bound.
Separate appeals from the judgments of the Court delivered by Bergin CJ in Eq and Rein J were heard concurrently. At the hearing, Senior Counsel for Mrs Taheri confirmed that only two issues were pressed in the appeal from the orders made by Bergin CJ in Eq. The first may be labelled "No reasonable reliance or inducement" (Grounds 2-4). Its essence was that the primary judge erred in concluding that Mr and Mrs Vitek, and in particular their barrister Mr Segal, were "induced by, or relied upon, any of the claimed fraudulent misrepresentations". The second may be labelled "No substantial restitutio in integrum". As pleaded (Grounds 5 and 6 of the Notice of Appeal), the error alleged was that because the consent orders and underlying settlement were tripartite in nature, substantial or practical restitutio in integrum could not be achieved without also setting aside the agreement between Mrs Taheri and Mr O'Donnell
In the appeal from the orders made by Rein J, the principal issue turned on the divergence of opinion in this Court as to the meaning of s 163B of the Conveyancing Act and whether a donee must act in the interests of or for the benefit of the donor (Grounds 6-10). The fourth and fifth issues were a challenge to the findings of ratification (Ground 11-16) and estoppel (17-18). Counsel confirmed that Grounds 7 and 8 of the first appeal and Ground 19 of the second appeal, together with a motion seeking leave to amend filed shortly before the appeal was heard, were not pressed.
Each of those five issues is addressed in turn below.

[15]

(a) Applicable legal principles

Although both the agreement and the Court's orders stood in the way of the Viteks' proceeding against Mrs Taheri, the argument on appeal proceeded on the basis that it was sufficient for Mr and Mrs Vitek to impeach the underlying agreement. That accorded with what a unanimous High Court said in Harvey v Phillips (1956) 95 CLR 235 at 244, approving what Lindley LJ had said in Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 at 280: "… nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud but upon any grounds which invalidate the agreement it expresses in a more formal way than usual … To my mind the only question is whether the agreement on which the consent order was based can be invalidated or not. Of course if that agreement cannot be invalidated the consent order is good." The same passage was also approved by French CJ in Newcrest Mining Ltd v Thornton [2012] HCA 60; 248 CLR 555 at [17].
Thus it was common ground that the availability of what has been described as "judicial rescission of the judgment" (Toubia v Schwenke [2002] NSWCA 34; 54 NSWLR 46 at [5]) turned on whether Mr and Mrs Vitek could obtain rescission of the agreement on which the consent orders were based.
Further, it was common ground on the appeal that the requisite causal connection for rescission flowing from a fraudulent representation was as stated by Wilson J in Gould v Vaggelas (1985) 157 CLR 215 at 236 and by McHugh J in Henville v Walker [2001] HCA 52; 206 CLR 459 at [107]. If a fraudulent representation "plays some part even if only a minor part in contributing to the formation of the contract", that is sufficient. Conversely, if there is no causal connection between the representation and the contract entered into, then the plaintiff will fail.
The low threshold of this test is made plain by the advice given by Lord Cross of Chelsea in Barton v Armstrong [1976] AC 104 at 118: "If it were established that Barton did not allow the representation to affect his judgment then he could not make it a ground for relief …. If on the other hand Barton relied on the misrepresentation Armstrong could not have defeated his claim to relief by showing that there were other more weighty causes which contributed to his decision to execute the deed, for in this field the court does not allow an examination into the relative importance of contributory causes."
To be clear, it would be no defence even if it were shown that Mr and Mrs Vitek might well have entered into the compromise absent any fraudulent misrepresentation: Barton v Armstrong at 119. As James VC put it in Re Imperial Mercantile Credit Association; Williams' case (1869) LR 9 Eq 225n at 226, in a passage endorsed by Meagher and Handley JJA in Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 at 570 and by Lord Millett in BP Exploration Operating Co Ltd v Chevron Shipping Co [2001] UKHL 50; [2003] 1 AC 197 at [105]: "… I do not think a Court of Equity is in the habit of considering that a falsehood is not to be looked at because if the truth had been told the same thing might have resulted."
The authorities to the same effect were collected by Beazley JA in Macquarie Generation v Peabody Resources [2000] NSWCA 361; [2001] Aust Contract Reports 90-121 at [81]. Her Honour concluded at [82] (citations omitted): "Thus, it is not relevant for the Court to determine whether, if the true position had been known, the representee would or would not have altered his position in relation to the contract. 'It is enough if a full and exact revelation of the material facts might have prevented him from doing so.'"
Bergin CJ in Eq expressly relied upon the formulation of principle in Gould v Vaggelas (at [63]). Her Honour, with respect correctly, stated that "whether or not Mrs Taheri's representations were the sole cause of the plaintiffs' compromising the 2005 proceedings with Mrs Taheri is not to the point". The challenge on appeal to her Honour's application of correct principle to the facts as found at [78]: "The plaintiffs were both aware of Mrs Taheri's claims in her 2007 affidavit. As Mr Roth's letter recorded, the settlement was reached because 'it was evident that Mrs Taheri had not signed the guarantee'. This was a clear reference to the reliance placed on Mrs Taheri's misrepresentations, and the inducement thereby of the plaintiffs into the agreement to settle. Although a deal of time was spent in cross-examination of Mr Segal about his thoughts and attitude at the time of the advice, I am satisfied that the plaintiffs were induced by Mrs Taheri's fraudulent misrepresentations into settling their claim against her and that the equitable remedy of rescission is available in respect of such agreement and the Consent Orders are amenable to being set aside."
There were two strands to the attack on her Honour's factual findings of inducement: the contemporaneous letter to Mr and Mrs Vitek from their former solicitor Mr Roth, and the evidence of their barrister Mr Segal, to both of which her Honour had referred in [78]. Each is addressed in turn.

