Evt Development Pty Ltd v Argyle Building Services Pty Ltd

[2023] VCC 586

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

BUILDING CASES LIST

Case No. CI-22-00895

EVT DEVELOPMENT PTY LTD (ACN 600 475 072)	First Plaintiff
and
EDISON LOU	Second Plaintiff
v
ARGYLE BUILDING SERVICES PTY LTD (ACN 151 322 520)	First Defendant
and
THE REGISTRAR OF TITLES	Second Defendant

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	1, 2, 3 and 31 March and 3 April 2023
DATE OF JUDGMENT:	19 April 2023
CASE MAY BE CITED AS:	EVT Development Pty Ltd & Anor v Argyle Building Services Pty Ltd & Anor
MEDIUM NEUTRAL CITATION:	[2023] VCC 586

REASONS FOR JUDGMENT
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Subject:BUILDING CONTRACT   

Catchwords:              Building contract signed between builder and proprietor – revised form of contract signed between parties for the purpose of presentation to proprietor’s lender  - whether second contract form constituted a ‘sham’ – cash payments made – extent of payments – payments by proprietor to sub-contract supplier – whether proprietor entitled to a credit for such payments against liability to builder

Legislation Cited:      Transfer of Land Act 1958; Building and Construction Industry Security of Payment Act 2002; Cash Transactions Act 1987

Cases Cited:Snook v London and West Riding Investments Ltd [1967] 2 QB 786

Judgment:                  (1)     Within 14 days of this day the parties must bring in short Minutes to give effect to these reasons.

(2)Costs reserved.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P H Caillard	Madgwicks
For the First Defendant	Mr A Blunt	Thomson Geer
For the Second Defendant	No appearance

HIS HONOUR:

Background

1In early 2019 the plaintiff, EVT Development Pty Ltd (“EVT”), held plans for what was described as a “proposed mixed use development” at 437 Gaffney Street, Pascoe Vale (Court Book (“CB”) 1063 and following). The proposed development included seven apartments and one shop downstairs (Transcript (“T”) 61, Lines (“L”) 1‑3). The proposed development included work from a number of major contractors.  First, it was to include a car stacker to be supplied, erected, and installed by Klaus Multiparking.  This facility would save space, dispensing with orthodox car spaces and allowing cars to be stacked one on top of another (T61, L41‑46).  The development also included provision for a lift which would be supplied and installed by a company known as “Schindler Lifts” (T62, L17‑20).  Finally, the development included a second lift to be provided by an organisation known as “Easy Living” and described as an EasyStep lift, which would lift wheelchair-bound persons so as to provide them with access to the development (T62, L33‑T63, L4).

2In 2016, a company known as SWAT Building Systems Pty Ltd (“SWAT”) lodged a successful tender to erect the proposed development (CB 2786) on behalf of the first plaintiff, EVT.  The “contract sum”, inclusive of goods and services tax, was $1,661,000 (CB 2787).  SWAT became insolvent and was ordered to be wound up.  The site was left without any work for three months (T65).  As a result, in March 2019, Mr Lou, the principal of EVT approached the defendant, Argyle Building Services Pty Ltd (“Argyle”), to take over the project (Ibid L23‑29).  At some time in April 2019, the parties signed a building contract styled “This Formal Instrument of Agreement” between EVT as principal and Argyle as contractor.  This agreement was expressed to be “made on the _____ day of __________ 2019”.  It remained undated following execution (CB 1200).  Attached and incorporated into the contract were “general conditions”, being AS 4000-1997 General Conditions of Contract as published by Standards Australia.  The “contract sum”, viz the price for the completion of the works, was $2,050,000 exclusive of goods and services tax (CB 1214).  The agreement was signed by Mr Lou on behalf of EVT as “sole director and sole company secretary” and by Mr Sam Salloum on behalf Argyle (CB 1208).  Mr Lou sent a text to Mr Salloum on the afternoon of 1 April 2019 in the following terms:

“Hey Sam,

According to discussion with both QS and Banker, they all accept the building cost from your contract, but we need to separate total cost with 2 ways like below:

Total: $2,050,000.00

Bank cover:  $1,620,000.00

EVT Cover: $430,000

Because if we put $2,050,000.00, that loan had been over 2 million banker will take another long process to look at.

Thus, can we make that changes on the contract.

…”

The “Formal Agreement” included the following under the heading “Amendment”:

“9.1No term or provision of the Contract may be amended or varied unless such amendment or variation is reduced to writing and signed by the parties.” (CB 1206)

Clause 10 set out some nine “Contract Exclusions”:

·Head-Work Fees

·Latent Conditions

·Service Applications, Connections & Associated Fees

·Utility Costs

·Sewer & Stormwater Upgrades

·Council Contribution Cost (Inc Asset Protection & All Permit Fees)

·Authority Fess [sic] and Charges

·Work Outside of Normal Working Hours (Sundays)

·Perimeter Scaffold & Any Associated Permits or Fees Required

(Ibid)

Mr Lou said he signed the contract on 2 April 2016.

