Andrews v Kocalidis

IN THE COUNTY COURT OF VICTORIA

Revised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
COMMERCIAL

GENERAL DIVISION

Case No. CI-08-05458

JOHN ANDREWS	Plaintiff
v
ANDREW KOCALIDIS (aka KAY)	Defendant
and
ANDREW KOCALIDIS (aka KAY)	Plaintiff by Counterclaim
v
JOHN ANDREWS	Defendant by Counterclaim

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JUDGE:	HIS HONOUR JUDGE GINNANE
WHERE HELD:	Melbourne
DATE OF HEARING:	19-21, 24-25 August, 11 September, 12 October and 1-4, 7-8 December 2009
DATE OF JUDGMENT:	4 August 2010
CASE MAY BE CITED AS:	Andrews v Kocalidis
MEDIUM NEUTRAL CITATION:	[2010] VCC 0982

REASONS FOR JUDGMENT
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Catchwords: CONTRACT – joint venture – purchase by one participant of property – declaration of trust – fiduciary obligations – construction of joint venture property not commenced after four years – right of party to end joint venture – whether joint venture repudiated – distribution of joint venture property – unjust enrichment.

Representations about progress of joint venture – representations about participants’ interests in property – whether misleading or deceptive – Fair Trading Act 1999.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R L Moore	McNab, McNab & Starke
For the Defendant	Mr J J Isles	George M Livaditis
HIS HONOUR:

1          In November 2003 the plaintiff, John Andrews, and the defendant, Andrew Kocalidis (who is also known as and will be referred to in this judgment as “Andrew Kay”), had been friends for many years. Mr Andrews is a builder and Mr Kay is a Chartered Accountant.
2          On 15 November 2003, Mr Kay purchased a property on which a house was erected at 55 Foch Street, Box Hill South (“the property”) with the intention that he and Mr Andrews would demolish the house and construct town houses and sell them and make a profit. No development has occurred. Rather, the friendship has ended and Mr Andrews and Mr Kay are locked in litigation in which they each accuse the other of breach of contract and misleading and deceptive conduct.
3          Mr Kay remains the registered proprietor of the property. This litigation raises, as a central issue, the identification of the respective interests of Mr Andrews and Mr Kay in the property. That issue requires examination of the dealings between Mr Andrews and Mr Kay, commencing in the middle of 2003.

The Issues Raised by the Pleadings
4          Mr Andrews’ case is first, that he and Mr Kay entered into a joint venture. The joint venture is pleaded in three ways. The first and second ways are that in or about mid 2003, or alternatively, on 15 November 2003, he and Mr Kay agreed to develop a property or properties for mutual commercial benefit. The third version of the joint venture pleaded by Mr Andrews is that by about July 2005, he and Mr Kay had reached an implied joint venture agreement to develop three town houses on the property for mutual commercial benefit.
5          Mr Andrews contends that, pursuant to the joint venture agreement, the property was held on trust for the joint venture and for no other purpose, and was a joint venture asset.
6          Mr Andrews alleges that Mr Kay repudiated the joint venture agreement and breached fiduciary duties owed to him. This repudiation is said to have occurred on or about 17 July 2007. Mr Andrews contends that because of Mr Kay’s repudiation and breach of fiduciary duties, he has suffered loss and damage, and Mr Andrews will be unjustly enriched to his detriment if he retains the property.
7          Mr Andrews claims that he is entitled to 50 per cent of the increased value of the property, calculated at July 2007 because at that time, Mr Kay resiled from the joint venture and it should have been wound up and the property sold.
8 Mr Andrews also alleges that Mr Kay contravened s. 9 of the Fair Trading Act 1999 by making misleading or deceptive representations that Mr Andrews’ interest in the development of the property was secured and protected pursuant to the ‘Canterbury Trust Deed’.
9          Mr Kay contends that by an agreement between him and Mr Andrews made prior to 15 November 2003, they agreed to buy the property at Foch Street if it could be purchased at auction for less than $500,000, and develop it by constructing three town houses and then selling them for profit. It was a term of the agreement that Mr Andrews and Mr Kay would both have to agree on the continuation of the project, having regard to any changes in economic circumstances or any delay with the development.
10        Mr Kay then pleads that in or about June 2004, he and Mr Andrews agreed to vary the agreement so that Mr Andrews’ niece, would take Mr Andrews’ share of profits from the development. It is alleged that if there was an enforceable agreement, then, by reason of the variation, the only persons who were entitled to share in the profits of the acquisition were Mr Kay and his niece. Mr Kay then alleges that the purchase of the land was completed on 3 June 2004 and that he and his niece were the primary beneficiaries of the trust.
11        Mr Kay alleges that Mr Andrews breached the agreement by refusing to build the three town houses at a maximum cost of $10,000 per square, and would only build them for $17,000 per square, plus levies and fees. Mr Kay alleges that Mr Andrews breached the agreement by not commencing work building the town houses and not giving them priority over his other building work. Mr Andrews is said to have thereby repudiated the agreement, and Mr Kay contends that he accepted that repudiation on or about 14 July 2007.
12        Mr Kay states that if he had known that the agreement was not going to proceed he would have purchased a property in Mont Albert, which would have increased in value as well as removing the need for him to rent a property in which to live between 2003 and 2007.
13        Alternatively, Mr Kay alleges that in July 2007, he and Mr Andrews abandoned the development and the joint venture.
14        Mr Kay also alleges that Mr Andrews contravened the Fair Trading Act 1999 by making misleading or deceptive representations about a number of matters. These were: his intention to pay the costs of, and share profits from, the development equally; the cost of construction; the profit to be obtained; the priority that he would give to the construction work, and the completion date. He also alleges that Mr Andrews represented that by the time settlement of the purchase occurred, all permits and plans would be in place to allow building to commence and that all units would be constructed within eight months of settlement.
15        Mr Kay denied initially that he and Mr Andrews were joint venturers and described their relationship as an agreement. However, he argued that if the parties owed each other fiduciary obligations, Mr Andrews breached them by failing to act in good faith, by profiting at his expense, by failing to keep him informed, by not making full and fair disclosure of all aspects of the project and by failing to give priority to it.
16        Mr Kay also claims the sum of $15,000 which he loaned to Mr Andrews in 2005 and which has not been repaid.

Amendment of Pleadings and Witnesses
17 The trial commenced on 19 August 2009 and proceeded for the estimated five days, at which point it was adjourned until 11 September 2009. Thereafter, Mr Andrews obtained leave to amend his Statement of Claim. This necessitated the adjournment of the proceeding to 1 December 2009, when the trial continued until 8 December 2009, when judgment was reserved. Mr Andrews was recalled to give further evidence at the resumed evidence.
18 In addition to giving evidence themselves, both parties called a Valuer, Mr Cocks for Mr Andrews and Mr Brindley for Mr Kay. Mr Kay also called Mr Buchanan, a Quantity Surveyor, and Mr Clarke, a conveyancer and finance broker.

The Purchase of the Property
19        In 2003, Mr Andrews and Mr Kay discussed the possibility of jointly purchasing and developing a property for profit.
20        Mr Andrews’ evidence was that Mr Kay said that he would purchase a property using his own finance and Mr Andrews would obtain the planning permits and charge a 15 per cent builder’s margin on the cost of construction, which was to be included in the building costs.
21        Mr Kay’s evidence was that Mr Andrews suggested that they adopt a 50/50 arrangement whereby each would contribute 50 per cent of the capital, including the deposit and balance of the purchase price of the property and receive 50 per cent of the net return. Mr Kay said that Mr Andrews was to receive a working wage but not the equivalent of 15 per cent of construction costs. Mr Buchanan, a Quantity Surveyor, gave evidence that the common builder’s margin was 10 per cent.
22        Mr Kay gave evidence that he held three discussions with Mr Andrews about the purchase of the property. The third was the week before the auction. They discussed the development of three double-storey town houses of a minimum of 20 squares. The maximum cost of the town houses was to be $10,000 a square, and they were to have a good-quality finish. The cost of the town houses, based on 20 squares, would be $600,000. Mr Andrews told Mr Kay that the project would take eight months to complete and he would give the job priority. Mr Andrews would market the town houses, and they would fetch approximately $450,000 each, and both of them would achieve a profit of $80,000 to $100,000 before tax. Nothing was put in writing.
23        In about October 2003, after they had considered other properties, Mr Andrews informed Mr Kay of the Foch Street property and said that it was suitable for the construction of three town houses. It was a large block of about 951 square metres with a house on it and a brick garage, shed and carport abutting the eastern boundary. It was about twice the size of a standard suburban block.
24        The block backed onto a park. Although there were some issues, including with the roots of exotic trees located on a next-door property extending onto the property and no visible stormwater draining, these issues could be overcome.
25        Mr Andrews’ evidence was that Mr Kay told him that he could fund the purchase of the property and that Mr Andrews did not have to worry about finance, but was to focus on obtaining permits for the development for the subdivision.
26        Mr Kay said that it was agreed that he would meet Mr Andrews at the Foch Street property on 15 November 2003, fifteen minutes prior to the auction. However, that Mr Andrews rang him and advised him that he was running late and then, in a later telephone call, said that he would not be able to attend the auction. He said that when the hammer fell, leaving him the successful bidder, he was speaking to Mr Andrews on his mobile telephone.
27        Mr Andrews was in Adelaide visiting friends and stated that he had not promised to attend the auction. Whilst I accept that Mr Kay understood that he would be at the auction, I do not consider that Mr Andrews made a definite commitment to be there.
28        Mr Kay purchased the property in his own name for $495,000, with six months for settlement, and paid a deposit of $49,500. Later, on the auction day, he again spoke by telephone to Mr Andrews and told him of the purchase. Mr Andrews informed him that he did not have his half of the deposit. Mr Kay stated that while he was irritated and shocked at this news, he accepted that it would “all come out in the wash”1. This meant that the distribution of the profit that he anticipated from the venture would occur in accordance with the contributions that he and Mr Andrews had made to purchase the property.
29        Soon after 15 November 2003, Mr Andrews informed Mr Kay that he was not proposing to provide half of the purchase price. Mr Kay gave evidence that in a conversation on 15 March 2004, Mr Andrews told him that:
“We never borrowed the full construction amount because he didn’t or we didn’t need the money and these things were usually done by Construction Finance.”

30 Mr Kay and Mr Andrews then discussed obtaining construction finance, which Mr Kay understood would be obtained through a joint loan in both names, with both making interest repayments. However, Mr Kay ended up being the sole mortgagor and Mr Andrews did not make interest payments.
31 Finance to complete the purchase of the property had not been obtained by the settlement date of 13 May 2004 and the vendor of the property served a Rescission Notice. Ultimately, Mr Kay was able to obtain the balance of the

T (Transcript) 507, L13-17
purchase price from the Commonwealth Bank and settlement occurred on 3
June 2004, but he had to pay $5000 penalty interest for the delay.
The Canterbury Trust
32 On 3 June 2004, a Deed of Trust, entitled “The Canterbury Trust” (“the Trust”), was signed by Mr Carl Terauds, as settlor, and Mr Kay as trustee. The primary beneficiaries were Mr Kay and Ms Eleni Zafiropoulos, who was a niece of Mr Andrews, aged about fourteen years. The appointors under the Trust Deed were Mr Andrew Kay and Mr John Andrews, who was described as “Gianni Andreou”. The definition of general beneficiary included an uncle of a primary beneficiary and therefore Mr Andrews came within that definition. Advances from the Trust Fund could be made to him pursuant to clause 6.1.
33 Clause 2 of the Deed of Trust stated that:
“In consideration of the premises:

(a) the Settlor, as Settlor, hereby declares that the Trustee shall; and
(b) the Trustee hereby declare that they will henceforth –
stand possessed of the Trust Fund and the income thereof upon the trusts and with and subject to the powers and provisions hereinafter expressed concerning the same.”

34 Clause 1(29) defined “Trust Fund” to mean:
“The settled sum all moneys investments and property paid transferred to or accepted by the Trustee as additions to the Trust Fund held by them pursuant to this Deed the accumulations of income hereinafter directed or empowered to be made all accretions and additions thereto from any source and the investments and property from time to time representing that money investments property accumulations accretions and additions and without limiting the foregoing references to the Trust Fund includes any specific asset for the time being forming part of the Trust Fund.”

