Arraj v Al-daqaq and Naami

[2023] NSWDC 9

District Court

New South Wales

Medium Neutral Citation:

Arraj v Al-daqaq and Naami [2023] NSWDC 9

Hearing dates:

8 and 9 December 2022

Date of orders:

3 February 2023

Decision date:

03 February 2023

Jurisdiction:

Civil

Before:

Weber SC DCJ

Decision:

(1)   That there be judgment and verdict for the plaintiff against the defendants in the sum of $195,857.74.

(2) Interest thereon at the rates pertaining from time to time pursuant to s 100 of the Civil Procedure Act.

(3)   That the defendants pay the plaintiff’s costs.

Catchwords:

Contract of Loan – Construction Loan – where monies advanced have not been repaid

Legislation Cited:

Civil Procedure Act

Cases Cited:

Thomas v Hollier (1984) 156 CLR 152

Young v Queensland Trustees Ltd (1956) 99 CLR 560

Category:

Principal judgment

Parties:

Plaintiff: Simon Arraj
First Defendant: Haythem Khairi Al-daqaq
Second Defendant: Maria Naami

Representation:

Counsel:
Plaintiff: J Pokoney
First Defendant: Self Represented
Second Defendant: Self Represented
Solicitors:
Plaintiff: Deutsch Partners
First Defendant: N/a
Second Defendant: N/a

File Number(s):

2021/00364317

JUDGMENT

Introduction

1. The plaintiff is the sole director and shareholder of Checkpoint Finance Group Pty Ltd (“CFG”). CFG carries on the business of providing mortgage management services.

2. The plaintiff explained CFG's role in a typical loan transaction in the following way:

“In a typical loan transaction, CFG’s role as a Loan/Mortgage/Facility Manager is to manage the entire loan process pre- and post-settlement including:

origination of new loan applications;

borrower and property due diligence;

borrower and guarantor credit checks;

instructing and managing panel-approved land values;

instructing and managing panel-approved quantity surveyors for construction loans;

instructing solicitors, certification and settlement;

managing loan repayments;

issuing loan statements;

managing progress payments for construction loans;

facilitating loan variations and restructures; and

discharging mortgages at the end of the loan.

3. The first defendant is the registered proprietor of certain land in Yagoona (“The Land”). The second defendant is his wife. All dealings between the defendants and the plaintiff were undertaken by the second defendant, whose grasp of English is superior to the first defendant’s English language skills.

4. The first defendant purchased the land with a view to demolishing the existing house and undertaking a duplex development. The intention was that once complete, the defendants would live in one duplex and sell the other. The development was to be undertaken jointly between the first and second defendant.

5. Neither plaintiff had any experience in either building or property development. Neither presented as commercially adept.

The Defendants Seek Finance

6. A development application was ultimately obtained for the duplex development and plans for construction were made. The defendants required finance in order to undertake the development. They were advised that a financier would require any application for finance to be made by a company controlled by them, rather than by them in their individual capacities. Accordingly, the plaintiff's caused Christina Pty Ltd to be incorporated (“Christina”). Both defendants were shareholders and directors of Christina.

7. In order to obtain finance, the defendants approached the plaintiff. In addition to providing mortgage management services through CFG, the plaintiff also acted as a representative of Riggy & Boo Pty Ltd (Riggy & Boo), a private lender.

8. On 9 September 2019, a loan facility to Christina was approved by Riggy & Boo, and on 4 March 2019 a construction loan between Christina and Riggy & Boo was executed. The defendants were guarantors of Christina's obligations pursuant to the construction loan. The evidence however was that Christina played no part in the subsequent development. Its role was limited to being the applicant for the finance.

9. Before the construction loan could be finalised, there were a number of conditions precedent to the contract which required attention. Importantly, for present purposes, home warranty insurance (HOWI) needed to be put in place.

