Fong v Shi - [2007] SADC 7

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
FONG v SHI
[2007] SADC 7
Judgment of His Honour Judge Soulio
14 February 2007
PROCEDURE
Appeal against decision of Master setting aside a default judgment pursuant to 1987 rule 51.06 - appeal instituted pursuant to s43(2)(a) District Court Act 1991 and 2006 DCR 292(1) - held, appeal allowed.
District Court Act 1991 s43(2)(a); District Court Rules 1987 r51.06, r97.01, 2006 DCR 292(1), referred to.
Mayfield v Zadow & Zadow [2006] SADC 70; Cook v DA Manufacturing Co Pty Ltd [2004] QCA 52; Evans v Bartlam [1937] ASC 473; Leasefin Corp Ltd v Clarke SCSA Jud No S3660, 16 Otober 1992; Westpac v Garrett (2004) SASC 265 6 September 2004; Watson v Anderson (1976) 13 SASR 329 at 341; Poyser v Gajic & Anor [2006] BSC 380 (20 October 2006); Fightvision Pty Ltd v Onisforou & or; Tszyu v Fightvision Pty Ltd & Anor (1999) 47 NSWLR 473; Olsson v Dyson (1969) 120 CLR 365 at 388; Vickery v Woods (1952) 85 CLR 336 at 345; Upper Hunter County Disctrict Council v Australian Chilling and Freezing Co Pty Ltd (1968) 118 CLR 429 at 437; Alexander v Rayson [1936] 1 KB 169; Miles v New Zealand Alford Estate Co (1186) 90 All ER Rep 1726; Wigan v Edwards & Another (1973) 1 ALR 497; Thomas v Thomas [1842] 2 QB 851, considered.

FONG v SHI
[2007] SADC 7
Introduction

This is an appeal by the plaintiff against a decision made by a Master on 18 September 2006 whereby the learned Master set aside judgment signed by the plaintiff in default of the filing of an address for service. Service of the proceedings was effected on 17 May 2006. An address for service was required to be filed by the defendant on or about 7 June 2006. It was not filed. Judgment was signed on 15 June 2006 pursuant to Rule 23.01 of the District Court Civil Rules 1987 (“the 1987 Rules”). The application to set aside that judgment was filed on 20 June 2006. The judgment was set aside pursuant to r51.06 of the 1987 Rules.
Nature of the Appeal
The appeal was instituted on 29 September 2006. The District Court Civil Rules 2006 (“the 2006 Rules”) came into operation on 4 September 2006. Rule 6 DCR 8 of the 2006 Rules is the transitional provision. It relevantly provides that the 1987 Rules continue to apply to appellate proceedings commenced before the commencement date. Accordingly, and it was common ground between the parties, the 2006 Rules regulate the present appeal.
The appeal is instituted pursuant to s43(2)(a) of the District Court Act 1991 and 6 DCR 292(1), and is by way of re-hearing.
As Smith J observed in Mayfield v Zadow & Zadow[1] this means that:
This Court may exercise its own discretion without regard to the manner in which it was exercised by the Master (see Police v Cadd; O’Brien Lovrinov Crafter Pty Ltd v Corradini; see also Transeast Pty Ltd v Commonwealth Bank).
The appellate Court in a rehearing is deciding the matter as at the time of the hearing of the appeal and so may have regard not only to the evidence adduced in the lower court, but also to any further relevant evidence. In respect of this “further relevant evidence”, the appellate Court is not constrained by the principles relating to the admission of “fresh evidence” on appeal (see Wigg v Architects Board; Police v Cadd (supra); Henschke v Guardianship Board). Finally, an appeal by way of rehearing does not mean that this Court should not give appropriate weight to, in this case, the decision of the Master (see In re Flinders Trading Co Pty Ltd). This must be so, particularly where, as here, the evidence remains the same as it was before the Master. Also r97.01 indicates that “... in matters involving the exercise of a discretion the judge may exercise his own discretion ...”. So at the threshold in an appeal such as this, the Court has a discretion as to whether it should intervene at all.
[1] [2006] SADC 70
For present purposes 6 DCR 292(1) is the equivalent of r97.01 District Court Rules.
