Taylor v Johnson

[1983] HCA 5

High Court of Australia|1975-04-14|Before: Dawson JJ, Deane JJ, Powell J

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Source facts

Court

High Court of Australia

Decision date

1975-04-14

Before

Dawson JJ, Deane JJ, Powell J

Source

Original judgment source is linked above.

Judgment (61 paragraphs)

[1]

High Court of Australia Mason A.C.J. Murphy, Deane and Dawson JJ. Taylor v Johnson [1983] HCA 5

[2]

1983, Feb. 23 Mason A.C.J., Murphy and Deane JJ.

[3]

On 27th March 1975, Mrs. Ivy Johnson ("Mrs. Johnson") granted an option to Mr. Laurence Colin Taylor ("Mr. Taylor") or his nominee to purchase two adjoining lots of vacant land, each comprising approximately five acres, at McGrath's Hill near Windsor in New South Wales for a total purchase price of $15,000. The option was exercised by Mr. Taylor on 14 April 1975. On or about 7 May 1975, Mrs. Johnson and Mr. Taylor's children, Ann Marie Taylor and Peter Laurence Taylor ("Ann and Peter Taylor"), entered into a contract, on Law Society of New South Wales and Real Estate Institute of New South Wales approved conditions, for the sale of the land. The purchase price was $15,000 as provided by the option. Subsequent to entering into the contract, Mrs. Johnson declined to perform it in accordance with its terms. She claimed that at the time she granted the option and at the time she executed the contract she believed that the document she was signing provided for a consideration of $15,000 per acre of the subject land which would have represented a total purchase price of some ten times the $15,000 which both documents specified. The evidence was to the effect that, under its then zoning, the value of the subject land was in the vicinity of $50,000 and that its value would have increased to around $195,000 if a proposed rezoning of the land had become effective.

[6]

To no small extent, the issues between the parties on the argument in this Court are issues of fact. The judgments of the members of the Court of Appeal fully set forth the objective facts and we refrain from repeating them. In some respects, we differ from the Court of Appeal in our views on particular matters or as to the importance which we would attach to particular events or considerations. One example is that the Court of Appeal took the view that, at the time Mr. Taylor obtained the option over the subject land, he had in mind the effect which a proposed road diversion would have on a proposal that land which he already owned on the Windsor Road would be rezoned whereas it seems to us that at that time he already knew that the application for rezoning affecting that land had been rejected. Another example is that the view was taken in the Court of Appeal that the reason which Mr. Taylor gave to Mrs. Johnson for seeking an option, namely that he wished to show it to the Windsor Municipal Council, was false whereas it seems to us that, while Mr. Taylor's main purpose for seeking the option was to bind Mrs. Johnson to sell the land to him or his nominee at the stipulated price, he may well have wished to have the option available to show to officers of the Council if it became necessary to establish his standing to make the representations which he made a few days later asking the Council to exercise its influence to procure a rezoning of the area in which the subject land was situated. A third, and possibly more important, example is that, on our approach to the overall facts, we would tend to pay slightly more attention to the state of mind of Mrs. Johnson and her husband, Mr. Johnson, than the members of the Court of Appeal appeared to do. It is not, however, necessary that we dwell upon any such differences of detail or emphasis or that we set out the detailed reasons which have led us to the conclusions of fact which we have ultimately reached. It suffices, for the purpose of the appeal, that we identify a number of inferences which we consider are plainly to be drawn from the evidence.

[15]

McRae and Svanosio, like Solle v. Butcher, were not cases involving a mistake as to the existence or content of an actual term of the written contract. There is, however, nothing in the joint judgments of Dixon C.J. and Fullagar J. which would exclude such a case from their acceptance of the general proposition that neither party to a contract "can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew that he was under a mistake" [8] . Whether that proposition should properly be accepted as applying in the case of an informal contract or in the case where there is a mistake as to the identity of the other party are questions which can be left to another day. It would seem that it does not apply in a case where the mistake is as to the nature of the contract. For the present, but not without hesitation (see, e.g., Robert A. Munro & Co. v. Meyer [9] ; Chitty on Contracts, 24th ed. (1977) vol. 1, par. 337;Joscelyne v. Nissen [10] , we are prepared to accept it as applicable to a case, such as the present, where the mistake is as to the existence or content of an actual term in a formal written contract. It therefore becomes necessary to consider the scope of the basis upon which relief in equity is available from the contractual consequences of unilateral mistake. Dixon C.J. and Fullagar J. referred, in the above passage from their judgment in Svanosio, to a difficulty in conceiving circumstances in which equity could properly give relief by setting aside the contract unless there had been fraud or misrepresentation or a condition could be found expressed or implied in the contract. Presumably, their Honours were referring to "fraud" in the wide equitable sense which includes unconscionable dealing. If they were not, we do not share the difficulty to which they referred. To the contrary, it seems to us that the reported cases, including Solle v. Butcher itself, readily provide concrete examples of such circumstances.

