IN THE MAGISTRATES COURT OF VICTORIA
AT MELBOURNE
CIVIL DIVISION
Case No. C12222835
HEY YEOB SON
Plaintiff
v
KWANG JE LEE
Defendant
---
MAGISTRATE:
GINNANE
WHERE HELD:
MELBOURNE
DATE OF HEARING:
27 NOVEMBER 2013
DATE OF DECISION:
CASE MAY BE CITED AS:
SON v LEE
REASONS FOR DECISION
--Catchwords: Self represented litigant – role of court in assisting litigant – claim for damages
for breach of agreement for sale of business- consideration of equitable defences of duress
– undue influence – unconscionable conduct – quantum of claim otherwise not established
– claim dismissed
--APPEARANCES:
Counsel
Solicitors
For the Plaintiff
Mr I McEachern
EC Legal
For the Defendant
In Person
!Undefined Bookmark, I
HER/HIS HONOUR:
1.
By an Amended Complaint the plaintiff sues the defendant for the amount of $144,577
and has abandoned the excess in order to confine the proceeding to within the
jurisdiction of the court. The claim is said to arise from the defendant’s failure to meet
obligations under a sale of business by the plaintiff to the defendant in 2005 of the St
Kilda Noodle and Sushi Bar and subsequent agreements in relation to the amounts
that remained due.
2.
The plaintiff was represented by experienced counsel. The defendant was self
represented. Both the plaintiff and the defendant are Korean.
3.
The defendant identified certain facts that he alleges amount to a sufficient basis to
make good a defence that he is not indebted to the plaintiff. The extent of the plaintiff’s
English comprehension is questionable. Certainly he did not exhibit in the course of
the presentation of his case any appreciation of nuance and on occasions I needed to
intervene in order to try and identify the questions being posed by him in cross
examination and the meaning of his answers given under cross examination. I was
alert to the need to limit any disadvantage to the defendant as a result of deficiencies
by way of language and comprehension and also because of his self represented
status.
Principles applicable to the conduct of cases involving self represented litigants
4.
The extent to which the presiding judicial officer in the course of a contested hearing
should act or intervene where a party is self represented or, as in this case, limited by
language, has been the subject of guidance by Superior Courts. The function is
sometimes referred to as the “duty” of a court to unrepresented litigants. In fact, no
separate duty exists. No discrete obligation is owed by a court to particular litigants,
whether legally represented or otherwise. There is, however, a duty upon the court to
ensure that the litigants before it are afforded a fair hearing.
5.
The authorities relating to the overriding duty of a court to ensure a fair trial were given
detailed consideration by Bell J. in Tomesevic v Travaglini (2007) 17 VR 100. In that
case, the unrepresented plaintiff had appeared before a County Court judge seeking
leave to appeal some 3 years out of time. The application was opposed by the
1
DECISION
prosecution, represented by counsel. The judge peremptorily refused the application
on the ground that the delay had been too great. He did not inform the plaintiff that the
relevant legislation required the plaintiff to satisfy the court that the delay in appealing
was due to exceptional circumstances, and that the delay would not materially
prejudice the prosecution case. In the course of his judgement, Bell J cited as the
disadvantages suffered by litigants in person both lack of knowledge of the law and
court procedure together with lack of objectivity and emotional distance from their
case.
6.
Compliance with the duty of ensuring a trial is fair may, for instance, necessitate the
provision of interpreters. The defendant did not seek the assistance of an interpreter.
7.
Of course a balance has to be struck between the obligation to provide assistance
concerning substantive legal rights and procedure and ensuring that the judicial officer
does not become, nor be perceived to become an advocate in the cause of the
unrepresented litigant. Bell J. referred to a number of cases in which reference was
made to the dilemma faced by a judicial officer in the case of an unrepresented
litigant. In Rajski v Scitec Corporation Pt Ltd(Unreported Supreme Court NSW, Court
of Appeal, 16 June 1986 per Samuels JA) who stated at14::
“In my view, the advice and assistance which a litigant in person ought to
receive from the court should be limited to that which is necessary to diminish,
so far as that is possible, the disadvantage which he or she will ordinarily
suffer when faced by a lawyer, and to prevent destruction from the traps which
our adversary procedure offers to the unwary and untutored. But the court
should be astute to see that it does not extend its auxiliary role so as to confer
upon a litigant in person a positive advantage over the represented
opponent…An unrepresented party is as much subject to the rules as any
other litigant. The court must be patient in explaining them and may be lenient
in the standard of compliance which it exacts. But it must see that the rules
are obeyed, subject to any proper exceptions. To do so otherwise, or to
regard a litigant in person as enjoying a privileged status, would be quite
unfair to the represented opponent.”
8.
In the same case, Mahoney JA observed at 27:
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DECISION
“Where a party appears in person, he will ordinarily be at a disadvantage.
That does not mean that the court will give to the other party less than he is
entitled to. Nor will it confer upon the party in person advantages which, if he
were represented, he would not have. But the court will, I think, be careful to
examine what is put to it by a party in person to ensure that he has not,
because of lack of legal skill, failed to claim rights or put forward arguments
which otherwise he might have done…However, the right of the party so to
advance his interest by litigation must be balanced against the right of the
parties involved in his litigation not to be involved in pointless litigation and to
have the litigation conducted properly and with reasonable promptitude.”
9.
In Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 a
complaint had been made to the Human Rights Commission by the convicted Russell
Street bomber who complained to the Commission that prison authorities were
impeding his efforts to prepare a petition of mercy. His complaint was rejected and he
sought judicial review in the Federal Court and was unsuccessful. He was self
represented and argued upon appeal to the Full Court of the Federal Court that the
judge at first instance had not adequately assisted him in the carriage of his case. The
Full Court dismissed the appeal and in the course of its judgement stated at 446:
“A trial judge often faces something of a dilemma. While he or she may be
bound to provide some advice and assistance to an unrepresented litigant, the
authorities make it clear that the Judge should not intervene to such an extent
that
he
or
she
cannot
maintain
a
position
of
neutrality
in
the
litigation…However the boundaries of legitimate intervention are flexible and
will be influenced by the need for intervention to ensure a fair and just trial…”
10. Reference was made in Minogue’s case to the decision of Panagopoulos v Southern
Healthcare Network (Unreported, Supreme Court of Victoria, 15 September 1997). In
a trial before Smith J the plaintiff sought damages from the defendant for negligence
said to have arisen during the course of her birth, causing severe brain damage. The
case was conducted on her behalf by her father, who sued as her next friend, and a
non-lawyer acquaintance of her father, legal aid having been withdrawn. The
defendant hospital was represented by silk experienced in the area of medical
negligence, a junior and they were instructed by a leading firm of solicitors in the field.
An application was made on behalf of the defendant that the judge disqualify himself
3
DECISION
on the ground of apprehended bias. This was said to have arisen by the His Honour’s
questioning of the plaintiff’s witnesses at some length and that his questioning of
defence witnesses amounted to cross-examination. In considering the application,
Smith J observed that the absence of legal representation introduces a factor into the
equation which creates great difficulties for the trial judge who has an obligation to
ensure that a fair and just trial is conducted.
11. Smith J refused the application to disqualify himself. In the circumstances of the case,
he concluded that unless the judge attempted to ensure that the evidence was
properly explored he would have presided over a travesty of justice. A fair minded
observer would conclude that not only that he was not motivated by bias but also, was
taking all proper steps to try and ensure a just outcome to the litigation.
12. Bell J in Tomasevic summarised the principles relating to a judicial officer’s duty to
ensure a fair trial by giving self-represented litigants due assistance as follows at p
140:
“The matters regarding which the judge must assist a self-represented litigant
are not limited, for the judge must give such assistance as is necessary to
ensure a fair trial. The proper scope of the assistance depends on the
particular litigant and the nature of the case. The touchstones are fairness and
balance. The assistance may extend to issues concerning substantive legal
rights as well as to issues concerning the procedure that will be followed…
The judge cannot become the advocate of the self-represented litigant, for the
role of the judge is fundamentally different to that of an advocate. Further, the
judge must maintain the reality and appearance of judicial neutrality at all
times and to all parties, represented and self represented. The assistance
must be proportionate in the circumstances—it must ensure a fair trial, not
afford an advantage to the self-represented litigant.”
