Esber v Massih - [2006] NSWSC 321

CITATION: ESBER v. MASSIH [2006] NSWSC 321

HEARING DATE(S): 30, 31 May 2005; 10 June 2005; 2 Spetember 2005

JUDGMENT DATE :
26 April 2006

JURISDICTION: Equity

JUDGMENT OF: Hall J at 1

DECISION: The plaintiff is entitled to relief in terms as follows - (a) a declaration that the defendant holds half of the land known as 31 Walker Street, Merrylands, being the land comprised in Folio Identifier B/435743 on trust for the plaintiff; (b) a declaration that the plaintiff is entitled to half of any profits from the development and sale of the property being two duplex units, 31 Walker Street, Merrylands; (c) an order that trustees be appointed for the sale of the property referred to in (a) and (b) pursuant to s.66G of the Conveyancing Act 1919 (NSW); (d) an order that the said property in (a) and (b) be vested in such trustees subject to any encumbrances affecting the entirety of the land but free from encumbrances, if any, affecting any undivided share or shares therein to be held by such trustees upon the statutory trust for sale under Division 6 Part 4 of the Conveyancing Act 1919 (NSW). I propose to make declarations and orders accordingly. I propose, unless the parties wish to lodge written submissions within the next 14 days, to order that costs should follow the event and that, accordingly, the defendant pay the plaintiff’s costs of the proceedings. I grant leave to the parties to bring in short minutes of orders to give effect to the orders.

CATCHWORDS: Joint venture arrangement - plaintiff as project manager/builder - property purchased and registered only in defendant's name - plaintiff to provide skill and supervision - defendant to finance development - alleged agreement - no profit margin on costs but agreement to equally share profits on sale - circumstances of relationship consistent with joint venture partnership - suggestive of a relationship other than that of mere owner/builder - plaintiff possessed of a sufficient interest in the developed property with a right to have it sold and the proceeds divided.

LEGISLATION CITED: Home Building Act 1989
Conveyancing Act 1919

CASES CITED: Pallant v. Morgan [1953] Ch. 43
Banner Homes Group PLC v. Luff Developments Limited [2000] Ch. 372
Epple v. Wilson [1972] VR 440
Davies v. Uratoru; Davies v. Residential Tenancies Tribunal (1995) 6 BPR 13,917
Luxury Homes Pty. Limited v. Danieli [2005] NSWSC 375
Go-Tell Nominees Pty. Limited v. Nichols (1997) Supreme Court of Victoria, unreported, 3 March 1997
Simons v. David Benge Motors Pty. Limited Pty. Limited (1974) VR 585

PARTIES: Marcel ESBER v.
Charles MASSIH

FILE NUMBER(S): SC No. 3415 of 2004

COUNSEL: Plaintiff: B Debuse
Defendant: G. Sirtes

SOLICITORS: Plaintiff: Watson & Watson
Defendant: Deacons

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HALL, J.

WEDNESDAY 26 APRIL 2006

No. 3415 of 2004

MARCEL ESBER v. CHARLES MASSIH

JUDGMENT

1 HIS HONOUR: The plaintiff seeks declarations and orders as set out in the amended statement of claim including a declaration that the defendant holds half of the land known as 31 Walker Street, Merrylands, being the land comprised in Folio Identifier B/435743 on trust for him.

2 The plaintiff in this respect claims an interest as a beneficiary under a constructive trust said to be imposed with respect to the property in circumstances of the defendant’s refusal to honour an alleged joint venture agreement or “arrangement” that he claims he made with the defendant to locate and develop land, namely the subject property. The defendant, on the other hand, contends that there was no joint venture agreement or arrangement between the parties and that accordingly there is no basis for the plaintiff’s claimed interest in the property.

3 The parties agree about one thing. They entered into an arrangement, the subject matter of which involved the development of a residential property. Nor is it in dispute that, pursuant to that arrangement, the plaintiff undertook to arrange for the demolition of the improvements on the property and its development by the construction of two duplex dwellings. Further, there is no dispute that the plaintiff did in fact arrange and project managed that work.

4 What essentially is in dispute is both the nature and the essential terms of that arrangement. In that respect, the questions are:-

(a) Was the arrangement essentially one whereby the plaintiff and/or his family company, Constructions Metropolis Pty. Limited, agreed with the defendant to demolish and construct on the basis of remuneration in the forms of a builder’s margin on costs and in part satisfaction of an earlier loan by the defendant (of either $9,000 or $12,000)?

(b) Was it an arrangement whereby the parties agreed that the defendant would finance and purchase in his own name the acquisition and development and the plaintiff would undertake the demolition and reconstruction as a mutual development project at no cost (that is, no margin added on to sub-contractor and suppliers’ expenses) and the duplexes to be sold, the plaintiff and defendant each being entitled to 50% of the profits of sale?

5 On 26 May 2005, I granted leave to the plaintiff to amend the statement of claim filed on 19 October 2004 to include alternative relief as set forth in paragraphs 15, 16, 17 and 17A. By these amendments, the plaintiff claims, alternatively to the primary relief, the value of work on a quantum meruit basis or a claim in respect of the value of work and costs incurred, the value of which to be investigated by an Associate Judge and judgment to be in an amount determined in the plaintiff’s favour.

6 I permitted the amendment on the basis that, should the plaintiff fail in respect of the primary relief as claimed, then he will be entitled to proceed with the alternative claim. I was not, however, prepared to hear the alternative claim concurrently with the primary relief sought, given potential prejudice to the defendant arising by reason of the late amendments.

7 The plaintiff’s essential contention in relation to the joint venture is that he and the defendant agreed that a property would be purchased with the defendant raising the necessary finance for its acquisition and development and the plaintiff would undertake the management, administration and construction of the project, without payment to him of a builder’s margin or additional cost over expenses. On that basis, they would share equally any profits arising from the sale of the developed property.

8 The plaintiff particularised the “agreement or understanding” in the plaintiff’s written contentions and final submissions as follows, namely, that:-

“a. the defendant would provide the initial capital to purchase a property;

b. that the balance of the acquisition costs would be financed through a bank;

c. that the plaintiff would provide his work and experience to obtain development consent for the erection of a duplex;

d. that on consent being granted the plaintiff would provide his work and experience to build the development;

e. that the costs of construction would be borrowed;

f. that on completion of the development the (duplex) properties would be sold;

g. and after repayment of the capital contribution of the defendant, the financing costs, costs of construction and sale the profit (sic) would be shared equally.”

UNCONTESTED FACTS

9 The plaintiff and the defendant attended the same high school. At that time, were only acquaintances. Subsequently, they developed a friendship in about 1998 or 1999 through a mutual friend, a Mr. Anthony Harb.

10 The initial events with which this litigation is concerned arose in 2001. Prior to that time, the plaintiff had been engaged in property development with his brother, Joseph Esber, having completed a conversion of an office building in Surry Hills into eight luxury units in 1996/1998. In the period 1997 to 2002, he and his brother completed a 58-unit construction in Chippendale.

11 The defendant is a chartered accountant carrying on business as Charles Massih & Co. in Parramatta and has done so since late 1999.

12 He gave evidence that early in their friendship the plaintiff spoke to him about financial difficulties that he was experiencing and, in consequence, the defendant lent him $12,500 over a period of approximately six months in various instalments. That loan had not been repaid as to 2001. (The plaintiff disputed the amount of $12,500 and claimed that the loan amount was $9,000).

13 In late 2000 or early 2001, the defendant attempted to refinance the plaintiff’s apartment in Surry Hills, but it appears that the apartment went to auction on a mortgagee sale.

14 The plaintiff says that it was in early to mid-2001 that the defendant first raised the prospect of them both undertaking a property development together. There is some variation in the evidence on this, with the plaintiff suggesting that it was the defendant who was keen and pushing for them both to undertake a development project together. The defendant asserted that it was not something that he specifically approached the plaintiff about and he was not “pushing” the plaintiff to do so. The defendant was aware that the plaintiff had had experience as a developer and that he had been involved in one or two development projects and that he had been assisting his brother in the development of six duplexes on a property owned by the plaintiff’s parents in Walker Street, Merrylands, the same street in which the subject property was located.

15 In any event, it is common ground that there were discussions in which a potential project between them was discussed.

16 In 2001, the plaintiff negotiated on the defendant’s behalf with the owner of 31 Walker Street, Merrylands for the purchase of that property. The negotiations resulted in agreement. In December 2001, a contract of sale was entered into with the defendant being the sole purchaser. The defendant initially (in February 2002) opened an account (Exhibit 1, pp.185-192) and subsequently raised a loan with the National Australia Bank for the refinancing of the purchase and for the property’s development. Acceptance of a quotation dated 28 January 2003 by Constructions Metropolis Pty. Limited for the project occurred on 14 March 2003 (Exhibit 1, p.158). Demolition followed by construction of the duplexes commenced about March 2003. The approval of the NAB loan was confirmed by letter dated 20 March 2003 (Exhibit H). The first draw down was on 11 April 2003 (it appears that was for the purpose of paying out the previous mortgagee, Permanent Custodian).

17 In the period March 2003 to October 2003, the defendant managed and supervised the development.

18 The dispute between the plaintiff and defendant in relation to the costs of the project occurred on or about 1 November 2003.

19 The following factual matters are conceded or admitted by the defendant on his defence to the proceedings filed on 17 March 2005:-

(a) That the plaintiff and himself had agreed to look for land in the Merrylands area.

(b) That it was agreed that the plaintiff would manage the development of the land (although the admission is qualified by the terms “the defendant’s development” and “his land” ).

(c) That in the period October/November 2001, the plaintiff negotiated a purchase price for the land with the vendor.

(d) That the purchase price negotiated by November 2001 was the amount of $340,000 and in mid-November 2001, the plaintiff and the defendant had determined the property was appropriate for development.

CONTESTED ISSUES OF FACT

(a) The plaintiff’s version of early conversations

20 The evidence concerning the various dealings between the plaintiff and the defendant in respect of the subject property (much of which is the subject of dispute) is to be found in the plaintiff’s affidavit sworn 11 June 2004, in the defendant’s affidavit of 22 April 2005 (which responds to the plaintiff’s affidavit) and the plaintiff’s affidavit in reply dated 11 May 2005. There is a fundamental dispute as to certain critical discussions concerning the “arrangement” between them in relation to the land purchase and development project. The plaintiff claimed that in mid-September 2001, whilst having a drink with the defendant in Parramatta, he had a discussion with the latter which centred upon a joint development proposal. The plaintiff claimed this culminated in the Walker Street project. Reproduced below is the plaintiff’s version of what he claims was said on that occasion and which he contends contains the essential basis for the agreement alleged:-

“He said: ‘Marcel, when are we going to do a project together?

