Sydney Water Corporation v Omonoia Constructions - [2000] NSWDDT 11

CITATION: Sydney Water Corporation v Omonoia Constructions [2000] NSWDDT 11

PARTIES: Sydney Water Corporation Ltd - Cross Claimant

Stelios Hatzisarantinos, James Katakouzinos and James Katsianis T/as Omonoia Constructions- Cross Defendants

TITLE OF COURT: Dust Diseases Tribunal

JURISDICTION: Original

MATTER NO/S: 188 of 1998 and 194 of 1995

DELIVERED ON: 2 November 2000

DELIVERED AT: Sydney

HEARING DATES: 27 March 2000-30 March 2000, 13 June 2000, 16 October 2000-9 October 2000

JUDGMENT OF: Curtis J

NUMBER OF PARAGRAPHS: 85

CATCHWORDS: Dust Diseases Jurisdiction - Cross Claim against Contractor - Formation of Contract - Non Est Factum - Unconscionability

REPRESENTATION
CROSS CLAIMANT
Mr M F Holmes QC with Mr S E Torrington instructed by Phillips Fox appeared for the cross claimant

CROSS DEFENDANTS
Mr B R Ferrari instructed by Sparke Helmore appeared for the cross defendants

Dust Diseases Tribunal of New South Wales

Matter No 194 of 1995

(Re: Emanuel Papadakis)

Sydney Water Corporation

(Cross Claimant)

Stelios Hatzisarantinos, James Katakouzinos and James Katsianis T/as Omonoia Constructions

(Cross Defendants)

Matter No 188 of 1998

(Re: Fotios Manolakoudis)

Sydney Water Corporation

(Cross Claimant)

Stelios Hatzisarantinos, James Katakouzinos and James Katsianis T/as Omonoia Constructions

(Cross Defendants)

2 November 2000

JUDGMENT
CURTIS J

BACKGROUND

Dimitrios Katakouzinos, Stelios Hatzisarantinos and James Katsianis (the Partners) trading as Omonoia Constructions, carried on business laying sewer lines under contract to the Water Board, predecessor in title to Sydney Water Corporation (Sydney Water), between 1964 and 1976.
The Partners employed in these works Fotios Manolakoudis and Emanuel Papadakis. Both of these men contracted the disease of silicosis in the course of carrying out the work as a result of the negligence of both the Partners and the Water Board. Each sued the Partners and Sydney Water for damages. On 28 July 1999 Mr Manolakoudis settled his claim on terms which included judgment against the Partners and Sydney Water, each in the sum of $65,000 inclusive of costs. On 28 March 2000 Mr Papadakis settled his claim against the Partners in the sum of $55,000 inclusive of costs and discontinued his claim against Sydney Water with a covenant not to sue.

THE CLAIM

Sydney Water incurred legal costs and disbursements in resisting each of these claims and paid the judgment and interest in the matter of Manolakoudis. It seeks orders that it be indemnified by the Partners.
It is the contention of Sydney Water that the works carried out by the Partners, upon which Mr Manolakoudis and Mr Papadakis were employed, were carried out pursuant to contracts with the Water Board, all of which included the following term:
The contractor shall and does hereby indemnify the Board against all liability in respect of any claim made against the Board under the provisions of the Workers Compensation Act 1926 or any amendment of such Act or substitution therefore and in respect of any payment at common law in consequence of any injury suffered by any employee of the contractor in the course of or in connection with the carrying out of the work and in respect of all compensation or damages payable and costs and expenses which the Board shall incur in connection with such claim.
An alternative basis for the claim was advanced upon an assertion that the cross-defendants are in breach of a contractual term that they obtain insurance against the liability of the Water Board as principals. It has not been necessary to determine that issue.

THE DEFENCES

In answer to the claim the Partners deny that the contracts concluded between themselves and the Water Board contained any such term as alleged, and, in the alternative, plead non est factum and unconscionability.

