Newman v Krahe
[2000] QDC 53
•16 June 2000
[2000] QDC 053 DISTRICT COURT OF QUEENSLAND
REGISTRY: BRISBANE
NUMBER: 569 of 2000
APPLICANT:
PAMELA DEBORAH NEWMAN
RESPONDENT:
DOROTHY KRAHE
REASONS FOR JUDGMENT
DELIVERED the sixteenth day of June, 2000.
By application filed in this court on 11th February, 2000 the applicant sought an order pursuant to the provisions of section 38 of the Property Law Act 1974 appointing trustees for the sale of land situated at 30, Raceview Avenue, Hendra. Other orders were sought in the application.
On 11th February, 2000 the Chief Judge ordered, with the consent of the parties, that Allan Wayne Dick and Glenys Joy Van de Graaf be appointed trustees for the sale of the land. The application was adjourned before me on 7th June, 2000.
I heard the matter on 7th June, 2000. Short evidence was given, and then counsel addressed me. I then reserved the matter for further consideration by me.
The facts are withing short compass, and there is little conflict between the parties on them. I shall set out the essential matters.
In 1997 the respondent was the proprietor of a café business in Racecourse Road. Early in that year she met the applicant’s son, Peter Newman. She and he entered into some business enterprises.
In or about October, 1997 Peter Newman discussed with the respondent their purchasing the property at 30-32, Raceview Avenue, Hendra (which I shall hereafter refer to as “the property.”) The property was comprised of a house and eight stables. It was eventually sold to the respondent and Mr. Newman for the sum of $195,000.00.
The respondent and Mr. Newman obtained a loan for the purchase of the property from the National Bank in the sum of $155,000.00.
The respondent also contributed the sum of $5,000.00 from her own funds towards the purchase price, together with an amount of just over four thousand dollars for the costs of the purchase.
Mr. Newman seems to have been the main source of information for his mother.
The applicant provided $35,000.00 to her son and the respondent to be applied to the purchase price. She borrowed this sum from a credit union. The monies were available to her by 28th November, 1997.
Prior to settlement the (then) solicitors for the respondent had prepared a deed declaring a trust in favour of the applicant. The document originally provided that the applicant should, upon the sale of the property, receive a one sixth share of the sale price. On the morning of settlement that provision was changed, so that the deed provided for the applicant to receive a quarter of the sale price.
The short issue I have to resolve is whether the applicant is entitled to receive, on the sale of the property, a quarter or a sixth share.
The document, as signed by the parties, clearly provides for the applicant to have a quarter share. However the applicant challenges the document, alleging that it was signed by her under duress and further that it is unconscionable.
An affidavit by Robert Downey, the (then) solicitor for the respondent (and Mr. Newman) was read by the respondent’s counsel. It seems to me that his evidence, based as it is largely upon his contemporaneous memoranda, is most likely to be accurate. Indeed, the respondent did not call him, and the applicant did not require him to be present for cross-examination.
According to Mr. Downey, the first contact he had with the applicant was on 10th November, 1997, when she discussed with him the possibility of her being included on the contract. She told him she was contributing $35,000.00, and wanted the contract to reflect her having a one-third interest in it.
The following day Mr. Downey suggested to the applicant that she obtain independent legal advice. She was advised that her interests were best protected by a declaration of trust.
According to Mr. Downey he received a phone call from the respondent, presumably on 27th November, 1997, during which the respondent was adamant that she would not sign anything which acknowledged the applicant as having a third interest in the property. That same day he received correspondence from the applicant’s solicitors noting that he (Mr. Downey) was to prepare the deed, and that it would reflect their client’s one sixth interest in the property. Mr. Downey says he read this correspondence to the respondent, who indicated it was acceptable to her.
The next day, Mr. Downey sent facsimile copies of the deed to the solicitors for the applicant, as well as to her son. The former responded by saying that their client would sign, but “there was a question whether it should reflect a 1/4 or 1/6 share of the property.” Mr. Downey says that day he phoned the respondent, advising her that “Peter Newman had amended the Deed to reflect that his mother was to have a 1/4 share in the property.”
On the day of the settlement the parties gathered in Mr. Downey’s office. His recollection is that the respondent “seemed dissatisfied with the amendment.” He recalls advising her that the vendor would probably take action if the contract was not settled that day.
It appears to me that it is clear that prior to the date of settlement the respondent knew there was an issue as to the size of the interest to be taken by the applicant. She had made it clear she would not proceed if the applicant was to take a third share. I am prepared to accept that she had, as a result of earlier transactions entered into with Mr. Newman suffered losses, and that she had provided the deposit of about $5,000 in respect of the contract on the property.