I said: ‘Alright. How do you want to do it.’

He said: “As equal partners. We’ll do a property together and develop it. You have the experience and knowledge of how things work in property development and construction. You will be in full control.’

I said: ‘OK I’ll only go into this partnership under the condition you put in all the necessary equity and I will manage the project from start to finish. At the end of the project after all expenses are paid, we split the profit 50/50. I don’t have any money as it is all tied up with other projects. But I can do the development at no cost.’

He said: ‘OK, I trust you. If you want I will sign a document to that effect.’

I said: ‘That’s not necessary. I would not be going into this if I didn’t trust you. How much money do you have to invest, as it will depend on the size of the project that we can undertake.’

He said: ‘I don’t have that much readily available case (sic), but I can borrow it from my brothers when I need to.’

I said: ‘How much do you think you can borrow from them?’

He said: ‘About $60,000 to $80,000.’

I said: ‘Well with that sort of money we can only do a small project, ideally a duplex development. The money should cover the shortfall the banks won’t lend.’

He said: ‘I’m OK with doing a duplex if you are happy to go along with it.’

I said: ‘I’m OK with it. I will start looking for properties tomorrow. We are doing a construction of 6 duplexes in Merrylands. I will have a look around there.’”

21 The plaintiff’s evidence was that between June 2001 and July 2002 he was working with his brothers John and George Esber in the construction of a duplex construction in Walker Street, Merrylands and on unspecified dates, he commenced to look for a property with development potential in Merrylands and had various discussions with the defendant about his efforts in that respect. However, no property, at that stage, was found.

22 The plaintiff says that in late July or early August 2001, through an acquaintance, Mr. Allen Habouchie, he became aware that the subject property, 31 Walker Street, Merrylands was for sale. At that time, the property was Mr. Habouchie’s home. The plaintiff’s evidence was that he went one afternoon to look at the property and then rang the defendant who said he would have a look at it.

(b) The defendant’s version of the conversations

23 The defendant denied the conversation, which the plaintiff alleged, occurred in mid-September 2001 at Parramatta, as set out in paragraph [20]. In particular he stated that there was no discussion at this or at any other time to the effect that:-

(a) there was an arrangement that “we would do the project as equal partners” ;

24 In October 2001, the plaintiff said he also inspected another property, 16 St. Ann Street, Merrylands, which was a vacant block of land and which was then for sale for $350,000. He said that he met with the defendant and they discussed both sites. This is said to have occurred in late October 2001.

25 According to the defendant, he had a conversation with the plaintiff at a place known as P.J. O’Gallaghers, where he had a conversation as set out in paragraph 31 of his affidavit sworn 22 April 2005. It is the defendant’s account that on this occasion he said to the plaintiff:-

“I know you’re not in a financial position to commit to this project, but maybe you could get some funds from one of your brothers and we could do a small development together.”

26 According to the defendant, the plaintiff indicated that this was not possible at that time. He explained, however, that he was confident of receiving funds from the then current family project being undertaken at Merrylands and that he was sure that his brother would give him some money at the end of it. According to Mr. Massih’s affidavit, he then said to the plaintiff:-

“Well, what about if I purchase Allen’s property, would you build it for me? That way, maybe after that is finished, you may have received payment from your brother and we could then be in a position to buy a slightly bigger development site together.”

27 The defendant says that the plaintiff responded:-

“Charles, I haven’t forgotten how you have lent me money and never asked for repayment. I asked you for funds when I couldn’t even ask my brothers and you came through. A single duplex site will take me no time to do and is in the same street as our project so it won’t be that much extra work.”

28 According to Mr. Massih, he replied:-

“We’ll tell Allen Habouchi tomorrow that I am interested in purchasing his property and see if he can negotiate a good price with him since he approached you. We will work out some sort of management fee for your time if this transaction goes through.”

29 The plaintiff, according to the defendant, then said:-

“Look just forget about payment, I will do it in lieu of the money you have lent me.”

30 The defendant says he responded:-

“That’s fine, but I will also get you to quote me on the project when the time comes and you can factor your profit margin in that quote as well.”

(c) The plaintiff’s evidence in reply

31 In his affidavit in reply sworn 11 May 2005, Mr. Esber denies the conversation took place as alleged by the defendant, or at all. He says that there were several discussions about them undertaking a property development together and that he may have said words to the effect:-

“Charles, I haven’t forgotten how you lent me money and never asked for repayment.”

32 He denies saying anything to the effect, “Look, just forget about payment, I will do it in lieu of the money you have lent me”.

33 In this respect, he said that he had had experience in property development and, whilst the project under discussion with the defendant was a relatively small one, it would engage him in a number of hours of work a day over at least a six-month period.

34 Mr. Esber said that he then made enquiries about the St. Ann Street property development and discussed it with the defendant. The defendant accepts that the plaintiff did make inquiries about that property, he understood, as a basis for comparing it with the Walker Street property. He agreed that there were discussions between them as set out in paragraph 14 of the plaintiff’s affidavit, but disagreed on the point of anything being said concerning, Sydney Water or concerning a surveyor providing “spot levels” or any discussion concerning a “hydraulic engineer”.

(d) The purchase of the property

35 The plaintiff and the defendant also disputed various events in the pre- contract of sale period. However, it is not essential for me to deal with each and every one of the points of disagreement. Some of these go to further discussions concerning surveyors and hydraulic engineers. The defendant did agree that the plaintiff put forward two properties located in Merrylands for possible purchase, namely, the St. Ann Street property and the Walker Street property and that the plaintiff then proceeded to negotiate a purchase price in respect of 31 Walker Street with the vendor. The defendant also agreed that there were specific discussions between them as to the following matters:-

(a) acquiring 31 Walker Street for a price of approximately $340,000;

(b) the copy of the contract of sale that had been received from the vendor. In the discussion on that matter, the plaintiff said there were no easements or other problems affecting the property; and

“… we still need to get a solicitor to check it and act for us”

36 The defendant denied that there was a discussion with the plaintiff as to the vendor’s acceptance of $340,000 and that he, the vendor, was happy to accept a $1,000 deposit, which would ease their cash flow. He further denied the discussion, which the plaintiff says, occurred concerning the name in which the title to the property would be registered. The plaintiff’s account of the discussion is as follows:-

“I said, ‘We need to work out who is on title to the property. I don’t know whether having me on title this time will be an impediment to getting finance. I’m worried that if I was to be on title, either a shareholder or co-owner, the banks will require me to be the borrower and guarantor of any loans on the property. And as a borrower and guarantor, I would have to reveal to the bank all other loans and guarantees that I currently have. As you know, I’m still involved in the Chippendale project for 58 units, where I have guarantees and loans in excess of $14 million. I think the banks would be reluctant to approve me as co-borrower at this point in time, what do you think?’. He said, ‘You may be right. I’m not sure. Let me know what you want to do’. I said, ‘Okay, I will let you know’.”

37 In cross-examination, the plaintiff said that he, at this time, was exposed to a “minimum $14 million”. There was no challenge made to the accuracy of that statement and there was no evidence adduced by the defendant to establish that the plaintiff was in any way overstating his indebtedness under a guarantee in relation to the project at Chippendale then at that time being undertaken by the entity, Knox Street Apartments (financed by Award Mortgage Management which the plaintiff said was an entity that financed commercial, not residential, projects).

38 The plaintiff claims that later in the conversation he said to the defendant:-

“Will you have a problem if you were to be on the title by yourself?”

39 The defendant said, “No, I don’t have a problem if you can trust me”. The plaintiff says he responded, “As I told you at the start, I would not have gone into this partnership if I didn’t think of you as a good friend and one I could trust. But I will let you know what I decide”.

40 The plaintiff said that the next day he contacted his sister, a solicitor, to make an appointment to see her.

(e) Discussions as to who was to be registered on the title

41 The defendant, in his affidavit sworn on 22 April 2005, stated that at no stage did the plaintiff and he discuss who would be on the title to the property. He said it was never considered nor discussed by him. He said that this was because he considered that he was the purchaser and was funding the purchase of the property and the construction costs and that the plaintiff had agreed to manage the development of the property in return for payment of a margin built into the construction contract and in lieu of paying the defendant money which he owed him. The defendant also stated that there was a conversation in which he, the defendant, said:-

“Do you think the project will be profitable at a purchase price of $340,000? What do you expect the construction costs will be?”

42 Mr. Esber is said to have responded, “Look, the duplexes we are building down the road will only cost us about $120,000 each, but this duplex will be bigger, so I think somewhere in the range $130,000 to $140,000”.

43 It was during that conversation, Mr. Massih said, that the plaintiff advised him that the vendor had accepted his, the defendant’s offer, of $340,000 and was happy to accept a $1,000 deposit if he, the defendant, had a problem raising the 10%. The defendant says that he said that they should try and exchange the contract as soon as possible. He denied that the words “partnership” were used in that conversation or in any of their conversations.

44 Soon after, the plaintiff attended the offices of Rose Kanaan & Associates, solicitors, in Campsie where his sister worked. In late November 2001, his sister advised him that the contract had arrived and that the terms and the conditions were satisfactory but that a s.149 certificate needed to be updated.

45 The defendant specifically denied that the plaintiff said, “Are you okay with me not being on the title as I could see it could be a problem for us to borrow money with my existing liabilities”, but does agree that there was a conversation in which the plaintiff said, “Do you have a problem with my sister acting on your behalf?”, to which he said, ”No, that’s not an issue for me”.

STAGES IN THE DEVELOPMENT PROJECT

(a)

The first stage of the project – the delay in obtaining development consent

46 Mr. Esber claimed that between early and mid-December 2001, he had discussions concerning the project with Robert Del Pizzio from an architectural firm, Architek, with Mr. Paul Arraj of Ace Civil & Hydraulic Engineers and Mr. Victor Mansel from Buxton Surveyors. He said he negotiated fee proposals for their services. The defendant said that he had some discussions with the architect and allowed the plaintiff to liaise with the architect as he knew that the plaintiff had employed him for his family’s Walker Street property development and he understood that the plaintiff knew local council guidelines relevant to development. The defendant said he, in any event, regarded it as part of the management responsibilities of the plaintiff.

