Singh v Singh

[2007] NSWSC 674

CITATION:	Singh v Singh [2007] NSWSC 674
HEARING DATE(S):	22/6/07
JUDGMENT DATE :	29 June 2007
JUDGMENT OF:	Bell J at 1
DECISION:	1. Allow the appeal; 2. Set aside the judgment; 2. Remit the proceedings to the Magistrate for determination in accordance with these reasons; 3. The respondent is to pay the appellant’s costs of the appeal, but is to have a certificate under s 6 of the Suitors’ Fund Act 1951, if qualified.
CATCHWORDS:	Presumption of undue influence - appeal from Local Court civil claim
LEGISLATION CITED:	Local Courts (Civil Claims) Act 1970 Uniform Civil Procedure Rules 2005
CASES CITED:	Archer v Archer [2000] NSWCA 314 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Bridgewater v Leahy (1998) 194 CLR 457 Johnson v Buttress (1936) 56 CLR 113 Poricanin v Australian Consolidated Industries Ltd (1979) 2 NSWLR 419 Wenkart v Pitman (1998) 46 NSWLR 502 Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573
PARTIES:	Baljinder Singh (Plaintiff) Manjeet Singh (Defendant)
FILE NUMBER(S):	SC 15745/06
COUNSEL:	Mr Barko (Plaintiff) Mr Singh (Defendant)
SOLICITORS:	Beazley Singleton Lawyers (Plaintiff) Ramrakha Jenkins (Defendant)
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	15439/01
LOWER COURT JUDICIAL OFFICER :	Magistrate Denes
LOWER COURT DATE OF DECISION:	19/10/06 - Downing Centre, Sydney

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BELL J

Friday 29 June 2007

15745/06 Baljinder Singh v Manjeet Singh

JUDGMENT

1 BELL J: This is an appeal against the decision of Magistrate Denes sitting in the General Division of the Local Court hearing a civil claim under the Local Courts Act 1982 (the Act).

2 The appellant (the plaintiff in the proceedings before the Magistrate) commenced proceedings by statement of liquidated claim, by which he claimed the sum of $26,018 from the respondent, Manjeet Singh. This sum was made up of three claims: (i) damages for breach of an agreement made by deed relating to the beneficial half ownership of a vehicle registered as a taxi (the deed); (ii) the repayment of a loan in the amount of $3,000; and (iii) exemplary damages in the amount of $5,000.

3 The hearing occupied three days. The Magistrate reserved her decision and on 19 October 2006 she gave judgment for the respondent.

4 The appellant did not press his claim for exemplary damages before the Magistrate and it is not the subject of appeal. There is no appeal against the rejection of the claim based on the alleged loan of $3,000. The appeal is confined to her Honour’s decision to set aside the deed.

5 A right of appeal to this Court from a judgment of the Local Court sitting in its General Division is conferred by s 73 of the Act. The appeal is confined to error of law. The Court may entertain an appeal under s 74 of the Act on a mixed question of law and fact but only by leave.

6 The summons claims orders including that leave be granted to appeal insofar as leave is necessary. Mr Barko, who appeared for the appellant before the Magistrate and on the hearing of the appeal, informed the Court that the appeal was brought under s 73. He made no submission in support of the grant of leave to pursue an appeal on a mixed question of law and fact.

7 The summons contains eight grounds of appeal. All of them, save ground eight, are directed to the contention that the Magistrate erred by her determination to set aside the deed upon the basis that the appellant had failed to rebut the presumption of undue influence. No submissions were advanced in support of ground eight.

8 The respondent was at all material times an adult. He is the nephew of the appellant. The deed, which conferred benefits on the respondent, was executed by him after he had been supplied with a draft of it and advised to obtain independent advice concerning it.

9 The pleading of the claim and defence are discursive and may not have assisted in focussing the issues raised by the claim based on the deed. A considerable amount of evidence of the history of acrimonious relations between the appellant and the respondent was in evidence.

10 It was the appellant’s case that he had obtained default judgment against the respondent in the Local Court in 1997 in an amount of approximately $18,000. He claimed that he and the respondent executed the deed, on 15 February 2000, by which they agreed that in consideration of him not enforcing the judgment he would receive a half interest in the taxi and they would share the use and expenses of it equally, retaining the profits and expenses of each shift individually, and that the proceeds of its sale would be shared equally. In February 2001 the respondent collected the taxi from the appellant’s premises and thereafter he exercised exclusive control over it. The appellant claimed damages for breach of the agreement, being the difference between his earnings as an owner-driver and his earnings as a taxi driver after February 2001. He also claimed one half of the proceeds of the sale of the taxi. It was not in issue that the taxi was sold in mid 2002 for the sum of $4,000.