A preliminary matter
At the outset of the hearing of the appeal, the respondent sought an adjournment to have Supreme Court proceedings relating to a caveat remitted and heard together with the present action. That was refused. An amended proposed defence was produced during the appellant’s submissions. There was no accompanying affidavit of merits. It had been anticipated that the amended proposed defence would be lodged with the Master prior to the delivery of his reasons. It was not. Upon delivering reasons the Master directed that “any defence properly setting the matters raised in argument be filed within 14 days hereof”. It was not. Nevertheless, counsel for the appellant consented to the lodging of the amended proposed defence at the hearing of the appeal, and consented to the appeal proceeding on the basis of that proposed defence. He was also prepared to concede that if an affidavit of merits had been filed it would have supported the new defence.
Applicable principles
In CookvDA Manufacturing Co Pty Ltd[2] the Queensland Court of Appeal, in considering the discretion to set aside a default judgment, referred to Evans v Bartlam[3] and said:
It is instructive from the reasoning of Lord Atkin at 480:
The discretion is in terms unconditional. The Courts, however, have laid down for themselves rules to guide them in the normal exercise of their discretion. One is that where the judgment was obtained regularly there must be an affidavit of merits, meaning that the applicant must produce to the Court evidence that he has a prima facie defence. It was suggested in argument that there is another rule that the applicant must satisfy the Court that there is a reasonable explanation why judgment was allowed to go by default, such as mistake, accident, fraud or the like. I do not think that any such rule exists, though obviously the reason, if any, for allowing judgment and thereafter applying to set it aside is one of the matters to which the Court will have regard in exercising its discretion. If there were a rigid rule that no one could have a default judgment set aside who knew at the time and intended that there should be a judgment signed, the two rules would be deprived of most of their efficacy. ...
But in any case in my opinion the Court does not, and I doubt whether it can, lay down rigid rules which deprive it of jurisdiction. Even the first rule as to affidavit of merits could, in no doubt rare but appropriate cases, be departed from. The supposed second rule does not in my opinion exist.
[2] [2004] QCA 52
[3] [1937] ASC 473
To similar effect was the reasoning of Lord Russell of Killowen at 481, he went on at 482:
The contention no doubt contains this element of truth, that from the nature of the case no judge could, in exercising the discretion conferred on him by the rule, fail to consider both (a) whether any useful purpose could be served by setting aside the judgment, and obviously no useful purpose would be served if there were no possible defence to the action, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained, to which he could have set up some serious defence. But to say that these two matters must necessarily enter into the judge’s consideration is quite a different thing from asserting that their proof is a condition precedent to the existence or exercise of the discretionary power to set aside a judgment signed in default of appearance.
At the hearing of this appeal counsel for the appellant specifically did not take any point in relation to the issue of delay, and at least by inference, in relation to the reason for the failure to file an address for service within time.
In considering the basis upon which the discretion should be exercised, the learned Master referred to the decision of the Full Court of the Supreme Court of South Australia in Leasefin Corp Ltd v Clarke[4] where the Full Court cited with approval the following passage from Brown Hutchison Pty Ltd v DKB Investments Pty Ltd at 9:
There is an onus on the plaintiff on the balance of probabilities on the whole of the evidence before the Court to show that it is entitled to the relief which it seeks. In considering whether the plaintiff has discharged that onus the Court must look at whether the defendant by its affidavits has deposed to a good defence to the action on the merits and has sufficiently specified the grounds of such defence. If the alleged defences and their grounds, to use the words of White J, are not sufficiently cogent to show that the defendant is not raising them merely in order to waste the Court’s time and abuse the Court’s measured procedures in order to delay or defeat a just claim by the plaintiff, or in the words of von Doussa J, ‘are patently unmeritorious’ and are only raised with the object of delaying judgment, then summary judgment should be entered if it is otherwise justified on the plaintiff’s affidavit.
… While a defendant is not required to set out all the facts upon which it will seek to establish its defences at trial, sufficient must be stated about them so that the Court can be satisfied in the circumstances of the case that the alleged defences are not spurious. What degree of particularity is required will probably depend upon the circumstances of the case and the extent to which the defendant’s bona fides might be impeached on other grounds. However, clearly a defendant cannot claim that there is a defence behind a smoke screen of its creation or expect the Court to act on its own assertion that it might exist.