[16]

(b) The letter of advice from Mr Roth

Contemporaneous documentary evidence of why the Viteks settled with Mrs Taheri on 30 April 2009 is contained in the letter by Mr Roth to his clients Mr and Mrs Vitek dated 4 May 2009 whose first paragraph was as follows: "A compromise was reached on 30 April 2009 in respect of the claim against Mrs Taheri in accordance with Peter's instructions in the amount of $100,000 payable within twenty-eight (28) days. The compromise was reached because it was evident that Mrs Taheri had not signed the guarantee and because of the difficulty in being able to prove that she was aware of the contract, the terms of the contract and her requirement to execute as guarantor and that Mr Taheri executed the guarantee on her behalf under a power of attorney and with her authority. The difficulty arose because of the manner in which Judge Barrett determined that the evidence in the trial would be taken, namely, the plaintiff's evidence first rather than as is the usual course for all parties' affidavits to be read (put into evidence) and then for any examination and cross-examination to take place."
It was not suggested that that letter - a contemporaneous and confidential communication from lawyer to client - was anything other than a candid statement of the rationale for the compromise reached two working days earlier. Rather, Mrs Taheri sought to capitalise upon it, making much of the fact that it emphasised the perceived difficulty that Mrs Taheri's affidavit would not be read, and she not exposed to cross-examination. This was said to demonstrate that, far from the misrepresentations in it inducing the settlement, there was no causal connection at all. Mrs Taheri added that her first affidavit had been served some two years earlier, confirming that it was the course adopted by the trial judge three days earlier (which had led to the possibility that the affidavit would not be read) which was what induced settlement.
Mrs Taheri's argument is attractive, but cannot be accepted. First, there were times when Mrs Taheri came close to submitting that because the real cause or the "operative factor" (see transcript 28.05.14, p 54) was the well-founded apprehension that none of Mrs Taheri's evidence would be led, the fraudulent representations were not a cause of the Viteks' decision to settle against her. That does not follow. As the authorities previously referred to show, it is a heavy burden to demonstrate the absence of causality.
Secondly, this is not a case where a fraudulent representation as to the quality of a motor vehicle is claimed to have induced its purchase, or where a fraudulent representation as to likely return or tax advantages is said to have induced the making of an investment. In such cases, the subject matter of the fraudulent representation is also the subject matter of the contract of which rescission is sought. The compromise of litigation is different.
Litigation is compromised because parties choose to trade the risks, costs, delays and uncertainties of court proceedings with the certainty of a settlement. The focus of the compromise made on 30 April 2009 was not cost or delay or any perceived inability of Mrs Taheri to satisfy a judgment debt; instead, it was the risk that the Viteks might fail to establish that Mrs Taheri was liable on the guarantee. To ask therefore whether the representations in Mrs Taheri's affidavit "played some part, even if only a minor part" in the Viteks' decision to settle requires an analysis of what were the forensic consequences of the pleaded misrepresentations, and whether the consequences played a part in the Viteks' assessment that they might fail against Mrs Taheri.
The pleaded representations in Mrs Taheri's affidavit sworn on 4 April 2007 gave rise to the following forensic consequences in the litigation. First, the Viteks were entitled to proceed on the basis that Mrs Taheri's solicitors would conduct the litigation on her behalf consistently with it. Secondly, the Viteks were entitled to assume that Mrs Taheri, if and when she was called to give evidence and was cross-examined, would maintain that the signature on page 23 of the contract was not hers, and that she was unaware that her husband had purported to sign on her behalf as guarantor. That created a difficulty for the Viteks' case based on ratification and supported Mrs Taheri's defences in equity and under the Contracts Review Act. Thirdly, the fact that the evidence was in an affidavit which had been served (rather than, say, correspondence from her solicitor or particulars in a defence) enhanced the likelihood that it would substantially reflect Mrs Taheri's stance and testimony in the litigation, it being a solemn statement of her recollection of events.
The forensic consequence of those representations, cumulatively, was that there was a palpable possibility that Mr and Mrs Vitek would fail against Mrs Taheri if the court accepted her sworn evidence.
Issues in litigation are generated in a formal way by the pleadings. However, for practical purposes, an assessment of the evidence available to both sides in respect of each of those issues, coupled with an evaluation of the extent to which that evidence is inherently plausible, or is supported by contemporaneous documents, or is undisputed, or only weakly disputed, is the ordinary everyday task undertaken by every litigator. That assessment is undertaken throughout the course of a proceeding, as documents are discovered, affidavits served, and ultimately as evidence is tested during the course of a trial.
Part of the reason for settling with Mrs Taheri was the risk that she would not be found to be liable on the guarantee on the basis that the court would accept what she had sworn, namely, that she was unaware of what Mr Taheri had purportedly done on her behalf. On a fair reading of the second sentence of Mr Roth's letter reproduced above, that was a substantial contributing cause, but it suffices that it be a cause contributing to the settlement. Plainly enough, the reason for that concern was the affidavit evidence of Mrs Taheri, containing the five representations reproduced above, which were found to have been false to her knowledge. This was squarely within the Viteks' pleaded case that "induced by and in reliance on one or more of the representations" they settled, and was the force of the first four sentences of her Honour's reasons at [78] reproduced above.

