Powell General Sheet Metal Pty Ltd v Autopak Nominees Pty Ltd

[2011] NSWSC 321

Supreme Court

New South Wales

Medium Neutral Citation:

Powell General Sheet Metal Pty Ltd v Autopak Nominees Pty Ltd [2011] NSWSC 321

Hearing dates:

7 and 8 February 2011, 22 February 2011

Decision date:

06 April 2011

Jurisdiction:

Equity Division

Before:

Sackar J

Decision:

1. Declaration that it was the common intention of the plaintiff and the defendant at the time of entry into contract that the contract price was one million five hundred and seventy thousand dollars ($1,570,000.00) plus GST.

2. Order that the contract be rectified to give effect to such intention by providing that the contract price is one million five hundred and seventy thousand dollars ($1,570,000.00) plus GST.

3. Defendant to pay the Plaintiff's costs of the proceedings.

Catchwords:

CONTRACTS - rectification of contract
EQUITY - common mistake - when rectification of contract for common mistake is warranted - common intention of parties to contract on basis other than that specified in the contract - contract inclusive or exclusive of GST
EVIDENCE - drawing of adverse inferences due to failure to call witnesses.

Cases Cited:

Allied Pastoral Holdings Pty Ltd v Hunt FCT (1983) 1 NSWLR 1
Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238
Marlinga Pty Ltd v Maoor Enterprises Pty Ltd (1973) 128 CLR 336
New South Wales Medical Defence Union Ltd v Transport Industries Insurance Co. Ltd. (1986) 6 NSWLR 740
National Australia Bank Ltd v Budget Stationery Supplies Pty Ltd (1997) 9 BPR 97804
Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101
Bishopgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd [1981] 1 NSWLR 429
Re B T Property Trust (unreported, SC NSW, 31 March 1998)
Jones v Dunkel 101 CLR 298
Cubillo v Commonwealth 174 ALR 97
Christmas v Nicol Bros Pty Ltd (1941) 41 SR (NSW) 317
S v M (1984) 36 SASR 316
Flint v Lowe (Fed C of A, von Doussa, Higgins, Nicholson JJ, 23 June 1995, unreported)
Jones and Another v Sutherland Shire Council (unreported judgment of June 15; Sep 5, 1979)
Asim v Penrose & Anor [2010] NSWCA 366

Texts Cited:

JD Heydon (2010), Cross on Evidence, Eighth Australian Edition

Category:

Principal judgment

Parties:

Powell General Sheet Metal Pty Ltd - Plaintiff
Autopak Nominees Pty Ltd - Defendant

Representation:

Counsel:
P Walsh - for plaintiff
J Levingston - for defendant
Solicitors:
Adams & Partners Lawyers - Plaintiff
Alexander Lee & Associates - Defendant

File Number(s):

2010/301584

Judgment

PROCEEDINGS

1. These proceedings were commenced by Statement of Claim filed on 10 September 2010.

1. The Plaintiff seeks a declaration that it was the common intention of both it and the Defendant at the time that each entered into a contract for the sale of land that the contract price be $1,570,000 plus GST.

1. The Plaintiff sought in the alternative that the court grant a declaration that it was the intention of the Plaintiff at the time and known to the Defendant that the contract price was $1,570,000 plus GST. This alternative relief was abandoned in the course of the hearing.

1. An order for rectification is sought.

1. A further order was also sought that the Defendant specifically perform the agreement as rectified. This relief was also abandoned as the sale has completed and an amount of $69,300 representing the disputed amount of GST has been put into an interest bearing account awaiting the outcome of these proceedings.

THE CONTENTIONS OF THE PARTIES

1. The contract that was signed by both parties on 26 July 2010 shows a total contract price of $1,657,700 expressed to be inclusive of an amount of GST. The GST is separately identified in the contract as $150,700.The contract was for the purchase of 1-8 / 65-67 Forrester Road, St Marys.

1. The Plaintiff's case is that the amount shown on the front page of that contract should be regarded as in effect an arithmetical mistake. The price it contends negotiated and finally agreed between the parties, namely $1,570 000, was always intended to be exclusive of GST. The contract should accordingly be rectified.

1. The Defendant on the other hand asserts that at all relevant times the price that was being negotiated and agreed was one inclusive of GST. No rectification is therefore warranted as the contract is an accurate reflection of the parties' intentions.

BACKGROUND FACTS

1. It is common ground that soon after the vendor placed the relevant property on the market in about June of 2010 it found itself in the enviable position of being courted by rival purchasers.

