Mistakes

Question 1

Shotter v Westpac Banking Corporation

Answer 1

Plaintiff’s business associate V had a company. Bank lent money to the company and required a guarantee from Plaintiff and V. Plaintiff guaranteed believing his guarantee was limited to the loan. The company defaulted and Bank made a claim on Plaintif. Plaintiff sought relief.
Held: No relief. Plaintiff’s mistake was of interpretation of the guarantee and fell within 6(2)(a)

Question 2

Paulger v Butland Industries Ltd

Answer 2

Company founded by Paulger owed more than $7m to creditors. Company entered into a contract to sell the business and Paulger expected creditors would be paid from proceeds. Paulger wrote to give assurance and gave personal guarantee. Before being sold, the company was put into receivership and creditors were not paid, so brought action against Paulger.
Held: No relief as the mistakes claimed were mistakes only in the interpretation of the contract.

Question 3

Criteria to relief

Answer 3

Criteria for obtaining relief under the act:
1. qualifying mistake
2. disproportionate exchange of value or benefit
3. no assumption of risk

Question 3

Qualifying mistakes s24(1)(a)

Answer 3

All the parties, or atleast one party, were influenced in their decision to enter into the contract by a ‘qualifying mistake’

Question 3

Available relief s28

Answer 3

The court has wide discretion to grant relief “as it thinks just” including
- validating the contract
- cancelling the contract
- varying the contract
- ordering compensation or restitution
- vesting, transferring or assigning any property to any party

Question 4

consideration factors to relief

Answer 4

in exercising discretion, the court shall have regard to the following:
- extent to which plaintiff caused the mistake s27
- general security of contractual relationship would be prejudiced s21(2)
- where the subject property has been disposed to a third party s31

Question 5

who is entitled to relief

Answer 5

1. a party to the contract or any person claiming through or under them s29
2. application for relief may be made by:
   - the party or person mentioned in 1
   - any other person where it is material to know whether relief under s28 will be granted s30

Question 6

Non est factum

Answer 6

“It is not my deed”
allows a person to avoid having to respect or honour a document that he/she signed. If successfully pleaded the document is rendered void.

Question 7

requirements for invoking the defence/Non est factum laid out in Saunders v Anglia Building Society

Answer 7

1. proponent must have signed the document believing it to have a particular effect
2. document must have a radically or fundamentally different effect from that which was believed. Class and character not just contents
3. Proponent’s mistaken belief must have resulted from erroneous explanation or description of the document given by someone else
4. proponent must have acted with all reasonable care in signing the document

Question 8

When non est factum not available

Answer 8

Lord Reid in Gallies v Lee, “the plea cannot be available to anyone who was content to sign without taking the trouble to find out at least the general effect of the document”

Question 9

Gallie v Lee

Answer 9

Elderly aunt intended to convey her house to her nephew for him to obtain a loan, on condition she would remain living in the house. The nephew’s friend who was helping asked the aunt to sign a deed of gift document to the nephew. She signed believing it was a deed or gift, having not read it. It actually conveyed the house the friend who then mortgaged the house and when he defaulted, they sought possession of the house.
Held: Plea of non est factum was unsuccessful as the difference was not sufficient (it was still a deed conveying ownership just to the wrong person); She also failed to check the name.

Question 10

Landzeal Group Ltd v Kyne

Answer 10

Plaintiff was a business that did vehicle graphics and employed defendant. Defendant later left the company and plaintiff filed restraint of trade against. Original contract had a missing page regarding pay so plaintiff provided a new copy and defendant signed without reading. Unbeknown, the new version included a restraint of trade clause. Defendant pleaded this was secretly added and thus not enforceable
Held: Plea succeeded as he was not careless in reading the second document..

Question 11

Kurth v McGavin

Answer 11

Alcoholic signed an agreement for sale and purchase of a property then regretted. Failed to avoid the contract on grounds of incapacity and non est factum as he understood the nature of the document he signed.

Question 12

Effect of non est factum

Answer 12

Where the plea of non est factum succeeds, the contract is rendered void.

Question 13

Onus of proof

Answer 13

The proponent who pleades non est factum as a defence has the onus to establish that the criteria of the doctrine are met. That party is usually the defendant.
- the plea can only rarely be established by a person of full capacity and requires clear and positive evidence.
- where a third party had already acquired rights of the subject-matter, the Court is reluctant to interfere and grant relief.