The importance of legal advice – how we defended a $2-million claim on legal technicality
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Level 35, 31 Market Street, Sydney NSW 2000 Australia
Unit 1-6, 25/f, building 1, chengdu international financial center, no.1, section 3, hongxing road, jinjiang district, chengdu city, sichuan province, zip code 610021
The law is littered with traps of technicalities. A recent victory in the Supreme Court by Brightstone Legal showcases the importance of always consulting a lawyer when preparing legal agreements.
Our client was involved in a transaction where Mr. A had paid to Mr. B a sum of AU$2 million in exchange for a foreign currency of equal value. Following a series of unfortunate events, Mr. B was unable to repay Mr. A in the said foreign currency; neither was Mr. B in a position to return the AU$2 million that was originally paid to him.
An angry Mr. A approached our client and Mr. B and made our client sign a guarantee, where if Mr. B was unable to repay the AU$2 million by a certain date, our client would be liable for it on Mr. B’s behalf. Our client had, against his better judgment, signed the document.
Mr. B eventually went back on his words and Mr. A then came after our client for the repayment of the AU$2 million for which our client had signed and guaranteed to repay.
We won and we won on a legal technicality (and no, we are not even talking about duress).
The law of Australia governing contracts requires parties to the contract to have paid to each other ‘consdierations’, failing which the contract does not exist. ‘Consideration’ is legal speak for ‘price/opportunity cost/value given up’. In our client’s circumstances and as he had received no benefits whatsoever from Mr. A, it was decided that no consideration had passed from our client to Mr. A. Hence, no contract was formed.
However, the law of Australia nevertheless recognise written documents promising the performance of certain actions even if there are no ‘consdierations’. They are called ‘deeds’ and could be unilateral. ‘Deeds’ are governed by section 38 of the Conveyancing Act 1919 (NSW) in New South Wales and require the deed to be a) in writing; b) to be signed, sealed and delivered by the person signing it and c) to be witnessed by a person not a party to the deed.
The primary basis of our victory was on the second ground – the document that was signed by our client was neither ‘signed, sealed [nor] delivered’ by our client, nor was it witnessed – and we won a AU$2 million claim on a technicality that could have easily been avoided had Mr. A sought legal advice earlier.
Always seek legal advice
We deeply empathised with Mr. A’s situation. Nevertheless, he would have had a real and extremely strong claim against our client had he sought legal advice and prepared the deed properly.
His unwillingness to involve a lawyer fundamentally caused him to lose AU$2 million unnecessarily and this is classic example of how crucial lawyers are during a dispute.
For all dispute related enquiries, please contact us via the information below.