[4] SCSA Jud No S3660, 16 October 1992
The learned Master also referred to the decision of White J in Westpac v Garrett[5]:
The principles which should guide a court asked to exercise its discretion to set aside a default judgment appear in the following passage from the judgment of Walters J (with whom Mitchell J agreed) in Watson v Anderson (1976) 13 SASR 329 at 341:
… a mere statement by a defendant that he has a good defence is not sufficient to justify a review of the exercise of a judicial discretion. He must go further and demonstrate ‘a very compelling reason’ for his failure to appear in the action, and, further, that he has a plausible defence either in law or in fact. True it is that on an application to set aside a judgment by default, the Court does not pronounce on the law or the facts, but it seems to me that before allowing a defendant to come in and defend, the Court should have before it materials which enable it to say how it came about that the defendant found himself bound by a judgment regularly obtained; that the defendant genuinely desires to be allowed to come in and present his case; and that issues are raised in such a form as to require serious consideration of the defence that he would put forward. In the words of Jenkins LJ in Grimshaw v Dunbar [1953]1 QB 408 at 416 ‘the Judge is entitled to satisfy himself that the party applying has a bona fide intention of defending the action, and that there is some possibility of his doing so with success’.
[5] (2004) SASC 265 6 September 2004
The learned Master correctly stated the principles pursuant to which his discretion was to be exercised.
I also note that in Poyser v Gajic & Anor[6], Morris J said:
As was pointed out by the plaintiff, the fact that the court’s task is confined to determining whether there are merits in the defence – rather than determining the merits of the defence or seeking to resolve factual issues – does not mean that the court must accept uncritically as giving rise to a genuine dispute every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents, or other statements by the same person, or inherently probable: see Eyoto Pty Ltd v Hanove Pty Ltd (1994) 12 ACSR 785 at 787.
[6] [2006] BSC 380 (20 October 2006)
The factual background
No point was taken by the appellant in relation to the learned Master’s recitation of the facts, which was based upon his analysis of affidavits filed by the defendant and his solicitor, and a significant number of affidavits filed on behalf of the plaintiff.
I summarise the evidence by way of chronology as follows.
·July 2001 - Jian Shi (the defendant’s father) signed a receipt having acknowledged borrowing from the plaintiff, the sum of six hundred and fifty thousand RMB expressed to be “for the sole purpose of property investment” and agreeing to repay the loan and all outstanding interest before October 2003.
·7 December 2001 - The defendant’s father purchased property at 42 Henry Street Ottoway.
·October 2003 - The defendant’s father failed to re-pay any part of the loan or interest.
·4 May 2004 - The plaintiff lodged a caveat (“the first caveat”) at the Lands Titles Office claiming an estate and interest as mortgagee over the property.
·16 June 2004 - The plaintiff’s solicitor forwarded a letter of demand for outstanding monies to the defendant’s father.
·20 July 2004 - The agreement, the subject of the within action, was entered into between the plaintiff and the defendant whereby, to use very general terms, the defendant agreed to pay to the plaintiff the amount owed by the defendant’s father in two instalments of Four Hundred Thousand RMB with the total to be re-paid by 30 December 2004. The plaintiff was required pursuant to the agreement to withdraw her caveat. I observe that that would of course enable the land to be dealt with. The defendant was to take out a mortgage over the property, and use the funds, at least in part, to pay the plaintiff.
·23 August 2004 - The plaintiff’s solicitor forwarded to the defendant’s then solicitor a notice of withdrawal of caveat.
·5 October 2004 - The first caveat was withdrawn and the interest of the defendant’s father in the property was transferred to the defendant.
The defendant mortgaged the property to an amount of $156,000, and paid the plaintiff an amount of $69,019 AUD, being the first payment under the agreement, and being an amount equivalent to 400,000 RMB..
·Early December 2004 - An oral agreement was entered into between the plaintiff and the defendant whereby the plaintiff extended the due date on the basis that the defendant was to pay interest on the second instalment at the rate of 7% per annum from 15 October 2004 to the date of payment. The purpose was to enable the defendant to sub-divide the land.
·30 December 2004 - The remaining instalment of Four Hundred Thousand RMB fell due but was not paid
·9 March 2006 - The plaintiff’s solicitor attended the property and noted that it was advertised for sale. No sub-division had been obtained.
