Adamson v Ede

[2009] NSWCA 403

New South Wales

Court of Appeal

CITATION:	ADAMSON v EDE [2009] NSWCA 403
HEARING DATE(S):	26 August 2009
JUDGMENT DATE:	10 December 2009
JUDGMENT OF:	Allsop P at 1; Basten JA at 1; Sackville AJA at 1
DECISION:	(1) Extend the time for filing the notice of appeal to 1 April 2009. (2) Dismiss the appeal. (3) Order the appellant to pay the respondent’s costs of the proceedings in this Court.
CATCHWORDS:	ADMINISTRATIVE LAW – procedural fairness – hearing rule – cross-summons filed prior to hearing – whether reasonable opportunity to contest cross-summons – inconsistent pleadings – concession of existence of lease by claim that it should be set aside – denial of existence of lease – whether prejudice suffered by the appellant - COSTS – general rule – cross-summons partly successful – costs awarded against cross-defendant – serious allegation of improper conduct – relief in cross-summons awarded without examination of allegation – no finding of misconduct in making allegation – whether grounds for interfering with exercise of discretion - LANDLORD AND TENANT – leases and tenancy agreements – special conditions of lease – conditions highly favourable to tenant – tenant to become beneficial owner of two-thirds interest in leased property – tenant entitled to rental rebates for various services – whether conditions unjust in the circumstances – Contracts Review Act 1980 (NSW), s 7(1) - PROCEDURE – application to re-open hearing – application for equitable set-off and defence – not field or served prior to day of judgment – whether application ought to have been entertained - WORDS AND PHRASES – "residential tenancy agreement" – "special conditions"
LEGISLATION CITED:	Contracts Review Act 1980 (NSW), s 7 Fair Trading Act 1987 (NSW), ss 42, 72 Residential Tenancies Act 1987 (NSW), s 9 Residential Tenancies (Residential Premises) Regulation 1995 (NSW)
CATEGORY:	Principal judgment
CASES CITED:	ACN 097 590 817 Pty Ltd as Trustee of the ACN Trust v Ede; Adamson v Ede [2007] NSWSC 1384 Adamson v Ede [2008] NSWSC 1143 Adamson v Ede [2009] NSWCA 379 Brailsford v Tobie [1889] 10 ALT 194 CGU Insurance Ltd v Lawless [2008] VSCA 38 Hermann v Charny [1976] 1 NSWLR 261 Issitch v Worrell [2000] FCA 477; 172 ALR 586 Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343 Parker v McKenna (1874) 10 Ch App 96 Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41 Surfing Hardware International Holdings Pty Ltd v McCausland [2008] FCA 1522
PARTIES:	Christopher Michael Adamson - Appellant Kenneth John Ede - Respondent
FILE NUMBER(S):	CA 40107/09
COUNSEL:	Appellant Self-represented J Horowitz - Respondent
SOLICITORS:	Appellant Self-represented Horowitz and Blinsky - Respondent
LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 11862/08
LOWER COURT JUDICIAL OFFICER:	Harrison J
LOWER COURT DATE OF DECISION:	28 November 2008

CA 40107/09
SC 11862/08

ALLSOP P
BASTEN JA
SACKVILLE AJA

10 December 2009

Christopher Michael ADAMSON v Kenneth John EDE

Headnote

The respondent is the owner of a property at Nabiac ("the premises"). On 31 July 2001 he executed a residential tenancy agreement ("the lease") in favour of the appellant, which was expressed to run for a period of three years commencing on 30 June 2003 with two options to renew for further terms of three years each. The appellant has been in possession of the premises since about April 2003, and has never paid rent as he claims that the Special Conditions of the lease relieve him of the obligation to do so.

On 23 April 2008 the appellant commenced proceedings in the Common Law Division seeking a "permanent injunction" restraining the respondent from retaking possession of the premises. The respondent filed a cross-summons seeking declarations to the effect that the lease was void and should not be enforced. Other, related sets of proceedings were on foot between the two parties, including one which had been the subject of a judgment by Windeyer J in the Common Law Division. Harrison J dismissed the summons and in response to the cross-summons, made declarations that certain parts of the lease were unjust within the meaning of s 7(1) of the Contracts Review Act 1980 (NSW).

The issues for determination on appeal were:

(i) whether the cross-summons ought to have been filed in the proceedings before Windeyer J;

(ii) whether aspects of the respondent's factual case were impermissibly inconsistent;

(iii) whether the appellant had been denied procedural fairness in relation to the cross-summons;

(iv) whether in relation to the cross-summons, the trial judge made appropriate findings and ordered appropriate relief under s 7(1) of the Contracts Review Act;

(v) whether inferences drawn by the trial judge were unreasonable having regard to the evidence;

(vi) whether the entire costs of the cross-summons should have been awarded against the appellant, and

(vii) whether the trial judge erred in dismissing the motion to re-open proceedings.

The Court held, dismissing the appeal:

In relation to (i)

1. There was no abuse of process in the respondent failing to challenge the validity of the lease in an earlier set of proceedings in which no reliance had been placed upon it: [20].

In relation to (ii)

2. No inconsistency arose in the respondent's factual pleadings and supporting affidavit evidence such as to render the respondent's claims impermissible: [33]–[34].

