Sande v Medsara Pty Limited

[2004] NSWSC 147

CITATION:	Sande v Medsara Pty Limited [2004] NSWSC 147
HEARING DATE(S):	15/12/03, 16/12/03, 17/12/03, 18/12/03, 19/12/03. Written submissions 5/1/04, 7/1/04.
JUDGMENT DATE:	11 March 2004
JUDGMENT OF:	Burchett AJ at 1
DECISION:	Orders to be made for rectification, specific performance and an inquiry as to damages.
CATCHWORDS:	RECTIFICATION - unilateral mistake - put and call options and contracts arising from their exercise - meaning and purpose of put and call options - mistake of one party's solicitor as to terms of contract known to the other party who concluded contract avoiding drawing attention to the mistake - unconscionable conduct.
LEGISLATION CITED:	Supreme Court Act 1970, s 68.
CASES CITED:	Anderson v Brouwer Claims Canada & Co Ltd [2002] BCSC 1043 Downtown King West Development Corp v Massey Ferguson Industries Ltd 28 OR (3d) 327 Enfield Corp., Re (1990) 48 Bus.LR. 134 Jones v Dunkel (1959) 101 CLR 298 Leibler v Air New Zealand Ltd (No. 2) [1999] 1 VR 1 Pukallus v Cameron (1982) 180 CLR 447 Riverlate Properties Ltd v Paul [1975] Ch 133 Taylor v Johnson (1983) 151 CLR 422 Thomas Bates and Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 Tutt v Doyle (1997) 42 NSWLR 10
PARTIES :	Joseph Sande and Diana Sande (first plaintiffs) Andrew Terides (second plaintiff) Esther El-Hage (third plaintiff) Tony Dbais (fourth plaintiff) Shane Hugh Mills (fifth plaintiff) James Moreland and Sara Wendy Moreland (sixth plaintiffs) Medsara Pty Limited (Defendant)
FILE NUMBER(S):	SC 4098/03
COUNSEL:	N. Hutley SC / M.B. Evans (Plantiffs) G. Curtin (Defendant)
SOLICITORS:	Mallesons Stephen Jaques (Plaintiffs) Kemp Strang (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Burchett AJ

11 March 2004

4098/03 Joseph Sande and Diana Sande (first plaintiffs), Andrew Terides (second plaintiff), Esther El-Hage (third plaintiff), Tony Dbais (fourth plaintiff), Shane Hugh Mills (fifth plaintiff), and James Moreland and Sara Wendy Moreland (sixth plaintiffs) v Medsara Pty Limited

JUDGMENT

1 His Honour: The six individual or paired plaintiffs owned, between them, eight adjoining lots of land on which houses are erected, being numbers 82, 82A, 84, 86, 88, 90, 92 and 94 James Ruse Drive Rosehill. By six separate but mutually interdependent sets of contracts, they all virtually simultaneously arranged for delayed sales of these properties to the defendant, Medsara Pty Limited. A dispute having arisen about two of the terms contained in each set of documents, the plaintiffs have brought this expedited proceeding in which they seek relief (inter alia) by way of rectification and specific performance of the contracts as rectified, together with an inquiry as to damages. What is alleged to have given rise to a right to rectification is that species of mistake as to a serious term of the contracts which the law calls “unilateral mistake”.

2 Before proceeding to the detail of the circumstances, I find it convenient to make some statement of the legal doctrine involved. In Taylor v Johnson (1983) 151 CLR 422 at 432-433 Mason ACJ, Murphy and Deane JJ said:

“The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension. … In such a situation it is unfair that the mistaken party should be held to the written contract by the other party whose lack of precise knowledge of the first party’s actual mistake proceeds from wilful ignorance because, knowing or having reason to know that there is some mistake or misapprehension, he engages deliberately in a course of conduct which is designed to inhibit discovery of it.”

Their Honours applied this proposition to the case of a proceeding in which the mistaken party sought rescission, specifically noting (at 433) that the question of rectification had not been raised. But earlier citation of authority (at 431) leaves little room for doubt that they considered their proposition would also be applicable in a case where rectification was sought, as they cited Riverlate Properties Ltd v Paul [1975] Ch 133 at 145, where, in an analogous situation, the English Court of Appeal considered rectification to be the appropriate remedy. Their Honours also cited Thomas Bates and Son Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 WLR 505 at 514-516. There, Buckley LJ (with whom Brightman LJ agreed) referred to an earlier judgment in which reliance had been placed upon the proposition stated in Snell on Equity, 25 ed (1960) at 569:

“By what appears to be a species of equitable estoppel, if one party to a transaction knows that the instrument contains a mistake in his favour but does nothing to correct it, he (and those claiming under him) will be precluded from resisting rectification on the ground that the mistake is unilateral and not common.”

Buckley LJ added:

“Undoubtedly I think in any such case the conduct of the defendant must be such as to make it inequitable that he should be allowed to object to the rectification of the document. If this necessarily implies some measure of ‘sharp practice’, so be it; but for my part I think that the doctrine is one which depends more upon the equity of the position. The graver the character of the conduct involved, no doubt the heavier the burden of proof may be; but, in my view, the conduct must be such as to affect the conscience of the party who has suppressed the fact that he has recognised the presence of a mistake.
For this doctrine – that is to say the doctrine of A. Roberts & Co. Ltd. v Leicestershire County Council [1961] Ch. 555 – to apply I think it must be shown: first, that one party A erroneously believed that the document sought to be rectified contained a particular term or provision, or possibly did not contain a particular term or provision which, mistakenly, it did contain; secondly, that the other party B was aware of the omission or the inclusion and that it was due to a mistake on the part of A; thirdly, that B has omitted to draw the mistake to the notice of A. And I think there must be a fourth element involved, namely, that the mistake must be one calculated to benefit B. If these requirements are satisfied, the court may regard it as inequitable to allow B to resist rectification to give effect to A’s intention on the ground that the mistake was not, at the time of execution of the document, a mutual mistake.”

The formulation of the principle thus made by Buckley LJ is stated as the law, in relation to the rectification of settlements, in Underhill and Hayton on the Law Relating to Trusts and Trustees, 15 ed (1995) at 248 – 249.

3 In Tutt v Doyle (1997) 42 NSWLR 10, the Court of Appeal applied Taylor v Johnson to a situation where what was in question was the rectification of a conveyance. Meagher JA (with whom Brownie AJA agreed) said at 12-13:

“[T]he real question involved in the case emerges: is it unconscionable for one party knowingly to take advantage of another party’s mistake? An affirmative answer seems to me to flow from the High Court’s decision in Taylor v Johnson … . True, in that case the only equitable remedy under consideration was rescission… . But I do not read the High Court as saying that once the ground of unconscionability is made out, it becomes a case of rescission or nothing.”