THE CONTRACT

During the relevant period it was the practice of the Water Board to place advertisements in Sydney newspapers calling for tenders for pipe laying work. The advertisements gave a contract number, the length and specification of the pipe to be laid, the locality where the work was to be done, the amount of security deposit to be lodged against completion of the work and the closing date for tenders. The advertisements usually included the words “tender forms, specifications, et cetera” as available from a particular section of the head office of the Water Board. Upon attendance at this office interested persons were for a small fee provided with a parcel of tender documents. The parcel included:
(1)A single sheet comprising a pro forma offer to perform the work.
(2)A lengthy document entitled “Schedule of Rates” in which the Water Board set out rates of payment for various operations required in the work, such as excavating stone, excavating soil, excavating shale etc
(3) A schedule of the work to be performed.
(4) A document entitled “General Conditions of Contract” which contained the indemnity clause relied on by Sydney Water.
(5)A document entitled “Standard Specifications for the Construction Testing and Maintenance of Sewerage Work”.
(6) The contract drawings.
Upon receipt of these documents an offeror would, upon his own costings, decide if he could make a profit at a fixed percentage over or under the Water Board's schedule of rates. He would then detach and lodge the formal tender offer. This document was a printed form in which the tenderer need only write a percentage in the space provided, the date, his identity and his signature. The important words there appearing were as follows:
I (we) the undersigned hereby offer to construct, completely finish and maintain the various works in contract number. . . in accordance with the general conditions of contract, contract specifications and drawings prepared by the Board for that purpose.
If the tender was successful the Water Board would send to the successful tenderer a form letter accepting the tender. This letter twice referred to the “General Conditions of Contract” and appointed a time and date for the contract to be sealed in the offices of the Water Board. The letter stated that the work could not commence until this was done. On the day appointed the tenderer was required to provide evidence of workers’ compensation and public liability insurance before the contract was executed by the Water Board's solicitor under power of attorney. The evidence of Mr Guthrie, a solicitor employed by the Water Board from 1967, was that the legal office bound up the tender documents which had been given to the tenderer initially within an outer document which was executed by the parties.
The original signed contracts are not in evidence. Mr Guthrie said that these have been destroyed. There is, however, evidence from Mr Barwell and Mr Mullins that a composite typewritten copy was, upon execution of the contract, archived with the Government Records Repository.
A search of this repository has found parcels of documents in respect of 22 contracts between the Partners and the Water Board relating to tenders bearing dates between 21 January 1967 and 7 October 1975 (SW8). Each parcel contains:
(1) A copy of the completed tender offer with the signature of the partner who completed the tender appearing in typescript.
(2) The schedule of rates
(3) The schedule of work
(4) A document entitled “General Conditions of contract”
(5) The Standard Specification
(6) The contract drawings
(7) A copy of the letter accepting the tender and appointing a date for execution of the contract
A copy of the outer document executed by the parties is not included. The document entitled “General conditions of contract” within each of those parcels includes an indemnity clause in the terms claimed by Sydney Water. That term appears as clause 22 in the contract the subject of tender on 22 January 1967 and as clause 10.2 in contracts the subject of tender after that date.
No documents have been found which relate to contracts entered between 1964 and 1966. In relation to this period Sydney Water relies on contracts made between 14 May 1963 and 4 May 1976 between the Water Board and Gilmour Constructions which on their face relate to the same type of work as that performed by the Partners. Parcels of documents relating to these contracts are in evidence (SW9).
The Gilmour contracts made between 1963 and early 1968 all include a document entitled “General conditions of Contract”, cl 22 of which sets out the indemnity clause in the terms claimed by Sydney Water. The same clause also appears in the copy of the Partners’ contract of 22 January 1967. The later Gilmour contracts include the indemnity clause as cl 10.2 of the “General Conditions of Contract” in terms identical to that found in the later Partners’ Contracts.
This documentary evidence confirms evidence of Mr Guthrie that there was no change to the relevant indemnity clause during the time Omonoia Constructions contracted with the Water Board.
Mr Jitts, an engineer employed by the Water Board who commissioned and supervised the works and who was involved in the tender process gave evidence that tender parcels always included the “General Conditions of Contract” and that no one could start without a contract. The evidence of the Partners was that they always signed a contract with the Water Board before they performed work.
The evidence establishes to my satisfaction that at all times when Mr Manolakoudis and Mr Papadakis worked for Omonoia Constructions, Omonoia Constructions was performing work under contract with the Water Board which contract included the indemnity term upon which Sydney Water relies.

NON EST FACTUM

The Partners seek to avoid the indemnity clauses upon the basis that they never consented to be bound by any document which included such a term of indemnity and are not bound by the signatures appearing on the contracts purportedly executed by them.

The Law

In Petelin v Cullen (1975) 132 CLR 355 the Court (Barwick CJ, McTiernan, Gibbs, Steven, Mason JJ) said this:
The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on the defendant who seeks to establish the defence.
Two questions arise on this evidence: one, is the contract so radically different from that which the Partners believed they were signing that they would not have consented had they known its true character and effect? Two, did that misunderstanding arise without any carelessness of the Partners?