13. In the course of the hearing of this proceeding I remained conscious of these
principles and endeavoured to apply them to the matters at hand.
The Plaintiff’s Claim
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DECISION
14. The plaintiff’s claim is contained in his Amended Complaint. A good number of the
facts are not controversial. They are:

A contract of sale of business was signed on 14 September 2005 between the
plaintiff and the defendant but backdated to take effect from 1 September 2005.
Under the contract of sale the plaintiff sold to the defendant and the defendant
purchased the business including stock and equipment of the St Kilda Noodle and
Sushi Bar. The sale price of the business was $250,000 payable by way of a deposit
of $1,000 together with the balance to be paid on 1 May 2007.

The contract of sale was accompanied by a Licence Agreement. The licence
agreement permitted the defendant to take possession of the business immediately
and to operate it and take the profits from it subject to payment by the defendant to
the plaintiff of the weekly licence fee of $1,000 until the balance of the purchase price
due on 1 May 2007 was paid.

Interest was due on any monies in default.
15. The defendant acknowledges taking possession of the business following the
execution of the contract of sale and agreed that he operated the business for a
number of years thereafter. However, what he does not acknowledge is an
understanding of the effect of the contract of sale and license agreement signed by
him and instead argued that the plaintiff told him that the documents were connected
with his immigration status. He says that he did not appreciate that he had become the
owner of the business. I am not persuaded to accept that primary submission.
16. In order to understand the respective arguments relied on by the parties, it is
necessary for me to deal with some background concerning the relationship between
the plaintiff and the defendant.
17. The defendant says that he entered Australia in October 2003 on a student visa. He
said he met the plaintiff in August 2004 and he then began working part-time and
subsequently full-time in the noodle business. He says he was paid between $7.00
and $8.00 per hour.
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DECISION
18. He subsequently took up residence at the same address in Middle Park where the
plaintiff resided. Apparently his student visa was due to expire on or about 13
September 2004 and he says the plaintiff told him to apply for a tourist visa. The
defendant says he was granted a tourist visas for 3 months and he continued to work
in the plaintiff’s business. He said he was managing the business. He says he was not
aware that his tourist visa did not permit him to work in Australia. He says that some
time before the expiration of his tourist visa the plaintiff approached him and
suggested that he could apply for an appropriate visa that would allow him to work
legitimately as a full-time manager in the business.
19. At the relevant time, the Migration Act 1958 (Cth) provided a category of status for
noncitizens to remain in Australia by reference to sponsored employment. This
category of visa is known as a 457 category visa.
20. The plaintiff sponsored the defendant to work in his business. The defendant says that
the application for a 457 visa was made on his behalf by the plaintiff. The defendant
said that in December 2004 the plaintiff presented him with a completed application for
a 457 visa which he signed. He says however he did not verify the information
contained in the document.
21. The plaintiff so the evidence revealed, in addition to conducting the business of a
business broker, also at all times relevant to the proceeding conducted the business of
a registered Migration Agent.
22. The defendant says that it was in the middle of 2005 and the plaintiff approached him
and said that he intended to sell the business to him. The defendant says that he had
no desire to purchase the business or indeed had any financial capacity to do so but
that he felt he could not refuse the proposal because the plaintiff's wishes were
inexorably tied up with his involvement and advocacy for his visa application.
23. The defendant’s 457 visa was granted on 14 September 2005.
24. The defendant said he had no understanding of the licence agreement he signed and
he says that he felt compelled to sign both the contract for the sale of the business
and the licence agreement because the plaintiff told him that his visa was dependent
on it. The defendant also says that when he signed the documents the plaintiff told him
6
DECISION
that if he missed any of the payments then he would take the business back and the
defendant would lose his 457 visa together with all monies paid by him to the plaintiff.
These allegations were denied in each particular by the plaintiff.
25. I pause here to mention in regard to the defendant’s employment status that no
evidence was introduced by either party to identify the basis under which the
defendant was employed by the plaintiff in the business prior to the sale. The
defendant said that he was only ever paid a token hourly rate, perhaps as little as
$7.00 or $8.00 per hour. If this allegation is true the employment would have been
unlawful for not complying with minimum wage entitlements prescribed under
Australian law. That controversy however is not a matter that was pursued by the
defendant in this proceeding. I add that the material before me includes pay advice
slips, Exhibit D11 that suggest otherwise than the defendant would have it in relation
to the defendant’s remuneration.
26. In addition to, and found within the material comprising Exhibit D15, is a series of pay
advice sheets for January and February 2006. This is peculiar because by that date
according to the plaintiff the defendant had well and truly become the purchaser of the
business and had entered the premises pending settlement of the sale under the
terms of the licence agreement and yet they purport to identify that the defendant was
receiving income by way of an annual salary as an employee of the St Kilda Sushi and
Noodle Bar Pty Ltd in the position of Chef.
27. Furthermore it would seem from the evidence adduced by the defendant that these
pay advices referred were supplied to the Department of Immigration and Multicultural
Affairs in response to requests by it to the plaintiff as part of its monitoring of the
defendant’s visa sponsorship. The letter from the department includes an important
direction to the sponsor that he must notify the department when a sponsored
employee ceases employment. The department’s letter was addressed to the plaintiff.
The letter expressed thanks to the plaintiff for the return of the completed form.
28. The Business Sponsor Monitoring form is dated 28 February 2006. It identifies the
plaintiff as the provider of the information contained in the form. The plaintiff describes
the defendant as “Chef” and the recipient of a wage of $1,049.30 per week. The form
requests from the plaintiff details of any significant changes with regards to the
business ownership since the business sponsorship approval. The plaintiff’s response
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DECISION
was in the negative as was also his response to the inquiry, whether there had been
any significant change to the direct employer relationship with the defendant as the
sponsored employee.
29. The plaintiff’s counsel did not explore these matters with the plaintiff and in the face of
the proposed tender of the exhibit, objected to it on the general basis that the matters
were irrelevant or, in some respects, as regards parts of the statutory declaration to
which the material was attached, scandalous. I permitted the tender. In so far as the
Migration Sponsor Form and the information furnished by the plaintiff to the
Department are concerned, I regard the documents as relevant to my assessment of
the genuineness of the account of the evidence given by the plaintiff when challenged
by the account of the evidence in regard to the same matters by the defendant.
30. If the plaintiff’s account of the genuineness of the transaction that resulted in the sale
of the business to the defendant is accepted then on the face of the Migration Sponsor
form, relevant information provided to the Commonwealth Department was false.
31. The defendant says that he continued to work in the noodle business as a full-time
chef under the 457 visa and that in response to the plaintiff's request he continued to
manage the business.
32. Following on the execution of the contract for the sale of business and the licence
agreement, the defendant paid the designated amounts of weekly payments. The
plaintiff of course claims the difference between the contract of sale amount and the
payments made by the defendant. This balance has been calculated in the sum of
$147,000. Accordingly, by reason of this calculation, the defendant since taking
possession of the business made payments to the plaintiff in the order of $102,000.
33. It was a matter of comment by me to the plaintiff's counsel that no evidence was led
by to identify the payments the plaintiff received as part of the proof of its quantum.
There was no evidence either of the payment of a deposit by the defendant in the sum
of $1,000 as provided for in the contract of sale.