·5 April 2006 - A caveat (“the second caveat”) was lodged over the property claiming an estate and interest as mortgagee pursuant to the terms and conditions of the agreement of 20 July 2004; and the plaintiff’s solicitors forwarded a letter of demand to the defendant claiming the second instalment together with interest, and advising that the second caveat would not be withdrawn until the amount owing was paid.
·15 May 2006 - The Registrar General advised the plaintiff’s solicitors by letter that the caveat had been warned.
·17 May 2006 - The subject proceedings were instituted in the District Court of South Australia.
·18 May 2006 - Proceedings were instituted in the Supreme Court of South Australia seeking to extend the second caveat.
·15 June 2006 - A default judgment was entered in the subject action for failure to file an address for service.
·20 June 2006 - The defendant’s solicitor filed a notice for specific directions seeking an order that the default judgment be set aside.
·7 August 2006 - Judge Withers delivered reasons in the Supreme Court proceedings and said:
There will be an order extending the time for removal of the caveat until further order. I will hear the parties as to costs but express the preliminary view that costs should await the outcome of the proceedings in the District Court.
·14 August 2006 - The defendant’s application to set aside the default judgment was argued before a Master in this Court.
·18 August 2006 - The parties appeared before Judge Burley in the Supreme Court action. He noted that:
The parties have reached agreement about the caveat and payment of monies into court. It is agreed that the caveat is not to be further extended. Instead the defendant without admitting liability has agreed to pay the net proceeds of sale of the subject property into court ... The defendant Mr Shi by his counsel undertakes to the court that upon settlement of the sale by the defendant of CT Register Book Vol 5277 Folio 956 commonly known as 42 Henry Street, Ottoway South Australia on Monday 21 August 2006 the defendant will pay into the Supreme Court of South Australia Suitor’s Fund in this action the net proceeds of sale. The plaintiff’s solicitor accepts the undertaking in lieu of other relief.
·18 September 2006 - The Master delivered reasons for decision setting aside the default judgment in this Court.
·29 September 2006 - The present appeal was instituted.
Arguments on Appeal
Despite submitting that the effect of the appeal being by way of re-hearing was that the discretion was to be exercised afresh, counsel for the appellant submitted that the learned Master had fallen into error.
First, counsel for the plaintiff criticised the learned Master’s finding [82] that:
As to the second issue namely whether the defendant has an arguable defence the threshold issue to be overcome by the defendant is quite low.
As I have said, the learned Master correctly stated the principles pursuant to which he was to exercise his discretion. His description, the subject of criticism, should not be seen as departing from the description in Watson v Anderson referred to above, namely that in defending the action “there is some possibility of his doing so with success.”
Second, counsel for the appellant pointed to an apparent tension between [83] and [84] of the reasons. At [83] the learned Master said that:
One would think that there was, as a matter of law, good adequate or real consideration passing from the plaintiff by enabling the defendant to obtain the property and in particular equity in the property on terms. Those terms were the withdrawal of the caveat in return for the defendant’s ability to obtain a loan to pay off the debt.
At [84] he said that:
In my view the only matter for argument is whether the “Deed of Undertaking” is in fact a contract or contract with adequate consideration as it expressly states, on either view of the translation.
The appellant attacked the findings in [86], where the learned Master concluded:
I have come to the view that there may well be an argument that the issue of the adequacy of the consideration may remain a live issue. The defendant’s father is not a party to the Deed and still remains liable to the plaintiff for the balance of the debt.
The plaintiff argued that I am entitled to find a novation of the debt, but in any event that there was good consideration for the defendant’s promise to pay.
The Agreement
The document which is the subject of the proceedings was written in the Chinese language. Each of the defendant and plaintiff provided a translation of the document. The plaintiff also provided a further translation prepared by one Ms Yang.
Whilst there are differences between the translations, the plaintiff was prepared to prosecute the appeal on the basis of acceptance, for present purposes, of the translation contended for by the defendant. The form of the agreement, according to the defendant, was as follows:
REPAYMENT PLEDGE
No.:20040719
Party A: CHANG YING SHI    Australian Passport No.:
Address: 42 HENRY STREET OTTOWAY SA 5013
Party B: WONG CHING FONG (Wong Ching Fong)
1.Party A is voluntarily assuming responsibility for repaying both the sum of 650 000 yuan Renminbi borrowed by his father JIAN SHI from Party B in July 2001 and the interest, a total sum of 800 000 yuan Renminbi.
