Khan v Khan

[2004] NSWSC 1189

Reported Decision: 62 NSWLR 229

Supreme Court

CITATION:	Khan & Anor v Khan & Anor [2004] NSWSC 1189
HEARING DATE(S):	30/11/04, 01/12/04
JUDGMENT DATE:	10 December 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Order for specific performance refused
CATCHWORDS:	EQUITY - undue influence - Mufti advises defendant in plaintiffs' presence of religious duty to honour oral promise to sell land to plaintiffs - defendant signs memorandum of agreement - signature witnessed by Mufti - whether "third party" undue influence - whether plaintiffs knowingly concerned - CONTRACTS - Statute of Frauds - alleged oral agreement for sale of land where formal exchange of contracts contemplated - alleged acts of part performance
LEGISLATION CITED:	Conveyancing Act 1919, ss.52A, 54A
CASES CITED:	Actionstrength Ltd v International Glass Engineering IN. GL. EN Spa [2003] 2 AC 541 Allcard v Skinner (1887) LR 36 ChD 145 Blomley v Ryan (1956) 99 CLR 362 Bullock v Lloyds Bank Ltd [1995] 1 Ch 327 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Gingis v Mount Scopas Memorial College Ltd [1998] VSCA 49 GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Johnson v Buttress (1936) 56 CLR 113 Lezabar Pty Ltd v Hogan (1989) 4 BPR 9498 Mohtar v Mohtar (1988) LSJS 377 Quek v Beggs (1990) 5 BPR 11,761 Peter Warren Properties Pty Ltd v Jalvoran Pty Ltd [2004] NSWSC 1149 Regent v Millett (1976) 133 CLR 679 Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378 Stivactas v Michaeletos (No 2) [1994] ANZ Conv R 242 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Watkins v Coombes (1922) 30 CLR 180
PARTIES :	Mohammed Shikandar Khan and Farisha Khan - Plaintiffs Mohammed Rizwan Khan and Roshanara Begum Sadiq - Defendants
FILE NUMBER(S):	SC 5745/03
COUNSEL:	Mr E.A. White - Plaintiffs First Defendant in Person Mr W.J. Carney - Second Defendant
SOLICITORS:	Gray & Perkins - Plaintiffs First Defendant in Person Nada Alamali - Second Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

FRIDAY, 10 DECEMBER 2004

5745/03 – MOHAMMED SHIKANDAR KHAN & ANOR v MOHAMMED RIZWAN KHAN & ANOR

JUDGMENT

1 The plaintiffs, Mohammed Shikandar Khan and his wife Farisha Khan, seek an order for specific performance of an alleged contract for the sale of a house property at 25 Hollows Place Bonnyrigg. They are the purchasers under the alleged contract. The vendors are the defendants, Mohammed Rizwan Khan and his mother Roshanara Begum Sadiq. In order to avoid confusion and without intending any disrespect, I shall refer to the parties in the manner in which they were described in the course of the trial, that is, “Shikandar”, “Farisha”, “Rizwan” and “Mrs Sadiq”. Although they share the name “Khan”, the plaintiffs are not related to the defendants.

2 The claim in the statement of claim for an order for specific performance is framed by reference to an alleged contract “dated 30 September 2003”. This obviously refers to a document of that date to which I shall come. In addition, the plaintiffs rely on what they regard as an earlier oral contract and acts said to constitute part performance of it. The plaintiffs plead such an oral agreement but do not specifically refer to it in the claim for the order for specific performance. However, I did not understand the defendants to take issue with the raising of this alternative basis for the specific performance claim.

The facts in outline

3 Rizwan and Mrs Sadiq became the registered proprietors of the Bonnyrigg property as joint tenants when it was vacant land. Rizwan thereafter arranged the construction of a house which had been completed or substantially completed by late 2002 when it was placed in the hands of an agent for sale. The price at which it was listed was $550,000 but, after some months, the agent indicated that the property would not sell at that price.

4 In April 2003, a mutual acquaintance informed Mrs Sadiq that the plaintiffs (Shikandar and Farisha) may be interested in purchasing the property. Rizwan was at that time overseas. Mrs Sadiq contacted Shikandar and indicated an interest in selling at $500,000. In the following days, after his return, Rizwan had a conversation with Shikandar in which Shikandar indicated a price of $475,000, Rizwan indicated a price of $495,000 and no consensus was reached. Rizwan said that he would speak to Mrs Sadiq.

5 In the next day or so, Rizwan spoke to Shikandar again and mentioned a price of $485,000, Shikandar said he was prepared to go to $480,000 and Rizwan agreed to that. Shikandar said that he and Farisha needed to sell their existing home at Hinchinbrook to finance the purchase. Rizwan said that he would wait until that was done. Shikandar said that, if they had a deal, he would put his house on the market. He knew the Bonnyrigg property was vacant and suggested he and his family move in on 1 May. Rizwan nominated a weekly sum of $250. Shikandar said that was too high. Rizwan then said that they could have two months rent free, then three months (from 1 July 2003) at $800 per month and $1,000 per month thereafter, to which Shikandar agreed.

