Comlin Holdings Pty Ltd v Metlej Developments Pty Ltd

[2018] NSWSC 761

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	Comlin Holdings Pty Ltd v Metlej Developments Pty Ltd [2018] NSWSC 761
Hearing dates:	13, 14, 15, 21 November 2017; supplementary written submissions (last submissions received 30 November 2017)
Date of orders:	28 May 2018
Decision date:	28 May 2018
Jurisdiction:	Equity
Before:	Parker J
Decision:	Plaintiff’s claim dismissed
Catchwords:	Partnership – rights and duties of partners inter se – Partnership Act 1892 (NSW) s 28 – obligation to account annually for partnership income Estoppel — estoppel by representation — equitable fraud – alleged agreement by plaintiff to allow the defendants to purchase certain land for redevelopment – alleged representation that the plaintiff would share in the profits of that development – equitable relief only available where no adequate remedy at law – remedies available in the law of partnership – no available claim based on estoppel or equitable fraud Land law – conveyancing – requirements of writing – contracts for the sale or other disposition of land or any interest in land – Conveyancing Act 1919 (NSW) s 54A – alleged agreement between successful bidder at auction with other parties to develop land – writing ordinarily required Land law – conveyancing – requirements of writing – exceptions – fraud on the Statute – no requirement of writing where detriment may be shown – loss of opportunity by being ready, able and willing to complete constitutes detriment – writing not required Limitation of actions – general – statute of limitations – claim against partners for share of alleged partnership property and profits of alleged partnership business – Limitations Act 1969 (NSW) s 15 – time runs from termination of the partnership business – alleged agreement to purchase and develop property – claim barred Limitation of actions – general – statute of limitations – claim for constructive trust relief based on alleged agreement to purchase and develop property with plaintiff to receive one-fifth share – Limitations Act 1969 (NSW) s 47 – time runs from the first act inconsistent with the alleged trust – claim not barred by statute Limitation of actions – equity – laches – concurrent questions with applicable statutory limitation periods – prejudice suffered by the defendant as a result of the passage of time – loss of evidence – death of a key witness – inordinate delay – speculative venture – difficulty of redoing the accounts of the partnership as a whole – defence established Contract – abandonment – alleged agreement to purchase property and develop it in partnership – no financial participation by plaintiff for more than a decade – alleged agreement abandoned Partnership – general – what constitutes partnership – agreement – alleged agreement to purchase and develop property in partnership – no partnership established on the evidence
Legislation Cited:	Conveyancing Act 1919 (NSW), ss 23C, 54A Income Tax Assessment Act 1936, ss 91, 92 Law of Property Act 1925 (UK), s 40 Limitation Act 1939 (UK), s 19 Limitation Act 1969 (NSW), ss 11(1), 14, 15, 27, 47, 48 Partnership Act 1892 (NSW), ss 19, 20, 22, 24, 28, 29, 32, 35, 39 Uniform Civil Procedure Rules 2005 (NSW), rr 17.4, 17.5 Statute of Frauds (29 Car 2, c 3, 1677), s 4 Trustee Act 1925 (NSW), s s69
Cases Cited:	Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 Brown v Robertson (1890) 16 VLR 786 Browne v Dunn (1893) 6 R 67 Ciaglia v Ciaglia [2010] NSWSC 341 Cody v Roth (1909) 28 NZLR 565 CSR Ltd v Amaca Pty Ltd [2016] VSCA 320 Dale v Hamilton (1846) 5 Hare 369; 16 LJ Ch 126 Fitzgerald v Masters (1956) 95 CLR 420 Ford v Comber (1890) 16 VLR 540 Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181 Irmie v Nisbet (1908) 27 NZLR 783 Last v Rosenfeld [1972] 2 NSWLR 923 Lees v Fleming [1980] Qd R 162 Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6 Moore v Flavelle [1969] 1 NSWR 361 Orr v Ford (1989) 167 CLR 316 Pallant v Morgan [1953] Ch 43 Ramsden v Dyson (1866) LR 1 HL 129 Rochefoucauld v Boustead [1897] 1 Ch 196 Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 Tito v Waddell (No 2) [1977] Ch 106
Texts Cited:	Fletcher, The Law of Partnership in Australia (9th Ed, 2007) J D Heydon, LexisNexis, Cross on Evidence, vol 1 (at Service 202) Lindley & Banks on Partnership (20th Ed, 2017) Meagher Gummow & Lehane’s Equity: Doctrines & Remedies (5th Ed, 2014)
Category:	Principal judgment
Parties:	Comlin Holdings Pty Ltd (Plaintiff) Metlej Developments Pty Ltd (First Defendant) Nova Scotia Developments Pty Ltd (Second Defendant) Kayrouz Constructions Pty Ltd (Third Defendant) LADS Developments Pty Ltd (Fourth Defendant)
Representation:	Counsel: BA Coles QC/CP O’Neill (Plaintiff) CRC Newlinds SC/L Gor/ P Abdiel (First and Second Defendants) A d’Arville/ME Hall (Third and Fourth Defendants)   Solicitors: Swaab Attorneys (Plaintiff) Sachs Gerace Broome (First and Second Defendants) McLachlan Thorpe Partners (Third and Fourth Defendants)
File Number(s):	2014/285405
Publication restriction:	Nil

Judgment

1. These proceedings concern a large property development at South Terrace, Bankstown, in Sydney. The case is an unusual one. The key events happened at an auction which took place as long ago as September 2001. The main defence witness is dead and the recollections of the plaintiff’s main witness, after all this time, are unreliable at best; but the plaintiff’s case is supported by entries from a 2001 diary. The plaintiff’s claim is said to be worth more than $20 million.

2. The Bankstown property was purchased by the four defendant companies in equal shares pursuant to a contract signed immediately following the auction. The defendants are engaged in property development. They are controlled by members of two families of Lebanese extraction. The first and second defendants are controlled by members of the Metlej family. The third and fourth defendants are controlled by members of the Kayrouz family.

3. There is a partnership between the defendants which was established in 1997 or 1998 for the purpose of carrying out a development on land at Marrickville. I will refer to the partners as the Venture Group. Without intending any disrespect, I will where convenient refer to the Venture Group principals by their first names.

4. Following its purchase, the Bankstown property was developed into a residential complex consisting of three towers with approximately 240 residential units. Since the completion of the development, the Venture Group partners have retained the units, which they rent out. The property is said now to be worth at least $100 million.

5. The Metlej family patriarch was Youssef Wadih (also known as Joe) Metlej. He died in December 2012. During his lifetime he controlled the first defendant. The second defendant was controlled by Wadih Joseph (known as William) Metlej and Joseph Steven Youssef Metlej. Youssef was their father. I will refer to the first and second defendants together as the “Metlej companies”.

6. The third and fourth defendants, to which I will refer as the “Kayrouz companies”, were controlled by two brothers. The third defendant was controlled by Toufic (also known as Terry) Kayrouz. The fourth defendant was controlled by Lichha Kayrouz.

7. The plaintiff company (“Comlin”) is controlled by Antonios (known as Tony) Bassil. Youssef Metlej was his father-in-law. Mr Bassil mainly works as a concreting contractor, but he has also undertaken a number of smaller scale property developments.

Issues for determination

8. In these proceedings, Comlin claims a one-fifth share of the development. Comlin alleges that it was actually Mr Bassil, acting on its behalf, who was the successful bidder at the auction, and that it was then agreed that the four defendants would purchase the property on the basis that Comlin would be entitled to a one-fifth share in the development.

9. The case for Comlin is that there was an oral agreement to this effect between itself and the four defendants, which amounted to a partnership or a joint venture. Alternatively, Comlin contends that the defendants hold the development, as to a one-fifth share, on trust for it.

10. The defendants deny that any such agreement was reached, or that any relevant promises were made by them to the plaintiff. The Kayrouz companies contend that, even if such an agreement was made between Mr Bassil and Youssef Metlej, Mr Metlej had no authority to bind them or the partnership to such an agreement.

11. The defendants further contend that the alleged agreement was not in writing and is therefore rendered ineffective or unenforceable by the Conveyancing Act 1919 (NSW), ss 23C and 54A.

12. Finally, the defendants rely on various provisions of the Limitation Act 1969 (NSW). To the extent that the plaintiff relies on equitable causes of action not covered by the Limitation Act, the defendants contend that relevant provisions apply by analogy, and also rely on laches and abandonment.

Factual findings

13. The critical factual issue in the case is what happened during, and immediately after, the auction in September 2001. The auction was attended by Youssef Metlej, Mr Bassil, Toufic Kayrouz and Dan Juan (known as Donny) Kayrouz. Donny Kayrouz is the son of Lichha Kayrouz.

14. Mr Bassil gave evidence in the plaintiff’s case. The plaintiff also led evidence from Albert Bassett Chahine and Raymond Boumoussa. A company controlled by Mr Chahine was the second or third mortgagee (the order of priorities was a matter of dispute) of the property before it was sold. Mr Chahine was involved in some negotiations with the parties before the sale; he did not attend the auction itself but arrived shortly after it had finished. Mr Boumoussa was a contractor who worked on the site with Mr Bassil before the sale. Mr Bassil, Mr Chahine and Mr Boumoussa all gave affidavits and were cross-examined.

15. For the Metlej companies, affidavit evidence was given by Glen Madsen, William Metlej and Antoinette Elias. Mr Madsen was the auctioneer who conducted the auction. Both he and William Metlej were cross-examined. Antoinette Elias is a daughter of Youssef Metlej. She was one of his executors. She was not cross-examined.

16. Affidavit evidence was also given for the Metlej companies by Joe Alphonse, Donald Khoury and Hon (known as Edward) Wu. Mr Alphonse was a solicitor who practised under the name “Metledge & Thompson” (and later “Alphonse & Associates”). He acted for the Venture Group partners on the purchase of the Bankstown property. Mr Khoury and Mr Wu are from the accounting firm Khoury & Co, who are the accountants to the Venture Group and to the Metlej family. None of these witnesses was cross-examined.

17. For the Kayrouz companies, affidavit evidence was given by Toufic Kayrouz and Donny Kayrouz. Both were cross-examined.

18. The Bankstown property is part of a larger block of land which was purchased by ABC Plumbing Service Pty Ltd (“ABC”) in 1993. ABC was a company controlled by Mr Chahine. The land was subsequently subdivided into two lots. Lot 1 was sold to a company called Nordoc Pty Ltd (“Nordoc”) and ABC retained lot 2. Nordoc appears to have purchased the land from ABC with the assistance of finance from Elliot & Tuthill (Mortgages) Pty Ltd (“ETM”). As its name suggests, ETM conducted a mortgage lending business in association with the law firm Elliot Tuthill.

19. Three mortgages were registered on the title. The first was a mortgage to ETM from Nordoc securing the funds advanced to purchase the Bankstown property. The second was another mortgage in favour of ETM. The third was a mortgage to another company controlled by Mr Chahine, called Artistic Builders Pty Ltd (“Artistic”).

20. By early 2001, a development approval had been granted and building work was under way. The builder was a company called Isaks Developments (Aust) Pty Ltd (“Isaks”). In January 2001 Isaks entered into a contract for concreting work on the project with Highrise Concrete Contractors (Aust) Pty Ltd (“Highrise”), another company associated with Mr Bassil. The contract price was stated to have an approximate value of $1.52 million. The construction period was from 16 December 2000 to 30 October 2001. The directors and shareholders of Isaks were Lena Pace and Benjamin Isakka. It seems that Benjamin Isakka was the same person who was referred to in Mr Bassil’s evidence as “Mick Isaks” (Mr Chahine referred to him as “Mick Isakka”; William Metlej referred to him as “Mick Issaka”).