35 On 2 June 2004, Mr Kay sent an email to the office of Mr A Clarke, who had been retained to perform the conveyancing, stating:
“I forgot to advise that the property is being purchased by Andrew Kay for Canterbury Trust (not The Canterbury Trust, just Canterbury) on trust for the Canterbury Trust. Ashley would have already sent you an email on this and notifying the other side.
Thank you for booking settlement tomorrow …”2

36        Mr Andrews argued that his interest in the property was protected by the Trust and its creation supported his argument as to the terms on which the property was held.
37        The idea of establishing a trust originated in discussions between Mr Andrews and Mr Kay in or about May 2004. The purpose of the Trust was to reduce Mr Andrews’ liability to tax. Mr Andrews and Mr Kay intended that income from their property venture, including Mr Andrews’ working wage, could be distributed to Mr Andrews without being regarded as income. The Trust was intended to enable a means for payment to Mr Andrews of income derived from construction of the property, and to diminish or eliminate his liability to capital gains tax.
38        Mr Andrews gave evidence that:
“Andrew Kocalidis said to me, ‘We’ll put your niece Eleni, into the trust.’ I think she’s been placed as an appointor, from memory, or primary beneficiary. That way the profits would not directly link me as the builder, as the builder of the development and as a beneficiary for tax reasons and it would work out to my benefit and to minimise capital gains tax by including my niece as a beneficiary there.”3

39 The use of the name Gianni Andreou disguised Mr Andrews’ identity. Mr Andrews stated that he did not use that name and did not know why it had been used in the Trust Deed.
40 On 21 March 2006, Mr Kay sent an email to MMD Legal Services in which he stated that The Canterbury Trust was created around 21 May 2004 and that his instructions were that the primary beneficiaries “not name John Andrews who is my ‘partner’ in the trust, but that the terms should enable distributions to be made to him”. He said that MMD Legal Services had advised previously that the distribution was allowed but that Mr Andrews had received advice that

Exhibit E
T 68, L14-22
he could not receive a distribution. Mr Kay requested advice about whether he could make a trust distribution to Mr Andrews. MMD Legal Services replied, stating that they did not give legal advice, but in later emails said that they would “have [its] barrister look at it for you”.
41        Mr Kay disputed that the property was held pursuant to the Trust and argued that if the Trust protected Mr Andrews’ interest, then he should seek to enforce it. He relied on the fact that Mr Andrews’ niece, who was a beneficiary, had not been joined as a party to the proceedings and that no order had been sought against her.
42        Mr Andrews and Mr Kay were aware of the details and purpose of the Trust. Mr Kay was an accountant and played a role in the formation of the Trust. Mr Andrews appeared to be a capable businessman and the Trust was formed for his benefit.
43        The Trust was a means used to seek to minimise the payment of tax on income that Mr Andrews would receive from the joint venture. There is little evidence of substance that the parties intended the property to be subject to the Trust. After June 2004, little more was heard of the Trust until March 2006, when Mr Kay enquired whether Mr Andrews could receive a distribution of income from it. Mr Kay did not enter into the building contracts of August 2006 as trustee. The evidence does not establish that the property became Trust property and part of the Trust Fund in June 2004 or at any later time.
44        If that conclusion be incorrect, then the property was only part of the Trust Fund during the course of the joint venture. Once the joint venture was terminated, at the least Mr Kay’s intention that the property be subject to the Trust and part of the Trust Fund ended. At the end of the joint venture the property came to be distributed in accordance with the principles discussed below.
45        Mr Andrews did not seek any orders to enforce the Trust.
Planning Permission
46        On 26 November 2003, Mr Andrews engaged Di Mase Berry & Co Ltd to provide a survey of the land. It was completed by 9 December 2003. Again, on 26 November 2003, Mr Andrews contacted Mr A Marmarou of ‘A Better Design’, requesting that he consider building envelopes and unit layouts for the site. Mr Marmarou produced drawings by April 2004.
47        In 2004, Mr Andrews retained town planners, Colin Bowden & Associates Pty Ltd, to apply to the City of Whitehorse for a planning permit. They did so on 25 May 2004. A number of objections were lodged. The Council requested further copies of documents. On 5 August 2004, after 60 days had passed without a decision, the town planner applied to the Victorian Civil and Administrative Tribunal for review of the failure to grant a permit.
48        The VCAT hearing occurred in November 2004 and the application was successful, with a decision made to issue a permit subject to the imposition of many conditions. On 12 January 2005, the City of Whitehorse wrote to Andrews Constructions Industries Pty Ltd, stating that VCAT had directed it to issue the attached Planning Permit. There were twenty-three conditions.
49        As a result of the conditions, amendments had to be made to the original town planning plans. Mr Andrews arranged for ‘A Better Design’ to prepare the landscape plans which were required by Council. The amended plans were submitted to the Council, which approved them. The provision of these plans delayed the endorsement of the Planning Permit until 12 April 2005.
50        The Planning Permit was due to expire on 12 January 2007. An application on behalf of Mr Andrews to extend it was submitted on 8 February 2007 and it was renewed on 4 April 2007 with a new expiry date of 12 January 2011, which was later extended to 12 January 2012.
The Attempts to Obtain Finance for the Joint Venture
51        In December 2003, Mr Kay retained Mr A Clarke of Low Cost Conveyancing to act as conveyancer of the property. Soon after he was also retained to obtain finance to purchase the property. Mr A Clarke was both a conveyancer and a finance broker and had been involved in unit developments.
52        In April 2004, Mr Kay and Mr Clarke met twice at Mr Kay’s workplace in the city and discussed obtaining construction finance. Mr Andrews was present at the second meeting, which occurred on 20 or 21 April 2004, and Mr Clarke explained to him that he would have to provide personal financial information. Mr Kay and Mr Clarke’s evidence was that Mr Andrews was asked to provide the financial information. Mr Andrews disputed that he was to provide any further information, but says that if he was, then Mr Kay waived any such requirement by proceeding to obtain finance under his own name. I accept Mr Clarke’s evidence about the requests made of Mr Andrews for financial information.
53        On 19 April 2004, Mr Andrews, through his company, Andrew Construction Industries Pty Ltd, provided Mr Kay with a draft quotation for the building of three units with medium-quality fixtures and fittings for the sum of $640,000 inclusive of GST, and including all subdivision and development fees.
54        On 20 April 2004, Mr Kay sent the draft quotation to Mr Clarke, stating that it had been prepared by Mr Andrews, who:
“… is my 50% partner in Foch Street; he has numerous property investments himself and he will be joining us at 6.30 pm at the ground floor of the Melbourne Central Office Tower at 360 Elizabeth Street.”
55        Mr Clarke considered that the quotation did not contain sufficient information to obtain the loan. On 26 April 2004, he emailed Mr Kay, stating:
“Hit a couple of hurdles with the finance.
Westpac won’t do it.
. . .
I am trying for a pre-approval first so as not to waste time with the full building contract.
I am trying with the Commonwealth Bank, but they won’t accept the utility bills as Id. I am therefore short. Do you have another credit card apart from the ones you gave me … .
I could use a quote for the building contracts though.
This would be on a letter head from the builder stating the total cost as being $1,048,058.00 for the construction and all fittings for the 3 units. The bank won’t hand over the construction money until the land is subdivided. It is possible that they also won’t hand over more than 80 per cent of the cost of the land minus costs at settlement of the land. I won’t know until they make their final position known to me.
If this fails with the CBA it will be extremely difficult for me to get a loan for you.
The problem is that the deal is bordering on a commercial venture (as far as the banks are looking at it) which opens up a whole different can of worms. 70% lends plus full financial records etc
Worst scenario is we will need John’s full financial information, including
I.D. and put him in on the loan.
Another scenario is to have the land loan only, which I can get easily at this stage, however more than 80% of the land cost for you would be hard.
…”
56        Later, on 26 April 2004, Mr Kay forwarded to Mr Clarke an almost identically worded quotation to that of 19 April 2004, but which gave a price of $1,048.538 which was slightly above the quote that Mr Clarke had requested. Mr Kay stated:
“John has already emailed the attached to you. Please determine at the
earliest time how CBA reacts.
Also, if CBA accepts, then interest rate & bank fees etc. c.f. Westpac.
We get the other 10%, i.e. $50K, to bring it up to 20%, plus the $34k or so we need for settlement, plus the moneys for subdivision. So I think your ‘Another scenario is to have the land loan only’ is viable and has little practical impact. If CBA rejects and we travel down this path, then the financing should be with either CBA or Westpac, assuming costs are comparable, depending on who is more certain to approve the development once subdivision occurs – or we could break the units between 2 or 3 financiers. From a time perspective until 15th May, this may also be the safest way to go in view of ‘which I can get easily at this stage’.
I like the present structure and idea behind financing the development, so we want to progress down this path with either CBA or Westpac. I am not keen on the ‘commercial venture 70%’ etc, nor ‘Worst scenario is we will need John’s full financial information’.”
57        The only difference between the two quotations, apart from the significant increase in the price, was that the second quotation included the words “to a high standard of finish and fittings”. Mr Clarke said that the figure of $1,048,538.00 that he had sought was the retail value of the development, and that he needed the retail value to give to the banks for a proper appraisal. The banks would lend 80 per cent. They were only interested in the retail value.
58        It was put to Mr Andrews by counsel for Mr Kay that this was not a genuine quotation, but he denied this, and said he was required to give a quotation to Mr A Clarke for that sum and had been so requested by Mr Kay.4
59        Mr Kay gave evidence that Mr Clarke had advised them to “gross up the value to get sufficient money for the construction finance plus the interest”5. Mr Clarke was called on behalf of Mr Kay and presented as a witness of truth. No suggestion of his involvement in false quotations was made and I make no such findings. I accept the truth of his evidence.
60        After much discussion about the loan, Mr Clarke was instructed by Mr Kay that it was to be in his name, because they were not able to obtain Mr Andrews’ financial information and working plans. However, the arrangement between Mr Andrews and Mr Kay was of a 50/50 share of expenses and profits.
61        In May 2005, Mr Clarke submitted loan applications in Mr Kay’s name to the Commonwealth, Colonial and Westpac Banks. He stated that the loan applications had been delayed, because he could not obtain the information that he required from Mr Andrews. Mr Clarke stated that an average turnaround for a loan application was seven to ten days, provided that it was accompanied by the necessary financial information. The bank required