1. Mr Peter Pazios was a witness called for the Plaintiff. He was an estate agent employed by a firm known as Pullman and Williams Real Estate of Penrith. Mr Pazios never was it seems appointed the Defendant's agent for the purposes of the purchase but he nonetheless played a significant role in the negotiations as a facilitator.

1. Mr Pazios first had dealings with Mr Paul Kearney, a director of the Defendant, in about 2008 when he had acted for the vendor of a property ultimately purchased by Mr Kearney's company. That property was immediately next door to the land the subject of this litigation.

1. In November of 2009 Bawdens Industrial Real Estate of Parramatta was approached by Ms Linda Jerrison, a director of the Plaintiff, to provide a proposal to act as exclusive selling agent for the property and provide a valuation.

1. A Mr Saied Hezari of Bawdens prepared a proposal and report in that month in which he expressed the opinion that the property should attract a price of between $1,560,000 and $1,750,000 and suggested listing the property at the higher of the two amounts. There is no suggestion that the range of values in his opinion was to be understood as inclusive of GST.

1. The proposal was not it seems immediately accepted because the property was not listed with Bawdens until June 2010. An exclusive agency agreement was however executed by the Plaintiff appointing Bawdens as their agent on 24 June.

1. It is not controversial that Mr Pazios and Mr Paul Kearney towards the end of June or perhaps early July 2010 discussed the possible purchase by the Defendant of the subject property. ¹There is an issue as to who first made contact with who, but nothing turns on this for the purposes of the current proceedings.

1. On 14 July Mr Pazios told Mr Kearney that another agent had told him that there was a rival buyer and that Mr Kearney should if he wanted the property act quickly. ²He also told Mr Kearney that the vendor was asking "$1,560,000 with vacant possession and what did he want to do." ³Mr Kearney instructed Mr Pazios to make an offer of "$1,510,000." ⁴

1. At all times up to 26 July the day contracts were ultimately exchanged there was another potential purchaser, L and M Insulations, who was interested in buying the property and who had already inspected the property prior to the Defendant doing so on 23 July.

1. Following his conversation with Mr Kearney, Mr Pazios sent two emails on 14 July 2010, one at 12.48 pm to Ms Linda Jerrison. That email in part read:

"Hello Linda,

I confirm the agreed price of $1,510,000 +gst (vacant possession sale)."

1. At the foot of the email Mr Pazios nominated the purchaser as Autopak Nominees Pty Ltd, as trustee for the Paul Kearney Superannuation fund. He also included details of amongst other things Mr Kearney's mobile number and in addition gave contact details for the Defendant's solicitor, a Mr Lee.

1. At 12.53 pm on the same day he purported to forward a copy of that email to Mr Paul Kearney and his son, Mr Peter Kearney, for their information. ⁵There was an issue at the trial as to whether Mr Paul Kearney or for that matter Mr Peter Kearney received it or indeed any emails from Mr Pazios. Mr Paul Kearney denied he ever received this email. Mr Peter Kearney was not called as a witness before me.

1. On 19 July at 3.01pm Mr Peter Kearney sent an email to Mr Pazios and copied it to his father. ⁶The email requested Mr Pazios provide the full name of the vendor so presumably contract documentation could be prepared. At the top of that email appear the names of Mr Pazios and Mr Paul Kearney but not their full email addresses.

1. Mr Pazios forwarded that email to Ms Jerrison at 3.24 pm on 19 July. At 3.42 pm she responded by providing the relevant details. ⁷

1. Mr Kearney readily accepted that he had put an offer of "$1,510,000" ⁸early in the negotiations although he always asserted that that offer as all of his offers were inclusive of GST. He said for example when he got the proposed contract that it expressed the price as inclusive of GST, which was in accordance with his expectations and intentions. ⁹The evidence was silent as to who prepared this contract and why the price was to be expressed as $1,510,000 inclusive of GST. I note Mr Pazios' email of 14 July, which states that price as exclusive of GST.

1. Mr Pazios gave evidence that a meeting took place at the subject property between himself, Mr Anthony Powell and Ms Linda Jerrison on behalf of the vendor and Messrs Paul and Peter Kearney on behalf of the purchaser on the 22 July. ¹⁰All other witnesses agree such a meeting took place but everyone other than Mr Pazios puts it as occurring on Friday 23 July. ¹¹

1. No witness suggests any negotiations or discussions on price took place during the inspection. ¹²Ms Jerrison, Mr Powell and Mr Pazios say that Mr Kearney at the conclusion of the inspection said he would be able to exchange contracts on Monday 26 July. ¹³Mr Kearney agrees with this account and says further that he shook Mr Powell and Ms Jerrison by the hand intending to signify in effect a binding contract.