6 Shikandar, Farisha and their children moved into the property accordingly and Rizwan arranged for solicitors to prepare a contract for sale at a price of $480,000. Shikandar became aware of certain respects in which the house and a pathway in the grounds had not been finished off properly. Rizwan attempted to have contractors come back to attend to these matters but was unsuccessful. Shikandar raised the possibility of a $15,000 reduction in the purchase price. In the end, however, an arrangement was made between Rizwan and Shikandar under which Shikandar would do the necessary work, the occupation fee for August would be waived and the price would be unchanged. Mrs Sadiq sent Shikandar the notices for council and water rates. He sent the council rates notice back, paid the water rates and asked for reimbursement of $35 which he calculated to be applicable to the period before he and his family went into occupation.

7 Mrs Sadiq was incensed that Shikandar had demanded payment of $35. She was also incensed that he had negotiated a reduction in the licence fee and had tried to obtain a $15,000 reduction in the price. She thought his approach petty and unfair. She decided she did not want to sell to him.

8 By 2 September 2003, respective parts of the form of contract for the sale and purchase of the Bonnyrigg property had been signed by Shikandar and Farisha and probably also by Rizwan. On that day, Rizwan spoke to Shikandar and told him that Mrs Sadiq did not want to sign the contract. On or about 9 September 2003, a meeting took place at Mrs Sadiq’s house. Present were Mrs Sadiq, Rizwan, Shikandar, Farisha and two friends of Mrs Sadiq. There are slightly different accounts of this meeting but the common theme is that Mrs Sadiq indicated she did not wish to sell and that the meeting resulted in some form of consensus under which the price was to be increased from $480,000 to $490,000. On 16 September 2003, the plaintiffs’ solicitors forwarded to the defendants’ solicitors the executed counterpart of the contract with the price altered to $490,000. It was accompanied by a deposit bond for $48,000 and a request that the deposit remain at that figure despite the increase in price.

9 Things still did not go smoothly. Rizwan later arranged another meeting. It took place on 30 September 2003 at Mrs Sadiq’s home. Present were Mrs Sadiq, Rizwan, Shikandar, Farisha, Mrs Sadiq’s other son Bilal (Rizwan’s brother) and Mufti Naiem Ali, the Imam of the Green Valley Mosque. Mufti Naiem’s attendance had been arranged by Rizwan who is actively involved in the affairs and work of the mosque. All the parties are Muslims. The meeting began at about 8 pm and continued for more than two hours. All participants other than Bilal were present throughout. Bilal arrived about half an hour after the start.

10 Mufti Naiem played the part of a religious adviser at this meeting. Rizwan considered himself honour bound to sell. He, Shikandar and Mrs Sadiq each explained their position to the mufti. The mufti quoted some religious precedents or precepts about the significance of agreements by word of mouth and, as stated in his own affidavit, said:

“After listening to all sides of the story it is clear the deal has been done, it’s just that money hasn’t changed hands. Everything was clearly stated by Mohammed [ie, Shikandar] when the deal was done and before he moved into 25 Hollows Place, Bonnyrigg. Mohammed and Farisha acted upon trust and promises made by both of you to them and they have also sold their house.”

11 Mrs Sadiq then said that she would not sell. There was further discussion about price. She says that she mentioned a price of $510,000 in the expectation that Shikandar and Farisha would not be able to pay that much. A price of $492,000 instead of $490,000 was mentioned, as was a price of $495,000. Farisha said words to the effect that she had jewellery worth at least $3,000 that could make up the difference, but whether she meant this as part of the negotiation or as a means of trying to shame Mrs Sadiq into seeing the difference as paltry cannot be known. Eventually, Rizwan, Shikandar (and, on some accounts, Bilal) went outside and talked. Bilal says that he suggested to Rizwan that they each put in $2,500 to make up the difference of $5,000 without telling their mother. When those who had gone outside came back, it was on the basis that an agreement had been reached at $495,000.

12 Mrs Sadiq says that, at that point, Mufti Naiem said to her, “You have to take $495,000 which is all they can afford and you will be rewarded in the after life”. Mrs Sadiq was asked, at that juncture, to sign the part of the contract requiring signature by the vendors. She eventually did so. Her account of the circumstances in which she did this is contained in the following part of her affidavit:

“My son Bilal said to me, ‘ Mum, do not do this, sell it to them’ .
Rizwan also kept saying, ‘just sell it to them’ .
I felt my sons were both turning against me. The Sheik’s [ie, Mufti Naiem’s] words were strong. I then agreed to sign the agreement …”

(The reference here is to one part of the formal contract for sale that had been prepared).

13 Bilal’s affidavit contains the following account:

“My mother was asked to sign something, but she refused. Rizwan said to her ‘ sign it ’. I said words to the effect ‘ just sign it ’. My mother kept saying words to the effect, ‘ I’ll sign it later ’. This went on for at least four (4) minutes until she signed the piece of paper. As soon as my mother signed it, I hugged and kissed her and said to her words to the effect, ‘ You have done a good deed ’.”