4 In Leibler v Air New Zealand Ltd (No. 2) [1999] 1 VR 1, the Court of Appeal of Victoria upheld an order for rectification, on the ground of a unilateral mistake, where the mistaken party’s solicitor had erroneously deleted from an agreement a clause which should only have been amended, not deleted, and the other party, knowing that a mistake had been made, concluded the agreement without drawing attention to the mistake. Winneke P and Phillips JA said (at 4):

“His Honour found…that, when the parties executed the shareholders’ agreement not long afterwards, the one was continuing to labour under the mistake that cl. 10.9 had not been deleted but merely amended and the other remained aware that the former was labouring under that mistake. His Honour found further that although cl. 10.9 had been solely for the benefit of the respondents and had been deleted by the respondents’ own solicitors (albeit by mistake), the appellants ought to have drawn the mistake to their attention and, not having done so, had acted unconscionably. In short, his Honour made all the findings of fact necessary to sustain an order for rectification… .”

Kenny JA summarised the principles involved in the following terms (at 14):

“The principles which govern an application for rectification of a contract on the ground of unilateral mistake can be briefly stated. If (1) one party, A, makes an agreement under a misapprehension that the agreement contains a particular provision which the agreement does not in fact contain; and (2) the other party, B, knows of the omission and that it is due to a mistake on A’s part; and (3) lets A remain under the misapprehension and concludes the agreement on the mistaken basis in circumstances where equity would require B to take some step or steps, depending on those circumstances, to bring the mistake to A’s attention; then (4) B will be precluded from relying upon A’s execution of the agreement to resist A’s claim for rectification to give effect to A’s intention [here her Honour cited Taylor v Johnson and numerous other authorities]. Whether or not the mistake must be one which operates in favour of B or merely to the detriment of A is not entirely clear… .”

5 In Canada, the law goes at least as far as these authorities in favour of an application for rectification, and may go somewhat further. In Anderson v Brouwer Claims Canada & Co Ltd [2002] BCSC 1043, Chamberlist J said (at para 72), citing Downtown King West Development Corp v Massey Ferguson Industries Ltd 28 OR (3d) 327:

“Where the mistake is unilateral, that is of one party only, rectification formerly was allowed only in cases where the non-mistaken party was aware of the other party’s mistake and consciously sought to take advantage of it by means of conduct bordering on fraud or involving sharp practice. More recently, these limits on the availability of the remedy have been relaxed so that where one party is mistaken as to the terms of an agreement, and the other knows of the mistake and does not draw it to the attention of the mistaken party, it suffices that it would be inequitable to allow the non-mistaken party to insist on the binding force of the document, either because this would benefit him or because it would be detrimental to the mistaken party: see Thomas Bates and Son Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 WLR 505.”

His Honour went on to indicate the existence of a question whether actual knowledge of the mistake was required, and to express his own view in the following terms:

“Equity and fair dealing in modern commercial transactions require that this form of relief be available in situations where one party may not actually have known of the other’s mistake but the mistake was of such a character and accompanied by such circumstances that the party had good reason to know of it and to know what was intended.”

6 These statements of the relevant doctrine would not be complete without a reference to the onus of proof. For, in several of the authorities, it has been laid down that the plaintiff, in a case of this kind, must establish his claim by “convincing proof”: Leibler v Air New Zealand Ltd (No. 2) at 19; Riverlate Properties Ltd v Paul at 139; Pukallus v Cameron (1982) 180 CLR 447 at 452, with which cf 456.

7 It is against these principles that the significance of the facts put in evidence by the parties must be assessed. For the purposes of this case, it is sufficient to take as the starting point a day early in the month of September 2002 when one of the plaintiffs, Mr Andrew Terides, got in touch with a Mr Gillan Davis, a real estate agent, who is the principal of Richardson & Wrench Artarmon. Mr Davis had been a real estate agent for a period of twenty years, and he specialised in the sale of development sites. Upon being told by Mr Terides that other owners in James Ruse Drive were also interested in selling their properties, and wished to do so in conjunction with each other, effectively selling a block, Mr Davis investigated the feasibility of the development of the site constituted by the group of properties as a “key block” site under the existing local government master plan. On or about 10 September 2002, he met the owners, presenting a recommendation that each of the properties be sold at the same time to a developer by interdependent contracts. At that meeting, a number of the plaintiffs agreed to go ahead with the proposal and, at the instance of Mr Sande, to engage as the solicitor to act for them one Rachelle Bond who practised under the name Dynamic Lawyers.

8 Following this meeting, Mr Davis engaged in the promotion and advertisement of the proposed sale of the properties as one site. Among other offers which he received as a result of his efforts, was an offer from one Raymond Raad as principal of a development company Radray Constructions Pty Ltd (“Radray”) in the sum of $5.75 million, with a five per cent deposit, a delay of eighteen months in settlement, and on condition a letter of consent to the submission of a development application to relevant authorities would be supplied. Mr Davis responded that he needed an offer in writing, and the amount would need to be at least $6 million for him to recommend it. On 2 October 2002, Mr Raymond Raad increased his offer to $6 million.

9 Sometime later, Mr Davis was informed that a delay of eighteen months was not acceptable to his clients, and he entered into negotiations with Mr Raad to shorten this period. On 7 October 2002, Mr Raad told him that fifteen months was absolutely the shortest period to which he would go. There were other difficulties in the negotiations. However, on or about 17 October an agreement in principle was reached with Radray covering numbers 82 to 94 James Ruse Drive, although the properties remained on the market and contracts were not exchanged.

10 On or about 29 October 2002, a fresh potential buyer emerged. This was the Hawden Property Group (“Hawden”). A Mr Ian Turner from that group informed Mr Davis:

“We are prepared to offer $6.5 million, but we want a put and call option with a 5% deposit of which 1% would be released immediately. The total contract period would be 13 months.”

To that Mr Davis responded:

“I’m prepared to discuss that with my clients provided the option is not subject to anything and my clients have the right to call the option. Please put the details of your offer in writing.”

In order that this proposal may be understood clearly, it is necessary to explain what a put and call option is. The Oxford English Dictionary, 2 ed (2001), vol XII, gives an indication under “put” as a term employed in stock-jobbing and speculation:

“When money is paid for the option of buying at a given price, the operation is called ‘giving for the call’. When it is paid for the option of selling it is called ‘giving for the put’. Sometimes both operations are combined, and then it is called ‘giving for the put and call’.”