1. At 5.11 am on Saturday 24 July Mr Mimmo Scavera from L and M Insulations sent an email to Mr Hezari in which he indicated he was prepared to make "one final offer to stop the chain of events that are taking place with the new purchaser." ¹⁴

1. At 11.37am on Monday morning of 26 July Ms Jerrison received an email from a Mr Hezari informing her that Mr Scavera was prepared to offer "$1,560,000 + GST." ¹⁵

1. A little later that morning Mr Pazios received a phone call from Mr Anthony Powell, who informed him that Bawdens had an offer from another party at a price of "$1,560,000." ¹⁶

1. Mr Pazios says he immediately phoned Mr Kearney to tell him the bad news. Mr Kearney told Mr Pazios that he had thought he had a deal after he had shaken hands with the vendor at the inspection on Friday July 23. Mr Pazios advised Mr Kearney to "beat the offer by $10,000" and to indicate that there would be no more negotiations and to offer to exchange that day. Mr Kearney, he said, agreed. ¹⁷

1. Mr Kearney substantially agrees with Mr Pazios' version of events but states there were two conversations. The first in which he was told that he had been "gazumped" and that the price was now "$1.56m." ¹⁸He said he responded by saying he did not like doing business like that and thought he had done a deal when he had shaken hands. In a subsequent call with Mr Pazios he was told: "$1.57 million would do it." At that point he agreed to go to that figure as a "final offer from us." ¹⁹

1. At 12.33 pm on 26 July and less than an hour after his conversation with Mr Powell, Mr Pazios sent an email to Ms Jerrison and Mr Powell. It purports to have been copied to Mr Paul Kearney. The email states:

"Please be advised Paul has agreed to pay $1.57m + gst.

He will meet with his solicitor today at 3 pm.

I have rang (sic) him to advise you agree to this deal subject to him signing contract today."

1. It was put to Mr Pazios in cross examination that at no stage did he have any conversations on price with Mr Paul Kearney in which the words "plus GST" were mentioned, to which he said he could not recall. ²⁰It was not however put to him that his email of 26 July was not a contemporaneous account of his conversation with Mr Kearney ²¹or that he was mistaken in his recollection. ²²It was not suggested there was any motive for him to misrepresent the conversation he says he had with Mr Kearney in the email. It was put to him that he had never had any correspondence with Mr Kearney in which he mentioned a dollar amount plus GST. Unsurprisingly he said he believed he had such correspondence in emails.

1. Mr Paul Kearney did not have any contemporaneous notes of any conversations with anyone it seems including Mr Pazios.

1. Later in the afternoon at 3 pm on 26 July Mr Kearney attended his solicitors office as arranged, for the purpose of signing the contract which according to his evidence he expected would be for a price of $1,570,000 inclusive of GST. ²³Mr Lee his solicitor who was present that afternoon affirmed an affidavit but it was not read. Mr Peter Kearney his son was also present.

1. When he attended his solicitor's office Mr Kearney he discovered that the proposed contract for signature showed a higher price again from the one he had agreed upon only a few hours earlier in the day. Mr Kearney says he was unhappy with the increase. He said he complained to his solicitor but decided to go ahead anyway having made a commercial decision to end what he described as the "bidding war." ²⁴His son obviously decided to go ahead as well as he, along with his father, signed the contract.

1. The contract signed by all parties as I have already observed showed a price of $1,657,700 and specifically identifies GST ($150,700) as being included in that price.

1. After contracts had been signed the Plaintiff said it realised a mistake had been made which the Defendant denies.

WAS THERE A COMMON MISTAKE?

1. To obtain an order for rectification for common mistake, the Plaintiff must show the existence of a common intention, which continued in the minds of both parties up until the time of the contract. ²⁵Evidence of the parties' prior intentions as for example evidenced by negotiations is admissible. ²⁶

1. As Isaacs J outlined in Bacchus Marsh Concentrated Milk Co Ltd v Joseph Nathan & Co Ltd , ²⁷. the purpose of rectification is not to import additional or different terms into contracts, but, rather, 'to re-form instruments so as to make them accord with what the parties actually agreed to, or with what one party intended and the other party knew the first intended.' ²⁸The first concept of mistake as alluded to by Isaacs J - namely, of common mistake based on a failure of the written contract to accord with the actual common intention of the parties - is the kind that the Plaintiff alleges here.