21. By March 2001, the project had run into financial difficulties. There were unpaid contractors, including Highrise which was owed approximately $200,000. Work stopped on 9 March. Isaks appointed an administrator on 28 June and on 3 August its creditors resolved that it be wound up. There is no direct evidence of Nordoc’s financial position at this time, but clearly it too was in financial difficulty (which may have been the cause of Isaks’ problems). ETM exercised its power of sale over the property as first mortgagee. John Jordan, solicitor, of Elliot Tuthill, was the person giving instructions on behalf of ETM. Initially the auction was scheduled for 30 August. At the last minute, it was postponed to 13 September.

22. After ETM entered into the contract to sell the Bankstown property to the Venture Group on 13 September, Artistic brought proceedings against ETM and the Venture Group challenging the exercise of the power of sale. Artistic also contended that it was entitled to priority for its mortgage over ETM’s second mortgage. The proceedings were resolved between Artistic and the Venture Group and the purchase proceeded to completion in November 2001. (The proceedings as between Artistic and ETM subsequently proceeded to judgment before JC Campbell J, as his Honour then was, in February 2002: [2002] NSWSC 16).

23. In October 2001, Mr Chahine swore an affidavit for the purposes of Artistic’s proceedings which touched on his dealings with the parties to these proceedings. He also referred to those dealings in a police statement he made in November 2002 concerning an incident in which William Metlej was shot. Both the affidavit and statement were in evidence before me.

Documentary evidence

24. The earliest correspondence in evidence is a copy of a handwritten fax received by Mr Chahine on 8 June 2001. The fax was addressed to “ABC Plumbing Yagoona [sic] Services P/L” from “Mr Joe Metlej”. It stated:

In relation to the abovementioned property, we offer $9 million to include land, work to date, DA plus BA and all working drawings including engineers, architects, electrical, hydraulics and mechanical. All the fees paid to council and other bodies to become ours.

The fax bore a signature (I think that of William Metlej, but it is hard to tell) and gave Mr Alphonse’s details as solicitor.

25. There is no evidence of any written response to this offer. Youssef Metlej went overseas on 12 June and did not return until 1 August. There appears to have been no further activity by him, or by anyone else on behalf of the Venture Group partners, while he was away.

26. The next piece of documentary evidence after 8 June is a fax dated 23 July on the letterhead of Highrise from Mr Bassil to Mr David Winney of Walter Construction Group, a large construction firm. The fax referred to a request for information by Mr Winney during a discussion with Mr Bassil on the previous Friday, 20 July. The information itself, which consisted of eight pages, is not in evidence. The fax continued:

I understand the asking price is $14 million for a clean title, known as ‘Walk In Walk Out’.

27. Next, Mr Alphonse’s records show that in the lead-up to the scheduled auction on 30 August he was consulted by representatives of the Venture Group about the possible purchase of the Bankstown property. On 28 August Mr Alphonse wrote to Elliot Tuthill. The letter identified his clients as the four Venture Group companies and the heading was the proposed purchase of the property from ETM. The letter stated:

We wish to advise that we act for the abovementioned and request the following amendments to the Contract.

1.   Deletion of special condition 13.

2.   Whether deposit can be 5%.

Would you also advise us whether there have been any further amendments made to the special conditions which were provided to our client, a copy of which is enclosed.

28. By this time Mr Alphonse obviously had obtained a copy of the contract. I deal further with the contract documents below; for present purposes it is sufficient to say that under special condition 13 the deposit was to be released to the vendor rather than held by the agent pending completion.

29. A file note by Mr Alphonse dated 28 August records a telephone conference with Toufic Kayrouz. It reads:

Doesn’t want barrister’s opinion – went through issues with him – highlighted the following:

1.   whether he has power to use D/A.

2.   whether architect and engineers have been paid.

3.   whether subbies have a potential claim against him – even if not union problems because of non-payment whether he is satisfied with D/A.

4.   D/A.

5.   whether work that has already been carried out done properly and certified.

A further conference took place on 29 August with William Metlej which covered similar issues.

30. After the auction had been postponed on 30 August, there is a file note of Mr Alphonse recording a telephone call from Toufic Kayrouz on the morning of 13 September, the auction day, at 10.45am. The note reads:

they have decided to attend the auction – he understands that he is buying the land only and will bid accordingly.

31. The auction took place as re-scheduled on 13 September. Mr Madsen had no actual recollection of the events on the day of the auction, but gave evidence identifying his handwriting on the contract documents and of relevant aspects of his practice as an auctioneer at the time. At the time, Mr Madsen was then employed by Jones Lang LaSalle (“JLL”). The auction took place at JLL’s offices in George Street, in the Central Business District. There was an auction room with a separate “signing room” in which contracts were signed after the auction.

32. The contract for the sale of the Bankstown property to the Venture Group companies, as stamped, is in evidence. It was a standard form Contract for the Sale of Land – 2000 Edition with sixteen special conditions and the usual attachments. ETM was the vendor and Elliot Tuthill the vendor’s solicitor. JLL was the vendor’s agent.

33. Special condition 14 provided:

TITLE TO PLANS AND COPYRIGHT

(a)   The purchaser acknowledges that the vendor may not have the right to use the plans and other ancillary drawings and approvals in relation to the property. The purchaser has made its own enquiries as regards the use by the purchaser of these documents and shall make no objection, requisition, claim for compensation or delay completion with respect thereto.

(b)   The purchaser acknowledges having read the letter dated 12 September 2001 from Architectural Design/Brian O’Dowd which is attached hereto and will make no objection, requisition, claim for compensation or delay completion with respect thereto.

A copy of the 12 September letter referred to in special condition 14 was also attached to the contract.

34. The first two pages of the form, the special conditions, and the copy of the 12 September letter all bear a fax imprint recording that they were faxed from Elliot Tuthill between 9.49 am and 9.52 am on 13 September. It thus appears that the contract which had been in circulation in the period leading up to the auction was revised shortly before the auction was scheduled to begin. This is consistent with Mr Chahine’s 2001 affidavit which records that Mr Chahine was making enquiries of Mr Madsen the day before the auction about a revised version of the contract which Mr Chahine understood to be in preparation.

35. The printed auction program showed that the auction was scheduled to begin at 10.00 am. According to Mr Chahine’s 2001 affidavit, the auction of the property had been rescheduled for 10.30 am. The timing of Mr Alphonse’s file note suggests that the property did not go under the hammer until somewhat later in the morning.

34. There is no record of who attended the auction or of any pre-registration of bidders. Nor is there any record of the sequence of bids.

35. The contract as stamped had various details on the front page completed in handwriting: the names of the four Venture Group companies as purchaser; Mr Alphonse’s details as purchaser’s solicitor; the price ($6.6 million); and the deposit ($660,000). Some handwritten amendments were also made to the printed document and the special conditions. Special condition 13 (providing for the deposit to be released to the vendor) was crossed out. On the front page the deposit item had been completed as “vendor for the vendor’s use” in typewriting. The words “for the vendor’s use” were crossed out and replaced with the word “agent” in handwriting. The contract as stamped had the words “auctioneer as agent for the vendor” inserted in the signature block in handwriting; it was signed by Mr Madsen and witnessed. The handwritten changes were also initialled. Although the handwriting in the signature block did not appear to me to be similar to the other handwriting, Mr Madsen insisted it was all his.

36. The contract as stamped was not signed by the purchasers. Mr Madsen confirmed, in accordance with his usual practice, that the contract would have been filled out and signed in counterparts. The counterpart signed by the purchasers and given to ETM was not in evidence; there was no evidence from anyone from ETM and I was informed that ETM was deregistered in 2008.

37. There was thus no outward sign in the contractual documentation or in the correspondence or in Mr Alphonse’s file notes that the plaintiff had any involvement in the purchase of the Bankstown property.

Plaintiff’s claim

40. In May 2013, about six months after the death of Youssef Metlej, and more than eleven years after the auction, John McEncroe, solicitor, wrote to Anthony Panapoulos of Alphonse & Associates (Mr Alphonse had left the practice), who was acting for the executors of Mr Metlej’s estate. Mr McEncroe’s letter was the first intimation of the claim which is now being propounded in these proceedings. He wrote:

I act for Comlin Holdings Pty Limited who for consideration and/or for forbearance agreed with the deceased that the deceased acknowledged that Comlin had an interest in the above property and that the deceased assured Comlin on many occasions between 2002 and about May 2012, that he would protect and hold safe that interest of Comlin in the property.

Please acknowledge this notice of claim and ensure that the interest of Comlin is included in the Inventory of Property of the application for probate of the deceased’s estate.

41. A few days later Mr Panopoulos wrote back acknowledging Mr McEncroe’s letter, denying the claim and asking for “copies, evidence, if any, regarding details of your client’s claims”. There appears to have been no response.

42. The first occasion on which a partnership or joint venture was alleged in writing was in a letter from Swaab Attorneys, the solicitors who act for the plaintiff in these proceedings, in April 2014. The letter contains a detailed account of events allegedly surrounding, and at, the auction on 13 September 2001. It is generally consistent with the account given in Mr Bassil’s affidavit in these proceedings, although counsel for the defendants did identify what they submitted were some discrepancies. I deal further with this at [156] below.

43. Mr Bassil’s affidavit was sworn in August 2015. According to that affidavit, Mr Bassil first proposed to Youssef Metlej in about March or April 2001 that they buy the Bankstown property and develop it together, and Youssef responded in words to the following effect:

Yes, I am interested. Let’s look at buying it together. My partners, Toufic, William Lichha and me are looking for sites because the Marrickville job is ending. We are keen to do another development. We should do this one together.

44. Mr Bassil said he told Mr Chahine about this and had a meeting with Mr Chahine, Youssef Metlej and William Metlej at the Bankstown property. According to Mr Bassil a conversation took place in words to the following effect:

Mr Bassil:   My father in law Youssef and I are going to buy the property.

Mr Chahine:   The first mortgagee can’t get the money so they are going to have to sell it.

Youssef Metlej:   We are interested in the property, we want to buy it. That’s what we are here for.

Mr Chahine:      Ok, how much do you want to pay?

Mr Bassil:   Isaks is asking 11 million. He is trying to recover the money that he lost.

Mr Chahine:   You can discuss it with him and offer him whatever you want. All I am interested in is getting my money back.

45. Mr Bassil said that shortly afterwards he had a meeting with Mr Chahine in which he (Mr Bassil) stated that “we” wanted to buy the property for $9 million and asked for Mr Chahine’s help, but was told by Mr Chahine that he (Mr Chahine) had his own interest in the property under Artistic’s mortgage. Mr Bassil did not explain why he was able to say “we” wanted to buy for $9 million. Nor did he suggest that he was involved in the $9 million offer which was faxed to Mr Chahine on 8 June.

46. Mr Bassil’s affidavit contained nothing further about the Bankstown property until 20 July. The creditors’ meeting for Isaks took place on that day and was adjourned to 3 August. Mr Bassil said that afterwards he had a meeting with Mr Isakka and Mr Pace at which they told him that they wanted $13.6 million for the property which would come with “clean title”. Mr Bassil asked for a copy of the contract to be faxed to his solicitor, Mr McEncroe. He said that he then had a meeting with Mr Winney in which they discussed at “a very high level” a potential arrangement under which Mr Bassil would purchase the Bankstown property and on-sell it to Walter Construction Group with the possibility of them then doing a partnership or joint venture together.

47. Mr Bassil said that on 2 August, having met Mr Isakka on the site, he went to visit Youssef Metlej to talk about what was happening at Bankstown. He said they had a conversation to the following effect:

Youssef Metlej:   What happened with the property in Bankstown

Mr Bassil:   Isaks is bankrupt. I received information from the administrator. The property is going to auction. They are not going to sell it beforehand

Youssef Metlej:   I told you I am interested in going in with you to buy the property I will talk to Toufic, Lichha and William about progressing it. We will go to the auction together and we will develop it together.