Issitch v Worrell [2000] FCA 477; 172 ALR 586; Surfing Hardware International Holdings Pty Ltd v McCausland [2008] FCA 1522; 171 FCR 533; CGU Insurance Ltd v Lawless [2008] VSCA 38; 15 ANZ Ins Cas ¶ 61-755; Brailsford v Tobie [1889] 10 ALT 194, referred to.

In relation to (iii)

3. Claims for relief based upon s 7(1) of the Contracts Review Act were foregrounded in the cross-summons well before the time of hearing, and the appellant suffered no prejudice from the trial judge's approach to consideration of the issue: [27]–[28].

In relation to (iv)

4. The trial judge correctly characterised as unjust the nature of certain of the special conditions. In the circumstances, there was no need for a distinction between a finding of unjustness and a decision as to the form of relief to be explicitly identified and acted upon. The findings of unjustness having been upheld, the relief granted was appropriate: [38]–[49].

Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26, 639; Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 252 ALR 55, cited.

In relation to (v)

5. The challenged inferences and findings were a matter for the trial judge who observed the parties in the course of the hearing and in giving evidence. None of the challenged findings was shown to be erroneous: [52]–[60].

In relation to (vi)

6. The allegation of dishonourable conduct, ultimately not upheld by the trial judge, was nonetheless neither made in bad faith nor summarily dismissed. In circumstances where no misconduct was found on the part of the respondent, no basis exists for interfering with the trial judge's exercise of discretion: [70]–[72].

Hermann v Charny [1976] 1 NSWLR 261; Parker v McKenna (1874) 10 Ch App 96, referred to.

In relation to (vii)

7. Both the appellant's conduct and the broader circumstances of the proceedings provided sound reason for the trial judge's refusal to hear the motion to re-open: [74]–[78].

CA 40107/09
SC 11862/08

ALLSOP P
BASTEN JA
SACKVILLE AJA

10 December 2009

Christopher Michael ADAMSON v Kenneth John EDE

Judgment

1 JUDGMENT of THE COURT delivered by BASTEN JA: The respondent was, on 31 July 2001, the owner of a property at Lot 106, Trapyard Road, Nabiac in northern New South Wales (“premises”). He executed a residential tenancy agreement of the premises (“the lease”) in favour of the appellant, which was expressed to run for a period of three years commencing on 30 June 2003 with two options to renew for further terms of three years each.

2 The appellant, who is a solicitor, has been in possession of the premises since about April 2003. The appellant has never paid rent to the respondent as he claims that the Special Conditions of the lease relieve him of the obligation to do so.

3 According to the trial Judge, the proceedings were prompted by a letter of 21 April 2008 from the respondent’s solicitor to the appellant. The letter gave notice to the appellant that he was required to vacate the premises forthwith and that, if he did not leave by 28 April 2008, the respondent would retake possession.

4 On 23 April 2008 the appellant commenced proceedings in the Supreme Court seeking a “permanent injunction” restraining the respondent from “taking or attempting to retake possession of the premises … except in accordance with a judgment, warrant or order of a court”. (The appellant was “the plaintiff” in this proceeding and was referred to as such by the trial judge in his judgment, parts of which are extracted below.)

5 The respondent filed a cross-summons seeking declarations to the effect that the lease was void and should not be enforced. (He was referred to by the trial judge as “the defendant”.)

6 In October 2008 the matter came on for hearing before Harrison J in the Common Law Division. On 31 October 2008 his Honour handed down judgment dismissing the summons and making declarations that parts of the lease were unjust within the meaning of s 7(1) of the Contracts Review Act 1980 (NSW), with the result that special conditions 1-8 and 12 were declared void: Adamson v Ede [2008] NSWSC 1143. The appellant was ordered to pay the costs of the proceedings in the Common Law Division.

7 The notice of appeal in this Court contained 24 grounds, none of which identifies the errors alleged in the judgment below with any precision. Pursuant to directions given by Macfarlan JA on 3 August 2009, the appellant, who appears for himself, prepared written submissions which did not address the individual grounds of appeal, but were divided into nine topics which appear to have encompassed all of the arguments that he sought to place before this Court. Indeed, in oral submissions he addressed some but not all of the topics raised in the written submissions. It is desirable to identify as the issues raised on the appeal each of the topics in the written submissions, which will be addressed below:

(1) procedural unfairness including surprise, ambush, approbation and reprobation, estoppel and election;
(2) failure to hear motion to reopen;
(3) costs;
(4) res judicata;
(5) reliance on judgment of Windeyer J in SC 6285/03;
(6) unreasonable inferences;
(7) failure to make just orders under the Contracts Review Act ;
(8) leave for extension of time;
(9) leave to adduce further evidence.

8 In a supplementary judgment delivered on 28 November 2008 (unrep, p 4) Harrison J referred to a document which had been provided to him containing schedules of both current and concluded court proceedings between the parties and interests associated with each. His Honour continued:

“There appear to be approximately 15 sets of proceedings in the first category and the same amount in the second. These include proceedings in as disparate jurisdictions as the Court of Appeal, this Court, the Family Court, the Federal Magistrates Court, the Federal Court, the District Court and Local Courts in Taree, Forster and in Sydney.”