2.Party A pledges to repay the above sum to Party B in two instalments, each time repaying 400 000 yuan Renminbi. The final deadline for full repayment is 30 December 2004.
3.Party A and Party B agree that Party A will repay Party B in Australian dollars, calculated at the current Hong Kong dollar Renminbi exchange rate of 1.06:1. The Australian dollars repaid by Party A shall be equivalent to 754 7000 Hong Kong dollars and are to be paid at the appropriate time into Party B’s designated Hong Kong bank account.
4.As soon as Party B receives the original “Repayment Pledge” signed by Party A as well as a photocopy of Party A’s passport, he will instruct his Adelaide lawyer Mr Gorden Cheng to arrange a reversal of the house attachment order to enable Party A to arrange a mortgage loan with the bank to repay the debt to Party B. The first repayment shall be made prior to 15 October 2004.
5.During the repayment period, Party A shall first use the money borrowed from the bank by means of this house and the over 1000 square metres of attached land behind it to repay Party B, which the borrowed money being given to Party B’s lawyer, Mr Gorden Cheng.
6.Party A gives his guarantee that he will abide by the pledge above and will be legally liable if unable to repay the debt by the due date.
Party A: (signature)  Party B: Wong Ching Fong
Date: 20 July 2004  Date: 19 July 2004
The Proposed Defence

The defendant pleads in his proposed defence that:
5.at the time of lodging the first caveat the plaintiff did not have legal or equitable estate or interest in the land in the terms of the estate claimed in the caveat;
6.3.The document is not a Deed at law;
6.4.The defendant is a mere volunteer and no consideration passed from the plaintiff;
6.5.the defendant was not privy to any dealings between the plaintiff and Jian Shi;
6.6.the defendant has never received a loan or borrowed money from the Plaintiff; and
6.7.the said deed is void and unenforceable.
Deed at Law
Counsel for the plaintiff made the concession that whilst I could find that the agreement was a deed at law, that question could be left aside, and the matter decided as one of simple contract.
Novation
The plaintiff argued that I was entitled to find, bearing in mind the nature of the decision to be made upon this appeal, that there had been a novation of the original agreement between the plaintiff and the defendant’s father.
In argument before the learned Master counsel for the defendant argued that there was no alleged novation of the loan agreement and that the arrangement entered into between the parties was new and a “voluntary” arrangement.
The learned Master said[7]
It is arguable that the agreement was really between the defendant and his father (and the plaintiff) whereby the defendant would take over his father’s debt on condition that his father transferred the property to him and that this transfer would be consented to by the plaintiff removing the caveat over the defendant’s father’s interest in the land on condition the defendant paid money owing to the plaintiff thereby releasing the father from his original liability to her.
[7] [87]
At the hearing before me counsel for the defendant submitted that the novation issue had not been specifically raised previously, although in view of the learned Master’s reference to novation, set out above, that cannot quite be correct.
Counsel for the defendant complained that novation “is not pleaded per se” and submitted that there was nothing in the subject agreement that supported a contention that there had been a termination and new agreement, and nothing in the pleadings which supported that proposition.
Counsel for the plaintiff relied on the decision in Fightvision Pty Ltd v Onisforou & or;Tszyu v Fightvision Pty Ltd & Anor[8]. There the boxer Mr Tszyu entered into a contract with Classic Promotions Pty Ltd, a term of which was that he was not to box professionally anywhere in the world for a certain period, unless the bout was promoted or co-promoted by Classic Promotions Pty Ltd. At first instance the trial judge found that Mr Tszyu was in breach of that contract. Whilst the contract had originally been between Mr Tszyu and his trainer Mr Lewis, and Classic Promotions Pty Ltd, Fightvision alleged that the contract had been novated by discharge and the substitution of a new contract in the same terms between Fightvision and Mr Tszyu and Mr Lewis. The Court of Appeal delivered a joint judgment.