But the implications, for relevant purposes, are indicated more fully in the joint decision of the Ontario Securities Commission in Re Enfield Corp. (1990) 48 Bus.LR. 134 at 138:

“In the case of a put option, the grantor (the prospective buyer) has made its ‘offer to purchase’ at the time it grants the put, and has made that offer to purchase irrevocable for whatever exercise period it has agreed to. The ‘offeror’ thus becomes irrevocably bound to purchase as of the date of its grant of the put, and following that date it has no choice but to fulfil its obligation to purchase should the holder of the put duly elect to accept the offer by exercising its option within the agreed-upon exercise period. It is on the date of its grant of the put that the offeror’s investment decision has been made… .
This is, of course, exactly the converse of the situation with respect to a call option. There, the grantor of the option is the prospective seller, not the prospective buyer/offeror, so that the latter’s investment decision need not be made until it determines whether or not to exercise the option it has been granted.”

Put options, call options and the more complex dealing constructed out of a combination of both, sometimes called a “straddle”, are reasonably familiar in transactions relating to stocks and shares. As applied to the situation involved in this case, what was contemplated was the grant by each of the proposed vendors to the developer of an option (the call option) on agreed terms, to be exercised by a specified date, to buy each of their properties; and, in order to protect them against the risk that the developer might withdraw from the transaction by simply failing to exercise his option, the grant at the same time by the developer of an option (the put option) to each of the proposed vendors, exercisable within a specified period if the call option was not exercised, to require the developer to buy at the agreed price and upon the agreed terms.

11 Mr Turner’s proposal was followed by a draft document, as well as by further discussion with Mr Davis in which it was accepted that a 2% deposit should be released to the vendors and that numbers 96 – 100 could not be included in the sale, with the result that the offer would be reduced on a pro rata basis. The amended proposal was put by Mr Davis to each of the plaintiffs. He explained that Hawden was offering more money and a shorter settlement period of 13 months, made up of a put and call option of 10 months and then a 3 months settlement period. The developer would pay a deposit of 5%, with 2% to be released immediately and the other 3% upon the exercise of either the call or the put option. Each of the plaintiffs instructed Mr Davis to go ahead with the Hawden proposal if Radray could not meet it.

12 Mr Davis then spoke with Mr Raymond Raad, advising him that a better offer had been made, which was $500,000 more with a 5% deposit, based upon a 10 month put and call option followed by a 3 month settlement period, a total of 13 months. Mr Ramond Raad responded:

“I can’t match that. If they don’t go ahead, let me know.”

So on 29 October 2002, Mr Davis prepared a sales advice to be sent to the plaintiffs and Ms Bond, showing the purchase prices for the properties and the terms of the sales to Hawden. This sales advice clearly specified the term of the option as “10 months” and settlement as “3 months after exercise of option”. The form in which the transaction was to be framed, as a put option and a call option, is clearly stated, together with the effect of doing it that way, except that the term “put option” is used as if it meant “call option” and vice versa. The individual prices are set out as $1,600,000 for numbers 82 to 84 to be sold by the plaintiffs Joseph and Diana Sande, $575,000 for number 86 to be sold by Andrew Terides, $575,000 for number 88 to be sold by Esther El-Hage, $820,000 for number 90 to be sold by Tony Dbais, $770,000 for number 92 to be sold by Shane Hugh Mills, and $575,000 for number 94 to be sold by James and Sara Wendy Moreland. Those amounts total $4.915 million, which is significantly more than Radray’s offer if allowance be made for the fact that numbers 96 – 100 were no longer included in the sales. Ms Rachelle Bond’s name is given as the vendors’ solicitor and the purchaser is specified as Hawden Property Group Pty Ltd, the solicitors for which are shown as Luchetti & Co.

13 On 30 October 2002, Mr Turner wrote a letter on the letterhead of Hawden Property Group Pty Ltd and in its name, confirming the sales and specifically that “the term of the option if necessary be reworded to reflect that settlement will be no earlier nor later than 3 months form [scil from] the end of the 10 month term”. On 1 November 2002, option fees totalling $98,300 were received by Mr Davis from Hawden, the cheques being made out by Gallwey Pty Ltd (Gallwey), a company in the Hawden Property Group. Mr Davis understood that it would be the company which would actually undertake the purchases.

14 As a result of discussions he had with Ms Bond, Mr Davis understood that the put and call options and the proposed contracts would be exchanged between her and Hawden’s solicitor Ms Luchetti on 7 November 2002. On that very day, he received telephone calls from Mr Andrew Terides and Mr Tony El-Hage, the son of the plaintiff Esther El-Hage, and also a telephone call from Ms Bond. What Mr Davis was informed in these calls was that Mr Terides and Mrs El-Hage had been approached by a Mr Wheadon, who knew about the transaction and was offering an extra $20,000 to each owner. Mr Terides was not initially interested as he had already signed the option contract which was to be exchanged, but Mrs El-Hage wanted the extra money. Mr Davis, who had not previously heard of Mr Wheadon, tried unsuccessfully to get in touch with him, and also telephoned each of the plaintiffs, saying:

“We don’t know anything about this Mr Wheadon. It is very risky to lose a known buyer. I recommend not losing Hawden.”

At that stage, this advice was accepted.

15 Between 2 November and 7 November, Mr Davis received some telephone calls from a Mr Milad Raad, a brother of Raymond Raad, who is the principal, together with another brother, a Mr Michael Raad, of a substantial group of development companies of which the defendant Medsara Pty Ltd is one. Mr Milad Raad is a successful developer, and extremely experienced. Since 1984, he has been a solicitor, and he practises as Milad S Raad and Associates, almost the sole professional work of which relates to his own developments. Mr Raad was the main witness for the defendant in the proceeding, and his evidence differs sharply on important matters from that of Mr Davis. I should say at once that, for reasons which will become apparent, I prefer the evidence of Mr Davis. On or about 2 November, Mr Milad Raad informed Mr Davis that Raymond Raad had told him about the James Ruse Drive site, and he added:

“I am keen on it – what do I have to do to buy it?”

Mr Davis made it clear that Mr Raad would have to make a firm offer. It would seem that between 2 November and 7 November, Mr Milad Raad engaged in some fencing with a view to seeking an opening for a favourable bargain. But on 7 November, when exchange was about to take place with Hawden, Mr Raad became blunt; he told Mr Davis that he understood from Raymond Raad that an offer had been made of a put and call option for 13 months at $6.5 million. He said: “I will offer you $20,000 more per owner and exchange immediately.” Mr Davis responded:

“I need you to be very clear about the terms. We are selling only numbers 82 to 94 at this stage, 2 per cent is to be paid and released immediately on entering the option. On exchange of the sale contract, which is in a maximum of ten months, you must pay and release a further 3 per cent, settlement is 3 months after exchange of the sale contract. The put and call option is not subject to development consent. You have no choice about proceeding. The vendors have a right to call the option at 10 months.”