The HOWI Advance

10. The plaintiff gave evidence that on 10 February 2019 (some three weeks before the construction loan was executed), he had a conversation with second defendant to the following effect:

“Ms Naami: Can you please pay the home owners insurance for us and we will repay you quickly”

Mr Arraj: I am not your lender. You don’t have the money to pay this?

Ms Naami: We don’t have it right now. We are getting as much money as we can now so the builder can start construction immediately.

Mr Arraj: Ok, I will do this. I will lend you the money interest free but I need you it paid back during the first few draw downs.

Ms Naami: Thank you. We will make sure you get paid back quickly.”

11. The second defendants’ evidence in relation to this conversation was somewhat equivocal. She says that at the time of the conversation she believed that the funds for the HOWI would be drawn down from the Riggy & Boo construction loan. She said she did not ask the plaintiff to personally advance these funds, rather she says that she requested that the monies be advanced from the construction loan.

12. It simply could not be correct however that the HOWI would be paid out of the construction loan, as it was not in existence at the time of the conversation, and the provision of HOWI was a condition precedent to it coming into existence.

13. The evidence clearly establishes that the plaintiff did pay the sum of $26,440.24 on account of the HOWI.

14. The plaintiff says that his communication with the second defendant set out above formed the basis of further loans, which he seeks to recover in these proceedings.

15. The plaintiff then sent an email to the second defendant confirming the payment. He also provided the defendants with a copy of the remittance for payment and added:

“Payment for Home Warranty Insurance has bene [sic] made by me. I will need to be reimbursed on settlement...”

The Initial Deposit Payable to the Builder

16. On 11 March 2019 the builder requested that he be paid sum of $15,283.50 on account of the remaining deposit owed to him.

17. The plaintiff says that he received a phone call from second defendant on or about that date in which she said words to the following effect:

“Can you please pay the deposit for me? We will pay you back quickly when building starts.”

18. On the same day the plaintiff sent an email to the second defendant stating:

“I will attend to this.

When are you proposing to start construction works?”

19. On 14 March 2019, the evidence discloses that the plaintiff did in fact pay the balance of the deposit ($15,283.50) as requested by the builder. After this occurred, later on that day the plaintiff received an email from the second defendant stating:

“Hi simon just want to know if you transferred the rest of the deposit to the builder thanks”

Construction Work Starts

20. On 14 June 2019 a construction certificate was issued by the Bankstown Council. Construction work started shortly thereafter.

Deed of Variation and Acknowledgement of the Construction Loan

21. The term of the construction loan was due to expire in March 2020. By early 2020 however it had become apparent that the project could not be completed by that time, and as such the duplexes would not be ready for sale by March 2020 as was contemplated by the term of the construction loan. Riggy & Boo agreed to extend the construction facility for ten months.

Further Requests for Payment – Windows and Tiles

22. On 23 March plaintiff received an email from second defendants stating:

“Hi simon I recived a call from the windows company the force us to pay the deposit today or they will cancel every things and ingrese the price. Also the tiels company they advice me that they have the limits stock we have to pay the today, thanks”

23. Later on that day he received a further email from the second defendant stating:

"Hi Simon I just want to know if you will pay the deposit to the window company because they call me again and I dont know what I will answer .cancel or go a head?”

24. Later on the same day he had a conversation with the second defendant in which she said:

“Will you also pay the deposit for the tiles?"

25. At 6.50pm, the plaintiff received an email from the second defendant stating:

“Hi Simon I announced now from Joseph that he didn’t recived any things from the lender soliceter I think we are now in a very danger situation I dont have any more to say thanks for every things."

26. At 7:14pm on the same day, the plaintiff sent an email to the second defendant stating:

“I continue to work to resolve this. My comments are as follows:

   The deed was sent to Joseph at 6:30pm. Please see attached. If you sign this tomorrow we will make the payment of $60,000 immediately

   I spoke to Shadi (Windows) and told him to make the frames. I have guaranteed his payment

   I will be paying the 30% deposit for the tiles tomorrow

We are all frustrated and nervous about the situation. It's not my fault Sinan was very slow and no one expected the Coronavirus. We will work together to complete this."