3Mr Salloum said he originally thought this contract was signed on 8 April 2019, but realised he was mistaken.  He believed “it was 3 April that the contract was finally executed” (T388, L19‑21).  Mr Salloum had previously been employed by SWAT (T384, L31).  He said as a director of Argyle, he had some reluctance to take on the project because “the site was a distressed site.  It had difficulty … and it was also the fact that it was a previous employer and I did feel uncomfortable – I didn’t want to cause any rift with the previous employer in going forward with this” (T385, L24‑27). Mr Salloum said that SWAT’s work was shoddy and needed to be demolished (T397, L18-27). At this time, viz April 2019, Mr Salloum remembered that Argyle had “anywhere between five and eight” other projects on hand (Ibid L34‑35).

4Once the contract was signed, Mr Lou said he needed to send it to EVT’s financier, National Australia Bank (T71, L28‑29).  Mr Lou said “but the bank’s AQS [sic viz quantity surveyor] has been reject the contract price” (Ibid L38-39).  This meant that Mr Lou had to negotiate with EVT’s bank manager, Mr Thuan Le (Ibid L45‑47).  Mr Lou said that he sent a “soft copy” of the instrument of formal agreement, viz an electronic copy, to Mr Le on 4 April 2019 and received advice from him by telephone that the contract price was too high (T72, L3‑15).  Mr Lou said he relayed this message to Argyle (T73, L43‑44).  Mr Lou’s chronology on this point seemed to vary.  According to another part of his evidence, the message that the contract price was too high may not have been received from the bank until as late as 11 April (T74, L16‑26).  On 8 April 2019, in the early afternoon, Mr Lou sent a text to Mr Salloum asking if he could see Mr Salloum in Mr Salloum’s office at “1500”, viz 3.00pm.  Mr Salloum responded, agreeing to this less than 60 seconds later (CB 1722).  Mr Lou later identified an email to the bank covering the “soft copy” sent on the morning of 3 April 2019 (T77, L17-28).

5Following the impasse as to the contract price, Mr Lou sent Mr Salloum a text at 12.13pm on 8 April suggesting that he “come to your office by tomorrow around 1330 to do hard copy.”  A moment later, Mr Salloum texted “contract still needs to be completed.  There were some things I’m not sure about and need to speak with the lawyer.  I’ll call you when I get a chance” (CB 1722).  Mr Salloum and Mr Lou exchanged texts arranging a meeting at Mr Salloum’s office at “1500”, viz 3.00pm (Ibid).  According to Mr Lou, he attended Mr Salloum’s office that afternoon, meeting Mr Salloum and his assistant, Mr John Lin, according to Mr Lou “three of us, have been signed one single page of the – just the new price page” (T83, L22‑24).  According to Mr Salloum, Mr Lin was a “contract administrator” employed by Argyle who, in that capacity, had authority to sign contracts on behalf of Argyle (T459, L43‑47).  Mr Lin left Argyle’s employment just after mid‑2021 (Ibid L37‑41).

6Mr Lou’s mother tongue is Mandarin.  Mr Lin was also a Mandarin speaker.  Mr Salloum does not speak Mandarin.  Mr Lin assisted Mr Lou in his dealings with Mr Salloum, helping with translations (T111).

7The contract price was adjusted downwards to $1,785,000 as the new fixed price contract sum (T91, L16‑19).  This figure was exclusive of goods and service tax (Ibid L23).  The revised price of $1,785,000 exclusive of goods and services tax was, according to Mr Lou, proposed by Messrs Salloum and Lin (T87, L18‑21).  The “amended page” is at CB 1278.  It shows a price of $1,785,000 exclusive of goods and services tax and is initialled by Mr Lou and Mr Salloum.  The full copy of the contract in its second version is to be found at CB 1861 and following.  The face sheet at CB 1867 begins “this Formal Instrument of Agreement is made on the 8 day of April 2019.”  Clause 10, headed “Contract exclusions” added to it as follows:

·“Elevator EasyStep to shop front entry.”

It purports to have been initialled by both parties, as will appear, Mr Lou denies having initialled this alteration (CB 1873).

8On 5 June 2019, Mr Lou sent an email to Mr Salloum.  There may be debate as to the precise purport of this email which touches upon some of the key issues in the proceeding.  Accordingly, whilst it is a lengthy document, regrettably written in broken English, I take the liberty of setting it out in full.