48. Mr Bassil said that Youssef Metlej continued to express interest in buying the Bankstown property together with “his partners”. Mr Bassil said that on 24 August he attended a meeting with another property developer, George Ghossayn, and discussed the Bankstown project with him. He said that later that evening he met Youssef and had a conversation to the following effect:

Mr Bassil:   I met with George Ghossayn regarding the Bankstown job earlier today. He said he is interested in buying into the job with me. He has a lot of money.

Youssef Metlej:   Don’t be silly to get involved with him. I told you I will buy it with you and with Kayrouz’s. We have got the money. We made a big profit from the Marrickville job. You can trust me, you’re like a son to me, don’t worry.

49. Mr Bassil said that he had a meeting on 28 August with Mr Chahine, Donny Kayrouz and Youssef Metlej at which they discussed the purchase price and the prospect of buying the property before the auction (scheduled for 30 August). On 29 August, Mr Bassil was told of the postponement of the auction. He said that thereafter he had a number of conversations with Youssef Metlej during which Youssef reaffirmed his interest in the purchase. Mr Bassil also discussed with Mr Jordan and Mr Chahine the possibility of buying the property before the auction or buying out ETM’s first mortgage, but nothing came of this.

50. Mr Bassil said that on 5 September he telephoned a banker from the National Australia Bank, David Blackie, with whom he had previously dealt. Mr Bassil said he thought that Youssef would be arranging the finance for the purchase but spoke to Mr Blackie to check that finance could be obtained. He said that he was assured by Mr Blackie that there would be no difficulty with getting the necessary finance for construction. In his affidavit he also referred to a facility which Comlin had with the Arab Bank and which enabled Comlin to draw down funds for “property development and building type costs”.

51. Mr Bassil said that on 12 September, the day before the auction, he spoke to Youssef and reminded him that the auction was taking place on the following day. He said that Youssef said that he would be there with Toufic Kayrouz and that “we” would buy the property together. Mr Bassil said he would be there with his cheque book to pay the deposit and Youssef Metlej replied that was good.

52. Mr Bassil said that on the day of the auction he took his own cheque book (or perhaps an Arab Bank cheque) along with him. In his affidavit, he said that at the auction he sat behind Youssef Metlej and Toufic Kayrouz who were sitting next to each other. Toufic Kayrouz started the bidding at the auction and bid up to $6 million but then stopped. Mr Bassil said he was surprised at this, as he had previously been told the Venture Group partners were prepared to buy the property for over $9 million. Mr Bassil said he then started bidding himself and eventually made the winning bid of $6.6 million. He then went into the signing room with Mr Madsen and an unidentified representative of the vendor, where he was presented with the contract. He said that he filled it out with the name of Comlin and signed it. But then, as he was taking the cheque to pay the deposit out of his pocket, Youssef and Toufic (and probably also Donny) came into the room and the following conversation took place:

Youssef Metlej:      We want to buy the property.

Mr Bassil:         Why, I bought it.? [sic]

Youssef Metlej:   I just spoke to William. He told me that we have to buy it because our accountant recommends that we buy it because we will make too much profit from the Marrickville job if we don’t.

…

Mr Bassil:   I bought it. I have an interest in it. I poured concrete that I haven’t been paid for and now I bought it. If you want it I will be one of your partners.

Youssef Metlej:   Yes. Ok. We have talked about this before. No worries. We will make you a partner.

Mr Bassil:   Ok, one of the partners means one fifth of the profit?

…

Youssef Metlej:   Yes. No worries Tony. You’re like my son, we will treat you as one of us, and you can trust us. You will be a one fifth partner in this development and we will share the profits with you, but we want to be recorded as the owners of the property.

Mr Bassil said:      Ok, then.

53. Mr Bassil said that he then asked for a copy of the contract as a record and the agent gave him a copy of the first page. He said he then shook hands with Toufic, Youssef and the agent and left the signing room. He said that he saw Mr Chahine before he left the auction rooms and told him that he and “his partners” had bought the property for $6.6 million. During his cross-examination, Mr Bassil said that after he received the copy first page of the contract in the signing room, the other principals of the Venture Group were waiting for William to arrive to sign the contract. Mr Bassil did not wait for William and left.

54. In his affidavit, Mr Bassil said that later on, in late October or early November, he was involved in negotiations with Mr Chahine about the litigation brought by Artistic concerning the power of sale. He said that after the litigation was settled and the purchase was completed in November 2001, up until the development was completed, he met and spoke with Youssef regularly, “probably at least once a week”, to discuss the development. He said that he also had meetings with William Metlej. He said he did some concrete pumping work at the site “in or about 2005” and attached a copy of a cheque he said he received for the work he had done. The cheque, dated August 2005, was for only $857.43.

55. Mr Bassil said that after the development was finished “in or about 2005”, he had a conversation with Youssef to the following effect:

Mr Bassil:      How is the Bankstown job going?

Youssef Metlej:   We have finished. There is too much profit for all of us though. We need to continue with other projects. We will rent out the units and use the money from that to pay off the mortgage. We will use the equity in the development as security for loans for other jobs we are doing.

Mr Bassil:      So when do I get my share?

Youssef Metlej:   If you want to sell it now we will pay too much tax. We rent, pay down the mortgage, that’s the best way to do it. Don’t worry your money is working for you. It’s the best thing for us all.

56. Mr Bassil said that in early 2013, after Youssef Metlej’s death, he rang William Metlej asking where his “share in the Bankstown property” was, and was told by William that he would ask Toufic. Mr Bassil did not refer at all in his affidavit to Mr McEncroe’s letter of May 2013 (see [40] above), or to his conversation with Antoinette Elias which took place in about July (see [105] below). He said that late in 2013 he raised the issue again with William and they had a conversation in words to the following effect:

Mr Bassil:   Have you spoken to Toufic about my share in the Bankstown property?

William Metlej:   Toufic said we are not going to pay you. You didn’t pay any money towards it.

Mr Bassil:   But we agreed on it. What do you think about my share?

William Metlej:   If you don’t do the work I don’t see why I should pay you.

Shortly afterwards he asked William again and was refused.

57. Mr Bassil said that by about February 2014 he had become concerned and approached Swaab Attorneys for advice. This was about two months before Swaab Attorneys’ letter of demand on his behalf (see [42] above).

58. Youssef Metlej died of cancer in December 2012. Mr Bassil acknowledged in cross-examination that he had several months in which he could have raised a claim about the Bankstown development with Youssef or with other members of the family before Youssef’s death. He said he did not do so because he did not wish to trouble Youssef during his last illness.

Plaintiff’s further evidence

59. The documents which Mr Bassil claimed to have been given in the signing room were in evidence. The form of contract as completed and signed in the name of Comlin is clearly the previous version of the contract circulated by ETM, not the version of the contract as revised prior to the auction. It does not contain the changes faxed through to Mr Madsen on the morning of 13 September, in particular the attached town planning letter and special conditions 14 and 15. Nevertheless Mr Bassil maintained in cross-examination that he had received the document at the auction. He rejected the suggestion that he might have obtained it in advance.

60. The document which Mr Bassil said he obtained as a record of the transaction is a copy of a partially completed but unsigned first page of the contract. The typewritten details correspond with the typewritten details on the contract as stamped. The details of the Venture Group and their solicitor and the date are completed in handwriting. From a comparison between it and the contract as stamped, it can be seen that the first page of which it was a copy, although completed in the same handwriting, was not exactly the same as the stamped version. That original is not in evidence.

61. As matters developed at the hearing, the most important documentary evidence tendered by Comlin was a 2001 diary belonging to Mr Bassil. The diary contains records of numerous meetings and conversations relating to business affairs of Mr Bassil, including various entries referring to the Bankstown property. The entries which I have set out below are quoted verbatim, without correcting the grammatical and spelling errors. It is only fair to Mr Bassil to say that English is his second language.

62. The diary contains a number of entries in March and April referring to Mr Bassil’s attempts to obtain payment for the amount due to Highrise. They include:

09.03.01

2.30pm   I went to Bankstown job spoke to Mick + Albert about the chque they said next Wednesday. The job stoped.

27.03.01   Albert Shahine

5:00pm   Discussed about the job at Bankstown + how to get pay. I told him you have share I owed money. I poured concrete at your job. He agreed.

18.04.01   Bankstown job waiting till next Friday.

10:30am

63. There are no further entries in the diary which refer to the Bankstown project until 20 July. The entries from then on are as follows:

20.07.01

10.00am   Liquidater meeting at York St for Bankstown job. Adjurned till 3.8.01.

Most creditors voted to adjurned.

12.00pm   I met with Nordoc + Lina + Michael at his solicitor office at North Sydney next to Union Hotel + He will fax to my solicitor the contract they asking $13.6M. For clean title.

1:00pm   Lunch with David Winney & Anthony from Walter regarding the job at Bankstown.

02.08.01

4.00pm   Mick from Isaks promised for chq. For Bankstown job I did not get he doesn’t have it I was very angree with him.

6:00pm   I went to visit my father in law I was unhappy he noticed asked me I told him I did not got paid from Bankstown. He told me to speak to him about buying the job together.

09.08.01

5:00pm    I went to John McNcroe signed document for Mr A.J. Torbey solicitor. I told him to get the contract for 228 South Terrace St Bankstown. I gave him a few nos + names.

16.08.01

6:00pm   My father in law come over discussed the business + other he told me Kayrouz very intrested to buy Bankstown job

18.08.01

7:00am   To Young with Michael [Abdulkarim, another solicitor with whom Mr Bassil dealt] and Joseph Batti. We spoke about Bankstown job. I told them I will buy it for myself but my father in law he want to be partner with me and his partners Kayrouz family.

24.08.01

2.00pm   Meeting + lunch with George Ghosayn regarding Bankstown job for auction.

6:00pm   My father in law come over to my house I told him about the meeting with George Ghossayan regarding the job at Bankstown. He told me you silly to get him involve I will buy it together with you no worry we got the money. We made a big profit from Marrickville job. I treat like my son.

28.08.01

8:00am   Bankstown job for 2hrs. with Albert and Don Kayrouz + Joe Metlej. Discussing the purchase price if we can buy it before the auction. Albert he want his share

29.08.01

10:00am   About 2pm the agent Ian Gray rang me + cancelled the auction untill 2 weeks. Also I spoke with Jon Jordan solicitor + Albert.

5:00pm   Meeting with father in law he told me we will buy it for 9-10m. His partners happy to pay. For Bankstown job. No worry we can do it together.

30.08.01

11:00am   I spoke with the solicitor John Jordan today to buy the first mortgage is 6.5 M. Bank Chq. Can buy it before auction. I ask if I can have clear title? He said if you want clear title & freehold you have to go to auction.

03.09.01

12:00pm   I took my uncle Peter to Lebanese consult to make a authority to Uncle Leba. Father in law come with me. We talked about Bankstown job William done some feasibility on it Joe told me very good job plenty of profit we will buy it together.

05.09.01

3.00pm   I spoke to Albert Chahine about Bankstown I told him if he accept 6.5M + get me a clear title for the job I will buy it before the auction.

64. The entries for 12 and 13 September are as follows:

12.09.01

11.00am   Spoke to Joe Metleje my father in law regarding the auction tommorow he confirm will be up there with his partners also He said we will buy it together the job got a lot of profit. I told him I will be there with my chq. book.