34. There was no admission by the defendant of the amounts of money paid by him to the
plaintiff or an admission of the quantum of the plaintiff’s claim. Nonetheless he
acknowledged payment of amounts to the plaintiff. He said by his Amended Defence
8
DECISION
that he agreed to pay the plaintiff because he felt compelled to do so because of
threats made to him which included that the provision of his visa as dependent upon
him signing the contract of sale of business. It is appropriate that I set out the manner
in which this part of the defence is put. It is put as follows:
“I deny that I entered into the Contract of Sale of Business (“the Contract”)
and the Licence Agreement (“the Agreement”) with my free will on the
specified date in the amended statement of claim. Owing to the fact that in
any event I felt compelled to sign the Agreement and the Contract because
the plaintiff told me that my visa was dependent on them and the business. As
result, I was misled to enter into the Contract and the Agreement;
I did not then, and still do not today, understand the purpose of the
Agreement;
I had been working for the Plaintiff within the business part time from on or
about mid August 2004 to early September 2005;
the Plaintiff offered me a proper manager and Chef position in his business on
or about December 2004, and after a few days later the Plaintiff presented a
completed Visa application form to me for my signature;
the Plaintiff lodged my 457 Visa application including sponsorship and
nomination application in December 2004, and 457 Visa was granted to me
on 14 September 2005; and
I continued to work in the business officially as a full time chef under the 457
visa program, and the Plaintiff also requested me to manage the business
since then.
2. To the allegation contained in paragraph 2 I defend as follows:
I deny paragraph 2 because I did not enter into the Agreement with my free
will but I agreed to pay the Plaintiff because of the circumstances described in
paragraph 1 above;
in addition, I have been managing the business as a full time manager and a
chef since my employment, however, I never received any formal income from
the business, the Plaintiff or any of his corporate entities during the
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DECISION
employment under the 457 Visa;
as I aforementioned, I did not then, and still do not today, understand the
purpose of the Agreement.
3. I deny paragraph 3 on the ground of that I could not understand the
contents of the Contract and Agreement, except for the ones explained to
me in Korean.
4. To the allegation contained in paragraph 4 I defend as follows:
a) I deny paragraph 4 because according to the visa application the Plaintiff
lodged to the DIAC (“the Immigration Department”) by himself, I was
employed as a chef in the business and I was requested to manage the
business by the Plaintiff. Therefore, I was not in the position of taking
possession of the business but, as a chef and manager, I was following what I
was requested by the Plaintiff;
b) accordingly, I, as a chef and manager, was in charge of hiring and paying
other employees, purchasing stock; and
c) at the time of signing the Contract and the Agreement, Plaintiff told me that
he repeatedly said that if I missed any of the payments to him and he would
take the business back and I would lose my 457 Visa and lose all money that I
had paid him.
35. The defendant has relied on a variety of circumstances in an effort to satisfy the Court
that the plaintiff engaged in false and misleading conduct towards him and made a
series of threats in relation to his immigration status in Australia in order to compel him
to enter into the contract of sale for the business and thus suborn his free will.
36. Part of the documentation relied upon by the defendant in his defence to the
proceeding was referred to in a statutory declaration declared by him on 5 October
2011 together with various attachments. The statutory declaration includes serious
allegations about the plaintiff which if any number of them was proved true may
amount to criminal offences. They would certainly call into question the plaintiff’s
character and the extent to which I should place reliance on his evidence in the
proceeding whenever it conflicted with contrary evidence. I will have occasion to come
back to the material produced by the defendant later in these reasons for decision.
The commercial relationship
10
DECISION
37. There are some facts when considered objectively support the genuineness of the
transaction as asserted by the plaintiff. There are facts however that do not.
38. One of the peculiarities associated with the commercial dealings between the parties,
for example, is that the defendant was not given any documents that one might
reasonably anticipate would accompany a sale of business such as a food outlet.
There was not, for instance, any documentation setting out the takings or the
overheads and expenses or anticipated profits. Counsel for the plaintiff said this was
explicable because the defendant had worked as manager of the business for a period
in excess of a year and that he had also shared a residence with the plaintiff and so
could reasonably be assumed to have had a familiarity with such matters. I cannot
agree with this submission. The period of time the defendant worked in the business
was not of such duration as to reasonably be able to provide a realistic insight into the
trading position of the business, and without a disclosure of documentation, it is
difficult to see how a “guess” derived over such a limited period of time could be
considered to adequately compensate for a lack of audited accounts of the business.
The plaintiff accepted that a reason why accounts were not produced is because many
transactions were cash transactions and had not been booked to the business. This is
a matter that on its face and about which no explanation was provided also causes me
concern in treating the transaction entered by the plaintiff with the defendant at face
value.
39. The defendant testified that after taking over the conduct of the business he was not
required give an accounting of the takings from it to the plaintiff. He was permitted to
deal with and treat the income derived from the operation of the business as his own.
The plaintiff’s counsel submitted that such an arrangement is consistent with the
contract that conferred possession of the business on the defendant from the date of
execution. I agree that this is a fact that provides objective support for the transaction.
40. The defendant agreed under cross-examination that he had paid all the operating
costs of the business, including overheads such as utilities and also the wages paid to
staff. These expenses were paid from the income derived from the operation of the
business. The defendant also paid over amounts of money commensurate with the
amount required by weekly payments under the licence agreement. All of this, the
plaintiff’s counsel submitted, is consistent with the defendant understanding that he
11
DECISION
had taken over the business, and that for good or ill, it was his business subject to the
liability to settle the contract when due. I also agree with this characterisation by the
plaintiff.
41. There are though peculiarities and irregularities associated with the commercial
arrangement that existed between the parties. For example, the balance due under
the agreement was not paid by the date specified, that is to say, by 1 May 2007.
According to the plaintiff, no issue was raised by the defendant’s failure to meet the
settlement date under the contract and instead the prevailing arrangement of a weekly
payment continued for some time thereafter.
42. Apart from such matters there is also the question as to why the plaintiff sold the
business to the defendant in the first place. About this issue, there is a contest of
evidence.
43. The plaintiff testified that he had received an offer for the business in the amount of
$195,000. He said that he believed the business was worth more than this sum and so
he rejected it. There then arises a conflict between the plaintiff and the defendant as to
who first approached the other in regard to the sale and purchase. The plaintiff
disagrees with the defendant's account that it was he who approached him.
44. The plaintiff says that it came to pass that he wanted to sell the business and a
consequence of that decision would have been be that he would no longer be able to
support the defendant’s residency in Australia as a sponsored employee. Therefore,
the defendant would have to either secure a new sponsor or leave Australia.
45. The plaintiff said he offered to sell the business to the defendant for the amount of
$250,000. I asked the plaintiff why having rejected an offer of $195,000 he would
agree to sell the business to the defendant who by all accounts had no money or
assets for the significantly larger sum of $250,000 and be willing to defer settlement
for a period of almost 2 years. The plaintiff did not give me a satisfactory explanation.
As a matter of fact no independent evidence was furnished of a previous offer for the
business in the amount of $195,000 and no written evidence of a valuation of the
business in the greater amount was adduced.
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DECISION
46. The plaintiff’s pleading alleges that the defendant made various irregular payments in
reduction of the balance of the purchase price under the contract of sale and also
irregular payments under the licence agreement but no claim was made for interest for
late payment.
47. The defendant said he paid the plaintiff $3,000 per week from the date the agreement
for the sale of the business agreement and the license agreement were executed up
until the end of 2009 and that thereafter he was only able to pay some several
hundred dollars per week and some weeks nothing at all. The defendant said the
plaintiff never provided him with receipts for payments which were made in cash.
48. The plaintiff says that when settlement did not take place on 1 May 2007 the parties
made a Second Agreement whereby the defendant was permitted to continue in
possession of the business and to continue to be entitled to the profits from it subject
to the payments required to be made under the licence agreement. Presumably as
there was no evidence to the contrary the agreement was implied but in any event the
evidence suggested that the scope of this “Second Agreement” was no more than the
plaintiff acquiescing in the defendant’s default.
49. The plaintiff says that the defendant thereafter maintained occupation of the premises,
continued to operate the business and continued to make irregular payments to him
under the licence agreement. Again, however no schedule of payments received by
the defendant was put in evidence by the plaintiff. The plaintiff appeared content to
have the Court accept the claim in the sum of $147,000 based on the defendant’s
limited admission that he made certain payments to the plaintiff. I don’t regard that
approach as satisfactory.
