Part 1: Some contractual issues
This is the first of two articles looking at legal practice with non-English speaking clients. This article touches on issues of contract, and the concluding part looks at aspects of legal practice for those clients.
Despite the 2013 census statistic that 96.3% in our country speak English, legal disputes involving non-English speakers are increasingly common. In part this might be due to the entrepreneurial nature of many recently arriving New Zealanders and also to different norms as to contractual formalities. Anecdotes are not uncommon which recount substantial transactions – sometimes complex – with little or no documentation. Some of the issues have cross border aspects which add their own complexity.
Language difficulties create risk in business arrangements for those directly involved and third parties relying on those arrangements such as suppliers, lenders or otherwise. A common example is a real estate transaction which has been relied on to purchase another property or to spend the proceeds. There are also risks for those who advise in relation to these arrangements. Has their advice been directed to correctly understood facts or been understood by the recipient? Has the loan been properly secured so as to be efficiently and economically enforced? Managing such risks is necessary and challenging for the legal advisor.
How contract law treats claims of language difficulties
A contract is created when agreement is reached. Agreement is usually signified by the parties’ signature. The importance of third parties being able to rely on signatures is accepted legally and commercially.
In his lecture published in Essays on Contract (Oxford, 1990) as “Form and Substance in Legal Reasoning: The Case of Contract”, Professor Atiyah posed, with reference to the rule in L’Estrange v Graucob  2KB 394, the question of why signatures are, within established limits, regarded as conclusive. He answered:
“A signature is, and is widely recognised even by the general public as being a formal device, and its value would be greatly reduced if it could not be treated as a conclusive ground of contractual liability at least in all ordinary circumstances.”
Professor Atiyah added:
“However, what is, I think, less clear is what is the underlying reason of substance in this kind of situation. The usual explanation for holding a signature to be conclusively binding is that it must be taken to show that the party signing has agreed to the contents of the document; but another possible explanation is that the other party can be treated as having relied upon the signature. It thus may be a mistake to ask, as HLA Hart once asked, whether the signature is merely conclusive evidence of agreement, or whether it is itself a criterion of agreement.”
The law of contract has dealt with challenges to apparent agreement in two broad ways. One involves the signatory having exercised their will in agreeing and not being subject to undue influence by relevant others. The second is signatories claiming the document is not what they intended to sign: an issue since medieval times.
Lack of consent
Mikitasova v ASB Bank Ltd  NZHC 897
This was a case about the absence of consent due to undue influence impeaching the evidence of the signature. The legal advisor for a Russian couple and the bank did what she normally did and no issues were obvious. Viya Mikitasova sought an injunction to stop ASB from selling her property to enforce her guarantee of her husband’s borrowings. The lawyer acting gave evidence of advising her, without the husband in the room, that her property would be at risk and that she need not sign. The lawyer also obtained her signature on a waiver of independent advice. The lawyer was satisfied she had no difficulty comprehending what was discussed. This approach seemed compliant with the bank’s requirements but in due course may be the subject of evidence and debate as to usual practice. There was no evidence of discussion of the overall financial situation of the couple so it may not have been enough had she been taking will instructions or certifying a contracting out from the Property (Relationships) Act 1976.
Ms Mikitasova gave evidence she neither understood the detail nor the concept of such arrangements; including the waiver. Some Russians who knew her deposed as to her limited English. She claimed intimidation and control by her husband. The bank knew she was not commercially interested in the transaction, was a recent arrival from Russia and only dealt with the bank in her husband’s presence. The court was satisfied she had a seriously arguable case both of undue influence and that the bank could be imputed with knowledge of that influence.
The critical issue of whether the bank had done enough in the circumstances to counter its knowledge could not be determined in an interim injunction context with only affidavit evidence. The substantive hearing might touch on matters such as the extent of necessary disclosure of the principal debtor’s financial position and any need for Russian interpreters. Moore J made clear determinations that the balance of convenience favoured refusal of the orders. Damages, from the bank, should they ultimately be ordered, were an adequate remedy for Ms Mikitasova whereas it was unlikely she could pay the bank. Delay and lack of candour were also counted against her.
Non est factum
The second defence was developed for those who were illiterate or blind and so had to rely on others to read the document to them. The defence or doctrine is called the plea of non est factum or “it is not my deed”. This is distinct from defences relying on some aspect of the enforcer’s conduct such as misrepresentation or similar where it is essential there be some communication which is understood by the party raising it.
Frequently, when considering this defence, the court is faced with letting the signatory free of what appear to be binding obligations when others have relied on those same obligations. It seems, and the courts have found, it is more appropriate that the signatory should remain obligated. See Simon Connell, “Not My Doctrine? Finding a contract law explanation for non est factum” (2016) 47 VUWLR 245. The burden of proof lies heavily on the signatory seeking release to prove the document has a very different effect or character than intended, was not signed negligently and probably must also prove they were misled.
Non-English speakers signing documents in English will depend on others to explain the nature and effect of the document. Use of Google Translate is also common. Hurdles for those who don’t speak English will arise. The courts have found lack of knowledge of the language of the document sufficient to require the advice of others to understand it is sufficient to justify the court considering the defence. See Petelin v Cullen (1975) 132 CLR 355 at 11-12 and Marinovic v Marinovic HC Auckland CIV-2006-404-2447, 27 April 2007 at -.
Marinovic is interesting as the elderly couple were long term residents of New Zealand who had enjoyed a successful business career but had limitations reading English. Knowing the general nature and effect of the document but still signing without carefully ascertaining the contents will readily be found to be negligent and therefore binding on the signatory. In Zhao v Golden Garden Ltd  NZHC 2204 at  Bell AJ noted “In this area it is also necessary to bear in mind the caution expressed by Huggins V-P in Kincheng Banking Corporation v Chan Siu Kit  HKC 212 (Hong Kong Court of Appeal):
“Anyone who signs a document in a language he does not understand is necessarily negligent unless he has been actively misled as to its nature.”
In that case the guarantor signed a guarantee in English, was given an explanation in Cantonese but maintained he could only speak Mandarin. He raised no objection at the time and was found to be an unreliable witness.
A similar result is implicit in Mikitasova and likely in the United Kingdom, Australia (Bank of Western Australia Ltd v Luo  NSWSC 733 (6 July 2010) and the United States (Lauren E Miller, “Breaking the Language Barrier: The failure of the objective theory to promote fairness in language barrier contracting”, Indiana Law Review Vol 43: 175 note 7).
The surrounding evidence is weighed by the court. Commonly there will be conflict between the formal signed document and informal communication perhaps by texts or emails but also spoken with no record. Other business dealings by the signatory are considered. It is open to a signatory to lead evidence from their lawyer should they suggest there was a deficiency in the legal advice. Failure to do so without adequate explanation could lead to an inference that the evidence would not be helpful.
Next month I will look at the legal advisor dealing with a non-English speaking client to ensure they achieve the objects of the engagement and meet their obligations.
Alan Sorrell email@example.com is a barrister at Bankside Chambers, Auckland. He has acted in a wide range of contract, partnership and shareholder disputes, securities regulation issues, and real property, trust and estate matters.