The Facts

Dimitrios Katakouzinos was born in Greece in 1930. Before coming to Australia he conducted a tailoring business from a small shop. He came to Australia in 1960 at the age of 29. He then spoke no English and found work as a labourer with the Water Board with the assistance of his cousin. After two years he left the Water Board and worked with a Mr Frank Rovsol and then with Walcon Constructions, who performed drainage work with the Water Board as contractors. He acquired some skill in the laying of pipes and the construction of manholes. In 1964 Mr Katakouzinos, professing himself “very experienced” entered the partnership of Omonoia Constructions with the other two partners who also worked at the time for Walcon. The Partners obtained a reference from Mick Walsh and Mr Conlan, the principals of Walcon Constructions, and tendered for contracts with the Water Board. I accept that at the time Mr Katakouzinos had little command of written English although he had some very limited speaking ability.
Mr Hatzisarantinos was also born in Greece in 1930. He worked there as a carpenter before coming to Australia in 1960 where he also obtained work with the Water Board as a labourer on drainage works before taking up employment with Walcon Constructions. At the time of the formation of Omonoia Constructions and at the time the Partners entered the first of these contracts I accept that he was illiterate in the English language and spoke little or no English.
Mr Katsianis was born in Greece in 1926. He worked on the family farm until 1960 when he came to Australia and found employment with Walcon Constructions where he met the other two partners of Omonoia. I accept that when he first entered contracts with the Water Board he was illiterate in English and spoke little in that language.
The Partners, intent upon tendering for work, recognised advertisements inserted by the Water Board in newspapers but were unable to properly read these advertisements. They took the advertisements to a Mr Sevdakis, whom they described as their accountant, for translation before attending upon the Water Board to obtain tender documents for particular numbered contracts.
The Partners then engaged the services of an engineer with whom they visited the locality of particular drainage contracts together with Mr Sevdakis and the plans. The engineer gave them geophysical advice. The Partners then determined upon a price. I do not accept the evidence of some of the Partners that it was the engineer who determined the price, rather it was the experience of the Partners which enabled them to determine whether they could make a profit upon any particular tender.
The Partners then submitted their tender and upon receipt of a letter of acceptance or rejection attended upon Mr Sevdakis so that the letter may be translated. The Partners concede that they knew from that which Mr Sevdakis had learned from the contractual documents that certain insurance was a necessary term of the contract as was the lodgement of a security deposit.
Upon the day appointed for execution of the contract the Partners attended with Mr Sevdakis upon the office of the Water Board, producing evidence of insurance to an employee of the Water Board on the fourth floor. They took a letter from him confirming that fact to the twenty first floor where they introduced themselves and Mr Sevdakis to the solicitor for the Water Board before signing the contracts. Before signing the contract the Partners knew that the contract included terms referred to as “General conditions of contract”.
Mr Katakouzinos gave the following evidence:
Mr Ferrari
QuestionCan you describe the appearance of the thing you signed, what did it look like?
AnswerWe understand that was the contract, what we signed was the contract.
QuestionWhat I am asking you is -
AnswerBut about the details, what exactly was in the contract we didn’t know.
(Transcript p 117.3)
……………
Mr Holmes
Question -You understood back in August 1973 that when you were putting in the tender and then executing the contract of the Water Board there was a binding contract on you and the Partners on the one hand and the Water Board on the other.
Answer -We understood what our responsibilities were as far as the work goes.
Question-You understood there was a contract, did you not.
AnswerYes, of course I understood it was a contract.
Question -When you signed the document which said ‘In accordance with the general conditions of contract, contract specifications and drawings prepared for the Board for that purpose’ you understood that was what you were obliged to do.
Answer- We had not other choice, we couldn't do otherwise because they wouldn't give us any job after that.
Question- You knew the Water Board laid down the specifications and the general conditions of contract and unless you accepted them you would not have got the job.
Answer-We were very aware of that, that if we didn't do what they wanted they wouldn't give us a job.
His Honour:
Question -As well as doing what they wanted you had to accept all of the other conditions in the thick document.
Answer -Yes, we were obliged to do so whether we liked it or not.
……………
Mr Holmes
Question -If you look at the second paragraph of that letter it said, `Your attention is drawn to undermentioned requirements laid down in the general conditions of contract,' do you see that.
AnswerYes, we knew that.
Question -That is again a reference to the general conditions of contract we have been talking about.
Answer-Yes, we accepted the general conditions in many forms.
(Transcript p 159)
……………
His Honour:
Question -You say you accepted the general conditions.
Answer -Yes, because as I explained to you before we had no choice because we wouldn't get any work otherwise.
Question -Did you [go] to the trouble of asking anyone to translate them to you.