“Hi Sam,

As I had discussed with my lawyer on phone, his suggestion by below:

According to bank required, which means the developer must be paid off the balance at first, after then, bank will draw down the loan amount to the end. That means if you transfer your clearly type property to Sam or his company need to be refinanced immediately, meanwhile to show the refinance amount of the money to both banker and QS to make sure that they will accept the amount to start to draw down.

I had already contacted banker to send an e-mail about draw down process on Wednesday.

Thus, the best way to solve this issue:

1.Change contract price to $1,785,000(Base on QS report) to match your new contract price $2.05M

2.Edison need to pay off or deposit into NAB (Plus the amount of money you had already desposit into NAB) the difference leave to the bank start to draw down until the end of this project.

Difference Calculation below:

$2,050,000 (Total building cost from Sam)

- $1,785,000 (Reduce building cost from Sam)

＝$265,000（Edison need to pay for sam or deposit into NAB before first Claim from Sam)

Current desposit from Edison.

（$205,000 that is GST base on $2.05M)

($200,000 that is to increase the loan amount for nab to draw down $1,700,000 base on new building cost $2.05M)

Final Calculation below base on $2.05M

$2,050,000

-$1,700,000

-$265,000

＝$85,000（Edison need to pay for sam or desposit into NAB to make total loan amount to $2.05M）

3.I am not suggest you give cash to your builder because that is Illegal Way, both of your builder and yourself will have many issues later.  And those cash will not be recorded.

4.If builder still worry about the risk of reduce the price from $ 2.05M to $1.78M, I can draft an agreement between your builder and you to make sure that builder will receive the full amount of the building cost $2.05M when this project finished.(The variation amount need to be calculated later base on builder's claim)

5.We need to reduce building price from $2.05M to $1.78M to let QS to update their report based on $2.05M, they may add up some other fees to make the final price around $2.1M.

6.I had already confirmed that the effect of the Guarantee is that if any part of the building costs are not paid by the Bank, then you must pay yourself.

Further, your Docklands apartment is being offered as security by way of a charge in favour of the Builder.

This means that the Builder can lodge a caveat on the title.

This will prevent you to sell or transfer the property to anyone else, unless pay the money you owed to Builder under the building contract.

7.    Final suggestion by my lawyer is:

We do not need to change the contract price just put “valution [sic] for current work had been done.”

Thus, the QS will understand how to updating the report.

Hope that is very clear for you, if you have any questions please feel free let me know.

Thanks.”

9According to Mr Salloum, the second version of the contract with the reduced price was signed not on 8 April 2019, but rather on 5 June (T417, L1‑3).  It is common ground that the parties had a meeting on 5 June.  Seeking to explain the 5 June email, Mr Lou said “Sam did tell me later on there was a variation with what we coming up.  So they worry about the fixed contract price is already on 1.785.  But when it’s the variation coming out, who need to cover that?  And that might be rising up the construction costs” (T90, L26‑29).  According to Mr Lou, between April and June, no work was being done on the project (T92, L8‑18).  Mr Lou said the delay was “because they asked me to give the security first” (Ibid L22).  He said this “security” was “part of the cash and the rest as a personal guarantor” (Ibid L26).  These were requirements laid down by Mr Salloum (Ibid L28‑30).  Perhaps implausibly, Mr Lou said that whilst Mr Salloum had demanded cash, he had not nominated any particular figure (T93).  Mr Salloum said that he always understood the proper contract price to be $2,050,000 exclusive of goods and services tax.  When asked why he signed the contract with the much lower figure for the contract price of $1,785,000, he said “I was put under a lot of pressure by Mr Lou to amend the figure for his financial purposes so he can get funding from the bank.  It was never intended to be the actual contract figure” (T417, L18‑20).  I put it to Mr Salloum that as he described this second version of the contract, it was “an apparent agreement which neither side really regarded as binding but was created to deceive somebody else” (Ibid L24‑26).  Mr Salloum replied “I would probably say yes” (Ibid L28).  On 8 June 2019, that is some three days after the meeting at which Mr Salloum says the second version of the contract was signed, Mr Salloum sent an email to Mr Lou stating, “As per our revised contract value please see the new trade breakdown for the bank attached …” (CB 1901).  The attached trade breakdown dated 22 March 2019 showed an original contract price of $1,785,000.  On Mr Salloum’s account, the “trade breakdown” was backdated because the figure $1,785,000 as the contract price was only adopted on 5 June 2019 or 8 April at the earliest (CB 1902).

