Acemount Pty Ltd v Simple Icon Pty Ltd - [2013] WASC 212

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ACEMOUNT PTY LTD -v- SIMPLE ICON PTY LTD [2013] WASC 212

CORAM: McKECHNIE J

HEARD: 18, 20 - 22 MARCH 2013

DELIVERED : 30 MAY 2013

FILE NO/S: CIV 2269 of 2004

BETWEEN: ACEMOUNT PTY LTD
Plaintiff
AND
SIMPLE ICON PTY LTD
Defendant

Catchwords:

Agreement for purchase of land - Terms agreed - Parties to contract - Whether agreement varied - Breach of contract - Whether specific performance appropriate - Whether accounting appropriate - Turns on own facts

Legislation:

Nil

Result:

Plaintiff succeeds, specific performance and accounting ordered

Category: B

Representation:

Counsel:

Plaintiff: Mr D K Barker
Defendant: Ms L B Black

Solicitors:

Plaintiff: Chalmers Legal Studio Pty Ltd
Defendant: Zilkens & Co

Case(s) referred to in judgment(s):

Nil

McKECHNIE J:

Overview: What is this case about?

In 2002, two brothers‑in‑law, Arash Shakibaee and Hootan Golestani, agreed to develop land at 30 Jarrad Street, Cottesloe known as Vivian's Corner. Who the parties were and what was agreed as to the profit distribution is in contention between them even though each, together with Shiva Shakibaee, has a supposedly clear recollection of conversations.
As the trial progressed it became apparent that there was very little about the agreement in actual dispute between the parties. Arash Shakibaee and Mr Golestani agreed that Vivian's Corner would be developed and that Simple Icon Pty Ltd would be the vehicle for the development. Simple Icon Pty Ltd was a company controlled by Mr Golestani. They agreed Macquarie Bank would be approached to finance the project, but when Simple Icon and Mr Golestani's balance sheet and assets proved insufficient security for Macquarie Bank they agreed that Arash Shakibaee and his companies Laranna Pty Ltd and Acemount Pty Ltd would execute a deed of guarantee and cross‑collateralisation in respect of other projects including the Subiaco Palazzo project then being undertaken by Acemount. Mr Golestani accepts that the Vivian's Corner development was completed and that there should be an accounting to the other party. He asserts that the other party was Arash Shakibaee personally and that he never knew that Acemount was the contracting party. He and his wife Shiva Shakibaee, who is Arash Shakibaee's sister, say that in 2002 Arash Shakibaee was going through marriage dissolution with his then wife Karine and wished to hide assets from her proceedings in the Family Court. He repeatedly said that he was not sure whether the project would ultimately be in the name of Acemount, Laranna or Arash Shakibaee personally.
Arash Shakibaee on the other hand says that from the beginning it was made clear, and Mr Golestani knew, that the parties to the agreement were Acemount and Simple Icon. Alternatively, even if the agreement was evolving, no later than the approval for finance when the deed of cross‑collateralisation arose, Acemount, to Mr Golestani's knowledge, was the party to the Vivian's Corner development agreement.
Arash Shakibaee says that the arrangement was for Acemount to take 50% of the eventual profit of the Vivian's Corner development and 45% of the eventual profit would go to Simple Icon.
Mr Golestani says that the arrangement was that each contracting party would receive 45% of the eventual profit with the remaining 10% to be used for seed capital for future projects.
As part of the development plan for Vivian's Corner it was agreed that Acemount would manage the project and earn a fee for doing so. It was also agreed that Mr Golestani or Simple Icon would receive 45% of that fee. The difference is explained by Arash Shakibaee as reflecting the overall agreement and as a way for each party to earn income during the development; and by Mr Golestani as reflecting a retention either for seed capital or, as some documents prepared by Mr Anderson the accountant would suggest, office expenses. Mr Golestani insists that the management agreement is different from the earlier agreement with (whomever it was made) as to the percentage split of the eventual profit.
Matters came to an end between the parties on 19 May 2004 when Arash Shakibaee refused to sign papers for the Macquarie Bank varying the loan arrangement. He says that a variation was necessary because of the builder's delays and that when the papers came to be signed there were likely to be more delays and he did not wish to go back to the bank later for yet another variation. Mr Golestani says that Arash Shakibaee gave no reason but simply refused to sign the papers. He pleads that it was an implied term of the agreement that Arash Shakibaee and his entities would execute variations to the funding arrangements.
On the evening of 19 May 2004, Mr Golestani removed two computers from the office of Acemount. He says that he removed only one, that which he was using. However, I find that two computers were removed.
After 20 May 2004 the project proceeded to completion. The project was in default and Mr Golestani acted under the direction of Macquarie Bank. At some stage Mr Golestani decided that Simple Icon would retain a unit, Unit 14, from the project as part of its profit share. He says, but Arash Shakibaee denies, that this was an agreement they had. The unit has since been mortgaged and returns a rental income of about $90,000 per year which is used in part for the Golestanis' living expenses.
And so the parties come to this court to resolve their disputes, relationships within the family having now broken down completely.

The issues and the results

1.Did Arash Shakibaee and Mr Golestani agree to the development of Vivian's Corner through their respective companies Acemount and Simple Icon? Answer - yes.
2.What was the percentage of the profit to be split between them? Answer - at least 50/50.
3.Was there an agreement that Simple Icon could retain a unit as a part share of their profits? Answer - no.
4.Who was in breach of the agreement on 19 May 2004? Answer - Mr Golestani and Simple Icon.
5.Is Acemount entitled to have Simple Icon specifically perform the contract by selling Unit 14 and accounting for profit? Answer - yes.
6.Is Acemount entitled to an accounting by Simple Icon in respect of the Vivian's Corner development? Answer - yes.