14 Mufti Naiem confirms in his affidavit that Mrs Sadiq signed the contract at this point. He also says that Shikandar then asked Rizwan and Mrs Sadiq to “sign a letter confirming the agreement at $495,000”, Shikandar’s reason for requesting this being, “as the price has changed so much”. It is common ground that Rizwan then wrote out a letter or memorandum, that he and Mrs Sadiq both signed and that Mufti Naiem witnessed their signatures. The memorandum is as follows:

“30/9/2003 10.00 pm
I Mohammed Rizwan Khan & my mother Roshanara Begum Sadiq agree to sell our property at 25 Hollows Place Bonnyrigg to Mohammed Shikander Khan and Farisha Khan to the value of $495,000.00.
(Sgd) M R Khan
Mohammed Riswan Khan
(Sgd) R. Sadiq
Roshanara B. Sadiq
WITNESSED BY
(Sgd) [Indecipherable]
MUFTI NAIEM ALI”

(There is no question about the signature I have described as “indecipherable” being that of Mufti Naiem). Shikandar and Farisha took this document with them when they left the meeting. The original was tendered by them at the trial.

15 Rizwan took the part of the contract signed by him and his mother back to her the next day. He saw a need to alter the price to $495,000 and to correct a misspelling of Mrs Sadiq’s name and for the changes to be initialled. Mrs Sadiq refused to initial the alterations, took the contract from him and tore it up. There was never any exchange of contracts. Mrs Sadiq also took steps to see a chamber magistrate about the memorandum. The earliest appointment she could get was on 14 October 2003. Thereafter, she sent a letter to both Shirandar and Rizwan notifying them of her withdrawal from the sale.

The claim based on the memorandum

16 I consider first the claim based on the memorandum of 30 September 2003. The plaintiffs put that document forward as a contract for sale in its own right. Rizwan’s position is that he considers himself bound in conscience to sell at $495,000. He therefore does not seek to defend the claim based on the memorandum of 30 September 2003. Mrs Sadiq, on the other hand, says that the agreement contained in the memorandum “was unconscionable and obtained through undue influence being exerted on the defendant [ie, Mrs Sadiq]”. This part of the defence filed for Mrs Sadiq continues:

“ Particulars
a. The Mufti who attended the meeting was brought there by the Plaintiffs. In the knowledge that a Muslim woman would not go against the word of such a person or his word.
b. Until the meeting with the Mufti, no contract in writing had been entered into. The contract entered into on that day was done so without the Defendant having the benefit of legal advice before she signed it.
c. The Defendants legal position was misrepresented to her in that the Mufti told her there was a bargain done and she must sign the contract when this was not legally the position.”

17 The source of what Mrs Sadiq seeks to characterise as “undue influence” in the sense understood by equity is said by her to be Mufti Naiem. He, of course, was not a party to the transaction. He attended the meeting at the request of Rizwan (not, as the particulars suggest, at the instigation of the plaintiffs) and with the consent of both Mrs Sadiq and the plaintiffs, Shikandar and Farisha. He did so, I have no doubt, in a genuine attempt to assist resolution of difficulties affecting adherents of the Muslim religion by offering advice about the religious, spiritual or moral dimensions of the circumstances in which they found themselves, as well as the implications of precepts of Islamic law. No one contends that Mufti Naiem played the role of a religious arbitrator whose award could, as a matter of contract, be binding: compare Gingis v Mount Scopas Memorial College Ltd [1998] VSCA 49. But there was, in my view, a common expectation that he would inform the parties of their obligations according to Islamic requirements. And that, of course, is what he did.

18 It seems clear enough that the equitable principles concerning relief against undue influence upon which Mrs Sadiq relies are those stated as follows at paragraph 15-150 of the fourth edition (2002) of Meagher, Gummow and Lehane’s ‘Equity Doctrines and Remedies” (by Meagher, Heydon and Leeming), under the heading “Third parties”:

“The equitable doctrine extends to cases where the party exerting the undue influence was not the direct recipient of the disponor’s property. It extends to set aside transactions involving third parties in the following capacities: (a) where Y under the influence of X disposes of his property to Z; it does not appear necessary that the third party Z act in concert with X provided, presumably, he is not a purchaser from Y without notice of X’s influence ….”

19 This poses, in the present case, the question whether Mrs Sadiq (Y) was relevantly under the influence of Mufti Naiem (X) when she agreed, by the memorandum of 30 September 2003, to sell to Shikandar and Farisha (Z). The relevant influence is not confined to one involving selfishness or any desire for personal advantage on the part of the person exerting it: see, for example, Bullock v Lloyds Bank Ltd [1995] 1 Ch 327 at p.323. I record at once my very clear finding that Mufti Naiem, in participating as he did, was not in any way whatsoever actuated by considerations of self-interest. His sole concern, as the Imam of the mosque, was the proper and legitimate one of providing spiritual guidance and counsel to all present at the meeting.