Mr Milad Raad said:

“OK then, I agree. I have the money available. I can handle the matter directly with your solicitor if the vendors agree.”

Mr Davis made it clear that he went through the agreed terms in this conversation in detail because he did not wish to take any risk of losing the Hawden transaction, and then have confusion about the proposed transaction with Mr Raad. Just as Mr Raad was an extremely experienced developer, so Mr Davis was an extremely experienced agent, with particular expertise in putting together multiple sales for developments. Nothing in the cross-examination of him led me to doubt that he was indeed cautious about getting into the position of the dog in Aesop’s fable who lost the bone he had when grabbing for a bigger one.

16 Very much of the cross-examination of Mr Davis was directed to peripheral issues, such as the suggestion he had blown hot and cold on the question whether he was aware Mr Wheadon was an agent, a criticism that ignores the distinction rightly made by Mr Davis between awareness (which implies knowledge) and suspicion or belief, which he said he had “at the time [that Mr Wheadon] was acting for another developer”, that is as an agent. In particular, many questions related to whether Mr Davis had been as scrupulous as he should have been, and as he claimed to have been, in making each of the plaintiffs aware of any opportunities to obtain a higher price. I need not expand this judgment to explore every Byzantine turning of the negotiations in order to examine this point fully; for, on the assumption that counsel’s criticism is valid, I would remain persuaded by Mr Davis’s evidence concerning his conversations with Mr Raad. I formed the opinion that he was a man of very considerable competence who would be very likely to have done what he said he did. There was certainly nothing in his demeanour to suggest that he should not be believed, and much to suggest that he should.

17 Mr Raad’s conversation with Mr Davis, although crucial for the issue which ultimately arose in the case, was only one event in a flurry of activity that occurred on 7 November 2002. A facsimile letter of that date was sent by Mr Wheadon under the letterhead “Wheadon Services Pty Limited” from Mr Raad’s office to Dynamic Lawyers. It confirmed advice from Ms Bond that morning that the contracts had not exchanged and continued:

“I confirm my advice that I am interested in purchasing these properties and I have spoken to a number of the vendors and I have offered them an extra $20,000.00 each to sell their properties to me.
I understand that they have another buyer at a lower price and I understand that they are apprehensive that I may not perform and in that regard I am prepared to exchange contracts with you by 5pm today.
Please obtain your clients’ instructions in relation to my offer as I am a genuine buyer and I have funds available to honour my commitment to exchange today.
Your clients only stand to benefit by my offer as I am setting a very strict time limit to exchange and if I do not perform they will not prejudice their position with the other buyer.”

It will be observed that this letter provides some confirmation of Mr Davis’s evidence that a matter of concern was the apprehension that the new offer might fall through. It will also be observed that the proposition the vendors could “only stand to benefit” by the new offer of a mere $20,000 per property above the price already agreed at a number of millions could only true if other terms were not varied adversely to the vendors.

18 Mr Davis spoke to each of the plaintiffs, receiving instructions from all except Mr Dbais to accept Mr Milad Raad’s offer. Mr Dbais asserted it was not fair that he should receive only the same amount of extra money as all the others, since he said he had a larger area of land, and eventually Mr Davis agreed to reduce his commission, while at the same time Mr Raad added another $20,000 to his offer, in order to obtain the agreement of Mr Dbais. Mr Davis also telephoned Mr Ian Turner of Hawden, who declined to enter into a bidding war, saying “we have had enough”.

19 Finally, Mr Davis telephoned Mr Raad and said:

“Congratulations, you’ve got the properties. The price for each property will be: number 82–84 - $1,660,000; number 86 - $595,000; number 88 - $595,000; number 90 - $855,000; number 92 - $785,000; number 94 - $595,000. That’s with a 10 month put and call option not subject to any performance criteria, the deposit is 2 per cent the further 3 per cent on exercise of the option and the final 95 per cent 3 months thereafter. What name will you be buying the property in?”

Mr Raad replied:

“I will handle that directly with the vendors’ solicitor.”

20 Pausing at this point, I note that the evidence of Mr Davis of his conversations with Mr Raad, which I have accepted, shows an intention common to both parties in respect of the term of the option and the time to elapse before settlement of each contract. And I find that common intention to be convincingly proved. The next step was that Mr Davis telephoned Ms Bond, informing her that a higher offer had been received from Milad Raad and that the terms were to be the same as those in the Hawden contract – the only thing different being the prices.

21 On 8 November 2002 a letter was sent by Milad S Raad and Associates, Solicitors, to Dynamic Lawyers, confirming “a total price of $5,065,000.00 for the properties” and adding:

“We are instructed that the sales are to be formulated as both put and call options, for a period of 13 months.
On our instructions the options are to be exchanged by 12 noon today. Our client’s offer has been substantially increased over its earlier offer on that basis.”

The letter confirmed that the purchaser would be Medsara Pty Ltd. Although the “total price” mentioned in the letter is $20,000 less than the total of the figures confirmed by Mr Davis to Mr Raad ($5.085 million), no difficulty seems to have arisen in that respect; the difference simply reflected the last minute adjustment as a result of Mr Dbais seeking somewhat more than he was originally to receive. It was the higher figure that was finally agreed.

22 The solicitor acting for the plaintiffs at the time of the transaction, Ms Bond, gave evidence that on 7 November 2002 she was expecting Ms Luchetti to call to effect an exchange of the instruments creating the put and call options in respect of the Hawden company, Gallwey. Ms Luchetti was late, and before she had arrived, Ms Bond received a telephone call from a person who identified himself as Brian Wheadon. She had not previously known Mr Wheadon. She told him, in response to a question he asked, that she was about to exchange with Ms Luchetti. Mr Wheadon then said that he had offered her clients $20,000 more than the current purchaser was offering, and he put Mrs El-Hage onto the telephone. Mrs El-Hage, a widow then in her late 70’s, was in a very excited state and almost screamed over the phone: “Stop! Stop! We got $20,000 more.” Very shortly afterwards, Ms Bond received the letter from Wheadon Services Pty Limited to which I have already referred. At about 11am that day, Ms Luchetti arrived at Ms Bond’s office, to inform her:

“My brother has just called me and has told me what happened. Gallwey has decided not to go ahead.”