10As to the issue of cash, Mr Lou says it was Mr Salloum, on behalf of Argyle, who demanded payments of cash (which I took to mean bank notes as distinct from an electronic transfer of funds or a cheque) as a condition of Argyle’s commencing work on the site.  Mr Salloum said that at the meeting on 5 June, “Mr Lou was trying to induce a reduced contract value.  I told him we weren’t comfortable with that scenario, and that the price had to be 2050.  I even indicated that if he couldn’t afford to build it then he should probably explore options of selling it (T404, L34‑36).  Mr Salloum said that Mr Lou “was just giving reassurances that he would always cover the difference in the balance, and that whatever I feel comfortable in doing, he would do” (Ibid L41‑43).  According to Mr Salloum, “Mr Lou indicated now that he could reduce it [viz the contract price] to 1785, that he would get funding for that amount, and the difference, he would pay in cash” (T406, L28‑29).  The effect of the discussion, according to Mr Salloum, was “on paper he will reduce the contract price to be 1785 to appease solely exclusively for bank purposes, but we would always be paid for the true contract value of 2050” (T407, L34‑36).  Mr Salloum said this would require $265,000 in cash (Ibid L38‑40).  Mr Salloum said that it was not he who asked for cash, but rather “it was offered to me” (T408, L13).  The second version of the contract, on Mr Lou’s account was signed on the afternoon of 5 June at Argyle’s offices with Mr Lou representing EVT and in the presence of another director of Argyle, Mr Stuart Dunstan (T408, L43).  Mr Dunstan was present because he was keen to meet Mr Lou (T409, L1‑2).  Mr Dunstan said that he was “just interested to see how the actual business [of Argyle] run.  So I was off work because I was put off work due to my injury [recuperation from hip replacement] … so I decided just to see how the actual business ran” (T369, L31‑33).  Mr Dunstan did not have a detailed recollection of the events of 5 June “because it’s so many years ago now” (T370, L45).  Mr Dunstan said that Mr Lou and Mr Salloum “were talking about the contract and in relation to the reduction in the price” (T371, L12‑13).  Mr Salloum had told Mr Dunstan “that Mr Lou was having trouble with his finances and … couldn’t get money out of China … and was having trouble with his finances with the bank to finance the actual project” (T372, L21‑23).  Mr Dunstan said the substance of the discussion “was that Mr Salloum wasn’t happy about the reduction in the price of the contract, but he had agreed begrudgingly to the lower price” (T373, L11-12).

11The project proceeded to completion, presumably the various units were sold but the parties are in dispute as to the balance of accounts between them arising out of the development project.  As will appear, these disputes fall principally into three categories.  First, according to EVT, the second version of the contract nominating a lower contract price of $1,785,000 was according to EVT the contract binding the parties, whilst Argyle contends that the true agreement between the parties and the “expectation” was that the original price of $2,050,000, as set out in the first version of the contract, was to be the basis for the settling of accounts between the parties.  Secondly, whilst the parties are agreed that there were cash unrecorded payments made by EVT to Argyle, Mr Salloum and Argyle say that these payments totalled no more than $200,000, whilst EVT says a sum of $390,000 in unrecorded cash payments were made.  Thirdly, EVT claim to be entitled to credit for a series of payments which it said it made at the request of Argyle to subcontract suppliers.  The issues relative to this matter narrowed and were largely resolved as the trial progressed.  Finally, there was a dispute as to whether EVT was entitled to credit for a payment of $962, which it said should be taken in reduction of its liability under the contract, but which Argyle and Mr Salloum said was made under a separate informal leasing arrangement relative to neighbouring premises.

This proceeding

12By their Amended Statement of Claim, the plaintiffs, EVT and Mr Lou, seek payment either of $222,445.30 “being the amount paid by EVT to third parties for works to be performed by Argyle under the agreement”, or $184,835.34 “being the amount paid by EVT for works in excess of the contract price.  They also sought $26,600 for liquidated damages.  Mr Lou sought relief relative to the caveat lodged against the title of his residence at Point Cook (CB 12).

13By its Amended Defence and Counterclaim dated 23 February 2023, Argyle, aside from denying the plaintiffs’ claim, sought payment of $571,757.54 inclusive of GST “as a debt”, alternatively damages interest under the agreement or alternatively under statute.  Argyle made a similar claim against Mr Lou based on the guarantee of the obligations of EVT which he had executed.

Procedural history

14This dispute has a relatively complex procedural history. Mr Lou gave a personal guarantee of the obligations of EVT, and pursuant to a charge clause in that guarantee, a caveat, AS-375735C, was lodged as an incumbrance on Mr Lou’s residential property at Point Cook on 6 August 2021, EVT’s solicitors, Madgwicks, lodged an application under s89A of the Transfer of Land Act 1958 for the removal of that caveat. The following month, solicitors for Argyle commenced proceedings in the Victorian Civil and Administrative Tribunal (“VCAT”). A vice-president of the tribunal, Judge Marks, struck out the VCAT proceeding of Argyle on the basis that this Court was a more appropriate jurisdiction to hear the dispute. No proceeding having been commenced in this Court by Argyle, EVT launched the present proceeding and Argyle mounts its claim against EVT and Mr Lou as a counterclaim.