9 His Honour also referred to “this extraordinary saga of litigation”, a description with which it is hard to cavil. It is, accordingly, not surprising that the background to these proceedings has been articulated in numerous judgments, including that of Harrison J in the Court below and in a judgment of Windeyer J upon which Harrison J drew: see ACN 097 590 817 Pty Ltd as Trustee of the ACN Trust v Ede; Adamson v Ede [2007] NSWSC 1384. In an appeal from the last-mentioned decision, the circumstances were reiterated in the recent judgment of this Court: Adamson v Ede [2009] NSWCA 379. It is unnecessary to recount more of the facts than are necessary for an appreciation of the issues raised on the appeal. These facts may be identified in the course of dealing with the topics covering the disparate grounds of appeal.

Topic 9: leave to adduce further evidence

10 It is convenient to commence by disposing of the ninth topic identified by the appellant in his written submissions. It was, in effect, an application for leave to adduce further evidence at the hearing of the appeal. As it turned out, the evidence was largely of a procedural nature and was designed to support the complaint about a failure of Harrison J to permit the appellant to file and serve a motion to reopen the proceedings on the day on which judgment below was delivered, namely 31 October 2008. The material was admitted at the hearing of the appeal and will be considered below under topic two.

Topic 8: extension of time

11 In the judgment delivered on 31 October 2008 Harrison J concluded by stating that he would “propose” three orders and agreed to hear the parties on the question of costs. In his judgment of 28 November 2008 his Honour noted that he had, on 31 October, “invited the parties to bring in short minutes of order to give effect to my conclusions”. The orders made were included in his judgment of that date. A minute of the orders, made on 28 November 2008, was prepared and executed in the Registry on 8 December 2008. According to the notice of appeal, a notice of intention to appeal was filed within time, on 24 December 2008. However the appeal was not filed within three months of the material date (a period which would have expired on 28 February 2009) but on 1 April 2009.

12 The appellant has given reasons for the delay, which explained without justifying it. On one view, limited leniency should be offered to a litigant in person who is a solicitor, particularly where the solicitor’s conduct as such is the subject of serious accusations. Nevertheless, given the history of disputation, it is unlikely that any real prejudice was caused to the respondent through the delay and, when the matter was raised at the hearing of the appeal, counsel for the respondent was content to leave it as “a matter for the court whether time is extended”, while noting that it might have a consequence with respect to costs.

13 The matter having been fully agitated before the Court, it is appropriate to extend the time for filing of the notice of appeal until 1 April 2009, as sought by the appellant.

Topic 5: reliance on judgment of Windeyer J

14 Topic five raised by the appellant complained of the references made by Harrison J to the judgment of Windeyer J in the earlier proceedings in the Equity Division, including lengthy extracts from the earlier judgment. The appellant was, however, unable to identify any respect in which the judgment of Harrison J might have been affected by extracting passages from the earlier judgment. The passages in question were entirely devoted to a statement of factual background. As indicated above, it is unnecessary for each Court dealing with similar material to restate the material if it can appropriately be done by reference to another judgment.

15 Presumably the basis of the appellant’s concern was that he had, in substance, been unsuccessful before Windeyer J. That might, in particular circumstances, depend upon adverse factual findings or upon a view of the facts which might be open to reconsideration in another case. The passages relied upon by Harrison J were not of that character, in either respect. There is no substance in the ground sought to be raised under topic five. Indeed, it had no immediate point of reference in the notice of appeal.

Topic 4: res judicata

16 Topic four, although headed “res judicata” is in substance a complaint that the respondent’s cross-claim should not have been allowed to proceed, on the basis that it should properly have been raised in the proceedings before Windeyer J.

17 The nature of the proceedings before Windeyer J was adequately set out in his Honour’s judgment and has been explained in the earlier appeal in this Court. The proceedings concerned a claimed interest of the trust company controlled by Mr Adamson, and of Mr Adamson himself, in the premises. The documents relied upon by the plaintiffs in those proceedings did not include the lease. Accordingly, there was no cause for the respondent to put in issue complaints he may have had in respect of the lease. Its relevance was peripheral, being one of a number of documents executed on 31 July 2001, the others being the basis of the claim of Mr Adamson’s interests in those proceedings.

18 As Harrison J noted, there was a degree of inconsistency in the position taken by the appellant, namely that he could commence fresh proceedings to agitate his entitlement to remain on the property under the lease, but that the respondent could not, in opposition to that claim, challenge the validity of the lease or parts thereof: at [24]. The appellant’s response to that proposition was that, when the proceedings came before Windeyer J, there was no threat to his entitlement under the residential tenancy agreement. That threat only arose after those proceedings by way of a letter dated 21 April 2008 from the respondent’s solicitor advising the appellant that he was a trespasser and was required to vacate the premises by 28 April 2008: the letter appears in the judgment below at [7].

19 The factual proposition may be conceded, but it does not support the legal contention. The fact remained that the appellant had not earlier sought to rely upon the residential tenancy agreement and, accordingly, once he did so, the respondent was entitled to take issue with its validity.

20 There was no abuse of process in the respondent failing to challenge the validity of the residential tenancy agreement in an earlier round of the litigation where no reliance had been placed upon it. The ground of appeal must be rejected.

Topic 1: procedural unfairness – surprise, ambush, approbation and reprobation, estoppel and election

21 Despite the various ways in which the first topic was characterised, it was primarily based on the alleged inconsistency between a claim that there was no lease (because the appellant had obtained the respondent’s signature on a blank form) and the claim that the respondent was entitled to have the terms of the document varied pursuant to the Contracts Review Act (which assumed the existence of an otherwise valid lease). Secondly, the appellant alleged that the Contracts Review Act claims were raised so late in the proceedings that the appellant had no reasonable opportunity to contradict them.