20 A conventional “undue influence” case was described by Mahoney JA in Stivactas v Michaeletos (No 2) [1994] ANZ Conv R 242 as follows:

“In such a case, the evidence is ordinarily directed to establishing three things: that the defendant had influence over the plaintiff; that he exercised that influence so that what was done was, to the relevant extent, the result of that influence rather than the will of the plaintiff; and that his position or otherwise the circumstances were such that the influence, and the exercise of it, were ‘undue’ to the extent that equity should intervene.”

His Honour referred to Watkins v Coombes (1922) 30 CLR 180 at pp.193-4 and Johnson v Buttress (1936) 56 CLR 113 at p119 and pp.134-6 in this connection.

21 In the kind of “third party” case referred to in the extract I have quoted from the fourth edition of Meagher, Gummow and Lehane, the ingredients are somewhat different. The evidence must, in a case of that kind, show that the party designated X had influence over the party designated Y; that X exercised that influence so that what Y did was the result of the influence rather than Y’s will; and that the party designated Z unconscientiously derived a benefit from the conduct of Y knowing that that conduct was a result of the influence of X rather than Y’s will. If the position of Z is characterised by analogy with liability, it involves the kind of secondary liability based on knowing participation discussed in Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378. The third party recipient of benefit (Z), who knowingly takes with notice of the undue influence exerted upon the disponor (Y) by the person having ascendancy (X), takes unfair or unconscientious advantage of a situation in which a force against which equity will grant relief is known by him or her to be at work. The approach of equity towards Z was made clear by Mason J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at p.462. After referring to Blomley v Ryan (1956) 99 CLR 362, Mason J said:

“It is made plain enough, especially by Fullagar J., that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.”

22 As von Doussa J observed in Mohtar v Mohtar (1988) LSJS 377 (a case in which a litigant had settled proceedings under pressure from someone who was not a party to those proceedings), it is implicit in what Mason J said that the disabling condition or circumstance may be brought about by the conduct of someone who is not the other party to the transaction.

Undue influence – the evidence

23 I proceed to consider the evidence relevant to Mrs Sadiq’s defence based on undue influence.

24 Immediately before the meeting of 30 September 2003, Rizwan was, in his own mind, committed to selling to Shikandar and Farisha at a price of $490,000. He was embarrassed that his mother would not see matters that way. He had given his word and considered himself honour-bound to proceed with the sale. It was Rizwan who arranged the meeting of 30 September 2003. It was Rizwan who arranged for Mufti Naiem to attend. The circumstances in which Mufti Naiem was asked to attend were described by him in evidence as follows:

“A. He [Rizwan] told me about the conflict about the house and they have done the deal and it was a verbal deal with Rizwan and his mum and Sikander Khan and he said that we both agreed on 480 but it was not written and now his mum she has been changing from the pricing so to tell whether the deal is according to Islamic sort of view, whether it is done or not and tell the mother that the person he does the dealing, even though verbally and they have agreed, so it was done or not so I came and listen from both sides.”

25 Mufti Naiem also recounted in cross-examination having informed those present, after listening to each of them, that “a deal had been done” and that the oral arrangement at $490,000 should be honoured. He referred to the subsequent discussions involving an increase to $495,000. He was then cross-examined about the circumstances in which Mrs Sadiq later signed the contract:

“CARNEY: Q. Once the price was agreed upon, everybody was happy.
A. Yes.

Q. Is it possible that she said she wants to take the contract away and not sign it there?
A. No, she did not say anything about.

Q. It is part of my job and I have to put to you that she did say that, that she wanted to think about it and sign it later?
A. She signed the contract first, at the same time.

Q. What I want to suggest is before she signed the contract she did say, no, I want to think about it and someone said no, sign it now?
A. Yeah, the thing is she said this but because she was changing her mind, so just to come to a conclusion, we requested if you sign it now because you can change, you know, that's it.”

26 Mufti Naiem had earlier said in cross-examination:

“Q. Eventually the price was reached?
A. Yes.

Q. When that price was reached, did Mrs Sadiq say that before she signed the contract she wanted to think about it, do you remember her saying that?
A. She said when she agreed and he came to the price what she wanted and then she agreed it is okay and obviously signed the contract and after the contract they write the letter.

Q. So you asked her to sign the contract?
A. Myself, yeah, from my side I gave, I told how it was done and then that you sign about you understand, she said okay the price what she wanted and I told her if you are agreed on this, you can sign it.

Q. Didn't she say at that time she wanted to think about it or go away?
A. No, I don't remember this.”

27 Rizwan’s oral evidence about events at the meeting after the discussion of price outside was as follows:

“Q. So, then you came back inside?
A. We came back inside and said to my mother, ‘Ready to go ahead for 495,000’.

Q. That is what the plaintiff said?
A. Yes.

Q. He was happy to go ahead for 495,000?
A. Yes.

Q. Can you recall what happened then?
A. After that we - I had already signed the contract that was previously signed and then my mother--

Q. You had the contract there with you?
A. Yes, and then my mother signed the contract and then Mr Shikandar said, ‘We should write something in writing about this’.

