By Rebecca Mostyn -
Snapshot
- The recent Supreme Court decision of Jarjo v Patterson serves as a timely reminder of the many tribulations that can occur when acting for husband and wife clients.
- Practitioners should be vigilant where one spouse purportedly acts on behalf of the other spouse without a valid power of attorney.
- There are a number of considerations in establishing whether there was an authority to act and whether there was a principal/agent relationship between spouses in a property transaction.
The notion of whether a husband has actual authority to bind a wife to a contract, where the husband acted without her knowledge, highlights one of the common ethical dilemmas that practitioners face when acting for married clients. A common scenario, that many practitioners may be familiar with, occurs when a party strides into the office and states that they wish to provide instructions on behalf of their spouse. This can create various issues for practitioners in acting for the party or continuing to act when problems arise.
On the facts: was there authority?
The recent decision of Jarjo v Patterson [2022] NSWSC 1049 (‘Jarjo’) involved a property transaction where the husband entered into negotiations and signed a contract for sale of land on behalf of his wife, who was unaware of the sale taking place.
The property was owned by Mr and Ms Patterson (‘the vendors’). The Pattersons were married and owned the property as joint tenants. Mr Patterson was involved in all the sale negotiations. He signed the agency agreement and contract for sale of land without his wife’s knowledge. Mr Patterson also signed the documents as his wife, stating that he was reliant upon the advice of the agent who said ‘Don’t bother, you just sign it’. Mr Patterson stated he blindly followed this advice as he was sick of dealing with the agent.
The agent in the transaction, Mr Iskander, did not liaise with or have any contact with Ms Patterson throughout the entire process. The property had been actively on the market and had gone to auction in 2018, but the highest bid of $4.5 million did not meet the reserve price (at [8]). The property was passed in and failed to sell so marketing was ceased. To Ms Patterson’s knowledge, the property was taken off the market permanently from that point.
The issue of Mr Patterson signing on Ms Patterson’s behalf was exacerbated by the fact that Mr Iskander had signed as witness to the contract, which had two signatures for the vendors, and he exchanged the contracts without assistance from a legal representative. Ms Patterson did not want to sell the property and demanded that the sale be reversed. The purchasers commenced proceedings and sought a declaration that the contract was valid and binding, and an order for specific performance.