13.09.01

10.00am   Auction for Bankstown job level 18, 400 George street city. The site is at 288 South Terrace St Bankstown. I went to auction at the city my father in law + Toufic Kyrouz + Don was there, agent Glen Matton start the auction he said you have a clean title by settlement + no materials including the sale Toufic start the auction by 4m. The bid was by 250k than up to 6m. I start bidin by 100K till finished by me for 6.6m. Than my father in law said I want it I said good luck you can have it. Than I walked away. After I agreed with them I am a silent partner to get 1/5 of profit at the end.

65. The plaintiff also tendered an auction program issued by JLL for the purposes of the auction and setting out features of the property and terms of the auction. The document has various handwritten annotations on it by Mr Bassil. They include: “Start 4M. Sold 6.6M. I bought it”. There are further annotations apparently relating to the development but which are difficult to interpret.

66. Mr Bassil’s diary also contains the following entries for 19 and 26 September:

19.09.01

4:00pm   Every one from Bankstown job called me to pay them money. All subbie lost money not get paid. They find out I bought the site I told my father in law he said not to worry we bought clear title from the auction.

26.09.01

5:00pm   Father in law came over + asked if Dave signed the lease for Flinders Hotel

Also we talked about Bankstown job he tried to get the plans from the engineer.

67. The diary contains three entries from November concerning the proceedings brought by Artistic:

01.11.01

6.00pm   Albert Shahine rang me + said I want to meet William + his partners I said I will pass the message.

02.11.01

2:00pm   Albert Shahine rang + said I want to have meeting with yours, William + Toufic all the buyers. I said I will ring William + tell him. I rang William he was not there about 3.15pm. Albert rang me again + said I want to see yours. (The buyers) today. I said I will ring William again. I rang William he said I do not want to meet with or talk to him. If you want talk to Toufic Kayrouz his my partner his no [mobile number] I rang Toufic + the phone cut off than after a few minutes about 3.30pm Joe Alphonse the solicitor rang me + said I heard you been talking to Albert Shahine. I said yes he rang me + told me want to meet with William + others Joe said: We will meet with him next week at court. I said: Maybe he will withdraw the case. Joe said do not speak with him we are not interested he will ran the case. Sudenly I saw Joe Metlej (solicitor) I told the storey. He said let the solicitors speak to each other. I told Albert he I want to meet with you first than I tell my solicitor.

06.11.01

9.00am   Court for Bankstown. Albert drop the case against Metleges + Kyrouz.

68. Mr Chahine’s 2001 affidavit referred in places to his dealings with Mr Bassil and the Venture Group. He said that Mr Bassil first expressed interest in buying the property in May 2001, saying that he had “partners” in the proposed purchase, including his father-in-law, Youssef Metlej. Mr Chahine said that at Mr Bassil’s request he had a meeting in early June with Youssef Metlej, William Metlej, Mr Bassil and another man whom he thought was Toufic Kayrouz, and that Youssef Metlej said to him words to the effect of:

We want to buy the property. We are registering our interest.

69. Mr Chahine said that a day or so later he met Mr Bassil again who told him that “we” wanted to buy the property for $9 million. Mr Chahine said that he told Mr Bassil that Artistic had its own interest in the property under the mortgage and he (Mr Bassil) would have to look after his own interests.

70. Mr Chahine’s affidavit referred to the events surrounding his receipt of the fax of 8 June. He said that he received a telephone call from Youssef Metlej who said that “we” wanted to buy the property for $9 million and were looking to find someone who could accept the offer. Mr Chahine asked him to put it in writing and Youssef then put William Metlej on to give him the necessary details, following which he received the fax. He then passed the fax on to his solicitor.

71. Although Mr Bassil’s diary refers to a meeting involving Mr Chahine on 28 August, this was not mentioned in Mr Chahine’s affidavit. But the affidavit did say that on 31 August, the day after the postponement of the auction, Mr Bassil telephoned him and told him that he (Mr Bassil) had just spoken to Mr Jordan of Elliot Tuthill who was prepared to sell him the first mortgage for $6.5 million. Mr Bassil asked whether “we” could make a deal with him to drop his claims on the property and against Elliot Tuthill.

72. Mr Chahine’s affidavit did not refer to any further negotiations with the parties to these proceedings. He described negotiations with representatives of Nordoc which went right up to the morning of 13 September. As a result, Mr Chahine did not arrive at the auction until after it finished. The affidavit stated:

By the time that I reached the auction rooms of Jones Lang LaSalle, the auction sale of the property had taken place.

Whilst in the auction rooms, I saw Mr Youssef Metlej, Mr Bassil and Mr Kayrouz signing a contract. Mr Bassil saw me and said: “We’ve bought the property for $6.6 million”.

73. Mr Chahine’s 2002 police statement contained a summary of the events leading up to the auction which differs in some points of detail from his 2001 affidavit. It also contained an account of his dealings with William Metlej and Mr Bassil after the auction concerning Artistic’s claim against ETM and the Venture Group partners which would have post-dated his 2001 affidavit. He said (again this is verbatim):

A few days after William and his partners bought the property I saw William near my site with some other people who I can't remember. We have a lunch at Foodstar, Bankstown. Sometime later William phoned me complaining that after we have lunch he got a summons to go to Court. I explain to him what my solicitor explain to me. I said I have nothing against you. I have to do that to protect my interests. A few days later Tony Bassill called me and ask me if we can sort this all out and can we have a meeting. I arrange a meeting at Three Swallow Hotel and I advised my solicitor I was having a meeting with Tony Bassill and their partners. I met with Tony Bassill and another gentleman who was his barrister. We talked about the situation. No result from the meeting except Tony promise to talk with his partners and get back to me. Tony didn't get back to me. I phoned William a few times trying to understand the situation. At last call he advise me his father in Lebanon and he would be back on Monday and he would get back to me as it was his fathers decision. I reminded him that Court was the day after his father arrived and that we needed to sort it out before it went to Court but he did not come back to me.

74. Mr Chahine’s statement continued by saying that he decided to drop Artistic’s claim against the Venture Group partners anyway. However, there remained an issue between Mr Chahine’s other company, ABC, and the Venture Group partners. It appears that the building work undertaken on the Bankstown site encroached on lot 2, which had been retained by ABC (see [18] above). Mr Chahine was proposing that the Venture Group partners purchase lot 2 or at least pay rent. These negotiations appear to have been acrimonious and came to nothing.

75. Mr Chahine said that further proceedings were brought both against him and against the Venture Group partners by Nordoc and Mr Kashlah Taouk, who had wished to buy the property. Mr Isakka was also still trying to negotiate with both Mr Chahine and Youssef Metlej, presumably to recoup some of the cost Isaks had expended on the building work. After Artistic obtained judgment against ETM, there were consequential proceedings (Mr Chahine referred to them as an appeal but this may not be correct). According to Mr Chahine, Youssef made some sort of threat to him that he would ensure that evidence was changed so that Mr Chahine would lose the case. Mr Chahine did not mention Mr Bassil as having been involved in any of these negotiations.

76. Mr Chahine’s affidavit in these proceedings was sworn in August 2015. His evidence about his dealings with Mr Bassil and the Metlejes up to the auction was essentially the same as in his 2001 affidavit, except that he said that he did not in fact recall seeing anyone signing anything at the auction. He said that what he had said in his 2001 affidavit in this regard was incorrect. He still said that Mr Bassil told him that “we” had bought the property for $6.6 million. His affidavit also contained an expanded description of the meeting with Mr Bassil at the Three Swallows Hotel about dropping Artistic’s claim which presented Mr Bassil as apparently being one of the partners in the Bankstown project, negotiating on behalf of himself and the other partners.

77. Mr Boumoussa’s affidavit was sworn in August 2015. Mr Boumoussa said that in “early 2001” Mr Bassil discussed with him the possibility of buying the Bankstown property. Mr Boumoussa said that his next discussion with Mr Bassil about the property was after the auction. Mr Boumoussa said that Mr Bassil told him that he had bought the property. He said that later he was introduced by Mr Bassil to Youssef Metlej. He said that Mr Bassil introduced Youssef as his “sharik” (an Arabic word for “partner”) who had a “joint venture with me to build this project”. Mr Boumoussa said that, about two weeks later, Youssef telephoned him and asked him to come to meet his “partners”. Mr Boumoussa attended the site and was introduced by Youssef to William Metlej and Toufic Kayrouz.

78. Mr Boumoussa later undertook the formwork for the development. He said that all his dealings were with Youssef directly and not with Mr Bassil, and that he was paid by Toufic’s son by cheque. But he did say that the job took about four to five months and over that period Mr Bassil asked him from time to time how the project was going. Later Mr Boumoussa moved to Dubai. He said that he spoke to Mr Bassil every three to four months and on most occasions Mr Bassil would update him on how the project was going.

79. Mr Bassil gave evidence of the family and business context within which his alleged involvement in the purchase of the Bankstown property took place. Through his mother, Mr Bassil was distantly related to Youssef Metlej. Mr Bassil was born in Lebanon and migrated to Australia in 1977. His parents and the rest of his family remained in Lebanon. Mr Bassil married Youssef’s daughter, Betty, in June 1977. He said that from that time forward he had a close relationship with Youssef, who treated him like a son.

80. Mr Bassil said that from 1977 onwards he did cement rendering work for Youssef. In about 1980, he and a business partner bought a concrete pump and he expanded his operations into concrete pumping. His business expanded further with the purchase of some large concrete pumps from Singapore in about 1987. He did concrete pumping work for a number of builders and developers, including Youssef. He said their dealings were always oral. Mr Bassil said that in February 2001 he did some concreting work on the Marrickville property being developed by the Venture Group; this was his first dealing with the Kayrouzes. The contractual arrangement for this job was also oral. According to evidence from William Metlej, which was not contradicted, Mr Bassil’s business was always pumping and pouring concrete. He never held a builder’s licence.

81. It appears that the concrete pumping business was carried out by Mr Bassil and his business partner under the name “St George Concreting Pumping Services” but, as has been seen, Mr Bassil also operated through Highrise. The evidence did not explain the relationship between St George Concreting Pumping Services and Highrise.

82. Mr Bassil said that at Youssef Metlej’s request he (Mr Bassil) sold Youssef one of the concrete pumping machines bought in Singapore at cost. Mr Bassil and his partner continued to operate the machine; Youssef would come in to their office at the end of each month and they would calculate and pay him the profit made by it. Later Youssef transferred the machine to another one of his sons-in-law.

83. Mr Bassil was also involved in a venture concerning the Flinders Hotel in eastern Sydney. The Hotel property was purchased in April 2001 in the name of six parties. A one-third share was held by Joseph Lichaa Metlege and Moses Joseph Metlege. Joseph Metlege is the maternal uncle of Mr Bassil and Moses Joseph Metlege is Joseph Metlege’s son. A second one-third share was held by Youssef Metlej, William Metlej, and Joseph Metlej as joint tenants. The remaining one-third share was held by Comlin. According to Mr Bassil, the venture operated as a partnership, the decision-makers being Joseph Metlege, Youssef Metlej, William Metlej and himself. He said that they regularly referred to each other as “partners” although there was no written partnership agreement. Mr Bassil said that a development approval for about 15 units was obtained but it did not proceed. The Hotel property was subsequently sold in July 2002.

84. Mr Bassil gave evidence of himself having undertaken the redevelopment of six properties prior to 2001. This involved carrying out subdivisions and the construction of townhouses and factory units. The largest redevelopment involved the construction of six factory units and one shop. From Mr Bassil’s description it appears that only one of the redevelopments was undertaken through Comlin, and the others were undertaken by Mr Bassil in his own name; but in some cases the properties were subsequently transferred to Comlin. Some of the townhouses and units were sold and others were retained for rental purposes. Mr Bassil also gave evidence of a number of property purchases which did not involve redevelopment. Three of these were purchases by Comlin and two by Mr Bassil in his own right.