AnswerNo.
QuestionWhy not.
AnswerI can't answer it because we just did not ask anybody.
(Transcript p 161)
……………
Mr Ferrari
QuestionWhen you were asked about the General Conditions you said something to the effect that we could not do anything else.
AnswerBecause we thought all these General rules were referring to the jobs we had to do and therefore we had to comply.
(Transcript p174)
……………
QuestionWhen you spoke in your last answer of General rules what were you referring to?
AnswerAll those - to the type of job we had to do and that we had to complete the job at a certain time and give it to them as they wanted it.
(Transcript p175)
……………
Question-What sort of contract did you believe it was that you were signing.
Answer-He said that I was responsible to complete the work - I had an obligation to complete the work as they wanted even if I lost money.
(Transcript p 176)
……………
Question-Did you have any understanding of any obligations being created between you and the Water Board other than about the way you performed the work.
Answer -I always did my work very well and I didn't think it would come to that and I didn't think I would have any responsibility.
(Transcript p 177)
His Honour:
Question-Did you understand that you might have to make good any loss suffered by the Water Board if they suffered loss because of your actions.
Answer No, nobody ever explained that to me.
(Transcript p 178.2)
……………
Mr Ferrari:
Question-What was your understanding about your obligations to the Water Board if an injury occurred to one of your workers partly through your fault of The Partnership and partly through the Water Board's fault.
Answer -For over 17 years we worked so hard that's why we never had an accident but if anything happened I believe that my insurance and the Water Board would be partly responsible.
(Transcript p178.9)
……………
His Honour:
Question -Did you think that details such as that may have been spelt out in the general conditions which you did not read.
Answer-No, that never crossed my mind because if I thought that any clause like this was in there I would never have signed the contract and this is why I worked very hard all my life.
(Transcript p 179)
Before the end of the trial I raised with the parties my scepticism concerning this last answer, I said that I thought it probable that if Mr Katakouzinos was made aware of the indemnity term he would have made certain that he insured himself against its possible effect. Mr Katakouzinos was not recalled.
Relevant evidence from Mr Hatzisarantinos is as follows:
Mr Ferrari
Question -When you got the plans at the Water Board would you also be given documents with those plans. Is that correct.
AnswerYes.
QuestionWhat occurred about reading the documents that came with the plans.
Answer -I can't remember in details what we did exactly but the accountant would read the paper to us, it's been a long time, sorry, I can't remember too much.
QuestionDo you remember something of the details from the document.
AnswerNo, nothing at all, I can't recall anything.
Question -Do you remember what matters were dealt with in the papers that the accountant read.
Answer -Yes, in those papers the rules of the Water Board were stated.
Question-When you say, the rules of the Water Board, what do you mean by the rules of the Water Board.
Answer-That the Water Board had to provide an overseer, the engineer and the materials, it wasn't our job to select those.
Question-Anything else in relation to the documents that you remember.
Answer -I can't remember too much but there were rules as how we were about to go with the job, if it was over 5 feet we had to use plans and things like that.
Question -Did you understand that the documents dealt with matters other than the way the work was to be carried out.
Answer-No, I didn't know that.
Question-Did you understand that the documents could require the Partners to pay the Water Board where employees were injured at work.
Answer-No, we didn't know that, they didn't tell us that.
(Transcript p 200)
……………
Mr Holmes:
Question -When you went and got the tender documents, the bundle of documents, did you take them to him [the accountant Mr Sevdakis] as well.
AnswerYes, yes.
Question -The bundle of documents, did he read all of those to you all the way through.
Answer-He would read and say to us, ‘these are the rules of the Water Board how to do the job’. We didn't know if he read everything to us.
Question-Did you ask him to read everything to you.
Answer-We asked him to read whatever we had to know but he said, `Well, after the first one all the others are the same’.
……………
Question-My question was that you knew the Water Board had general conditions of contract which had applied in every contract with subcontractors such Omonoia Constructions and Walcon.
AnswerYes, I didn't know details.
Question -You did not know details but you knew there was a general set of conditions which the Water Board required each subcontractor to agree to.
Answer -We knew that we had to do the job according to the specifications.
His Honour:
Question -Did you understand that you had to provide evidence of insurance.
Answer -Yes, because they would ask us to provide them with that otherwise we couldn't get the job.
Question-Did you understand that the requirement that you be insured was one of the general set of conditions or rules.
Answer-Yes, we had to have it.
(Transcript p 216)
……………
Mr Holmes:
Question-You understood that the general conditions or rules were the same for you as for Mick Walsh and Mick Conlan.
Answer-Yes, for everybody.
……………
Question -Mr Hatzisarantinos, you went along with your accountant when you signed the contracts, did you not.
Answer-Yes.
Question-You relied upon him to translate the contract to you.
Answer-Yes.
(Transcript p 217)

