Petelin, who could not read English, signed a document believing it to be a receipt for $50. In fact, the document gave Cullen an option to purchase Petelin's land which Cullen then exercised. Petelin refused to sign a contract of sale and Cullen sought specific performance.
Petelin succeeded in his non est factum claim on appeal. The Court held that
(1) Petelin believed that what he had signed was merely a receipt;
(2) that Petelin was not careless in this respect (he could not read English and understanding the document was beyond his capacity) and
(3) even if he had been careless, Cullen was not an 'innocent person without knowledge or reason to doubt the validity of the appellant's signature' (at para 15).
On the doctrine of non est factum they noted the defence is 'available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing' and 'to those who through no fault of their own are unable to have any understanding of the purport of a particular document' (para 12). The party seeking to rely upon this doctrine has a heavy burden of proof and must show that
(1) he or she believed the document to be radically different from what it was; and
(2) as against innocent parties his or her failure to read and understand the document was not due to carelessness (in this context meaning that he or she failed to take 'reasonable precautions in ascertaining the character of [the] document before signing it').
Facts
Petelin owned land at Liverpool which Cullen wished to purchase. In 1969 Cullen sought an option to purchase the land and Cullen's agent, Mr Clements, handed Petelin a document 'a document in the form of a letter granting the option to purchase for a consideration of $50 and advised the appellant to take it and to consult a solicitor in regard to it. [Petelin] spoke little English and could not read English.' [para 2]. Petelin took the document away and later returned it, signed, but with portions excised. Upon handing over the document (which included an option to purchase) Mr Clements gave him a cheque for $50.
Six months later Cullen sought an extension of the option to purchase for a further six months. Mr Clements sent a letter to Mr Petelin together with a cheque for $50. The letter stated that it enclosed a cheque for $50 for a further six months extension of the option. Petelin later met Mr Clements in person and Mr Clements asked him to sign a document showing 'that you received $50'. Petelin signed. The document also stated that Petelin agreed to extend the option for six months. Petelin did not read the document and gave evidence to the Court that he could only read a little and 'the problem is I don't know what it means'.
Cullen then sought to exercise the option within the six month period and Petelin alleged that he had been deceived and there was no binding agreement between them for the option.
Background to High Court Proceedings
- Justice Helsham dismissed suit for specific performance by Cullen on the ground that Petelin had made out the defence of non est factum
- Helsham J held that Petelin signed the extension of the option believing it to be a receipt and after having been told by Mr Dlements that he 'must sign'. He further held that Petelin had not read the document nor was he capable of reading and understanding it.
- Court of Appeal of the Supreme Court of NSW: upheld appeal by Cullen
- The Court of Appeal noted that nowhere in his testimony did Petelin explicitly say that he believed that what he was signing was a receipt (he stated 'I can't say yes or no'). They further found that Petelin was 'careless in failing to take reasonable precautions to ascertain what was in the document' (para 359 CA and para 10 HC judgment)
Decision
The High Court upheld Petelin's appeal on the grounds of non est factum. In the course of its judgment the Court stated:
At para 11 (CLR p 359)
The importance which the law assigns to the act of signing and to the protection of innocent persons who rely upon a signature is readily discerned in the statement that the plea is one "which must necessarily be kept within narrow limits" (Muskham Finance Ltd. v. Howard (1963) 1 QB 904, at p 912 )
and at para 12 (CLR pp 359-60):
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 and 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 a defendant who seeks to establish the defence.
The Court noted, however, that when speaking of 'carelessness' in the context of non est factum, it does not refer to the 'tort of negligence but to a mere failure to take reasonable precautions in ascertaining the character of a document before signing it.' (para 14; CLR p 360).
The Court also noted that Justice Helsham, at first instance, had reached his finding that Petelin had understood that what he signed was a receipt 'based on a favourable view of the appellant's credibility, notwithstanding that his account of events involved some features which might have invited disbelief'. (para 9). The High Court considered that it was legitimate for Justice Helsham to conclude that Petelin had thought the document was merely a receipt.
Petelin v Cullen