[8] (1999) 47 NSWLR 473
Their Honours described novation as follows[9]:
Novation is a transaction by which all parties to a contract agree that a new contract is substituted for one that has already been made: Olsson v Dyson[10] per Windeyer J, which Bainton J referred to. Novation involves the extinguishment of one obligation and the creation of a substituted obligation in its place. Intention is crucial to show a novation; see, eg Vickery v Woods[11] per Dickson J as His Honour then was. “A novation may be expressed or implied from the circumstances”. (my emphasis)
[9] [78]
[10] (1969) 120 CLR 365 at 388
[11] (1952) 85 CLR 336 at 345
The evidence was that a Mr Mordey, the Chief Executive Officer of both Classic Promotions Pty Ltd and Fightvision, had informed Mr Tszyu that Classic Promotions Pty Ltd was winding up and Fightvision would be exclusively promoting Mr Tszyu’s fights in the future; that Mr Tszyu did not dissent from Mr Mordey’s statement; and that upon returning to Australia Mr Mordey said much the same to Mr Lewis, who accepted the situation. Thus Fightvision’s claim was that the original contract was expressly novated to it with the consent of all parties.
Their Honours said[12]:
In our opinion, the submission that Mr Mordey’s words to Mr Tszyu and Mr Lewis were insufficient to establish novation seeks to read too much into the way in which these parties carried out much of their contractual relationships and activities. Stated simply, Mr Mordey was the promoter and Mr Tszyu was the boxer. The corporations involved were merely vehicles for the promoter to promote Mr Tszyu’s fights. It is unsurprising the Mr Mordey did not know of the legal term “novation”. What non-lawyers would? Mr Mordey did know, however, that it was desired to wind Promotions down (or up, it does not matter) and have Fightvision become the exclusive promoter of Mr Tszyu’s bouts. He told Mr Tszyu and Mr Lewis of this, and they were agreeable. It was informal, but it had the result that all parties to the 17 January 1992 contract agreed that there would be a new contract with Fightvision in place of Promotions.
[12] [83]
Further the court said[13]:
In Upper Hunter County District Council v Australian Chilling and Freezing Co Pty Ltd[14] Barwick CJ said that in searching for the contractual intention, “no narrow or pedantic approach is warranted” particularly in the case of commercial arrangements”. This equally applies, in our view, when searching for an intention that there be a novation. Given the terms of the conversations, which His Honour accepted, as well as the overwhelmingly consistent pattern of conduct of the parties after 30 January 1993, there is no ground for disturbing His Honour’s finding on novation.
[13] [86]
[14] (1968) 118 CLR 429 at 437
Here however, it is open to find that the defendant’s father remains liable for the balance of the debt owed to the plaintiff. I cannot find on the affidavit evidence available that all parties agreed that the present agreement was to be substituted for the original agreement, such as it was, by the defendant’s father to repay the monies owing to the plaintiff.
Accordingly in my view the appeal must be decided on the issue of the contract itself including the issue of whether there was sufficient consideration at law for the promise made by the defendant to pay the sums of money to the plaintiff, and whether there is any possibility of a successful defence.
Consideration
It is necessary to bear in mind that the agreement here was produced between the parties, apparently without legal advice. The factual matrix is, as I have said, uncontroverted.
It was not suggested on behalf of the defendant that there was any need to lead any evidence which would bear upon the construction of the agreement.
The plaintiff says that the agreement by her to remove the caveat, in exchange for the promise by the defendant to pay the moneys owing to the plaintiff, constituted good consideration, and accordingly there is no merit in the defendant’s proposed defence. It was put on behalf of the defendant in argument that:
the agreement was no more than a “voluntary transaction” by which the defendant assumed a moral obligation.
In my view, on the face of the agreement, the defendant’s promise to pay was negotiated in exchange for the plaintiff’s promise to remove the caveat. In doing so the plaintiff acted to her detriment, for the reasons set out below. The terms were each terms stating an undertaking.
I turn to consider the issue of consideration provided by the plaintiff, it of course being the defendant’s position that there was no sufficient legal consideration.
In Contract Law in Australia[15] the learned authors state:
Consideration need not be “adequate”. It is well established that the “inadequacy” of consideration is no ground of objection. “Adequacy” denotes “adequacy in value”, by comparison with the (objective) value of the promise which it supports. On the other hand, “sufficiency” of consideration describes “legally sufficient” consideration, that is, as a synonym for its “validity” or “effectiveness”.
(325)
[15] 4^th ed Carter and Harland, Butterworths 2002.