Mr Katsianis gave the following evidence:
Mr Ferrari
Question -You said earlier that you had Mr Sevdakis read to you from the documents the specification documents you got from the Water Board.
Answer-Yes.
Question-Did he read the whole document to you.
Answer-No, only the rules at the front regarding the water, that's all.
(Transcript p 241)
……………
Mr Holmes:
QuestionYou knew when you signed those tenders that they referred to the General Conditions of contract at the top in the third line.
AnswerWhich one?
Question -You understood you were accepting the Water Board's general conditions of contract.
Answer-I didn't know the general conditions, I thought it was just for the price, whatever we're signing that was for the price.
(Transcript p 243)
……………
Question -You knew that you and the Partners were accepting that you were going to have to work under the Water Board's standard general conditions of contract.
Answer-Yes, yes.
Question -You understood the Water Board had general conditions of contract which required contractors such as Omonoia to accept in their contracts.
Answer-I can't remember if all these details were explained to me.
Question -They were explained to you, were they not, Mr Katsianis, were they not.
Answer-Because it's in English I cannot remember.
Question -You saw those words `General conditions of contract' time and time again.
Answer-What do you mean?
Question -You saw those words `General conditions of contract' in the tenders that you put in and in the letters you got back from the Water Board addressed to you.
Answer-Yes, maybe Mr Sevdakis explained to me at the time but I don't remember anything.
Question -He did explain to you the general conditions of contract at some stage, did he not.
Answer-What do you mean exactly when you say that?
Question -The general conditions of contract that were referred to in your tender were referred to and the Board's acceptance were explained to you by Mr Sevdakis.
Answer -Mr Sevdakis would say to us that we had to use water, equipment we use and how - after the conditions were this rules.
Question-Mr Katsianis, could you turn the page in Exhibit SW11 [a contract document]. Do you see a document which is described document number GC105 and then three lines further on `General conditions.'
Answer-Yes.
Question-You used to pick up that document with your tenders when you went along to collect the tender specifications and parcel of contract documents, did you not.
Answer-I must have.
Question-That document was read to you by Mr Sevdakis.
Answer-Did he read it to me? I can't remember if he read it to me.
Question -Is your position this, Mr Katsianis, that you would have the Court believe that you had this document here and it was not translated to you and that you did not bother to ask for it to be translated.
Answer-Because we trusted Mr Sevdakis very much whatever he said we believed him.
QuestionIt would have been careless of you not to ask what the words “General Conditions of Contract” mean would is not?
AnswerWell in those years I could not - I couldn’t have known what it means and I don’t know what it means now.
(Transcript p 243)
Mr Ferrari for the Partners asserts that upon the basis of this evidence “they were unaware that any contract related to any matters other than the manner of performance of the works, the time of performance and manner of payment (including workers compensation)”. I do not accept this submission.
If the evidence which I have reviewed above is to have any meaning it seems to me that the Partners attempt to assert that they understood the contractual documents to relate only to the Standard Specifications for Construction and to the manner in which the works were to be performed in the technical sense. If that is their position I cannot accept it. It is inconsistent with the objective evidence and the proven ability of the Partners to carry on a large scale commercial activity.
The contracts signed by the Partners were in the same terms as were contained within the tender documents. Those documents included the Schedule of rates, the Schedule of work, General Conditions of Contract, Specifications for Constructing and Testing and Maintenance of the works and Contractual Drawings. The General Conditions of Contract contained 19 pages comprising 46 clauses. The Specifications for Construction are contained within 29 pages of 118 clauses.
The General Conditions of Contracts let between 1963 and January 1967 to both Gilmour Constructions and the Partners contained terms and conditions set out under the following headings:
Authority; Interpretation of Terms; Control of Work; Security Deposit and Signing of Contracts; Labour, Materials and Plant; Fees, Notices, Etc; Contractor to Comply with Statutory Authorities; Contractor’s Liability for Damage; Roads - Barriers, lights, restoration of surfaces etc; Trespass; Injury to adjoining property - liability for accidents; Protection of sewers, water mains etc; Drawings, specifications, etc; Copies of drawings supplied to contractor; Possession of site; Order of procedure of works; Setting out works; Protecting and maintaining signals and marks; Contractor to be represented; Access to works; Board’s Property; Insurance - Fire and Workers’ Compensation; Truck system; Workmen’s wages; Measurements and quantities; Payments and certificates; Work not covered by Contractor’s schedule of prices; Bad material and improper work; Power to dismiss men; Power of entry - taking over portions of work; Variations; Omission of part of works; Assignment of contract; Claims; Settlement of claims; Proceedings in default of contractor; Bankruptcy; Time of completion; Maintenance; Storage, conveyance and use of explosives; Conditions not to be waived; Hours of labour; Preference to unionists; Amounts due to the Board; Notices by the Board; General interpretation.
The General Conditions of Contract set out in the later contracts appear under these headings:
Authority; Meaning of terms; General interpretation; Conditions not to be waived; Security deposit, signing of contract and commencement of works; Notices, fees, royalties etc; Exchange, primage and customs duty; Specifications, drawings etc; Contractor’s schedule of prices; Insurance; Time of completion; Assignment or sub-letting of contract; Notices by the Board; Compliance with requirements of Statutory Authorities; Control of work; Contractor to be represented; Possession of site; Order of procedure of works; Notice by contractor for Board’s inspection of works; Setting out works; Protecting and maintaining signals and marks; Labour, plant, tools and equipment; Materials and work; Materials and work not in accord with specification; Board’s property; Contractor’s liability for damage; Trespass and maintenance of fences; Roads- barriers, lights, restoration of surfaces etc; Protection of sewers, water mains etc; Board’s access to works; Hours of labour; Engagement and dismissal of workmen; Rates of wages to be paid; Payment of workmen; Power of the board to pay workmen; Board’s power of entry; Connections to existing services; variations; Omission of part of works; Disputes; Settlement of disputes; Defects liability period (maintenance); Proceedings on default by contractor; Bankruptcy; Amounts due to the Board; Handing over of works; Payment and certificates.
The Standard Specification for Construction appear to be the same in respect of both the earlier and the later contracts. The specifications are quite detailed and appear under the following headings:
Extent of contract; General; Materials; Earthworks; Concrete; Pipe laying and joining.