22 The proceedings were commenced by summons filed by the appellant on 23 April 2008, which sought to prevent any attempt by the respondent to retake possession of the premises, the appellant’s entitlement being identified as that arising under the residential tenancy agreement. A cross-summons, filed on 23 May 2008 commenced with a claim for a declaration that the lease not be enforced pursuant to s 7(1) of the Contracts Review Act. It asserted that the lease was procured through undue influence, unconscionable conduct, breach of fiduciary duty and misleading and deceptive conduct in contravention of s 42 of the Fair Trading Act 1987 (NSW) and sought, in the alternative, that the lease be “set aside” pursuant to either s 7 of the Contracts Review Act, or s 72 of the Fair Trading Act.

23 On 22 May 2008 the respondent swore an affidavit in support of the cross-summons and in opposition to the appellant’s proceedings. He described the circumstances in which the lease came to be signed by him. He also set out his education and experience at the date on which the lease was signed. He stated that the appellant did not discuss the special conditions with him at the time of signing and further stated that “there was no handwriting on the document when I signed it”. He asserted that he did not read the document because he did not have his glasses with him and the appellant merely told him to sign where he (the appellant) indicated. The respondent stated that he thought the lease was to protect his interests in the property in relation to his former wife, who was then living in the property and would be allowed to stay until she had been paid for her share pursuant to a Family Court settlement.

24 The primary judge addressed the form of the lease and the circumstances of its execution by asking:

(a) Where was the lease signed and who was present?
(b) What did the lease contain when it was signed?
(c) Did the plaintiff explain the Special Conditions in the lease to the defendant?
(d) What did the defendant think he was signing?

25 His Honour answered some of these questions favourably to the respondent (the defendant below), but not all. He held at [48]:

“In these circumstances I find that the lease was executed by the defendant in the presence of the plaintiff and Mr Faddoul. It contained all of the handwriting that is present in the copy of the document that is annexed to the plaintiff's affidavit. The plaintiff did not explain the special conditions of the lease to the defendant at any time. The defendant did not think that the lease was a lease to his wife but in fact understood it to be a lease of the property to the plaintiff.”

26 His Honour then proceeded to deal with the cross-claim and in particular special conditions 1-13, which were the handwritten conditions included in the document prepared by the appellant. His Honour concluded that all of those special conditions, apart from 9, 10, 11 and 13, were unjust in the circumstances relating to the lease at the time it was made and that, accordingly, the respondent was entitled to an order pursuant to s 7(1) of the Contracts Review Act: at [65]. His Honour was not persuaded, however, that, once the unjust provisions were removed, the lease was unjust: at [70]. His Honour also rejected the respondent’s claims that the appellant had acted in breach of his fiduciary obligations as a solicitor and had unduly influenced the respondent in relation to the execution of the lease: at [71].

27 The complaint of lack of reasonable opportunity to contest the cross-claim must be rejected. As noted above, claims for relief based on s 7(1) of the Contracts Review Act were at the forefront of the cross-summons filed by the respondent one month after the filing of the summons and five months before the hearing of the proceedings. The appellant sought to place some weight upon the grant of leave to file an amended cross-summons at the hearing, but the only purpose of that document was to add as a party to the proceedings the ACN Trust, which was noted on the lease as a tenant and was therefore a necessary party to any dispute concerning the validity of the lease or parts thereof. (Indeed it should have been a co-plaintiff in the primary proceeding.)

28 Moreover, the trial judge was at pains to ensure that the appellant, even though he is a solicitor, understood the case made against him under the Contracts Review Act. His Honour pointed out that the appellant had not suggested, while cross-examining the respondent, that he (the appellant) had explained the effect of the special conditions before the respondent signed the lease. Upon the trial judge being told by the appellant that it was part of his case that he had provided an explanation of the special conditions to the respondent, his Honour permitted the appellant to reopen his case to give evidence to that effect. (His Honour also provided an opportunity for the respondent to give evidence in response to the appellant on this issue.)

29 The primary basis of challenge was that there was an inherent inconsistency between the concession in the cross-claim that the lease existed, but should be set aside because it was unjust and the denial of the existence of a lease. That approach was said to be inconsistent with well-established principle laid down in Brailsford v Tobie [1889] 10 ALT 194 at 195 (Holroyd J).

30 Brailsford is an example of a case in which a party has not been allowed to plead two inconsistent sets of facts where he or she knows one set of facts to be false. However, the principle, as explained in the Full Court of the Federal Court in Issitch v Worrell [2000] FCA 477; 172 ALR 586 at [32], (Drummond J, Spender and Katz JJ agreeing) is that a party can “as a general rule plead inconsistent sets of facts in the alternative …, but not where one of those sets must be known to the party to be false”. That principle was applied by Foster J in Surfing Hardware International Holdings Pty Ltd v McCausland [2008] FCA 1522; 171 FCR 533 at [54]-[59].