T251
T 538
proper building contracts and working plans. He did not receive the
documents so he changed the loan to a ‘land only’ loan application.
62        Mr Kay gave evidence that he was paying loan repayments of $2,400 per month. Mr Kay stated that he had asked Mr Andrews for contributions to the loan repayments on a number of occasions, including in late 2004 or early 2005, when he was a passenger in Mr Andrews’ car in South Yarra when he told Mr Andrews that the interest payments were crippling him and that he could not continue carrying the burden. Mr Andrews replied that he would send Mr Kay the invoices connected with the development that he had paid, but that he never did. Mr Andrews denied that such a conversation occurred. He said that Mr Kay was adamant that he wanted to “take out” or obtain the construction finance. He said that Mr Kay told him: “Look, I’m very busy at work and until we sort out the finance or until I sort out the finance – we can’t do anything on it.”6
63        On 21 July 2005, Mr Andrews provided a further quotation for the construction of three town houses in the sum of $825,000. He stated that this quotation included a higher quality of work than the previous quotation and took account of the conditions on the Planning Permit and was a genuine quotation. Mr Clarke said that it was a legitimate and genuine quotation. This was the quotation that went to Westpac.
64        Mr Buchanan, a Quantity Surveyor called by the defendant, did not accept that the planning conditions or any increase in quality justified the increase price quoted.
65        Mr Kay gave evidence that the quotation for $825,000 was not genuine and was a means of inflating the true contract price of $660,000 so that the bank would lend 100 per cent of the actual contract price. He said that the
T 366
$825,000 quotation was necessary in order to obtain 80 per cent, which was $660,000. The amount of $660,000 included the $600,000 construction cost and $60,000 interest. Mr Kay said:
“It is the real fake. It is the real fake because it is a fake that was going to go to the bank. So out of all the quotes this was the real McCoy. The others were training runs.”7
66        Mr Kay said that it was the real fake because Mr Andrews had agreed to construct the town houses for $600,000. Despite this, Mr Kay forwarded the quotation to Mr Clarke. Mr Clarke’s evidence was that he understood this to be a legitimate and genuine quotation.
67        I have some doubts about the quotation. The quotation figure of $660,000 is 80 per cent of the amount of $825,000. However, I am not persuaded that the quotation of July 2005 was not genuine. It included items additional to those contained in the original quote and Mr Andrews’ evidence was that it responded to the conditions attached to the Planning Permit. The amount of the quotation correlates, within a few thousand dollars, to the amount of the building contracts entered into in August 2006. I am also influenced to this conclusion by Mr Clarke’s evidence.
68        Mr Clarke continued discussions with Westpac to obtain the necessary loans.
69        On 20 September 2005, Mr Kay emailed Mr Clarke asking about the progress of the Westpac application and stating that further delays were likely to mean scrapping plans to commence in 2005 and Mr Andrews having to accept other jobs until early 2006.
70        On 25 September 2005, Mr Clarke stated that the loan had been revamped. Westpac had given loan approval to refinance the purchase of the property. The first stage was the refinance of the mortgage of property by Westpac, which had been set up as 80 per cent of a loan of $595,000.00, i.e., the sum
T 924 and T 1090
of $476,000.00, comprising $396,000.00 to pay out the CBA loan and $80,000.00 remaining. He said that the total loan for the refinance and construction was $1,136,000 which was 80 per cent of the total value of $1,420,000, which in turn was a combination of $595,000 relating to the purchase of the property and $825,000 relating to the construction. That latter figure was the amount of the quotation of 21 July 2005. Mr Clarke stated that to be unconditionally approved for the construction stage he would need plans and permits for each unit and a separate building contract for each property.
71        In an email of 26 September 2005 to Mr Kay, Mr Andrews argued that subdivision could not occur until construction was well underway. He was critical of Mr Clarke’s approach to obtaining finance. He also stated:
“Please let me know as this is getting more complicated and more expensive by the minute, as time is of the essence and [we] are wasting a lot of time and money. It is three months to Christmas and I was hoping that we would’ve had the units up to lock-up stage, so we could start marketing them in Oct/Nov which are the best months for real estate and overseas Asian buyers are looking at investing in accommodation for the next school term i.e. Feb/March 06. We have also missed out on at least five months of building time, considering that we decided that we were going to go ahead with the development back in May this year – 4 months ago. I don’t have to remind you of our holding costs. When do you think we should start building as we need to put a plan/strategy in place? I am not prepared to fork out any more money (will need around $15k to $20k) towards plans, engineering etc for building permits, until we at least have loan approval and have strategy in place”.
72        Mr Andrews attributed delays to the fact that Mr Kay was busy with work in late 2005 and early 2006 and was on occasion interstate. Mr Kay denied that this was a cause of delays.
73        On 12 October 2005, Mr Clarke received notification of pre-approval for a loan from Westpac Bank of $660,000, which was 80 per cent of the retail cost as per the July quotation. Westpac required a valuation, plans and specifications. The land did not have to be subdivided. In Mr Clarke’s experience, plans were normally provided by the builder within six weeks. These plans required sufficient detail to enable a builder to commence construction.
74        On 19 October 2005, Westpac notified Mr Kay of pre-approval of two further loans totalling $476,000.00 which related to the refinancing of the purchase price of the Foch Street property.
75        These loans were not accepted and were allowed to lapse.
76        On 17 October 2005, Mr Kay was made redundant in his employment with Placer Dome.
77        On 27 January 2006, Mr Clarke sent an email to Mr Kay enquiring how things were progressing. Mr Kay forwarded this email to Mr Andrews, who replied “say no more mate. It will be definitely done this week end”.
78        On 29 March 2006, Mr Kay emailed Mr Clarke, stating that he should receive the working plans and new contracts over the next couple of days and that he was hopeful that they could activate the old loan. On 4 May 2006, he emailed Mr Clarke, stating that he still had not received the working plans from Mr Andrews and that he was concerned that the longer things went, the “more Westpac will want to redo everything”.
79        On 29 August 2006, Mr Andrews and Mr Clarke signed building contracts for the construction of three town houses for a total of $825,000. The contracts were made between Mr Andrews as builder and Mr Kay as owner. They were in the form of the Master Builders Association of Victoria HC-5 Edition 3-20 and were for the construction of two-storey brick veneer town houses and garages. The anticipated commencement date of construction was 16 October 2006 and the total construction period was 306 days, with completion in August 2007. The individual contract prices for the town houses were $290,000, $240,000 and $295,000. The contract prices included Mr Andrews’ 15 per cent margin.
80        On 6 September 2006, Mr Kay emailed to Mr Clarke:
“This thing is back on so hopefully we can pick up where we left it with Westpac. Conditional approval tomorrow $50K + $426K + $660K = $1,136K.
Assuming you are still interested in doing this financial deal, could you please provide the advice below.
Action Items
John Andrews has now come through with individual contracts and some further design drawings as attached.
John appears ready now to proceed with the development, having
cleared all his backlog work.
I don’t know if these drawings (in folder ‘Archie Marmarou’) satisfy ‘full building plans and specifications’. John advises that this is all we need to start construction. Please peruse and advise whether this satisfies the further details Westpac requested. John has advised that the engineering plans are a week away.
The three contracts have a common ‘General conditions’ and therefore only one is attached, with a separate appendix representing each unit in the attached. Units 1 to 3 have a construction cost of $290K, $245K and $295K respectively totalling $830,000. The three contracts are otherwise identical i.e. anticipated start of 15 Oct 06 lasting 306 days, with 6 instalments commencing with 5% and ending with 10%. The ‘specifications’ are at 21st July 2005 (clause 6 in each appendix), ‘plans’ as of March 05 (clause 7), and there is attached my signature dated 29 August 05.
Ashley, please advise whether the contracts and plans would have satisfied Westpac’s needs if we had delivered these to Westpac a year ago.
Please advise what further information Westpac would now need e.g. current mortgage statement, plus my personal tax return for 2005 only, or also for 2006.
Please advise whether Westpac can pick up this application where we left it, or instead Westpac have since shredded everything we provided and has no corporate memory of this venture. I would suspect that the people you would be dealing with now have also changed.”
81        These emails lead to the conclusion that Mr Kay received plans which Mr Andrews regarded as working plans in about September 2006. Mr Andrews’ case was that the plans had been provided in November 2005. The evidence does not support that contention. Mr Andrews’ evidence does not explain the delay in the delivery of the plans. It was suggested that Mr Kay could have approached Mr Marmarou and obtained them, but it was Mr Andrews’ task to arrange for their preparation and delivery. His failure to do so in a timely manner, and Mr Kay’s failure to terminate the joint venture in return is indicative of how both men were willing to let the project drift. The explanation for that may be Mr Andrews’ involvement in other work and Mr Kay’s work commitments which required some interstate travel. Whatever the reason, there was no great urgency to complete the project brought to bear by either party.
82        In September 2006, Mr Andrews approached another lender, Chocolate Home Loans, about obtaining finance for the project and was informed that it was confident that it could find a suitable lender with competitive interest rates. However, nothing became of that.
83        On 30 March 2007, Westpac wrote to Mr Andrews, stating:
“We’re pleased to update you on the progress of the loan for the owner(s)
Andrew Kay.
The next stage requires that you provide the owner(s) or directly to us,

the following documents so that we can complete the processing:

ƒ confirmation of council approval in the form of a letter, or a stamp
on the building plans;
ƒ a copy of your Builder’s Risk Insurance policy, covering the
property during its construction through to completion.”

84        Mr Andrews stated that the working drawings were prepared and that he needed to obtain the engineering drawings, building insurance and building permits.
85        The Westpac loan was finally approved on 29 June 2007 for $870,000, of which $577,572.80 remained to be drawn. The sum of $870,000 was 60 per cent of the development value of $1,450,000. Westpac had reduced its land to value ratio to 60 per cent.
86        This loan gave Mr Kay $870,000 to discharge a debt of $346,000 to the Commonwealth Bank, and $524,000 towards the cost of construction of $825,000.
87        The tenants occupying the Foch Street house had vacated the premises in early 2007.
88        Mr Andrews stated that once he received a Westpac letter indicating that finance had been approved, in about May or June 2007 he commenced to obtain quotations for the demolition of the house and disconnecting of services and spoke to his structural engineer to finalise the structural and drainage plans. The building permit had yet to be obtained. Mr Andrews estimated that it would take six weeks to prepare the documentation required to obtain it, including engineering, structural and drainage works drawings, working drawings and building insurance.
Meeting in July 2007
89        On 12 July 2007, Mr Kay and Mr Andrews met for about two hours in the evening. Mr Andrews disputed that a meeting occurred on that date, because it was his birthday and consequently he was unlikely to have taken part in the meeting that evening, but the evidence supports the conclusion that he did. Mr Kay said that Mr Andrews gave him a CD with working drawings for the project and a costing document.8
90        The costing document showed a total building cost for the three town houses of $821,592.00. Mr Kay said that this was a lot more money than he expected. They discussed possible changes to the plans but nothing that reduced the price. Mr Kay gave evidence that he told Mr Andrews that finance was not available to meet that cost.9 The Westpac loan provided construction finance of $580,000 and he could provide $80,000 from his personal funds, totalling $660,000, which was the sum of the original quotation.
91        Mr Andrews however maintained that the price was $821,592. He told Mr Kay

See Exhibits 3 and 4
T 579, L23
that there were definite signs that the housing market was strong, that he was very confident of pre-selling the town houses and that he already had an offer in the vicinity of $620,000 or $640,000 for one of them. He stated that they discussed keeping the middle unit for a year, even the possibility of Mr Kay living in it. He stated that he told Mr Kay that even if the cost price was $1.5 million, sales of about $1.8 million would be achieved so there was still plenty of profit margin.
92        Mr Kay did not accept the sale prices that Mr Andrews suggested and considered that even if the town houses were sold for $600,000, the net profit would be marginal. Mr Kay’s calculations were based on a building price of $860,000, which included levies, plus the purchase price of the property, interest and stamp duty of $550,000 plus additional interest to be incurred prior to the completion of the project. These sums totalled $1,560,000.
93        Mr Kay said that even if sales realised $1.8 million, that the project was marginal because, based on, inter alia, the time it had taken Mr Andrews to carry out the extension work for Mr Kay’s brother, the building construction might take longer than Mr Andrews had estimated.
94        Mr Kay’s brother’s project was a ten-month project that was scheduled to be completed in June 2007 pursuant to a contract dated 12 July 2006, but was not completed until April 2008.10
95        On 14 July 2007, Mr Kay sent Mr Andrews an email, stating:
“As discussed today, based on the prices below on the total back-of-an- envelope, $1,560,000 costs were discussed on Thursday night, Foch St becomes a very marginal situation. And you yourself said you are not prepared to proceed on a break-even prospect, as this was never the intention. So please don’t forget to ensure no further disconnections occur and certainly no demolition, pending confirmation of sales prices on the townhouses or the property as it is. After next Saturday when I speak to some real-estate agents, we should discuss this again.
After almost four years, this is not a good situation to be in.”
T 585

96

Mr Kay gave five reasons for considering the project to be very marginal. These were that there was no contract containing a strategy, there was a risk about gaining Council’s approval, a financial risk, an execution risk and a realisation risk.

97

A few hours after the earlier email of 14 July 2007, Mr Kay sent Mr Andrews an email containing sales of town houses in Canterbury and nearby, showing sales at prices between $460,000 and $575,000.

98

The reference to the demolition works in Mr Kay’s email of 14 July 2007 arose because Mr Andrews had obtained a demolition permit and made arrangements for the demolition of the house. The demolition did not proceed.

99

Mr Andrews informed Mr Kay of this by email of 15 July 2007. The email stated:
“Hi Andrew
All I can do is delay the demolition company in doing the works. I have signed an authority and paid a deposit. They have taken out and paid for the demo permit and have already organised the disconnection of services, as I advised you last Thursday.
I also met with an interested purchaser yesterday, and it looks like they will put in an offer of $620,000 for the rear unit.
I advised them that I would put it forward to the Vendor, however I will delay it so we can see what prospects and prices the Malaysian agent will come up with.
Keep in touch and let me know your thoughts”.