[17]

Mrs Taheri also relied on evidence given in cross-examination by counsel then appearing for the Viteks, Mr Segal, who had said that he had "no beliefs at all" about the truth or otherwise of Mrs Taheri's affidavit at the time the settlement was reached. It was said that this confirmed that there was no causal connection between the fraudulent representations in the affidavit and the decision to settle with her.
There are two reasons for rejecting this submission. The first is that it recalls the submission long ago rejected by Hutley JA (with whom Glass and Samuels JJA agreed) that even in an ordinary case, an absence of belief in the truth of a representation is fatal to a claim based on it: Gipps v Gipps [1978] 1 NSWLR 454. It is clear law that in order to defeat such a claim it is necessary for the false belief to be "wholly dissipated" for knowledge to defeat misrepresentation: at 460. Hutley JA said (at 460 and 461): "Any other rule would be an affront to commonsense. It would mean that, if a person dealing with a rogue has made to him a representation which he knows to be false, but believes to be false to a particular extent, he has no right of action, after making the contract in reliance upon the representation as adjusted by the representee, even though he later learns that the misrepresentation was greater than he suspected. … The only way in which the decision of the trial judge on this issue can be effectively attacked would be to show that the respondent understood completely the extent of her husband's misrepresentations; or, possibly, that the difference between what she understood and the extent of his misrepresentations was so minute that his Honour should have decided that it was irrelevant."
The second reason for rejecting Mrs Taheri's submission is that a representation in litigation can induce a settlement irrespective of the recipient's belief as to its truth. Litigation is different from buying a motor vehicle or making an investment. It is one thing for a lawyer to have no view one way or the other as to whether a witness is telling the truth. The reliance by the Viteks, through their counsel Mr Segal, in the present context was not upon the truth of the representations, but upon the fact that they were made and might be accepted by the Court, thereby giving rise to the litigation risk which could jeopardise the prospects of his clients Mr and Mrs Vitek. This was well appreciated by the primary judge, with whose assessment at [62] I respectfully agree: " … [Mr Segal] was giving advice on the forensic probabilities based on the prospect that Mrs Taheri may be believed on her oath."
As much is confirmed by the transcript in context: "Q. You had no reason to believe and did not in fact believe anything that Mrs Taheri said in her affidavit about her involvement or lack of involvement in the transaction or knowledge of the guarantee? A. I had no reason - Q. No reason to believe what Mrs Taheri asserted to be her lack of involvement or lack of knowledge about the contract and guarantee? A. I had no beliefs at all. Q. Your state of mind at the time that the settlement agreement was entered into in April 2009 was just that Mrs Taheri had made assertions in her affidavits, which if read might or might not be accepted by the trial judge? A. If hers was read? Q. Yes? A. Might or might not be accepted. Well, that's true."
It will be seen that the answer on which Mrs Taheri relied ("I had no beliefs at all") was made in answer to the second half of a (double) question, which asked as to counsel's subjective beliefs. It is difficult to see how the answer could be relevant to any issue in the proceedings, although there was no objection to this half of the question. Further, although it is regrettable that Mr Segal appears to have been interrupted when giving his answer, the testimony which mattered was whether counsel had reason to believe that the tribunal of fact might accept what was in Mrs Taheri's affidavit; the subsequent questions make it clear that Mr Segal held that view. Both Mr Segal and the cross-examiner proceeded on the basis that if Mrs Taheri were called, her evidence would accord with her affidavit and might be accepted by the primary judge. It was entirely orthodox for both to take that course. It is, with respect, self-evident that the assessment of litigation risk was informed by the representations made in Mrs Taheri's affidavit. It follows that there was a causal connection between the fraudulent misrepresentations and the decision to bargain away the litigation risk by the 30 April 2009 compromise.
The primary judge's reasons at [78] reproduced above deal with both of these issues, and in a way which does not disclose any error. It was amply open to her Honour to find that a contributing cause to the settlement was the representations identified above flowing from Mr Taheri's affidavit which had given rise to the forensic difficulty stated in Mr Roth's letter of 4 May 2009 and perceived by Mr Segal. The fact that the Viteks' lawyers were concerned by the possibility that Mrs Taheri's affidavit might not be read does not exclude its contribution to their assessment of litigation risk. The fact that Mr Segal said that he himself had no subjective belief as to the truth or falsity of Mrs Taheri's assertions was irrelevant. These grounds of appeal should be dismissed.
That was not the only evidence of inducement on which the Viteks relied at trial (I have in mind in particular the evidence of Mr Vitek) but it is sufficient to resolve this aspect of the appeals.