The parties and witnesses

Arash Shakibaee is a property developer. He has always traded through the medium of a company.
Arash Shakibaee was married to Karine from 1994 to 2005 though he left the matrimonial home in 2001. During his marriage, the vehicle through which he traded was Laranna Pty Ltd as trustee for the Shakibaee Trading Trust.
Following the breakdown of his marriage, Arash Shakibaee was the sole director and shareholder of Acemount Pty Ltd registered on 27 June 2001. Shortly after its incorporation, Acemount traded under the business name Paradigm Development Studio.
Poya Shakibaee is Arash Shakibaee's brother. He has no interest in Acemount as shareholder, director or employee, but has worked with his brother Arash in property development and he is entitled to a share of the profits.
Mr Gary Anderson is an accountant who was, for a time, employed by both Mr Hootan Golestani and Arash Shakibaee. He has been responsible for the books of account of Acemount. He was involved in preparing accounts as part of the divorce proceedings between Arash Shakibaee and Karine.
Mrs Yvonne Servina commenced employment with Acemount in February 2002 and continued her employment with Paradigm Development Studio Pty Ltd, a company incorporated in 2007.
Mr Hootan Golestani is the sole shareholder and director of Simple Icon Pty Ltd, trustee for the Indent Trust.
Ms Shiva Shakibaee (Hootan Golestani's wife), is sister to Arash and Poya Shakibaee.

Introduction to the evidence

Previous developments

It was the custom for the developments to be given nicknames. Over the years, Arash Shakibaee, through his corporate vehicle, had been involved in a number of developments. Some of these had involved the Golestanis: Court Place, Subiaco; Squash Courts Leederville; Abbotsford Gate, West Leederville; Cloud Street, West Leederville.
Acemount's first development was Palazzo Subiaco.
The history of the prior developments involving the parties does not shed much light on the actual contractual nature of the Vivian's Corner development. What becomes clear from all sides is that there were differences of opinion that arose from time to time, including differences of opinion as to the share of profits. Nevertheless, those differences of opinion did not prevent the parties from continuing their relationship.

Vivian's Corner development

Quite how the development first came to notice is a matter of slight difference in the evidence of Mr Golestani and Arash Shakibaee, but the difference is immaterial.
Vivian's Corner was a deceased estate for sale on the corner of Railway Parade and Jarrad Street, Cottesloe.
It was agreed that the proposition should be explored. Poya and Arash Shakibaee did cash flow projections, one for a 12 strata lot development and another for a 15 strata lot development. Mr Nick Flavell, an employee with Macquarie Bank, was sent a copy of the cash flow development projections for the 12 strata lot development (Exhibit 3).
Macquarie Bank had supplied funding to Arash Shakibaee for other developments and was his banker.

The terms of the contract

The plaintiff pleads that there was an evolving oral contract between the parties and Mr Golestani knew that Acemount was the contracting party. Acemount relies on the conduct of the parties and documents to support the oral contract.
Apart from two issues, there is no dispute as to the terms of the agreement formed in 2002 to develop Vivian's Corner notwithstanding that it was an oral agreement. I accept that the Golestanis wanted the agreement reduced to writing in due course and that never happened. This was a point of contention.
The terms of the agreement not in dispute are:
•Simple Icon would purchase the land and pay the deposit;
•the project would be fully funded by Macquarie Bank;
•Acemount would receive a fee (from monies borrowed from Macquarie Bank) for project management;
•Hootan Golestani would be paid 45% of that fee for his contribution to the project development;
•the units would be sold, the bank repaid and the profits split.
The terms in contention are:
•whether Acemount was a contracting party;
•whether the agreed distribution of profits was 55% Acemount / 45% Simple Icon (Arash Shakibaee's position) or 45% equally with 10% to be used jointly for future developments as equal partners (Mr Golestani's position); and
•whether Simple Icon could keep a unit as a part share of its profit.

Matters affecting credibility

The witnesses to the oral contract, and in particular Arash Shakibaee and Mr Golestani, are giving evidence in 2013 of conversations which extended over some time in 2002 and 2003. Their witness statements were prepared in 2010 for an earlier hearing which did not take place, and even then eight years had passed. Their evidence was in the form of witness statements and all the parties were cross‑examined. Every witness presented as plausible and, except for comments shortly, apparently credible. I do not pass judgment on any witness solely on the basis of their demeanour in court.
Recollections fade over time and memories become unreliable, so I have searched through the subsequent documents and conduct to see if there is an echo to the original voices.

Mr Arash Shakibaee

From the whole of the evidence, including the documents and the evidence of Mr Gary Anderson, I conclude, contrary to Arash Shakibaee's denials, that there was a period in 2002 ‑ 2003 when he was trying to conceal his involvement in the Vivian's Corner development from Karine. This reflects adversely on his credibility to a degree. However, the evidence establishes that Arash Shakibaee was for a time, trying to conceal any interest in Vivian's Corner. He was not simply trying to conceal the involvement of Acemount or of himself or of Laranna, but that he had an interest. This was a forlorn effort in retrospect and abandoned in due course.
I have taken the effect of this attempt into account on Arash Shakibaee's credibility generally. It does not materially affect his credibility on the crucial issue as to who were the contracting parties. His evidence on that has been consistent. It accords with such documents that throw light on the issue. On the essential matters, his evidence finds support in other witnesses and in contemporary documents, especially the original offer and acceptance (Exhibit 4), and subsequently, the cross‑collateralisation documents.