31 In CGU Insurance Ltd v Lawless [2008] VSCA 38; 15 ANZ Ins Cas ¶61-755, the Victorian Court of Appeal (Maxwell P, Neave and Redlich JJA) considered a case in which a plaintiff (a 10 year old boy at the time of the accident) was injured when his hand was caught between a post driver, operated by his grandfather (the respondent) and a fence post. The respondent claimed that, whilst operating the tractor-driven driver, he had no knowledge that the boy had approached the fence post as it was being driven into the ground. He claimed indemnity under an insurance policy from the appellant. The appellant argued that it was not required to indemnify him because he had not taken “reasonable precautions” and thus deliberately exposed the plaintiff to the danger of injury. On appeal, the appellant argued that, having defended the plaintiff’s claim on the basis that he did not know where the plaintiff was at the relevant time, the respondent could not then assert that he had taken reasonable precautions for the plaintiff’s safety. In dismissing this argument, Redlich JA (with whom Maxwell P relevantly and Neave JA agreed) stated at [27]:

“In support of the contention that the respondent had deprived himself of the ability to prove that he took reasonable precautions, as he was not entitled to have the benefit of an alternative case which he had positively and expressly disclaimed, counsel for CGU relied upon the cases of Issitch v Worrell ; JC Decaux Pty Ltd v Adshel Street Furniture Pty Ltd [[2000] FCA 1118; 178 ALR 339 at 343]; Brailsford v Tobie ; and Suvaal v Cessnock City Council [[2003] HCA 41; 77 ALJR 1449]. The first three cases concern a general pleading rule that prohibits a party from pleading … inconsistent sets of facts in the alternative where one of those sets of facts must be known to the party to be false.”

32 No pleading principle applied in the present case, nor was it suggested at trial that the cross-claim should be struck out in part or in whole for this reason. In truth, there was no inconsistency in the pleading, in part because there was no pleading. The appropriate form of relief would depend upon relevant findings of fact.

33 Although relying on the pleading cases, the appellant also put his argument on the basis that the respondent should not have been allowed to put on inconsistent factual claims in his affidavit. Once reduced to that proposition, different considerations arise. For example, there was no necessary inconsistency between factual statements that there was no handwriting on the document which the respondent signed and that there was no discussion between the appellant and the respondent about the matters which appeared in the handwritten special conditions contained in the copy of the lease tendered in Court. Similarly, there was no inconsistency between the assertion that there was no handwriting on the document and the respondent’s assertions as to his education, experience and lack of legal training.

34 One reason why the respondent’s claim that the handwriting was not on the document when he signed it was rejected was that he was only asked to sign the final page of the lease (the execution clause) and to place his initials on the first page. The handwritten material did not appear on either of those pages and, accordingly, the respondent was unable to satisfy the trial judge that the handwritten material was absent when he signed the lease. Indeed, his evidence in respect of the handwriting was, expressed more precisely, that he did not see any handwriting on the document when he signed it. Even if he had given evidence (not contained in the affidavit) that he had reason to believe that the handwritten pages were not there, for example because he turned over every page of the document in front of him, that evidence would not have been inconsistent with the evidence of lack of explanation and as to his experience and education.

35 The challenge is without substance and must be dismissed.

Topic 7: orders under Contracts Review Act

36 On the basis that relief was available to the respondent under the Contracts Review Act, the appellant nevertheless challenged the findings with respect to each of the special conditions said by his Honour to have been unjust.

37 The first two special conditions involved acknowledgments by the respondent that the trust was beneficially entitled to two-thirds of the rent, that the appellant “will account direct to the ACN Trust for such sum” and that, following subdivision, ACN Trust will be “sole landlord”.

38 Harrison J noted that to describe one of two tenants as in fact the beneficial owner of a two-thirds interest in the land and to foreshadow circumstances in which it would become the sole beneficial owner of the land was a curious provision to have in a lease which nominated the respondent as the landlord. The substance of the appellant’s complaint in relation to this finding was that the conditions reflected the position which was sought to be made good in the proceedings before Windeyer J and, his Honour having rejected that position, on appeal. At the very least, the appellant submitted, a finding with respect to these special conditions should have awaited the outcome of the first appeal. However, the legal issue could not have been re-litigated before Harrison J and his Honour was, accordingly, entitled to act on the basis that the decision of Windeyer J was correct. (Even if his Honour had erred in that respect, the dismissal of the appellant’s appeal from the judgment of Windeyer J means that no substantial miscarriage of justice resulted.)

39 Similar considerations applied in relation to special condition 5. Harrison J described this condition as “almost incomprehensible” and “probably … unenforceable”: at [56]. It commenced:

“5. The tenant shall have the right from the date hereof to all manner of building work on the premises and the grounds including demolitions, alterations, additions and new buildings…. Such work to be at the sole discretion of the tenant. The tenant shall as against the ACN Trust be entitled to a rental rebate of $50,000 for the cost of such work including an allowance for the tenant’s [sic] own time.”

40 The characterisation of this provision by the primary judge was not inapt. In the course of the appeal, the appellant was unable to provide any coherent construction of the third sentence in the condition. He was reduced to arguing that the error on the part of the trial judge was in failing either to remove that sentence or to tailor the appropriate relief so as to make the underlying purpose of this sentence clear. However, this suggestion ignored the fact that the appellant had, in substance, reserved to himself (as tenant) the owner’s right to carry out works on the land at his sole discretion and (presumably) to set off the whole of the cost against so much of the rent as was supposedly payable to ACN Trust, his co-tenant and a trust under his control.

41 Special condition 3 stated that the appellant was entitled to be the caretaker/manager of the property and thus entitled to a rebate of rent of “$16 per hour net plus disbursements”. Of this clause, the primary judge said that it might have been “unexceptionable standing alone” but that its significance derived “more from its place in what amounts to a suite of special conditions that provides several bases to the plaintiff for practical purposes to avoid the payment of rent”: (at [54]).