The Events of December 2010
50. The plaintiff testified that sporadically prior to December 2010 the defendant had
expressed a desire to leave the business and this intention culminated in December
2010. The plaintiff said his reaction was far from happy. He said he told the defendant
that he could not just as it were “walk away” from the business and leave his obligation
to pay the defendant under the agreement unmet.
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DECISION
51. The defendant in December 2010 attended on the plaintiff at his residence in Altona in
the company of an acquaintance, who was described as a paralegal. Dealings
between the plaintiff and the defendant became heated and a physical altercation
ensued between the two men. The paralegal was not identified by name and did not
give evidence. There was no police involvement and the two men appear to have
calmed down and a discussion followed.
52. According to the plaintiff there arose out of their meeting a “Third Agreement” which
was to the effect that a balance outstanding under the contract of sale of the business
was agreed upon in the amount of $144,577 and that this amount was to be paid by
the defendant to the plaintiff by way of weekly payments of $100 or multiples thereof
with interest in the event of default. In return, the plaintiff said he told the defendant
that he would endeavour to sell the business and the proceeds of the sale would be
applied to reduce the debt owing by the defendant.
53. The plaintiff said that in order to give effect to these intentions two documents were
executed by them both dated 5 December 2010 and it is these documents that are
relied on by the plaintiff as constituting the Third Agreement.
54. The first document comprising the Third Agreement was headed "Promise to Pay".
The second document constituting the Third Agreement was headed "The clarification
between He Son and Kwang Je Lee”. The plaintiff says the latter document
acknowledged the defendant’s indebtedness and furthermore the document provided
that if the business was sold the sale proceeds would be deducted from the $144,577
as the amount agreed between the parties as due under the contract for the sale of
the business.
55. The plaintiff said he tried to sell the business but was unsuccessful in doing so.
56. The defendant’s account of the events surrounding him leaving the business is,
perhaps not surprisingly, very different from the plaintiff’s. The defendant testified that
he continued to work in the business until as he put it in his evidence he was “kicked
out” of the business in October 2010. He said that the plaintiff then sold the business
to another Korean family. He says that the plaintiff managed the business with the
Korean family who in turn did not make a go of it or complete the purchase of the
business.
14
DECISION
57. The defendant said that he was forced to sign the documents comprising the Third
Agreement dated 5 December 2010 because he had been physically assaulted by the
plaintiff. He said he signed them without checking their contents and he was not
afforded the opportunity to obtain any independent advice about the effect of the
documents and their contents. He says that he did not understand the contents of the
document.
58. Furthermore, the defendant said it was not culturally part of his makeup to question
persons in positions of authority. He said that this character trait had also been
instilled in him as a result of his military service in Korea. He looked upon the plaintiff
as a person who held authority over him and that whilst a questioning nature may be
more readily evident in Australian life and business affairs, but it was not part of his
character. I accept that self assessment by the defendant.
The Third Agreement
59. In determining the enforceability of the Third Agreement it is important to give close
consideration to the Exhibits P5 and P6.
60. The document headed Promise to Pay, Exhibit P5 by its language binds the defendant
to pay the plaintiff a minimum $100 per week together with yearly interest of 11.5% on
any unpaid balance. Excluding interest, and assuming the minimum payment only was
made, the debt would not be extinguished in less than 30 years. It was not explained
to me why the plaintiff would regard such an arrangement as being in his commercial
interest. The question was not addressed in any meaningful way by the plaintiff in
evidence although the plaintiff’s counsel emphasised that the payment was a
“minimum payment” and, therefore, naturally enough, it was open to the defendant to
pay larger amounts in a progressive reduction of the debt.
61. It might perhaps have been that the plaintiff thought that the arrangement constituted a
holding pattern only pending his best endeavours to find a purchaser for the business
and thereafter apply the sale proceeds obtained in order to extinguish the debt
remaining due by the defendant. In considering the possibilities left open by the
evidence, Exhibit P6, the clarification document is also relevant to consider.
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DECISION
62. The plaintiff testified that the clarification provided that the proceeds of a sale of the
business would go to reduce the defendant’s outstanding balance and liability. The
clarification document does not provide as much by its terms.
63. Clause 11 of the clarification document obliges the plaintiff to do no more that to try to
sell the business. Clause 12 provides;
When the sales of the business hit over $150,000 before 31st December 2011,
SEAN (the plaintiff) will distribute some of them to DEAN (the defendant) as
good face however the amount of distribution will be at SEAN’s discretion. It
could be anything but none depend on the supporting and cooperation from
DEAN for selling the business however SEAN has an intention to have DEAN
to be free of debt from SEAN.
64. There are other clauses within the clarification document that are also difficult to
reconcile on their face. For example, paragraph 5 of it, records that the plaintiff took
over the control of the lease and the business because of the failure of the instalment
payments being made by the defendant. This is not consistent with the plaintiff’s
account in his evidence of what or when the relevant events occurred which was that
the status quo was maintained whereby the defendant remained in occupation of and
operation of the business. Instead, paragraph 5 of the clarification is consistent with
the defendant's account that the plaintiff re-entered the business prior to, and not in
consequence of, the defendant indicating that he wished to leave it.
65. Furthermore, clauses 6, 7, 8 and 9 of the clarification document does not accord with
the plaintiff's claim either. These clauses specify that the plaintiff had the business
valued at a suggested sale price of $48,000, of which commission would be in the
amount of $9,900 and advertising of $800. It then states that the defendant has an
outstanding debt of about $150,000 including principal and interest as at 31 December
2011.
66. I pause here to mention that the plaintiff produced no evidence to identify how this
sum or the accumulation of interest was arrived at. The clarification further states that
the amount the defendant owed is the difference between his debt of $150,000 and
the proposed sale Price of $48,000. This is not how the debt was pursued in this
proceeding.
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DECISION
67. Clause 13 of the clarification is expressed in these terms, "SEAN will distribute some
money to DEAN whatsoever when the business has been sold by any price but the
less than the amount of $58,000 plus the amount DEAN charge for the stock of the St
Kilda sushi and Noodle bar plus any cost involved to the selling of the business. The
amount of distribution will be again at Sean's discretion."
68. It is ironic that a document described as a “clarification” is indeed its very antithesis.
Read as a whole, it is incapable of being objectively or commercially construed.
69. Although evidence was given by the plaintiff of an attempt to sell the business and of a
contract that was entered between him and other Koreans, the plaintiff says they did
not settle and the sale fell through. Once again the plaintiff did not introduce into
evidence documents evidencing such a sale or the amount of the sale and, therefore,
the extent to which any sale amount would have exceeded and so extinguished the
defendant’s debt, cannot be ascertained.
70. The defendant introduced Exhibit D3, a document expressed in these terms:
“This intention of clarification of Agreement to Sell or agreed Business or
License agreement” made between the plaintiff and Kwanjoo Kim and
Changik Lee under dated 14 October 2010 in which the plaintiff agreed to sell
and the buyers agreed to purchase the business at 89b Fitzroy St, St Kilda for
$150,000.
71. Much of the document is written in Korean. The date of the agreement accords with
the defendant’s account of when he was removed from the business or, to use his
vivid description, kicked out, and it is not consistent with the plaintiff’s evidence.
72. I am satisfied by regard to the evidence that utilising the Power of Attorney dated 10
May 2010, Exhibit P2, the plaintiff had by October 2010 intended to sell the business
in consequence of the defendant’s failure to conclude the sale of business agreement
and I do not accept his account that it was only on the defendant determining in
December 2010 to leave the business that he put in train arrangements of the type
that are said to be reflected in the Promise to Pay and Clarification and then
endeavoured to find a purchaser for the business.
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DECISION
73. The defendant in the course of his case also produced a “Licence Agreement” dated
22 December 2010, Exhibit D2 made between the plaintiff and Kwanjoo Kim. This
agreement is troubling because it undercuts the plaintiff’s testimony in a number of
important respects.