15On 15 March 2022, Argyle served a payment claim under the Building and Construction Industry Security of Payment Act 2002. In accordance with the terms of that statute, EVT, via its solicitors, Madgwicks, filed a “payment schedule”, the effect of which was to deny liability for the amount of $380,000 claimed. In accordance with the statutory procedure, Argyle, via its solicitors, Thomson Geer, sought an adjudication which entailed lodging jurisdictional submissions with the adjudicator and a statutory declaration by Mr Salloum.

16In August 2021, EVT sought to have the adjudication set aside with that dispute being resolved by consent orders made by Stynes J on 9 November 2021.  Again, an affidavit of Mr Salloum was filed on behalf of Argyle relative to the issues in the Supreme Court.

The date of the second contract

17In the view I take, it is unnecessary to make a finding as to whether the second building contract between the parties was executed on 8 April, as EVT and Mr Lou contend, or on 5 June 2019, as Argyle and Mr Salloum say.  The evidence of Mr Dunstan, who whilst a director of Argyle did not appear to take a particularly partisan position and who did not pretend to have a detailed recollection of events which, in the circumstances, might have been difficult to credit, supports the view that the second contract was signed in June rather than in April.  However, I refrain from making a finding on this point.

The witnesses

18Mr Lou gave his evidence in a straightforward manner, albeit in somewhat broken English.  I have quoted some of the answers which he gave and some of his emails which are, in a number of respects, difficult to comprehend.  In some important respects, as will appear, I have not accepted the case advanced on behalf of EVT, which necessarily reflects to some degree upon the reliability of Mr Lou’s evidence.  Generally, however, I regard him as a witness of truth.

19Mr Dunstan gave brief evidence as to what he says transpired at the meeting at the premises of Argyle on 5 June 2019.  He did not pretend to have a detailed recollection of events and his candid concession on this score bolstered his credibility in my mind.  I accept him as a witness of truth.

20Mr Salloum was the principal witness on behalf of Argyle.  I treat his evidence with some caution.  Unlike Mr Lou, he spoke in clear and correct English and responded directly to questions.  Nevertheless, the evidence which he gave as to cash receipts by his company, particularly in light of his previous statements, was troubling.  His evidence on behalf of Argyle was that the true agreement and understanding between the parties was that the contract price was to be the original figure of $2,050,000, not the lower figure to be found in the second contract; namely, $1,785,000.  In the points of claim filed by Argyle’s solicitors at VCAT, paragraph 5 stated “on or about 8 April 2019, Argyle and EVT entered into a contract for the construction of seven residential units and a commercial shop shell at the Property (Project) for the contract price of $1,785,000 ESC GST …”.  It will be seen that this is inconsistent with the evidence given by Mr Salloum at the trial of the present proceeding, both as to the date of the contract (April rather than June) and as to the true contract price.

21According to an affidavit of Aleksandar Kovaceski, made 22 June 2022 (AK‑1, page 3) when the matter was before an adjudicator, a document styled “Submissions on jurisdiction” filed on behalf of Argyle stated, at paragraph 2 “on 8 April, Argyle and EVT formally entered a ‘build only’ construction contract for the sum of $1.785 million plus GST.  A Formal Instrument of Agreement and AS‑4000 were executed at that time”.  Once again, this is inconsistent with the evidence which Mr Salloum gave at trial in this proceeding.  These submissions were prepared by Mr Salloum himself (T541, L6‑16).  In a statutory declaration made 12 April 2022 for the purposes of the adjudication, Mr Salloum said that the original contract sum was $1,785,000 (AK‑1 478, paragraph 30(a)).  As to the statement in the submissions about the contract being for a price of $1,785,000, Mr Salloum said that this was obviously not correct (T540, L40‑46).  As to the material presented to the adjudicator, Mr Salloum said “I had to – I had to show a consistent story as to what that narrative – I had to show the trade breakdown.  I had – which were all 1.785.”  This was plainly inconsistent with his concession to me in evidence at trial that the price of $1,785,000 was a sham.  It seems to me that, for the purposes of the adjudication and to obtain a favourable outcome for Argyle, Mr Salloum was prepared to advance a case which he knew to be untrue.