47 In relation to the administration of the development, Mr. Esber says that he met with the defendant at least once a week between late December 2001 and late January 2002. He claims that at one of the meetings in mid-January he said to the defendant:-

“From an accounting point of view, in whose name should we get the invoices relating to the project made out to? We are incurring costs and I have to let these people (consultants) know so that we can pay them once they have raised their invoice.”

48 The defendant is alleged to have said, “It doesn’t matter. Just get them to invoice you directly”.

49 In late January 2002, the plaintiff said that he had obtained the necessary plans and reports and suggested that they could now lodge a development application. He said that he inquired whether the defendant was happy for him, the plaintiff, to be named as the applicant for approval. He said the defendant agreed, “Yes, the Council can call you should they need any further information”.

50 Mr. Massih said that although he agreed that there was a discussion whereby the plaintiff would be the applicant for the purposes of the development application, he otherwise denied the conversation as claimed by the plaintiff. He asserts that the plaintiff said, in effect, that it would be preferable for him to be the applicant in the event of any delays or hold-ups occurring in the approval process and that it would expedite things if he was the applicant. He says he agreed that if that would remove barriers, then the plaintiff’s suggestion or proposal was not a problem.

51 The plaintiff said that they met at the Council premises, where the defendant wrote out a cheque to the Holroyd City Council and he, the plaintiff, lodged the application. He said over the next month he and the defendant had discussions concerning planning and progress of the loan application. The defendant denies that there were any such meetings specifically held for that purpose and said that he did not discuss the loan application with the plaintiff other than a casual inquiry by Mr. Esber as to how the loan application was progressing.

52 Throughout the period February to April 2002, the plaintiff said he had various meetings and dealings with the Council and its town planner. Revised drawings were lodged with Council as required by it in about mid-May 2002. At this time the plaintiff was recovering from an operation after he had broken his leg on 6 April 2002.

53 Thereafter, the plaintiff says that he was advised by the defendant that the Council was not going to approve the application and that it would have to be redesigned because the adjoining property was of heritage significance. Mr. Esber said that he said to the defendant that the Council would not move and thereafter he undertook inquiries for a solicitor experienced in land and environment matters. The defendant disagreed with this account. He said that he had been at school with a Mr. Pierre Saab, a solicitor experienced in such matters, who was in due course retained. He indemnified the plaintiff in respect of costs and expenses (including legal fees) relating to the proceedings in the Land and Environment Court (Exhibit 3). A hearing by that Court was held on 1 November 2002. On that occasion the matter was, in part, resolved, after the plaintiff consulted with the architect and the hydraulics engineer over amended drawings in accordance with Council’s recommendations.

54 On 1 November 2002, the development application was modified. The costs associated with the proceedings were invoiced to the plaintiff but were paid for by the defendant.

55 The defendant said that he understood throughout the development approval process that the plaintiff was assisting him as a friend and in accordance with their agreement that he would manage the defendant’s development. He said that their interactions were on a friendly basis. On the evidence it is clear that in this first stage (planning and approval) the plaintiff did spend a good deal of time and effort in this period to secure the development approval.

(b) The second stage - securing finance for the development project

56 In the period November 2002 through to March 2003, Mr. Massih arranged finance for the construction of the duplex development. As noted earlier, the purchase of the property was initially financed with Permanent Custodian and was in due course refinanced with the National Australia Bank with respect to the acquisition and loan funds were also advanced for the development costs. The plaintiff said that he attended two meetings along with the defendant, one with a Mr. Joseph Faddouh from “Yes Home Loans” in November 2002, and one with a Mr. Norman Ghangi from the National Australia Bank in mid-February 2003. It may be observed at this point, that if the plaintiff’s interest in the project was merely that of builder or manager of the project, it was somewhat unusual for such a builder/project manager to be attending a meeting with the owner’s banker on the matter of loan finance. The defendant said that he understood the plaintiff attended the first meeting because the plaintiff had nothing else to do that day. He agrees that he met with Mr. Ghanji from the National Australia Bank and that he previously said to the plaintiff, “Norm Ghanji from the NAB wants you to attend the meeting because you are the builder, is that okay?”. The plaintiff is said to have responded, “no problem”.

57 Mr. Esber says that at some point, the defendant said to him:-

“To assist in getting finance, can you put together a fixed price contract with a builder so that I can justify the development cost to the bank so that they can loan the money.”

58 The plaintiff replied, “I can do that”. The plaintiff asserted in his affidavit in reply of 11 May 2005 that the building contract was prepared solely for the purposes of obtaining finance. He said that he did not recall the conversation with Mr. Ghanji at NAB in the terms related by the defendant.

(c) The third stage – the development/construction stage

59 The demolition of the existing dwelling commenced in March 2003. Construction work proceeded thereafter until October 2003 when it was completed. The property, 31A Walker Street, was placed with John J. Starr (Real Estate) Pty. Limited on 21 October 2003. The principal’s solicitors noted on the agency agreement (Exhibit A) was Rose Kanaan & Associates, at which firm the plaintiff’s sister worked. The property was first marketed on 1 November 2003.

THE ROLE OF CONSTRUCTIONS METROPOLIS PTY. LIMITED

60 In seeking to unlock or discover from the evidence the true nature and terms of the agreement or arrangement between the parties, it is necessary to have regard to the possible significance of what appear to be certain conflicting and unusual circumstances. Amongst these is the role of Constructions Metropolis Pty. Limited, the company named as “builder” in a quotation of 28 January 2003, in the letter of acceptance of 14 March 2003 and in the document containing General Housing Specifications. Progress claims were issued in the name of that company (see paragraphs [111] to [123]. These claims related to supplier and sub-contractor costs which were paid directly from the defendant’s loan facility account. There is, as discussed below, no evidence of payments going to Constructions Metropolis as builder, even though that is what would normally occur under a building contract.

61 On one view, Constructions Metropolis was used by the parties as a convenient vehicle for insurance purposes and to satisfy National Australia Bank requirements before it approved the construction loan and for drawing down loan monies on submission of progress claims. Whilst the company could be said to have had a role of sorts, the actual dealings concerning the development project were between the plaintiff and the defendant.

62 The defendant placed a great deal of emphasis upon the documents evidencing the existence of a construction contract, in particular, that said to have been based on the quotation of 28 January 2003 and the progress payments. However, in the particular dealings of this case between former friends, there is a need for caution in treating such documents as necessarily evidencing the reality of the relationship between the parties or at least in deciding whether they outweigh other evidence which tends to show the plaintiff to have been the manager and administrator of the development and the contracting party with sub-contractors and suppliers (and not Constructions Metropolis Pty. Limited) along with the unusual arrangement whereby the plaintiff was given access to the defendant’s project loan facility and used it himself to draw on for project expenses. I have not overlooked the defendant’s submissions that the last mentioned matter and other unusual aspects of the relationship may be explained by the trust and friendship the parties once enjoyed. These facts, however, are to be evaluated in light of all the material bearing upon the possible existence of a joint venture relationship.

63 Mr. Massih tendered in evidence the quotation or tender on the letterhead of Constructions Metropolis Pty. Limited (a company owned by the plaintiff’s brother, George Esber) but under Mr. Esber’s hand. It was, as earlier mentioned, dated 28 January 2003. The quotation expressed thanks for the opportunity to tender for the project for two duplexes at 31 Walker Street, Merrylands with a tender price of $340,648 inclusive of GST. The letter referred to the builder’s licence details and referring to George Esber as the licensee and quoting licence number 17233C. It is to be noted, as a matter of possible significance, that Mr. Massih signed the quotation thereby indicating his acceptance without having made any detailed inquiry or having obtained comparative quotations. I refer to this aspect again below.

64 On 14 March 2003, the plaintiff, again on the letterhead of Constructions Metropolis Pty. Limited and impliedly on its behalf expressed thanks to the defendant for accepting the tender of 28 January 2003. The letter attached a specification entitled “General housing specifications” on the standard form produced by the Housing Industry Association for the project, the specifications being between the defendant, as owner, and Constructions Metropolis Pty. Limited, as contractor, with the licence number being shown as 17233C.

65 As discussed elsewhere in this judgment, the defendant did not seek a formal building contract setting out terms and conditions specifying the rights and duties of “owner” and “builder”.

66 On 20 March 2003, the National Australia Bank wrote to the defendant a letter concerning the loan application. It was entitled a “Pre-Contractual Statement” (Exhibit H). The letter specified conditions of approval. It advised that, subject thereto, a facility of $640,000 was approved.

67 The acceptance of the quotation of 28 January 2003 dated 14 March 2003 was sent to the National Australia Bank prior to Exhibit H being received: see paragraph [94] of Mr. Massih’s affidavit sworn on 22 April 2005.

68 Clause 1.2 of the Specifications said that the specifications formed part of the “Building Contract Documents” and that it should be read in conjunction with the “Building Agreement, Engineer’s Reports, Plans and other special details”. As noted above, however, the plaintiff and defendant failed to execute building contract documents or a building agreement as referred to in clause 1.2.

69 By Clause 2.4, the Contractor is said to provide all labour and materials to construct and complete the building.

70 A number of progress claim documents on the letterhead of Constructions Metropolis Pty. Limited are in evidence, the earliest of which appears to be 10 May 2003, signed by the defendant and addressed to the plaintiff. I will return to consider these invoices and their significance below.

71 A project account was established by the National Australia Bank in the defendant’s name and funds were transferred from it to the defendant’s Westpac account. The majority of the drawings for the project were made out of the latter account.

72 The plaintiff said that the construction was undertaken by himself co-ordinating and supervising contractors commencing in March 2003 and concluding in late October 2003. He said that initially tradesmen and suppliers gave their invoices to him and he passed them to the defendant for payment. The defendant would give him a cheque drawn from the Westpac account operated in the defendant’s name. In late April 2003, the defendant spoke to the plaintiff and in consequence, he volunteered to make Mr. Esber a signatory to his bank account so that he could pay project expenses directly as it was considered that would save time and would avoid them chasing after each other. The plaintiff agreed. From that time onwards, Mr. Esber was able to draw on the account to pay for the development of the Walker Street property as required. He said that Mr. Massih also gave him his internet banking access code so that he could do the necessary banking over the internet.

73 From April 2003 onwards, funds were transferred from the NAB loan account to the defendant’s Westpac account from which construction costs were paid.

74 Mr. Massih gives a somewhat different version although not a great deal turns on it. He said that when he was with the plaintiff at P.J. O’Gallagher’s, the plaintiff said, “It is becoming time consuming and frustrating to try to get hold of you to get you to sign cheques. Is there a more efficient way we can do this?”. He said it was either the plaintiff or himself who said words to the effect, “I (or you) should be made a signatory to your account and granted access to internet banking”.