74. Pursuant to this licence agreement, the plaintiff is described as the “Licensor” and
Kwanjoo Kim as the “Licensee. Under the agreement there is a description of “The
Product” which is identified as “the company as Foodjoy investment Pty Ltd ACN: 146
790 598”. “The business” is described as: Foodjoy investment Pty Ltd Trading as sushi
and grill located at 89b Fitzroy St. St Kilda Vic 3182 as the product”. There then
follows a series of RECITALS including:
“A. The licensor is the owner of the product/the business (the Product) described in
Part A of the Schedule.
B. The Licensor has agreed to grant the Licensee the right to use the Product strictly
on the terms contained in this Agreement and the Licensee has agreed to act as a
Licensee of the product on the terms in this Agreement”.
75. The defendant also produced the ASIC results of Foodjoy Investments Pty Ltd. The
ASIC search reveals that the company was registered on 12 October 2010, that is to
say, two days before the date of the Agreement made between the plaintiff and
Kwanjoo Kim and Changik Lee. It also records that the plaintiff and one of the two
buyers Changik Lee were the original directors of that company. The defendant said in
similar vein that he was appointed a director of many companies by the plaintiff
without his knowledge or consent. The statutory declaration contained a number of
ASIC search results identifying the defendant having been a disclosed director of
various companies. Although the Licence Agreement contained in Exhibit D2 referred
to a “Promise to pay by the licensee to the plaintiff of $150,000 this apparently never
came to fruition.
76. I have already referred to the existence of a General Power of Attorney executed
between the plaintiff and defendant On 10 May 2010 (Exhibit P2).
Identifying the defendant’s grounds of defence – the state of the defendant’s pleadings
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DECISION
77. Elsewhere in my reasons I have extracted some parts of the defendant’s Amended
Defence. It is of course not drafted as a lawyer might. In adumbrating contested fact,
and by positing alternative explanations for events often in narrative prose, it would
run foul of a pleading summons but no point was taken prior to the commencement of
the hearing. This is understandable because in has been held that some latitude
should be allowed to unrepresented parties who prepare their own pleadings. In
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, Kirby P stated:
Courts should approach the peremptory termination of the litigation with
special care to ensure that, within the possibly ill-expressed and unstructured
statement of the legal claim sought to be ventilated, there is no viable cause
of action which, with the appropriate amending of the pleading and a little
assistance from the court, could be put into proper form. If this can be done,
the court should avoid the summary termination of the proceedings for this will
prevent the Court from examining any merits of the case, once the statement
of claim is struck out.
78. This flexible approach should be balanced, however, against the rights of the other
party and undue indulgence should not be extended to the unrepresented party.
79. Counsel for the plaintiff did not express any surprise by the defence and recognised
that the pleading and the approach taken by the defendant touched on defences such
as undue influence and non est factum. In considering the defendant’s evidence it
appears to me that his case raises the possibility of the application of a number of
general law and equitable defences which given the defendant’s status I am obliged to
consider in order to ensure a fair trial process.
Duress
80. The defendant has alleged that he executed the Third Agreement constituted by the
clarification and promise to pay as a result of physical assaults and threats.
81. Where duress is established the common law permits the victim to escape their
contractual obligations by rendering the contract voidable. In order that duress is made
out one of the contracting parties must exert “illegitimate” pressure on the weaker
party which induces the weaker party to enter into the contract. Duress might relate to
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DECISION
the person involved (e.g., threatening to kill them if they do not enter into the contract),
to the property of the other person (e.g., threatening to burn down their house if they
do not enter the contract) or may take the form of “economic” duress. Economic
duress might exist, for example, where the dominant party threatens not to perform a
contract - although not all such threats will constitute duress - in particular, if other
options were available to the weaker party (such as, for example, seeking legal
remedies) duress will not be established.
82. I am not persuaded that the facts support the existence of physical duress exerted on
the defendant in relation to the First Agreement, or the so-called Second Agreement,
but in relation to the Third Agreement the defendant says that he was physically
assaulted and as a result he executed the Promise to Pay and the Clarification. That
there was a physical altercation between the plaintiff and defendant is not disputed. Of
course in relation to the First Agreement and the Third Agreement the defendant also
says it was a common aspect that he was threatened in regard to his immigration
status, and the threat of the loss of monies already paid under the agreement. I have
carefully considered the matter and I am not satisfied that duress has been
established. Certainly in regard to the Third Agreement before the documents were
executed the defendant appears to have had access to some legal resource in the
guise of the paralegal. The defendant did not explain why he did not seek any advice
from that person or seek other advice. Also of course it was open to the defendant to
contact the police in relation to the alleged assault. It was also open to the defendant
to have made contact with the Department of Immigration in relation to the alleged
threats made by the plaintiff in regard to his visa status. The defendant said that he
was inhibited in contacting authorities because he believed he acted unlawfully by
certain actions he had taken in conjunction with the plaintiff in regard to an allegedly
arranged marriage and of having worked during the currency of his tourist visa and
that the plaintiff took advantage of his special vulnerability.
83. I was satisfied listening to the defendant and considering all of the evidence that that
he had a consciousness of his conduct and actions and that whatever else may be
said about the commercial transactions, about which I have more to say later in these
reasons, he was not the object of legal duress in the entering into them.
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DECISION
84. Success on the ground of duress is predicated on the defendant knowing the nature of
the documents he executed but not having a free choice in the matter because of the
duress attendant on their execution.
85. I am not satisfied that the facts disclosed give rise to the defendant being able to rely
upon the defence of duress. The defendant says he did not know what the documents
were but he believed them to be related to his immigration status because of
statements made to him by the plaintiff. I am not persuaded of the correctness of that
assertion.
86. That the defendant understood the essential nature of the documents cannot in my
judgment be seriously put in issue. The defendant testified that in the middle of 2005
the plaintiff approached him and said that he intended to sell the business to him.
Although the defendant said he had no desire to purchase the business and lacked
the financial capacity to do so, he said he felt he could not refuse the proposal
because the plaintiff's intentions were, as he saw matters, inexorably tied up with his
visa application. I am in addition also not persuaded that the defendant signed the
contract and the licence agreement believing they were related to his immigration
status because on an objective analysis the documents are starkly different from
immigration documents of which he had many and therefore presumably a familiarity.
The visa documents have a character and get up about them that include photocopies
of passports and they are of a type I think it can be reasonably assumed the defendant
would have associated with immigration issues whereas the commercial documents
don’t have this character about them. This includes, for example, a list of cooking
equipment and utensils that went with the sale of the business and was attached to
the commercial documents although the defendant said that list was inserted at a later
date.
87. Allied to the sale of business agreement was the licence agreement. In relation to it,
the defendant testified that he signed it because he felt compelled to do so and that
the plaintiff told him that his visa was dependent on it. The defendant’s visa was
approved on the date of signing of the contract documents. In any event, and overall
and paying regard to the evidence and the limitations of language, both the content
and tenor of the defendant’s evidence persuaded me on the balance of probabilities
that he had a sufficient understanding of the purpose of the documents such that
although he might have thought it in his self interest to sign them, he did not sign them
21
DECISION
under the misapprehension that they were documents required either for or as part of
his immigration documents.
88.
The defendant also says that when he signed the documents the plaintiff told him that
if he missed any of the payments that he would take the business back and the
defendant would lose his 457 visa and all monies paid by him to the plaintiff. These
allegations were denied in each particular by the plaintiff. Even had such statements
been made they are capable of being construed as consistent with the possible
consequences that might ordinarily follow from a breach of a contract of purchase
entered into and also by reason of any adverse change to the defendant’s immigration
status. Assertions by a party to a transaction, even those that are strongly expressed,
but that concern potential consequences that might flow from adherence to positions
adopted by parties in conforming or not with asserted legal obligations cannot, in my
view, without more amount to legal duress.