100       The reference to the advice by Mr Andrews to Mr Kay of “last Thursday” is a reference to 12 July 2007. That reference suggests that Mr Kay’s recollection of a meeting on that day, even if it were Mr Andrews’ birthday, was accurate.
101       On 17 July 2007, Mr Andrews sent Mr Kay an article from the Herald Sun newspaper confirming “the skyrocketing market we talked about” and also last weekend’s results in the Box Hill area. Particular reference was made to a property in Tyne Street that sold for $655,000. It was an old house on a subdivided block.
102       On 24 July 2007, Mr Kay emailed Mr Andrews, commenting on the Tyne Street property and noting that he had sent an email to another estate agent describing the Foch Street property and the fact that it had “Council Permits, working drawings, engineering drawings, Five Star Energy Rating Reports, stormwater & sewerage report, Building Survey, and Land Survey”. He asked for Mr Andrews to confirm that this was the correct wording and that he could at least get a hard copy of the same to verify that it can be delivered with the land. Mr Kay also queried the working drawings that had been provided in the CD that Mr Andrews gave him in the meeting on 12 July 2007.
103       On 24 July 2007, Mr Andrews confirmed that Mr Kay had the working drawings and responded to the query about whether town planning permits had been obtained. He stated:
“The only thing outstanding is the structural engineering which includes soil report and stormwater design. However this does not impede the sale of the property as any developer/builder is interested that it has town planning permits. All the other documentation is a bonus.”

104 On 31 July 2007, Mr Andrews sent Mr Kay a newspaper guide as to house prices for the last quarter and noted that Box Hill South had gone up 23.3 per cent. He asked Mr Kay to let him know his plans.
105 On 2 September 2007, Mr Andrews emailed Mr Kay, stating that he had tried contacting him a few times, acknowledged that he was working interstate, but stated that it was imperative that they further discuss their development property. He stated:
“As Trustee of the Canterbury Trust, you must act diligently and in the
interests of the Trust and its Beneficiaries.”

106 Mr Andrews stated that he had consulted with estate agents, who agreed that the market sales were phenomenal and that the property was unique as it had current Town Planning Permits, and that he had written confirmation that the property would sell at a starting point of $750,000 to $800,000. He stated that if the three town houses were built, sales in the vicinity of around $1.9 million would be achieved. He stated that:

“I already have an offer for the rear unit of $650,000 where we need not
pay commissions.”

107 Mr Andrews then stated:
“You can see that it is more profitable to sell the property now, especially if we achieve prices of $850,000 to $900,000 which are presently attainable, without the headache and heartache of building.
So Andrew, I put to you the three alternatives for your considerations:

(1) We appoint an agent and put the property to auction in six to
seven weeks, allowing for proper marketing.
(2) We take the risk of going ahead and build.
(3) If you wish to keep the property for whatever personal reasons
you may have, you buy me out now.
I don’t want to appear as being pushy here Andrew but it is in both our interests that we maximise our returns whilst the market it strong, as it’s all about timing.
It will be appreciated that by the end of next week at the latest, 7th September 2007, you let me know what you want to do, so that we can put the wheels in motion.”

108 Mr Kay did not respond. Mr Andrews proposed a meeting, but again Mr Kay did not respond. On 12 October 2007, solicitors for Mr Andrews wrote to Mr Kay, describing him as Trustee of The Canterbury Trust, stating:
“We advise that we act for Gianni Andreou who together with you are the beneficial owners of the aforementioned property. We understand that the purchase was through the establishment of the Canterbury Trust on 3 June 2004. Both of you are the Appointors of the Canterbury Trust.
We are instructed that despite numerous requests and demands for action and an accounting of rents and profits for the property, no resolution has been effected. Our client has been advised that proceedings may need to be instituted against you for the purpose of protecting his position, and obtaining possession and in due course, effecting a sale of the property after adjustments for the claims as against you which may include but not be limited to the matters directly addressed in this correspondence”.

109 The letter concluded by threatening legal action.
110 Solicitors for Mr Kay responded on 21 November 2007 disputing that The Canterbury Trust owned the property, stating that Mr Kay has been the sole and beneficial owner of the property and stated that The Canterbury Trust was and had been inoperative. The letter also stated:
“We submit that your client has misunderstood the nature of the relationship between our respective clients. Your client was afforded the opportunity to be nominated as the builder of the units proposed to be constructed on the property. In this regard, our client acknowledges that your client undertook some work in procuring initial drawings and seeking Council’s approval for the proposed development. Your client was paid a commercial fee for his work.”

111       The letter then requested that a caveat lodged by the plaintiff be withdrawn. There was further correspondence in 2008 between solicitors for Mr Andrews and solicitors for Mr Kay.
112       On 18 August 2008, Costas Construction Pty Ltd sent Mr Kay an estimate of constructing three two-storey townhouses, each with garage under roofline for $727,134.
113       On 29 August 2008, Mr Kay’s solicitor wrote to Mr Marmarou of ‘A Better Design’ seeking the design plans for the property.
114       On 26 November 2008, Network Planning Consultants Pty Ltd, on behalf of Mr Kay, wrote to the City of Whitehorse, stating that:
“As advised, we have been engaged by Mr Andrew Kay (the owner of the land) to act for him in connection with the relevant statutory planning issues with the project.
. . .
Mr Kay has been the sole owner of the land since the inception of this project. Initially he had engaged Andrews Constructions Industries Pty Ltd for various tasks, this company being the preferred contract builder expected to be commissioned for the construction by Mr Andrew Kay. Part of the arrangement was that Andrews Construction Industries Pty Ltd would seek the necessary Planning Permit on behalf of our client Mr Kay (who was also meeting all the costs involved).
A disagreement occurred between our client and Andrews Constructions Pty Ltd, which resulted in a prolonged legal dispute between the parties. This has taken almost two years.
The various legal issues in the dispute have now been adequately addressed to our client’s satisfaction, whom now wishes to proceed as soon as possible to implement the project in accordance with the current Planning Permit. To this end, arrangements have been made for the existing dwelling to be demolished prior to Christmas, and for a builder to be appointed.”

115       The letter went on to seek a further extension of the Planning Permit which was granted.
116       Mr Kay said that the letter was sent to obtain a renewal of the Permit to keep his opportunities or options alive.
117       Mr Andrews commenced these proceedings on 15 December 2008.

The Credit of the Plaintiff and the Defendant
118       Both parties challenged the credit of the other. Mr Andrews submitted that insofar as there was a disagreement between the parties on the terms of the agreement and what occurred thereafter, his evidence should be preferred for the following reasons. First, the allegedly false manner in which Mr Kay had completed taxation returns, including a failure to include rent that he had received. Second, the manner in which he had given his evidence, including not answering questions directly. Third, the change in his position between November 2007 and trial. By this was meant that in November 2007, he had described Mr Andrews as simply a builder who had been paid for his work, whereas at trial, his case was that he and Mr Andrews had reached an agreement about the construction of the units, which agreement Mr Andrews had breached.
119       Mr Andrews also argued that Mr Kay’s counsel had not put a number of important matters to him in cross-examination.
120       Mr Kay in turn criticised aspects of Mr Andrews’ evidence and conduct.
121       I have not found any issue of fact which I have had to decide on the basis of credit. I do not consider the arguments I have set out as significant in the determination of any contested issue of fact. In any event, both the plaintiff and the defendant can be subject to adverse comment as to their credit for the reason which includes their participation in the preparation of a false receipt which was to be provided to the Westpac Bank evidencing the supply of building equipment for a substantial sum, when that supply had not occurred. This document was prepared on 14 June 2007 when Mr Andrews sent a summary receipt to Mr Kay at his request, stating that the total contributions received in respect of the project were $304,665. This document affects the credit of both parties adversely.

Was there a Joint Venture?
122 Mr Andrews’ case was that there was a joint venture which imposed fiduciary duties on him and Mr Kay. Mr Kay denied initially that there was a joint venture although in final submissions his counsel accepted that there was.11 Mr Kay, on a number of occasions, referred to Mr Andrews and himself as “partners”.
123 In United Dominions Corporation Ltd v Brian Pty Ltd,12 Mason, Brennan and Deane JJ stated:
“The term ‘joint venture’ is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, ‘adventure’) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership.”

124 Before determining whether there was a joint venture, it is necessary to consider whether any agreement between Mr Andrews and Mr Kay was created.

T 1374
(1985) 157 CLR 1, at 10 cf Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577 and GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers and Palmer [2005] VSCA 113 per Warren CJ.
Uncertainty

125

Mr Kay argued that the agreements relied on by Mr Andrews were void for uncertainty, because essential aspects of the bargain were missing. These were:

(a) the obligation to pay the costs of the development;
(b) what was to happen if one party decided to abandon the project prior to development consent and the other did not wish to do so?
(c) what was to happen if one party wished to abandon the project after development consent was obtained? and
(d) the costs that were to be taken into account to ascertain the “net proceeds” of the development;
(e) the mechanism for resolving disputes between the parties.
126 Mr Kay submitted, in the alternative, that if the agreement was enforceable, it allowed a party to withdraw if the project was not viable in his opinion. This was based on the implication of a term in the joint venture in accordance with the approach in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales13 as it argued to be always in the contemplation of the parties that they could withdraw from the transaction.
127 Mr Andrews alleges that the terms of the joint venture included:

(a) that Mr Kay would purchase the property from his own funds or borrowings;
(b) that Mr Andrews would be responsible for all work associated with developing the property, including making application for planning permits, commissioning a building designer, commissioning a building

(1982) 149 CLR 337
surveyor, building, and assisting in organising finance for the
development of the property;

(c) on the sale of the property as developed:

(i) Mr Kay would be reimbursed the purchase price and any interest on borrowings for the purchase;
(ii) Mr Andrews would be reimbursed any out-of-pocket expenses he had incurred in developing the property;
(iii) the parties would share an equal proportion of any net profit.14
128 Mr Kay referred to many matters which he and Mr Andrews did not discuss in order to support an argument that if the Court were satisfied that a joint venture agreement existed, then it was void for uncertainty. Counsel for Mr Kay referred to the judgment of Ormiston J in Vroon BV v Foster’s Brewing Group Ltd,15 which included the following passage:
“… Sugarman, J said in his otherwise unreported judgment in Goldberg v
Thorby (unreported FC of NSW):
‘It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential or critical terms, have been agreed upon.’ Again in a somewhat more limited context, it was said by Gibbs, CJ, Murphy and Wilson, JJ in Booker Industries Pty Ltd v Wilson Parking (Queensland) Pty Ltd (1982) 149 CLR 600 at 604:
‘It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future.’

I would accept that in commercial transactions the court should strive to give effect to the expressed arrangements and expectations of those engaged in business, notwithstanding that there are areas of uncertainty and notwithstanding that particular terms have been omitted or not fully worked out. Where one should draw the line is difficult to state and

Although not expressly pleaded, it was assumed in argument that these terms were also part of the alternative versions of the joint venture on which the plaintiff relied.
[1994] 2 VR 32 at 67
equally difficult to apply. The Court's desire to give effect to commercial bargains has in recent years been frequently reiterated but occasionally overstated. … .”
129       Counsel for Mr Andrews placed particular reliance on the recent decision of the New South Wales Supreme Court in Luxury Homes Pty Ltd v Lanham,16 where Bergin CJ, in Eq., stated:
“I am of the view that essential aspects of the bargain are missing from the Agreement including: the obligations of both parties in respect of the Nolans’ property; the Nolans’ obligations in respect of the use of their property in the joint venture; the obligations in relation to the costs of the development, other than if the parties abandoned the Project prior to development approval; the intentions of the parties in respect of the costs of the development up to the stage of construction finance, except in the circumstance that the parties decided to abandon the project; the intentions if one party decided to abandon the Project prior to development consent but the other did not wish to do so; the intentions of the parties if one party wished to abandon the Project after development consent was obtained; the costs that were to be taken into account to ascertain the ‘net proceeds’ of the development; the costs that were to be categorised as ‘remaining costs’; and the mechanism for resolving disputes between the parties. It is not possible to identify any definite or precise meaning whereby any particular contractual intention can be attributed to the parties in respect of these essential matters.”17
130       Luxury Homes v Lanham involved a very experienced property developer and a person who wished to develop a number of blocks of land for profit. Some of the terms of their arrangement were put in writing.
131       Mr Andrews responded that the joint venture was enforceable as both parties had expressed an intention to purchase the property and develop it by using Mr Andrews’ expertise as a builder-developer and Mr Kay’s in finance. After deducting expenses on the project, the profit would be spilt 50/50. If the project could not go ahead, the parties’ obligation was to sell it and divide it on a 50/50 basis.
132       The principles concerning the certainty required for a joint venture agreement were summarised by the New South Wales Court of Appeal in Thompson v
[2009] NSWSC 873 and the plaintiff also relied on Koomphato Local Aboriginal Land Council v Sanpine Limited (2007) 82 ALJR 345
supra at [124]
White.18 That case concerned a property development where one party alleged that eleven fundamental matters were not agreed. Tobias JA, with whom Ipp and McColl JJA agreed, after referring to authorities, stated:
“What the foregoing establishes is that although the term ‘joint venture’ has no settled common law meaning, it is conventionally and commonly used to refer to an association between persons for the purpose of a single undertaking for mutual commercial gain.
. . .
Accordingly, subject to there being sufficient certainty with respect to the essential terms upon which the particular undertaking is to be pursued, the ordinary rules of contract relating to whether the parties intend to enter into a contractual relationship apply.”19
133 Tobias JA identified seven propositions from the authorities, of which the fifth sixth and seventh have particular application in this case. They were:
“(e) The context in which the contract is arrived at and, in particular, the conduct of the parties may be relevant to questions of incompleteness. However, once the court has determined that the requisite intention of the parties is present, it is then necessary to go onto to consider whether the contract is so incomplete or uncertain as to be void: Anaconda Nickel at 111 [27] and [28];
(f) It does not follow that any omission will make a contract incomplete or uncertain in the sense of rendering it invalid. It is true that the omission of an essential term will have that effect; and that all the essential elements of an express contract must be present: Integrated Computer Services at 11,117. However, in this context the meaning of ‘essential’ is ambiguous. If it means a term without which the contract cannot be enforced, then the statement that the parties must agree on the essential terms of the contract is true. However, it is not for the court to determine which terms are ‘essential’ in the sense that it regards them as important as opposed to a term which it regards as less important or a matter of detail. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether they are important or unimportant. They are ‘the masters of their contractual fate’: Anaconda Nickel at 112 [29];
(g) In determining whether essential terms are uncertain, it is important to bear in mind that ambiguity does not mean uncertainty. Further, in determining whether contracts are void for uncertainty, courts should be astute to adopt a construction which will preserve their validity as they are the upholders of bargains and not their destroyers: Anaconda Nickel at 112–113 [30] and [33].”20
[2006] NSWCA 350
supra at [94] and [96]
supra at [100]. See Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101