1. The question of how the common intention of the parties is to be construed may be a matter of inference. ²⁹However, as made clear in Pukallus v Cameron , ³⁰and Franklins Pty Ltd v Metcash Trading Ltd ³¹there must be "convincing proof" ³²of "a continuing common intention" ³³that runs contrary to the actual terms of the agreement. As such, the omitted agreement must be capable of such proof in clear and precise terms. ³⁴

1. As outlined in Bush & Anor v National Australia Bank , Hodgson J (as he then was) observed that the court must be satisfied of the following, for an order of rectification to be made:

(a) That whether there is an antecedent agreement or not, the parties formed and continued to hold a single corresponding intention on the point in question

(b) That such intention continued to exist in the minds of both or all parties right up to the moment of execution of the formal instrument of which rectification is sought

(c) That while there need to be no formal communication of the common intention by each party to the other or outward expression of accord, it must be objectively apparent from the words or actions of each party that each party held and continued to hold an intention on the point in question corresponding with the same intention held by each other party

(d) That the document sought to be rectified does not reflect that matching intention but would do so if rectified in the manner requested

1. In ascertaining the intention of the parties, the statement by Menzies J in Hooker Town Developments Pty Ltd ³⁵and applied by Yeldham J in Bishopgate Insurance Australia ³⁶is helpful. Menzies J observes that:

37

"It seems rather that the true principle involves finding an identical corresponding contractual intention on each side, manifested by some act or conduct from which one can see that the contractual intention of each party met and satisfied that of the other. On such facts there can be seen to exist objectively a consensual relationship between the parties."

DISCUSSION

1. There is no doubt from the contemporaneous emails that the Plaintiff's directors intended that all negotiations were exclusive of GST and that the ultimate contract price would be expressed as such.

1. The Plaintiff's agent Mr Hezari and Mr Pazios as facilitator, each intended the very same thing. Although the accounts given by Mr Pazios of various conversations especially with Mr Kearney do not include one in which he can recall mentioning GST he believed he made it clear in his emails which he purported to send to all relevant parties.

1. Mr Paul Kearney was obviously annoyed at the increase of $50,000 (the difference between $1,510 000 and $1,560 000), with which he was confronted without warning on Monday morning 26 July. He believed he had shaken hands and sealed the agreement on Friday 23 July at $1,510,000. He says he was prepared ultimately to go to $1,570 000 (a further $60,000 on his original offer) as long as it was understood as his final position. All those figures according to him he understood were to be inclusive of GST.

1. Assuming he always believed that all offers were inclusive of GST, his reaction when the ultimate contract with its substantially higher price was put in front of him for signature, again without warning on the afternoon of 26 July, was only to complain privately to his solicitor and then somewhat meekly sign the contract. This is in my mind more than a little odd and stretches credibility. I find the following exchange when he was cross-examined insightful:

"Q: You made no complaint to anyone that the price was 100 odd thousand higher than the one you thought you bargained?

A: No

Q: Did it occur to you this might have been an error and I wanted to fix it up in accord with the deal we struck?

A: As I said, it was uppermost in my mind to seal the deal and stop this bidding war that's going on. It was still within our budget. I took a commercial decision to sign the contract.

Q: Without any complaint at all?

A: I complained to Mr Lee. I said I was unhappy.

Q: I want to suggest to you when you saw the contract, the third page which is at page 204, you mistakenly thought the $1,657,700 represented a price which was 1,570,000 plus GST; that's why you didn't complain.

A: I can't recall.

Q: Put it directly, you didn't think there was an error on the face of the contract as regards the deal you thought you had struck?

A: Well, it was a moveable feast. The price was all over the place.

Q: I want to suggest to you you thought that contract represented 1,570,000 plus GST?

A: I did not think that."

1. When he was confronted with the new price he did not seek to speak to the vendors directly as the persons he had shaken hands with or to have his solicitor register any form of complaint formally or otherwise with the vendors solicitors. The new price even on his view of negotiations amounted to a further unilateral increase of $87,700 ($1.657,700 -$1,570,000), as I have said, without warning.

1. I find his explanation that he just wanted to end a bidding war in the context simply implausible. In the witness box he impressed me as an astute businessman. He did not attempt to suggest for example that he thought the final price was a bargain or that commercially it was imperative that the property be acquired. He simply said it was within his budget and he took a commercial decision to sign. ³⁸

1. All relevant participants on one side of the negotiations were discussing and negotiating a price exclusive of GST and intended that to be so and yet the other side (at least Mr Kearney) may as well have been in an entirely different universe if I accept the Defendant's contentions. Mind you not all relevant witnesses for the Defendant were called.