The learned authors go on to say:
Although the law governing the formation of contracts is not concerned with the adequacy of consideration, and inadequacy as such does not negate the validity of consideration, it may be relevant to issues of economic duress, undue influence and unconscionability as well as the availability of the remedy of specific performance.
(326)
Neither by the proposed defence nor in submissions, did the defendant raise issues of economic duress, undue influence or unconscionability.
In Alexander v Rayson[16] by two separate agreements the plaintiff agreed to provide the defendant with the lease of a flat, and to provide certain services. Apart from a term requiring the provision and maintenance of a “Frigidaire” the services under the agreement were essentially the same as those to be provided under the lease. The defendant sought, at a much later time, to avoid payment of the service agreement on the basis that there was no consideration. The court said[17]:
If it were not for the frigidaire, therefore, it might well be contended that there was no consideration for the agreement by the plaintiff to pay the £750 a year in addition to the £450 payable under the lease. The provision and maintenance of the frigidaire does, however, constitute some consideration for the agreement. It certainly would seem to be a somewhat inadequate one, but the court is not concerned with the adequacy of the consideration if consideration there be.
[16] [1936] 1 KB 169
[17] At 181-182
I note that here the Withdrawal of Caveat, in relation to the first caveat, was signed by the plaintiff, and forwarded to the defendant’s then solicitors under cover of letter of 23 August 2004. The letter said, in part:
The Withdrawal of Caveat is sent to you subject to your client’s strict undertaking to comply with the terms and conditions of the said deed of undertaking for repayment of loan aforesaid.
If for any reasons whatsoever your client is not in a position to comply with the terms and conditions of the said deed of undertaking for repayment of loan aforesaid or any of them, you should return the original Withdrawal of Caveat in duplicate and the duplicate caveat 9836873 to me forthwith immediately for my client’s possession.
Subject to the terms and conditions of the deed of undertaking for repayment of loan, you may submit the withdrawal of caveat to the Lands Titles Office for registration.
The Withdrawal of Caveat was duly registered, and of course, the first payment pursuant to the agreement, was made.
Counsel for the plaintiff contends, that given the wording of s191 of the Real Property Act1886, which is set out below, a caveat is a claim in respect of land, and it is that claim which has been given up by the plaintiff.
Section 191 reads:
Any settlor of land or beneficiary claiming under a will or settlement, or any person claiming to be interested at law or in equity, whether under an agreement, or under an unregistered instrument or otherwise house in any land, may lodge a caveat with the Registrar-General for- bidding the registration of any dealing with such land, either absolutely or unless such dealings shall be expressed to be subject to the claim of the caveator, or to any conditions conformable to law expressed therein:
In Miles v New Zealand Alford Estate Co[18], Cotton LJ said[19]:
Now, I understand the law to be this: if a serious claim is in fact made, and made honestly a contract of abandonment of the claim is a good consideration for any promise.
Now when the term “honest claim” is used, I think this is meant, that a claim is honest if the claimant, or the person putting forward his claim, does not know that his claim is a mere nothing; it is also honest if he is not aware of the facts showing that his claim is a bad one, which he knows were not known to the other party. Of course, if both parties know all the facts, and with knowledge of those facts obtain a compromise, it cannot be said that that is dishonest.
[18] (1886) 90 All ER Rep 1726
[19] At 1730
Cotton LJ went on to say[20]:
If the validity of a compromise were to depend on the answer of the question whether the compromise was a good one or not, no compromise would be effectual, because, if it afterwards came into question, the compromise being relied upon, it must be necessary to go into the question whether the claim was in fact a good one or not.
[20] At 1731
Further, in Miles, Bowen LJ said[21]:
It seems to me that, if a person bona fide forebears a right to litigate a question of law or fact which it is not vexatious or frivolous to litigate, he does give up something of value. It is a mistake to suppose that it is no advantage which a suitor is capable of appreciating, to be able to litigate his claim, even if he turns out to be wrong. It seems to me it is equally a mistake to suppose that it is not sometimes a disadvantage to a man to pursue a cause of action, even if in the end he succeeds; and I think that the reality of the claim put forward must be measured, not by the state of the law as it is ultimately discovered to be, but by the state of the knowledge of the person who at the time has to judge and make the concession.