22The most troubling aspect of Argyle’s case is that in all versions of the defence and counterclaim before the most recent filed on the eve of trial, Argyle denied receipt of any cash.  In the amended defence and counterclaim dated 23 February 2023, paragraph 10 of the defence (CB 66) admitted receipt of payments from EVT in the sum of $2,287,686.84 inclusive of goods and services tax.  This included receipt of $200,000 in cash which was consistent with the evidence given by Mr Salloum at trial.  The earlier version of the defence had limited the receipt admitted to have been made by Argyle from EVT to $2,087,686.84.  This represented an effective denial of all cash receipts which was not persisted with in the final version of the defence or “sworn up to” by Mr Salloum at trial.  Mr Salloum agreed in cross-examination that he had always been aware of the relevant cash receipts (T528, L5‑6).  Mr Salloum also made an affidavit on 15 June 2022 in the proceeding in the Supreme Court seeking to set aside the adjudication, which also failed to give credit for the $200,000 now admitted to have been paid in cash (T544‑5).

Cash payments

23As previously explained, it is common ground between the parties that EVT (and therefore Mr Lou) are entitled to a credit of $200,000 in excess of the funds which EVT has remitted to Argyle by electronic transfer, being cash payments.  EVT claims credit for cash payments of $390,000 (Closing Submissions, Table 2, paragraph 48).

24The principal difference between the two figures is that EVT alleges a payment directly made by Mr Lou to Mr Salloum at his home on 17 November 2020, and Mr Salloum denies receipt of any such payment.

25Mr Salloum agreed that he had received a call at his home from Mr Lou, but said that what he received was a fake watch (T443).  EVT relied on a text message transmitted by Mr Salloum on that day with a one hundred thumbs up sign (CB 1835).  Immediately above this thumbs up sign is another text transmission from Mr Salloum giving the address of his residence in Richmond.  Mr Salloum gave the following explanation of the significance of the one hundred thumbs up:

“Mr Lou tried to call me. I picked up the phone but I couldn’t talk. I was with my wife over there. And I said, ‘I’ll call you straight back.’ But he goes, ‘I just want to know; is it off Bridge Road or is it 19’ – just something along those lines about my address, and I responded. I just – when I finished with my wife, rather than calling him back, I just responded with 100, thumbs-up. It’s meant to be 100 per cent.” (T434, L7-12)

26He continued:

“So on the iPhone, as soon as you write ‘100’ on there, it comes up with a red 100 – sort of underscore-100-type thing. And I was trying to convert it to 100 per cent, “You’ve got the address right.” (Ibid, L21-24)

27Mr Lou said he delivered the cash to Mr Salloum but met nobody else (T130).

28There was debate as to whether there was to be found any indirect evidence of these cash payments.  For instance, by withdrawal from bank accounts.  Regrettably, the full range of EVT’s bank accounts were not discovered by the ordinary processes.  Shortly before trial, Argyle served a Notice to Produce on EVT, and banking records going back some three years, that is those which are available to a bank customer “online” were provided, but there were no bank records from Westpac Banking Corporation with whom the plaintiffs apparently had some accounts, nor for accounts with the Commonwealth Bank of Australia prior to the three-year cut off period.

29During an adjournment at my suggestion, the missing bank records were subpoenaed but they had not arrived at the time of the resumption, and so I am required to make my finding on this payment, or alleged payment, without the benefit of this probative material.

30Engagement in cash transactions does no credit, either to Mr Lou or Mr Salloum.  When the then Commonwealth Attorney-General, Mr Lionel Bowen, moved the Second Reading of the Cash Transactions Reporting Bill 1987, which would become the Cash Transactions Act 1987, he said “It is notorious that the underground cash economy provides great scope for tax evasion, both domestically and internationally” (Hansard House of Representatives 13 May 1987, 3104).

31I must choose between the accounts given by two witnesses, both of whose credibility must be regarded as under a cloud.  Nevertheless, the considerations mentioned above relative to inconsistent statements made in affidavits, statutory declarations and pleadings by or on behalf of Mr Salloum, means that I prefer the account of Mr Lou.  I find Mr Salloum’s explanation of the one hundred thumbs up sign singularly unconvincing, most noticeably because he was not responding to any text transmission made by Mr Lou.  On his account, he was responding to a statement made by Mr Lou by audio over a telephone.  The easiest way to convey the message that Mr Lou had accurately identified Mr Salloum’s address was to say over the telephone “Yes”.  Resort to a text would be an unlikely elaboration.  The other $90,000 difference between the accounts given by Messrs Lou and Salloum is less easily identified. 

32According to the table summarising the differences on cash payments by Mr Blunt subjoined to paragraph 48 of his closing submissions, EVT alleged a payment of $120,000 on 6 June 2019 with Argyle denying any payment on that day but admitting receipt of $140,000 on 7 June, and a further $40,000 and $20,000 on 18 June 2019.  Both parties agree, relative to the payment of $20,000.  Debate centres upon a series of texts exchanged between Messrs Lou and Salloum in June 2019.  At Court Book 1737, there is a text recorded from Mr Lou to Mr Salloum saying “I try my best to get $150,000 for you”.  This text is dated 7 June.  It indicates that as at 7 June 9.41am, no $150,000 cash had been received.