75 The defendant said the reason he gave the plaintiff access to his account and to his internet banking access code was to ensure that the project ran as quickly and smoothly as possible. He agreed that funds were transferred from April 2003 from the NAB loan account into his Westpac account so that construction costs could be paid. On occasions when funds did not come from the NAB on time, he said that he transferred funds across from another account. He said that also at other times additional payments for construction costs were made from his business account.

PROJECT DOCUMENTS

76 The evidence established that there were a number of documents relevant to the development. They included the contract works and associated arrangements:-

(a) The quotation on the letterhead of Constructions Metropolis Pty. Limited dated 28 January 2003. The quotation expressly envisaged that a formal agreement would be executed upon acceptance of the tender.

(b) An insurance quotation from Savill Hicks Group dated 14 March 2003 addressed to Constructions Metropolis Pty. Limited in respect of the project at 31 Walker Street, Merrylands.

(c) Workers compensation policy of insurance issued in respect of the “premium period” 28 March 2003 to 28 March 2004 to Constructions Metropolis Pty. Limited.

(d) Certificate of insurance, March 2003, from HIA Insurance Services Pty. Limited under the Home Building Act 1989 (NSW) with respect to 31 Walker Street addressed to “George Esber” in respect of the project at that address to be carried out by George Esber.

(e) Invoices from sub-contractors and suppliers addressed to the plaintiff himself and cheques in respect of several such invoices issued by the defendant and, other invoices issued by Constructions Metropolis Pty. Limited (see below).

(f) Other invoices and delivery dockets addressed to Constructions Metropolis or Marcel Esber (see pp.407, 411, 416, 422, 436 and 447 of the tender bundle at p.158).

ANALYSIS

77 In the circumstances of this case, which include the absence of any formal contract, memorandum or other document recording the basis of their agreement, it has been necessary to analyse the particular facts concerning the role and participation in the project undertaken by the plaintiff and the defendant and, in that context, to assess the extent to which Constructions Metropolis Pty. Limited was involved, if at all, in the construction side of the project.

78 It was common ground that the plaintiff did have property development experience and that both the plaintiff and defendant had before October 2001, discussed the proposition of doing a joint development. In other words, they both had expressed interest in undertaking a joint development for their mutual advantage.

79 In the circumstances that have been adverted to above, it has been necessary to examine a considerable body of factual material to identify from it the trace elements or indicators of the true arrangement made by the parties. The competing and conflicting version given by each plainly give rise to a fundamental credit issue for those versions clearly cannot both stand.

80 In the analysis that follows, a number of factors are identified as probative of matters favourable to one party or the other. “Probative” in the context of this case in reference to the primary matters that will determine the outcome of the proceedings, embraces evidentiary material that has a tendency to prove a matter because it is consistent with or is supportive of it. Alone, some such matters are equivocal in nature and only acquire probative strength when viewed or combined in the light of other matters.

81 Although closely attending to the evidence as it was given by the plaintiff and the defendant, in particular during cross-examination, I found it difficult to say I preferred one over the other. I later will refer to aspects of the evidence which either directly or indirectly raises matters that impact on the credit of either party. This is one of those cases where, in attempting to ascertain the terms of the arrangements, I am required, to a significant degree, to rely upon documents and the actions or conduct of the parties and by accompanying and relevant circumstances.

82 The matters relied upon by the plaintiff as indicative or supportive of the joint venture asserted in the proceedings may, to a point, be segmented between events that occurred prior to the purchase of the property and later occurring matters. In the earlier period, apart from certain disputed discussions between the parties, consideration is given to the plaintiff’s efforts in finding a suitable development property, in negotiating its purchase, in engaging expert advice on the proposed development and applying in his name for development consent. In the latter period, that is after the property was acquired, it was contended that a number of matters were consistent with a joint venture. These included profit and loss statements being sent by the defendant to the plaintiff, certain items recorded in the project accounts and payments made by the defendant for project supplies and services.

83 The plaintiff relied upon the defendant’s agreement that “in general conversation” the prospect of he and the plaintiff doing a development project together had been discussed as the plaintiff claimed. In particular, in cross-examination, the defendant conceded:-

(a) that he had discussed with the plaintiff opportunities for a property development in the western suburbs of Sydney;

(b) that he had discussed the prospect of the plaintiff and the defendant doing a property development together and that he had initially wanted the plaintiff as a partner;

(c) that he was aware of the plaintiff’s experience in property development, whereas, he had himself only been involved in one other project with a relative;

(d) that he held the opinion that it would be beneficial if he was to become involved in property development, and to do so in conjunction with somebody who had the necessary experience;

(e) that it was a possibility that, so far as he was concerned, the plaintiff was a person with whom he could undertake a property development;

(f) that he “early on” had discussed doing development potentially in partnership with the plaintiff on a profit sharing basis. He conceded that he had discussed such a possibility on a few occasions;

84 The plaintiff was involved in price negotiations for the purchase of 31 Walker Street. The negotiations were left in his hands by the defendant to conduct without any detailed or specific instructions during the negotiation stages, although the defendant said in evidence that he was aware of the course of negotiations. This is not consistent merely with a simple relationship of owner/builder, although it is not unequivocally indicative of one particular type of relationship as against another.

85 The extent of the work undertaken by the plaintiff from November 2001 prior to the quotation of 28 January 2003 and prior to finance being approved in March 2003 was considerable. The work involved site investigations, including the engagement of an architect and an engineer for the purpose of examining matters that needed to be addressed to ensure a successful outcome for the development application to be lodged with Council. The plaintiff contended that there is significance to be attached to the fact that he was prepared to undertake and immerse himself in such work without a work agreement and without being paid any remuneration. The plaintiff submitted that the performance of that work in the pre-development phase is not consistent with a mere owner/builder relationship. There is no suggestion in the evidence that any payment was made or promised to the plaintiff for his time and effort in these respects. There is no reference in correspondence or otherwise throughout the period by either party to the fact that the services that were provided by the plaintiff on an ongoing basis constituted a form of repayment of an earlier loan said by the defendant to have been $12,500 or that they were to be otherwise remunerated.

86 The following are noted in relation to this last mentioned matter:-

“I understood throughout the development approval process that Esber was assisting me as a friend and in accordance with an agreement that he would manage my development. Most of our interactions were on a friendly basis …”

“We will have to work out some sort of management fee for your time if this transaction goes through”

87 Whilst the defendant contended that the plaintiff had agreed to undertake all such work as a matter of friendship and/or as a means of repaying the earlier loan, it is unlikely that the plaintiff would have been willing to engage in all of the work necessary to obtain development consent without there having been some understanding or an agreement as to a level of remuneration that would apply to such work unless, of course, there was some other form of incentive such as share in profits, if any, on sale.

88 The plaintiff also relied on the fact that the development application was made his name. The defendant said this was done as a matter of convenience and would facilitate the progress of the development application. At the time the development application was lodged, there was no binding contract on foot. The plaintiff, accordingly, contended that the facts referred to in [85] are consistent with him having an interest in obtaining the development consent.

89 Without giving undue weight to this matter it, in my opinion, is to be taken along with other matters referred to in this analysis, as tending to support the premise underlying the plaintiff’s claim.

90 Following agreement with the vendor on a price for the acquisition of 31 Walker Street, the defendant was ready to accept the plaintiff’s proposal that the plaintiff’s sister be engaged as the solicitor for the conveyance. If the property was intended to be entirely the property of the defendant, it is a little surprising that the defendant did not engage his own solicitor or a solicitor appointed by him. That said, this matter, however, can only be regarded as of marginal importance.

91 The defendant had very limited experience in property development (he had previously purchased a property with a nephew, obtained a development consent for it but did not undertake the development). The fact that he was prepared to undertake the purchase and development of 31 Walker Street without any preliminary investigations or assessment as to the viability of the project in terms of building costs etc. before contracting to buy the land for the development is unusual, especially for an accountant who could be expected to exercise due caution. In this respect, his conduct displayed almost complete reliance on the plaintiff’s judgment as to the cost of the project without any close inquiry, scrutiny or challenge by the defendant himself.

92 Whilst not unequivocal, this is a matter that tends to be consistent with the plaintiff having a vested interest in the project and therefore being able to be trusted by the defendant to exercise sound commercial judgment in relation to the project.

93 The defendant gave the plaintiff the go-ahead to proceed with the project soon after the exchange of contracts in December 2001 and well before the quotation from Constructions Metropolis Pty. Limited dated 28 January 2003. Whilst the defendant claimed that he relied upon the plaintiff as a trusted friend, his limited involvement in property development again is consistent with the defendant being able to rely upon the plaintiff as a person with a financial or vested interest of his own to protect and advance.

94 In due course, the quotation obtained on the letterhead of Constructions Metropolis Pty. Limited was accepted by the defendant without any inquiry or check. The defendant agreed that he made no attempt to obtain comparative quotations or tenders based on the project plans and specifications in order to evaluate the quotation of 28 January 2003. This, it may be said, is not entirely consistent with what a prudent and intelligent professional would be expected to do. It is consistent with the proposition that the defendant was happy to proceed without any independent third party assessment or evaluation of the value of the project or comparative pricing because it was also in the plaintiff’s interest to undertake the construction on the most economical basis possible and so maximise the return in the interests of both parties. (The defendant’s competing contention was that this is to be wholly explained by the trust and friendship between them.)

95 The defendant was prepared to undertake the development without a building contract, even though the need for a formal contract had been referred to in the quotation of 28 January 2003. The defendant acknowledged that, although the quotation had been accepted no agreement existed between them regulating the rights and duties of the parties on matters such as rights of termination etc. In summary, the defendant was prepared to proceed with the development without checking the price quoted and without a formal agreement. Whilst not unequivocal, these matters are not entirely consistent with a commercial owner/builder relationship. It is at least consistent with a relationship of a different kind in which the plaintiff had an interest in the proposed development other than that of mere “builder” and that that provided a level of comfort or reassurance to the defendant.

96 The Profit and Loss Statement as at June 2003 (Exhibit 1, p.6) is relied upon by the plaintiff as significant in failing to include the costs of any construction or building contract said to have been entered into with the plaintiff before June 2003. This is said to have added significance in that the profit and loss statement was prepared by the defendant who, as a practising accountant, could have been taken to be astute in relation to financial and accounting matters.