89. It is relevant too in endeavouring to do justice to the defendant’s various arguments
that I refer again to relevant aspects of his amended defence.
I deny paragraph 3 on the ground of that I could not understand the contents
of the Contract and Agreement, except for the ones explained to me in
Korean.
90. This part of the defendant’s pleading and of course large parts of his oral evidence
together with a significant tranche of his cross-examination of the plaintiff were
directed to this limb of his defence.
91. As I have already concluded, I am satisfied that the defendant did know the essential
nature of the documents. A party must establish that he is mistaken about the nature
of the documents that he is signing - essentially that, through no fault or neglect of his
own he was unable to understand the meaning or the significance of the documents
he signed. The defendant was not blind or illiterate. The evidence does not inform me
of the extent of the defendant’s English literacy or comprehension at the date he
executed the documents but there is some evidence to indicate that he had a working
grasp of English and conducted himself in the day to day dealings attendant upon
working in the noodle bar including attending to banking and postal services for the
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DECISION
payment of utilities and various third party suppliers, and of the hiring of staff and the
attendant payment of their wages.
92. The defendant said that there were parts of the documents that were explained to him
by the plaintiff in the Korean language. He did not contend that the contents that were
explained to him in his native tongue were otherwise than related to the documents
themselves, or that the plaintiff told him in Korean that they were something other than
what they professed to be.
93. From the time of the contract and licence agreement was signed I am satisfied that the
defendant operated the business. I am not satisfied that the defendant is able to rely
on legal duress.
Undue influence
94. Undue influence, where established, will also render a contract voidable. It may arise
where there is an inequality of power between the contracting parties which results in
the weaker party entering into a contract with the dominant party. Not all such
transactions will result in a remedy - but where the influence that exists between the
parties can be classified as “undue” the weaker party will have the choice of rescinding
the contract.
95. Undue influence may be in the form of express undue influence. This will occur where
the dominant party acts in such a way as to effectively deprive the other of their free
will and, therefore, in this respect it is closely allied with the defence of duress. The
law also recognises what is referred to as presumed undue influence. This may occur
where the dominant party holds a position of trust or confidence over the weaker party.
A not uncommon example of such a position might be that of a solicitor and client.
96. In this proceeding the question arises on the facts whether for example, the relevant
transactions entered into by the defendant resulted from unfair and undue pressure by
the plaintiff as the beneficiary under the contract and not from free and independent
judgment by the defendant.
97. If I am satisfied that a special relationship is made out in this case then as a matter of
law I am required to presume that the influence that existed between the plaintiff and
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DECISION
the defendant when entering the contract was “undue” unless the plaintiff as the
dominant party has satisfied me on the balance of probabilities otherwise. The
defence of undue influence gives rise to a rebuttable presumption: Johnson v Buttress
(1936) 56 CLR 113.
98. In Buttress, Latham CJ at 119 said that undue influence may be presumed from the
relations existing between parties and that whilst there is no exhaustive list of relations
giving rise to a presumption of undue influence, Latham CJ said it includes:

parent and child;

guardian and ward;

trustee and cestui que trust;

solicitor and client;

physician and patient ; and

cases of religious influence.
99. More broadly however than the mere mechanical recourse to a class of relations,
Latham CJ said that a presumption of undue influence arises whenever “the relation
between donor and donee is such that the latter is in a position to exercise dominion
over the former by reason of the trust and confidence reposed in the latter” ibid at 119.
100. I am therefore required to determine if the relationship between the plaintiff and
defendant gave rise to a special relationship in consequence of which it fell to the
defendant to rebut what will amount to an assumed presumption of undue influence.
101. The defendant’s circumstances require me to consider if the plaintiff exercised such
dominion over the plaintiff as to characterise theirs as a special relationship. There is
no question but that the plaintiff occupied a dominant position in his dealings with the
plaintiff. This was not just a relationship of vendor and purchaser. The plaintiff was
after all the person who offered the defendant employment soon after his arrival in
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DECISION
Australia. So too, and it is not disputed by him, the plaintiff at least provided advice to
the defendant as to the means by which he could prolong his presence in Australia by
way of a sponsored visa. He did more of course than provide advice; he became the
defendant’s sponsor under the visa programme and as such the defendant’s tenure in
Australia was dependent on the plaintiff maintaining the defendant’s employment in
the business he operated. Why then should I not be persuaded that a special
relationship existed?
102. Although at first glance it may appear relatively simple to conclude that a special
relationship existed, I am unable to make such a finding on the facts of the case. It
should not be thought that the plaintiff was required to maintain his relationship of
sponsorship of the defendant indefinitely. However, in the normal course of a sale of
the plaintiff’s business, it would have been necessary for the defendant to have
secured another sponsorship or, presumably, have had the new operators of the
noodle bar take over the defendant’s sponsorship and maintain his employment. Thus
as I understood the plaintiff’s case, the purchase by the defendant of the business
facilitated his remaining in Australia. Of course the plaintiff maintains that the
defendant proposed the purchase and the defendant says it was the plaintiff who
presented him with what might be described as a fait accompli. Even though I am
satisfied on the balance of probabilities that it was the plaintiff who initiated the
approach to the defendant and suggested an arrangement by which he could
purchase the business and so stay in Australia and therefore progress a claim for
permanent residency, the defendant was not compelled to agree to any such proposal.
The fact that had the defendant not entered into the agreement to purchase the
business from the plaintiff that his 457 visa may have been placed in jeopardy does
not mean that he did not enter the contract voluntarily as understood at law.
103. I am therefore not on balance satisfied that a special relationship existed. Therefore
because of the absence of such a special relationship, undue influence is not
presumed and therefore, it is not necessary for the plaintiff to prove the contract was
the free or voluntary exercise of independent will by the defendant and also therefore it
is not essential to show that the defendant received independent legal advice. Had I
concluded otherwise then I would have been minded to apply the guidance provided
by Latham CJ when he identified the provision and receipt of independent legal advice
as the clearest and most obvious mechanism for overcoming the presumption.
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DECISION
However, as I am not satisfied that the defendant has made out the special
relationship, a rebuttable presumption did not fall to the plaintiff to make good.
Non est factum
104. Successfully calling in aid the doctrine of non est factum is rare. It is understandably a
difficult defence to establish and appropriately so. A party must establish that he is
mistaken about the nature of the documents that he is signing and that through no
fault or neglect of his own he was unable to understand the meaning or the
significance of the documents he signed.
105. As a general rule, and subject to certain statutory consumer protection laws irrelevant
to this proceeding, parties are bound by the documents they sign, whether or not they
have read or understood them. The doctrine non est factum which literally means, “it is
not my deed”, may be called in aid where the signatory can demonstrate he did not
understand the very nature of the document he signed. The doctrine was the subject
of the decision of the High Court in Petelin v Cullen (1975) 132 CLR 355. The facts of
the case briefly stated were that Petelin, who could not read English, signed a
document believing it to be a receipt for $50. In fact, the document gave one Cullen an
option to purchase Petelin's land which option Cullen exercised. Petelin refused to
sign a contract of sale for the land and Cullen sought specific performance. Petelin
succeeded in reliance on the doctrine on appeal. The Court held:
(a) Petelin believed that what he had signed was merely a receipt;
(b) Petelin was not careless in this respect (he was unable to read English and therefore
his ability to understand the document was beyond his capacity) and
(c) Even if he had been careless, Cullen was not an “innocent person without knowledge
or reason to doubt the validity of the appellant's signature'” (at para 15).
106. On the application of the doctrine of non est factum the Court noted the defence is
“available to those who are unable to read owing to blindness or illiteracy and who
must rely on others for advice as to what they are signing” and “to those who through
no fault of their own are unable to have any understanding of the purport of a
particular document” (para 12).
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DECISION
107. The party seeking to rely upon this doctrine has a heavy burden of proof and must
show that:
(1).Firstly he believed the document to be radically different from what it was; and
(2).Secondly, as against innocent parties his failure to read and understand the
document was not due to carelessness (in this context meaning that he failed
to take “reasonable precautions in ascertaining the character of [the]
document before signing it”.