33Mr Salloum sent a text at 3.42pm on the same day stating “$150,000 received”, followed up by a further text at 4.07pm stating “Correction $140,000 received not $150. Thanks” (sic).  This seems to be consistent with Argyle’s case that $140,000 was received on 7 June, and I so find.

34At 8.12pm on 10 June 2019 at Court Book 1738, Mr Lou sent a text to Mr Salloum saying:

“Can I bring another $40,000 at this Thursday around 1400 to your office? Make total $180,000 and I will bring final $20,000 at next Monday.

I am very sorry to separate 3 times to make total $200,000 for you. …”

(CB 1738)

35This text is supportive of the view that the payment on 7 June was $140,000 and not $150,000.  It also tells against any payment of $120,000 having been made on 6 June, and is consistent with part of Argyle’s contention that the cash payments in June 2019 totalled $200,000. 

36On 13 June, Mr Lou sent a text saying “Just duoble (sic) check the cash make sure that is all right. …” (CB 1739). Mr Salloum responded about 60 seconds later “Hi Edison it all seems fine. …” (Ibid).  This supports the view that $40,000 was promised on 10 June and delivered on 13 June.

37At 10.19am on 17 June, Mr Lou texted “Can I bring $20,000 at tomorrow around 1230 to your office?” (sic) (Ibid).  A few minutes later at 10.31am, Mr Salloum responded “All good mate” (Ibid). 

38At 12.57pm on 18 June, Mr Lou sent a text to Mr Salloum saying “Just make sure you had received $200,000 cash, once you have time please double check it” (CB 1740).  No response is recorded.

39There is no documentary evidence of the alleged $120,000 payment on 6 June, and the documents point away from a payment of $150,000 rather than $140,000 the following day.

40I conclude therefore that the total of the cash payments made by EVT to Argyle in the period June 2019 to November 2020 is $300,000.

Third party payments

41In his closing submissions, Mr Blunt, counsel for Argyle, conveniently summarised the issues remaining outstanding.  A number of matters were resolved in the course of the trial by agreement between the parties.  At paragraphs 13-20, Mr Blunt set out a series of matters that he described as “issues not in dispute”.  Amongst those were the following:

“17.Fourthly, EVT paid Klaus [Multiparking] $79,503.70 inclusive of GST during the project and that amount must be repaid by Argyle to EVT.”

42Also included as an issue not in dispute was:

“18.Fifthly, EVT paid Easy Living $55,000 inclusive of GST during the project and that amount must be repaid by Argyle to EVT…”

43I take these matters of common ground “as read”.  Paragraphs 21-24 set out matters which, according to Mr Blunt’s analysis, are “issues in dispute”.  None of those issues pertains to any payments or alleged payments by EVT to third party contractors.  On the face of it, therefore, this issue is resolved by agreement.  The total amount conceded by Mr Blunt to have been paid to the third party contractors, namely Klaus and Easy Living, is $134,503.60, being the total of the two figures already mentioned (Table attached to paragraph 9).

44Paragraph 11 of the Amended Statement of Claim refers to payments to sub-contractors in the total sum of $222,445.30 (CB 50).   The total amount alleged in that paragraph as being made to Klaus Multiparking was $139,131.30, together with a further payment of $28,314 to Schindler Lifts Australia.

45In his closing submissions at paragraph 38, Mr Caillard on behalf of EVT and Mr Lou, claimed a total credit of $79,503 relative to payments to Klaus Multiparking which accords with Mr Blunt’s description of this matter no longer being in dispute.  As to Easy Living, he claimed $37,670 as having been paid to Easy Living, and noted that there was no dispute now as to Schindler Lifts Australia. 

46In those circumstances, I should record a finding on these matters in accordance with the agreement between the parties.

Liquidated damages

47Mr Blunt, at paragraph 19 of his closing submissions, accurately recorded that it was agreed that Argyle is liable to pay EVT liquidated damages in the sum of $26,600 under GC 34.7 (one of the clauses in the building agreement).

Variation

48He also noted that it was common ground that pursuant to GC 36, another “boilerplate” provision of the contract, EVT’s liability had been increased by $604,444.38 inclusive of GST.

Caveat

49The caveat on Mr Lou’s residence has been removed and no further relief was sought in that regard.

Which contract?

50Perhaps the major question dividing the parties was which contract, leaving to one side the date on which one or the other might have been signed, established the rights and obligations between the parties?