27. The evidence establishes that on 30 March 2020, the plaintiff paid the $4,813 deposit for the tiles to OTC Tiles & Bathrooms.

28. On 1 April 2020 the plaintiff also paid the $7,000 deposit for the windows to Pacific Windows.

Further Request for Payments

29. In early August 2020,the plaintiff deposed that he had a conversation with the defendants in words to the following effect:

“Ms Naami: We need to hurry up the construction.

Me: I understand. I want this to be expedited as well. The QS won't authorise payments as you construction budget has increased significantly’. I have personally lent you a lot of money and it's been interest free. I have done this to help you out. But I didn’t expect all these delays which are due to you and your builder.

Ms Naami: I know you help us a lot, but we need to finish.

Me: You can’t finish unless the builder pulls his finger out and starts pushing the construction. I have also lent you money in good faith. It started off as a small amount and now we are talking a lot of money. I need security for my loan and the easiest way is to lodge a caveat.

Ms Naami: We are simple people. We are not bad people. We know you help us, and we will give you your money.

Me: I have acted in good faith to help you complete your property. But if these delays continue at some point, I will need security for money. All the money I have given you has gone towards building and improving the property. A caveat will be the best option.

Ms Naami: We understand and that’s fine. We not running away."

30. On 12 August 2020, the plaintiff received an email from the builder, which was copied to the second defendant setting out the costs which the builder anticipated would be payable for the month of August. These were estimated to be $70,000.

31. On the same day, the plaintiff sent an email in reply to the builder and Ms Naami stating;

“Hi Sinan & Maria,

You have excluded bathroom PC items. This should be included and be completed by 15 Sep 2020.

The windows supplier has sent the attached invoice. You will need to account for this in the $70k.

I will need the total cost to complete and time frame to PC.

I also require acknowledgement of the following:

   I am personally owed $48,313, which is independent of the loan with Piggy & Boo

   The additional $70,000 is a loan from me and is separate to the loan with Piggy & Boo

   The total amount owing to me will be $118,313. This is due and payable by no later than 30 November 2020

Please provide a response to this ASAP."

32. By subsequent email, the second defendant confirmed that payment of the $70,000 was to be made directly to the builder. In responding to the plaintiffs email, the second defendant did not qualify, contradict or otherwise challenge the characterisation of the funds as a loan from the plaintiff to the defendants.

33. The payment of $70,000 was made by the plaintiff in two instalments. The first was made on 14 August 2020 in the sum of $50,000. The second was made on 30 August 2020 for the remaining sum of $20,000.

Plumbing and Civil Payment

34. On 9 October 2020, the plaintiff received an email from the builder addressed to both the second defendant and the plaintiff. The email stated:

"Please find attached invoices requiring immediate payment so that I can push these contractors to complete the remaining works ahead of concreting. This also so that I can push the Job once and for all towards completion. There will be other contractors requiring payments as well including deposits or claims, I will send them in the order of urgency.

Please advise with the remittance once paid.”

35. Those invoices were issued by JJJ Plumbing Pty Ltd ($5,500) and AMA Civil & Building Solutions ($7,161).

36. At 8.28am on 10 October 2020, the plaintiff sent an email to the builder and the second defendant stating:

"Payment for these invoices have been made. Receipts attached.

Please explain why the concrete works have not commenced? There is no reason why work is not continuing onsite. You can not expect any lender to pay you for works not commenced or complete. You received a deposit of $36,500 at the stad of the job and your sub-contractors should trust you that they will be paid.

I am now owed $130,974, broken down as follows:

37. The evidence clearly discloses that payments in fact were made for these amounts however some were made from an account of a related company SDA. I shall return to this topic later in these reasons.