11 The respondent in his amended defence pleaded non est factum to the deed and, in the alternative, that he had executed the deed under the undue influence of the appellant and as the result of threats made by the appellant and, in the further alternative, that the appellant had failed to pay his equal share of the expenses for the taxi in accordance with clause 3.3 of the deed. Particulars of the defence of undue influence included matters which may be thought more accurately to have raised a defence of duress.

12 The appellant and the respondent both came to Australia from India. The appellant arrived in 1986. At the time he owned land and other property in India, which he left in the care of his sister who is the respondent’s mother. The respondent came to Australia in 1993 and for a time he lived with the appellant.

13 In March 1996 the respondent purchased a car for the sum of $33,579, which was registered as the taxi. The appellant was a taxi driver.

14 There was conflicting evidence about a loan which the appellant claimed to have made to the respondent to assist with the purchase of the taxi. He gave evidence that he had loaned the respondent $10,000 for this purpose. He called a witness, Harnek Singh, who gave evidence supportive of his account. The Magistrate rejected this evidence. The respondent denied the loan. The appellant and the respondent signed an agreement on 21 April 1997 (annexure A to the appellant’s statement) recording that the respondent owed the appellant the sum of $18,500. The agreement was a handwritten document which included the respondent’s agreement that he would not associate with a person named Gurjeet Singh.

15 There was conflicting evidence concerning a dispute relating to the property that the appellant had left in India. He claimed that his sister failed to account to him for the proceeds of sale of this property and that the respondent threatened him saying, “We are not going to give anything back to you until I become an Australian citizen”. Whereas the respondent gave evidence that the appellant had pressured him to make good the debt which he claimed was owed to him by the respondent’s mother.

16 In April 1997 the Sheriff seized an amount of property from the respondent in execution of the default judgment. At some later time the respondent applied to pay the judgment debt by instalments. His application was refused.

17 The appellant and the respondent came to an informal arrangement to share the costs and profits associated with running the taxi. In January 2000 the appellant instructed his solicitor, Phillip Beazley, to prepare the deed. A draft of the deed was handed to the respondent and he was advised by Mr Beazley to obtain independent advice. The deed incorporated an amendment to the draft. Mr Beazley said that the amendment was made at the request of the respondent. His evidence was the subject of challenge. Her Honour accepted Mr Beazley.

18 In 2001 the appellant instructed a solicitor to act for him in an application to set aside the 1997 default judgment. In an affidavit made by him in support of this application he sought to rely on the deed, asserting that “The judgment in this action has been merged and satisfied in a Deed” which he annexed to the affidavit (at [41]).

19 The Magistrate did not make findings in relation to a number of the conflicting matters of history. She found that from October 1996 the relationship between the appellant and the respondent had deteriorated (at [15]).

