Elite Realty Development

Elite Realty Development Pty Ltd v Sadek [2023] NSWCA 165
Court of Appeal of New South Wales
Payne, Mitchelmore, & Stern JJA
Duress – Afyouni and Sadek formed a joint venture to develop property in Maroubra – they incorporated Elite Realty Development Pty Ltd and Maroubra Road Development Pty Ltd – after a disagreement, Afyouni changed the settings to Elite’s bank accounts so that both he and Sadek had to consent to withdrawals – this caused problems with paying subcontractors – one of the subcontractors threatened Afyouni with a gun and demanded he unblock the bank account – Afyouni complied – Afyouni and Sadek then agreed to terminate the Maroubra joint venture, on the basis that Afyouni would relinquish his directorship and ownership of Maroubra Road Development and receive $700,000 – Sadek had also incorporated a separate company which bought properties at Matraville and Condell Park – Afyouni and Elite sued, alleging their entry into the termination agreement was procured by duress (the gun incident) and also alleged that the Matraville and Condell Park properties had been bought with joint venture funds – they also alleged that Sadek had improperly terminated another joint venture at Avoca – the primary judge found Sadek either procured the gun attack or acted in a common design with the attacker – however, Afyouni could not rescind the termination agreement because, although he had entered that agreement under duress, he later affirmed the agreement by performing it once the duress had ended – the primary judge also found that the purchases of the Matraville and Condell Park properties were funded with bank loans, were not intended to fall within the Maroubra joint venture, and were not bought with joint venture funds – the primary judge also found that Sadek had not terminated the Avoca joint venture – Afyouni and Elite appealed – held: Sadek and the other respondents had sufficiently pleaded their affirmation defence – Afyouni and the other appellants were on notice that Sadek relied on affirmation – an agreement is voidable if illegitimate pressure was applied by someone who intends to compel the person to enter into the agreement – it is not necessary for the will of the victim to be overborne; it is a matter of the will being deflected, not destroyed – the test for a plaintiff relying on duress is objective: was it reasonable for the person alleging duress to believe that the person engaging in the wrongful conduct would take the action foreshadowed? – affirmation may occur when the person under duress performs the voidable contract with knowledge of the circumstances after escaping from the duress and taking no steps to set aside the agreement – the primary judge did not err in finding that Afyouni was no longer under duress when performing the termination agreement – Afyouni’s post-traumatic stress disorder diagnosis did not constitute duress – the primary judge did not err in rejecting Afyouni’s evidence that he remained in fear of Sadek while performing the termination agreement – the primary judge did not err in finding that Afyouni had affirmed the termination agreement by accepting the $700,000 due to him under the agreement, by resigning his directorship of Maroubra Road Development, and by and transferring his shares – the primary judge had been correct to find that that the Matraville and Condell Park properties had not been bought with joint venture funds – the primary judge had not erred in finding that Sadek had not terminated the Avoca joint venture – Afyouni could not argue that Sadek’s conduct falling short of legal termination amounted to a breach of duty, as this was inconsistent with his case at first instance – appeal dismissed.
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