97 The consolidated profit and loss statements for the years ended 30 June 2002 to 21 April 2004 (p.219 of Exhibit 1) recorded the cost of sales as including sub-contractor payments as the principal expenditure item for the project. The costings and the payments as recorded did not, on the evidence, as is commonly the case with building construction contracts, contain a builder’s profit margin in respect of such payments and for which progress payment certificates were issued by the plaintiff. (This matter is discussed below – see Funds utilised for project expenses arising under progress claims.)

98 The plaintiff was not contradicted in stating that the progress payments made to sub-contractors did not, in fact, contain any amount referrable to a profit margin. The consolidated profit and loss statement does not contain entries showing monies being paid to Constructions Metropolis Pty. Limited. Although these matters are not unequivocal, they are again factors which tend against the existence of a mere builder/client relationship. They are at least consistent with a joint enterprise arrangement of the nature contended for by the plaintiff.

99 The fact that the plaintiff contracted with sub-contractors and suppliers personally and for which he was invoiced (there being no relevant involvement of Constructions Metropolis Pty. in this respect) is evidence that he acted as “builder” and was prepared to assume the risk attaching to the liability to meet such expenses, facts consistent with his case.

100 The evidence in the cross-examination of the plaintiff indicated that in practice a builder usually pays the sub-contractors and then seeks reimbursement from the owner. It was, as previously, mentioned, the defendant who directly paid suppliers and sub-contractors (either by cheque or drawings on the loan fund account). He did not, as is customary with building contracts, pay the plaintiff (or anyone else acting as builder) by way of reimbursement or on account of such expenses. In his affidavit sworn on 11 May 2005, the plaintiff stated (at paragraph 30):-

“… the progress claims were issued by me for the purposes of obtaining the drawn downs from the bank. … The progress claims were calculated in regards to the cash flow necessary to pay sub-contractors and expenses associated with the project. No money came directly to me, all of the money was accounted to Charles Massih as being actual building costs and I did not charge any fee at that time for the work I had done …”

101 The plaintiff’s evidence in cross-examination in this respect was as follows (transcript 89):-

“When construction did commence, Charles apparently set up a special Westpac account to pay contractors from, and he in that initial stage paid contractors directly, even though they were invoiced to me, I would provide him with the invoices, and he would draw the cheque. Eventually it got to a stage where it just wasn’t feasible because they could never get hold of him. He decided, probably the easiest to make me a signatory on the account to make it more convenient, and have access to internet banking. From that point onwards, I paid all suppliers, I was signatory to this account.”

102 No progress payments were made to Constructions Metropolis even though the acceptance of the quotation of 28 January 2003 suggested that company would be the builder.

103 The plaintiff transferred into the defendant’s Westpac account $20,000 in October 2003 (from funds borrowed from his brother) for meeting liabilities to contractors who were chasing him for payment. The plaintiff said that he needed the contractors to complete the works and he advised the defendant that he would borrow the money from his brother provided the defendant agreed to repay it by the end of the month. The plaintiff claims that the defendant agreed to this proposition. It was put to the plaintiff that he was setting up a situation by the transfer of the $20,000 to give the appearance of a joint venture with the defendant. This, however, is a large amount to be expended to support a pretence in the hope of a court later coming to determine issues in future litigation. It would be, in any event, unusual for a builder to make such a transfer. Whilst not unequivocal, it is suggestive of a relationship other than that of owner/builder.

104 The relationship between the plaintiff and the defendant went beyond that of owner/builder in that it involved the plaintiff, following completion of the construction, in arranging details for the marketing of the property including the arranging for the defendant to sign the auction agency agreement and the sale inspection report and returning these to the agent’s offices.

105 The plaintiff’s attendance on Mr. Massih’s bank (the National Australia Bank) with the defendant to arrange project finance was not satisfactorily explained by the defendant and the explanations given by him were somewhat inconsistent. The defendant agreed that the plaintiff initially attended with him at “Yes Home Loans” in mid to late November 2002 and then the bank. He stated that it was not a pre-arranged meeting adding:-

“I understood that Esber accompanied me because he had nothing else to do that day. He accompanied me for the drive after which time we had lunch. He met Norm Ghangi from NAB.”

106 The defendant, however, also stated that it was Mr. Ghangi of NAB who wanted the plaintiff to attend “because you are the builder”. The conversation related by the plaintiff in his affidavit sworn 22 April 2005 (paragraph [86]) is brief in the extreme and hardly warranted Mr. Ghangi asking for a builder to attend on him. Confirmation was sought as to the project cost on what was a comparatively small and straightforward duplex development. All the defendant had to do was to request a written estimate of the cost of the project for the benefit of the bank followed, if required, by a more detailed quotation. Mr. Esber’s attendance on Mr. Ghangi is consistent with his interest being more than that of a mere builder. Having said that, however, this again is a matter that should not be accorded too much weight. It is but one fact to be taken into account with others.

107 The defendant in his affidavit sworn 27 April 2005 said of Mr. Ghangi of the National Australia Bank:-

“… one of the documents he required was the contract from the builder outlining the project costs.”

108 The National Australia Bank loan approval letter dated 20 March 2003 (Exhibit H) also specified that the provision of a copy of a signed “Fixed Price Building Contract” was a condition of the loan.

109 It is to be noted that the defendant’s affidavit simply annexed the quotation of 22 April 2005. There was no formal contract entered into as expressly contemplated by the quotation.

SPECIFIC MATTERS RELIED UPON BY THE DEFENDANT

110 Absent unequivocal evidence, as earlier stated, the plaintiff and the defendant sought to advance and oppose each other’s cases by pointing to particular matters said to support their respective cases. The matters which the defendant claimed supported his contention that no joint venture arrangement was entered into with the plaintiff included:-

(a) the fact that the property was registered in his name as sole proprietor and that the plaintiff’s evidence as to that was said to be implausible;

(b) the fact that it was he who financed the project principally from loan funds advanced by the National Australia Bank;

(c) the inherent unlikelihood in a joint venture arrangement in which he, the defendant, assumed sole responsibility for the financial risk associated with the project (what was termed the “uncommerciality” of the asserted joint venture);

(d) the statement he attributed to the plaintiff in evidence: “… he made it very clear he was not in a financial position to go into partnership” (t.133). This statement is said to have arisen in the context of discussions between the plaintiff and the defendant in which a proposal of a joint property development was discussed;

(e) the existence of documentation which suggested or was said to establish the participation of Constructions Metropolis Pty. Limited as evidenced, in particular, by the following documents:-

(i) the premium statement issued by the workers compensation insurer (GIO Workers Compensation (NSW) Limited) dated 31 March 2003 nominating, in respect of the project, Constructions Metropolis Pty. Limited as insured in respect of the premium period 28 March 2003 to 28 March 2004;

(ii) certificate of insurance issued by HIA Insurance Services Pty. Limited dated 6 March 2003 to George Esber in respect of the subject project;

(iii) the quotation for the construction of the two duplexes at 31 Walker Street, Merrylands issued by Constructions Metropolis on 28 January 2003 signed by the plaintiff on behalf of the company;

(iv) the letter dated 14 March 2003 on the letterhead of Constructions Metropolis addressed to the defendant attaching the General Housing Specification and the acceptance of the tender by the defendant;

the defendant also relied upon the fact that the letter of 14 March 2003 was signed by both the plaintiff and the defendant as a matter of significance and favouring the conclusion that the arrangement between them was in fact a building contract;

the documents issued by Constructions Metropolis will be discussed below. It is necessary to have regard to those documents (all but the quotation of 28 January 2003 having been written in March 2003) in the overall context of the dealings between the parties;

(f) the reference in the plaintiff’s letter of instructions to his solicitor, Mr. Lynch, in October 2003, to the fact that he would receive a fee for managing the project confirmed the defendant’s case that the plaintiff acted as builder. The plaintiff in evidence stated that the letter was expressed inaccurately and should have stated that he would not receive a fee for managing the project. The plaintiff then sought to explain his inconsistent statements on this aspect by asserting that he had over-stated his actual entitlement due to his annoyance and frustration over the dispute.

In the written submissions on behalf of the defendant (pp.5-6), it is contended:-

• that the plaintiff’s evidence in cross-examination as to the reason for the reference to a management fee in his letter of instructions to Mr. Lynch, the solicitor, was not maintainable, having regard to other implied and express references identified in the submissions;

• the claim for a management fee as a reaction to what was described by the plaintiff as the defendant reneging on their agreement, is itself inconsistent with the typographical error explanation. On this point, see “The Management Fee issue” below.

The evidence of the plaintiff on this aspect of the matter was far from satisfactory and I have taken it into account in evaluating the plaintiff’s evidence overall. On one view of it, the claim for the management fee referred to in the letter of instructions is inconsistent with the proposition of a profit share arrangement as promulgated by the plaintiff in the proceedings;

(g) the issuing of invoices for sub-contractor payments and progress claims was consistent with the plaintiff acting as a builder complying with the Home Building Act ;

(h) the outstanding loan debt owed by the plaintiff to the defendant of $12,500 and the defendant’s forbearance in relation to payment of it provided an explanation for the plaintiff otherwise seemingly undertakening considerable work in the pre-development approval stage without being paid any remuneration or having a contractual entitlement in that respect;

(i) the indemnity in favour of the plaintiff with respect to costs and expenses of proceedings instituted in the Land and Environment Court;

(j) the plaintiff’s asserted failure to maintain adequate financial documentation to establish expenditure on the building works was said to be inconsistent with how a person claiming a profit share would act in relation to a joint venture;

(k) the fact that the Starr Partners Exclusive Agency Agreement was alleged to have been only signed initially by the defendant as Principal and the plaintiff’s name only inserted later at a time of the emerging dispute;

(l) the contention that one would expect a joint venture partner to be more concerned to keep costs down than the evidence in fact discloses. The acceptance of this contention depends upon it being established that costs were needlessly incurred or that inefficiencies generated unwarranted costs. This, however, was not a matter that the defendant set out to establish in the proceedings;

CONSIDERATION OF PARTICULAR ISSUES

(a) Payment of project costs

111 The payment of project costs were, as detailed below, inconsistent with the conventional arrangements whereby a property owner pays the contracted builder upon the issue of progress payment certificates, with the builder being responsible for directly paying sub-contractors and suppliers:-

(a) As noted earlier, in the initial stage of development, it was the defendant who paid contractors directly, although invoices were addressed to the plaintiff. The defendant effected such payments by issuing cheques. Subsequently, after the defendant made the plaintiff a signatory to his account at the Westpac Bank, the latter paid all sub-contractors and suppliers directly from the project account. Further, there is no evidence that the invoices or progress payments included a profit margin for the plaintiff. The plaintiff’s evidence in that respect was that the payments made from the account did not include a margin (see below, (b) Funds utilised for project expenses arising under progress claims ).