134

The decisions in Luxury Homes Pty Ltd v Lanham and Thompson v White establish that the identification of the essential terms of a joint venture depends on considering all aspects of the relationship between the parties. A critical aspect of the relationship between Mr Andrews and Mr Kay was that it was an oral agreement between friends who trusted each other.

135

Mr Kay relied on fourteen matters as essential terms upon which agreement had not been reached. Those matters, whether taken individually or collectively, were not essential terms. They can be considered in groups.

136

There was the nature of the risk that would be acceptable to the parties should the transaction proceed. This was not an essential term. Most contracts carry risks but each party usually makes their own assessment of them.

137

The second matter was that the parties had not agreed how each would be compensated if his capital were to be tied up over a lengthy period of time and, if the project did not proceed, how one party would buy out the other. No exit strategy had been agreed and there had been no discussion as to how the project assets would be divided if the development did not proceed. This was not an essential term of the joint venture. The parties did not contemplate the project not proceeding. Equitable principles govern the distribution of property upon the failure of a joint venture if the parties have not reached an agreement on that issue. An agreement does not become uncertain because it does not contain provisions regulating the aftermath of its failure.

138

Mr Kay referred to Mr Andrews’ email of 26 September 2005 and the reference to the need to “have a strategy in place”. Mr Andrews argued that this suggested that more matters needed agreement before the project could proceed. This comment was made almost two years after the property was purchased. It expressed a concern about the future of the project rather than about whether the parties had reached an agreement in the first place.

139

It was also argued that no discussion had occurred as to what would happen if the project were at a standstill for four years and that no timeframe for completion had been agreed. However, the parties’ expectations were that planning approval and finance would be pursued in a timely manner. Once construction commenced it was originally contemplated that the work would be completed in eight months, or in the later building contracts of August 2006, a period of 306 days. The obtaining of planning approval was beyond the control of the parties. A precise timeframe could not be agreed, and the absence of any precise term about the completion of these steps does not render the agreement uncertain. The parties did not contemplate that the building work would not have commenced after four years. However, that unforeseen event does not make the agreement uncertain.

140

Mr Kay argued that there was no dispute resolution mechanism to deal with the lack of agreement about issues such as the quality of finishes, the type of finishes, the price of construction or the size of units. The evidence of Mr Buchanan, a Quantity Surveyor called on behalf of Mr Kay, suggested that builders would readily identify high-quality finishes. The absence of a dispute resolution mechanism is not unexpected in a verbal agreement between friends.

141

It was also argued that there was no discussion as to how the parties would proceed if there were price changes in interest rates, building costs, material costs or other project costs. These matters did not require express agreement. Interest rates and costs were likely to alter during the course of the project, and those alterations would be brought into account in calculating the net profit.

142

Mr Kay argued that the most that could be said about the agreement was that both parties would have to be happy for the project to continue in order for the development to occur. It is not an obstacle to the creation of an agreement that it could be determined by one party because he did not wish it to continue, subject to the application of legal and equitable principles governing such situations.

143

It was argued that Mr Kay could decline to purchase the property on the day of the auction for any legitimate reason without the reason being discussed or ascertained. However, the agreement did not commence until the property was purchased on 15 November 2003.

144

It was put there was no agreement as to the priority or expenditure given that the borrowings of $577,572 were not going to cover costs and that the contract would inevitably be breached by Mr Kay as only $577,572 remained to be drawn on the Westpac loan when it was approved. There was no term of the agreement that allocated payments from that sum to pay the building costs of $825,000 plus other expenses. However this issue arose in June 2007 after the Westpac loan approval and has no relevance to the issue of whether an agreement was created at the time the property was purchased.

145

It was argued that the building contract was skewered in the plaintiff’s favour, not least because of the builder’s margin or wage built into it. However, the building contract was signed freely by both parties two-and-a-half years after the property was purchased.

146

In Thompson v White, Tobias JA considered that once the property was located:

“... the parties agreed that it would be acquired for the purpose of its development and sale and that the profits earned would be shared equally. This agreement was one in respect of which they intended to be contractually bound.”21

147 A similar conclusion applies to the facts of this case. The agreement between

supra at [101](a)
Mr Andrews and Mr Kay was between friends, and that fact stamped its character from start to finish. Although there was no written agreement, they had agreed on the essential terms of the agreement which were as follows. When Mr Kay acquired the property on 15 November 2003, Mr Andrews and Mr Kay had agreed to develop it by erecting three town houses for profit, using their separate skills of a builder and accountant. In their telephone conversation late on 15 November 2003, Mr Andrews and Mr Kay agreed that that Mr Kay was provide the funds to purchase the property. The parties later agreed that all of the construction costs would be raised through borrowings.
148       The net profit deriving from the development was to be divided equally. The net profit was the sum remaining after Mr Andrews had been reimbursed for the costs incurred in obtaining planning and building permission, and the cost of building the project, together with his margin, and Mr Kay reimbursed for the purchase price and interest on borrowings to purchase the property and undertake the construction.
149       The subsequent conduct of Mr Kay and Mr Andrews points to the reaching of a binding agreement. The subsequent conduct includes the creation of the Canterbury Trust and Mr Kay’s email of 2 June 2004, stating that he held the property on behalf of that Trust. Subsequent conduct can support the conclusion that an agreement has been reached in the first instance: see Brambles Holdings Ltd v Bathurst City Council22 per Heydon JA.
150       I find that the relationship between Mr Andrews and Mr Kay was a fiduciary one and they were both joint venturers in a commercial enterprise with a view to profit. Profits were to be shared, and the property was to be held as a joint venture asset. As in the United Dominion’s case, the policy of the joint enterprise was ultimately a matter for joint decision.
(2001) 53 NSWLR 153, at 163-164
Was Mr Kay Entitled to Bring the Joint Venture to an End?

151

In or after July 2007, Mr Kay decided that he did not wish to proceed with the joint venture. Mr Andrews argues that in so acting, he repudiated the joint venture and breached his fiduciary duties and obligations under the Canterbury Trust. As a result, he ought to be prevented from obtaining any benefit from the repudiation or breach of duty without paying equitable compensation to Mr Andrews.

152

The determination of these issues turns on the identification of the rights of the parties to end the joint venture before it was completed.

153

The agreement did not expressly provide for the possibility that one party might not wish to proceed. However, both Mr Andrews and Mr Kay participated in the joint venture to make a profit and neither would have participated to lose money. The risks associated with the project had to be acceptable to both of them. The joint venture depended on the co-operation of Mr Andrews and Mr Kay in performing their roles of construction and providing finance. Mr Andrews agreed that he and Mr Kay had to be happy with the continuance of the project and that both parties would have to see that there was a reasonable chance of making a profit.23 In answer to the question “But it [the risk] had to be acceptable for both parties”, he answered:
“Yes. I mean we are friends, we are mates, I respect him. I don’t want to
go contrary to what each of us feel or think.”24

154 Mr Kay considered that the risks were too high, whilst Mr Andrews thought that a worthwhile profit could be achieved. Mr Kay reasoned that he had available $580,000 from the Westpac loan plus a maximum of $80,000 from his personal funds, thereby giving $660,000, which was the price originally quoted by Mr Andrews. He argued that the cost of the project was $821,000 construction costs, plus costs such as Council open space levies, totalling