Mr Hootan Golestani

It is the evidence of both Mr Golestani and his wife Shiva Shakibaee that Arash Shakibaee was trying to hide assets from his then wife. This is why Mr Golestani said in the Family Court proceedings that he did not know who the contracting party was - whether it was Arash Shakibaee, Acemount or Laranna. The witness statement is different from both his pleaded case and his evidence under cross‑examination that he thought the contracting party was Arash Shakibaee personally (ts 199). This change of position does adversely affect Mr Golestani's credibility. His explanation for the change is unconvincing. It relates directly to the issues.
Arash Shakibaee was persuasive as to why he used a corporate vehicle and why indeed he has always used a corporate vehicle for his property development ventures, a fact confirmed by Mr Anderson his accountant whose evidence I accept as neutral.
Although I accept that for a time Arash Shakibaee was trying to conceal his assets from his then wife (he later disclosed his interest (through Acemount in Vivian's Corner), it does not lead to the conclusion that he told Mr Golestani he did not know what entity he would use for the Vivian's Corner development. As I have said, Arash Shakibaee was attempting to conceal his interest in Vivian's Corner from Karine in any form, not his interest in a particular form. There was little reason to keep Mr Golestani in the dark as to which entity would be used by Arash Shakibaee. Mr Golestani, if called (as he was) in the Family Court proceedings, would be bound to tell that court of Arash Shakibaee's entitlement to a profit, whatever its source. Both Mr Golestani and Shiva Shakibaee were at pains to point out to Arash Shakibaee that they would not lie for him or deceive Karine.

Issue 1 - The agreement was with Acemount

Arash Shakibaee's evidence that Mr Golestani knew the entity is confirmed by the contract of sale for 30 Jarrad Street, Cottesloe on 3 May 2002 (exhibit 4):
WE the purchaser Acemount Pty Ltd and/or nominee of 3/180 Hampden Rd, Nedlands 6009 HEREBY OFFER TO PURCHASE.
Mr Golestani says that Arash Shakibaee was insistent he attend at the real estate agent's office to sign the offer because Arash Shakibaee did not want Karine to know. However, the offer was made on 24 April 2002 for $1,550,000 (Exhibit 4). That offer was not accepted. Arash Shakibaee, to Mr Golestani's knowledge, negotiated with the agent, eventually increasing the offer to $1,600,000 in the agent's office. This offer was accepted on 3 May 2002. If Arash Shakibaee was intent in having no document to link him to the development, a new offer in Simple Icon's name would have achieved that.
Mr Golestani's response:
At the point that we have that in hand if we sign it, we have a contract. If we go back and we ask for them to re-write it or if we reject it or in any form alter the document, we then are now exposed where they are well within their rights not to proceed (ts 177).
This makes little sense. The vendors do not have to proceed or accept any conditions until they agree a price. Why would Mr Golestani assume a vendor would back out if a new offer and acceptance, in the same terms, but with an agreed price, was presented?
Mr Golestani knew of both the offer and acceptance. There were a series of conditions and additions to the printed conditions including condition 10: 'The nominee is Simple Icon as Trustee for the Indent Trust'.
Mr Golestani says that he was unable to get to the office of the real estate agent for signing and this is why the contract is in the name of Acemount. Whether that be right or not is immaterial. He has conceded that he knew of the offer and its terms.
He therefore had knowledge that the contracting party was Acemount, with or without a nominee, and that Acemount was assuming the liabilities of the offeror until the nominee accepted nomination. The offer was made on 24 April 2002 and not accepted until 3 May 2002. While earlier discussions may have been vague as to whether Arash Shakibaee would use either Laranna (a vehicle used for some earlier developments) or Acemount (the vehicle used for the Subiaco Palazzo project) Mr Golestani knew that Arash Shakibaee had always entered into developments using a corporate vehicle. He knew that the company was Acemount.
When Acemount accepted $1,600,000 it did so with Mr Golestani's blessing:
You have now said in evidence that you were told by Arash that Acemount had signed it and you were also told by Arash that the offer had been rejected with a counter offer of $1.6 million?---Mm'hm.
Right. And that Acemount then in fact accepted the counteroffer of $1.6 million and initialled the contract?---Correct. ... I understood that Acemount was to be the purchaser as in a scenario where they had identified a nominee of Simple Icon, correct.
That was on the contract. All of that had been done?---Correct (ts 179).
Thereafter every document created confirmed the involvement of Acemount in the development, not only as project manager but also, in due course, as a signatory to the deed of cross‑collateralisation, a deed which had direct effect on Acemount, because it collateralised the Subiaco Palazzo development.
The Application for Planning Approval (Exhibit 94) to the Town of Cottesloe was signed on 18 June 2002 by Arash Shakibaee. It named Acemount as the owner, and nominated Hootan Golestani as the contact person along with his home and work numbers.
The plaintiff must establish its case on the balance of probabilities. Considered as a whole, the case that Acemount was a party to the contract is more probable than the contrary position taken by Mr Golestani.
I am quite satisfied, on the balance of probabilities, on this point. Hootan Golestani knew that Arash Shakibaee always used a corporate vehicle. He knew that Laranna had been previously used at the time of Arash's marriage. He knew about Acemount. He had taken part in discussions selecting the name Paradigm Development Studio. More particularly, he knew that the offer to purchase was in the name of Acemount, albeit that Simple Icon was the nominee of Acemount. Arash Shakibaee's evidence is clear that Acemount was the contracting party.
By contrast, to Arash Shakibaee's consistency, Mr Golestani's position has shifted to an extent, as I mentioned earlier, which adversely affects his credit. This became clear in the course of his cross‑examination where he claimed that it is only comparatively recently he has positively reached the view that the party with whom he contracted was Arash Shakibaee personally. Previously he has said he did not know whether it was Arash Shakibaee, Laranna or Acemount. This explanation is both convenient for him, as Acemount is the plaintiff, and implausible. This litigation has been in train for many years. In the Family Court proceedings, Hootan Golestani said he did not know which of the three was the contracting party. Now he says he does.