85. Mr Bassil was pressed in cross-examination about Comlin’s financial capacity to meet the deposit and a share of the purchase price. Mr Bassil conceded that his dealing with Mr Blackie of the NAB concerned construction finance, not finance for the purchase of property. He accepted that, although he had a number of facilities with the Arab Bank, each of those facilities was for a specific existing purpose. He acknowledged that he had a tax debt of approximately $360,000 and had borrowed some money from the Arab Bank to meet that liability. He accepted that if he was to purchase at the auction he would be required to lodge a cheque immediately which would need to clear in a couple of days. Mr Bassil, however, continued to assert that he had finance arranged. He said that, with his business experience, he would not make the elementary error of attending an auction and bidding on a property if he was unable to raise the funds to pay the deposit.

Defendants’ evidence

86. Evidence from Mr Khoury and Mr Wu, the accountants for the Venture Group, established that there was no formal written partnership agreement for the Venture Group partnership, but partnership accounts were prepared, a tax file number was obtained and tax returns were lodged covering the partnership’s activities. When the Goods and Services Tax (“GST”) was introduced in 2000, an Australian Business Number (“ABN”) was obtained for the partnership business and it was registered for GST purposes.

87. The principals of the four Venture Group partners were Youssef Metlej, William Metlej, Toufic Kayrouz and Donny Kayrouz. Youssef Metlej’s background was as a builder. William studied economics at university and became a certified practising accountant and licensed tax agent. After leaving university he worked at the Australian Taxation Office. He studied at night to obtain building qualifications and began working in the building industry in 1986 or 1987 with his father. William said that the skills of the four principals complemented each other. He was generally responsible for the day to day management of the development sites. Donny Kayrouz usually dealt with obtaining the necessary development approvals. Toufic Kayrouz was generally responsible for obtaining finance.

88. Toufic Kayrouz gave evidence as to the way the partnership was managed. The Marrickville property and the partnership bank accounts were held jointly in the names of the four Venture Group companies. In order to operate the bank accounts, two signatories were required, one from a director of one of the Metlej companies and one from a director of one of the Kayrouz companies. Toufic’s evidence was that there were frequent meetings between some or all of the principals of the Venture Group partners, on average twice a week. William Metlej and Donny Kayrouz acted as joint project managers and brought in the other principals as required to resolve any significant issues. Toufic said that all significant decisions were made jointly by the four principals, including setting the sale price for the units, the terms of borrowing from financiers and the approval of expenses (other than minor purchases of up to about $1,000). This evidence was not contested.

89. According to William Metlej, one hundred and one apartments were built on the Marrickville site. In 2001 approximately sixty-nine apartments were sold, the remainder being retained for rental return purposes (these remaining apartments were subsequently sold). The partnership also undertook a development project at Hurstville.

90. William Metlej gave evidence about the offer faxed to Mr Chahine on 8 June 2001. He said that the $9 million figure was based on an assessment that he had undertaken at Youssef’s request. William’s evidence differed in some respects from the account given in Mr Chahine’s 2001 affidavit. William said that he himself discussed the offer with Mr Chahine beforehand. Mr Chahine told him to put it in writing and he then sent the fax. In his affidavit, William did not mention any direct involvement by Youssef, but in cross-examination he said that he sent the fax at Youssef’s request and that Youssef was also present at the meeting with Mr Chahine at Marrickville. In a further affidavit sworn just before the hearing William specifically denied that Mr Bassil was present at any meeting with Mr Chahine, and he adhered to this in cross-examination.

91. According to Toufic Kayrouz, he was approached in about June 2001 by Youssef Metlej about the possibility of purchasing the Bankstown property and completing the development. He said that the $9 million offer put in the 8 June fax to Mr Chahine was put on behalf of the Venture Group. The offer was rejected but he and Youssef remained interested in the project.

92. Toufic said that he remembered attending the auction. Youssef Metlej was there with Mr Bassil. Toufic did not expect to see Mr Bassil there. But he thought nothing of it, as he knew that he was Youssef’s son-in-law. Toufic said that, shortly beforehand, he and Youssef had agreed that they should offer up to $9 million. At the auction they agreed to go to different sides of the room so it would not be obvious that they were working together. Accordingly, Youssef was with Mr Bassil and Toufic and Donny stood some distance away but within eyeshot.

93. Toufic said that there were a number of bidders; both Youssef and he placed bids at various stages. He said his last bid was for about $6.3 million or $6.4 million. After that bid there was a bid from someone else and then he saw a bid for $6.6 million had come from the area where Youssef was. He said he looked at Youssef, who looked back at him, touched his chest with his hand, and nodded, which he took as a signal that the $6.6 million bid was from Youssef. He therefore did not bid again and the property was knocked down at $6.6 million. He did not say he actually saw Youssef place the successful bid, only acknowledge that it was his. He did not remember seeing Mr Bassil bid. Toufic said he was very pleased to have secured the property for $6.6 million and, had he not believed that the last bid was Youssef’s, he would have continued to bid up towards the $9 million figure which he and Youssef had previously agreed.

94. Toufic said that, following the success of the bid, the contract was signed in the signing room. Present were Youssef, Mr Bassil, Donny, himself and a representative of the agent. Toufic said that contracts were completed and exchanged as between ETM and the Venture Group in the ordinary way. He paid the deposit with the Venture Group cheque book he had brought with him. Mr Bassil did not say anything of any moment.

86. Donny Kayrouz could not remember any relevant detail of the auction. In particular, he could not recall who placed the winning bid and he accepted that it could have been Mr Bassil. His evidence did, however, confirm that he attended the auction with Toufic and Youssef with the intention of the Venture Group purchasing the property if it could be obtained for the right price and left with the clear impression that that is what had happened. He did not recollect anything along the lines of Mr Bassil making the successful bid and then being persuaded to relinquish his entitlement to complete the purchase.

87. William Metlej said that he decided before the auction that there was no point in him attending as the other principals of the Venture Group partnership would be able to deal with any eventualities. In particular, he said that Donny Kayrouz had excellent negotiation skills and if there was a chance to negotiate to purchase the property, Donny could do it. William said that he did, however, attend after the event. He said that he received a call to say that the Venture Group partners had secured the property at auction and asking him to come and sign the contract on behalf of the second defendant. He was driven there by his brother, Joseph. He said that when he arrived he signed the contract. He did not see either Mr Bassil or Mr Chahine.

88. The purchase of the Bankstown property was completed by the Venture Group partners with the assistance of a $5 million bank loan secured on the Marrickville property. The balance of approximately $950,000 was paid from a Venture Group bank account. These funds, as well as the Venture Group funds used to pay the deposit, had been generated by the Marrickville development. Construction on the Bankstown development began in 2003. A total of approximately $11 million was contributed by the partners in 2003-2004 and 2004-2005. Finance of up to a further $7 million was also obtained from Perpetual Investments.

89. The Venture Group partnership tax return for the year ended 30 June 2002 is in evidence. It recorded a profit of approximately $8.5 million, attributable to the sale of units in the Marrickville development. This would have equated to taxable income for each of the four partners of approximately $2.1 million. Also in evidence are accounts for the Marrickville, Bankstown and Hurstville projects for the 2002-2003 and 2004-2005 financial years. The accounts for the Bankstown project show that the purchase and development costs, including the construction costs, were capitalised. The result is that losses were reported for the 2002-2003, 2003-2004 and 2004-2005 financial years of approximately $310,000, $530,000 and $730,000 respectively, largely attributable to interest costs.

90. For some reason unexplained in the evidence, the Venture Group tax return only included the profit or loss from the Marrickville development, but it appears from a letter attached to the 2003 tax return that a one-quarter share of the loss which was attributable to the Bankstown project (and a one-quarter share of the loss attributable to the Hurstville project) was notified to each of the partners for inclusion in its tax return.

91. The accounts for the Bankstown development contained no reference to Comlin having any interest in the property or in the income generated by the development. Mr Khoury and Mr Wu said that they were never told about any partnership or other arrangement with Comlin concerning the Bankstown property.

92. William Metlej gave some evidence about the course of the Bankstown development. He denied that Mr Bassil was involved in any discussions about the progress of the project. He said that Mr Bassil was briefly involved in concreting work but his services were terminated because his work was not up to scratch. He repudiated the suggestion implicit in Mr Bassil’s alleged conversation with Youssef when the development was completed that there was some sort of change of plan which led to the units being retained. According to William, it had always been intended that the units would be developed for rental purposes.

93. William Metlej placed the completion of the development as having occurred in about April 2006 (as also did Mr Wu). Occupation certificates tendered without objection after the hearing showed that Tower A was completed in May 2006, Tower B in October 2006 and Tower C in January 2008.

94. Toufic Kayrouz also denied that Mr Bassil had any involvement in discussions between the Venture Group partners about the Bankstown project. Mr Bassil had not claimed to have been involved in any discussions with Toufic and Toufic’s evidence in this regard was not challenged.

95. William Metlej said that his father never told him that Mr Bassil had any interest in the development. He agreed that Mr Bassil contacted him in January 2013 shortly after his father’s death about a share in the Bankstown property. He said that he knew nothing about it and would ask Toufic. He said that later in the year Mr Bassil asked for a meeting with Toufic. Toufic was “very dismissive” about having a meeting and none took place.

96. In her affidavit, Ms Elias said that her father talked about the Bankstown project but never mentioned that Mr Bassil had any interest in it. She also deposed to a conversation she had with Mr Bassil at a family gathering in July 2013. She said that Mr Bassil referred to a “letter regarding my entitlements” (clearly a reference to Mr McEncroe’s letter of May 2013: see [40] above) and continued:

Tony Bassil did not elaborate on the claimed business deal other than to say my father had promised him something for helping him to find the Bankstown site. Tony did not state or make any claim about being in a partnership/joint venture with my father on the Bankstown development.

As I have noted, Ms Elias was not required for cross-examination. Her evidence was uncontested.

106. William Metlej also gave evidence in response to Mr Bassil’s evidence concerning his other business dealings with Youssef. William agreed that Youssef purchased a concrete pump from Mr Bassil but his evidence was that the pump was let out independently. The pump was eventually transferred to John Elias, Antoinette Elias’ husband, and later to Mr Bassil’s son. William said that Youssef was very disappointed with what he perceived to be Mr Bassil’s lack of acumen in purchasing the Flinders Hotel. He said that Youssef gave him to understand that no one in the family should go into business with Mr Bassil again.

107. Ms Elias also gave evidence on these matters. She said that her father complained that Mr Bassil did not manage her father’s concrete pump well. In 1993 her father took the machine away from Mr Bassil and asked John Elias to operate it for him. The work came from another concrete pumping business, A & F Concreting, which would refer the work from its customers and collect the money due in return for a commission. Youssef said he was told that A & F had previously referred work to Mr Bassil on this basis but Mr Bassil had attempted to deal directly with A & F’s customers so as to cut A & F out. Ms Elias said Youssef thought this was unethical as well as foolish from a business viewpoint. Ms Elias also said that her father told her that he was dissatisfied by Mr Bassil’s management of the Flinders Hotel and after his experience with Mr Bassil he would never go into business with Mr Bassil again. Ms Elias also said that Youssef was well known for his honesty and fair dealing in business.

Conclusions and commentary

108. I think it is clear that the fax to Mr Chahine of 8 June was an offer on behalf of the Venture Group companies. There is a disparity between Mr Chahine’s account of the events surrounding receipt of the fax (at [70] above) and William Metlej’s (at [90] above), but the disparity is of little significance because on either view Youssef and William were involved in making the offer. The evidence of Toufic Kayrouz that he was consulted about, and agreed to, the offer was not contested. Nor was William’s evidence that the offer figure was formulated without Mr Bassil’s involvement. The fax was probably not in a form which would have been legally binding, but there is no reason to doubt that the Venture Group partners were, as early as June, ready, willing and able to purchase the property (with the benefit of development work already undertaken) for $9 million.