[18]

No substantial restitutio in integrum
Secondly, it was said that the fact that the compromise between Mrs Taheri and Mr O'Donnell had not been set aside meant that Mrs Taheri was denied of her basic entitlement to being restored to the position before the agreement which was rescinded had been entered into.
Rescission of a contract induced by fraudulent misrepresentation is available at common law and in equity. The parties' submissions were framed in terms of the availability of the remedy in equity, in light of the more accommodating approach identified by Dixon CJ and Webb, Kitto and Taylor JJ in Alati v Kruger (1955) 94 CLR 216 at 223-224. The question is whether, even if precise restitutio in integrum is not possible, equity "can do what is practically just between the parties, and by so doing restore them substantially to the status quo".
The consent orders made on 30 April 2009 in terms refer to two underlying agreements, which are separately noted in Orders 1 and 3. The Court was told that there was no written evidence of either of those underlying agreements. However, it is plain on the face of the orders that (a) the agreements were between different parties - Mrs Taheri and the Viteks in the case of the first agreement, and Mr O'Donnell and Mrs Taheri in the case of the second agreement, (b) neither agreement was expressed to be contingent upon the other, and (c) in particular, the orders contingent upon making of payments within 28 days were not interdependent of each other. As much was candidly acknowledged by Mrs Taheri: "her Honour is on substantial ground in rejecting any notion that there was here, as it were, a mutual interdependence of obligations such as to give one meaning to the idea of this being tripartite."
However, Mrs Taheri said that it was sufficient to observe that there was a compromise of a claim brought against a guarantor, who had herself brought a cross-claim for indemnity against the possibility of her being liable, which also was compromised. If only the former compromise were set aside, then the guarantor would be in a substantially worse position.
I respectfully disagree. The availability of rescission in equity turns crisply on whether there was a single tripartite contract, or two bipartite contracts entered into at the same time and reflected in consent orders made simultaneously.
Test the matter this way. It was no answer to Mrs Taheri's obligation to pay $100,000 within 28 days if she did not receive $50,000 from Mr O'Donnell within the same period. That is the point of the promises not being interdependent. Or consider the position from Mr O'Donnell's point of view. If he paid the agreed $50,000, then he was entitled to judgment in his favour on the second cross-claim, irrespective of whether Mrs Taheri fulfilled her promise and paid the Viteks and obtained a judgment in her favour. If Mrs Taheri failed to pay $100,000 to the Viteks, it was open to them to accept her repudiation and continue their proceedings against her on her guarantee, even though Mr O'Donnell entitled to judgment in his favour against her.
That is to say, the agreements reflected in the orders in their terms contemplated the possibility that one might be performed and the other breached. Those considerations - which flow directly from the consent orders reflecting two bilateral agreements neither dependent upon the other - demonstrate the absence of necessary prejudice by the rescission of one but not the other. That is sufficient to resolve these grounds of appeal.
However, it is possible to go further. The Viteks as a fallback pointed out that the claim against Mr O'Donnell was lost by Estate Homes and Mr Taheri. In most cases this would not be to the point. The effect of the settlement was that Mrs Taheri's cross-claim was never determined, and it is invidious to conclude that an unlitigated claim is so weak that it may be put to one side for the purposes of restitutio in integrum.
That said, the ultimate issue is whether there may be achieved "what is practically just", to use the language of Lord Blackburn in Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 at 1279 and quoted in Alati v Kruger. Here, there was considerable overlap between the first cross-claim against Mr O'Donnell litigated by Estate Homes and Mr Taheri, and the second cross-claim against Mr O'Donnell brought by Mrs Taheri which was compromised. Barrett J's conclusions dismissing it have been reproduced above. Although she was only a witness, and not a party, Mrs Taheri gave evidence in support of the first cross-claim including that she had "never received any advice in relation to the Contract" and that she was in Melbourne on 18 and 19 August 2003. She was disbelieved. Mr Taheri was substantially disbelieved. Mr O'Donnell gave evidence of his explanation to Mr and Mrs Taheri of the contract on 19 August 2003. He had a detailed filenote which expressly included reference to the guarantee in special condition 51. Mr Taheri's submission that Mr O'Donnell's filenote recording the advice he gave to the Taheris was a fabrication was rejected. And Mr O'Donnell's receptionist (who was also his daughter, then studying law) swore that she had a distinct recollection of meeting Mrs Taheri on 19 August 2003 (she recalled being "particularly uncomfortable", for reasons which she explained and which were inherently plausible: see Blue 1/185G).
The point of the foregoing is to observe that there is force in the Viteks' submission that it is difficult to see how the second cross-claim brought by Mrs Taheri against Mr O'Donnell would, if litigated, have suffered any different fate from the first cross-claim. The fact that the agreement between Mrs Taheri and Mr O'Donnell was not set aside is not something which gives rise to a concern that there has been a want of practical justice so far as Mrs Taheri is concerned. She retained the benefit of $50,000 in exchange for a claim that so far as can be seen was, at best, very weak.

[19]