[21] At 1735
In Wigan v Edwards & Another[22] Mason J said:
The general rule is that a promise to perform an existing duty is no consideration, at least when the promise is made by a party to a pre‑existing contract, when it is made to the promisee under that contract, and it is to do no more than the promisor is bound to do under that contract ... an important qualification to the general principle is that a promise to do precisely what the promise is already bound to do is a sufficient consideration, when it is given by way of a bona fide compromise of a disputed claim, the promisor having asserted that he is not bound to perform the obligation under the pre‑existing contract or that he has a cause of action under that contract. The qualification recognises that for the Court itself to examine and determine the correctness of the promisor’s claim would be a pointless exercise when the new bargain indicates that the promisee regarded the fresh promise as a benefit, presumably viewing the promise of performance as more advantageous than the remedies available to him for breach of contract. But the law, by insisting that the claim in dispute is one which was honestly or bona fide made, prevents the qualification from assisting the party who would seek to gain an unfair advantage by threatening unscrupulously to withhold performance under a contract.
[22] (1973) 1 ALR 497
Mason J went on to consider the differing formulations used by members of the Court in Miles and said:
But it is perhaps open to question whether a bona fide compromise of a dispute is sufficiently established by showing that the promisor honestly believed that his claim was well founded. It has been said that it must also be shown that the claim was not vexatious or frivolous ... the difference expressions of principal do not reflect an importance conceptual difference. There will be few cases involving an honest or bona fide belief in a claim which is vexatious or frivolous.
In my view a caveat is to be regarded as notice of a claim. It operates as an impediment to dealing with the land. In acting to remove the impediment, the plaintiff may be regarded as having provided consideration.
In Thomas v Thomas[23] upon which the plaintiff here relied, a widow brought an action against the executors of her husband’s estate, on an agreement entered into between them whereby the executors agreed to transfer a life interest in a dwelling house, on the basis that that was the verbally expressed desire of the deceased prior to his death. The transfer was stated to be “in consideration of such desire and of the premises”. It was a condition of the agreement that the widow would pay to the executors the sum of £1 per year towards the ground rent and would keep the dwelling house in good and tenantable repair. One of the executors died. The other refused to execute the conveyance and brought an ejectment application. The defendant had argued that the rent and repairs could not be said to have been the motive which induced the executors to make the agreement, but rather the moral consideration, and that was insufficient to support the promise.
[23] [1842] 2 QB 851
Patteson J held, in responding to that argument[24]:
Motive is not the same thing with consideration. Consideration means something which is of some value in the eye of the law, moving from the plaintiff: it may be some benefit to the plaintiff, or some detriment to the defendant; but at all events it must be moving from the plaintiff. Now that which is suggested as the consideration here, a pious respect for the wishes of the testator, does not in any way move from the plaintiff; it moves from the testator; therefore, legally speaking, it forms no part of the consideration. Then it is said that, if that be so, there is no consideration at all, it is a mere voluntary gift: but when we look at the agreement we find that this is not a mere proviso that the donee shall take the gift with the burthens; but it is an express agreement to pay what seems to be a fresh apportionment of a ground rent, and which is payable to the executors.
[24] Thomas v Thomas at 859
To use the words of Lord Denman CJ[25]:
There is nothing in this case but a great deal of ingenuity, and a little wilful blindness to the actual terms of the instrument itself. This is in terms on express agreement, and shews a sufficient legal consideration quite independent of the moral feeling which disposed the (defendant) to enter into such a contract.
[25] Thomas v Thomas at 859
On the hearing of the application the learned Master did not have the benefit of detailed submissions on the issue of the “adequacy” of the consideration, despite having requested such submissions be made.
It is not necessary to consider what took place after the agreement was signed by the two parties, but as stated, the caveat was withdrawn, and payment, at least in part, was made.
Had the payment been made in full, it is very difficult to envisage that the defendant, in those circumstances, could at some later stage bring an action for recovery of the monies paid pursuant to the agreement.
In my view, the inescapable conclusion is that by agreeing to remove the caveat over the land owned by the defendant’s father in exchange for the promise by the defendant to pay the monies owing to her by the defendant’s father, the plaintiff has provided sufficient legal consideration for the agreement.
Conclusion
In my view the defendant’s allegation that the deed was no more than a voluntary agreement on his part, and that there was no consideration paid by the plaintiff, is without merit, and does not present any reasonable possibility of a successful defence.
I allow the appeal. I will hear the parties as to consequential orders.