38. It is important to note that the defendants never demurred from the plaintiffs assertion that he had paid the above sums on their behalf.

Joinery Payment

39. Once again, the plaintiff made payment. Having done so, he sent a confirmatory email to the Builder and the second defendant, which included the following:

“Payment for these invoices have been made. Receipts attached…

… I am now owed $130,974, broken down as follows:

40. There was again no demur from the defendants as to the plaintiffs assertions.

Payments to Surveyor

41. On 21 December 2020, the plaintiff says that he had a telephone conversation with the second defendant in words to the following effect:

Ms Naami: “ We have invoices for the surveyor to pay. Can you please pay?"

Me: “I keep finding you out of my own funds. This job is being delayed because of you and your builder. You are way over budget and you haven’t resolved the issues with Sydney Water and the relocation of the power pole."

Ms Naami: “We are doing it. Sydney Water issue fixed and we just need to pay the Surveyor. We have approval to move the power pole."

Me: “I’ve been asking for a copy of the approval for months. Where is it?"

Ms Naami: “I ask Sinan for it."

42. On the same day, the plaintiff paid $2,660.00 to C&A Surveyors.

43. Later that day, the plaintiff received an email from the second defendant stating:

“Thank you for paid the survayer invoice. GOD bless you a protect you allwayes.”

Further Construction Costs

44. On 31 December 2020, the term of the Construction Facility (as extended) expired. The amount owed to Riggy & Boo was not repaid by Christina Pty Ltd. Through subsequent correspondence, the defendants, the builder, and the plaintiff sought valuations of the property in order to assess the costs of completing the works (as compared with likely return).

45. On 18 February 2021, the builder sent an email to the plaintiff and the second defendant advising that there were “a couple of outstanding invoices” and noting that a “cash injection to move forward” was required to complete the works at the Property.

46. After seeking confirmation that necessary approvals had been obtained, The plaintiff confirmed that a further payment of $30,000 would be made by him. The second defendant provided the account details for the payment, by subsequent email.

47. The plaintiff subsequently made two payments of $20,000 and $22,000 on 24 February 2021 and 6 March 2021 respectively, into the account nominated by the second defendant.

48. These payments were the last made by the plaintiff pursuant to the Loan Agreement.

49. In summary the plaintiff has established that the following payments have been made by him to or for the benefit of the defendants.

The Defendants’ Acknowledgement

50. From March 2021 until approximately April 2021, the plaintiff sought to contact the second defendant by telephone, without success.

51. Following this period of non-communication, on 23 April 2021 the second defendant wrote an email to the plaintiff, which stated:

“Hi simon

I sent you this letter can you please sign it and return it to me .and we will go forward to finish the construction and keep all the parties happy.”

52. The “letter” described within the email was attached as a PDF file and expressly recognised the defendants’ indebtedness, whilst requesting that further moneys be advanced by the plaintiff. Critically, the letter provided, inter alia:

Mr Simon Arraj.

We confirm the following:

1.   We acknowledge that you have paid monies on our behalf.

2.   On Thursday 22 April 2021 you confirmed that there is no written loan agreement for the monies you have paid and you are not charging or claiming interest on the monies you have paid.

3.   An account of the amount of monies you have paid needs to be undertaken – and we request you provide receipts and records of the payments made including any bank statements….

53. The letter proceeded to request a further advance in the sum of $50,000 from the plaintiff. It was signed by both of the defendants. The request for further funds, however, was not accepted by the plaintiff and no further payment was made.

54. The importance of this letter, signed by both the defendants, is not in respect of a request for further advances, as none were made. Its importance is in the fact that it provides an unequivocal acknowledgement by the defendants of the making of advances by the plaintiff to their benefit, as the plaintiff alleges.

The Plaintiff’s Claim

55. The plaintiff seeks repayment of all monies advanced by him on the basis first of there being a contract of loan between the plaintiff and the defendants, or alternatively, he makes a restitution reclaim for monies had and received.