Conveyancing Act, s 163B
The third matter on which Mrs Taheri relied was a limitation on the authority of her agent Mr Taheri deriving from s 163B of the Conveyancing Act. That section has now been replaced by the Powers of Attorney Act 2003 (NSW), but the power granted by Mrs Taheri in 2001 continues to be governed by s 163B, which was in these terms: 163B Power conferred by prescribed form of instrument (1) Subject to this section, an instrument (whether or not under seal) in or to the effect of the form in Schedule 7 confers on the attorney thereby appointed authority to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do. (2) The authority conferred by an instrument referred to in subsection (1) does not include: (a) authority to exercise or perform any power, authority, duty or function as a trustee conferred or imposed on the person executing the instrument, or (b) unless it is expressly conferred by the instrument - authority to execute an assurance or other document, or do any other act, as a result of which a benefit would be conferred on the attorney appointed by the instrument. (3) Where an instrument referred to in subsection (1) specifies any conditions or limitations to which the authority conferred by the instrument is to be subject, the authority is so conferred subject to compliance with those conditions or limitations."
It will be recalled that the power of attorney granted by Mrs Taheri expressly conferred authority to act so as to confer a benefit upon the attorney, so as to attract s 163B(2)(b).
The issues in relation to the power of attorney were confined both on appeal and before the primary judge. In particular, the primary judge noted (at [19]) that "no point is taken that the signature of Mr Taheri was not stated to be appended 'per' or 'for Mrs Taheri'". Neither at trial nor on appeal was any argument made on the basis that Mr Taheri did not place his signature on the guarantee but instead wrote his wife's name as if it were her signature. Emmett JA has addressed these issues in more detail in his reasons at [31]-[33].
The only question which arose was whether the instrument conferred power upon the attorney to execute the guarantee, securing the performance of its obligations of Estate Homes, a company of which Mrs Taheri was neither a director nor member.
Argument at trial and on appeal focussed upon the reasons of White J in Perochinsky v Kirschner [2013] NSWSC 400; 16 BPR 31,481, where his Honour adopted a narrower view of s 163B, departing from the approach of Hammerschlag J in Spina v Permanent Custodians Ltd [2008] NSWSC 561; 13 BPR 25,463, and substantially following what had been said by Austin J in Spina v Conran Associates Pty Ltd [2008] NSWSC 326; 13 BPR 25,435, a view which Gzell J preferred in Hughes v Hughes [2011] NSWSC 729. The primary judge preferred the approach of Hammerschlag J. Mrs Taheri submitted that his Honour erred in doing so.
It was common ground that there was no appellate authority on the point. It was common ground that the point was to be resolved as a matter of statutory construction.
The issue is simply stated: does an instrument which includes a benefit clause in accordance with s 163(2)(b) authorise the attorney to act other than in the interests or for the benefit of the donor? With respect to those judges who have reached the opposite conclusion, I conclude that it does.

[20]

(a) Actual authority, apparent authority, and fiduciary duty

It is useful to mention three overlapping general law doctrines before construing legislation directed to empowering an attorney to act on behalf of a principal. The first is the attorney's actual authority. The second is the attorney's apparent (or ostensible) authority. The third is the attorney's fiduciary obligations to his or her principal.
The actual authority conferred upon an agent depends principally upon the terms of its conferral by the principal. However, a principal may be bound as against a third party by the conduct of his or her agent within the agent's apparent authority, even if it exceeds the agent's actual authority. Isaacs J regarded this in Curtis v Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17 at 28 as trite law. More recently, in Day v Day [2013] EWCA Civ 280; [2014] Ch 114 at [26], Sir Terence Etherton C said that: "So far as a third party is concerned, a general power of attorney may well clothe the solicitor with apparent authority to effect a transaction and so make the transaction binding on the principal even though the transaction was outside the solicitor's actual authority. … Apparent or ostensible authority of the agent may make the transaction binding on the principal even where it does not coincide with the actual intention of the principal and the express instructions given to the agent …"
The substance of that doctrine is reflected in (former) s 162 of the Conveyancing Act which protects purchasers and other third parties dealing with attorneys who execute documents which, on their face, appear to be within the terms of a power. Indeed, s 7 of the Powers of Attorney Act 2003 "preserves the operation of the general law in relation to powers of attorney, including a prescribed power of attorney. That law includes the doctrines of apparent authority": Dimitrovski v Australian Executor Trustees Ltd [2014] NSWCA 68 at [17] (Meagher JA). The same is true of its predecessor, s 163B.
As between principal and agent, the agent is a fiduciary, and speaking generally is required not to place himself or herself in a position of conflict, nor to obtain a profit or benefit from the position, without first obtaining fully informed consent: see most recently Howard v Commissioner of Taxation [2014] HCA 21 at [33] and [56]. Those fiduciary obligations inform the decisions on which reliance has been placed in the decisions dealing with s 163B, particularly the way in which instruments conferring authority have been construed. However, the obligations imposed by equity are ordinarily subject to the terms of the contractual arrangement between principal and agent; each of those fiduciary obligations "must then accommodate itself to the relationship between the parties created by their contractual arrangements": Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 99.
Questions of actual authority and fiduciary obligation focus upon the internal relations between principal and agent. But s 163B is primarily focussed upon the external relationship when a third party deals with an agent. As much is plain from its nature, from the requirement in (former) s 163(2) that the instrument be registered if an attorney executes certain conveyances or deeds, from the statutory protection given to third parties by (former) s 162 and from the statutory prohibition in (former) s 162A upon an attorney purporting to exercise a power which the attorney knows has been terminated or suspended. That invites a consideration of the doctrine of apparent authority, a doctrine without which, as Lord Ellenborough long ago said, "there would be no safety in mercantile transactions": Pickering v Busk (1812) 15 East 38 at 43; 104 ER 758 at 760.
Finally, an apparent or ostensible agent cannot bind a principal to that which the principal cannot lawfully do (see, for example, Morris v Kanssen [1946] AC 459 at 475). That is reflected in the generality of the closing words of s 163B(1) "anything the person executing the instrument may lawfully authorise an attorney to do".