1. There were two witnesses in particular not called by the Defendant. Mr Peter Kearney, Mr Paul Kearney's son, and Mr Alexander Lee, solicitor. At a minimum they could have corroborated Mr Kearney's assertion of complaint on the afternoon of the 26 July because both were present in Mr Lee's office when it apparently occurred. I can I believe comfortably draw the inference that they would not have assisted the Defendant's case in that regard if they had been called. ³⁹No explanation has been proffered to explain their absence.

1. I consider Mr Peter Kearney falls into a very special category all of his own for a number of additional reasons. It seems to me he was very much involved in the negotiations and the details of transaction generally. For example in his email to Mr Pazios of the 19 July ⁴⁰he was seeking to identify the precise name of the vendor so the contract could be prepared. Secondly he was along with his father a director and/or substantial shareholder of the Defendant. He was a co-signatory to the contract. ⁴¹

1. He and his father were specifically required to provide as directors and/ or substantial shareholders of the purchaser, a guarantee and indemnity of the purchasers obligations under the contract including the payment the of the purchase price. ⁴²

1. These factors in my mind are of considerable significance.

1. Mr Pazios who played a role as a facilitator and Mr Hezari the vendor's agent were experienced agents. Both were at pains in their emails to refer to price as exclusive of GST. Mr Pazios said he could not remember expressly raising the topic of GST in conversation with Mr Paul Kearney.

1. Much was made by the Defendant of the fact that Mr Kearney asserted he never received an email form Mr Pazios. To concede that he had would cause great damage to the Defendants case because the two emails in particular of the 14 and 26 July and which were purportedly sent to Mr Paul Kearney both refer to offers plus GST. Mr Kearney put two reasons as to why he did not receive either email. First he asserted at some point in July he changed his email address ⁴³and secondly he said he never authorised Mr Pazios to put the offer contained in the email of 26 July.

1. There is no doubt that Mr Pazios and Mr Kearney spoke on the morning of 26 July (once according to Mr Pazios or twice according to Mr Kearney) about putting an offer of $1,570,000. Mr Pazios could not recall mentioning GST. Mr Kearney expressly denies it was mentioned.

1. There is also no doubt that the agreement was to be subject to contracts being exchanged that afternoon which was discussed with Mr Kearney as is clear from the email. It is also plain from the email that he must have told Mr Pazios he was seeing his solicitor at 3pm in the afternoon, which had been previously arranged. ⁴⁴There is no evidence that either Mr Peter Kearney or Mr Lee had any conversations with Mr Pazios, so the source of these details had to be Mr Paul Kearney. The question of price was also clearly discussed.

1. I accept that Mr Pazios was at pains to make clear the offer would be exclusive of GST. I am certain Mr Kearney would have wanted to be quite precise about that as well one way or the other. There is no reason to doubt that the email is a contemporaneous record of a conversation between Mr Pazios and Mr Kearney. As I have already observed whatever Mr Pazios' recollection might be in relation to his various conversations it was not put that his email was a mistake or contrived. The evidence supports the view that he sent this email as well as the earlier email of 14 July very soon if not immediately after his conversation on each occasion with Mr Kearney. I am firmly of the view that Mr Pazios was accurately conveying the instructions he received from Mr Kearney and Mr Kearney is simply mistaken in his asserted recollections to the contrary. I am of course not obliged to accept Mr Kearney's assertions to the contrary. ⁴⁵This is particularly so given the absence of any contemporaneous notes made by him which might corroborate the contrary. I am of the view that the probabilities therefore favour Mr Kearney having told Mr Pazios he wished to offer $1,570,000 plus GST and I so find. I have come to this view independently of the fate of any of the emails purportedly sent by Mr Pazios to Mr Kearney.

1. Further as I have already observed it was put to Mr Kearney in cross examination ⁴⁶that the reason he was prepared to sign the contract at the new price was because he mistakenly thought that the $1,657,700 represented a price of $1,570,000 plus GST. If I may say so, somewhat tellingly, he answered, "I can't recall". ⁴⁷That answer is so much at odds with his evidence otherwise that he deliberately agreed to the ultimate price notwithstanding he had no prior warning simply to conclude the transaction. I am persuaded that he did indeed believe that the ultimate contract price was intended to be $1,570,000 plus GST and that the $1,657,700 was meant to reflect that but he did not check the precise calculations at the time he signed the contract.

