Citation: Khan & Anor v Khan & Anor [2004] NSWSC 1189
Court: Supreme Court of New South Wales, Equity Division
Date: 10 December 2004
Judge(s): Barrett J
Background
The plaintiff purchasers sought specific performance of an alleged contract for the sale of a residential property at Bonnyrigg in Western Sydney. The defendants, a son and his mother, were the registered co-owners. Although the parties shared a surname, they were unrelated.
Price negotiations between the parties began in April 2003 and reached an initial verbal agreement of $480,000. The purchasers moved into the property under an oral licence arrangement while formal contracts were being prepared. However, the vendor mother became unhappy with what she regarded as the purchaser's petty conduct over minor financial matters and refused to sign the contract.
On 30 September 2003, a meeting was held at the vendor mother's home, attended by both sets of parties and the Imam of a local mosque (Mufti Naiem Ali), whose attendance had been arranged by the vendor son. The Mufti expressed the view that a deal had been done as a matter of Islamic religious obligation. The vendor mother subsequently signed a memorandum of agreement witnessed by the Mufti. The plaintiffs relied on both that document and an earlier oral agreement, together with alleged acts of part performance, as the basis for their specific performance claim.
Legal Issues
- Whether the memorandum of agreement signed on 30 September 2003 was procured by undue influence, such that it could not be enforced
- Whether the plaintiffs were knowingly concerned in any third-party undue influence exerted on the vendor mother, disentitling them to relief in equity
- Whether a binding oral contract for the sale of land was formed prior to formal exchange of contracts
- Whether the relevant statutory requirement for written evidence of a land sale contract (under the Conveyancing Act 1919) was satisfied, or whether acts of part performance took the matter outside that requirement
Decision
On undue influence and the memorandum of agreement: Barrett J found that the Mufti's conduct at the 30 September meeting constituted undue influence over the vendor mother. By invoking religious duty and Islamic precepts about oral promises, the Mufti placed pressure on her that went beyond mere moral persuasion. The court found this amounted to third-party undue influence vitiating her signature on the memorandum.
The court then considered whether the plaintiffs were "knowingly concerned" in that undue influence, which would disentitle them to enforce the memorandum. Barrett J held that the plaintiffs were indeed aware of the nature and likely effect of the Mufti's involvement. Rizwan had arranged the meeting and the Mufti's attendance, and the circumstances of how pressure was brought to bear meant the plaintiffs could not claim the benefit of the memorandum in equity. Accordingly, specific performance based on the memorandum was refused.
On the oral agreement: The court was not satisfied that any binding oral contract for sale had come into existence. Barrett J applied the well-established principle, reinforced by Gleeson CJ in Lezabar Pty Ltd v Hogan, that where parties proceed toward formal exchange of contracts in the ordinary conveyancing way, a court will not lightly infer they intended to be bound by an antecedent oral agreement. This consideration had become even stronger following the introduction of s.52A of the Conveyancing Act 1919, which imposed detailed legislative requirements on contracts for the sale of land.
On the facts, the parties had always contemplated a formal exchange of contracts. The purchasers' occupation of the property was referable to a licence arrangement in contemplation of a contract to be completed, not to any concluded sale agreement. The alleged acts of part performance were likewise acts under the licence, not under any contract for sale. The claim based on the oral agreement therefore failed.
Orders Made
- The plaintiffs' claims in the statement of claim were dismissed with costs.
Key Takeaways
- Third-party undue influence can vitiate a contractual document even where the party who benefits from that document did not themselves exert the pressure, provided they were knowingly concerned in the circumstances giving rise to the influence.
- Religious or moral authority invoked to pressure a party into honouring an alleged promise may constitute undue influence, even where the advice is framed as spiritual guidance rather than overt coercion.
- Where parties to a proposed land sale engage in ordinary conveyancing practice (including preparing and exchanging formal contracts), courts will apply a strong presumption that no legally binding oral contract was intended to arise beforehand, a presumption strengthened further by the statutory regulation of land sale contracts under the Conveyancing Act 1919.
- Acts of occupation and payment under a licence to occupy pending exchange of contracts do not readily constitute acts of part performance of a contract for sale; the acts must be referable to the alleged contract, not to a collateral arrangement.
- In refusing specific performance, the court applied the principle that a party who is knowingly concerned in undue influence exerted by a third party cannot obtain equitable relief on the strength of the document so procured.
Legislation and Cases Referenced
Legislation:
- Conveyancing Act 1919 (NSW), ss 52A, 54A
Cases:
- Allcard v Skinner (1887) LR 36 ChD 145
- Johnson v Buttress (1936) 56 CLR 113
- Blomley v Ryan (1956) 99 CLR 362
- Regent v Millett (1976) 133 CLR 679
- Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
- Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
- GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631
- Lezabar Pty Ltd v Hogan (1989) 4 BPR 9498
- Quek v Beggs (1990) 5 BPR 11,761
- Bullock v Lloyds Bank Ltd [1955] 1 Ch 317
- Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378
- Stivactas v Michaeletos (No 2) [1994] ANZ Conv R 242
- Actionstrength Ltd v International Glass Engineering IN.GL.EN Spa [2003] 2 AC 541
- Peter Warren Properties Pty Ltd v Jalvoran Pty Ltd [2004] NSWSC 1149
- Watkins v Coombes (1922) 30 CLR 180
- Mohtar v Mohtar (1988) LSJS 377
- Gingis v Mount Scopas Memorial College Ltd [1998] VSCA 49