(b) In relation to payments made by the plaintiff on his own credit cards, reimbursement of many, but not all, payments was made by the defendant. There was no evidence of any profit margin being added to expenses paid for by the plaintiff in this way.

(c) As noted earlier, in October 2003, at an early stage in the dispute between the plaintiff and the defendant, the plaintiff transferred $20,000 into the defendant’s Westpac account in order to meet project costs. There was an issue as to whether this payment was in fact made before or after the dispute arose between the plaintiff and the defendant. The transfer was made on 10 October 2003. Whilst the evidence is not precise on the point, it would, on the probabilities, appear that the transfer preceded the breakdown in the relationship.

(d) Notwithstanding the acceptance of the quotation from Constructions Metropolis Pty. Limited dated 28 January 2003, the evidence as to project costs does not reveal that that company rendered accounts for work done by it and for which it was paid. The documentary evidence included invoices from suppliers and sub-contractors addressed to the plaintiff himself: see, for example, Exhibit 1, pp.267-276, 279-298, 304-320, 344-347, noting, however, that some invoices were paid by Constructions Metropolis Pty. Limited, particularly, in the latter part of 2003, early 2004, eg., Exhibit 1, pp.348, 349, 351, 352, 354, 359, 361, 364, 369, 374 and 376.

(e) The plaintiff submitted that there had to be an explanation as to why he would expose himself to personal liability for contractors and suppliers if the construction work was, as the defendant claimed, performed under a contract with Constructions Metropolis Pty. Limited. Subjecting himself to personal liability is consistent, the plaintiff contended, with his case that he held a personal interest in the development project.

(f) The plaintiff also relied upon the fact, as noted earlier, that, except for some payments referred to in (d) above and some payments initially made on his credit card, suppliers and sub-contractors were paid, not by “the builder” (whether the builder be regarded as Constructions Metropolis or the plaintiff), but direct by the defendant himself (or directly from his account). This is not consistent with what occurs with an ordinary building contract where the builder pays sub-contracted third parties.

(g) The plaintiff also relied upon the fact that it was unusual for a builder to be made a signatory to the principal’s project loan account. It is more consistent, he contended, with what occurs in a partnership relationship. The plaintiff characterised the project working account as similar to a partnership account.

(b) Funds utilised for project expenses arising under progress claims

112 In his affidavit sworn 22 April 2005, the defendant in paragraphs [95] to [98] responded to the plaintiff’s affidavit in relation to matters concerned with progress claims and the funding of expenditure. The defendant stated that progress claims on the letterhead of Constructions Metropolis Pty. Limited were provided by the plaintiff to him.

113 As observed earlier, the progress claims received by the defendant from the plaintiff were provided by him to his bank. The defendant then said (at paragraph 99):-

“The bank then deposited funds into the bank account to which I allowed Esber access. From there, payment of progress claims was made by Esber.”

114 The plaintiff responded to the defendant’s evidence in this regard in paragraph 30 of his affidavit sworn on 11 May 2005. In that paragraph he stated:-

“With respect to paragraph 55 to 99 of the Massih affidavit, the progress claims were issued by me for the purposes of obtaining the draw downs from the bank. They were part of the general arrangement whereby Charles Massih was to provide the finance in the business. The progress claims were calculated in regards to the cash flow necessary to pay sub-contractors and expenses associated with the project. No money came directly to me, all of the money was accounted to Charles Massih as being actual building costs and I did not charge any fee at that time for the work that I had done. Rather my expectation in accordance with the agreement which I had set out in the my first affidavit was that I expected that on completion the two properties would be sold and I would receive 50% of the profit after accounting for the expenses. The expenses were those associated with the cost of purchase and the cost of construction. The progress claims merely detailed, for the purposes of the drawn downs from the bank, those costs.”

115 The plaintiff also, in that affidavit (paragraph 33) denied that any payments were made for personal matters or other projects from the defendant’s account. Schedule 1 to his affidavit sworn on 11 May 2005 provides detailed particulars in relation to project expenditure.

116 In the period April to September 2003, there were five progress claims supplied by the plaintiff on the letterhead of Constructions Metropolis Pty. Limited addressed to the defendant. The documents concerning progress claim number one were not attached to the affidavit evidence (they have apparently been mislaid). The following progress claims were in evidence:-

Progress Claim No. 2
Period ending 10 May 2003 $54,878

Progress Claim No. 3
Period ending 24 June 2003 $41,601

117 The evidence of both the plaintiff and the defendant establishes that the progress claims were sent on to the lender (National Australia Bank) for the purposes of periodic draw downs to meet project expenditure. Whilst in the conventional case of owner/builder, payments on progress claims are made by or on behalf of the owner to the builder, the accounting records do not establish that this occurred in relation to the subject project. Whilst the defendant stated that he received the progress claims, the defendant’s Westpac cash management account records (see Exhibit marked “CM7” to the defendant‘s affidavit of sworn 22 April 2005 – pp.184 to 204 of Exhibit 1) do not, in fact, record or reflect payment to either the plaintiff or to Constructions Metropolis Pty. Limited in accordance with such progress claims. This is supportive of the plaintiff’s evidence referred to earlier, namely that the progress claims were issued by him for the purposes of obtaining the draw downs from the bank but that monies did not come to him directly. The draw downs once made then became the source of payments made directly to individual suppliers and sub-contractors. In this way, the evidence favours the plaintiff’s case that he did not receive progress payments containing an in-built margin or management fee and that the “arrangement” did not contemplate that he would. Moreover, the defendant did not, in his case, establish the payment to, or receipt by, the plaintiff of a margin or fee.

(c) Conclusions on the role of Constructions Metropolis Pty. Limited

118 The defendant relied upon documentation which suggested that Constructions Metropolis Pty. Limited was involved in the project as builder pursuant to the company’s quotation dated 28 January 2003. As noted earlier, a letter dated 14 March 2003 signed by the plaintiff under the name of Constructions Metropolis Pty. Limited (and accepted by the defendant on that date) referred to a General Housing Specification for the project, which specification identified the defendant as “owner” and Constructions Metropolis Pty. Limited as “contractor”. The specification identified the contractor licence number as 17233C, being the licence held by George Esber, the plaintiff’s brother.

119 The plaintiff’s evidence was to the effect that, in order to comply with statutory requirements, the project was to be conducted under the building licence held by George Esber, a director of Constructions Metropolis and that George Esber, although overseas for many months in the project period, in effect exercised some form of supervision, the plaintiff speaking to him from time to time by telephone. Whether that can be said to in fact constitute supervision is, of course, a wholly different question.

120 The defendant relied upon the fact that progress claims were issued on the letterhead of Constructions Metropolis, which claims were signed by the plaintiff. However, as observed above, the progress claims were employed by sending them to the National Australia Bank to secure funds but do not evidence payments based thereon being made to Constructions Metropolis.

121 In evaluating the defendant’s contention in this regard, it is important to have regard to the essential nature of the arrangement. The plaintiff and the defendant agreed that the plaintiff would invest his time, skill and energy into the development of the property following upon his work in obtaining the necessary development consent. There was at least, on the plaintiff’s case, never an agreement that he was to be paid any remuneration during the period when such work was undertaken. His investment of time, skill and labour would go towards converting what was a single dwelling property with a value reflected in the purchase price into a fully developed multi-dwelling (two duplex) property. The enhanced value of the latter would be the product of both invested loan finance and the plaintiff’s own contribution as described above. The so-called “sweat equity” (a term employed by Mr. Sirtes of counsel in the course of these proceedings) was not, on the plaintiff’s case, to be rewarded by any payment by way of a margin on costs or a fee but by his “investment” in terms of time, skill and labour in the property and by a return in due course from the proceeds of sale in equal proportions.

122 The quotation from Constructions Metropolis Pty. Limited, the acceptance of the quotation and the General Housing Specification and the progress payment claims all on their face suggest Constructions Metropolis as builder. A central subjacent issue, however, is whether any contract as evidenced by those documents was the contract under which work was in fact performed or whether, as the plaintiff contends, those documents were brought into existence for the specific purpose of satisfying the lender’s requirements. I consider that analysis of the relevant facts indicates the latter.

123 The analysis of the factual detail related to the performance of work, the method and system applied in the administration of the project and associated documentation, leads to the conclusion that the plaintiff, and not Constructions Metropolis, acted and assumed the responsibilities of a builder and that he so acted with the knowledge and support of the defendant, at least until the dispute arose between them in October 2003.

(d) The supply of profit and loss statements

124 The plaintiff relied upon the fact that the defendant supplied him with copies of the profit and loss statement for “Pegasus Projects” (the name given to the development of 31 Walker Street) and the profit and loss statement for the period 1 July 2001 to 30 June 2002 as indicative of a relationship other than purely that of owner/builder and which it was suggested reflected a sharing of information between partners in a development project.

125 The copies of the profit and loss statements were faxed to the plaintiff on 10 June 2003. At that time, the defendant stated that the plaintiff was pressing him for payment of expenses to a carpenter for the project. The defendant rejected the suggestion that he had supplied the documents by way of keeping the plaintiff up to date in the context of a joint venture.

126 The defendant was asked why he sent the documentation (t.190):-

“Q. And why do you say that you sent a profit and loss statement to him:? A. Because he was asking me for money to pay a carpenter and as at that point in time I told him that I had drawn a considerable amount from my business account and he was requesting that I should be able to squeeze a little bit more out and I told him the magnitude of the expenses that I have had to draw on from my business account and that was to show him how much money I had drawn personally from my business account before further funds from the NAB were advanced.”

127 The explanation given by the defendant in this respect is curious. A copy of the profit and loss statement to 1 March 2003 is at p.182 of Exhibit 1 and the profit and loss statement to 30 June 2002 is at p.183 of Exhibit 1. The total cost of sale to 1 March 2003 was $12,291. These did not relate to construction costs but to acquisition costs. Similarly, for the period to 30 June 2002, the cost of sales shown also related to acquisition costs and not construction costs. When put to him, the defendant acknowledged that they only related to the acquisition of the property but stated:-

“… but they were purely sent out to him to show what I had paid.”

128 Whilst the defendant said that the statements were sent to the plaintiff before the National Australia Bank loan monies had come through, the Westpac account in fact showed that a draw down of $70,000 had been made on 11 April 2003.