23 On 8 November, Ms Bond received a telephone call at about 8:40am from a Mr Neil Kerz, who is an employed solicitor in the office of Milad S Raad and Associates. Mr Kerz informed her that his client was the purchaser, and said:

“We just want to be sure of the terms.”

Ms Bond replied:

“The terms are a 10 month option and 3 months to completion.”

She also confirmed the price in respect of each transaction and that this was to be $20,000 more than the price stated in the Gallwey contract. Mr Kerz said exchange must take place by 12 noon, to which Ms Bond replied:

“That is impossible but I will do my best.”

Mr Kerz concluded the conversation by saying that he would send a letter of confirmation.

24 Shortly after the telephone conversation between Ms Bond and Mr Kerz, Ms Bond received from Milad S Raad and Associates the facsimile letter to her of 8 November 2002. It will be observed that this letter refers to the transactions as “sales…to be formulated as both put and call options, for a period of 13 months”. There is a degree of ambiguity about the language, but, in the context of the marketing of a number of properties at a price of over $5 million (a transaction in respect of which all witnesses agreed the time for completion was of the utmost importance), I think the most natural way to understand the relevant sentence is that the sales were to be effected, using put and call options, within a period of 13 months. It would simply not be consistent with a business-like approach to state one part of the vital provision as to time, the term of the option, while leaving the other part, the time for settlement, up in the air. Particularly so in the context of the replacement of a done deal that was ready for exchange, in which precise times were specified, by a new deal in which the only change expressed was a relatively small increase in price.

25 But Mr Kerz gave evidence denying that Ms Bond had said anything about the time for completion to be stated in the contracts, and it was his contention that his letter was referring only to the term of the option itself.

26 What followed was something of a comedy of errors. By evil mischance, at just this time when urgent preparation of fresh documents was required to carry the new transaction with Medsara Pty Limited into effect instead of that about to be exchanged the day before with Gallwey, Ms Bond’s computer software completely failed. She was unable to prepare the documents on 8 November in the normal way. With the consent of Ms Luchetti, an attempt was made to solve the problem by the utilisation of the forms Ms Luchetti had prepared in respect of Gallwey, with appropriate changes. This appears to have compounded the problems because, at a late stage in the arrangements for the Gallwey transaction, Gallwey had proposed, not a change in the total period to settlement, but a change in the length of the put and call options from 10 months to 12 months, with a compensating reduction of the time for settlement, to be specified in the contract to come into existence upon the exercise of either option, from 3 months to 1 month. There is some difference between Ms Bond and Ms Luchetti as to whether this had actually been agreed. I do not think such a difference of recollection, bearing in mind the complexity of the transaction and the distraction of later events, is of much significance from the point of view of the credit of either witness, although I find that some of the plaintiffs had not agreed, but what is of importance is that Ms Luchetti had actually made the change in her documents, which Ms Bond came to utilise for the purposes of the later transaction, and that Ms Bond did not appreciate this fact. As a result, when Ms Bond attempted to overcome her software problem by producing documents that utilised Ms Luchetti’s documents, but did so hastily and under considerable pressure, amongst numerous other errors of less importance, two vital errors occurred. Instead of the put and call options specifying a term of 10 months, they specified a term of 52 weeks. This, of course, had been intended by Ms Luchetti, although it was neither intended by Ms Bond nor was it the figure that had been given by both Mr Davis and Mr Turner, on 29 and 30 October respectively, when confirming the Hawden agreement in writing, nor was it the figure that had been given by either Mr Davis or Ms Bond in their respective conversations with Mr Raad and Mr Kerz, nor did it correspond to the period specified in Mr Kerz’s letter, however that letter should be understood. Much more seriously, the error was then compounded, in all the contracts produced by the computer except one, by the specification of 13 months as the contractual period to completion. Thus the total effect if the agreement was to be concluded without amendment would be to tie the properties up for 25 months before payment of the purchase price would be due. No specific period of extension beyond the 13 months (10 months option period plus 3 months to settlement, or 12 months option period plus 1 month to settlement) contemplated in respect of the Gallwey transaction had ever been suggested in respect of the transaction with the defendant according to any witness.

27 It is clear that Ms Bond was under great pressure by reason of the attempt to exchange by noon on 8 November, or indeed by any time on that day. I infer that she simply did not check the documents as they were produced in anything like an effective manner. It was intended that there would be an exchange of counterparts, and one set was picked up by Milad S Raad and Associates from Ms Bond’s office. It was obvious to Mr Kerz and Mr Raad that various details had to be filled in, and that there were defects in the documents. Mr Kerz drew Mr Raad’s attention to the specification, in one of them, of a period to settlement of 13 months on top of an option period, not of either 10 months or 13 months, but of 12 months. Mr Kerz said in evidence he “assumed” that this very long period to settlement “had been negotiated by Milad Raad”; but he did not suggest that Mr Raad, when his attention was drawn to the term, made any self-congratulatory comment; what he replied was: “Are they all the same?” Mr Kerz answered that he did not know because he had not checked them all, and that he would do so. Having checked all the other contracts, his evidence is he informed Mr Raad: “Yes, they’re all the same.” In fact, they were not all the same; in one case the computer had not made the error of inserting the figure 13 in the specification of the months to settlement, but had inserted the period originally intended of 3 months. According to Mr Kerz, a stroke in black ink had been placed in front of the figure 3, so that the document specified 13 months, although the alteration was not initialled. Ms Bond denies that she had noticed the insertion of the figure 13 in the other documents, and she denies that she had amended one document to specify the same period. She also denies that she had noticed the specification of the option period as 12 months. It would be surprising if she had noticed the 12 months period, in particular, without realising it was an error, since nothing suggests that period could have appeared correct, even to a very harassed person instructed as Ms Bond was. As I have said, I accept that in fact not all the plaintiffs had ever approved Ms Luchetti’s proposal.

28 There is thus a clear conflict between the evidence of Ms Bond and the evidence of Mr Kerz as to whether the alteration had been made before the copy had left Ms Bond’s office. Of course, the copy to which I have so far referred was the copy picked up in advance of exchange by Milad S Raad and Associates for execution by Medsara and subsequent exchange. The copy now held by Medsara is the copy subsequently obtained upon exchange. That copy also has been altered, without any initialling, by the insertion of an ink stroke before the figure 3. It is the plaintiffs’ case that both copies must have been so altered after coming into the possession of the defendant.