It is quite apparent from a cursory reading of the Specifications for Construction that they do not refer to any obligations relating to the lodgment of security deposit, the prepayment of stamp duty, the insurance cover, the time for completion, the supervision of works, the order of procedure, and most importantly the procedures for payments. These are all matters referred to in the general conditions and all matters in respect of which I believe on the probabilities the Partners had some understanding before entering the first contract. These understandings were probably conditioned by their experience with Walcon Constructions together with what Mr Sevdakis told them.
The Partners professed technical expertise in tendering. Mr Katakouzinos said that it was because he saw himself “as very experienced” that he spoke to his employers Mick Walsh and Mick Conlan about obtaining work for himself. The Partners themselves determined the appropriate pricing of each contract upon the basis of their technical experience. It is probable that they then knew the technical demands of the specifications in general terms. It is inherently more probable that they relied upon Mr Sevdakis to translate the non technical terms of the contract set out as “General conditions”. Both Mr Katakouzinos and Mr Hatzisarantinos agreed in terms that they knew of the existence of general conditions which required that specific policies of insurance be taken out.
In rejecting the evidence of the Partners that they believe the contracts signed related only to technical specifications I do not conclude that upon the probabilities they knew of the indemnity clause. I do, however, find that they knew that the contracts signed by them contained provisions other than bare technical specifications and that those provisions placed upon them an obligation to insure against certain contingencies which might arise under the workers compensation legislation or at common law. It is their evidence that they engaged an insurance broker before entering the first contract, a Mr Jamison. The Partners might not have known the terms of the indemnity clause, however, the existence of that clause in the context of a contract assigning the burden of insurance between parties to a contract is not such as to make the content of the document radically different from that which the parties knew it to be. Of the Partners, only Mr Katakouzinos gave evidence that had he known of the indemnity clause he would not have signed the contract. For reasons given I reject this evidence.
This contract was a contract which had the legal effect of requiring the Partners to do work and the Water Board to pay for it. In anticipation that personal injury might be caused to employees of the Partners as a result of their negligence it required that the Partners insure against that liability. That much I believe was clearly understood by the Partners. The contract went further than this understanding and required that (1) the Partners indemnify the Water Board for losses it may suffer in consequence of that negligent conduct of the Partners anticipated by the obligation to insure (2) That the obligations of the Partners extend to obtaining insurance against this liability.
Those two additional terms are said by Mr Ferrari to be radically different to that to which the Partners consented. I do not believe this to be so. In Saunders v Anglia Building Society (Gallie v Lee) [1971] AC 1004 Viscount Dilhorn said at 1022:
The difference between what a document is thought to be may be in substance or in kind. It will not suffice if the signer thought that in some respect it would have a different legal effect from what it has; nor will it suffice if in some respects it departs from what he thought it would contain. The difference, whether it be in kind or substance, must be such that the document signed is entirely ... or fundamentally different from that which it was thought to be so that it can be said that it was never the signer’s intention to execute the document.
Upon the evidence the Partners intended that they should be bound by any term that was accepted by their competitors. The evidence of Mr Guthrie is that approximately 200 such contracts were signed in any one year, each one of which contained this clause.
Even if the document were radically different in character or effect from that assumed by the Partners I would hold that they had been careless. Mr Sevdakis was the agent engaged by the Partners for the purpose of their understanding the contracts. If he did not read the indemnity clauses he was careless. If he read these clauses and failed to inform the Partners he was careless.
Further, the Partners placed the contractual documents in the hands of Mr Sevdakis and could not have been but aware that they contained many clauses and must impose many obligations upon them. The extent of care required in order to justify a plea of non est factum must be correlative to circumstances which include the innocent reliance of the other contracting party and the magnitude of the contractual undertaking. Where the Water Board provided copies of the terms on which it would contract, to be taken away and digested by interested persons, I believe it reasonable to expect a high degree of care from those persons. If they could not read English they ought to have commissioned a literal translation of the contractual documents or taken legal advice.
The Partners patently intended to accept many obligations imposed by the contract upon trust without inquiry as to their content. These were large scale engineering works and the Partners expected to profit. In fairness to the other party to the contract the Partners ought to have fully informed themselves so that they knew precisely what was expected of them in order to make that profit. I accept the Partners had little education and could not read English but I believe they were intelligent men capable of forming judgments as to what was in their own interest.
Mr Ferrari has submitted that the Partners were unsophisticated immigrants who had no experience of commerce or law in a common law country. I do not accept that the men are unsophisticated. I believe them to be disingenuous and worldly-wise. Given that they had no experience of commerce or law it was careless of them not to seek legal advice before entering those contracts.
In Wilton v Farnworth (1948) 76 CLR 646 at 649 the High court confirmed that a gift of property procured by a donee from a donor of low intelligence may be set aside as unconscionable. Latham CJ relied upon the fact that the disposition was a gift. Of business transactions he said:
Where a man signs a document knowing that it is a legal document relating to an interest which he has in property, he is in general bound by the act of signature. He may not trouble to inform himself of the contents of the document, but that fact does not deprive the party with whom he deals of the rights which the document gives to him. In absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions (p649).
Such considerations were no doubt in the mind of the members of the High Court in Petelin v Cullen when they stated that there is a heavy onus on the defendant who seeks to establish the defence of non est factum.
The question of onus was addressed by Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362 where he said:
The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found.…But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the Tribunal.
I think it inherently unlikely that Mr Sevdakis failed to draw to the attention of the Partners provisions within the General Conditions of Contract and limited his explanation to matters appearing in the Specification for Construction. The evidence of the Partners, has not led me to the point of actual persuasion that they would not have entered those contracts had they known of the Indemnity clause. I bear in mind the serious effect such a finding would have upon the innocent and reasonable business expectations of the Water Board. The defence of non est factum must fail.