Issue 2 - What was the nature of the split of profits?

Arash Shakibaee's evidence is plausible and in keeping with the impression I formed of him as an astute and tough‑minded businessman. He insisted on a greater share of development profits because of his greater knowledge and involvement compared with that of Hootan Golestani. His rejection of the notion that 10% was to be seed capital is also plausible. In his view, the money belonged to Acemount under his control and he could use it as he wished.

On the other hand, Mr Golestani's evidence that, in view of their past relationships he insisted on an equal division of profits is also plausible. The change of arrangements on some occasions was the cause of rancour. His evidence that there was to be a retention of 10% finds some support in the accounts prepared by Mr Anderson over the period of the matrimonial dispute where he allocated 10% as office expenses.
I have taken account of Poya Shakibaee's evidence about a 55/45 split. I consider his recollection is too vague on this point to rely on (ts 146).
In one sense, the project management agreement with a split of 55%/45% might be seen to provide some support to Arash Shakibaee's position. However, I am satisfied that the project management agreement was separate from the development agreement. Its principal purpose was to provide a revenue stream to Acemount and to Mr Golestani. It does not necessarily follow that the arrangement as to share of income was the same as the arrangement as to share of profits.
The recollections of Arash Shakibaee and Mr Golestani both being equally plausible, I am not affirmatively persuaded that there was to be a 55%/45% share of profits. I am, however, satisfied there was to be at least a 50/50 sharing of profits. Mr Golestani has conceded as much.

Issue 3 - Was there an agreement that Simple Icon could retain a unit as part share of the profits