29 An attempt was made on behalf of the defendant to show, through the evidence of a forensic documents examiner, a Ms Novotny, that the alterations of the number 3 to 13 were more probably than not made before either copy left Ms Bond’s office. However, the evidence was quite inconclusive. Counsel for the plaintiffs expressly put to Ms Novotny in cross-examination that the allegation she was seeking to examine (which, of course, the defendant was trying to refute) was “an allegation that the [figure] 1 was added by someone on the Medsara side”. It was then put to her that her view “does not exclude the possibility of the 1 being done later in the circumstances I have just explained to you?” and she replied: “No, that’s right.” In my opinion, the question has to be answered upon the direct evidence, conflicting as it is, of Ms Bond on the one side and Messrs Raad and Kerz on the other, and upon a consideration of the inherent probabilities of the situation. From that point of view, it is significant that Mr Kerz says he was specifically asked by Mr Raad to check whether all the copies were the same; at that time, according to him, they all showed 13 months, but one of them showed that figure by way of an alteration of 3, being thus noticeably different from the others, yet he says he did not notice this fact and told Mr Raad that they were all the same. It is hard to imagine that an experienced conveyancing solicitor, asked to check six documents for such a purpose, would be at all likely to make such a glaring mistake. On the other hand, although it is possible that Ms Bond was so flustered she might conceivably have thought the odd one out among the copies, if she noticed the discrepancy, ought to be altered to conform with the others, one would rather expect her, knowing her computer was malfunctioning, to have given some attention to the discrepancy, which would at once have revealed that it was the 3 months figure that was correct. After all, she had prepared at greater leisure the contracts for the proposed sales to Hawden and must have been familiar with their structure. When, much later, she observed the reference to 13 months in the contracts, the evidence is she recognised it as a mistake immediately and communicated, in what Mr Davis described as a “high state of panic”, both with Mr Kerz and Mr Davis. I shall return to this issue when I have stated my conclusions about the evidence concerning the context in which it arises.

30 The exchange proceeded at 5:30pm on 8 November, when Mr Kerz came to Ms Bond’s office with the counterparts executed by Medsara Pty Limited. Ms Bond had still not noticed the incorrect statements of the length of the options and the period for completion of the contracts. Nor did Mr Kerz say anything at all to draw her attention to those figures, which totalled 25 months. Nothing was said about the alteration in the contract relating to Mrs El-Hage. One instrument, that relating to Mr Dbais, had not been executed, and it was arranged that in this matter exchange would be effected on the following day by Mr Milad Raad himself with Ms Bond. The others were exchanged. It is apparent from obvious discrepancies between counterparts that the copies of the contracts were not checked. Mr Kerz gave evidence that the options were checked, but they did not proceed to check the contracts. He could not explain why. Nor could he explain why he had failed to pick up discrepancies; he acknowledged that he had not drawn any to Ms Bond’s attention. At one point in his cross-examination, referred to a particular discrepancy merely as an example, he said:

“I’m embarrassed to say that this is so glaringly obvious I would have expected to have picked that up. I can’t give you an explanation why I didn’t see that.”

The plaintiffs suggest through their counsel the court should infer the reason was that, being conscious of the gross error with respect to the time to elapse before settlement which appeared to have crept into the documents, Mr Raad and Mr Kerz were anxious to conclude the exchange as quickly as possible and without alerting Ms Bond to the need to check the documents more carefully. For that reason, a number of minor differences between the copies exchanged which, in the normal practice of a solicitor, would have been corrected upon exchange if observed, were not corrected, although Mr Kerz acknowledged that he was aware of a number of them. He admitted in cross-examination that he could not explain why he did not follow his “usual practice as a solicitor” in this respect.

31 On the following day, a Saturday, Mr Raad effected the exchange of the remaining option agreement, again without making any mention to Ms Bond of the discrepancy between the 12 months option period specified in the documents, which he said he had noticed, and what he had previously been notified which, even on his case, was the different figure 13 months; and without drawing Ms Bond’s attention to the 13 months specified as the period after exchange of contracts and until completion, which, on his own case, had never previously been mentioned. He also, while asserting that he and Ms Bond checked the option, disavowed checking the contract. He admitted he could not offer any explanation of his conduct in that respect.

32 The critical issue, as will by now have become clear, is whether Mr Raad, on behalf of the defendant, was aware prior to the exchange of instruments on the 8th and 9th of November that a serious mistake had been made in the formulation of the terms which fixed the period to completion of the contracts, and deliberately chose to take advantage of this mistake by proceeding to exchange as quickly as possible without doing anything liable to draw attention to the mistake - such as pursuing the normal practice of solicitors of carefully comparing counterparts before exchange, correcting observed minor discrepancies, and querying the plain discrepancy between the period of 13 months mentioned in Mr Kerz’s letter in respect of either the term of the option or the total term to elapse to settlement and the 12 months specified in the documents as the term of the option and the 25 months to elapse to settlement according to the same documents. I put this as the critical issue because that there was a mistake is really beyond argument. Despite some variations in different statements concerning the two vital terms which were mistakenly stated, the common intention established, as I have held, between Mr Davis and Mr Raad, was never varied. It was precise, and the evidence is convincing that it continued, subject only to the mistake, since no relevant variation was negotiated. Not only does the evidence to which I have thus far referred point clearly to the making of a serious mistake, but there was more. Evidence was given on behalf of each of the plaintiffs to establish that they had been told the relevant terms provided for an option with a duration of ten months and a settlement period thereafter of three months. It is not in dispute that Mr Davis issued sales advices which were in accordance with that understanding, and that Ms Bond acted likewise following the exchange in that she made the appropriate diary entries to ensure that the matters would be ready for settlement without delay upon 8 December 2003. It was, indeed, by reason of her following the appropriate office procedure that she went to her file on 5 June 2003, pursuant to a prompting noted in her diary, for the purpose of making ready for the exchange of contracts which she expected to take place on 8 September pursuant to the exercise of the options. When she did so, she noticed the error in respect of the completion date and the alteration in the contract relating to Mrs El-Hage. Ms Bond got in touch with Mr Kerz at once and sent a letter of 5 June 2003 seeking an appropriate amendment of the contract on the basis of mistake. Failing to receive any response to the substance of her letter, Ms Bond wrote a further letter on 11 June 2003 formally requesting rectification. To this the response on 16 June was curt indeed:

“We acknowledge receipt of your letter of June 11th, 2003.
With respect, there is no basis for a claim for rectification.”