109. I do not accept that Mr Bassil was involved as a potential purchaser at this stage. Mr Bassil claimed that by the beginning of August, he had been involved in discussions about purchasing with Youssef Metlej (and through him the other Venture Group partners) going back to March or April (see [43]-[47] above), and, admittedly at a high level, with representatives of the Walter Group on 20 July (see [46] above). But none of the alleged discussions with Youssef are supported by a diary note, and neither the diary note of 20 July nor the fax to Mr Whinney on 23 July mentions Mr Bassil himself being a purchaser. The claims rest entirely on Mr Bassil’s affidavit account from August 2015.

110. As mentioned, there was no challenge made on behalf of Mr Bassil to William’s evidence that the $9 million figure had been based on his assessment, and there was no evidence from Mr Bassil of any discussions with the Venture Group principals before he supposedly put the figure to Mr Chahine. In my view, this is telling. Had Mr Bassil been considered to be a participant alongside the Venture Group partners, then I have no doubt that he would have been involved in their collective decision making about the offer to Mr Chahine.

111. It is true that Mr Chahine’s 2001 affidavit recorded Mr Bassil as being present at the meeting between Mr Chahine, Youssef and William, as asserting that Youssef Metlej was his “partner”, and as saying that “we” wanted to buy the property. Mr Chahine’s affidavit was relatively contemporaneous which gives it some weight, but I do not think it can be pressed too far. Mr Chahine was aware of the family connection between Mr Bassil and Youssef Metlej. From his point of view, there would have been little or no observable difference between Mr Bassil participating as a go-between trying to promote a sale on the one hand, and his participating as a partner in the project on the other. And this is not a distinction which would have mattered to Mr Chahine, then or later. In my view, Mr Chahine’s evidence is not enough to establish that Mr Bassil was himself one of the prospective purchasers at this time.

112. I think this conclusion is supported by common sense. Mr Bassil’s diary entries from March and April only record discussions about getting paid for the work he had done. It stands to reason that Mr Bassil’s first objective would have been to secure payment for that work. If possible, he would have wanted to get Isaks back working on the project so that Highrise could complete the rest of its contract with Isaks. No doubt Mr Bassil would have been keen to see the Venture Group partners or some other purchaser come in and recapitalise the project, thereby allowing Isaks to continue. The angry reaction that Mr Bassil had on 2 August when he was told by Mr Isakka that the promised payment for Highrise’s work would not be forthcoming shows that at that stage Mr Bassil was still hoping for Highrise to be paid. The $200,000 owed to Highrise was a substantial sum of money but I find it far-fetched to suppose that Mr Bassil would have seriously contemplated making the sort of financial commitment necessary to become a part owner of the project himself in order to recoup that money, at least until it was clear that there was no alternative. To the extent that Mr Bassil’s evidence suggested that he had, I do not accept it.

113. The strength of Comlin’s case lies in Mr Bassil’s diary entries from 2 August onwards. These record:

(a)   offers by Youssef Metlej before the auction to involve Mr Bassil in the purchase;

(b)   Mr Bassil being involved in discussions before the purchase with Mr Chahine and with Mr Jordan of ETM, and also being involved in subsequent discussions with Mr Chahine concerning the resolution of Artistic’s proceedings so far as they concerned the Venture Group;

(c)   Mr Bassil planning to take his cheque book along to the auction;

(d)   Mr Bassil placing the successful bid of $6.6 million; and

(e)   most significantly, Mr Bassil making an agreement to be a “silent partner” and receive a one-fifth share of the profit.

114. Counsel for the Metlej companies argued in the course of final submissions that the diary notes, or at least some passages in them, might not be contemporaneous. Counsel suggested the entries, and in particular the crucial final sentence of the entry for 13 September 2001, which records the agreement that Mr Bassil would be a “silent partner”, might have been added later.

115. In response, counsel for Comlin referred to a further entry from the diary dated 1 November, which records a conference at the chambers of Mr JC Kelly SC, who was acting for the Venture Group partners in the proceedings brought by Mr Chahine’s company, Artistic. The note reads:

01.11.01

4.00pm   Q.C. at city office. Mr John Kelly barisseter Alex + solicitor Joe Alphonse. The meeting start 4.30pm finished 5pm. He took copie of my diary for 29-30 of August + 13 of September the day of the auction. He said no need for you to be witness.

116. Of course, this entry could itself have been added to the diary at a later point. Furthermore, even if the entry does show that there were diary entries about the Bankstown project at the time, it does not establish that the crucial final sentence of the entry on 13 September was then in the diary. It therefore does not completely answer the submission made by counsel for the Metlej companies. But I have been troubled about whether the submission is a fair one. I was informed without objection that the diary had been produced in advance of the hearing for the purpose of forensic examination by the defendants, and no report was relied upon by them. The only reference to the question in the evidence was a suggestion to Mr Bassil in cross-examination that the entry for 13 September might have been made up many years afterwards; he disagreed and the point was taken no further.

117. The rules of court relating to discovery provide that the delivery of a formal list of documents was taken to be a notice to admit the authenticity of the documents contained in the list: see Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’), r 17.5. As a consequence, if a notice disputing the authenticity of a discovered document was not served within the period allowed (14 days), its authenticity is admitted: see UCPR r 17.4. Where the document described as having a particular date, then I would take the admission thereby made as being an admission that it was prepared on or about the date stated. The rule therefore has the effect of requiring any issue about the authenticity of discovered documents to be raised well in advance of the hearing.

118. So far as I am aware, formal orders for discovery were not made in this case; if they were, there is no evidence before me to establish any deemed admission of the authenticity of the diary notes. But although r 17.5 may not have directly applied, I think it gives some guidance as to what fairness requires in litigation of this kind. In my opinion, having conducted a forensic examination of the diary, the defendants were obliged to give proper advance notice of any challenge to the contemporaneity of the diary entries. Because Comlin bore the onus, the challenge need not have involved the making of an affirmative case by the defendants. If their expert’s evaluation was inconclusive, so that the expert could not say whether the entries (and in particular the crucial last sentence of the 13 September entry) were contemporaneous, it would probably have been sufficient to serve a report to this effect. But something needed to be done before the trial so that if Comlin had further evidence on the question, that evidence could be presented. It was too late to raise the challenge at the final hearing.

119. In modern litigation, with its preliminary disclosure of the parties’ cases by means of affidavits and witness statements well in advance of the trial, the rule in Browne v Dunn (1893) 6 R 67 is far more often invoked than applied. But in my opinion this is one of those cases where it does apply, and it prevents me from entertaining counsel’s submission. I think I must proceed on the basis that all the diary entries are contemporaneous ones, including the crucial last sentence of the entry on 13 September 2001.

120. Counsel for the defendants emphasised the evidence of Antoinette Elias that Youssef Metlej had never mentioned to her any dealings between Youssef and Mr Bassil, and her evidence of his rectitude. The suggestion was that if Youssef Metlej had made a commitment to Mr Bassil, he would have honoured it. Counsel also emphasised the evidence of Ms Elias (and William Metlej) about Youssef Metlej’s disappointment with the Flinders Hotel venture.

121. I do not think this is of great significance. Although the case was conducted before me on the assumption that Youssef Metlej was a man of his word, indeed a pillar of respectability, if Mr Chahine’s police statement was correct Youssef was capable of behaviour which was far from savoury. While I accept that Youssef might have been disappointed by the management skills displayed by Mr Bassil in the Flinders Hotel venture, the evidence of that disapproval is not definitively dated to the period prior to the auction. In any event, the fact is that Mr Bassil’s diary notes show that he was prepared to go into business with Mr Bassil on the Bankstown project, because he offered to do so on a number of occasions.

122. On the other hand, I think that there are five important difficulties with, or shortcomings in, Comlin’s case.

123. The first difficulty with Comlin’s case is its lack of commercial logic. The principals of the Venture Group companies were experienced and capable businessmen, who, between them, had the resources and the skills needed to undertake a large-scale property development of the type in question. They did not need Mr Bassil’s help to buy the Bankstown property or to carry out the redevelopment.

124. Preparation for the purchase would have entailed considerable preparatory work in lining up the finance, getting advice from and giving instructions to Mr Alphonse about the contract, and assessing the feasibility of the development. There is nothing in the written evidence which indicates that Mr Bassil assisted with any of this. Nor does the evidence show that it was contemplated that Mr Bassil would contribute to the redevelopment if the purchase went ahead, and he did not do so.

125. The diary notes refer to a number of offers by Youssef Metlej prior to the auction to buy the property together with Mr Bassil. But the notes themselves leave Mr Bassil’s position ambiguous. They do not record any acceptance by Mr Bassil of Youssef’s offers. Rather he appears to have been operating independently, using his own solicitor, Mr McEncroe, to get a copy of the contract (9 August), and telling his associates on 18 August that he would buy the property for himself but that Youssef wanted to be a partner with him. The entries for 24 August show him negotiating with Mr Ghossayn and then receiving a further offer from Youssef. It is not until 28 August that the notes record him working together with principals in the Venture Group, at a meeting with Youssef, Donny and Mr Chahine. But the notes concerning his dealings with Mr Chahine and Mr Jordan on 30 August and 5 September speak of him as the purchaser in the first person; there is nothing to indicate that he was acting on behalf of the Venture Group partners as well as himself. The reference to Mr Bassil taking his cheque book to the auction in the note on 12 September also suggests that he was intending to bid himself, rather than together with the Venture Group partners: why else take the cheque book?

203. For these reasons, I conclude that Comlin’s claim is not barred by ss 54A or 23C.

Limitations, laches and abandonment

216. These proceedings were commenced on 29 September 2014, just over thirteen years after the auction. In their defence, the Metlej companies plead four specific statutory bars in the Limitation Act: ss 14(1)(a), 15, 27 and 48. The Kayrouz companies’ defence is more broadly expressed. It simply pleads that the plaintiffs’ claim are “statute barred and out of time pursuant to the Limitation Act” and that the Kayrouz companies “rely on the provisions of that Act in defending the claim”.

217. At the final hearing, counsel for the Kayrouz companies relied on s 47 of the Limitation Act, which was not one of the provisions identified in the Metlej companies’ defence. It appears that no specification was ever sought of the particular provisions upon which the Kayrouz companies relied for their limitation defence. It seemed to me that in those circumstances it was open to the Kayrouz companies to rely upon s 47, and further that, as a result, there could be no prejudice to Comlin in allowing the Metlej companies to rely on that provision also. I put this view to counsel for Comlin, who, as I understood, accepted it. Accordingly, I will proceed on the basis that all of the limitation periods relied upon by either set of defendants is available to both.

218. It is convenient first to consider the provisions of the Limitation Act which potentially apply to Comlin’s partnership claim. Section 15 provides:

Accounts

An action on a cause of action for an account founded on a liability at law to account is not maintainable in respect of any matter if brought after the expiration of a limitation period of six years running from the date on which the matter arises.

219. The Partnership Act contains a number of provisions which, expressly or implicitly, impose obligations to account. Section 28 (expressly invoked in Comlin’s Statement of Claim: see [176] above) relevantly provides:

Duty of partners to render accounts

(1)   Partners in a firm … are bound to render true accounts and full information of all things affecting the partnership to any partner or the partner’s legal representatives.

220. Section 29 relevantly provides:

Accountability of partners for private profits

(1)   Every partner must account to the firm for any benefit derived by the partner without the consent of the other partners from any transaction concerning the partnership, or for any use by the partner of the partnership property, name, or business connexion.