129 In the context in which the defendant claimed that the plaintiff was pressing for payment to be made to a carpenter, it makes little sense for the defendant to be sending the plaintiff, whom the defendant asserted was merely acting as a builder, copies of accounts that had nothing to do with the construction costs or the construction project itself, but which were wholly related to acquisition costs. This is especially so as the acquisition costs did not, in context, represent a significant amount of money.

130 Too much should not be made of this incident. It, however, at least raised a question as to the defendant’s credit on that issue. Sending to a builder copies of what would otherwise be regarded as the private profit and loss statements belonging to a builder’s principal does not make a great deal of sense. It is a fact, although not an unequivocal one, that can be said to be consistent with the fact that the plaintiff and the defendant enjoyed a business relationship other than that of mere owner/builder.

(e) The management fee issue

131 The plaintiff’s case was founded on the fact, as he claimed, that he would undertake the development at no cost and would, on completion, be entitled to a 50% share of the profits on sale of the developed property.

132 The defendant sought to attack the plaintiff’s case in this respect upon the basis of a letter of instructions, referred to above, written by the plaintiff to his solicitor, Mr. Lynch. A copy of the letter forms part of Exhibit 1 at pp.71-72. In it the plaintiff referred to an agreement, inter alia, for the payment of a fee for managing the project. This is referred to in the second paragraph of the first page and in points 4 and 5(b) on page 2 of the letter.

133 In cross-examination of the plaintiff, it was put to him that this was entirely inconsistent with his case, in particular, with his evidence that he represented and agreed with the defendant to do the development “at no cost”. The plaintiff first asserted that there was a misprint in the second paragraph of the letter and it should read “I will not receive a fee” instead of “I will receive a fee”. I cannot accept this explanation. It is inconsistent with the context and the references to a fee on page 2 of the letter.

134 In paragraph [72] of his affidavit sworn on 11 June 2004, the plaintiff said that he included the demand for $55,000 for a management fee because he was angry that the defendant had not continued to finance the development and had, he claimed, broken their agreement.

135 The issue arising on the letter to Mr. Lynch raises an important matter as to the plaintiff’s credit. A question arises as to whether or not the original agreement or arrangement made in 2001 was one which provided that the plaintiff would work for a fee or not. On this issue it is important to identify any matter which reflects what was agreed.

136 The defendant in his affidavit sworn on 22 April 2005, said (paragraph [35]) that the plaintiff did say “Look, just forget about payment, I will do it in lieu of the money you have lent me”. This is, at least, consistent with the plaintiff’s fundamental assertion that he would not be paid for his work but that he would be entitled to a share of any profits. The defendant does go on to say that he said:-

“That’s fine but I will get you to quote me on the project when the time comes and you can factor your profit margin in that quote as well.”

137 The plaintiff denied this conversation in his affidavit sworn on 11 May 2005 (paragraph [11]). It is of some importance to observe that there is no evidence of the parties in fact acting upon a basis that the plaintiff was to be paid a management fee. The accounts, for example, including the profit and loss statements, and other records, including the correspondence between the solicitors for the plaintiff and defendant, make no express or implied reference to an entitlement to a management fee.

138 Accordingly, whilst the plaintiff was advancing to his solicitor in the midst of his dispute with the defendant an unmeritorious right to a $55,000 management fee in addition to a profit share, and the making of that claim reflects adversely upon the plaintiff, it is essential to examine the course of events concerning the project up to and subsequent to the letter in question to ascertain, on the probabilities, the basis upon which the plaintiff and defendant agreed to participate in the project. In other words, does the evidence establish that he had, at the outset, in fact contracted on the basis of an entitlement to a management fee or was that an alleged entitlement that the plaintiff made in his letter to Mr. Lynch which he knew was not part of any agreement?

139 I am satisfied, having particular regard to the matters referred to above, that there was no agreement whereby the plaintiff was to receive a management fee, whether in the amount of $55,000 or in any other amount. Further, in examining the facts on this issue, in addition to the absence of any reference to an agreement or entitlement to a management fee, it would make little commercial sense, if there was nothing more in the project for the plaintiff than such a fee, that he would not be paid at intervals but would wait until the end of the project before being entitled to payment of such a fee or any part of it.

(f) Solicitors’ correspondence – November 2003

140 Between 19 November 2003 and 9 February 2004 (Exhibit 1, pp.78-96), the solicitors for the plaintiff and defendant corresponded in relation to the dispute that had then recently arisen between the parties. Whilst the plaintiff’s solicitors frequently referred to the fact of a “joint venture agreement”, the response and matters raised on behalf of the defendant, in the initial stages, referred, not to whether such an agreement existed, but on other matters including, in particular, the costs of the project.

141 The defendant accepted that the plaintiff’s letter of instruction (Annexure J to the plaintiff’s affidavit sworn 11 June 2004), was received by him. The plaintiff says that he himself delivered it to the defendant at his home on 9 November 2003 (paragraph [72] of the plaintiff’s affidavit). The defendant says in his affidavit in response sworn 22 April 2005 (paragraph [139]), that:-

“This was the first time that I became aware that Esber was making a claim for a share of the profits that I allegedly obtained from my development.”

142 However, correspondence between the plaintiff’s solicitors (Watson & Watson) and the solicitors for the defendant (Scara Trimarchi) commenced soon thereafter, namely, on 19 November 2003. By that date, the plaintiff and the defendant were very much in dispute. On 19 November 2003, Watson & Watson wrote to Scara Trimarchi as follows:-

“Dear Sirs

JOINT VENTURE DEVELOPMENT – 31 WALKER STREET, MARYLANDS (SIC)

Your client: Charles Massih

We act on behalf of Marcel Esber and refer to our telephone conversation on 12 November 2003. We confirm our advice that;-

(1) You act on behalf of Charles Massih;

(2) Our clients were engaged in a Joint Venture Agreement in relation to the purchase of the above property. Application for Development Approval for the construction of a duplex at the property …”

143 The remaining parts of the letter go on to refer to the costs of construction and the fact that they had exceeded the original estimate and that the defendant had sought from their client confirmation of the amounts spent. The letter goes on to deal with the provision of financial information “in relation to the Joint Venture expenses incurred by our client”.

144 Several letters thereafter were exchanged between the solicitors for both the plaintiff and the defendant. In some of these letters Watson & Watson referred expressly to “Joint Venture at 31 Walker Street, Merrylands”.

145 Given that the defendant’s case was that there was no joint venture at all, it is somewhat surprising that the defendant’s solicitors did not immediately refute the reference to “Joint Venture” from the outset of the correspondence. It was not until later that an issue was raised by the defendant as to the lack of any entitlement in the plaintiff in the property. It was not, in fact, until 28 November 2003 that Scara Trimarchi first foreshadowed, in somewhat oblique terms, that the defendant was disputing the contention that the plaintiff held an interest in the property. In the letter on that date, Scara Trimarchi responded in part:-

“We confirm that our client will not be providing any undertaking with regards to distribution of proceeds from sale of property at 31 Walker Street, Merrylands. We confirm the property did not sell at auction on 20 November 2003.”

146 The fact that it took the defendant three weeks (having received the documents, Annexure J, on 9 November 2003 and the letter from Scara Trimarchi dated 28 November 2003) to indicate that he was contesting the plaintiff’s claimed interest in the property is a little surprising. Again, it is not a matter by itself to be given too much weight. It simply remains a piece of evidence which represents a contrast with the strong denials by the defendant in and subsequent to the commencement of the proceedings.

DETERMINATION

147 In determining the contentious issue as to a “joint venture development” as against the defendant’s contention of an owner/builder relationship, I have sought to identify the matters that are, in my opinion, consistent with the former than the latter. Those include:-

(a) The willing engagement of the plaintiff over a protracted period of time (October 2001 to December 2002) in undertaking the work necessary to obtain development consent without the promise or payment of a fee for service.

(b) The fact that, notwithstanding the acceptance of the quotation of Constructions Metropolis, that entity was not active as builder in the project.

(c) The fact that the plaintiff supervised the work and assumed personal liability to suppliers and sub-contractors who invoiced the plaintiff.

(d) The fact that the suppliers and sub-contractors were, in the main, paid directly by the defendant or from loan funds advanced to the defendant and not through or by Constructions Metropolis.

(e) The fact that, on the evidence, the most likely and plausible explanation for the plaintiff himself undertaking the supervision, management and administration of the development was that he, and not Constructions Metropolis, had a vested interest in doing so.

(f) The system of payments for the project is inconsistent with a mere owner/builder relationship. The progress payments in evidence coincide with the budget items and were rendered in order to obtain the finance to pay suppliers and sub-contractors. The documentary evidence does not reveal payments being made to and received by the plaintiff as a margin or fee. The plaintiff did not receive amounts referred to as progress claims as would be expected in relation to a conventional building contract. This is consistent with the plaintiff receiving an end-of-project return in the nature of a profit-share.

148 The evidence on analysis establishes, as a matter of probability, an arrangement between the plaintiff and the defendant in the terms claimed by the plaintiff. I have, accordingly, concluded that the plaintiff has discharged the onus of establishing such an arrangement which included the purchase of the property 31 Walker Street Merrylands in the name of the defendant with a view to its development into duplex units for the mutual benefit of the parties.

SUBMISSIONS AS TO THE INTEREST ACQUIRED

149 The plaintiff’s claim, as formulated in the amended statement of claim, asserted an agreement between the parties for the acquisition and development of land referred to in paragraph 2 of the amended statement of claim as “the Arrangement”. The plaintiff’s contention (paragraph 7 of the amended statement of claim) was that the arrangement between the parties contemplated an interest in land, namely, the Walker Street property, it being agreed between the parties that it would be purchased in the defendant’s name.

150 In the plaintiff’s written outline of argument and in its final submissions, it was contended that the plaintiff’s interest was as a beneficiary under a constructive trust, such trust being imposed on the land following and pursuant to the defendant’s refusal to abide by what is referred to as the joint venture agreement to acquire and develop the subject property.

151 Counsel for the plaintiff stated that the trust contended for was based upon what has been referred to as the Pallant v. Morgan equity. Reliance in this respect was placed upon Pallant v. Morgan [1953] Ch. 43 as discussed and analysed in Banner Homes Group PLC v. Luff Developments Limited [2000] Ch. 372, 396-398.

152 In the final written submissions on behalf of the plaintiff, it was contended that equity would impose a trust in the circumstances of this case whether or not that trust does in fact arise by reference to the Pallant v. Morgan equity or whether it arises by virtue of a partnership between the parties that gave rise to an interest in land or alternatively by reason of unconscientious conduct of one party arising from the acquisition of the beneficial ownership of the land in circumstances pleaded and where the plaintiff has relied upon the defendant who thereafter sought to assert and rely upon his legal title to the land.