Q. We should write something in writing?
A. Yes, so I wrote it up and then I signed it and then my mother signed it and it was witnessed by Mufti.”

28 Particularly pertinent is the following passage from cross-examination of Mrs Sadiq:

“WHITE: Q. Now after that you said, you say in your statement that you recall mentioning $510,000.
A. Mm.

Q. Now that was a price, wasn't it, that you put to the plaintiffs as being what you would accept?
A. Why I said that price, because when the Mufti and we had the meeting we all had our say and I have been saying from the beginning I am not going to sell it, I am not going to sell the house, I am not going to sign the contract and I wasn't aware that Rizwan had the contract with him that day, it just came out of the blue, and I gave a figure. I knew that figure would be a shocking figure for them.

Q. That was a figure, wasn't it, Mrs Sadiq that you put?
A. Yes, I did, 510, I did say 510.

Q. If the plaintiffs had said all right, I will take 510, you would have sold the property to them?
A. Probably at that time there was the Mufti because he was closer to God.

Q. Mrs Sadiq you mentioned the figure of $510,000?
A. Yes.

Q. That was a figure you put, you say here, knowing that it would not be accepted. I am asking you if it was accepted you would have had to sell the property for 510?
A. With the Mufti, everybody would have been there.

Q. Yes?
A. But I would have taken the offer.

Q. Didn't the Mufti just suggest to you that the deal had been done at 490?
A. Yes, the Mufti did say the deal has been done. The Mufti has just arrived in the country a few months ago. He hasn't any idea of this country's law or anything. He just gave his view from the Moslem side. He didn't think how it was going to affect this whole family. There are two families involved. He hasn't been in this country for a very long time and we all respected him because we thought he was a figure from the Mosque and for him it is like a big disgrace and he said he had given his word and for him to show his face there it was a big disgrace so the Mufti had to bring us --

Q. You didn't pay any regard to what the Mufti had said, did you?
A. Yes, I did, because that's why I got him to sign the paper.

Q. He suggested that the deal had been done at $490,000 and you came back and said 510?
A. I had been saying to the Mufti the deal is too low, very low.

Q. You didn't pay any attention to him?
A. I did, I respected him, I did.

Q. Why didn't you sign the contract for 490?
A. I did, because both of my children were saying ‘sign, Mum, sign’, and Mrs Khan, she had a sick son, she broke down. Both of my sons were putting the pressure on Mum saying ‘today is the day when we are all here’.

Q. Which is it, Mrs Sadiq, is it the Mufti, his presence, that took away your independent will?
A. I think the whole people, the people. If, as you are saying, the first time when we had the meeting I had my two friends present. The second meeting was just the Mufti, the plaintiffs and my children so they didn't allow any friends or any outsiders.

Q. I am just asking you, I am trying to find out why you say that your judgment --
A. Yeah, my judgment.

Q. --was overborne?
A. Yes, it was overborne, yes.

Q. And do you say that was because of the Mufti?
A. The whole people.

Q. Well it couldn't have been the Mufti, could it?
A. No, the Mufti didn't play very good role there. If it wasn't for the Mufti I wouldn't have signed the paper.

Q. I beg your pardon, what do you say?
A. If it wasn't for the Mufti, because the Mufti came in and he started to say the words ‘lucky you are not in any other country, if you had been in a Moslem country it would be a different story’, and I got scared, these are the words he is trying to put.

Q. You don't say you were scared in your statement, do you?
A. The words, in the way the words he is using are closer to God. We respect him. He is the man from the Mosque.

Q. Why did you pick the figure of 510?
A. Because I didn't want to sell it and if it was going to be that amount, if I had to sell it, I had no choice. They had put me in a corner where I had no friends. My two boys were putting a lot of pressure on me and the Mufti too, like the words he was quoting.

Q. So your judgment was overcome, was it, overborne, and you suggested a figure of 510, is that the position?
A. Yes.

Q. Do you agree with me that if the plaintiffs had said ‘alright we will do it at 510’ that you would have to have sold the property to them for that figure?
A. Because they had the contract there. You have to understand the contract was there. Usually you don't sign a contract in front of a Mufti. You have to sign in front of a solicitor, where the solicitor go through the contract and explains everything. Because the contract was there, they knew what they wanted at that time.”

29 Shikandar and Farisha were fully aware of the standing and authority of Mufti Naiem and of the role he played at the meeting on 30 September 2003. I quote from the cross-examination of Farisha:

“Q. You were aware of course what a Mufti is?
A. Yes.

Q. It is a silly question but the proceedings are recorded?
A. Yes.

Q. You are aware he was obviously a man well versed in Islamic law?
A. Yes.

Q. Go [? Scil. God] and Islamic doctrines and processes?
A. Yes.

Q. And if a Mufti tells you that a deal is done it is an important thing?
A. It is.

Q. It is not something you would lightly go against?
A. It depends like, how things had been done in the beginning, yes.

Q. Certainly if he has heard both sides of the story and I take it you witnessesed your husband give his side, Riswan giving his side and if he said this is a done thing, a deal, did that impress you?
A. Yes.”