(2)   This section applies also to transactions undertaken after a partnership has been dissolved by the death of a partner, and before the affairs thereof have been completely wound up, either by any surviving partner or by the representatives of the deceased partner.

221. Sections 28 and 29 operate during the subsistence of the partnership. Section 39, quoted at [179] above, applies on dissolution. Although s 39 does not expressly refer to an account being taken of the residual partnership assets, that is the normal way in which it would operate.

222. The application of the Limitation Act, s 15, to a partnership case was authoritatively considered by the Court of Appeal in Sze Tu v Lowe (2014) 89 NSWLR 317, at [357]-[370] and [379]-[385]. The business of the partnership in that case was the operation of two shops. The active partner closed first one shop and then the other, retaining the remaining assets for himself. No account was sought by the other partners. The Court of Appeal concluded that the partnership had been for a “single adventure or undertaking” which had been dissolved under s 32(b) when the second shop was closed. This had been more than six years before the proceedings were instituted. The Court held that s 15 barred any claim for an account in favour of the other partners for their share of the takings before dissolution or of the residual partnership assets. Gleeson JA said (at [362]):

… the limitation period in s 15 of the Limitation Act cannot be sidestepped by describing a contractual duty to account, or the duty at law arising under s 29 of the Partnership Act, as a claim for breach of fiduciary duty. It is a claim to which s 15 of the Limitation Act applies directly. Where proceedings are brought in equity, equity acts in obedience to the statute and applies s 15 directly to such a claim for the taking of accounts.

223. The present case is more complicated. The relief claimed by Comlin presupposes that the partnership is still subsisting. Is this correct? And, if so, would it make any difference? I have considered these question as a matter of principle, as the parties did not refer to any authority, or, indeed, address the question in any detail in their submissions.

224. It was not suggested that anything was said in the signing room, or that there were any prior discussions between the parties, about the circumstances in which the alleged partnership would terminate. In my view the alleged partnership was a partnership “for a single adventure or undertaking”, namely the “development” of the Bankstown property, which would, by force of the Partnership Act, s 32(b), dissolve upon the “termination of that adventure or undertaking”.

225. The question thus arises when, if at all, the “termination of that adventure or undertaking” would have taken place. In my view, the natural meaning of the term “development” in the context of the alleged conversation was the completion of the building work involved in redeveloping the site. It would follow that the alleged partnership would have dissolved when the last of the towers (tower C) was completed and ready for occupation. The occupation certificate shows for tower C issued in January 2008, and the alleged partnership would therefore have dissolved more than six years before the commencement of these proceedings.

226. It remains to consider the effect of the alleged conversation between Mr Bassil and Youssef Metlej concerning the “rolling over” of Comlin’s interest in the development (see at [55]). It might have been contended that this amounted to an agreed variation of the scope of the partnership business under the Partnership Act, s 19. But Comlin did not plead or argue its case in that way. It is also difficult to see how any such agreement by Youssef Metlej would have bound the Kayrouz companies (or the second defendant, for that matter). In any event, for reasons given at [159]-[160], I do not accept that any such conversation took place.

227. For these reasons, I think that Comlin’s claim in these proceedings is wholly barred by s 15. But, in case I am wrong in this view, I will now consider what effect s 15 would have if the alleged partnership were still subsisting.

228. Section 28 of the Partnership Act does not specify how frequently partnership accounts are to be rendered. It leaves that to agreement between the parties, or, in default of agreement, to such implication as may arise from the circumstances of the particular partnership.

229. In Australia, a partnership firm must lodge a tax return for income tax purposes for each financial year ending on 30 June, or such substitute accounting period as may have been nominated: see Income Tax Assessment Act1936, s 91. The individual partners are liable for income tax on their respective shares of that income (and receive deductions for their shares of a loss) for the financial year in question, and must include that income (or loss) in their tax returns: see Income Tax Assessment Act1936, s 92. In these circumstances, I consider that, in the absence of a contrary provision in the partnership agreement, a firm is obliged under s 28 to account to its partners for each financial year’s income (or loss), so that the individual partners may in turn comply with their obligations to include that share of the partnership income or loss in their own tax returns.

230. In stating the matter in this way, I have referred to partnership loss as well as partnership income. That is because both losses and gains must be included in the relevant tax return, and if a partnership loss is suffered it may be deducted against other assessable income. In that sense, even where the partnership has made a loss, the individual partners may derive a benefit from the accounting.

231. Thus, in my view, even if the alleged partnership were still a subsisting one, any action against the Venture Group companies for an account of income of the partnership up to and including the year ended 30 June 2008 would be barred by s 15. It is unnecessary to consider whether any account could be obtained for a share of the income attributable to the partial accounting period up to 29 September 2008.

232. In case I am wrong in thinking that the only claim available to Comlin in these proceedings is a partnership claim, I will now consider the limitation period which would be applicable to Comlin’s claims based on equitable estoppel (including Pallant v Morgan “equitable fraud”). It is convenient to deal first with s 47 which provides:

(1) An action on a cause of action:

(a)   in respect of fraud or a fraudulent breach of trust, against a person who is, while a trustee, a party or privy to the fraud or the breach of trust or against the person’s successor,

(b)   for a remedy of the conversion to a person’s own use of trust property received by the person while a trustee, against that person or against the person’s successor,

(c)   to recover trust property, or property into which trust property can be traced, against a trustee or against any other person, or

(d)   to recover money on account of a wrongful distribution of trust property, against the person to whom the property is distributed or against the person’s successor,

is not maintainable by a trustee of the trust or by a beneficiary under the trust or by a person claiming through a beneficiary under the trust if brought after the expiration of the only or later to expire of such of the following limitation periods as are applicable:

(e)   a limitation period of twelve years running from the date on which the plaintiff or a person through whom the plaintiff claims first discovers or may with reasonable diligence discover the facts giving rise to the cause of action and that the cause of action has accrued, and

(f)   the limitation period for the cause of action fixed by or under any provision of this Act other than this section.

(2)   Except in the case of fraud or a fraudulent breach of trust, and except so far as concerns income converted by a trustee to his or her own use or income retained and still held by the trustee or his or her successor at the time when the action is brought, this section does not apply to an action on a cause of action to recover arrears of income.

233. Section 11(1) contains the following definitions of trust and trustee which apply except where the context or subject matter otherwise indicates or requires:

Trust includes express implied and constructive trusts, whether or not the trustee has a beneficial interest in the trust property, and whether or not the trust arises only by reason of a transaction impeached, and includes the duties incident to the office of personal representative but does not include the duties incident to the estate or interests of a mortgagee in mortgaged property.

Trustee has a meaning corresponding to the meaning of “trust”.

234. Section 47 can be traced back to the Trustee Act 1888 (UK), s 8. In Sze Tu v Lowe, the Court of Appeal noted that under the modern descendants of that enactment in England and Victoria, the courts interpret the reference to recovery of “trust property” against a “trustee” as being limited to property misapplied by someone who at the time of its misapplication has assumed the responsibilities of a trustee, whether expressly or de facto. But the definitions of “trust” and “trustee” in s 11 were the result of a deliberate change in the law recommended by the NSW Law Reform Commission in the report which led to the enactment of the Limitation Act 1969, and the meaning of those terms in s 47 is therefore wider (at [332]-[338]).

235. In these proceedings, Comlin’s prayers for relief include declarations of entitlement to a one-fifth interest in the property and the income derived therefrom (see [176] above). This reflects the relief decreed by Harman J in Pallant v Morgan itself (see [188] above). In essence, Comlin seeks the imposition of a constructive trust reflecting the terms of the alleged agreement in the signing room. It is clear from Sze Tu v Lowe that s 47 is capable of applying to such a constructive trust.

236. Counsel for Comlin nevertheless contended that s 47 did not actually apply to the Pallant v Morgan claim in this case. They argued that the claim should be seen as a claim for an account rather than a claim to recover specific trust property. Counsel relied on a statement by Megarry VC in Tito v Waddell (No 2) [1977] Ch 106, and on the decision of Helsham J in Moore v Flavelle [1969] 1 NSWR 361. Alternatively, counsel contended that, if s 47 did apply, the time only began to run when Mr Bassil’s claim for an interest in the property was rebuffed after Youssef Metlej’s death (see [56] above).

237. In Tito v Waddell, Megarry VC was considering the application of s 19 of the Limitation Act 1939 (UK), which provided:

“(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action – (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or (b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use. (2) Subject as aforesaid, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other prevision of this act, shall not be brought after the expiration of six years from the date on which the right of actin accrued: …”

His Lordship said:

The first limb of section 19(2), relating to an action “to recover trust property”, is open to the difficulty that an action to recover a beneficial interest in trust property cannot readily be described as an action to recover “trust property”: what a man owns beneficially is essentially different from what a man holds not beneficially but in trust.

238. His Lordship identified a difficulty, but did not suggest the solution. Some meaning must be given to the phrase “action … to recover trust property” in s 47(1)(c).

239. Moore v Flavelle concerned trusts established under the will of a testator who had died in 1899. The trustees had paid monies out of the trust funds to persons who are not entitled to receive those monies. The beneficiaries sought an account. The applicable limitation period was prescribed by the then s 69 of the Trustee Act 1925, which contained a proviso in s 69(1) which was in similar terms of s 19(1) of the 1939 UK Act. It was not suggested that the trustees had acted fraudulently and they relied on the six year period generally applicable under s 69 of the Trustee Act. The proceedings were commenced in March 1967, so this would have limited the account to the period from March 1961. But the trustees still retained property in their hands for distribution to the beneficiaries, and it was argued on the beneficiaries’ behalf that the action was one “to recover trust property or the proceeds thereof” retained by the trustees and that accordingly the period of the account was not limited in time. Helsham J said:

I do not consider that a suit commenced on a particular day seeking accounts from a trustee and an order for payment over of what may be found to be due upon those accounts can be said to be an action to “recover” within the meaning of the section what is as at that day admittedly held by a trustee as trust property liable to be distributed in the trust. And even though that property may be caught up in the general claim for administration in the same suit neither that claim nor the order for administration can in any sense be said to relate to the recovery of that property. In my view this portion of the proviso was intended to relate to the trust property or proceeds on its collection or realization in cases where it is necessary to sue for such actual property or proceeds because the same is retained by the trustee or another whether by reason of adverse claims for neglect to transfer or otherwise. Neither a suit for accounts nor for general administration falls within this type of claim.

240. In my opinion, this decision, properly understood, is contrary to counsel’s contention. In this case, the alleged Bankstown property which is subject to the alleged constructive trust remains in the hands of the Venture Group companies, who are treating it as their own and refusing to acknowledge that Comlin has any entitlement to it or to the income derived from it. The case falls squarely within the circumstances described by his Honour where “it is necessary to sue because the [property] is retained by the trustee … whether by reason of adverse claims or neglect to transfer or otherwise”. In my opinion, Comlin’s Pallant v Morgan claim is properly characterised as a claim “to recover trust property … against a trustee” for the purposes of s 47(1)(c). It would also appear to be a claim “for a remedy of the conversion to a person’s own use of trust property received by the person while a trustee” for the purposes of s 47(1)(b).

241. It still remains necessary, however, to ask when the cause of action under s 47 accrued. In Pallant v Morgan, the circumstance which gave rise to the constructive trust was the plaintiff’s abstention from bidding which permitted the defendant to make the winning bid at the auction. The defendant was bound from that point forward to respect the plaintiff’s promised interest in the property. Unless there was some understanding to the contrary not recorded in the decision, the plaintiff would have been entitled to require the subsequent transfer to be made in his favour jointly with the defendant (subject to contributing his half share of the purchase price). Had the issue of limitation arisen, arguably the cause of action would have arisen, at the latest, when the contract was completed and the defendant took sole title.