T 142
T 152, L31- L153, L2
$860,000, plus $300,000 of loan repayments, plus the balance of the
purchase price, giving a total cost of $1.5 million.25
155       The reduced amount that Westpac was willing to loan meant that amount that Mr Kay had available in July 2007 was less than he may have had in August 2006 when he signed the building contracts.
156       Mr Andrews considered that a sale price for the town houses of $1,800,000 could be achieved. Mr Kay strongly disagreed. He described the project as marginal:
“Because you need to take into account one-eleventh goes on GST, you need to take into account the holding costs. I don’t believe his eight months or one year because with reference to everything else I’ve seen, it would take him three times two, six years, to build this thing. But even at one year, you take the GST and the income tax you would have to pay and all the holding charges and considering the risk factor – this is a risky proposition. Considering the risk factor, you don’t do it, it is not – even if you could do it, even if I had the funds to do it, you still don’t do it, it is marginal. You don’t outlay a million dollars plus for a marginal situation. It is just too bloody risky. You don’t do it.”26
157       Mr Kay referred to the length of time that Mr Andrews had taken to complete work on his brother’s house, which he said should have been completed at June 2007 but only the base stage was up.
158       Mr Andrews said that the costs were clear from August 2006 when the contracts had been signed. He stated:
“I said to him, ‘Look, Andrew, even if it was at $1.5 million, we’re looking at sales of about $1.8 million, so there’s still plenty of margin in there for us to make a profit at the end of the day’. Of course there are risks in any development of proceeding to build and develop and Andrew was well aware of the risks from day one, that in anything there is developmental …
Because it was discussed that we may get permits, we may not get permits, we may get a permit for only two town houses and not three. That was all quite clear to Andrew … .”
Q: “Did you tell him that? --- A: Yes, that is a risk-taking exercise, but at
T 580
T 584, L12-25
the end of the day, the rewards will be there.”27
159       In July 2007, Mr Kay was subject to significant financial obligations because of the purchase of the property. He had been out of work for a time. The building contracts of August 2006 envisaged a period of 306 days for the completion of the project. Mr Kay was wary of Mr Andrews’ capacity to construct the town houses according to an agreed timetable.
160       The rights of the parties to determine the joint venture need to be considered in a broader perspective than the circumstances in which they found themselves in July 2007. Events could well have occurred which made the joint venture impossible, for example, planning approval being refused or finance not being granted. Then, the purpose of the joint venture would have been frustrated or the parties would have been entitled to rely on the occurrence of a condition subsequent, to end the contract. Any such event would have presented circumstances which Deane J described in Muschinski v Dodds28 as “the premature collapse of the joint venture and the consequent preclusion of the attainment of the commercial advantage”.
161       Equally, there may have been changes in economic circumstances, such as a significant increase in interest rates, made a profit uncertain in the opinion of one of the venturers, or a delay had resulted in a change in one party’s circumstances in a manner which affected their ability to continue in the joint venture, e.g., loss of a job or other financial misfortune. In such circumstances, the implication of a term to deal with the party’s rights to terminate the agreement would have been required to give business efficacy to the agreement.
162       Mr Kay pleads that it was a term of the agreement that he and Mr Andrews would both have to agree on the continuation of the project, having regard to
T110, L 6-21
(1985) 160 CLR 583, at 619
any changes and economic circumstances or any delay with the development. Counsel for Mr Kay submitted that it was always in the contemplation of the parties that they could withdraw from the transaction.
163       This term was said to be implied by law to give business efficacy to the agreement.29 If such a term exists it must be a right to end the agreement and not a term to delay the commencement of it, otherwise the agreement would be an agreement to agree and therefore unenforceable.
164       The circumstances in which an agreement, particularly one giving rise to fiduciary obligations, can be ended by one party will depend on its particular terms. In the case of some agreements, such as partnerships, statute stipulates some of the circumstances in which the agreement can be ended.30
165       Mr Andrews and Mr Kay did not discuss their right to terminate the agreement at the time they embarked on the adventure. They did not consider what would happen if the project had not commenced within four years. They were contemplating achieving a profit through the successful completion of the venture.
166       Against the background of the matrix of facts in this joint venture between friends, it could not have been reasonably anticipated that either of them would have been obliged to continue indefinitely in a venture that they had no desire to continue, at least up to the point when construction had been commenced.
167       A time would have been reached when the die was cast and it would have been too late for either party to withdraw. At that point a party may have been estopped from exercising a right to terminate the agreement. That point had
The defendant relied on Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 and BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1980) 180 CLR 266
Partnership Act 1958, Division 4, and see ‘Lindley and Banks on Partnership’ (18th ed.) 2002, page 149
not been reached in the second half of 2007, when construction had not
commenced and a building permit had not issued.
168       In Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd,31 Crennan J stated:
“Where, as in the present case, there is no formal contract concluded between the parties a more flexible approach to the question of implying terms is warranted than that laid down in BP Refinery at 283: see Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 121; Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 at 573; Byrne & Frew v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410 at 422-423. In this kind of case all that is necessary is to show that the term to be implied is necessary for the reasonable or effective operation of the contract in all the circumstances.”
169       The approach of Crennan J in Gold Peg International Pty Ltd is applicable to a joint venture between friends. It is true that Mr Kay may have decided not to proceed with the joint venture, because he considered that he might achieve a greater profit by selling the property. His solicitor’s correspondence in the second half of 2007 in response to Mr Andrews’ demands did not accurately set out his arrangements with Mr Andrews. His correspondence with the City of Whitehorse suggested that he was proposing to develop the property himself. At July 2007, Mr Kay had finance available of $577,572 to finance an $825,000 construction. He had been out of work for six months. Despite initial discussions about the available funds he had available in November 2003, four years later he was not obliged to finance the project for a further indefinite period.
170       In addition to the approach discussed in Gold Peg International Pty Ltd, the implied term satisfies the criteria established in BP Refinery (Westernport) Pty Ltd v Shire of Hastings.32 It was reasonable and equitable; it gave business efficacy to the contract – the contract was not effective without it; in the circumstances of this matrix of facts and the evidence that I have referred to, it
(2005) 225 ALR 57, at 79
supra at 283
was something so obvious that it went without saying; it was capable of clear expression and it did not contradict any express term of the contract, but added to them.
171       It is noteworthy that Mr Andrews has not sued Mr Kay for repudiating the building contracts signed in August 2006. This illustrates that even when written documents were executed by them, matters were left to drift and that neither of them felt committed to the project if they chose not to pursue it.
172       I find that there was an implied term in this particular joint venture agreement that either party could terminate it if they chose, certainly prior to the commencement of construction of the town houses.
173       This implication is especially appropriate in circumstances when one party had formed the view that the joint venture would be unprofitable or carried too many risks. Both Mr Andrews and Mr Kay could have validly ended the joint venture in the second half of 2007 provide construction had not commenced.
174       Mr Kay did end the joint venture. He did not do so expressly, but his actions and the terms of his solicitor’s letters taken together indicated at least by the end of 2007 that he did not propose to continue with it.33 I accept the substance of his evidence as to why he did not wish to continue in the joint venture. His explanation of his concern at the financial risk was reasonable and rational.
175       The defence of abandonment has not been established. Mr Andrews wished to continue the project. The evidence, whether viewed objectively or otherwise, does not support the conclusion that both parties had conducted themselves so as mutually to abandon the joint venture.34
176       This conclusion means that Mr Andrews’ claim that Mr Kay repudiated the
See Carter, Peden and Tolhurst ‘Contract Law in Australia’ (5th ed.) 724
See DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
agreement and that he is entitled to expectation damages is not established. Mr Andrews claimed that if the joint venture had proceeded and the three town houses had been developed by June 2008, he would have made a profit of $113,429.00 plus a builder’s margin of $107,608.00, or if expenses were included and $15,000.00 owing to Mr Kay deducted, he would have received the sum of $230, 510. There may have been mitigation issues. Mr Andrews’ income received from work that he was free to perform, because he did not have to perform the joint venture construction work, would have had to be offset against his claim for the builder’s margin. Mr Andrews’ alternative damages calculation is that if the property had been sold in September 2007 with permit, his share of the net profit would have been $154,241.00.
177       Mr Andrews relied on the Court of Appeal decision in Edmonds v Donovan and Distronics Ltd v Kingston Links Country Golf Club Ltd35 which emphasised that fiduciary duties survive the termination of the relationship that created them. That case rejected that departing participants in a joint venture were:
“… free to seize for themselves, and behind the back of the respondents, the business opportunity which the persons had been pursuing in conjunction and which the respondents were still intent on pursuing.”36
178       This case presents a different set of circumstances in which the joint venture has been validly ended.
Was Mr Kay Estopped from Ending the Joint Venture?
179       Mr Andrews contended that he continued to carry out his obligations under the joint venture agreement in reliance on Mr Kay’s representations that his interest in the property were secured and protected by The Canterbury Trust Deed. These representations were made in June 2004 in the Trust Deed and associated correspondence. He and Mr Kay had a common understanding
(2005) 12 VR 513
supra at 538
that the property would be developed as a joint venture. He argued that Mr
Kay was estopped from departing from that common understanding.
180       The estoppel relied on, as I understood it, was based on an assumption as to an existing state of affairs. Brennan J stated in Waltons Stores (Interstate) Ltd v Maher:
“A party who induces another to make an assumption that a state of affairs exists, knowing or intending the other to act on that assumption, is estopped from asserting the existence of a different state of affairs as the foundation of their respective rights and liabilities if the other had acted in reliance on the assumption and would suffer detriment if the assumption were not adhered to.”37
181       The representations about The Canterbury Trust were made some time after the joint venture commenced. Mr Andrews did not take any additional steps as a result of them. He had already embarked on the obtaining of planning approval.
182       The representations made by Mr Kay are to be considered in the context of the agreement that the parties had reached and the right of each of them to end the agreement. The representations did not require Mr Kay to do anything that the agreement did not require him to do.
183       If the estoppel relied on by Mr Andrews was based on representations or promises as to a future state of affairs, i.e., as to the shares of the parties in the property at the completion of the joint venture, then for similar reasons it has not been established.
The Entitlements of Mr Andrews and Mr Kay to the Joint Venture Property
Following Termination of the Joint Venture.
184       Both parties advanced arguments about the appropriate division of the property if the joint venture had come to an end.
(1988) 164 CLR 387 at 413, per Brennan J.

185

In Muschinski v Dodds,38 Deane J referred to a prima facie rule of equity that in the event of the premature collapse of the joint venture and the consequent preclusion of the attainment of the commercial advantage:
“… that, to the extent that the joint funds allow, the joint venturers are entitled to the proportionate repayment of their capital contribution to the abortive joint venture. That is so notwithstanding that it was the common understanding or agreement that the funds advanced were to be applied for the purposes of the joint venture and that the return from them would take the form, not of a repayment of capital contributed but a share in the proceeds of the joint venture when carried to fruition…
The prima facie rules respectively entitling a fixed term partner to a proportionate refund of his or her premium and a contractual joint venturer to a proportionate repayment of his or her capital contribution on the premature dissolution of the partnership or collapse of the joint venture are properly to be seen as instances of a more general principle of equity. That more general principle of equity can also be readily related to the general equitable notions which find expression in the common law count for money had and received… and to the rationale of the particular rule of contract law to which reference has been made. Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct.”39

186 In that case, a man and a woman who had lived together for three years decided to buy a property on which to erect a prefabricated house and to restore a cottage. The woman was to provide $20,000 from the sale of her house and the man was to pay the cost of construction and improvement from $9,000 he would receive on the finalization of his divorce and from loans. The property was conveyed to them as tenants in common. Although some improvements were made by the man, the erection of the house did not proceed and the parties separated. The substratum of the joint venture failed because of a refusal of planning permission on the terms the parties desired, the fact that funds that the man anticipated did not eventuate and the ending of the de facto relationship between the parties. The woman contributed $25,295.45 and the man $2,549.77 to the purchase and improvement of the property. The Court declared that the parties held their respective legal

supra
supra at 619 authorities omitted
interests upon trust to repay to each his or her respective contribution and as to the residue for them both in equal shares. Neither party suggested that blame or responsibility for the abandonment of the joint project was to be attributed to the other.40
187       Mr Kay was entitled to end the joint venture and therefore blame or responsibility cannot be attributed to him in making that decision.
188       The judgment of Deane J in Muschinski v Dodds, with which Mason J agreed, and which was followed in Baumgartner v Baumgartner,41 establishes the following principles which apply on the premature collapse of a joint venture where fault cannot be attributed to the parties.
189       First, that to the extent that the joint funds allow, the joint venturers are entitled to the proportionate repayment of their capital contributions to the abortive joint venture.42
190       Second, equity requires that the rights and obligations of the parties be adjusted to compensate for disproportion between the parties’ contributions to the purchase and improvement of joint venture property. That adjustment requires that the parties be proportionately repaid their respective contributions to the extent allowed by the proceeds of any sale.43 In appropriate cases, contributions other than financial contributions can be brought into account.44
191       Third, that equity will not permit a party to assert a right to, or retain the benefit of, joint venture property to the extent that it would be unconscionable for the
This summary of the facts is principally taken from Baumgartner v Baumgartner (1987) 164 CLR 137 at 147
(1987) 164 CLR 137
supra at 623
supra at 623
supra at 622
party to do so.45
192       Fourth, the entitlement of the parties in equity to share in any surplus after the discharge of any debts incurred in their joint undertaking and the repayment to them of their respective contributions is only qualified to the extent to which it positively appears that it would be unconscionable for one party to assert or retain the benefit of property contributed by the other party. There could well be circumstances in which equity and good conscience would require that the party who has made the major contribution to a joint endeavour should obtain a correspondingly greater share of any surplus remaining after repayment of the respective contributions.46
193       Fifth, the four principles set out above are not displaced because it was the common understanding or agreement of the parties that the funds advanced were to be applied for the purpose of the joint venture and that the return from them would take the form, not of a repayment of capital contributed, but of a share in the proceeds of the joint venture when it was carried to fruition.47
194       I would add that even if I had not found the implied term in the joint venture permitting its termination, I would have regarded the circumstances that prevailed in July 2007 as causing the collapse of the joint venture. In those circumstances, the same principles summarised in the immediately preceding paragraphs would have applied.
The Contributions of the Parties to the Joint Venture
195       Mr Kay gave evidence that the vast majority of the income that he received during the time of the joint venture was either used in paying tax or repaying the loans to purchase the property. The mortgage balance at the time of trial
supra at 623
supra at 623
supra at 619
was $230,000.48 As at December 2009, he had paid $463,780.81, which he referred to as his capital contribution, including loan repayments, interest, rates, taxes and development costs.49 He had also received rent payments from tenants occupying the property in the sum of $11,990.00. At July 2007 his cost of capital was $386, 398.48.50
196 This sum of $463,780.31, comprised the deposit paid to purchase the property, payments by Mr Kay into his CBA/Colonial account, into two Westpac accounts and into a Citibank account, development costs and rates and incidentals privately funded, less rent received. These amounts, as at 12 October 2009, when the defendant’s final pleading was filed, were:

Deposit paid $49,500.00

Payments into CBA/Colonia A/c 373555404 $193,078.49

Payments into WBC 49-9454 $94,867.12
Payments to WBC Private 29-5223 $97,715.88
Payments into Citibank Credit A/c $11,115.94
Development Costs privately funded $14,537.19
Rates and incidentals privately funded $11,258.11
Rent Received -$11,990.00

__________

Total Defendant Contributions at 30/9/09 $460,082.72
==========
197 Mr Andrews’ case was that he had contributed $24,473.31 towards the development of the joint venture in fees paid for land surveying, drawings and architectural drafting, obtaining the Planning Permit, paying insurance premiums and arranging the demolition permit. The insurance premium of $2,990.00 paid on 29 May 2007 was for the period 1 May 2007 to 1 May 2008 and did not relate to the Foch Street development. However, the Westpac