108. The High Court upheld Petelin's appeal on the grounds of non est factum. In the
course of its judgment the Court stated at p 359:
The importance which the law assigns to the act of signing and to the
protection of innocent persons who rely upon a signature is readily discerned
in the statement that the plea is one "which must necessarily be kept within
narrow limits" (Muskham Finance Ltd. v. Howard (1963) 1 QB 904, at p 912 )
and at pp 359-60:
“The class of persons who can avail themselves of the defence is limited. It is
available to those who are unable to read owing to blindness or illiteracy and
who must rely on others for advice as to what they are signing; it is also
available to those who through no fault of their own are unable to have any
understanding of the purport of a particular document. To make out the
defence a defendant must show that he signed the document in the belief that
it was radically different from what it was in fact and that, at least as against
innocent persons, his failure to read and understand it was not due to
carelessness on his part. Finally, it is accepted that there is a heavy onus on a
defendant who seeks to establish the defence”.
109. The Court noted, however, that when speaking of “carelessness” in the context of non
est factum, it was not doing so by reference to the “'tort of negligence but to a mere
failure to take reasonable precautions in ascertaining the character of a document
before signing it” (p 360).
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DECISION
110. I have already satisfied myself that the defendant had an essential understanding of
the documents he signed and he is not able to avail himself of the defence of non est
factum.
Unconscionable conduct
111. The equitable defence of unconscionable conduct also deals with transactions
between dominant and weaker parties. It also has elements common to the equitable
defences of duress and undue influence that I have already dealt with.
Unconscionable conduct is prohibited both in equity and also by statute.
112. Equity will intervene where one party has taken advantage of a '”special disability”
held by the other party such as where a person is vulnerable by reason of age,
illiteracy, lack of education or a combination of factors. The transaction need also
normally be harsh and oppressive to the weaker party. Where the defence of
unconscionable conduct is established the weaker party may choose to avoid the
transaction. In Kakavas v Crown Melbourne Limited (ACN 006 973 262) & Ors [2013]
HCA 25 the High Court dealt with the circumstances informing recourse to the defence
of unconscionable conduct in these terms (citations omitted):
[18] The invocation of the conscience of equity requires "a scrutiny of the
exact relations established between the parties" to determine "the real justice
of the case". Where an appeal is made by a plaintiff to the standards of equity
embodied in the Amadio principle, the task of the courts is to determine
whether the whole course of dealing between the parties has been such that,
as between the parties, responsibility for the plaintiff's loss should be ascribed
to unconscientious conduct on the part of the defendant. In Louth v Diprose,
Deane J explained the basis on which the conscience of equity is engaged to
apply the Amadio principle:
"The intervention of equity is not merely to relieve the plaintiff from the
consequences of his own foolishness. It is to prevent his victimization".
[19] In proceeding to consider whether equitable intervention is warranted in
this case, a number of points may be made at the outset. First, the principle
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DECISION
which the appellant invokes is not engaged by the circumstance that a
plaintiff's transaction with a defendant has resulted in loss to the plaintiff, even
loss amounting to hardship. ...
[20] Secondly, equitable intervention does not relieve a plaintiff from the
consequences of improvident transactions conducted in the ordinary and
undistinguished course of a lawful business. A plaintiff who voluntarily
engages in risky business has never been able to call upon equitable
principles to be redeemed from the coming home of risks inherent in the
business. The plaintiff must be able to point to conduct on the part of the
defendant, beyond the ordinary conduct of the business, which makes it just
to require the defendant to restore the plaintiff to his or her previous position.
113. On the question of constructive notice of special disadvantage the Court said:
[160] Even if, contrary to the findings of the primary judge, the appellant did
suffer from a psychological impairment, the issue here is whether, in all the
circumstances of the relationship between the appellant and Crown, it was
sufficiently evident to Crown that the appellant was so beset by that difficulty
that he was unable to make worthwhile decisions in his own interests while
gambling at Crown's casino. On the findings of fact made by the primary judge
as to the course of dealings between the parties, the appellant did not show
that his gambling losses were the product of the exploitation of a disability,
special to the appellant, which was evident to Crown.
[161] Equitable intervention to deprive a party of the benefit of its bargain on
the basis that it was procured by unfair exploitation of the weakness of the
other party requires proof of a predatory state of mind. Heedlessness of, or
indifference to, the best interests of the other party is not sufficient for this
purpose. The principle is not engaged by mere inadvertence, or even
indifference, to the circumstances of the other party to an arm's length
commercial transaction. Inadvertence, or indifference, falls short of the
victimisation or exploitation with which the principle is concerned.
[162] The appellant's attempt to rely upon constructive notice to supply the
want of findings of awareness on the part of Crown's employees of any
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DECISION
personal disability which affected the appellant should be rejected.
114. Reference was made in Kakavas to the well known decision of the High Court in
Commercial Bank of Australia v Amadio (1983) 151 CLR 447. The respondents, Mr
and Mrs Amadio, executed a guarantee and mortgage (as security for the guarantee)
in favour of the appellant bank. The purpose was to guarantee debts of their son's
company. Mr and Mrs Amadio were Italian migrants in their 70's, with limited English
skills, little formal education and limited (in the case of Mr Amadio) or no (in the case
of Mrs Amadio) business experience. Their son controlled a number of companies and
gave no indication of his significant debts and of arrangements he had in place with
his bank’s branch manager to deal with them. In fact, His debt was significant.
Eventually he was told by the bank that an increased overdraft required security to be
given by his parents. The Amadio’s were asked by their son to guarantee the account
and to provide security. Their son told them that the guarantee was for an amount in
the order of $50,000 and would be for a limited period of about six months. This was
false as in fact the liability was not limited to that extent. The bank manager obtained
the Amadio’s signatures on the mortgage instrument of security. The bank manager
did not provide an explanation about the document but did intervene to note that the
mortgage was not limited to a period of six months.
115. Based on the security furnished the bank paid out significant amounts on a number of
cheques and the overdraft grew significantly and quickly. The company declined and
went into liquidation. The bank demanded payment by the Amadios on the guarantee
and when it was not met served it notice to exercise the power of sale under the
mortgage.
116. The trial judge found that at the time of signing the document the Amadio's believed
that liability was limited to $50,000 and for a period of six months. This belief was
induced by their son's representations and, the trial judge found, they would not have
signed the document had they known its true effect. By majority (Justices Mason,
Wilson and Deane JJ) the Court held the Amadio's suffered from a special
disadvantage vis-a-vis the bank making it unconscionable for it to rely on the
guarantee Gibbs CJ held (obiter) that there was no unconscionable conduct but that
the guarantee could be set aside on the basis of the bank's misrepresentation. Justice
Dawson dissented.
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DECISION
117. Although it was not necessary for Gibbs CJ to reach a concluded decision on this
claim, given his finding in relation to misrepresentation, he nonetheless expressed the
view that this was not a case of unconscionable conduct. His Honour said:
[18] In my opinion it should not be held that this was the case of an
unconscientious bargain of the kind which equity would set aside, even in the
absence of fraud, misrepresentation or undue influence. Of course, the bank
and the respondents did not meet on equal terms, but that circumstance alone
does not call for the intervention of equity, .... A transaction will be
unconscientious within the meaning of the relevant equitable principles only if
the party seeking to enforce the transaction has taken unfair advantage of his
own superior bargaining power, or of the position of disadvantage in which the
other party was placed. The principle of equity applies "whenever one party to
a transaction is at a special disadvantage in dealing with the other party
because illness, ignorance, inexperience, impaired faculties, financial need or
other circumstances affect his ability to conserve his own interests, and the
other party unconscientiously takes advantage of the opportunity thus placed
in his hands": Blomley v. Ryan [1956] HCA 81; (1956) 99 CLR 362, at p 415,
per Kitto J.