42 Special condition 4 conferred on the appellant the right to undertake “the handling and carriage of the subdivision” and to be able to set off against the rental his charges calculated at the rate of “$60 per hour net plus disbursements for such related work from the date hereof”.

43 Special condition 6 allowed the appellant a “rent rebate” for all unpaid legal fees owing by the respondent to the appellant, “whether past or future”.

44 Special condition 7 involved the conferral on the appellant of a power of attorney to do all things “[f]or the purposes of this tenancy and the above clauses where necessary or convenient to do so”. On one view, that might have been seen as incidental to the role of caretaker or manager of the property, but it clearly went further than that. The primary judge considered that “its inclusion in the lease was just another attempt by the [appellant] to wrest control of the property from the [respondent] in a way that effectively neutralised the performance by the appellant of the only onerous obligation imposed on him by the lease”: at [58]. The obligation to which his Honour was referring was presumably the payment of rent and the power of attorney was treated as a mechanism for giving effect to the conduct of the appellant which would give rise to a rebate from time to time. Again, the characterisation by the primary judge was appropriate.

45 Special condition 8 authorised the tenant to sub-let or assign the tenancy without the respondent’s consent, by giving written notice to him. As the primary judge noted, that condition was inconsistent with cl 21 of the standard form of agreement. The standard form of agreement was in accordance with Sch 1 to the Residential Tenancies (Residential Premises) Regulation 1995 (NSW) as then in force. The parties appear to have assumed that the Residential Tenancies Act 1987 (NSW) applied. In accordance with the terms of the Residential Tenancies Act, the terms contained in the prescribed standard form cannot be varied: s 9(3). It appears that the primary judge considered that the clause may have been invalid for that reason, a conclusion which has not been shown to be erroneous on the appeal.

46 The final clause found to be unjust was special condition 12. That clause provided that, in the event of termination of the tenancy, the tenant would be entitled “to recover as a debt due and payable the value of any work done or disbursements under clauses 3, 4 or 5” and conferred on the tenant a caveatable interest over the land to secure such debts.

47 As the primary judge pointed out, this special condition appeared to confer a right to recover such amounts, even in circumstances where there had been a rebate of rent in respect of the amounts. Whether that construction should ultimately be accepted is inconsequential; once the earlier clauses have gone, it follows that clause 12 has no work to do and is, at best, inutile and at worst, unjust.

48 Finally, on this topic, the appellant contended that the primary judge failed to distinguish the two steps involved in a claim under the Contracts Review Act, namely the finding that the contract was unjust and a decision as to what relief should be granted: see Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26,639 at [34]-[36] (Spigelman CJ) and [109]; Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 252 ALR 55 at [87] (Campbell JA, Hodgson and McColl JJA agreeing). The premise underlying the submission should be accepted, but it is not clear upon what basis the appellant suggested that the primary judge had failed to draw the distinction. It is true that his Honour, having held that the special conditions identified by him were unjust, continued in the following sentence saying that the respondent was “entitled to an order pursuant to s 7(1)” of the Contracts Review Act: at [65]. His Honour then granted the parties an opportunity to be heard on the form of the order, and as to the paragraph of that provision under which it was appropriate to make an order.

49 It is arguable that his Honour was satisfied that the basis for relief having been made out, some form of relief should follow. That may not always be the case, but no basis supporting a different conclusion arose in this case, unless it were the desirability of awaiting the outcome of the appeal from the judgment of Windeyer J. Ultimately, none of these issues has substance; the judgment of Windeyer J having been upheld, the relief granted was entirely appropriate in the circumstances of the case.

Topic 6: unreasonable inferences

50 Under this heading, the appellant complained of what appear to have been seven separate findings or inferences.

51 The first three findings are identified as:

(a) “the lease conferred no net benefit on the defendant at all but instead subjected him to a series of one-sided and enigmatic burdens with no corresponding benefits” – at [29];
(b) the appellant displayed “considerable passion for the task at hand” and an obsessive concern about detail, often insignificant detail – at [30] and [31], and
(c) the appellant was present when the lease was signed by the respondent – at [29].

52 The inferences and findings of which complaint is made were very much a matter for the trial judge who observed the parties in the course of the hearing and, particularly, in giving evidence. In any event, it is not clear what flowed from these findings, the first two being made in the course of considering the third (the presence of the appellant when the lease was signed).

53 The objective facts identify the lease as having been signed by the respondent on the execution page and initialled by him on the front page. Why he would have initialled the front page (or only the front page) unless directed to do so was unclear. Why the Justice of the Peace (who was not called by either party) would have invited him to initial the front page (and only the front page) was also unclear. However, these findings provided little basis for further findings, nor did they materially affect the outcome of the case. The presence of the appellant might have been relevant in respect of the exercise of undue influence, perhaps including the concealment of the written special conditions. However, the trial judge was not satisfied that a case of undue influence had been made out, nor that the respondent’s claim that the handwritten special conditions were not in the agreement at the time it was signed had been made good. The challenge to the first three findings appears to go nowhere and should in any event be rejected, as the correctness of the findings should be accepted.

