Litigation and Dispute Resolution

Till debt do us part: what happens to a person’s debts when they die?

4 March, 2019

The Court of Appeal of New South Wales recently upheld a decision of the Supreme Court to set aside a deed under the Contracts Review Act 1980 (NSW) (the Act) on the basis that it was an unjust contract due to substantive and procedural unfairness. In the decision of Balagiannis v Balagiannis [2022] NSWCA 18, the Court of Appeal clarified that for the purposes of the Act courts should only consider the disadvantageous legal and practical effects of a contract on the party claiming relief.


By a Deed of Assignment in 2018, Nicolas Balagiannis assigned to his daughters Mary and Angelique Balagiannis, in equal shares and for no consideration, a debt of over $18.5 million owed to him by the NBF Trust, of which he is the principal.

Without the knowledge of the father, Nicolas Balagiannis, Mary and her husband, Dimitri Kentrotis, engaged lawyers to prepare the Deed of Assignment. They alleged they did so with the instructions of the father however the Court did not accept this evidence.  Shortly thereafter, Mary and Dimitri holidayed with Nicolas and waited until the last day of their trip before they confronted Nicolas with the Deed of the Assignment, explained it in simple terms and demanded he sign it immediately.

Nicolas complied and signed the Deed of Assignment on the spot. He did not seek legal advice, nor did he have the opportunity to do so given the sense of urgency that Dimitri and Mary created. Accordingly, Nick did not properly understand the effect of the Deed of Assignment, and the possible adverse consequences of assigning his entitlement to the $18.5 million debt, some of which came to pass when Mary and Angeliki took steps to enforce the debt.

At first instance, in the decision of In the matter of Reserve Hotels Pty Limited [2021] NSWSC 376, Justice Black of the Supreme Court of New South Wales held that the Deed of Assignment ought be set aside because it was unfair both in terms of the circumstances leading to its execution and in terms of its effect. See our previous article on the decision at first instance here.

Mary and Angeliki sought to appeal that decision.

Issues on Appeal

A contract may be unjust pursuant to section 7(1) of the Act due to the way it operates in relation to the claimant, the way in which it was made or both.

In determining whether a contract is unjust under section 9 of the Act, the Court must have regard to the public interest and to all the circumstances of the case, including consequences arising from compliance or non-compliance with any of the provisions of the contract.

The two key issues in the appeal were:

  1. Whether the primary judge erred in determining that the Deed was unjust due to its legal and practical consequences (substantive unfairness); and
  2. Whether the primary judge erred in determining that the Deed was unjust due to the circumstances under which it was prepared and signed (procedural unfairness).

Substantively unfair for whom?

The Court of Appeal held that the primary judge was correct to consider the consequences of the Deed of Assignment for Nicolas. A major consideration was Mary and Angelique’s ability to call on the debt on demand, which would likely force NBF Trust to sell a substantial asset to realise the debt. This was contrary to Nicolas’ desire to retain the assets and created the risk of a receiver being appointed by RHPL’s secured lender NAB.

However, the Court of Appeal found the primary judge erred in considering the consequences of the Deed of Assignment for Susan, specifically the ademption of a $6 million bequest to her under Nicolas’ and Susan’s mutual wills. The Court of Appeal emphasised that the power conferred by sections 7(1) and 9 of the Act is limited to consideration of the direct or indirect consequences of the contract in issue on the party claiming relief. Nonetheless, the primary judge’s decision that the contract was unjust was not materially affected by his consideration of its impact on Susan, because in any event his Honour had considered the consequences of the Deed of Assignment for Nicolas.

Under pressure – procedural unfairness in contract formation

The Court of Appeal found there was no error in the primary judge’s conclusions as to procedural unfairness in the preparation and execution of the Deed.

The appellants contended that the primary judge erred in finding that the Deed was unjust for reasons including that the assignment was made by an intelligent and sophisticated businessman, and was drafted in relatively straightforward terms. However, the Court of Appeal agreed with the primary judge’s conclusion that a combination of situational factors reduced the likelihood that Nicolas would take steps to protect his interests and seek independence advice before executing the deed.

Those factors included:

  • The lack of advance notice that the issue of assignment would be raised;
  • The informal family setting in which the execution of the Deed of Assignment occurred;
  • Nicolas’ regret and anxiety over his affair which led to tension with his family; and
  • The sense of urgency generated by the request to sign the Deed of Assignment immediately.

As discussed in our previous article, the decision is significant because it stands for the proposition that an individual’s business acumen stands for little in the context of an intrafamilial contract.

Key takeaways

The Court of Appeal’s decision confirms that substantive and procedurally unfair circumstances of a contract may entitle a party to seek relief under section 7 of the Act to have the contract set aside or varied.

When it comes to substantive unfairness, the courts will consider the highly disadvantageous legal and practical impacts of entry into the contract for the party claiming relief only.  The Court of Appeal’s decision is authority for the proposition that that inquiry being limited to the direct and indirect consequences of the challenged contract on the party claiming relief, and not the impacts on third parties.

On the other hand, in relation to procedural unfairness, the courts can have regard to the involvement of third parties in the circumstances leading to the formation of the contract. This includes the use of unfair tactics by third parties to pressure an individual into signing a contract without seeking legal advice that otherwise would have been obtained.

McCabes acted for Nicolas Balagiannis, Reserve Hotels Pty Ltd and Sydney Hotel Management Pty Ltd in the proceedings at first instance and on appeal, in which they were successful on all issues.

McCabes’ Litigation and Dispute Resolution team has a wealth of experience in advising and acting for its clients in relation to contractual disputes, including in relation to having contracts set aside. Please contact us if you require advice on any matters covered by this article.

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Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
29 August, 2023

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty.  The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.

Published by Leighton Hawkes
18 August, 2023
Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.

Published by Justin Pennay
10 August, 2023