T 794
T 773 and 794 and DCB 1000-1001
DCB 921-922 and T 773
Bank required proof of builder’s insurance in order to approve the loan and I consider that it should be brought into account in Mr Andrews’ favour.
198       Mr Andrews’ counsel referred to these payments as costs, but they should also be treated as capital contributions for present purposes.
199       The contributions of the parties are therefore to be regarded as follows: Mr Andrews $24,473.31 and Mr Kay $463,780.81 as at December 2009, which amount should be updated for the purposes of making final orders.
The Division of the Joint Venture Property
200       The property was joint venture property. It retains that character even though the joint venture has ended. Mr Brindley valued the property as at December 2009 in sum of $1,044,000.51
201       A frequent means of distributing the assets of a failed joint venture in accordance with the principles outlined above is for the property to be sold.52 Thereafter debts, including the mortgage, are repaid, and capital contributions returned. The remaining equity is distributed according to the parties’ agreement, unless it is established that such a distribution would produce an unconscionable result.
202       Mr Andrews amended his pleadings to delete a claim for the sale of the property and instead to seek declaratory relief and equitable compensation. However, reference to the possibility of the sale of the property was made in final submissions. I will hear the parties on whether a sale should be ordered and the terms of any such sale.
203       The remaining issue is how the net equity in the property, whether pursuant to a sale or taken from valuations, should be distributed. Mr Andrews and Mr
T 1100
Muschinski v Dodds (supra) at 623, and Fletcher ‘The Law of Partnership in Australia’ (9th ed.) p.252
Kay agreed initially that the net profit achieved by the joint venture would be divided equally between the parties. However, the decisions in Muschinski v Dodds and Baumgartner v Baumgartner indicate that any prima facie division can be departed from where it has been established that the result would be unconscionable. Deane J, stated in Muschinski v Dodds:
“If the venture between Mrs Muschinski and Mr Dodds had been merely a commercial one involving the purchase, development, partial realization and use of the Picton land, there would be little room for argument about the appropriate characterization, for the purposes of the relevant principle equity, of Mr Dodds’ conduct in seeking to assert and retain the full benefit derived by him from Mrs Muschinski’s contribution without making any allowance to compensate her for the disproportion between those contributions and his own. The basis upon which Mrs Muschinski made her contributions was that Mr Dodds, would in due course, contribute, both in money and labour, to the subsequent development. Their planned endeavour collapsed at a time when Mrs Muschinski had made all or almost all of her expected contribution to the overall venture, but Mr Dodds had made almost none of his. The parties had neither adverted to nor made special provision to deal with that situation. If no more than the commercial relationship had been involved, Mr Dodds’ conduct in seeking to catch and retain the unfair advantage of unforeseen circumstances by asserting his legal entitlement of a one- half interest in the property without assenting to any adjustment to compensate Ms Muschinski for the unintended gross disproportion between their respective contributions would be plainly unconscionable for the purposes of the relevant principle of equity. Indeed, if the relationship had been merely a commercial one, such conduct on the part of Mr Dodds would be of the very type which the relevant principle exists to preclude.”53
204       In this case, although the joint venture was between friends, it still is to be considered as commercial for the purposes of the relevant principle of equity and not a mixture of commercial and the personal, as was the case in Muschinski v Dodds.
205       In Baumgartner v Baumgartner, the High Court considered that the respective contributions of parties who were living together and pooling their income were not approximately equal and that adjustments should be made in the interests of justice.
206       A number of matters need to be considered in determining whether it has
supra at 621
been established that it would be unconscionable to divide the net equity in
the property or the proceeds of sale equally.
207       First, there is the disparity in the financial contributions made by Mr Andrews and Mr Kay. This is apparent from the amount of their capital contributions set out above.
208       Second, there is Mr Kay’s claim for the opportunity cost of capital. This claim is not a capital contribution and falls for consideration in determining the distribution of the net residue of the equity in the property. As previously stated, Mr Kay gave evidence that he would have purchased a property in Mont Albert if he had known that the joint venture was not going to proceed and would thereby have avoided paying approximately $64,000 in rent. His first method of calculating this cost of capital was the price increase on a Mont Albert property for $500,000 if he had made such a purchase. He put this at $230,000. Alternatively, he calculated his cost of capital as the amount of $116,049, which was the amount of interest that the joint venture, or Mr Andrews, did not have to pay because he applied his personal funds to the purchase, maintenance and enhancement of the property. This sum was calculated using the CBA/Colonial interest rate until June 2007 and the Westpac rate thereafter.
209       I do not give overwhelming importance on Mr Kay’s loss of an opportunity to purchase a property in Mont Albert. He took the risk of entering into the joint venture rather than following an alternative path. He let the joint venture drift. There was always a risk that Mr Andrews would end the joint venture just as I have decided that Mr Kay did. I give some importance to the fact that Mr Kay’s loan repayments saved Mr Andrews from contributing to the repayment of loans.
210       Third, there is the obtaining of the Planning Permit and Mr Andrews’ contribution in time in obtaining the Planning Permit and later its renewal which increased the value of the property. That was not a capital contribution and its significance falls to be considered in determining how the net residual equity in the property should be divided. The Valuers called by the parties, Mr Cocks for Mr Andrews and Mr Brindley for Mr Kay, gave evidence as to the increase in value of the property attributable to the Permit. Mr Cocks put that increase in value as at September 2007 as $150,000 and as at July 2009, as $114,000. Mr Brindley put the increase in value as at June 2007, as $140,000. I propose to adopt the figure of $114,000.00 which is closest in time to the calculations being undertaken.
211       Mr Kay argued against any sum being paid to Mr Andrews in recognition of his obtaining the Planning Permit. Mr Kay contended that obtaining the Permit had eliminated a risk in holding the land and the Permit’s value was to be only regarded as the elimination of a time constraint. Alternatively, Mr Kay submitted that any division of the increase in its value should be confined to the current increase in the value of the property caused by the Permit, discounted for the possibility that it may not be renewed. The increase should be calculated by applying the contributions that the parties had made, which were said to be 2.04 per cent by Mr Andrews and 97.96 per cent by Mr Kay, and that this amounted be discounted by an amount of $7,000.00 representing the cost of the Permit extension. This methodology was said to produce a figure of $11,738.09.
212       Mr Andrews, through the engagement of planners and surveyors, obtained the Planning Permit. That event was a significant step in the development of the property. He later obtained the renewal of the Permit. This was a form of contribution to the property, applying the principles in Muschinski v Dodds.
213       However, to treat Mr Andrews as contributing the full $114,000 takes no account of the fact the increases in value of the property due to the grant of the Planning Permit occurred because Mr Kay continued to pay the loan repayments. If he had not been able to finance the property development, no planning permission could have been obtained.
214       Fourth, Mr Andrews did not have to carry out the construction of town houses which was a cause of the original agreement that he would receive an entitlement to a fifty per cent share of any net profit.
215       Mr Kay submitted that Mr Andrews should only be awarded substantial damages if he, Mr Kay, had engaged in unconscionable conduct, and relied on cases such as Yeoman’s Row Management Ltd v Cobbe54 and Donis v Donis.55 Those cases do not assist where there has been a collapse of a joint venture, rather the approach in Muschinski v Dodds is applicable.
216       Mr Kay did argue that Mr Andrews should not receive any part of the proceeds of the property because he had acted unconscionably. A number of these arguments were determined by the conclusion that Mr Kay was entitled to terminate the joint venture. Most of the others were matters that Mr Kay accepted in the course of the joint venture.
217       These arguments included that Mr Andrews had breached the agreement by failing to pay half the purchase price, by not keeping to the construction cost estimate of $10,000 per square and not giving the project priority. Further, the arguments went that Mr Andrews did not purchase the property in joint names with Mr Kay, did not borrow the loan funds jointly with him, did not provide documents for the progress of the project and did not contribute equally to the repayments of interest.
218       Mr Kay accepted or acquiesced in each of these actions of Mr Andrews and decided to proceed with the joint venture, including entering into the building contract of August 2006. The actions of Mr Andrews on which Mr Kay relies
This decision of the United Kingdom Court of Appeal was reversed by the House of Lords: Cobbe v Yeoman’s Rowe Management [2008] 1 WLR 1752 and see Lord Neuberger ‘Thoughts on the Law of Equitable Estoppel’ (2010) 84 Australian Law Journal 225.
[2007] VSCA 89
cannot, in those circumstances, provide a basis for a claim of unconscionable conduct. The argument that Mr Andrews breached his duties as a fiduciary to disclose material matters to Mr Kay is not made out for reasons given below.
219       Taking all these matters into consideration, it has been established by Mr Kay that it would be unconscionable to distribute the residual equity in the property equally. This is because Mr Kay made the overwhelming amount of capital contributions in respect of the property. This has in large part enabled it to increase in value and produce any net equity. The second reason for this conclusion is that Mr Andrews did not carry out any construction work.
220       A division of the net proceeds of the property as to one fifth to Mr Andrews and four fifths to Mr Kay overcomes the unconscionable result of an equal distribution. It takes into account of the loss of opportunity pleaded by Mr Kay and the fact that Mr Kay has made the overwhelming financial contributions.
221       This division also recognizes that Mr Andrews was principally responsible for achieving the grant of the Planning Permit and the resulting increase in the value of the property. I say principally, and not solely, to take account of Mr Kay’s role in this aspect of the matter. Throughout the joint venture and thereafter he has been responsible for and has paid the loan repayments. There would have been no increase in value due to a Planning Permit if he had not done so.
222       The case differs from Muschinski v Dodds where Mr Dodds became a tenant in common in anticipation of the work that he was to do. Here, Mr Andrews expressly declined the opportunity to become the joint registered proprietors of the land, and the Canterbury Trust only protected his interests, if at all, while the joint venture continued. He avoided the risks that becoming joint lender might have exposed him to.
223       Mr Andrews relied on the fact that the parties had entered the joint venture expecting a profit of $100,000. But that expectation has little relevance when the scale and duration of Mr Kay’s capital contributions are considered.
224       Mr Kay submitted that I should deduct from any amount awarded to Mr Andrews a proportion of any taxation liability that Mr Kay might incur because of any payment that might have to be awarded to Mr Andrews as a result of this proceeding. Mr Andrews disputed this contention. On the material before me, I am not persuaded of the basis on which such a deduction should occur. However, I shall hear the parties further on this issue before making orders.
The Remaining Causes of Action
225       Having determined how the joint venture property should be distributed on the termination of the joint venture, there remains for consideration other causes of action relied on by the parties. I have postponed consideration of these claims to this point in the judgment because I have decided that none of them are established.
Fair Trading Act Claims
226       The first claim to be considered is made by both parties and is that the other had breached the Fair Trading Act 1999 by engaging in misleading or deceptive conduct.
The Plaintiff’s Claim
227       Mr Andrews’ claim for breach of the Fair Trading Act is that Mr Kay represented in trade or commerce in May 2004 that Mr Andrews’ interest in the Foch Street property was secured and protected pursuant to the terms of a trust deed entitled ‘The Canterbury Trust’. Mr Andrews pleads that in reliance on that representation, he continued to carry out his obligations under the joint venture agreement. The representation is alleged to be false and to contravene s. 9 of the Fair Trading Act, implicitly because it was misleading or deceptive. Mr Andrews has not pleaded that any damage was suffered as a result of the alleged contravention.
228       This claim has not been made out for reasons similar to the reasons given for deciding that no estoppel arises against Mr Kay. It is doubtful on the evidence that any such representation was made, but if it was, Mr Andrews did not suffer any loss or damage because of that reliance. The only substantive work that Mr Andrews did after the creation of the Canterbury Trust was to continue with the planning application, which had commenced previously.
The Defendant’s Claim
229       Mr Kay claimed that Mr Andrews had contravened the Fair Trading Act and sought an order pursuant to s.158(2) that the contract between them was void ab initio. Mr Kay pleaded six representations, which concerned things that Mr Andrews represented that he would do if Mr Kay would enter into the joint venture. Each representation was pleaded to be as to a future matter and reliance placed on s.4(2)(b) of the Fair Trading Act, by which the person making the representation bears the burden of proving that the person had reasonable grounds for making the representation. Mr Kay argued that he relied on the representations in deciding to enter into the joint venture rather than purchasing a property in Mont Albert.
230       The representations were, first, that Mr Andrews would pay the costs of and share the profits from the development equally. I find that from the date of purchase of the property it was clear to Mr Kay that Mr Andrews was not going to so share the costs. The representation about sharing the profit was only applicable if the joint venture was completed. The representation relied on has not been established.
231       The next representation is that the three town houses would be constructed at a cost of no more than $10,000 per square. That representation was made before planning approval was granted and could have been no more than a provisional estimate. Mr Kay ultimately signed the building contract in August 2006 which contained a higher construction cost. It has not been established that the representation was false. In any event, The estimate of $10,000 per square was a reasonable estimate in November 2004. There were reasonable grounds for making the representation.
232       The next representation is that each of the parties would make a profit from the development of $100,000. At best, this was estimation by Mr Andrews. It has not been proved that such a profit could not have been achieved if the joint venture had run its course. It has not been established that Mr Kay, an accountant, relied on this representation. Mr Andrews had reasonable grounds to make it based on the building estimates in evidence.
233       The next representation is that Mr Andrews would give priority to the construction of the town houses over his other building work. Mr Andrews accepted that he had made that statement.56 This representation and the next related to the construction period after finance had been arranged. Insofar as it related to the future, there was a reasonable basis for it. In addition, it otherwise has not been shown to be misleading or deceptive. Once finance was obtained in 2007, Mr Andrews was willing to commence construction.
234       The next representation was that the construction of the townhouses would be completed within eight months of completion of the purchase of the land. The Defence contains an admission that construction of the town houses would be completed (save for unforeseen contingencies) within eight months from the commencement of construction. Mr Andrews stated that he said that the project would take two years – one to get the permit and one year to sell.57 Mr Buchanan said that it would take three months to build in total but that small projects were often undertaken over a longer period. This representation was operative upon obtaining planning approval and the obtaining of finance, which did not occur until 2007. In addition the time frame for construction was replaced by the terms of the building contracts made on 26 August 2006