A further letter of the same date asserts that the defendant had “entered into the transaction in reliance upon the documents presented to us after preparation by your office”, and “rejects your client’s contention that there has been a mistake of any kind, and further that there has been any conduct on the part of our client about which there could be even a suggestion of unconscionability. Our client relies upon its rights under the deed, at law and in equity.”

33 These proceedings followed promptly.

34 The nub of the matter is that Mr Raad denies he was aware at any relevant time of the key terms of the proposed contractual arrangements with Gallwey; and he denies that Mr Davis made him aware of the vital terms under which the time to elapse to settlement was fixed. Mr Kerz also denies that Ms Bond made him aware of those terms, and he denies that his own letter, to which reference has already been made, reflected an understanding of the period to elapse until settlement. Mr Raad swore an affidavit in which he said he first became aware of the properties in question during a conversation with his brother Raymond Raad in October 2002, when Raymond Raad gave him details of the proposed agreement which he had at that time secured, including the price, then $4.44 million “on a 5 per cent deposit and a 15 month settlement”. Raymond Raad told him that initially he had sought a period of 18 months for settlement, but the vendors had rejected this; however they had now accepted 15 months. Subsequently, on 2 November 2002, in a further conversation with his brother Raymond, he was told “the vendors want a lot more money and I’m not prepared to pay them the money that they’re after”. Mr Milad Raad responded:

“Well Ray, if you’re sure that you’re not proceeding with the purchase, do you mind if I have a go at it?”

to which his brother replied:

“By all means, go ahead, I’m definitely out.”

Raymond Raad then told him the agent was Gil Davis; and later, on 4 November, supplied copies of the contracts into which he had proposed to enter.

35 So informed by his brother, Mr Raad said he contacted Mr Davis by telephone on a number of occasions, seeking an asking price, only to be rebuffed by an insistent request that he make his offer. Mr Raad then went back to his brother to try to find out how much more he thought it would be necessary to offer. Raymond Raad told him:

“The vendors want an extra $500,000. I’m not prepared to pay it.”

According to Mr Raad, he then telephoned Mr Davis on 5 November and again asked what the vendors were “looking for”. On this occasion he was told he would have to pay $4,925,000, and he claims he replied:

“If I’m going to pay an increased amount, I want better settlement terms than Ray was getting.”

Mr Davis said he would talk to the vendors about it.

36 On 6 November, according to Mr Raad, he offered the sum of $4,925,000, but Mr Davis said: “Sorry, the properties have been sold.” Mr Raad then instructed Mr Wheadon to contact the vendors direct to find out “what the go is”. On the morning of 7 November 2002, he received a telephone call from Mr Wheadon to say he was with Mrs El-Hage who had told him the properties had not been sold. Mr Raad said:

“Please let the owners know that I’m very interested in buying the properties and I’m prepared to offer an additional $20,000 per property to buy them.”

Mr Wheadon told him that Mrs El-Hage was prepared to accept the extra $20,000.

37 Mr Raad denied that he had on 7 November 2002 a telephone conversation with Mr Davis in the terms to which Mr Davis deposed. He said the conversation he had on that day was to the effect that Mr Davis said:

“The vendors have been approached by another buyer who is prepared to pay an extra $20,000 per property for a total price of $5,065,000. Are you prepared to pay that? I had another buyer but he’s not prepared to pay that much. If you are prepared to pay that amount on a 13 month option, I think I can get the property for you.”

Mr Raad replied: “Yes I am” and Mr Davis said he would see what he could do with the vendors. Shortly afterwards Mr Davis telephoned him again and said:

“You’ve got the property.”

Mr Raad denied that Mr Davis went through the terms of the deal with him in detail.

38 In particular, Mr Raad denied that he was told a settlement period, and he expressly asserted:

“I believed that once the contracts were issued I would be able to negotiate the settlement period if the settlement period contained in the draft contract was not acceptable. If ultimately I could not get the terms I wanted I could refuse to exchange.”

He deliberately refrained, on his own version, from asking the settlement period “in case a disagreement might arise which would cause the vendors to perhaps reconsider exchanging with the other potential buyer”.

39 The price was adjusted slightly on 8 November 2002 pursuant to a telephone conversation with Mr Davis, who told him that Mr Dbais was getting greedy and wanted an extra $30,000. Mr Raad would not go that far, but eventually agreed with Mr Davis that he would pay an extra $20,000 if Mr Davis would reduce his commission by $10,000 in order to conclude the deal with Mr Dbais. That was agreed.

40 Mr Raad expressly swore that he “was never aware of the terms” of the Hawden contracts until after these proceedings had commenced. He swore that he did not insert the numeral 1 in the contract with Mrs El-Hage “nor observe anyone else insert it”. When he received the documents from Ms Bond, he acknowledged that he “noticed that the option period in each was 12 months (or 52 weeks)”. He said he was “of the view that we had successfully negotiated an option period of 13 months. However as the settlement period contained in the contracts attached to each of the option agreements was for 13 months, I was content to agree to the 12 months in the option agreement.” He had, he claimed, expected the total period “would be greater than 15 months”.

41 A number of considerations cast doubt upon the version of events given by Mr Milad Raad. The financial controller of his holding company, a Mr Crane, gave evidence that in that capacity he had been involved in “maybe one hundred” developments up to 2002 and that Mr Raad was “a highly experienced developer of properties”. The contracts in question in this case were for a total amount of $5.085 million, and on that purchase price the stamp duty to be incurred upon exchange of contracts and payable within 90 days of their execution would be approximately $520,000. The times when such large liabilities were going to be incurred were not inconsequential in the eyes of experienced developers, and therefore they must have been part of the ordinary discourse of bargaining for anyone who dealt habitually with them. Mr Raad himself said that “the terms of a contract in relation to a development property, so far as they relate to the time at which a development property sale will be settled, are vital to the contract” and that “commercially they are essential from the point of view both of the vendor and the purchaser”. He accepted there was a vast difference between a contract for the sale of a property for $5 million to be settled within 13 months and one for the same amount to be settled in 25 months. Yet Mr Raad’s version involves that Mr Davis, an experienced agent specialising in transactions of this very kind, completely overlooked the need to specify a date for settlement or the period to settlement. Not only that, he did so in the context of replacing a contract with one buyer, in which he had been careful to specify a settlement period, by a contract with a new buyer the only more desirable feature of which was a relatively small increase in price.

42 Not only does Mr Raad’s version involve extraordinary carelessness on the part of Mr Davis; it also involves, on Mr Raad’s own admission, dishonesty on his own part. For he authorised Mr Wheadon to represent to the plaintiffs on 7 November, in order to persuade them not to exchange with Gallwey, that he was “prepared to exchange contracts with you by 5pm today” and that the plaintiffs “only stand to benefit by my offer”; yet, as Mr Raad plainly said in evidence, he was reserving to himself the right to “cancel the deal before the actual exchange” if the terms, which he said he did not know, turned out to be unsatisfactory to him.