1. In addition and independently of the above considerations, one email which I regard as having particular significance especially with regards to Mr Peter Kearney is that from Mr Pazios of the 14 July. It was sent to Ms Jerrison at 12.48 pm and apparently forwarded to Messrs Paul and Peter Kearney at 12.53pm. It is an email that simply has their names on the top and not their complete email addresses.

1. Mr Pazios was asked to concede that on the top of his email of 26 July there appeared the full email addresses of Ms Jerrison and Mr Powells whereas it only showed Mr Paul Kearney's name. He agreed but indicated that was how his computer in particular his Outlook mail system worked. I took that to mean that if the full email details of the intended recipient was in his mail system it would automatically direct the email accordingly without the need for him to type it out at the beginning of each email.

1. Mr Pazios in evidence did not indicate that any of his emails to Mr Paul Kearney (or for that matter anyone else) were returned to his mailbox as undelivered. There was importantly no evidence that Mr Peter Kearney however had at any time changed his email address but of course no evidence from him personally as to whether or not he had received the email of the 14 July.

1. The email of 14 July is part of a chain. Linked to that email is an email from Mr Peter Kearney to Mr Pazios with a copy to his father of 19 July.

1. Mr Paul Kearney does not deal with this email in his evidence nor was he asked whether he received it. It is reasonable to assume however that he did and that Mr Peter Kearney would have had the correct email address for his father as at the 19 July. Although it does not deal with price it is nonetheless important because it shows Mr Peter Kearney involving himself in the detail of the transaction. The real question is what inferences I should draw from this chain in circumstances where Mr Peter Kearney was not called.

1. The Plaintiff contends I should find that Mr Peter Kearney received the chain of emails and in particular the one of 14 July. On that basis it would therefore be clear that he was aware of the fact that the offer as at that date was exclusive of GST. It was submitted by the Plaintiff that that would lead to an inference that Peter Kearney was from 14 July fixed with knowledge that GST was to be added to the sale price. This would have a significant effect on the credibility of the evidence of his father and the Defendants case generally. Inferences should accordingly be drawn by reason of his not being called.

1. The Defendant on the other hand submits that as Mr Peter Pazios gave no evidence that emails were or were not returned undelivered I should draw no inference that Mr Peter Kearney received that email.

1. I should observe that the Defendant did not seek to explore the question of undelivered emails with Mr Pazios when he was in the witness box. Mr Pazios's evidence proceeded on the basis that the emails were delivered and that was what in effect what he believed and assumed. He was asked in cross examination about his emails and he never once mentioned any being returned as undelivered. I must say I would have expected him to have done so if that had happened. He impressed me as doing his best to give his evidence to the best of his recollection. Indeed he was completely candid about the extent of his recollection especially when it came to his conversations with Mr Paul Kearney. As I have already observed he explained how his address system worked on his computer. It is plain that Ms Jerrison and others did receive emails from him and in turn corresponded with him. It is also clear that Mr Peter Kearney corresponded with Mr Pazios by email.

1. The Defendant submitted that there was no room for the application of Jones v Dunkel and no inferences should accordingly be drawn adverse to the Plaintiff by reason of the fact that the Defendant did not call Mr Peter Kearney. There was no suggestion he would not have been available if the Defendant had wished to call him.

1. In Jones v Dunkel , Kitto J made the following observation:

"One does not pass from the realm of conjecture into the realm of inference until some fact is found which positively suggests, that is to say provides a reason, special to the particular case under consideration, for thinking it likely that in that actual case a specific event happened or a specific state of affairs existed. I therefore agree that in the present case a verdict for the plaintiff could not properly have been based upon such a general reflection as that a collision on a curve, where the road is substantially banked with a fall to the inside, and where the vehicle with the outside running is travelling downhill, is more likely to have been caused by the driver of that vehicle cutting the corner than by the driver of the opposing vehicle swinging wide. But there are some specific primary facts which the jury could have found on the evidence presented to them and which, if found, would suggest, as it seems to me, that the collision probably occurred on the diesel truck's wrong side of the road and therefore, prima facie as a result of negligent driving by Hegedus."

1. Kitto J goes on to say:

"But what should have been added, and not being added was in the circumstances as good as denied, was that any inference favourable to the plaintiff for which there was ground in the evidence might be more confidently drawn when a person presumably able to put the true complexion on the facts relied on as the ground for that inference has not been called as a witness by the defendant and the evidence provides no sufficient explanation in his absence. The jury should at least have been told that it would be proper for them to conclude that if Hedeges had gone into the witness box his evidence would not have assisted the defendants by throwing doubt on the correctness of the inference which, as I have explained, I consider was open on the plaintiff's evidence. In my opinion what his Honour said on the point amounted to a misdirection."