118. In the course of his judgment Mason J discussed the distinction and overlap between
various equitable claims. It is a useful statement of law.
[2] Historically, courts have exercised jurisdiction to set aside contracts and
other dealings on a variety of equitable grounds. They include fraud,
misrepresentation,
breach
of
fiduciary
duty,
undue
influence
and
unconscionable conduct. In one sense they all constitute species of
unconscionable conduct on the part of a party who stands to receive a benefit
under a transaction which, in the eye of equity, cannot be enforced because to
do so would be inconsistent with equity and good conscience. But relief on the
ground of "unconscionable conduct" is usually taken to refer to the class of
case in which a party makes unconscientious use of his superior position or
bargaining power to the detriment of a party who suffers from some special
disability or is placed in some special situation of disadvantage, e.g., a
catching bargain with an expectant heir or an unfair contract made by taking
advantage of a person who is seriously affected by intoxicating drink.
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DECISION
Although unconscionable conduct in this narrow sense bears some
resemblance to the doctrine of undue influence, there is a difference between
the two. In the latter the will of the innocent party is not independent and
voluntary because it is overborne. In the former the will of the innocent party,
even if independent and voluntary, is the result of the disadvantageous
position in which he is placed and of the other party unconscientiously taking
advantage of that position.
[3] There is no reason for thinking that the two remedies are mutually
exclusive in the sense that only one of them is available in a particular
situation to the exclusion of the other. Relief on the ground of unconscionable
conduct will be granted when unconscientious advantage is taken of an
innocent party whose will is overborne so that it is not independent and
voluntary, just as it will be granted when such advantage is taken of an
innocent party who, though not deprived of an independent and voluntary will,
is unable to make a worthwhile judgment as to what is in his best interest. (at
p461)
[4] It goes almost without saying that it is impossible to describe definitively all
the situations in which relief will be granted on the ground of unconscionable
conduct. As Fullagar J said in Blomley v Ryan...:
"The circumstances adversely affecting a party, which may induce a
court of equity either to refuse its aid or to set a transaction aside, are
of great variety and can hardly be satisfactorily classified. Among them
are poverty or need of any kind, sickness, age, sex, infirmity of body or
mind, drunkenness, illiteracy or lack of education, lack of assistance or
explanation where assistance or explanation is necessary. The
common characteristic seems to be that they have the effect of placing
one party at a serious disadvantage vis-a-vis the other."
[5] Likewise Kitto J (1956) 99 CLR, at p 415 spoke of it as "a well-known head
of equity" which ". . . applies whenever one party to a transaction is at a
special disadvantage in dealing with the other party because illness,
ignorance,
inexperience,
impaired
faculties,
financial
need
or
other
circumstances affect his ability to conserve his own interests, and the other
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DECISION
party unconscientiously takes advantage of the opportunity thus placed in his
hands".
[6] ... the situations mentioned are no more than particular exemplifications of
an underlying general principle which may be invoked whenever one party by
reason of some condition of circumstance is placed at a special disadvantage
vis-a-vis another and unfair or unconscientious advantage is then taken of the
opportunity thereby created. I qualify the word "disadvantage" by the adjective
"special" in order to disavow any suggestion that the principle applies
whenever there is some difference in the bargaining power of the parties and
in order to emphasize that the disabling condition or circumstance is one
which seriously affects the ability of the innocent party to make a judgment as
to his own best interests, when the other party knows or ought to know of the
existence of that condition or circumstance and of its effect on the innocent
party.
...
Was the defendant the victim of unconscionable conduct by the plaintiff?
119. I have already concluded that the defendant was not the subject of legal duress by the
plaintiff or that a special relationship existed between the plaintiff and the defendant
such as to give rise to the rebuttable presumption of undue influence in the entering of
the agreement for sale of the noodle bar and restaurant. It is a necessary concomitant
of these findings in regard to these defences that I am satisfied that the defendant’s
will was independent and voluntary as those concepts are understood in law.
However, my findings of fact, applicable to exclude such of those defences as already
identified, does not exclude them as being relevant to or determinative of the equitable
defence of unconscionable conduct. In regard to unconscionable conduct my inquiry is
very different because although the consideration of the defence is predicated on the
defendant’s will as independent and voluntary, the issue is whether the exercise of it
was the result of the disadvantageous position in which he was placed and of the
plaintiff taking advantage of that position unconscientiously.
120. Adapting the language of Kitto J, I am satisfied that on the facts disclosed the
defendant was at a special disadvantage in all of his dealings with the plaintiff. That
special disadvantage related to his limited English comprehension, his immigration
status that relevantly always was in the hands of the plaintiff in his guise as a
33
DECISION
migration agent, the lack of any financial disclosure related to the business, the lack of
the provision of a translation of the sale of business agreements from the English to
the Korean, and the sponsorship by the plaintiff of the defendant under the 457 visa
programme
121. I am also satisfied on the balance of probabilities that the plaintiff did not engage in
honest and transparent conduct towards the defendant. I cannot reconcile the truth of
the facts asserted by the plaintiff in this proceeding and his testimony with the
representations made to the Department of Immigration concerning the existing status
both of his business and the defendant’s position within the business that are
contained in the documents the defendant produced.
122. The Promise to Pay and clarification documents came into existence at a point in time
at which I am satisfied the plaintiff had determined to remove the defendant from the
business for default and that they were not created to benefit the defendant such that
in the event that the business was resold for an amount greater than the debt stated
that the debt allegedly outstanding by the defendant would be extinguished.
123. The documents that the plaintiff required the defendant to sign came about in the
context of their physical altercation, statements that I am prepared to find were made
by the plaintiff about the defendant’s ongoing migration status which undoubtedly
would have been telling in the mind of the defendant. They were made after all by the
person who not only held the upper hand commercially but who was also the person
who had prosecuted the plaintiff’s immigration applications and had through the
representations made to the Department of Immigration been the person whose
sponsorship facilitated his continuation in Australia.
124. I do not regard it as a satisfactory or sufficient answer to rely on the fact that the
agreements were all entered subsequent to the date that the 457 visa had been
approved. The significant role the plaintiff played not just as a business broker but also
as migration agent is in my judgement very relevant.
125. Adapting the language used by Kitto J, I am satisfied on the disclosed facts and
having considered the account of matters given by the principal protagonists and also
by having regard to the competing accounts of events and the corroboration of the
chronological account of significant matters by the material disclosed in the
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DECISION
defendant’s exhibits, that the defendant was at all material times at a special
disadvantage in dealing with the plaintiff because of his migration status, his limited
proficiency with English language comprehension, ignorance as to the matters that
should reasonably have been disclosed to him regarding the business he purchased
and the absence of independent legal or financial advice. In consequence of the
combination of these facts and the facts that I have earlier identified, I am satisfied that
the defendant had an impaired ability to conserve his own interests, and I am satisfied
the plaintiff took advantage of the opportunity thus placed in his hands by the
defendant’s reliance on the plaintiff to dispose of the business to the defendant for an
amount that he had been unable to otherwise secure from any other purchaser. None
of the plaintiff’s conduct detailed by me was fair, and the creation of and recourse to
documents, Exhibits P5 and P6, said to have been entered into with the intention of
exculpating the defendant from debt but which did not on their terms provide as much
but instead left open the plaintiff pursuing the defendant regardless of any other sale
of the business further satisfies me about my conclusions. The plaintiff’s conduct
attendant his dealings with the defendant are irreconcilable with what is right or
reasonable. I am satisfied that the plaintiff made a considered decision that was quite
simply not proper or right conduct and which deserves the opprobrium of a finding of
unconscionability.
126. I also add that otherwise than by reference to these conclusions, I would not have
been satisfied that the plaintiff had established the quantum of its claim.
127. The agreements sued upon are unenforceable and the plaintiff’s claim for the reasons
stated must fail.
128. I reserve liberty to the parties in relation to the form of any final orders required to give
effect to my decision.
ORDERS:
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DECISION