[21]

(b) Perochinsky v Kirschner

The most detailed analysis of the narrower construction of s 163B, which Mrs Taheri invited this Court to adopt, is that of White J in Perochinsky v Kirschner.
White J commenced with an analysis of the statutory language which conferred authority "to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do": at [65], emphasis in original. His Honour considered that if, as Hammerschlag J had considered, neither the term "attorney" nor the term "on behalf of" necessarily imported any notion of benefit, then the words "on behalf of" were given no work to do: at [67]. White J considered that another meaning was open such that those words were not treated as mere surplusage. His Honour had regard to Dixon J's endorsement in Tobin v Broadbent (1947) 75 CLR 378 at 401 of Russell J's dissent in Reckitt v Barnett, Pembroke and Slater Ltd [1928] 2 KB 244 at 268 where his Lordship had said that "[a]n attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property", and said that he saw no reason not to apply those words to the construction of s 163B: at [75]. His Honour reviewed the extrinsic materials (the second reading speeches, and LRC 18 and LRC 20) but found that they did not assist. His Honour reviewed other decisions, including Hambro v Burnand [1904] 2 KB 10, and concluded (at [90]) that he preferred the views of Austin J rather than those of Hammerschlag J. The conclusion reached by his Honour was explained by the example he gave at [91]-[92], which is also relevant to the findings made by the primary judge as the execution of the guarantee being in Mrs Taheri's interest or to her benefit: "Counsel for Mr and Mrs Kirschner submitted that a construction of the section that permitted an attorney to act for his or her own benefit only if that was also for the benefit of the principal would defeat the purpose of the provision which was to confer wide powers on the attorney, unless they were expressly limited by conditions or limitations included in part 2 of the form. Otherwise, it was said, if a husband gave his wife an enduring power of attorney and she exercised it to spend his money to buy clothes or groceries for herself, she would be acting beyond the power conferred. I do not think this necessarily follows. The question in each case would be whether the attorney, although deriving a benefit for himself or herself was acting on behalf of the principal. In my view, in the hypothetical case posed by counsel, it could well be said that the wife was acting on her husband's behalf if she exercised the power of attorney to spend money on herself if she was thereby only doing what the husband would do himself if he were present and capable. In such a case, the wife would be discharging what would be at least a moral obligation of the husband to provide support."

[22]