[26]

The land which the respondent, Mrs. Johnson, contracted to sell to the second and third appellants comprised two lots numbered 3 and 4 on a plan of subdivision of land on the outskirts of Windsor in New South Wales. A half interest in the land had been left to Mrs. Johnson in 1965 by a friend, the other half interest being left to the friend's brother. Mrs. Johnson had bought out the brother at auction and had then subdivided the land into ten allotments, each comprising approximately five acres. The land is, and has been since 1973, zoned "non-urban 1b " under the Windsor Planning Scheme, save for a small part at the rear which abuts on to the land zoned as industrial and which is itself zoned "industrial 1a ". Under the non-urban zoning, the land can only be used for general agricultural purposes. Mrs. Johnson had by 1969 sold at a considerable profit all of the allotments except for lots 1, 3 and 4 and lot 10, which was apparently created to accommodate proposals for road widening or realignment. Late in 1972, Mrs. Johnson placed lots 3 and 4 on the market. For a time they did not sell, but after some negotiations between Mrs. Johnson's husband and the first appellant, Mr. Taylor, on 27 March 1975, Mrs. Johnson signed a form of agreement granting an option to Taylor or his nominee to purchase lots 3 and 4 for the sum of $15,000, the option being exercisable on or before 16 April 1975. The option was exercised by Taylor on 14 April 1975 and Mrs. Johnson signed a contract of sale in accordance with the option, the purchasers nominated by Taylor being the second and third appellants, who were his adult daughter and son respectively. Contracts were exchanged on about 8 May 1975. On 20 May 1975, Mrs. Johnson's solicitors telephoned Taylor's solicitors saying that the option and the contract had been incorrectly drawn to show a purchase price of $15,000, whereas the agreed sale price was $15,000 per acre. This telephone conversation was confirmed by Mrs. Johnson's solicitors in a letter the following day asking that the contract of sale be amended or a fresh contract substituted. In a letter from his solicitors dated 26 May 1975, Taylor denied that there was ever an agreement for a sale at $15,000 per acre and relied upon the option and the contract for sale as exchanged. Proceedings were commenced, on the one hand by the second and third appellants against the respondent, claiming specific performance of the contract or, alternatively, damages and, on the other hand, by the respondent against all three appellants, claiming rectification of the option agreement and the contract or, alternatively, an order that the contract be set aside. There were also proceedings by the respondent against the second and third appellants seeking the removal of a caveat which had been lodged by them. The claim for rectification was not pursued.

[32]

But this is to carry what was said by the trial judge too far. His conclusion that there was nothing in the demeanour of any of the witnesses which would lead him to conclude that any of them was doing other than endeavouring, to the best of his or her ability and recollection, to tell the truth does not, as the Court of Appeal appeared to have decided, mean that the demeanour of the witnesses was therefore irrelevant in determining the facts upon the balance of probabilities. The fact that no evidence could be rejected upon the ground that the witness was apparently untruthful meant that factual issues could not be determined by reference to demeanour on its own. This can only have been what the trial judge had in mind when he said he was left to determine the matter on the balance of probabilities. It did not follow that it was then permissible to construct a version of events which was inconsistent with the evidence given by the witnesses on one side, involving the conclusion that one party was not telling the truth and that the other was, without taking into account the apparently truthful demeanour of the witnesses on both sides. The fact that all the witnesses were apparently truthful did not, as it were, cancel demeanour on both sides out or reduce it to an irrelevance in the determination of issues of fact, particularly where there was a possible version of the facts, such as that found by the trial judge, which was consistent with the finding that all witnesses were apparently truthful. The trial judge, in saying what he did, was indicating that he was unable to decide the case by rejecting the evidence of a witness or witnesses. That did not mean that the truthful demeanour of the witnesses was not then to be taken into account in reaching a conclusion on the balance of probabilities. Even having regard to what was said by the trial judge, in my view it was entirely inconsistent with accepted principle for the Court of Appeal to have concluded, as in effect it did, that one of the parties was untrustworthy in his dealings and untruthful in his evidence, without having seen or heard him and without regard to the fact that the trial judge found that he gave the appearance of a truthful witness. That finding of the trial judge was entitled to weight and it is apparent that the Court of Appeal gave it none.