242. But in the present case, it was part of the alleged agreement between the parties that the property would be acquired in the names of the four Venture Group companies, and not Comlin. The completion of the contract and registration of the property in the names of those four companies was consistent with the terms of the alleged constructive trust. In my view, it was not until the four Venture Group companies acted inconsistently with the terms of the alleged trust that time started to run. But I do not accept that this was not until 2013, when Mr Bassil expressly raised his claim with William Metlej and Toufic Kayrouz. By that stage the Venture Group companies had been treating the property, and the income from it, as their own for many years, and this was quite inconsistent with the terms of the alleged constructive trust.

243. The question is when the Venture Group companies first acted inconsistently with their obligations to Comlin. The first financial year of the trust was the year ended 30 June 2002. The Venture Group tax return for that year is in evidence but is unsigned and undated. The proceedings were instituted twelve years after 29 September 2002. The evidence does not affirmatively demonstrate that the Venture Group companies repudiated their obligations to Comlin before that date. It follows that, had I considered that a Pallant v Morgan claim was available to Comlin, that claim would not have been statute barred.

244. This conclusion makes it unnecessary to consider the application of s 48 (which applies to breaches of trust generally) or of s 27(2) (which applies to actions for the recovery of land or an interest in land).

240. In the course of submissions, I raised with the parties whether Comlin’s case could be analysed in terms of specific performance. On one view, the alleged agreement was an agreement by Comlin to surrender its entitlement to complete the contract in return for a share of the Bankstown property and the profits derived from it, and Comlin’s claim in these proceedings could be seen as an attempt to require compliance with that obligation.

241. On reflection I do not think it is necessary to consider this. Comlin’s claim is pleaded on the basis that the alleged agreement gave rise to an immediate and ongoing relationship of partnership, or to an immediate and ongoing entitlement to a one-fifth share of the property and the profits derived from it. An agreement under which Comlin surrendered its interest in return for a payment of one-fifth the profits when the development was completed, or for some other consideration payable at that point, would support relief in the nature of specific performance. But although Mr Bassil’s note, considered on its own, might have been consistent with such an analysis (see [246] above) Comlin did not put its case that way. Accordingly it is not necessary to consider the application of s 14(1)(a) by analogy, or the effect of s 23, or the observations of Dixon CJ & Fullagar J in Fitzgerald v Masters (1956) 95 CLR 420 at 428.

242. Both sets of defendants also pleaded the defence of laches in answer to the equitable claims made by the plaintiff. Laches is a defence which arises independently of statutory limitations. But some statutory limitations apply, either directly or by analogy, to equitable claims. Section 47 is an example. Where a statutory limitation period is applicable a question arises as to the concurrent operation of laches during that period. One view is that equity should “follow the law” by not permitting laches to be raised during the period when the statutory limitation period has not yet run. The other view is that laches is an independent defence and if its elements are made out equity should give effect to it even if that means depriving the plaintiff of his or her claim during the statutory limitation period. This question was left open by the Court of Appeal in Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181 at [28]-[30], but in CSR Ltd v Amaca Pty Ltd [2016] VSCA 320 at [259]-[262] the Victorian Court of Appeal adopted the latter view. No contrary submission was put to me in this case and I will therefore consider the application of the laches defence independently of any statutory limitation period applicable to Comlin’s equitable causes of action.

243. In order to make out the defence of laches, the defendant must usually show that, as a result in the delay of the plaintiff pursuing its claim, the defendant has suffered prejudice. In the present case, the defendants relied on the loss of evidence over the sixteen year period since the auction, and in particular the death of Youssef Metlej in 2012. In Orr v Ford (1989) 167 CLR 316, a case where laches was invoked as a result of the alleged loss of relevant evidence, the High Court majority (Wilson, Toohey & Gaudron JJ) said (at 330):

The question of prejudice resulting from unavailability of evidence necessarily involves some degree of speculation, but it is not a question of pure speculation. The issue is not whether evidence may have been lost but whether evidence which may have cast a different complexion on the matter has been lost.

249. This case goes well beyond the potential loss of relevant evidence. Youssef Metlej’s evidence would clearly have been relevant to the outcome of the proceedings. The fact that it is not known what he would have said is not material. It is enough that his evidence would have been relevant (indeed it would probably have been crucial) and that it has been lost.

250. Counsel for Comlin did not, as I understood them, dispute that if there had been a sufficient degree of delay on Comlin’s part beforehand, Youssef’s death would be sufficient to give rise to the defence. They argued, however, there was no relevant delay by Comlin during Youssef’s lifetime and that Comlin’s entitlements were only disputed in 2013 after Youssef had already died.

251. I am unable to accept this argument. On his own evidence, Mr Bassil was generally aware that the development was proceeding. From 2002 monies were being spent on purchase and development of the property; revenue losses were being incurred; the Venture Group companies were financing this expenditure (and receiving the tax deductions for the losses); and Comlin supposedly had a one-fifth share in all of this. There is, as I have found, no evidence of when the first tax return was lodged for the project, but by 2003 or 2004 at the latest it must have been clear to Mr Bassil that Comlin was not being treated as a one-fifth partner. Once the Venture Group started to complete the towers and earn interest from them, it must have been equally obvious that they were retaining Comlin’s alleged one-fifth share of that income (and paying tax on it) for themselves.

252. I do not accept Mr Bassil’s account of a conversation in 2005 with Youssef Metlej in which it was supposedly agreed that Comlin’s interest would be rolled over. Even if that conversation had taken place, it would not have bound the Kayrouz companies or the second defendant. As against those parties, Comlin simply allowed the situation to continue until after Youssef’s death.

253. In order for a claim to be barred by laches, the delay for instituting the proceedings must have been “inordinate”. I do not understand this term to have any fixed meaning, or any relationship with any of the various statutory periods of limitation prescribed in the Limitation Act. The term “inordinate” simply means excessive in the circumstances of the case. In the present case, I consider that the lapse of time between 2003 or 2004, when it must have been clear that the Venture Group companies had appropriated Comlin’s alleged share of the development to themselves, and the institution of proceedings in September 2014 is properly described as “inordinate”. Indeed I think that a significantly shorter period of delay would merit that description.

254. The fact that the Venture Group companies openly treated the development as their own is relevant for other purposes. An established ground for the application of laches is where the interest claimed is in a speculative venture; another is where profits are claimed: see Meagher Gummow & Lehane (5th Ed, 2014) at [38-025]. In the present case, all concerned seem to have been confident that the project would be a profitable one, but it still involved risk and the outlay of large amounts of money over a period of years before there would be any return. Comlin’s claim is only now being made in circumstances where the development has been completed and is an established commercial success with a large stream of rental revenue. And Comlin is not only seeking to obtain a one-fifth share of the property, but is also seeking to obtain an accounting going back to the beginning of the project so as to claim from the Venture Group companies income which they have been openly treating as their own and upon which they have been paying tax. These are strong additional reasons why it would now be unjust to give Comlin the relief it seeks. In my view, the defence of laches is made out.

255. The defendants also relied on a defence of abandonment. In Fitzgerald v Masters, the High Court explained that abandonment of a contract occurs when the conduct of the parties, considered objectively, is such as to manifest a common intention to treat the contract as discharged. In that case, the parties entered into a contract for the plaintiff to purchase a half share in farming land owned by the defendant. That happened in 1927. The plaintiff carried on a farming business on the land in partnership with the defendant from 1929 until 1932 when the plaintiff left. By then the plaintiff had paid more than half the agreed price. It was not until 1948 that the plaintiff, through solicitors, asserted a right to complete the purchase. The High Court concluded that the partnership had been dissolved in 1932 but this had not discharged the purchase contract (in that case the partnership business involved only the farming of the land, not the purchase and redevelopment of it, as in this case). The abandonment defence failed and specific performance was granted.

256. As the facts of Fitzgerald v Masters show, abandonment is not lightly inferred. But there are a number of points of distinction between this case and Fitzgerald v Masters. In Fitzgerald v Masters, there was found to be an express agreement between the parties to put payment of the balance of the purchase price on hold. Here, the property was the site of a large scale commercial operation, which was ongoing. Comlin neither contributed towards its share of the purchase and redevelopment costs or to the losses incurred on revenue account while the development was taking place, nor received any of the income from the development after it had been completed. Contributions were neither offered or sought on either side. For this to go on for more than a decade is enough, in my view, to manifest a common intention to abandon any agreement for participation by Comlin. I would uphold this defence also.

Partnership agreement

257. In case I am wrong in my view that the pleaded claims are statute barred (or barred by the defences of laches or abandonment), I will now express my views on whether Comlin has established the factual basis for the claims it makes.

258. Having regard to the difficulties and shortcomings in Comlin’s case which I discussed at [123]-[144] above, I am not, on balance, satisfied that an agreement was made on 13 September 2001 for the purchase of the Bankstown property by Comlin in partnership with the Venture Group companies, as Comlin alleges.

259. As I have explained, Mr Bassil’s diary notes do not go far enough to establish that an agreement in the particular terms alleged was actually made. The weaknesses in Comlin’s other evidence (and in particular the weaknesses in Mr Bassil’s evidence, which was critical) are such that Comlin has not proved its case. In particular, if the alleged agreement had been made, I think that Comlin would have been required to contribute its share of the purchase price and development costs. I do not believe that the experienced and tough-minded businessmen who were the Venture Group principals would have allowed Comlin to take the profits without contributing to the costs.

260. Putting aside Mr Bassil’s affidavit evidence as unreliable, I still do not find it easy to reconcile the remaining evidence to a coherent theory about what really happened at the auction in September 2001. One theory which fits reasonably well with the evidence is that Mr Bassil somehow came to make the winning bid but was then prevailed upon by Youssef Metlej (in the absence of the Kayrouzes) to allow the transaction to proceed with the Venture Group companies as purchasers, and Youssef later gave Mr Bassil to understand that he would ensure Mr Bassil received some form of financial reward. Even if Mr Bassil’s understanding was initially that his reward would be one-fifth of the profit after the property was sold (this being what he recorded in his diary note), that understanding may have been modified by later events. By the time Mr McEncroe’s letter was written in 2013 Mr Bassil may have forgotten what was recorded in his 2001 diary, and simply recalled a vague undertaking to “protect his interest”. But it is not necessary to pursue this further. Comlin has put its case as an agreement with all four Venture Group companies, and has not advanced an alternative claim against the first defendant alone. It is sufficient to say that I am not persuaded on the balance of probabilities that the account put forward on Comlin’s behalf is correct.

261. Comlin’s claim would therefore, if it were maintainable, fail on the facts. This conclusion makes it unnecessary to consider the question whether the alleged agreement would, if made by Youssef Metlej, have been binding on the Kayrouz companies or the second defendant.

Equitable estoppel

262. My conclusion that Comlin has failed to establish an agreement in the terms alleged means that if, contrary to my view, Comlin has an available claim based on equitable estoppel or “equitable fraud”, that claim would also fail.

Conclusions and orders

263. I have concluded that:

(1)   Comlin’s partnership claim is not barred by the Conveyancing Act, s 54A or 23C;

(2)   Comlin’s claim is barred by the Limitation Act 1969, s 15;

(3)   Comlin’s claim is independently barred by the defences of laches and abandonment;

(4)   in any event, Comlin’s evidence is insufficient to establish the agreement on which it sues, and if Comlin’s claim were not barred it would fail on the facts.

264. On the face of it, costs should follow the event. The parties will have liberty to apply to seek some different costs order.

265. The orders of the Court are:

1.   Order that there be judgment for the defendants.

2.   Order that the plaintiff pay the defendants’ costs on the ordinary basis.

3.   Grant liberty to the parties to apply for variation of Order 2, such liberty to be exercised within 21 days of today’s date.

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Decision last updated: 28 May 2018