I respectfully disagree with the conclusion and aspects of the reasoning in Perochinsky v Kirschner. Like his Honour, I start with the statutory text.
First, the presumption against surplusage is a valuable guide to ascertaining the legal meaning of statutes. Courts must "strive" to give meaning to every word in a statute: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [71]. However, it is easy to see other language in s 163B which is mere surplusage. It is difficult to see that the opening words "Subject to this section" add anything to the meaning of the section as a whole (obviously, subsections (2) and (3) detract from the conferral of authority effected by subsection (1), but the opening words of subsection (1) are not necessary to achieve that result). Subsection (1) applies where there is an instrument "in or to the effect of the form in Schedule 7"; the words "in or" add nothing. Likewise the words "thereby appointed" could be omitted without any loss of meaning. I agree with White J that the words "on behalf of the person executing the instrument" may, on the meaning I favour, be seen to be otiose. The fact of the matter is that the language in the bill which became law in 1983 is taken verbatim from a 1974 report by the Law Reform Commission, and reflects a different and more verbose style of drafting from what is seen in more recent legislation; contrast the concision of s 9 of the Powers of Attorney Act 2003, which (as the side-note indicates) substantially re-enacts s 163B(1) and (3): (1) Subject to this Act, a prescribed power of attorney confers on the attorney the authority to do on behalf of the principal anything that the principal may lawfully authorise an attorney to do. (2) A prescribed power of attorney has effect subject to compliance with any conditions or limitations specified in the instrument creating the power. The modern formulation uses 55 words, while s 163B(1) and (3) use 87 words. The fact that the drafter has employed a style which is replete with superfluous language means that little weight is to be given to considerations based on surplusage.
Secondly, there is a textual difficulty with the construction favoured by White J. Although the words are separated, the object of the verb "to do" is "anything". As a matter of ordinary grammar, the authority which is conferred is authority "to do" not some limited class of things, but "anything the person executing the instrument may lawfully authorise an attorney to do". It is difficult to read a restriction confining the words "anything the person executing the instrument may lawfully authorise an attorney to do" from the words which precede them. As a matter of ordinary English, a phrase which qualifies the generality of a word like "anything" will ordinarily follow, rather than precede, the word.
Thirdly, there is a difficulty arising from the structure of the section as a whole. The point of subsections (2) and (3) is to impose qualifications upon the generality of the authority conferred by subsection (1). Each in terms refers to the authority conferred by an instrument referred to in subsection (1). A natural reading of the section would identify subsection (1) as a conferral of authority, subject to restrictions in subsections (2) and (3). The construction favoured by White J yields restrictions in each of subsections (1), (2) and (3) - that in (1) being implicit in the meaning of "on behalf of", those in (2) and (3) being express.
Fourthly, there is a difficulty of textual consistency, if "on behalf of" is to connote a restriction only to actions by the attorney which are in the interests or benefit to the principal. Section 163B(2)(b) refers in terms to a "benefit" being conferred on the attorney. The fact that the same section uses the word "benefit" tends to undermine a construction which requires reading "on behalf of" narrowly as confined to cases where a benefit is conferred on the principal. "[W]here different words are used a change of meaning is intended": King v Jones (1972) 128 CLR 221 at 266. I acknowledge that this is a relatively weak consideration.
Fifthly, the construction which I favour results in a harmonious operation of ss 162 and 163B. The protection afforded to third parties by s 162 only arises where "an attorney under a power of attorney does an act within the scope of the power, professing to act on behalf of another". (Of course, that is not what Mr Taheri did when he wrote "V Taheri" on page 23 of the contract but that is not presently to the point.) The words "on behalf of" in s 163B may naturally be read as extending to the execution of a document by an attorney expressly as agent.
Sixthly, and more significantly than any of the foregoing, there is difficulty in applying the narrower construction favoured by White J. What are the metes and bounds of an attorney acting "for the benefit of" the principal? Moreover, how is it to be determined by third parties? For example, what forms of investments are sufficiently in the interests of, or for the benefit of, the principal, to satisfy the test? If the question of risk and likely profitability turns on what the principal would do himself or herself if he or she were present or capable, that introduces a large measure of uncertainty. Or, to take White J's example, what is a "moral obligation" to provide support? As it happens, "someone under a moral obligation" was precisely the example chosen by Mr Vinelott QC to illustrate conceptual uncertainty which would render a trust invalid: Re Baden's Deed Trusts (No 2) [1973] Ch 9 at 13 and 20. And how would, say, a bank or a newsagent or a casino operator know whether an attorney who withdrew money from a principal's bank account and purchased lottery tickets or gaming tokens was "only doing what the [principal] would do himself if he were present and capable"?
At least one purpose of s 163B and related sections was to provide certainty to third parties. Section 163B is to be construed harmoniously with the provisions dealing with registration of instruments and reliance by third parties. Those provisions cohere with ordinary principles of apparent authority. The purposive construction required by s 33 of the Interpretation Act 1987 (NSW) is not advanced by the construction favoured by White J.
Moreover, the extrinsic materials, which form part of the context against which the legislation is to be construed, tend to confirm this construction. The Minister's second reading speech is expressed in general terms ("The [bill] will provide for the operation of a statutory short form power of attorney conferring on the attorney authority to do on behalf of the principal anything the principal may lawfully authorize an attorney to do": Hansard, LA, 9 March 1983, p 4411), as is the Law Reform Commission report which the legislation implemented: LRC 18 paras 53-54. The Commission rejected a suggestion that the acts authorized by the instrument should be specified in a comprehensive list, and preferred an approach whereby the attorney was to be authorised to "do on behalf of the principal anything that the principal may lawfully authorize an attorney to do" subject to any limitations or qualifications in the instrument. White J found the Law Reform Commission Report unhelpful (at [79]); I respectfully disagree.
Seventhly, the concerns addressed by White J, which are evident in the decisions on which his Honour relied, are concerns directed to the potential for misuse by the attorney of the power conferred. I acknowledge the force of those concerns. However, they are not concerns addressed to questions of apparent authority. The Legislature has, by ss 162 and 162A, squarely addressed the possibility of an attorney acting beyond the actual authority conferred and in breach of fiduciary duty. Reading the statute as a whole, I see no sound reason to depart from the meaning of the language of s 163B so as to imply a limitation upon the conferral of power. In particular, I have no difficulty in a construction which permits the principal and third parties to be bound where the attorney acts contrary to his or her actual authority and/or breaches his or her fiduciary duty. The same result may be reached at general law where an agent acts in accordance with his or her apparent authority. That result is not displaced by this legislation, as was noted in Dimitrovski (a decision post-dating Perochinsky).
Accordingly, I respectfully agree with the views expressed by Hammerschlag J and Rein J on the construction of s 163B. The words "on behalf of" are not words of restriction which cut down the ordinary meaning of "anything". An instrument complying with s 163B may as a matter of law (and very often will) empower an attorney to do "anything" the principal may lawfully authorise an attorney to do, even if there is a benefit to the attorney and no benefit to the principal.
It is not necessary to deal with the challenge to the primary judge's findings at [29] that Mrs Taheri's presence and conduct at the meeting with Mr O'Donnell, without more, were sufficient to satisfy the narrower test favoured by White J, nor his Honour's conclusion that there was ample evidence that she wished to support her husband's venture because it was in her own personal interest (because it was likely to produce an indirect financial benefit) or out of other personal reasons such as marital loyalty. On the view I take, that is precisely the inquiry that third parties such as the Viteks are entitled not to undertake once they confirm that the attorney is authorised by an instrument which accords with s 163B.

[23]