UNCONSCIONABILITY
The law

The applicable principle was stated by Mason J in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 at 461 where he said:
Relief on the grounds of unconscionable conduct will be granted when unconscious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when advantage is taken of an innocent party who, although not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interests.
Mason J explained at 462 that this underlying principle may be invoked:
Whenever a party by reason of some condition or circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created.
Mason J said that he qualified:
the word ‘disadvantaged’ by the adjective ‘special’ in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasis that the disabling condition or circumstance is one which seriously affects the ability of an innocent party to make a judgment as to his own best interest when the other party knows or ought to know of the existence of the condition or circumstance and its effect on the innocent party.

The facts

Mr Ferrari for the Partners submits that they entered the contract when subject to special disadvantage because:
1.They were unable to read or write English.
2.They were unsophisticated Greek migrants who had no experience of commerce or law in a common law country.
3.They acted in the belief that they were performing the same work under the same conditions as when they were employed by Walcon Constructions except as to security of employment and manner of payment and responsibility for workers compensation.
4.They were dependent upon the cross-claimant for explanation of the effect of any contract.
5.They relied upon the cross-claimant for instructions and directions in regard to the performance of the contract.
6.They were unaware of the risks of silicosis.
In the circumstances of this case I do not believe that the inability of the Partners to read or write English is material. In Tarzia v National Australia Bank the Full Court of the Federal Court of Australia (Einfield, Olney and von Doussa JJ (12 October 1995 Unreported)) upheld findings of the trial judge that a combination of age, ignorance of English and lack of education does not necessarily put a person at a special disadvantage. Other matters may be weighed against these disabilities.
I have not accepted that the Partners were unsophisticated, although I do accept that they had no experience of law or contracts. In that regard being intelligent men they ought to have sought advice.
Given the size of the contractual undertakings it is in my opinion idle to suggest that the Partners acted in the belief that they were performing the same work under the same conditions as when they were employees. There is no credible evidence that the Partners were dependent upon the Water Board for explanation as to the effect of the contract or for direction as to the performance of the contract. I am not persuaded that they did not know or learn of the risk of silicosis.