54 The fourth finding that was subject to challenge was the refusal of the primary judge to accept the appellant’s evidence that he told the respondent to have the lease explained to him by his solicitor, Mr Nicolas Radich, who worked on the Gold Coast. The appellant noted that this finding was based in part on what he described as “a cynical view of the appellant”, namely that he would not have wished to have the document subjected to the scrutiny of an independent solicitor (the fifth finding). The appellant submitted that it may have been “equally reasonable” to conclude that, as a competent solicitor, he would have wished the respondent to obtain independent advice because he, the solicitor, was obtaining an interest under the agreement.

55 To say that two inferences are equally available does not avail the appellant in the present case. Furthermore, it is clear why the primary judge preferred the inference adverse to the appellant. His Honour did not treat the appellant as a competent and fair-minded solicitor seeking to protect the interests of his client. The terms of the lease themselves provide objective support for that view. It was a view which was based, at least in part, on matters of demeanour to which the primary judge had referred in other passages of his reasons.

56 Of more substance is the challenge to the sixth finding, namely that the appellant did not explain the terms of the lease to the respondent. This was a matter dealt with at some length by the primary judge at [37]-[45]. His Honour noted that the appellant did not assert that any explanation had been given in either of his affidavits and then set out part of the evidence given after the trial judge had directed the appellant’s attention to the issue. His Honour stated that the appellant’s evidence “of the explanation he said he gave to the defendant is also both wholly unsatisfactory and in my view incredible”: at [39].

57 His Honour gave reasons for that conclusion. First, the evidence was contradictory and confusing and gave the impression of recent invention: at [40]-[41]. Secondly, he noted the inadequacy of the explanation purportedly given in respect of the power of attorney: at [42]-[43]. Thirdly, he noted that there were portions of the special conditions that were, in his view, “incapable of explanation”: at [44]. He gave as an example the inter-relationship between special conditions 5 and 12 and the explanation given by the appellant in his oral evidence.

58 The respondent gave evidence that the appellant did not provide any explanation of the special conditions and his Honour accepted that evidence: at [45]. There is no basis for this Court to interfere with that finding.

59 Finally, the appellant claimed there was an implicit finding that the respondent did not understand the terms of the lease. This claim was made in the written submissions without any attempt at particularity. His Honour found that the respondent “understood it to be a lease of the property to the plaintiff”: at [48]. There were undoubtedly terms of the lease which, without independent advice and without an explanation from the appellant, the respondent could not have been expected to understand and which the Court (quite appropriately) described as confusing or difficult to understand. However, there was no finding that the respondent did not understand the lease as a whole, nor was the relief based upon any such implicit finding. Rather, it was based upon the characterisation of certain conditions within the lease as unjust. It might have been open to the appellant to cross-examine the respondent to establish that he did in fact understand how the lease operated, but it was not suggested that his Honour failed to make findings on that basis.

60 It follows that the challenges raised under topic six must be rejected.

Topic 3: costs

61 In a supplementary judgment delivered on 28 November 2008 the primary judge made orders dismissing the summons, declaring specific conditions in the lease to be unjust within the meaning of s 7 of the Contracts Review Act and declaring those conditions void. His Honour made an order that the appellant pay the respondent’s costs of the proceedings, including those of the cross-summons.

62 The appellant seeks to challenge that order on two bases. First, he says that he was successful in demonstrating that he had a right to occupy the property pursuant to a lease which was a residential tenancy agreement. That right or entitlement remained unaffected by the respondent’s success on his cross-claim. Secondly the appellant says that, to the extent that the respondent sought to rely upon a claim of fraud, that claim was not made good and, at the very least, the appellant should not pay the costs of so much of the proceedings as concerned that claim.

63 So far as the dismissal of the appellant’s summons is concerned, there was no challenge to the order made by the primary judge. Accordingly, so much of the costs order as relates to that relief was concerned, it must stand. Further, the respondent was clearly entitled to obtain a costs order based on his significant success in establishing that fundamental elements of the agreement, set out in the unjust special conditions, should be set aside. The practical result was to require a reassessment of the appellant’s purported compliance with his obligations under the lease, including the payments of rent.

64 With the exception of the fraud issue, it was by no means clear that, although the defendant was unsuccessful on some aspects of his claim, it would have been appropriate to award costs on the basis of severable issues. Nor does it appear that his Honour was invited to act on that basis. Accordingly, and again subject to the fraud allegation, the separate challenge to the costs order must fail.

65 With respect to the allegation of fraud, it is significant that the matter was not pleaded (being dealt with by way of summons and cross-summons) and that the allegation of fraud appears to have been identified by reference to the respondent’s claim that there were no handwritten special conditions in the lease at the time at which he executed it. Indeed, the respondent’s assertion was that, when he signed it, the lease was “blank”, presumably meaning that the details of the parties, the property, rent and the term of the lease, completed in handwriting on the first page, had not been completed.

66 In relation to these allegations, the primary judge stated in his supplementary judgment at 2-3:

“Mr Adamson, both at trial and again before me today, emphasises that the defendant’s allegations with respect to the circumstances in which the lease was executed amount to an allegation against him of fraud. It was part of his case at the trial that I should disregard the claims by the defendant about the circumstances in which the lease was executed because fraud had not been particularised in the statement of cross-claim or in any other way, according to Mr Adamson, that complied with the relevant rules.
In the events which have occurred I decided the cross-claim – indeed the whole proceedings – without reference to and without the need to involve myself in the question of whether or not allegations of fraud had been made or had been proved. In my opinion the so-called fraud issues were side issues not relevant to the true issues joined between the parties and it was unnecessary for me to deal with them or to decide them.”