[39]

The Court of Appeal rejected the evidence of Taylor and found that he knew at all times that Johnson intented to offer his wife's land for sale at a price of $15,000 per acre rather than a full price of $15,000. Of course, the state of Taylor's mind at the time the option agreement was signed and at the time contracts were exchanged was crucial. The Court of Appeal reached its conclusion by an elaborate analysis of the evidence and by constructing a version of events which involved Taylor not only in fraudulent course of conduct in relation to the acquisition of the land from the Johnsons, but also in prevarication in the negotiations which took place and subsequently in the witness box. In short, the Court of Appeal took the view that Taylor, despite his assertions to the contrary, had a particular interest in acquiring land in the vicinity of lots 3 and 4. This, it was said, was because he wished to acquire a site for his business on the outskirts of Windsor, the existing site in the heart of the commercial area having become unsuitable for its needs. Lot 174 was zoned non-urban and attempts to have it rezoned to allow it to be used for the purposes of the business had been unsuccessful. Moreover, so the Court of Appeal found, the proposed deviation of Windsor Road so as to bisect that lot was known to Taylor at the time he was negotiating to purchase land from Mrs. Johnson and, apart from the zoning, rendered that site unsuitable as a place to relocate the business. There was, however, the second application for rezoning which covered Mrs. Johnson's land which would, if successful, have made that land suitable for the relocation of Hawkesbury Valley Motors. According to the Court of Appeal, Taylor believed that the outcome of that application was likely to be successful. The Court of Appeal found that the reason given by Taylor to the Johnsons for wanting an option was specious. He had told the Johnsons that he wanted it to demonstrate his interest in the land to the local Council. The Court of Appeal concluded that even after Mrs. Johnson signed the option agreement, Taylor did not believe that she intended to sell the land for $15,000 and that this belief extended to the time at which the contracts were exchanged. For this reason, so the Court of Appeal concluded, Taylor did not give the Johnsons a copy of the option agreement so that the mistake could be concealed from them for as long as possible and for the same reason had a document constituting the exercise of the option delivered by the Johnsons to their solicitor in a sealed envelope.

[43]

It does not necessarily follow that the need of Hawkesbury Valley Motors for another site for its business meant that Taylor was anxious at the relevant time to acquire land from the Johnsons. He gave evidence that the business was experiencing liquidity problems and there was nothing to point to the contrary. Moreover, the land was ultimately acquired not by Taylor himself or the partnership or companies associated with the business, but by Taylor's adult children. It was not an inescapable conclusion that Taylor was aware of the true value of the Johnsons' land. His business was motor cars, not dealing in land, and the acquisition of land nearly two years previously would have been no sure guide to value. Cleary, $15,000 appeared at the time, as Taylor conceded, to be a bargain price but, as events turned out, it was a great deal closer to the true value of the land than the quite inflated value placed upon it by the Johnsons. It was not such a price as pointed necessarily to a mistake on the part of the Johnsons, particularly to a person not expert in the valuation of land. The fact that price was not mentioned by Taylor or the Johnsons after an initial conversation is not surprising. If each thought that he or she had secured an advantageous price it would be unlikely that price would be raised again. It may have been that Taylor thought it necessary to have an option to demonstrate to the local Council his interest in lots 3 and 4; he was, shortly after the option agreement was signed, in touch with the Council about the future of the land. The fact that Taylor did not give the Johnsons a copy of the option and placed the exercise of the option in a sealed envelope carried no inevitably unfavourable implications. On any view of the evidence the Johnsons appeared to have read the option agreement before signing it and, in any event, its contents could hardly be kept secret for any length of time. The document exercising the option contained no reference to price and it would have made no difference whether the Johnsons had read it or not.

[48]

Shortly expressed, the established principles are, we think, that in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it. And they said [26] : The duty of the appellate court is to decide the case - the facts as well as the law - for itself. In so doing it must recognize the advantages enjoyed by the judge who conducted the trial. But if the judges of appeal consider that in the circumstances the trial judge was in no better position to decide the particular question than they are themselves, or if, after giving full weight to his decision, they consider that it was wrong, they must discharge their duty and give effect to their own judgment. There is nothing in these passages to warrant the course taken by the Court of Appeal. The finding of the Court of Appeal on the state of Taylor's mind at the time he signed the option agreement, which was the basis upon which the appeal to the Court of Appeal was upheld, was not a matter of inference from undisputed facts. It was not a matter of inference from facts established by the findings of the trial judge. Indeed, the findings of the trial judge were for the most part to the contrary of those of the Court of Appeal. The Court of Appeal gave no recognition to the advantages enjoyed by the trial judge in reaching his conclusion that Taylor was a credible witness. The circumstances in which an appellate court is unimpeded by the findings of a judge sitting alone at first instance in making its own findings of fact are succinctly set out by Isaacs J. in Webb v. Bloch [27] . In that case, in which the plaintiff sued in this Court for damages for libel, the Full Court, on appeal, reversed the decision of Starke J. sitting without a jury and imputed malice to the defendants. But that was a case, as Isaacs J. [28] pointed out, in which: Nothing turns on credibility, on demeanour of witnesses, or any other advantage possessed by the learned trial judge. There are no disputed evidentiary facts: the only questions of fact for determination are to be arrived at solely by inferences equally open to the appeal Court as to the primary tribunal. 1. (1979) 142 C.L.R. 531. 2. (1979) 142 C.L.R., at p. 551. 3. (1979) 142 C.L.R., at p. 552. 4. (1928) 41 C.L.R. 331. 5. (1928) 41 C.L.R., at pp. 359-360.