1. It was also said by Menzies J , that:

"In my opinion a proper direction in the circumstances should have made three things clear: (i) that the absence of the defendant Hegedus as a witness cannot be used to make up any deficiency in evidence; (ii) that evidence which might have been contradicted by the defendant can be accepted more readily if the defendant fails to give evidence; (iii) that where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstances that the defendant disputing it might have proved the contrary had be chosen to give evidence is properly to be taken into account as circumstances in favour of drawing the inference."

1. Windeyer J also observed:

"Then, I think, his Honour should, when the juryman asked his question, have given an answer in accord with the general principles stated in Wigmore on Evidence 3 rd ed. (1940) vol.2 s.285 p.162 as follows: "The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances, which made some other hypothesis a more natural one than the party's fear of exposure. But the propriety of such an inference in general is not doubted ... This is plain commonsense. If authority be needed, two passages from R v Burdett (1) may be cited. Abbot CJ said: "No person is to be required to explain or contradict, until enough has been proved to warrant a reasonable and just conclusion against him, in the absence of explanation or contradiction, if the conclusion to which the proof tends to be untrue, and the accused offers no explanation or contradiction; can human reason do otherwise than adopt the conclusion to which the proof tends? The premises may lead more or less strongly to the conclusion, and care must be taken not to draw the conclusion hastily, but in matters that regard the conduct of men, the certainty of mathematical demonstration cannot be required or expected." (2) and Best J said: "Nor is it necessary that the fact not proved should be established by irrefragable inference. It is enough, if its existence be highly probably, particularly if the opposite party has it in his power to rebut it by evidence, and yet offers more; for then we have something like an admission that the presumption is just."(3)

1. The rule in Jones v Dunkel can operate against parties not bearing the burden of proof and those who do bear it as well. ⁴⁸

1. The Defendant embarked upon a strategy at the trial, which involved a direct challenge to Mr Pazios' belief that any email he purported to send to Mr Paul Kearney was ever received. Mr Kearney in his evidence denied he ever received emails from Mr Pazios and provided as part explanation that his email address had changed and asserted that Mr Pazios' records needed to be updated. ⁴⁹

1. There was no evidence that Mr Peter Kearney had changed his email address. There was no denial of course from him that he did not receive the email of the 14 July.

1. The whole thrust of the Defendant's case in this regard was to deny that Mr Paul Kearney and by implication Mr Peter Kearney had ever any understanding that the price was being discussed as one that was exclusive of GST, and therefore considerable effort was taken to distance the Defendant and Mr Paul Kearney in particular from any emails which would make him privy to such an understanding.

1. I can only assume that a deliberate forensic decision was made not to call Mr Peter Kearney because of a fear to do so. He would have been exposed to cross examination on the email of 14 July. As I observed, had he received it, it would have made him privy to negotiations of price exclusive of GST. ⁵⁰

1. I consider that the probabilities are that Mr Peter Kearney did receive the email of the 14 July in part by reason of it being part of a chain of communications between himself and Mr Pazios. In addition as at that date Mr Paul Kearney had asked Mr Pazios to put the offer of $1,510,000 and his son would have been aware of that fact. Although he and his son were yet to inspect the property they had clearly decided to buy it. Mr Pazios must have had Mr Peter Kearney's email details in his mailbox system and he did not it seems have any mail returned as undelivered that was directed to him. The email of 19 July from Mr Peter Kearney makes perfect sense in that context with him busying himself with necessary details for the preparation of documentation with an offer on the table as it were.

1. I therefore cannot accept the Defendant's submissions to the contrary on this point. On the basis of his having received the email of 14 July Mr Peter Kearney was privy to an offer expressed as exclusive of GST as at 14 July. That overwhelmingly supports the Defendant having the same contractual intention as that asserted by the Plaintiff prior to the execution of the agreement. I can more confidently arrive at that conclusion by reason of the failure to call Mr Peter Kearney.

1. However even without a finding that Mr Peter Kearney received the email of 14 July, I am firmly of the view for reasons otherwise stated and independently of my analysis above that Mr Paul Kearney and hence the Defendant did indeed understand and intend that offers would be exclusive of GST at all relevant times.

1. There I have no doubt that both parties intended to contract upon that basis.

1. In their respective haste to consummate the transaction and exchange contracts it is clear to me that both sides fell into error and signed a document which did not accurately reflect their common intention.