The respondent had knowledge of the alteration to the deed from late on Friday, 28th November,1997. Admittedly the only time available for her to reflect on her position and to take advice (before settlement) was the weekend - but, on the other hand, it cannot be said that the change was “sprung” on her when there was no time for her to think about the situation, or to take advice on it. I think it relevant that the settlement took place at the office of her solicitors.
Further, it should be born in mind that the deposit had presumably been paid by the respondent before the applicant was involved in the transaction. Bearing in mind the character of Mr. Newman (as it appears from the respondent’s material) - and the fact that the Bank had only been prepared to advance the applicant and Mr. Newman eighty per cent of the purchase price, one might be forgiven for suspecting that there was a significant risk of the respondent’s losing the deposit had the applicant not made her offer.
Halsbury’s Laws of Australia says of economic duress:
Economic pressure, such as a threat to breach a contract unless one party agrees to a new contract, or a variation of the contract which increases the promisor’s obligations, may amount to duress. Such payments made (and other benefits conferred) pursuant to a contract supported by consideration may be recovered, if there is a right to rescind a contract for economic duress which has been validly exercised. Once the contract has been rescinded, any payment made can be recovered, on the ground either of duress or total failure of consideration.
There is nothing contrary to principle in recognising economic duress as a factor which may render a contract voidable, provided always that the basis of such recognition is that it must amount to a coercion of will, which vitiates consent and that the victim must have entered the contract against his or her will. More generally, the rationale for the application of duress in this context is that the promisor’s apparent consent was induced by pressure exercised upon the promisor by that other party which the law does not regard as legitimate, with the consequence that the consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his or her mind.[1]
[1]. Paragraph 11–5725.
In Crescendo Management Pty. Ltd. v. Westpac Banking Corporation[2] McHugh JA (as His Honour then was) examined the conceptual basis of economic duress. He said:[3]
... The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised on one party by another party when the law regards that pressure as illegitimate: Universe Tankships Inc of Monrovia v. International Transport Workers Federation.[4] As His Lordship pointed out, the consequence is that the “consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind.” In the same case Lord Scarman declared (at 400) that the authorities show that there are two elements in the realm of duress: (a) pressure amounting to compulsion of the will of the victim and (b) the illegitimacy of the pressure exerted. “There must be pressure”, said Lord Scarman “the practical effect of which is compulsion or the absence of choice.”
[2]. (1988) 19 N.S.W.L.R. 40
[3]. At page 45. It should be noted that the other members of the Court (Samuels and Mahoney JA) specifically noted that they found it unnecessary to deal with the “conceptual basis of the defence of economic duress” - see page 41. The suggestion that they concurred made by the authors of the Seventh Australian edition of Cheshire & Fifoot’s Law of Contract at page 526 is misleading.
[4]. [1983] 1 A.C. 366, 384 (per Lord Diplock.)
Later His Honour said:[5]
In my opinion the overbearing of the will theory of duress should be rejected. A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.
[5]. Page 46.
The respondent here had demonstrated prior to 27th November, 1997 her ability to resist pressure (if that be the right expression) when she declined to enter into the contract if the applicant was to receive one third of the property. I suppose, in one sense, almost every offer and counter-offer in a protracted bargaining situation amounts to the exertion of some pressure on the other party by the person making the offer. If it be correct to say in this case that the applicant exerted pressure on the respondent - as to which I have some doubt - I am satisfied that the pressure cannot be characterised as being illegitimate. It was certainly not unlawful, and, in my view, it cannot be said to be unconscionable.
I am equally satisfied that the deed cannot be challenged on the basis that it is unconscionable - or that the applicant has engaged in unconscionable conduct.
Whilst the parties seem to have assumed in their discussions that the deed provided for the applicant to have a one quarter share of the property this in fact is not the case. I drew this to the attention of the parties during the proceedings, and was told, without demur, that the parties were proceeding on the basis that the deed reflects the agreement between the parties.[6]
[6]. See page 10 of the transcript.
I therefore order and direct that the trustees for sale, upon the sale of the property, dispose of the proceeds of sale as provided in the declaration of trust made on the first of December, 1997, a copy of which is Exhibit “A” to the affidavit of the applicant filed herein on 11th February, 2000.
I further order that the respondent pay the applicant’s costs of and incidental to the application to be assessed.
H. W. H. Botting
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