Assessment of undue influence defence

30 The thing that makes the influence of spiritual advisers “undue” and attracts equitable intervention was described by Lindley LJ in Allcard v Skinner (1887) LR 36 ChD 145 at p.183:

“But the influence of one mind over another is very subtle, and of all influences religious influence is the most dangerous and the most powerful, and to counteract it Courts of Equity have gone very far. They have not shrunk from setting aside gifts made to persons in a position to exercise undue influence over the donors, although that had been no proof of the actual exercise of such influence, and the Courts have done this on the avowed ground of the necessity of going this length in order to protect persons from the exercise of such influence under circumstances which render proof of it impossible.”

31 The relationship of spiritual adviser and follower is, of course, one of those in which undue influence is presumed. But in the present case there is no reliance on any presumption. The case was argued on the basis that actual undue influence had been brought to bear and it is that proposition that I must explore.

32 The central message impressed by Mufti Naiem upon those present on 30 September 2003 was that all were required by an Islamic precept equivalent to “my word is my bond” to enter into and complete a contract at $490,000. That suited Shikandar and Farisha very well. It also confirmed Rizwan’s pre-existing belief that he was committed in honour. For Mrs Sadiq, however, it represented a religious instruction or, at the least, a religious exhortation to do something she was not legally obliged to do, did not wish to do and had actively resisted doing.

33 The legal position (part of Anglo-Australian law for more than 300 years) was, of course, that Mrs Sadiq could not be contractually bound as a seller of land except by writing (I leave to one side at this point the question of part performance). This is the effect of the Statute of Frauds provision now embodied in s.54A of the Conveyancing Act 1919. The dilemma or tension that the Statute of Frauds resolved when enacted in 1677 was referred to by Lord Hoffmann in Actionstrength Ltd v International Glass Engineering IN. GL. EN Spa [2003] 2 AC 541 at p.549:

“The terms of the Statute [of Frauds] … show that Parliament, although obviously conscious that it would allow some people to break their promises, thought that this injustice was outweighed by the need to protect people from being held liable on the basis of oral utterances which were ill-considered, ambiguous or completely fictitious.”

The need for the certainty and enduring evidence that written bargains entail was thus seen, at that stage of history, as superior to the need for persons selling land to honour oral bargains. And that remains the position today.

34 There was (and is) a rational basis for a law that excludes “my word is my bond” in certain cases. But acceptance of that principle as a canon of good conduct is nevertheless properly and understandably something that appeals to many people, whether for religious reasons or merely as an incident of an upright way of life. In this, as in other areas of human affairs, individuals are free to embrace or not, as they wish, a principle of moral conduct going beyond legal rules.

35 Legally, it was Mrs Sadiq’s freewill choice whether to accept a commitment to sell to Shikandar and Farisha by signing an appropriate document. In the circumstances in which she was placed on 30 September 2003, the document in contemplation was a standard form conveyancing contract that had already been prepared. After Mufti Naiem had advised that “the deal has been done”, Mrs Sadiq did not immediately sign the previously prepared contract, even though she had been made aware that that was what religious duty required of her. She continued to negotiate. She nominated $510,000 because, she said, she thought Shikandar and Farisha could not possibly afford that price. This was a way of steering a middle course: she could appear to be acquiescing in the proposition that she must sell to Shikandar and Farisha while, at the same time, doing her best, within the bounds of credibility, to avoid doing so. The further negotiation between Rizwan and Shikandar followed. Mufti Naiem was still part of the assembled group. When Rizwan and Shikandar came in from outside and said that the price was to be $495,000, it was Mufti Naiem who, on Mrs Sadiq’s account, said, “You have to take $495,000 which is all they can afford and you will be rewarded in the after life”. Mufti Naiem’s own oral evidence is consistent with his having told her at that point that she must sign. There is, I think, some significance in the fact that Mufti Naiem witnessed the signatures of Rizwan and Mrs Sadiq on the memorandum. There was, in that way, a clear record that they signed in his presence. He adopted, or was given, a role in relation to the document that conformed to the authoritative role he had taken throughout the meeting.

36 Mufti Naiem said in evidence that he had told Mrs Sadiq that she should sign the contract after Rizwan and Shikandar had come back inside with an agreed price of $495,000. Mrs Sadiq said that she would probably have signed at $510,000 if, contrary to he expectations, Shikandar and Farisha had agreed to that price. Her precise answer to that question was, “Probably at that time there was the Mufti because he was closer to God”. According to Mrs Sadiq, Mufti Naiem also said to her that she if she sold at $495,000 she would be “rewarded in the after life”. It was her explicit evidence that she would not have signed anything “if it wasn’t for the Mufti”:

“If it wasn’t for the Mufti, because the Mufti came in and he started to say the words ‘lucky you are not in any other country, if you had been in a Moslem country it would be a different story’, and I got scared …”