1. I am in no doubt that there was a common mistake and the Plaintiff has made out its case. ⁵¹

1. Given the common mistake, the contract should be accordingly rectified.

1. In all the circumstances I find for the Plaintiff and accordingly make the following orders:

1. I declare that it was the common intention of the plaintiff and the defendant at the time of entry into contract that the contract price was one million five hundred and seventy thousand dollars ($1,570,000.00) plus GST.

2. I order that the contract be rectified to give effect to such intention as outlined in paragraph 33(1) above by providing that the contract price is one million five hundred and seventy thousand dollars ($1,570,000.00) plus GST.

3. I order that the Defendant pay the Plaintiff's costs of the proceedings.

**********

1 Affidavit of Peter Pazios, 16 December 2010, [8]. CB126. T .12, cross examination of Mr Paul Kearney, lines 31 - 40.

2 Affidavit of Peter Pazios, 16 December 2010, [10].

3 Affidavit of Peter Pazios, 16 December 2010, [12].

4 Affidavit of Peter Pazios, 16 December 2010, [13].

5 Affidavit of Peter Pazios, 16 December 2010, tab 8.

6 CB 133.

7 Ibid.

8 T.13, line 20.

9 Affidavit of Paul Kearney, 12 October 2010 [4].

10 Affidavit of Peter Pazios, 16 December, 2010, [16 ] and [17].

11 Affidavit of Paul Kearney, 12 October 2010, [5].

12 Affidavits of Jerrison [7], Powell [9], Pazios [16] and [17] and Kearney [5].

13 Affidavits of Jerrison [7], Powell [9] and Pazios [17].

14 CB 103.

15 Ibid.

16 Affidavit of Peter Pazios, 16 December 2010, [18].

17 Affidavit of Peter Pazios, 16 December 2010, [19].

18 Affidavit of Paul Kearney, 12 October 2010, [7].

19 Ibid.

20 T.7, lines 9 to 11.

21 Allied Pastoral Holdings Pty Ltd v Hunt FCT (1983) 1 NSWLR 1 at paras [17345 - 17460]; See also: JD Heydon (2010) Cross on Evidence, Eighth Australian Edition, paras [17435] - paras [17460].

22 JD Heydon, above n21.

23 Affidavit of Paul Kearney 12 October, [8].

24 T16, Line 30.

25 See, for example: Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238 and Marlinga Pty Ltd v Maoor Enterprises Pty Ltd (1973) 128 CLR 336 at 350-351.

26 New South Wales Medical Defence Union Ltd v Transport Industries Insurance Co. Ltd. (1986) 6 NSWLR 740. National Australia Bank Ltd v Budget Stationary Supplies Pty Ltd (1997) 9 BPR 97804 at 17,427 per Sheller J A. Bromley (1971), Rectification in Equity, 87 LQR 532. The same position is true in England, see Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101.

27 (1918) 26 CLR 410.

28 Id at para [4].

29 See: Bishopgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd [1981] 1 NSWLR 429 AT 431 (Yeldhman J) and Re B T Property Trust (unreported, SC NSW, 31 March 1998, Hamilton J).

30 (1982) 43 ALR 243.

31 [2009] NSWCA 407.

32 Id at para [5].

33 Franklins Pty Ltd v Metash Trading Ltd, above n23 at para [14].

34 Ibid.

35 (1973) 47 ALJR 320.

36 (1981) 1 NSWLR 429.

37 Ibid.

38 T 16, lines 40-44.

39 Jones v Dunkel 101 CLR 298.

40 CB 134.

41 See clause 46 of the contract.

42 Ibid.

43 Transcript 14, lines 12-13.

44 Affidavit of Paul Kearney, 12 October 2010 at [8].

45 Cubillo v Commonwealth 174 ALR 97 at 147-149 (per O'Loughlin J); Christmas v Nicol Bros Pty Ltd (1941) 41 SR (NSW) 317 at 322 (per Jordan CJ); S v M (1984) 36 SASR 316 at 319-320 (Walters J); Flint v Lowe (Fed C of A, von Doussa, Higgins, Nicholson JJ, 23 June 1995, unreported).

46 T 16 line 50 and 17, line 4.

47 T 17, line 1.

48 See: JD Heydon (2010) Cross on Evidence, above n21 and 22.

49 T 14, lines 10-14.

50 Jones and Another v Sutherland Shire Council (unreported judgment of June 15; Sep 5, 1979) (Court of Appeal per Hutley, Samuels and Mahoney JJA), applied in Asim v Penrose & Anor [2010] NSWCA 366 at para [172].

Decision last updated: 19 April 2011