The defence pleads (par 2(4)(k) that in conversation in the around March 2002 'the Golestanis stated they would like to retain as part of their profit share one or more of the units in the development either to live in or as a long term investment because of the possible tax benefits' in so doing. It is further pleaded that Arash Shakibaee agreed, subject to conditions, that the bank and all external creditors had been paid out, and that a party who would benefit by such retention above their agreed profit share must make a cost adjustment to compensate the other party for same.
By way of counterclaim, it is pleaded if the court finds that the development agreement is between the plaintiff and the defendant, the defendant claims a declaration that it is a term of the development agreement that the defendant may elect to retain one or more units in the project; and that the defendant made a valid election to retain Unit 14 in the project.
The defendant claims that the unit had a value of $650,000 as agreed by the plaintiff and defendant or alternatively that it had a value of $700,000 less GST being the value of the unit at the conclusion of the project.
In evidence Mr Golestani said as part of the discussion with Arash Shakibaee that:
I want the choice to retain a part of the development.
Arash Shakibaee replied:
The bank won't accept you taking a unit because your sale is not what they refer to as 'arms-length' and they won't count it as a pre-sale. What you can do is try and avoid the sale of a unit that you want, but if you are not achieving the pre-sales required then you have to put everything on the market and then pick whatever is left that the bank will let you keep.
Mr Golestani then mentioned a conversation he had with Gary Anderson to which Arash Shakibaee said:
That's fine, we can deal with it when it comes up.
These were part of general discussions in relation to working together in the future and possibilities. They did not specifically relate to Vivian's Corner. As a result this evidence does not support a concluded agreement to retain a unit reached in March 2002 as pleaded.
Mr Golestani said that he had a meeting with Arash Shakibaee prior to the submission of the application for planning approval for Vivian's Corner during the course of which he said to Arash Shakibaee:
We really need to document the deal between us because I want to be sure your Family Court proceedings don't impact me and I don't want any trouble in keeping any of the units.
He says that Arash Shakibaee responded:
My Family Court case won't have any effect on you. I'll get a settlement out of her, (meaning Karine). Simple Icon as the principal and it can retain what it likes.
When he received drawings of the development from Mr Hillam, Mr Golestani says he said to Arash Shakibaee:
I'd like to keep that shop.
Arash was dismissive, and said 'Ooh, you are already taking shops when we haven't sold anything! It doesn't work that way. Like I told you, if and when the bank says Ok' (45).
Mr Golestani acknowledges that when he met Robin Schneider of McGees property, to be the selling agent, he told Mr Schneider there will be 15 units for sale and that they were all to be put on the market. He claims that he discussed this with Arash Shakibaee who said:
His job was to sell what we provide him. ... Agents need incentive to do the best job, and reducing his potential income was not an incentive (46 ‑ 47).
Mr Golestani gave further evidence of discussion involving his father's commercial property and whether he thought it was a good idea to keep a shop. He said:
Arash was very angry and said: '... You'll need some sales so it's "de‑risked" before the bank let's you put one aside' (48).
There was then a discussion between Mr Golestani, Arash and Poya Shakibaee about Anderson's advice.
Mr Golestani's evidence:
When the first offer came through for the smallest of commercial shops (I believe it was around August 2003) ... and also the one I was most interested in keeping
...
Arash said: 'I really think that we have not sold enough units in the development, and even though the offer is below what was the set price, I think you should approve of the sale'.
The sale of unit 6 was duly approved.
There were discussions in early 2003 with planning consultant, Mr Paul Kotsoglo, about converting Unit 14 into a large single shop. This ultimately happened. Mr Golestani gave evidence about conversations and negotiations with a Mr Woodward for the shop (Unit 14) and how he asserted that Arash raised the price from $550,000 plus GST to $650,000 plus GST.
According to Mr Golestani there followed a discussion about leaving the unit in Simple Icon's name:
Arash: 'If I say you can't have it then you can't have it. I've made my decision and that is final. I am not going let you and your Dad get all of the benefits of this deal and I get fucked up the ass!'
I said: 'Then that's a no from you, correct? You are not going to take the shop?'
Arash: 'Not unless we leave it in Simple Icon's name!'
I said: 'Then that's a NO! I can take the shop as we agreed in the beginning, and I will! I will not jointly own it with you or play your games, and I will not let you coerce me into some fandangled way of committing perjury like you yourself already have!'
After some further heated arguments Arash said: 'Fine. Fuck this. If you want one, you're going to have to raise it with Macquarie and you can ask them at the next meeting. You still think you can afford it?'
I said: 'Why, you going to raise the price again and again? Yeah, 650, I can afford it. Listen, there is the price, and the rest doesn't concern you.'
Arash: '(In a condescending tone) Fine, but the bank will say no anyway.'
I said: 'Well then, we ask the bank. If they say no then we wait. If we have to sell it before we have Macquarie Bank's confidence that the project is de-risked, then so be it. But, if they say it's OK then it's my choice. Anyway, they can't say no completely. They say no for now!'
Arash: 'Fine, but you can't afford it anyway so I don't see why we are wasting their time or ours.'
I said: 'We ask and see.'
I went further to state: 'At the next meeting with Nick and Tyler (Mackey, of Macquarie Bank) (Tyler) I am going to ask if I can keep the shop. I want to hear their opinion with my own ears, and this time I am committed. That's it, no alternative.'
That was the end of the conversation and I left the office.
To the best of my recollection, at the next meeting that we had with the guys from Macquarie and which I believe was one of our monthly Project Control Group (PCG) meetings, Nick and Tyler met with myself and Arash.
I said at the meeting: 'I am interested in retaining the smaller shop on Jarrad Street.'
Nick: 'I don't think we would have a problem with that.'
I remember that Tyler was taking some notes during the meeting, and Nick was as well.
Nick queried what I wanted to retain and why, to which I replied: 'The reason I want to retain this unit is so that I can keep it under the name of Simple Icon because I know there are tax benefits.'
Having heard what was said in the meeting, a short while after the meeting I contacted Robin, informed him that I was retaining the corner shop, Lot 14 and that it was no longer for sale.
I asked Robin if he would be willing to place 'For Lease' signs on the windows as we were getting closer and closer to the project being completed and that I wanted to see if there was any interest.
Robin arranged some signs and he introduced me to the leasing agent at McGees, Richard Crone.
I told them my intent and that I was going to enter into the process of acquiring the shop, so in the interim I wanted to see if there was any interest.
To the best of my knowledge this occurred prior to October 2003. From October I was out of the country until November of the same year.
Within a few days Arash confronted me at our office.
He was at the time in Poya's office, and as I entered he approached me and was at his most hostile.
He yelled expletives at me and was in a tirade over the fact that I had informed Robin that the shop was not to be sold.
This fight was to go on for some time.
Arash was also being threatening and claiming that he did not care about anything other that what he now wanted.
I said: 'All of the possible scenarios that you have put to me for you to retain your share in the development are not acceptable to me. I also will not let myself be coached about what I will say for you (in the Family Court proceedings). It's unethical, immoral and illegal.'
Arash: 'You're a fucking idiot. You should be looking after me for all that I've done for you. Who do you think you are, telling me that you're going to keep a shop and expect me to just do what you ask? Why should I do anything for anyone who's not helping me? Obviously, I'm going to have to review this whole thing to make sure that what's fair happens.'
I decided that the chances of this shop getting an offer prior to completion was probably limited, and that I could then address the issue once the development was completed.
I informed Robin that I would remove the 'For Lease.'
I never told Arash that I accepted his argument, I just did the actions necessary to calm things down.
In a conversation I had with Poya I said: 'I am only doing this because I am sick of the threats. I will not sign any offer by anyone. In the end it's mine and when push comes to shove he cannot tell me that I can't have it. I pay the amount as asked and it has no effect on him. He just wants to hurt me because I won't do his bidding.'
Shiva Shakibaee's evidence is less definite:
Arash didn't think it was fair for one party (i.e. us) to get a tax benefit.
He thought that if there were tax benefits, that he should get half of it.
Around this time Hootan and I had conversations with Arash during which we would talk about retaining a unit in the project, but I don't remember any one conversation we had that was specifically about not having agreed to keeping a unit.
During these various conversations, Arash would say things like, 'you can't take it (the unit) because it will get messy', and, 'you can't afford it', and also, 'Macquarie is never going to accept you taking it'.
On one occasion, Arash said: 'We'll see if it sells first.'
By the time, two of the small commercial units had sold, and the larger one remained. Arash said that the remaining large unit was now to be priced at $650,000.
...
Hootan came home that night and said that Macquarie Bank was absolutely fine with it.
...
Arash asked Hootan and me to hold a unit for us and also one for him, but without it being in his name.
Arash said he wanted us to keep the unit so that he could avoid tax, stamp duty and so that he could keep it away from Karine.
That evidence can be contrasted with Arash Shakibaee's evidence:
I recall that by the beginning of 2004 1 residential lot and 1 commercial lot remained unsold.
I recall having the following conversation with Hootan before May 2004:
(a)Hootan said to me something like:
i.I would like to keep the commercial lot.
(b)I recall replying something like:
i.I cannot consider this until all the development costs are known and we have some idea of the profit.
...
The commercial lot 14 remains unsold. Lot 14 has been leased. Document 109 in the Book of Documents Volume 3 is a true and correct copy of the profit and loss statement for Vivians Corner which shows the receipt of rented income in 2006. Simple Icon has not accounted for that rental income or for rental income in subsequent years.
Arash Shakibaee was asked about the arrangement in cross‑examination:
The only thing I recall, the first time he ever spoke to me about holding a unit was around the time when Hill Architects prepared some plans, preliminary plans, and we were contemplating in identifying which direction we'll take with the plans and he just said, 'Look, I think I want to keep one of the smaller commercial lots.'
...
I said I cannot give him any answer on that point. We need to wait till the future.
...
He raised it regularly. He raised the desire to keep a unit and I continuously said it's not the appropriate time to consider at this point.
...
It was not a matter of being commercial rates. It's a matter of being appropriate thing to do at the given time (ts 119).
BLACK, MS: But there was no disadvantage to the interest of Acemount if at the time that units were being sold, if Hootan or Simple Icon retained one of the units, as long as you got your appropriate percentage value of the unit that it would have otherwise got had it been sold on the commercial market. Made no difference to you?---There are big differences.
What?---First of all, when someone comes and says I want to purchase a property from you, they give you a 10 per cent deposit. Second of all, they sign a contract. Third of all, they have to - we make sure that they have the right capacity to purchase it. So none of that was proposed to us. Okay? So it is not a normal transaction, as you describe it.
What I - - -?---And I have to put to you that there were many instances that the prices were increasing in that period of time in property and there were changes to the commercial lots taking place in regards to how we were changing the design and further approvals were being seeked (sic) and the values were being increased on a regular basis. So it was not to the best interest of both parties to make that decision at that given time or to make that decision at all.
What I want to suggest is that ultimately you indicated to Hootan you didn't have an issue with him retaining a unit?---I did.
You did have an issue. Is that what you're saying?---Yes (ts 119 - 120).
The only people to give direct evidence about the agreement are Arash Shakibaee and Mr Golestani, although Shiva Shakibaee gives evidence of a conversation and of understandings from things that Mr Golestani had said to her.
The reasons that Arash Shakibaee advanced in cross‑examination (quoted above) as to why he was not happy with the proposal are persuasive as to his attitude.
The highest that Mr Golestani's evidence reaches is a reluctant acquiescence at one point by Arash Shakibaee, followed shortly thereafter by a rejection of the idea.
There is no evidence of formal approval by the Macquarie Bank. Even if 'Macquarie Bank was absolutely fine with it' or 'I don't think we would have a problem with that', there is no evidence of a formal approval.
I am unconvinced by Mr Golestani's explanation as to why he, in effect, lied to the real estate agent, Mr Schneider, telling him that 15 units were available for sale. In the circumstances, I consider that far from misleading Mr Schneider, Mr Golestani was accurately conveying to him the substance of the agreement for Vivian's Corner. All units would be sold and the profits divided.
I am far from persuaded on the balance of probabilities that there was ever an agreement for Simple Icon to retain one unit for its own use and benefit as part of the joint venture agreement, either as originally formed or as modified. In fact, I am affirmatively of the view that although it was something that Mr Golestani wanted, it was not something to which Arash Shakibaee ever agreed.
I find that Simple Icon continues to hold the property on its own behalf and on behalf of Acemount.
The original agreement was to develop Vivian's Corner and sell all the units. One unit has not yet been sold. It is necessary for a decree of specific performance to conclude the fruits of the agreement.