67 By this statement, I do not take his Honour to mean that the allegation that the lease was signed in blank at the direction of the appellant was not addressed and determined at the trial. Rather, what was not addressed was whether that constituted an allegation of fraud which should have been specifically pleaded. There is a question, accordingly, as to whether the principle relied upon by the appellant should have been applied with respect to the substance of the unsuccessful claim, despite the lack of pleading.

68 His Honour dealt with the matter upon the one authority to which he was directed, on the basis that a party might lose some part of the costs where he had otherwise been successful, but failed on a severable claim for fraud. In Parker v McKenna (1874) 10 Ch App 96, James LJ stated at 125:

“It is not because a person has made himself liable to proceedings in equity or proceedings at law that the adverse litigant is entitled to make the court the place, and the proceedings of the court the means, by which personal spite or party hostility is enabled to indulge itself in unfounded aspersions upon character. … Unfounded aspersions have been wantonly and recklessly made, and the consequence of that is that this Court is obliged to give effect to what it has so often said it would do – make persons so dealing with the proceedings of this Court pay, and pay fully, in costs for it. I am of opinion, therefore that the plaintiff must pay the costs of so much of the proceedings as the Lord Chancellor has pointed out, and that he has so mixed that up with the rest of the suit that he has forfeited, in my opinion, his title to the costs which he otherwise would have been entitled to receive.”

69 That principle was said by this Court to be applicable in relation to an allegation that it was not the company’s common seal, but rather the common seal of another company, that had been affixed to a mortgage: see Hermann v Charny [1976] 1 NSWLR 261 at 267 (Hutley JA, Glass and Samuels JJA agreeing). The somewhat punitive approach identified in Parker was not followed, but the respondent was deprived of costs referable to particular aspects of the claim, on the basis of “serious misconduct in the litigation”: at 268F-G.

70 The allegation that a solicitor obtained the execution of an agreement in blank in circumstances where he was the intended beneficiary of the agreement and the other party was a former client, in circumstances where the agreement secured to the solicitor a means, at least by way of set off, for payment of legal costs, is an allegation of dishonourable conduct. It is a more serious allegation than that of not explaining the contents of the agreement and not directing the other party to obtain independent legal advice. However, the allegation was not found to have been made in bad faith and was not summarily dismissed. It was not found to have been proved, in part because it was quite possible that, at least in relation to the special conditions, the respondent was never made aware of the pages of the agreement which contained the handwriting.

71 Certainly, there was no finding of misconduct on the part of the respondent in raising the matter, which was a finding of the kind which lay peculiarly within the proper province of the trial judge who had heard the proceedings. Nor was it clear that his Honour was invited to make a finding in those terms. There was not even an implicit suggestion in his Honour’s reasons that the respondent had been guilty of misconduct, let alone “serious misconduct”, in the prosecution of his cross-claim.

72 In these circumstances, although there may have been grounds for a costs order which deprived the respondent of some part of this costs, the appellant has not made good a basis for intervention by this Court in relation to a discretionary order with respect to costs.

Topic 2: reopening motion

73 The allegation in relation to this matter identified in the written submissions was that, on 31 October 2008, being the day on which his Honour was to hand down judgment, the appellant “filed and served a motion to reopen”. He stated that he raised the matter with the trial judge prior to the delivery of judgment, but that his Honour declined to hear the motion. (The appellant contended he had a “right” to have the motion considered.) After delivery of judgment, the matter was stood over until 28 November 2008 to allow the parties to bring in short minutes of appropriate orders. That was done, and the appellant attended on 28 November but did not raise again his application to reopen the hearing. The application, it should be noted, sought to claim by way of equitable set-off and defence the amounts which he said had been spent by the tenants on the property between 31 July 2001 and 19 September 2003. The amounts claimed were amounts which might have been set-off against the rent under the lease, if the relevant provisions of the lease had been upheld.

74 There were several reasons why the motion was properly not dealt with in the proceedings below. First, there was no suggestion that it had been filed or served prior to 31 October. Accordingly, absent an order for abridgement of time, it could not have been dealt with on that date. The affidavit in support of the motion, setting out the details of the amounts claimed, would have required extensive pre-trial consideration, and probably pleadings, before any such hearing could have been conducted. It was not conceivable that the motion could have been dealt with on 31 October on any view of the matter.

75 Secondly, the appellant took no steps to have the matter properly served and listed for hearing between 31 October and the date when the orders were made on 28 November. There was some suggestion that the appellant thought that such steps were not open to him, although the basis upon which that was so was unclear and in any event did not matter. After the first abortive attempt to have the motion heard on 31 October, no further attempt was made after the effluxion of the usual period of notice following service on the respondent.

76 Thirdly, any claim for payment, whether for legal expenses, work carried out on the landlord’s property, or on any other basis, would have required the commencement of an entirely novel proceeding with pleadings, various interlocutory steps and a hearing which would address none of the issues which had been considered in the proceedings sought to be reopened, although the relief might be consequential upon the result.

77 The failure of the primary judge to deal with the motion on 31 October, or thereafter, was not erroneous and provided no ground of appeal.

78 The grounds of appeal raised by the appellant and addressed in both written and oral submissions should be rejected. It follows that the following orders should be made:

(1) Extend the time for filing the notice of appeal to 1 April 2009.
(2) Dismiss the appeal.
(3) Order the appellant to pay the respondent’s costs of the proceedings in this Court.

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