153 In the outline of the defendant’s written submissions, it was contended that the construction of the duplex at 31 Walker Street, Merrylands was undertaken by Constructions Metropolis Pty. Limited and that by reason of the fact that that company did not hold a builder’s licence and the fact that it carried out the construction meant that there was a contravention of provisions of the Home Building Act 1989 (NSW). However, in the final submissions on behalf of the defendant, emphasis was not on this aspect but on the question as to whether or not the arrangement alleged existed and, if so, whether it gave rise to an interest in land. I will return to the latter point below.

154 It was, as seen above, fundamental to the defendant’s submissions that there had been no arrangement or agreement for a joint venture or profit sharing arrangement as pleaded. Alternatively, it was submitted that if there was an arrangement as claimed, it was not one which gave rise to an interest in land and that the plaintiff’s only entitlement was to the proceeds of sale and not to the land itself. Reliance was placed upon the decision of Gowans, J. in Epple v. Wilson [1972] VR 440 and upon the decision of Hodgson, J. in Davies v. Uratoriu; Davies v. Residential Tenancies Tribunal & Anor (1995) 6 BPR 13,917.

155 Accordingly, in final oral submissions on behalf of the defendant, counsel put as a principal submission, that the evidence in the case, at its highest and most favourable to the plaintiff, would support a declaration sought in paragraph 3 in the amended statement of claim, but that did not support any order for the appointment of trustees “as it does not sustain anything other than a claim for a share of proceeds” (t.237). The question, it was submitted, was whether or not there was an agreement as to the land itself and, in this respect, attention needed to be given to the nature of any joint venture established.

156 The final oral submissions on behalf of the defendant also took issue with the assertion of the Pallant v. Morgan equity as a basis for the plaintiff’s claimed entitlement. The remaining submissions focused on the factual matrix and as to why the defendant’s version as to the facts should be accepted over that of the plaintiff.

157 I have reservations as to whether what has been termed the Pallant v. Morgan equity precisely applies to the pre-acquisition arrangement involved in this case. In this respect, I have had regard in particular to the analysis of Chadwick, LJ. in Banner Homes (supra) at 396-398. What is, of course, fundamental is the determination of the nature of the arrangement prior to the acquisition of the property and, in this respect, I have made the findings on the facts that are favourable to the plaintiff’s claim. In general terms, of course, equity may intervene by declaring a constructive trust in circumstances where parties acquire a property upon the understanding or basis that the property and, subsequently, its post-acquisition development is acquired in the name of one but in relation to which both have agreed to contribute, as in this case, namely, the defendant’s financial contributions and the plaintiff’s work and effort associated with the re-development/construction of the property. In these proceedings such a declaration should be made.

158 It is unnecessary to consider in depth all of the cases that have considered partnership arrangements entered into for the purposes of acquiring a single property. The question is whether or not, findings having been made as to the nature of the arrangement, they provide the plaintiff with a basis for the relief claimed. In this respect, I bear in mind the distinction between a claim in contract under which parties agree to share the ultimate profits of a venture, on the one hand, and arrangements between parties to a joint enterprise or partnership whereby the parties acknowledge and agree that they will take an interest in the property itself.

159 In Davies v. Uratoriu (supra), the property was acquired in the name of the defendant and it was occupied by the plaintiff and his family. The plaintiff sought orders to secure to him a share in the proceeds of the sale of the property. In that case, as in the present, the plaintiff and defendant had been friends for several years. They entered into conversations concerning the proposed purchase of property at Rose Bay which was then in a very run-down condition. It was accepted for the purposes of the case that the property was to be purchased for a price and to be acquired in the name of the defendant with the defendant providing the purchase money. The plaintiff would agree to renovate the property at an estimated cost of $30,000 and live in the property whilst the work was carried out. It was also a part of the agreement that the plaintiff would pay an amount styled as rent to the defendant to cover interest on finance obtained by the defendant. Finally it was agreed that, following renovation, the property should be sold and the profits divided equally.

160 The property was acquired in 1986, the whole of the purchase price and the legal expenses being provided by the defendant who had borrowed the necessary funds from a company which he owned and which, in turn, obtained the finance from an overdraft facility available to the last mentioned company.

161 Prior to completion in that case, sketch plans for the proposed extensions and estimates of costs were provided to the defendant. Hodgson, J. (as he then was) made a finding that documentary evidence confirmed the arrangement was one whereby the plaintiff was to provide his own labour for the renovations, without charge to the venture.

162 The defendant had steadfastly maintained that the plaintiff had no interest in the property itself but only an interest in receiving half the ultimate profits of the venture and that, subject thereto, the defendant could do whatever he liked with the property without discussion or disclosure to the plaintiff.

163 In determining the nature of the arrangement in that case, Hodgson, J. concluded that the transaction between the parties amounted to a partnership in the venture, with mutual fiduciary obligations. In particular, the venture was one in which the plaintiff and the defendant were carrying on business in common with a view to profit.

164 That finding was supported by the six matters identified in the judgment. These included the fact that there had been an agreement between the parties to share the profits of the venture equally, the business nature of the venture and the absence of detail one would expect if it was merely a contractual arrangement between arms-length contracting parties. The fact that the business only involved a single venture, did not negative a partnership.

165 Based upon the findings made in the present case as in Davies v. Uratoriu (supra), the nature of the arrangement between the parties, in my opinion, provided the plaintiff with an interest in the developed property and a right to have it sold and to have the proceeds divided. In particular, it is important in this case, as in Davies v. Uratoriu, that the construction has, in fact, been undertaken and completed by the plaintiff just as the renovations in Davies v. Uratoriu were completed by the plaintiff in that case. There, that fact was important in providing the plaintiff a right which equity would enforce to have the property sold and the proceeds divided. Such constituted an interest in land.

166 I have had regard to the facts and circumstances and issues arising in other cases including Luxury Homes Pty. Limited v. Danieli [2005] NSWSC 375 (White, J.); Epple v. Wilson (supra); Go-Tell Nominees Pty. Limited v. Nichols (1997, Supreme Court of Victoria, unreported 3 March 1997, per Cummins, J.) and Simons v. David Benge Motors Pty. Limited (1974) VR 585. Having done so, I am of the opinion that the plaintiff is entitled to relief in terms as follows:-

(a) a declaration that the defendant holds half of the land known as 31 Walker Street, Merrylands, being the land comprised in Folio Identifier B/435743 on trust for the plaintiff;

(b) a declaration that the plaintiff is entitled to half of any profits from the development and sale of the property being two duplex units, 31 Walker Street, Merrylands;

(c) an order that trustees be appointed for the sale of the property referred to in (a) and (b) pursuant to s.66G of the Conveyancing Act 1919 (NSW);

Conveyancing Act 1919 (NSW)

167 I propose to make declarations and orders accordingly. I have considered the appropriate form of orders, having regard, in particular, to the evidence as to a discussion between the plaintiff and the defendant concerning the question of a variation to the arrangement (plaintiff’s affidavit sworn 11 June 2004, paragraph 70; transcript of cross-examination of defendant, p.176). I propose to grant leave to the parties to address the form or orders proposed.

168 In respect of the last mentioned proposed order, I note that there is a consent (for two trustees) to be appointed under s.66G of the Conveyancing Act 1919 dated 25 May 2005 and an affidavit verifying consent of the trustees of Kim Crichton Gourlie sworn 30 May 2005.

169 I propose, unless the parties wish to lodge written submissions within the next 14 days, to order that costs should follow the event and that, accordingly, the defendant pay the plaintiff’s costs of the proceedings.

170 I grant leave to the parties to bring in short minutes of orders to give effect to the orders proposed.

**********

CITATION:	ESBER v. MASSIH [2006] NSWSC 321
HEARING DATE(S):	30, 31 May 2005; 10 June 2005; 2 Spetember 2005
JUDGMENT DATE :	26 April 2006
JURISDICTION:	Equity
JUDGMENT OF:	Hall J at 1
DECISION:	The plaintiff is entitled to relief in terms as follows - (a) a declaration that the defendant holds half of the land known as 31 Walker Street, Merrylands, being the land comprised in Folio Identifier B/435743 on trust for the plaintiff; (b) a declaration that the plaintiff is entitled to half of any profits from the development and sale of the property being two duplex units, 31 Walker Street, Merrylands; (c) an order that trustees be appointed for the sale of the property referred to in (a) and (b) pursuant to s.66G of the Conveyancing Act 1919 (NSW); (d) an order that the said property in (a) and (b) be vested in such trustees subject to any encumbrances affecting the entirety of the land but free from encumbrances, if any, affecting any undivided share or shares therein to be held by such trustees upon the statutory trust for sale under Division 6 Part 4 of the Conveyancing Act 1919 (NSW). I propose to make declarations and orders accordingly. I propose, unless the parties wish to lodge written submissions within the next 14 days, to order that costs should follow the event and that, accordingly, the defendant pay the plaintiff’s costs of the proceedings. I grant leave to the parties to bring in short minutes of orders to give effect to the orders.
CATCHWORDS:	Joint venture arrangement - plaintiff as project manager/builder - property purchased and registered only in defendant's name - plaintiff to provide skill and supervision - defendant to finance development - alleged agreement - no profit margin on costs but agreement to equally share profits on sale - circumstances of relationship consistent with joint venture partnership - suggestive of a relationship other than that of mere owner/builder - plaintiff possessed of a sufficient interest in the developed property with a right to have it sold and the proceeds divided.
LEGISLATION CITED:	Home Building Act 1989 Conveyancing Act 1919
CASES CITED:	Pallant v. Morgan [1953] Ch. 43 Banner Homes Group PLC v. Luff Developments Limited [2000] Ch. 372 Epple v. Wilson [1972] VR 440 Davies v. Uratoru; Davies v. Residential Tenancies Tribunal (1995) 6 BPR 13,917 Luxury Homes Pty. Limited v. Danieli [2005] NSWSC 375 Go-Tell Nominees Pty. Limited v. Nichols (1997) Supreme Court of Victoria, unreported, 3 March 1997 Simons v. David Benge Motors Pty. Limited Pty. Limited (1974) VR 585
PARTIES:	Marcel ESBER v. Charles MASSIH
FILE NUMBER(S):	SC No. 3415 of 2004
COUNSEL:	Plaintiff: B Debuse Defendant: G. Sirtes
SOLICITORS:	Plaintiff: Watson & Watson Defendant: Deacons