Issue 4 - Who breached the contract on 19 May 2004

The plaintiff pleads that on 19 May 2004 in breach of the terms of the agreement the defendant denied the plaintiff access to the property, removed all of the plaintiff's files and records from the project thereby preventing the plaintiff from controlling and managing the project and refused to act under the direction of the plaintiff thereafter. The plaintiff asserts that it has not been paid 55% of the balance of the management fee.
The defendant pleads that when it became obvious that the development was not going to be completed during the facility period granted by Macquarie Bank, the bank required an extension at a fee of $22,000. Arash Shakibaee arranged for the facility term to be extended by approximately two months. The documents were prepared. Everybody executed the documents except Arash Shakibaee, Acemount and Laranna Pty Ltd.
It is pleaded at par (10):
Notwithstanding requests by Hootan Golestani on behalf of the defendant, Arash Shakibaee refused to sign and refused to cause the plaintiff and Laranna Pty Ltd to sign the extension documents unless Hootan Golestani and Shiva Golestani agreed to comply with any direction from Arash Shakibaee towards the end of concealing Arash Shakibaee's interest in the Property and the development agreement from Arash Shakibaee's wife in Family Court proceedings which Hootan Golestani and Shiva Golestani refused to agree to do; and
It is further pleaded that it was the conduct of Arash Shakibaee and the plaintiff in refusing to execute the extension documents that was in breach of the terms of the agreement; or alternatively a repudiation of the management agreement. It is pleaded that the defendant was entitled to rely on the conduct to accept the repudiation and terminate the management agreement.
I find that Acemount did not terminate the agreement. Simple Icon, through Mr Golestani, acted in breach of the agreement by making off with the computers and files in dead of night and prevented Acemount from continuing the project management. This was a complete overreaction.
My reasons for this finding are as follows. Arash Shakibaee, I find, was committed to the Vivian's Corner development. It was in his interest that the project should proceed. Clearly there were problems with delays by the builder J‑Corp which in turn had an effect on the Macquarie Bank facility. Ultimately, there were, in fact, further delays beyond the two month extension. Moreover, as Mr Golestani accepted, it would take time for titles to issue. Arash Shakibaee's reasons for not signing were advanced in his witness statement and cross‑examination:
I recall in the conversation he said that he would not be paying the rest of the management fees and in fact he would not be giving us anything at all. Initially I considered that simply crazy talk.
Arash Shakibaee refused to sign it:
Because the delay in the process of getting the approval from Macquarie Bank - by the time that happened, at that similar time when the documentation was available from Macquarie Bank, we had received further reports from the builder because we had weekly meetings with the builder and it was identified that there will be further delays experienced than the delays that were communicated to the bank and which the bank had considered in their $20,000 adjustment of the fee (ts 133 - 134).