37 Mrs Sadiq said of the Mufti, “We respect him. He is the man from the Mosque”. She described the Mufti’s words as “closer to God”. The force of the words of a mufti was confirmed by Farisha who said that if such a person says that a deal has been done, that is “an important thing” and that such a pronouncement on the occasion impressed her. Mrs Sadiq, as a Muslim woman, regarded Mufti Naiem as a person of authority, particularly when it came to matters of Islamic law or duty. She regarded him, or his ruling, as capable of affecting her prospects so far as “the after life” was concerned. He told her she was lucky she was not in a Muslim country, the inference being that she would be in trouble if she did not perform an oral agreement in such a country. These matters, as she said herself, made her “scared”. She went some way towards disobeying or defying Mufti Naiem’s initial ruling by re-opening the question of price after he had given that ruling. When the price was increased to $495,000, both her sons implored her to sign the contract and were supported by Mufti Naiem. There was no lawyer or other adviser there to reinforce what she knew in her head (that she had no legal obligation and could refuse to sell if she wished, without having to give any reason) and, in that way, to put into context the very strong emotional appeals that were being made to her sense of religious duty.

38 There is a strong parallel, so far as the exertion of influence goes, between the present case and the description given by McLelland J in Quek v Beggs (1990) 5 BPR 11,761 at 11,778:

“I am satisfied that Mrs Quek knew, understood and intended what she was doing in making these gifts for the house. However I am unable to conclude that she was acting independently of any influence arising from Mr Beggs’ ascendancy in religious matters. In particular, her belief that in providing the money for the house she was following divine guidance, her perception of Mr Beggs as a representative of God, and her conception that it was ‘God’s house’ for which she was providing the money, are matters militating against any such conclusion.”

39 It was submitted on behalf of the plaintiffs that Mrs Sadiq is an astute woman well able to look after her own interests and that there was no undue influence in fact. Having seen and heard her in the witness box explaining the relevant events, I am satisfied that she is astute and intelligent. She is the owner or part owner of several residential properties. She knows about their values, the mortgages to which they are subject and the general processes of conveyancing. I am also satisfied that she had developed a strong disapproval of what she regarded (rightly or wrongly) as the petty attitude of Shikandar, as evidenced by the matters involving the attempt to negotiate a $15,000 reduction in price, the reduced occupation fee and the $35, and that she had a strong desire not to sell the property to him. But those factors are not sufficient to outweigh what I consider to be the clear effects of undue influence.

40 As I have said, Mufti Naiem was in no sense a beneficiary of the undoubted influence he brought to bear upon Mrs Sadiq’s will. He was doing no more than advise all present on matters of religious duty. Shikandar and Farisha no doubt approved Mufti Naiem’s rulings. But they went further. It was Shikandar who was not content with Mrs Sadiq’s merely signing the form of contract. He realised that that document would have to go back to the solicitor so that an exchange of contracts and associated formalities could take place. It was for that reason that Shikandar asked that the memorandum be prepared and signed on the spot. He wanted to be sure that Mrs Sadiq, having succumbed to Mufti Naiem’s influence, did not escape from what he regarded as a concluded bargain.

41 This conduct of Shikandar (which I think should be imputed also to Farisha) is sufficient, to my mind, to make reliance by the plaintiffs upon the written memorandum unconscientious in a way that equity will not countenance. The case is one in which Mrs Sadiq, under the religious influence of Mufti Naiem, contracted to dispose of property to Shikandar and Farisha who had notice of that influence and the effect of it upon Mrs Sadiq’s will. They were present when Mufti Naiem told Mrs Sadiq where her religious duty lay. They have not attempted to show that they did not take advantage of Mrs Sadiq’s obedience to Mufti Naiem. Nor, on the evidence, could they do so. The bargain under which they received a benefit from Mrs Sadiq is therefore one which equity regards as unconscionable and will not allow to be enforced against Mrs Sadiq. Her defence of undue influence is made out, as regards the part of the plaintiffs’ case based on the enforceability of the memorandum of 30 September 2003 as a contract.

42 I would add, in relation to the memorandum, that there is a very real question as to the contractual force it would have had in any event. It was signed in a context where a formal contract was the clearly envisaged vehicle for effecting any transaction and carrying it to completion. Such a form of contract was in existence and Mrs Sadiq signed that, as well as the memorandum, at the meeting of 30 September 2003. Generally speaking, contractual force will not be ascribed to notes and memoranda of terms signed in such circumstances, the expectation being that the parties do not intend to enter into any legally binding relationship except through the envisaged means of exchange of signed parts of a formal contract. The principles are discussed in the recent judgment of White J in Peter Warren Properties Pty Ltd v Jalvoran Pty Ltd [2004] NSWSC 1149 (30 November 2004). But these matters were not canvassed before me and I say no more about them.