Ratification
The fourth matter raised by Mrs Taheri does not arise on the view taken above, but the primary judge gave full reasons and the point was fully argued on appeal. The premise of the submission was that Mrs Taheri did not confer authority upon Mr Taheri to bind her to a guarantee of his company's obligations under the contract of sale. The gravamen of Mrs Taheri's evidence in 2010 was that she was aware that he had purported to have done so shortly after the event. Hence the Viteks submitted in the alternative that she had ratified her agent's otherwise unauthorised action.
There were essentially two themes in Mrs Taheri's written submissions on ratification. The first was that mere silence did not in the circumstances of this case amount to ratification. It is clear law that silence coupled with delay can amount to ratification, as the primary judge observed at [43]-[44]. In McLaughlin v City Bank of Sydney (1912) 14 CLR 684, the grantor's wife paid her husband's debts and delayed four and a half years before protesting to his bank, of which Griffith CJ said at 691 that "the inference of ratification is irresistible." But in any event, this was not a case of mere silence. Indeed, Mrs Taheri's verified cross-claim against Mr O'Donnell positively alleged that she was bound by the guarantee, and the essence of his breach of duty was failing to draw to her attention "the significance of, and the burdens and detriments imposed by or as a consequence of", inter alia, the guarantee (paragraphs 27(c) and 30(c)). Although it was said by Mrs Taheri in reply, and with some force, that there were many elements of this first pleading which were inapt and inelegant and indeed wrong (for example, parts proceeded on the false basis that Mr and Mrs Taheri, rather than Estate Homes, were purchasing the land), on any view as a matter of substance central to the claim against Mr O'Donnell was the allegation that Mrs Taheri was liable under the guarantee. That is sufficient, for "[s]uing on a transaction brought about by an agent acting beyond authority will also ordinarily mean ratification of the unauthorised transaction": Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 at [133] (Giles and Tobias JJA and Sackville AJA).
Mrs Taheri's oral submissions in chief were confined to a second proposition: namely, that although she knew that her husband had signed on her behalf, she did not know that his having done so was ineffective nor that she had a right to resile from the guarantee; it followed that she lacked the requisite state of mind to ratify his otherwise ineffective act.
The primary judge rejected this submission at [49], in effect holding that the knowledge of a right to disavow a transaction was not a relevant element of the knowledge required for ratification. That must, with respect, be so. In Leybourne v Permanent Custodians Ltd this Court said at [134] that: "There must be full knowledge of all the material circumstances in which the act was done, unless the principal intends to ratify and take the risk whatever the circumstances (for example, Bremner v Sinclair NSWCA, 3 November 1998; (2001) ANZ Conv R 29 at [32] per Campbell J). The extent of knowledge necessary depends on the particular facts. It should be enough knowledge to decide whether or not to adopt the unauthorised act (Bremner v Sinclair at [32])."
It cannot be that proof of an uncommunicated absence of knowledge about the right to disavow an unauthorised act by an agent will displace what to all intents would otherwise amount to ratification in circumstances where the primary facts were known to the principal. That is not what "full knowledge of all the material circumstances" in this Court's reasons in Leybourne means. I would reject the grounds based on ratification.

[24]

Estoppel
The primary judge expressed only brief views on this point, which only arose if he were wrong as to the scope of authority and ratification. That was an appropriate course for his Honour to take. I shall do the same.
Let it be assumed, contrary to all the foregoing, that Mr Taheri was not authorised to bind Mrs Taheri, and Mrs Taheri had not ratified his binding her to the guarantee. Mrs Taheri admittedly knew that the contract had been exchanged, purportedly with her signature as guarantee, shortly after that occurred. True it is that Mrs Taheri did not herself make the representation reflected in the executed contract for sale of land, but she knew that it had been made. The estoppel that was pleaded and found by the primary judge was based on Mrs Taheri's silence thereafter. Mrs Taheri must also for the purposes of this submission be taken to have known that the Viteks were unwilling to contract without her guarantee. Barrett J referred at [139] to evidence that when the purchaser became Estate Homes rather than Mr and Mrs Taheri, that the firm acting for the Viteks said: "Well nobody has mentioned that to me previously, all our searches indicate that Mrs Taheri owns the property, the contract would have to include a personal guarantee from Mrs Taheri."
Barrett J also noted that Mrs Taheri accepted that the fact that she owned property meant that she would be offering security to secure the obligations under the contract: at [140].
In those circumstances, it was open to the primary judge to find that the Viteks relied to their detriment in proceeding with the contract on the strength of Mrs Taheri's purported guarantee. Had Mrs Taheri told them the truth, they could have rescinded the contract. Although I would not use the language of a "duty" to speak out as the primary judge did (seemingly reflecting the submissions which had been made by counsel then appearing for Mrs Taheri: see at [62]), there is no error in his Honour's conclusion that Mrs Taheri was thereafter estopped from denying the assumed state of legal relations which she had failed to disavow.

[27]

Amendments 01 July 2014 - The words "and Hughes v Hughes [2011] NSWSC 729" deleted. Amended paragraphs: Headnote [3] 01 July 2014 - The words "and Gzell J in Hughes v Hughes [2011] NSWSC 729" deleted. Amended paragraphs: [109] 01 July 2014 - The words "a view which Gzell J preferred in Hughes v Hughes [2011] NSWSC 729" inserted. Amended paragraphs: [109] 17 April 2015 - [28] "other" added after the words "or do any" in the second sentence [29] "or" changed to "of" in the first sentence; "(emphasis added)" added after the quote from the Power of Attorney [33] "of" changed to "on" in the second sentence [40] "Siamak" should read "Siamac" [50] "conditions, alleged" replaced with "conditions and alleged" [53] "plaintiff's" replaced with "plaintiffs' " [65] the word "that" after "in that event" has been deleted [66] the word "with" in the last sentence has been replaced with the word "without" [69] after the word "second", replace "were" with "was" [75] change "Transport" to "Shipping" in the citation [75] the citation for the Williams case changed to LR 9 from 9 LR; the commas in the quote have been deleted [77] change "compromise in" to "compromising" [87] the word "of" has been replaced with the word "or" [87] the word "three" has been replaced with the word "four" [90] the words "evidence of" have been replaced with the words "advice on" [93] after the word "settlement", the word "were" has been replaced with the word "was" [103] the figure "1278" has been replaced with the figure "1279" [113] the ampersand has been replaced with the word "and" [119] "and" added before Slater in the citation; "so" has been added before "to do" later in the same sentence [126] the word "her" has been replaced with the word "he" 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. Decision last updated: 17 April 2015

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