The Partners did not entirely lack commercial experience, Mr Katakouzinos operated a tailoring business in Greece from his own shop, Mr Hatzisarantinos had worked as a carpenter. In any event while lacking commercial experience in Australia the Partners did not lack business acumen. Before establishing the partnership and embarking upon the works the Partners had accumulated a deposit for the purchase of premises at Marrickville for the purpose of storing equipment and machinery. In order to perform the work they entered upon loan and hire agreements in respect of the necessary plant and equipment. The Partners concede that they employed and supervised up to 10 men. I note that Mr Papadakis, whose affidavit is in evidence, (SW5), asserts that in 1971 to 1973 he was working with 20 men upon one of the Partners’ contracts. I think this figure more probable given the size of the jobs. The work performed by the Partners required some skill, and understanding of the technical requirements of the Water Board contained within the specifications. They secured a reference from Walcon Constructions in order to obtain their first contract.
The business was clearly profitable from the beginning. The mortgage over the premises at Marrickville was repaid from profits of the business and the Partners were able to lodge security deposits of sums of up to $47,000 to secure continuing contracts. In 1972 the Partners were able to absorb a loss of $50,000 on one contract suffered because of tidal miscalculations on the part of their engineer. That was a significant sum at that time. In 1979 Mr Katsianis purchased a property at 358-360 New Canterbury Road, Dulwich Hill, which he converted into 14 strata title lots, he retains three of those lots.
The works undertaken by the partners were substantial. The first contract of which there is a copy (SW8 Contract 4264S) records that on 3 March 1967 (the date appointed for execution in a letter of acceptance) the partners agreed to excavate for, and lay, a total of 20,054 feet (nearly four miles) of sewer pipe at Middle Harbour Creek and to complete the works by 3 November 1967. On 30 March 1971 SW8 (Contract 4632S) the Partners agreed to lay 20,306 feet of pipe at Eastern Lane Cove. On 8 February 1972 the Partners entered two contracts, one to lay 9,874 feet of pipe and the other to lay 18,765 feet of pipe, both in the Carol Creek Warringah area (Contracts 4735S and 4736S). On 21 October 1975 the Partners agreed to construct a total of 4.699 kilometres of pipeline in the Savilles Creek area lodging a $17,000 security deposit for this purpose, and undertaking to complete the work by 4 August 1976. Two weeks later, on 4 November 1975, they agreed to construct an additional 7.819 kilometres of pipeline and lodged a security deposit of $47,000. They also agreed to complete that work by 4 August 1976.
The organisation and management required to perform such contractual obligations is not consistent with the Partners being other than intelligent, practical and capable men. Mr Katsianis agreed that some of the contracts involved payments of hundreds of thousands of dollars to the Partners and that substantial expenses were incurred in payments for labour and materials (transcript 248). Mr Katakouzinos and Mr Hatzisarantinos in giving evidence professed to have no memory as to the consideration paid in respect of any contract, even in the most general terms. I found this evidence to be improbable. It served to emphasise the impression I formed that their evidence of ignorance of contractual terms beyond physical specification of the work should not be accepted.
I do not believe the Partners entered into these contracts while subject to any special disability. In any event there is no persuasive evidence that they presented to the Water Board as persons who may labour under any such disability. The defence of unconscionability fails.

Orders

(1) The cross defendants are to indemnify the cross claimant against the liability of the cross claimant in respect of the claims made at common law against the cross claimant by Fotios Manolakoudis and by Emanuel Papadakis.
(2) Liberty to the parties to bring in short minutes of order
(3) In the event that the parties cannot agree on quantum the matter is to be listed before me for further evidence and argument on 7 days notice by either party.
(4) Costs reserved pending submissions.

Mr M F Holmes QC with Mr S E Torrington instructed by Phillips Fox appeared for the cross-claimant
Mr B R Ferrari instructed by Sparke Helmore appeared for the cross-defendants