Arash Shakibaee said:
All three of us, [Poya, Hootan and I] would have discussed it. Poya did not suggest using it as a leverage.
[I] was planning to simply go back to Macquarie Bank and inform them of the latest schedule which had been communicated by J-Corp the builder which then would require them to go back to their head office and re-establish another fee.
...
They were happy. They understood that these things happen (ts 135).
[W]hat happened at that given time, the $20,000 - it must be clearly understood that the $20,000 is for moneys which the bank is out of pocket for a period of time which the bank is out of pocket which they would need to charge for to cover for the cost of money. In understanding that, once I understood that the construction delays were further than what we had communicated to the bank, which subsequently the bank had relied on in identifying the $20,000 difference in cost, now is no longer applicable. There is a lot bigger gap and time required for the bank to account for. You say they're only interested in their money and risk and so on but, no, but for me it's very important to communicate to the bank that we are under control and we can manage the project well and I don't want to sign a document and then the next day or the next week go back to them and say, 'Hey, by the way there's another four-week delay.' (ts 136)
You didn't update the bank. You didn't go and tell them that, did you? You just refused to sign the document?---No, Hootan that evening took everything, so we did communicate it to the bank subsequently but basically Hootan was saying that we don't have any rights at all (ts 136).
Arash Shakibaee agreed that $20,000 sounded fair enough. He refused to sign and told Mr Golestani why on 19 May 2004.
I think that was the last thing that tipped Hootan over a cliff, because of his inability to understand at all the issues.
[He] cannot control his emotion and deal with things in a commercial manner, so he just got aggressive and exploded and did something very stupid which I'm sure he's regretting now (ts 138 - 139).
Poya Shakibaee denied the allegation put to him:
I did not say to Arash:
Look, don't sign the extension to this $20,000. You and Hootan just need to sit down and try and sort this out between you (ts 149).
Mr Golestani's recollection is different:
No, he said that he refused to sign but not for those reasons.
But not for those reasons, so you're denying he said that to you?---Correct, other than the fact that he wouldn't sign
...
I had provided him the documents that did not have his signature, and it was at that point that he said that he would not sign it.
...
No, only on the 19th was when he said that he wouldn't sign.
He did not say the deed needed to be for a further period of time.
As at 19 May he expected that the builder would have completed construction of Vivian's Corner within that further one month. They gave an indication that they would but they did not do so. It took a further two months. They were three months behind approximately. They never made a comment that a different time would be needed. He was in regular contact with J‑Corp.
The events leading up to the formation of this document was an invitation by Macquarie Bank to meet with us where they expressed to us they did not believe that the project would be finished within that period of time. Myself, Arash and Poya were present. They said that from what they can see it's not going to be done and that they believe that an extension in the facility was required. The time line was discussed with them, was specifically discussed with them by Arash and Poya. They gave them the assurances that a one-month period would be enough. They had just as much ability to see the position of the builder - - -
When, in relation to the 19th - sorry, when in relation to 13 May, which is the date Macquarie transmits or sends the documents out - when in relation to 13 May do you say this meeting with Macquarie occurred?---I can only say just prior.
Well - - -?---Within a short period of time prior. I can't give you a date. But we were coming close to the completion of the project and that was our concern.
Yes. So you're saying that they raised with you concerns that the project may not be completed within the time by which the loan had to be repaid?---That was my understanding, yes.
And you met with them about that?---That's right, and that was something that they discussed.
I'm putting it to you that from the time of that meeting until 19 May 2004 it became apparent that the builder was not going to complete the project within a further period of one month?---I don't have any recollection of that but that was not any conversation - - -
It's not a view you had?---No. (ts 185).
As at 19 May 2004 Mr Golestani believed one month's extension was all that was required for the project to be completed. In the event he said there was practical completion from the builder in August 2004. In order to repay Macquarie he needed titles issued for settlement repayments and that was through the sale of the apartments.
The titles issued after August 2004.
As it turned out, conversations with Macquarie Bank about settlements appeared to work their way through till nearing the end of 2004. After 19 May 2004, Mr Golestani reached an understanding with Macquarie Bank for the funding to continue notwithstanding the deed wasn't signed.
Mr Golestani conceded he had discussions with Poya Shakibaee about his return but not Acemount's. The relationship with Arash Shakibaee as director of Acemount and the project management team had pretty much been totally frayed.
Mr Golestani explained that the result of Arash Shakibaee not signing was that Vivian's Corner went into default. Macquarie Bank took the project over. All his instructions were from Macquarie Bank and all his actions were reported to the bank. The bank did not appoint receivers and managers. Mr Golestani assisted them with the completion of the project. The project was not put into default until 10 September 2004.
I put to you again that between 19 May 2004, after having taken all of the documents from Acemount's office relating to Vivian's Corner, until that demand is served you had the control of the project?---It would appear that way.
And that during that period you did not invite Acemount to return and assist?---Correct. (ts 189 - 190).
My impression of Arash Shakibaee is that he was at the time well versed in both property development, its risks and reward and in financing such developments through a relationship with a bank, in this case Macquarie Bank. It should be remembered that it was he, through Laranna Pty Ltd and Acemount, who had a relationship with Macquarie Bank. He introduced Simple Icon to the bank for the Vivian's Corner development. It is unlikely in the extreme that he would have risked the Vivian's Corner development simply to use leverage against Mr Golestani to increase his share of the expected profit having regard to the fragile state at which the development was as at May 2004, owing to delays by the builder.
Although I am aware that Poya Shakibaee is still active in property development with his brother Arash Shakibaee, he did not appear to have ill‑will towards his sister, Shiva Shakibaee or Mr Golestani. While Arash Shakibaee said he does not trust his sister, Poya Shakibaee said he trusted and liked his sister. I accept Poya Shakibaee's evidence that Arash Shakibaee was concerned there might be other delays that had not been taken into account and wanted to avoid having to seek further extensions. While he cannot recall the exact conversation, his recollection confirms Arash Shakibaee's evidence as to the reason why he did not sign the documents.
I also accept Poya Shakibaee's evidence that he did not suggest to Arash Shakibaee that he use the threat of not signing the documents relating to the $20,000 penalty payment in order to apply leverage on Mr Golestani to sort out the issues with Arash Shakibaee.
As events were to show, the relationship with the Macquarie Bank was not one where the bank would have taken immediate steps against the project. In fact the bank let the project trade on, complete the development and sell the units. In the end, the bank was paid.
In my view, Arash Shakibaee is probably accurate when he said that in effect Mr Golestani's emotion got the better of him. Poya Shakibaee recalled that Mr Golestani was concerned that his father's property was provided by way of security. Mr Golestani became highly annoyed at the meeting and walked out.
Mr Golestani's actions in taking away the computers and files, in writing by a fax dated 30 May 2004 dismissing Acemount as project manager, and Arash Shakibaee as superintendent, effectively locked Acemount out of the development agreement (Exhibit 59).
Although Mr Golestani said only one computer was taken, I accept the evidence of Mrs Servina who worked as a secretary for Acemount; her computer contained all the documents relating to the Vivian's Corner development, together with emails sent and received. Her evidence was confirmed by Poya Shakibaee. Mrs Servina would well know whether she was unable to do work for a week or so because she lacked a computer.
Acemount did not accept the breach as a termination or repudiation of the contract as is clear from Arash Shakibaee's letter of 3 June 2004 (Exhibit 62).
The response to that letter by solicitors for Simple Icon delivered on 29 June 2004 (Exhibit 65) said:
The appointment was terminated with effect from 20 May 2004 for cause. The cause was not stated in the letter dated 30 May 2004 but included your company's mismanagement of the project.
There has been no evidence in the trial that Acemount mismanaged the project. Significantly, the response did not nominate Acemount's refusal to continue the guarantees as the cause for termination.
In any event, the termination was of the project management agreement. It had been agreed that Acemount would manage the project for a fee regarded as revenue and emanating from Macquarie Bank. That fee would be distributed 45% to Mr Golestani as it was until the events of 19 May 2004.