20 Her Honour found the deed had been validly executed. She rejected the defence of non est factum.

21 I will set out in full her Honour’s reasons with respect to the defence of undue influence:

[45] The next question to be determined is whether the defendant has made out a claim of undue influence and therefore the Deed, notwithstanding it appears to have been validly made, can be set aside. The Deed must be understood in the historical context of the relationship between the parties. Whilst I have found that the Defendant has not always been honest in some issues (such as the RTA documents) I accept his explanation that much of that documentation was at least arranged by the Plaintiff. The Defendant’s credit is not so adversely affected as to discount all his evidence. I have determined that I am not satisfied the Plaintiff did lend $10,000 to the Defendant. There is evidence that the Plaintiff told the authorities information damaging to the Defendant. There is evidence he told those in India that the Defendant had HIV. This was information that greatly affected the relationship the Defendant had with those in India. English was not the first language of the Defendant. It was the Plaintiff who introduced the Defendant to Mr Beazley, Mr Anil Singh, John Nathan and Harnek Singh. All the people involved were there as a result of the Plaintiff the Defendant brought nothing to the relationship. Taking into account the familial and cultural bond between the two, and the above evidence, I am of the view there was a degree of undue influence involved in the signing of the Deed. The Defendant did not contest the original statement of claim and I accept that is a result of the nature of the relationship between the two. Had he defended the matter, the Plaintiff would be required to prove the debt and I am fairly certain he would not have been able to given that there is no documentary evidence to support it. Without that Judgment Debt there would have been no basis for the Deed. Whilst the Plaintiff argues that the Defendant should not be able to rely on undue influence where he has previously sought to rely on the Deed to stay the Judgment, I am of the view that in this particular case he ought to be entitled to. He cannot now challenge the debt. The only way he could was to have it set aside. In addition, there are inaccuracies in the recitals in the Deed itself. Recital A and B are clearly wrong. What is also not clear is wether it is a transfer of equity, as described by Mr Beazley and as set out in paragraph 3.1, or designed as a mechanism for the repayment of the debt as noted in the Recitals. It appears that were it simply to deal with the issue of the debt and to transfer some form of equity, there is no need for paragraph 4 dealing with the land in India. Were the Defendant to have breached clause 4.1, he was to pay the sum of $15,000 in full and final satisfaction of the debt. There is no mention of a breach of any other condition – only in relation to the land in India. However, if the Plaintiff is to be accepted that the land in India is unrelated to the debt, why would the Defendant have to pay the debt in full if he fails to secure the transfer of title? There is also nothing in the Deed to indicate that if this were to occur, what happens in relation to the shared taxi. I accept that Mr Beazley was acting on the instructions of the Plaintiff. I find there is a presumption of undue influence because of the relationship between the parties. There is some discussion of the relations that may give rise to the presumption in Johnson v Buttress (1936) 56 CLR 113. What is clear from that judgment is that there is no exhaustive list of the relations in which undue influence will be presumed. What must be considered is whether one party is able to exercise dominion over the other by reason of the trust and confidence, then the presumption is raised (per Latham CJ). Once the presumption is raised, it is for the other party to rebut that presumption. In this case, I am not satisfied that the Plaintiff has rebutted that presumption. Accordingly the Deed is set aside.

22 Mr Singh, who appeared on behalf of the respondent, submitted that the Magistrate’s reasons did not reveal any error or misstatement of principle. He contended that the appellant’s complaint was with her Honour’s factual findings: Poricanin v Australian Consolidated Industries Ltd (1979) 2 NSWLR 419 per Hope and Glass JJA at 422S and 426E.

23 The appellant’s submission is that the facts that the Magistrate found do not admit of the inference that the relationship was one giving rise to the presumption of undue influence: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321.

24 The equitable doctrine of undue influence requires the court to set aside a transaction which has been unconscionably procured in consequence of the relationship between the parties. Undue influence may be actual or presumed. Actual undue influence requires the person raising it to prove that his will was overborne such that the transaction cannot be considered his free act: Johnson v Buttress (1936) 56 CLR 113 per Dixon J at 134; Bridgewater v Leahy (1998) 194 CLR 457 per Gaudron, Gummow and Kirby JJ at 477; Archer v Archer [2000] NSWCA 314 per Handley JA at [68]. Her Honour found that, “there was a degree of undue influence involved in the signing of the deed”. This is not a finding of actual undue influence.

25 There are categories of relationships which by their nature give rise to the presumption of undue influence. These include the relationship of guardian and ward. As her Honour appreciated, the relationship of uncle and adult nephew is not one that gives rise to the presumption. The presumption of undue influence may arise in a case in which, although not within one of the recognised categories, the evidence establishes the relationship to have been one of trust and confidence. Johnson v Buttress was such a case.

26 Her Honour’s discussion of Johnson v Buttress draws on the opening paragraph of the judgment of Latham CJ (at 119):

The relations mentioned, however, do not constitute an exhaustive list of the cases in which undue influence will be presumed from personal relations. Wherever the relation between donor and donee is such that the latter is in a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter , the presumption of undue influence is raised. (emphasis added)

27 In Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573 at 576, Gillard J observed of a relationship falling outside a recognised category giving rise to a presumption of undue influence that it must one “whereby at the material time of the gift the donor reposed complete trust and confidence in the donee and thereby placed the donee in a position to exercise ascendency or dominion over the will or mind of the donor”.

28 Her Honour found that a presumption of undue influence arose “because of the relationship between the parties”. She did not find that the respondent reposed trust and confidence in the appellant. She found their relationship had deteriorated some years prior to the execution of the deed.

29 Commonly, the doctrine of undue influence is invoked in relation to voluntary dispositions. It applies to contracts but in such cases it will be relevant to take into account whether the consideration was fair and whether the defendant was disadvantaged by the contract: Watkins v Coombes (1922) 30 CLR 180 per Isaacs J at 193-195.