43 The claim that he did not know the proposed terms, apart from the length of the option period, is inherently unlikely, not only because both Mr Raad and Mr Davis were so experienced, but also because Mr Raad’s introduction to the matter had come through his brother. He said in evidence that he regularly met with his brother for morning coffee. His brother told him, in respect of his own proposed purchase of the properties, which had got to the stage of preparation of contracts, “what the deal was”. Indeed, he had supplied copies of the contracts. Yet, according to Mr Raad, although so forthcoming in respect of his own proposal, having bowed out and being quite prepared to let Mr Milad Raad try to acquire the properties, his brother did not tell him anything about the terms of the offer by Hawden of which , it will be recalled, Raymond Raad had been made aware and which he had not been prepared to meet. No reason at all was suggested why Raymond Raad should have drawn down a curtain at that point. Nor is it easy to see why Mr Milad Raad should have been so anxious to out-bid Hawden if he did not know enough about the terms on which Hawden was buying to assess whether it was worthwhile to pay more on those terms.

44 It is to be observed also that the defendant did not call Mr Raymond Raad as a witness, although Mr Milad Raad admitted that he was available to give evidence. It seems clear that the rule in Jones v Dunkel (1959) 101 CLR 298 must apply in this situation.

45 A marked incongruity in Mr Raad’s version of events is his acceptance without query of the use of put and call options for a period of 12 months in a total period of deferral of settlement for 25 months. In the first place, of course, his case is that his office had been advised through Mr Kerz that the length of the put and call options was to be 13 months and he himself had been told the same by Mr Davis on 7 November. In the context of Ms Bond’s computer problem, of which Mr Kerz said Mr Raad’s office had been advised as the explanation of difficulties in achieving an exchange by the desired time, it is remarkable that the change from 13 months to 12 months and the appearance of 13 months, not as the term of the option, but as the period to settlement, should have excited no questions. But it is also remarkable for another and distinct reason. There is no doubt, and Mr Raad admitted this in cross-examination, that the “device of the put and call option is used in a sense as a stamp duty deferral method”, to Mr Raad’s knowledge at the time. No other reason for this complex arrangement was suggested. Yet here was a transaction between an experienced agent and an experienced developer, apparently repeating the form of an earlier proposed transaction between the same agent and another experienced developer, which utilised the device, but without any apparent reason at all limited its useful effect to less than half of the very long period to settlement that was available. From the point of view of the purchaser, this compelled him to pay over half a million dollars a year earlier than he needed to; and from the point of view of the vendors, they were depriving themselves of the bargaining lever for a higher price of offering an additional year’s deferral of the half million dollars payment. There was no advantage at all to either party in limiting the term of the option to about, and even before, the mid point of the period to elapse up to settlement, and there would have been no disadvantage in making it end close to the end of the period. With both a put and a call option in place, the parties were effectively bound and the logic of the use of this device was to defer the stamp duty for as long as possible. What had happened in relation to the earlier proposed agreement with Gallwey illustrates the point; even a period of three months to settlement was considered by Gallwey to be too long, so it wished to reduce it to one month in order to lengthen the deferral of stamp duty by two months by deferring the date of exercise of the options. There are really two aspects to this point; on the one hand, it seems very unlikely that the experienced persons involved would ever have contemplated put and call options for a period so inconsistent with the purpose of the device; and on the other hand it seems equally unlikely that Mr Milad Raad, if he thought there was no mistake, would not have telephoned Mr Davis or Ms Bond and made a request similar to that which Ms Luchetti had made on behalf of Gallwey; or, at the very least, that he would not have insisted on the full 13 months that had already been agreed.

46 Another feature of the situation, as represented by Mr Raad, is the surprising fact that Mr Davis had not attempted to make any use of the long total period to settlement of 25 months as a bargaining counter in an effort to extract a higher price. That an offer should have been sought from a developer in ignorance of such a carrot, and then simply accepted, must have seemed very strange indeed. There is no doubt Mr Raad made his offer, on his own case, in the expectation that there would be a significantly shorter period to settlement; for he said himself that when he saw the documents he was “pleasantly surprised”, and pressed as to whether he was not in fact “amazed”, he replied “yeah, I was”. On this point, it is to be borne in mind that Raymond Raad had told him he had reached agreement on a total period of deferral of 15 months, 18 months having been rejected by the plaintiffs, before Hawden’s higher price had led to his withdrawal from the bidding.

47 If to these matters is added the hasty exchange of five sets of documents by Mr Kerz, an experienced employed solicitor, and one set by Mr Raad himself, without the correction of numerous small mistakes being attended to, and admittedly contrary to practice, Mr Kerz having been told of Ms Bond’s computer problem, the perception of a mistake and the intention to take advantage of it are plainly to be inferred. I have come to the conclusion that in the circumstances I should infer both. I do not believe the evidence of Mr Raad or that of Mr Kerz to the contrary.

48 Turning to the matter of the alteration of the contract in respect of Mrs El-Hage, I think in the context of the whole situation there is strong reason to infer that the alteration was made by Mr Raad, or on his instructions. It is admitted that when the period of 13 months to settlement was drawn to his attention, he asked whether all the contracts were the same. I do not believe Mr Kerz’s evidence that he told Mr Raad all the contracts were the same. The question having been asked, and an experienced solicitor having looked at the documents in order to answer it, the overwhelming probability is that Mr Raad was then shown Mrs El-Hage’s contract. In this particular respect, it stuck out from the others like the proverbial sore thumb. I think the evidence from the defendant on this issue was false, and that I may draw the inference which I have stated.

49 Upon the whole of the evidence, I have come to the conclusion it is convincingly proved that the documents contained the mistakes alleged by the plaintiffs; that the defendant through Mr Raad actually appreciated that fact; and that he acted unconscionably in proceeding to effect exchange of the contractual documents without drawing attention to the mistakes and intentionally in such a manner as to minimise the likelihood of their becoming apparent. In my opinion, the plaintiffs are entitled to the rectification that they seek; specific performance of the contracts as rectified; and an inquiry as to damages pursuant to section 68 of the Supreme Court Act 1970. It is unnecessary to consider alternative bases on which relief is sought.

50 The only order I make at this stage is to direct the plaintiffs to bring in, on a date to be fixed, short minutes of orders to reflect these reasons.

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Last Modified: 03/16/2004