The alleged oral contract

43 The principles to which I have just referred are, however, relevant to the plaintiffs’ alternative claim based on an oral contract for sale and acts said to constitute part performance of it. I shall refer to their relevance presently. First, I note that the acts on which the plaintiffs rely – their taking of possession of the property, their attending to the repair and rectification of matters not properly finished off when the house was built and their selling of their existing house to obtain funds to complete the purchase of the property at Bonnyrigg are, of their nature, capable of being regarded as acts of part performance in relation to an oral contract for sale. I quote from the judgment of Gibbs J (with whom Stephen, Mason, Jacobs and Murphy JJ agreed) in Regent v Millett (1976) 133 CLR 679 at p.682:

“The principle upon which the doctrine of part performance rests was stated by Lord Cranworth, Lord Chancellor in Caton v. Caton ((1866) L.R. 1 Ch. App. 137, at p. 148) in words which appear to have a direct application to the present case. He said:
‘ ... when one of two contracting parties has been induced, or allowed by the other, to alter his position on the faith of the contract, as for instance by taking possession of land, and expending money in building or other like acts, there it would be a fraud in the other party to set up the legal invalidity of the contract on the faith of which he induced, or allowed, the person contracting with him to act, and expend his money.’”

44 But before this principle becomes applicable, it is necessary to identify the oral contract in question. As Brennan J said in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at p.432:

“In order that acts may be relied on as part performance of an unwritten contract, they must be done under the terms and by the force of that contract and they must be unequivocally and in their nature referable to some contract of the general nature of that alleged.”

45 The unwritten contract on which the plaintiffs seek to rely is a contract made by word of mouth between Rizwan and Shikandar in the conversation summarised at paragraph [5] above. The agreed price, at that point, was $480,000 but the plaintiffs say that they advance their claim based on unwritten contract and part performance on the conceded footing that they would have to pay $495,000 rather than $480,000. This, of itself, tends to undermine their case.

46 Two questions must be considered at this point: first, whether the conversation did, in truth, give rise to an oral contract; and, second, whether the acts relied on as acts of part performance were unequivocally referable to any such contract.

47 Very soon after the conversation in question, Rizwan arranged for solicitors to prepare a contract for sale at a price of $480,000. A counterpart was sent by those solicitors to solicitors acting for Shikandar and Farisha. They signed that counterpart.

48 Words of agreement may or may not connote contract. When the transaction in contemplation is one of sale and purchase and the subject matter is land in New South Wales, it is most unlikely that parties will intend an oral contract to come into existence. I quote from the judgment of McHugh JA (with whom Kirby P and Glass JA agreed) in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at p.634:

“An agreement for the sale of property at a specified price does not necessarily indicate a legally binding contract. The magnitude, subject matter, or complexities of the transaction may indicate that the agreement was a limited one not intended to have legal effect: Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 316-317. In New South Wales, real estate is ordinarily sold by signing and exchanging contracts in the form approved by the Real
Estate Institute and Law Society. Accordingly, even though the parties agree in writing that real estate is sold for a specified price, the presumption is that no binding contract exists until ‘contracts’ are exchanged: Smith v Lush (1952) 52 SR (NSW) 207 at 212; 69 WN (NSW) 220 at 222; Allen v Carbone (1975) 132 CLR 528 at 533.”

49 In Lezabar Pty Ltd v Hogan (1989) 4 BPR 9498 at p.9501, Gleeson CJ explained that sales of land in New South Wales are usually effected by formal exchange of contracts because

“the form of contract ordinarily used contains important provisions for the protection of both parties, and a court would not lightly attributed to knowledgeable parties an intention to forego such protection.”

50 As White J pointed out in Peter Warren Properties Pty Ltd v Jalvoran Pty Ltd (above), the consideration mentioned by Gleeson CJ has greater pertinence since s.52A of the Conveyancing Act 1919 and the Conveyancing (Sale of Land) Regulations came into force in 2000. Contracts for the sale of land are regulated by legislation as to their terms and content. This is for the protection of the parties.

51 Where parties have agreed a price and general terms for the sale and purchase of land and proceed in the normal way towards an exchange of contracts according to ordinary and usual conveyancing practice, the expectation that they do not intend to enter into any legally binding oral agreement in advance of exchange of contracts is particularly strong. In the present case, there is insufficient evidence to justify any contrary conclusion. After the conversation relied on as the source of the oral agreement, there were discussions about changing the price. Shikandar sought a reduction of $15,000 because of defects. He eventually settled, instead, for a concession on the occupation fee on the basis that he would not require rectification of the defects. In my view, Shikandar and Farisha moved into the property not because there was an oral contract for sale but because there was an oral licence agreement in contemplation of a contract for sale to be created by exchange of contracts in the normal way.

52 I am not satisfied that there was any oral contract for sale at $480,000 or at any other price. The acts upon which Shikandar and Farisha rely as acts of part performance referable to such a contract for sale were, in truth, acts referable to an agreement for licence to occupy in advance of a contemplated contract for sale and to variations of that agreement for licence.

53 The plaintiffs’ claim to have an oral contract for sale specifically performed fails because there was never any such contract.

Disposition

54 The plaintiffs’ claims in the statement of claim are dismissed with costs.

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Last Modified: 12/15/2004