30 Sir Owen Dixon explained the principles in this way in Johnson v Buttress (at 135):

Further, when the transaction is not one of gift, but of purchase or other contract, the matters affecting its validity are necessarily somewhat different. Adequacy of consideration becomes a material question. Instead of inquiring how the subordinate party came to confer a benefit, the court examines the propriety of what wears the appearance of a business dealing. These differences form an additional cause why cases, which really illustrate the effect of a special relation of influence in raising a presumption of invalidity, are often taken to decide that express influence which is undue should be inferred from the circumstances.

31 In my opinion the Magistrate erred in law by her determination to set aside the deed upon the basis that the relationship between the parties gave rise to the presumption of undue influence. There was no evidence to admit of the presumption arising. Furthermore, her Honour approached the matter on the basis that the respondent had not taken steps in 1997 to have the default judgment set aside at least, in part, because of considerations arising out of his relationship to the appellant. She considered that had he defended the proceedings it was unlikely that the appellant would have obtained judgment against him and that there would have been no occasion for the respondent to enter into the deed. Elsewhere her Honour recognised that it was not open to go behind the judgment. The reasoning in paragraph [45] seems to me to nonetheless fall into that error. This led to the further error of failing to recognise that the deed conferred a benefit on the respondent; the appellant’s agreement not to enforce the judgment. In the event the presumption did arise it would have been necessary to take into account that this was a transaction involving real consideration in deciding whether it had been rebutted.

32 Section 75 of the Local Courts Act 1982 provides that:

75 Determination of appeals
The Supreme Court may determine an appeal made under this Division:
(a) by varying the terms of the judgment or order, or
(b) by setting aside the judgment or order, or
(c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court’s directions, or
(d) by dismissing the appeal.

33 Mr Barko submitted that the matter should be remitted to the Magistrate to assess damages. The Magistrate determined the appellant’s claim in circumstances in which it is not clear that she addressed consideration to the defences that were raised. In these circumstances it would not be appropriate to remit the matter on a basis confined to the assessment of damages. Mr Barko did not submit that the matter should be remitted to be heard by another Magistrate following a fresh hearing.

34 Mr Singh submitted that, even if the Magistrate erred in her determination that the deed should be set aside, the appeal should be dismissed as futile. This is because the Magistrate went on to hold:

[46] Even if I were of the view that the deed was enforceable, there is a question in relation to the damages that flow. The deed is ambiguous in terms of what the debt to be paid is. Assuming it is for the judgment debt which is $17,500 (and not the $18,000 as set out in the recitals), the defendant had paid $4,000 plus $2,000. What remains is then $11,500. Baljinder Singh had the use of the taxi for a period of time and exclusively from 20 October 2000 to February 2001. His evidence was that he made approximately $500 - $600 per week. For approximately 17 weeks this would have amounted to $8,500. According to the defendant’s evidence (ref exhibit A paragraph 32 onwards) when the value of the shifts is added together, including the period of the informal agreement, then the plaintiff made an amount of $16,875. If the plaintiff is to be accepted then none of this went to extinguish the debt because the deed itself ended the debt.

[47] In relation to any issue of mitigation of damages, the plaintiff provides no primary evidence to establish that he paid a particular amount to drive the other taxi.

35 The appellant’s claim is for damages for breach of the agreement contained in clause 3 of the deed. In the event the Magistrate finds the claim to be proved it will be necessary to assess the appellant’s damages by reference to the loss suffered by the appellant as the result of being deprived of the use of the taxi in the period from February 2001 to mid 2002. In determining this question it is not apparent that there should be any discounting based on the fact that in the four months prior to February 2001 the appellant had exclusive use of the taxi during the respondent’s absence in India.

36 It is not clear to what her Honour was referring by her reference to “any issue of mitigation” in paragraph [47] above. The onus of proof on the issue of mitigation is on the defendant to establish the reasonable steps that the plaintiff ought to have taken by way of mitigation: Wenkart v Pitman (1998) 46 NSWLR 502. Her Honour has not made findings on the claim for damages. The appeal is not futile.

37 The appropriate course is to remit the matter to the Magistrate. Her Honour has determined that the deed was validly executed. She has rejected the defence of non est factum. However, because she determined that the appellant had failed to rebut the presumption of undue influence, her Honour did not give consideration to the defence raised by the respondent. It will be necessary for her Honour to determine the remaining issues raised by the defence (with the benefit of any further submissions by the parties) and, depending on her findings, to assess damages.

ORDERS


1. Allow the appeal;

2. Set aside the judgment;

2. Remit the proceedings to the Magistrate for determination in accordance with these reasons;

3. The respondent is to pay the appellant’s costs of the appeal, but is to have a certificate under s 6 of the Suitors’ Fund Act 1951, if qualified.
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