The Defendants’ Position

56. The defendant’s case, as articulated by the second defendant was difficult to pin down. She says in her affidavit that she believed that the funds which were advanced, were not advanced by the plaintiff, but were in fact advanced by Riggy & Boo. This was clearly not the case. She says that she did not personally ask the plaintiff to personally advance the funds. This again is not the case as the evidence discloses that in emails, she did in fact request for the plaintiff to make the loans. At times she suggested that the advances were made to Christina and not the defendants.

57. I thus do not accept the evidence of the defendants to the effect that the monies are not in fact being advanced by the plaintiff. I also reject the suggestion that the advances were made to Christina.

58. I should add however that I did not consider that either of the defendants was deliberately untruthful in their evidence. In my view it seems that the defendants were labouring under a considerable amount of confusion throughout the process, as to the respective roles of Riggy & Boo, CFG and the plaintiff in the ill-fated construction project. I also consider that the second defendant’s ever-increasing anguish as the property development became problematic has caused her memory of what occurred to become flawed.

59. In summary, I do not accept the defendant’s evidence where it is inconsistent with the plaintiff’s evidence.

60. In this regard, it is important to recall that the evidence discloses however that on numerous occasions the plaintiff, in writing confirmed that he was making advances personally to or on behalf of the defendants, and on no occasion did the second defendant, with whom the plaintiff was dealing, ever challenge such an assertion. Notwithstanding the lack of commercial sophistication of the defendants, one would have expected that if the defendant challenged the proposition that the plaintiff was lending money to them directly from his own funds that they would have said so (Thomas v Hollier (1984) 156 CLR 152 at [157]).

56. It is also important to recall that in April 2021 the defendants signed a document which expressly acknowledged that the plaintiff had made payments on their behalf.

57. In her oral submissions, the second defendant appeared to be wishing to articulate some form of cross claim against the plaintiff which would have presumably justified her position that the defendants are not liable to repay the plaintiff the monies which he advanced. There was however no such cross claim on foot.

SDA

63. Certain of the payments claimed by the plaintiff were made from the bank account t of the company SDA. The evidence was that the references in bank payment documentation to “SDA” was a reference to the company SDA investment Holdings Pty Ltd. The plaintiff is the sole director and shareholder of the company. The plaintiff gave evidence that the bank account of SDA was his business trading account.

64. Mr Pokoney of counsel who appeared for the plaintiff, said that the fact that the certain monies came from the SDA account did not inhibit the plaintiff's capacity to claim repayment of that sum in his own name.

65. It was put to me that the fact that the plaintiff borrowed from SDA, in order to make the payments as requested by the second defendant, did not detract from the fact that he had made those payments.

66. It was submitted that the situation was no different from that which would arise in circumstances where hypothetically the plaintiff borrowed money from a bank in order to make the payments.

67. I accept that this is the correct analysis, and that the plaintiff is indebted to SDA as in the exercise of his fiduciary duties as a director of SDA he would be obliged to repay to SDA such sums as were advanced from its account.

Conclusion

68. The plaintiff has established that by a series of transactions commencing with the HOWI advance, he made loans to the defendants on terms set out in the conversation whereby the second defendant made the request for the HOWI advance (see paragraph 10 herein)

69. Accordingly, an action in debt is available to the plaintiff to recover the advanced funds (see Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566).

70. There being a contract of loan in place there is no occasion, or need to consider the plaintiff’s alternative case in restitution.

71. The plaintiff is entitled to judgment in the sum of $195,857.74 with costs to follow the event.

Orders

1. That there be judgment and verdict for the plaintiff against the defendants in the sum of $195,857.74.

2. Interest thereon at the rates pertaining from time to time pursuant to s 100 of the Civil Procedure Act.

3. That the defendants pay the plaintiff’s costs.

**********

Decision last updated: 03 February 2023