Issue 5 - Specific performance

On my findings, Simple Icon is in breach of the development agreement. Acemount has not accepted the breach as a termination of the agreement.
The agreement was to develop Vivian's Corner into 15 units, sell the units and split any profits between Acemount and Simple Icon.
Acemount is entitled to insist that Simple Icon, which holds Unit 14 for the benefit of both parties, completes its obligation and sell Unit 14.
The same effective result is reached if Acemount's entitlement is to damages for breach of contract.
It is not fair or right that Simple Icon should profit from its breach by a windfall increase in value of the unit. The fair measure of damages for the breach would be to assess damages as at the time of judgment.

Issue 6 - Account

With reluctance I order an accounting. In the manner this litigation has progressed, I foresee further bickering and dispute needlessly dragging out the already significant costs over what is, by Supreme Court standards, a relatively small claim. However, Acemount is entitled to an appropriate order.
Although Mr Golestani's evidence is that the agreement was with Arash Shakibaee, he accepts that he has never instructed his accountants to prepare accounts detailing what Arash Shakibaee is owed.
Mr Golestani accepts that Arash Shakibaee is owed money from the development agreement (ts 205). I have found that the contracting party is Acemount.
Among other issues to be considered in the accounting will be the expenses incurred as a result of the caveat being lodged.
Acemount lodged a caveat over Vivian's Corner to protect its interest.
The caveat was later withdrawn to allow settlement of Lot 6 to proceed.
I have found that Acemount was the contracting party. Lodgement of the caveat to protect its interest in Vivian's Corner development was reasonable. This is a matter to be taken into account.

Conclusion

The plaintiff's claim for declaration and consequential relief succeeds.
The counterclaim is dismissed.