T 205
T 206
which provided for 306 days. The representation relied on has not been established. Alternatively if it were made and breached any breach was waived and the representation was not ultimately relied on by Mr Kay, because the time frame to which it referred was replaced by the terms of the building contract.
235       The next representation is that by the time settlement of the purchase occurred, all permits and plans would be in place to allow the building work to commence. Such a representation has not been established. Obtaining planning and building approval was beyond the control of Mr Andrews.
236       If contrary to my conclusion any contraventions of the Fair Trading Act did occur as a result of any of the representations I am not satisfied that Mr Kay has suffered any loss as a result of the contraventions. The evidence establishes that he constantly accepted conduct from Mr Andrews that he regarded as a breach of his obligations. I do not consider that the representations persuaded Mr Kay to enter into the joint venture agreement, but rather that he made his own decision to do so independent of any representations. Any loss or damage has therefore not been caused by any contravention of the Fair Trading Act and cannot be recovered.
237       The defendant’s claims under the Fair Trading Act are not established.
Mr Kay’s Remaining Defences and Claims
Did Mr Andrews breach fiduciary duties by failing to disclose material matters?
238       Mr Andrews and Mr Kay, because of their fiduciary relationship, owed to each other a duty to make full and fair disclosure of matters within their knowledge that might materially affect venture a decision by the other to enter into the joint venture - see Hill v Rose.58
[1990] VR 129

239

As in all aspects of this case a crucial fact is that Mr Andrews and Mr Kay were friends, who met socially on a regular basis. They had some understanding of the other’s personal and work commitments. The arguments about the requirements of disclosure are to be viewed in the light that that friendship gave.

240

Mr Kay made detailed submissions about the alleged failure of Mr Andrews to disclose his inability to prioritise the work on the property.

241

The evidence does not establish that Mr Andrews failed to disclose to Mr Kay, in or about November 2003, any matter which he knew, but Mr Kay did not know, which might have affected Mr Kay’s decision about entering into the joint venture.

242

The possibility of delays associated with the building project, where consent to proceed is required from regulatory authorities and finance must be obtained is self-evident.

243

Mr Kay pointed to evidence that Mr Andrews could only do one project at a time and that the details of the Medway Street Box Hill North project had not been disclosed to him. This was a development project that Mr Andrews was pursuing for his own benefit. It was proceeding very slowly, the building permit having issued in 1998 and still had barely reached lock up stage in 2009. It involved a large financial commitment of some $600,000 by Mr Andrews and had led to disputation with the City of Whitehorse.

244

Mr Kay has not established that he would not have entered into the joint venture if he had known of the history of Mr Andrews’ involvement in the Medway Street project. Mr Kay knew that Mr Andrews was a builder engaged in fulltime work. Mr Kay did not, in or about November 2003, ask Mr Andrews for any detail of that work. The basis of friendship underpinning the joint venture makes it unlikely that in November 2003, Mr Kay would have been deterred by the delays encountered at Medway Street from pursuing the joint venture. This applies equally to the arguments that Mr Andrews should have informed Mr Kay that his financial capacity was limited because he was committed to a $600,000 loan in respect of the Medway Street development in November 2003

245

There were a number of other breach of fiduciary obligations relied on by Mr Kay. One was that Mr Andrews was profiting at the expense of Mr Kay by working on other business projects and his high builder’s margin of 15 per cent. Mr Kay acquiesced in that payment by agreeing to the terms of the building contracts in August 2006. Mr Kay also relied on Mr Andrews’ claim for the insurance premium he paid for builders’ insurance. Westpac required proof that Mr Andrews had that cover.

246

Mr Kay also relied on the failure to disclose the likely risks and vicissitudes of the project particularly the delays and possibly increased costs. These risks and vicissitudes include delays in obtaining permits, delays in the project increasing holding costs and the risks of costs exceeding those estimated in November 2003. Those delays and increased costs were not anticipated by either party at the commencement of the joint venture. No breach of the duty of disclosure has been established.
The Defendant’s Submission that the Plaintiff Repudiated the Contract

247

Mr Kay argued that the Court should infer that Mr Andrews was not giving priority to the project and thereby demonstrated an intention to no longer be bound by the joint venture. Mr Kay contended that he was entitled to accept this conduct as repudiation of the agreement, and did so on 14 July 2007. Mr Kay relied on the following factors, which were either pleaded or put in final submissions:

(a)

Mr Andrews failed to provide a share of the deposit or interest payments;

(b)

Mr Andrews failed to give priority to the project and his other work commitments did not permit him to perform any work between 2003 and 2007. Time was of the essence;

(c)

Mr Andrews was unable to complete the Medway Street project in thirteen years;

(d)

Mr Andrews was unable to do any work for a period of four years at the property despite admitting that the town houses would be completed within eight months;

(e)

Mr Andrews took two years to complete Mr Kay’s brother’s house renovation when the contract provided for ten months;

(f)

Mr Andrews was unable to provide the plans for the project after November 2005 until at least September 2006, and possibly as late as July 2007;

(g)

Mr Andrews delayed in delivering the building contracts from October 2005 until September 2006;

(h)

Mr Andrews never obtained a building permit or the engineering specifications necessary to advance the project which were pre- conditions for the performance of any work.
248 There were very significant delays in providing the building contracts and obtaining Council approval. The building permit and engineering drawings were never obtained. However the ultimate decision of Mr Kay to withdraw was not motivated by any of those considerations but by his assessment of the financial outlook for the project in July 2007. By signing the building contracts in August 2006 he waived any right that he had to complain of previous delays or, failures by Mr Andrews to contribute to costs. At a number of points along the way Mr Kay might well have been justified in claiming that the contract had been repudiated because of Mr Andrews’ failure to give attention to it. But both of them let matters drift. The evidence indicated that each party acquiesced in or waived the other’s breaches.
249 Counsel for Mr Kay submitted that his decision to proceed with the project on the basis that he was the sole purchaser and the sole financier, without complaint, was to be explained because of his reliance on his friendship with Mr Andrews. He was locked into the contract to purchase the property, and had paid a deposit of $49,500 from his own funds. He did not wish to argue with Mr Andrews, and believed, at the time of settlement, that the project would proceed. However his acquiescence in delays and the manner in which Mr Andrews wished to conduct the project extended beyond the settlement of the sale of the property.

Mr Kay’s Claim for the Repayment of the $15,000 Loaned to Mr Andrews
250 On or about 31 October 2005, Mr Andrews asked Mr Kay to lend him some $22,000 to $25,000. Mr Kay said that Mr Andrews told him that he was short of cash and needed to pay some sub-contractors and was expecting money in three to four weeks. Mr Kay could only lend $15,000 and Mr Andrews accepted that. Mr Kay submits that this payment coincided with a tax invoice from ‘A Better Design’ of 4 November 2005 for the architectural plans. The defendant claims the repayment of that sum, together with interest under s.58 of the Supreme Court Act 1958.
251 I find that the sum of $15,000 lent to Mr Andrews has not been repaid and that Mr Kay is entitled to repayment of that sum.

Conclusion
252       I have reached the following conclusions:

(a)

In November 2003, Mr Andrews and Mr Kay did become joint venturers to purchase and build three town houses on 55 Foch Street, North Box Hill and to divide the resulting net profit equally;

(b)

that the joint venture contained an implied term that enabled Mr Kay to terminate the joint venture;

(c)

that Mr Kay exercised the right to terminate the joint venture in the second half of 2007;

(d)

thereafter, in accordance with equitable principles, the parties were entitled to repayment of their capital contributions and to a division of the residual equity in the property equally, unless it was established that such a division would be unconscionable;
(e) the capital contributions of the parties were:
(i)      Mr Andrews $24,473.31;
(ii)     Mr Kay as at December 2009 $463,780.31.

(f) It would be unconscionable, in view of their respective contributions, for the parties to share equally in the net residual equity in the property and that a division should occur of that equity as to one fifth to Mr Andrews and four fifths to Mr Kay;
(g) Mr Kay is entitled to judgment against Mr Andrews on the counterclaim for the sum of $15,000.00, together with interest in respect of the sum loaned to Mr Andrews and not repaid.
253 I will hear the parties as to the form of order that I should make and as to costs.

- - -

(a)	the Settlor, as Settlor, hereby declares that the Trustee shall; and
(b)	the Trustee hereby declare that they will henceforth –

(1)	We appoint an agent and put the property to auction in six to seven weeks, allowing for proper marketing.
(2)	We take the risk of going ahead and build.
(3)	If you wish to keep the property for whatever personal reasons you may have, you buy me out now.

(a)	the obligation to pay the costs of the development;
(b)	what was to happen if one party decided to abandon the project prior to development consent and the other did not wish to do so?
(c)	what was to happen if one party wished to abandon the project after development consent was obtained? and
(d)	the costs that were to be taken into account to ascertain the “net proceeds” of the development;
(e)	the mechanism for resolving disputes between the parties.

Deposit paid	$49,500.00
Payments into CBA/Colonia A/c 373555404	$193,078.49
Payments into WBC 49-9454	$94,867.12
Payments to WBC Private 29-5223	$97,715.88
Payments into Citibank Credit A/c	$11,115.94
Development Costs privately funded	$14,537.19
Rates and incidentals privately funded	$11,258.11
Rent Received	-$11,990.00

Total Defendant Contributions at 30/9/09	$460,082.72
==========

(a)	Mr Andrews failed to provide a share of the deposit or interest payments;
(b)	Mr Andrews failed to give priority to the project and his other work commitments did not permit him to perform any work between 2003 and 2007. Time was of the essence;
(c)	Mr Andrews was unable to complete the Medway Street project in thirteen years;
(d)	Mr Andrews was unable to do any work for a period of four years at the property despite admitting that the town houses would be completed within eight months;
(e)	Mr Andrews took two years to complete Mr Kay’s brother’s house renovation when the contract provided for ten months;
(f)	Mr Andrews was unable to provide the plans for the project after November 2005 until at least September 2006, and possibly as late as July 2007;
(g)	Mr Andrews delayed in delivering the building contracts from October 2005 until September 2006;
(h)	Mr Andrews never obtained a building permit or the engineering specifications necessary to advance the project which were pre- conditions for the performance of any work.

(f)	It would be unconscionable, in view of their respective contributions, for the parties to share equally in the net residual equity in the property and that a division should occur of that equity as to one fifth to Mr Andrews and four fifths to Mr Kay;
(g)	Mr Kay is entitled to judgment against Mr Andrews on the counterclaim for the sum of $15,000.00, together with interest in respect of the sum loaned to Mr Andrews and not repaid.

[2010] VCC 982

4 August 2010