51It will be recalled that in answer to a question from me, Mr Salloum conceded that the second contract was “a sham”.  The decision of the English Court in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 in the judgment of Diplock LJ (as he then was), who constituted the court, along with Lord Denning MR and Russell LJ gave what has been accepted since and in many decisions in Australian courts, as the classic definition of “a sham” in law. His Lordship said:

“As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a ‘sham’, it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or a document executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities … that for acts or documents to be ‘sham’, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a ‘shammer’ affect the rights of a party whom he deceived.” [1967] 2 QB 786, 802

52His Lordship’s definition seems to fit the second contract document exactly.  Mr Salloum was absolutely clear that it did not create real obligations as far as Argyle was concerned viz an obligation to construct a development for hundreds of thousands of dollars less than the price which it had originally agreed has the proper price for the project. 

53As far as Mr Lou for EVT is concerned, his lengthy email in broken English which I have quoted in full above, seems to boil down to saying that any reduction in the nominal price for the building work will be made up by cash payments.  The bank is the third party to be mislead by the ‘sham’.  If there were any doubts as to Mr Lou’s true intentions on this matter, they are resolved by further communications.

54On 24 May 2019, Mr Lou sent an email to Mr Salloum stating as follows:

“Let me meet you and explain to you.

Base on your explame     
Whatever the breakdown had change by QS are all not affect your claim
stage and actual cost base on your breakdown.
Because that breakdown had changed by my banker to compared by
current breakdown.
Thereforce you will not cover the majority cost upfront.
Example   
We do claim by every months until the 1.6M plus $100000 had been paid off
from NAB and then
I will contribute the rest of cost to let the job finish.
When can I meet you? I can come to see you to explain everything for you.” (sic) (CB 1731)

55On 11 July 2019, Mr Lou sent a text to Mr Salloum stating inter alia:

“I may not promise to much thing for you. But I can promise to pay you fullly

base on your contract price 2.05 M. Hope you can trust me, once I bring
200000 cash to you that already shows I will not let you take any risk on my project.” (CB 1742)

56This last text was also supportive of the total of the cash payments made in June 2019.

57It follows that the first contract is the repository of the parties’ rights and obligations.  The second contract form is a ‘sham’ and creates no legal rights and obligations.

58This finding renders moot the question whether the manuscript exclusion on the second contract was properly initialled and adopted by Mr Lou.  The opinion of the handwriting expert, Ms Tahnee Dewhirst, was to the effect that the initials were not made by Mr Lou.  She was not cross-examined and no contrary handwriting evidence was adduced on behalf of Argyle.

59The issue as to the exclusion is doubly moot since it is now conceded on behalf of Argyle that the payment to Easy Living should be available as a credit to EVT.  As is the question whether if the second contact is otherwise appropriate to create legal rights and obligations between the parties, it is unenforceable for lack of consideration as was contended on behalf of Argyle (Closing Submissions paragraph 38).

Interest

60Under the “boilerplate” terms of AS4000/1997, which forms part of the first contract, clause 37.5 states: “Interest in Item 30 shall be due and payable after the date of default in payment” (CB 1155).  The rate of interest is stated at item 30 as 10 per cent per annum (CB 1169).  Interest at that rate is therefore payable by EVT to Argyle upon any monies owing by it under the contract.

The $962.80

61Ultimately the parties were able to agree upon the amounts received by Argyle by electronic transfer with the exception of one amount of $962.80 paid by EVT to Argyle on 6 April 2021 (T510, L8-13).  Mr Salloum did not disagree that such an amount was received by his company (Ibid L21).  Mr Salloum denied however that his was a payment to the credit of EVT’s account under the building agreement.  He said “Mr Lou and myself had an agreement that the rental payments for next door would be shared so that we can use them as a side [sic scil site] office.  It became available during the course of the project” (T424, L23-26).  Mr Salloum could not immediately recall what rental was involved.  He said “My recollection it was probably 12 or 13 hundred dollars a month.  Thereabouts (Ibid L34-35).  Mr Salloum said this rental was to be shared “equally” between EVT and Argyle (Ibid L39).  Under cross-examination Mr Salloum said that the lease of the site office was the subject of a written lease agreement (T512, L37-41).  He produced a one-page document headed “Agreement to Lease Premises as a Site Office”.  There were no execution clauses or signature clauses on the single page.  Whether that was because the single page did not represent the entirety of the document or that signature or other execution had been dispensed with does not appear.  The document identified the leased premises as being “439 Gaffney Street, Pascoe Vale” with a month-to-month tenancy commencing 13 February 2020 with a monthly rental of $1,516.66 plus GST.  The tenant is shown as Argyle and the landlord as Shaw AMC Holdings Pty Ltd.  The figure of $962 does not appear to be any particular aliquot part of the nominated monthly rental.  It could not be a half share because it represents more than one half of $1,516.66.  This is an ex-GST figure.  The rental inclusive of GST would appear to be $1,668.33 and again $962 is not an obvious aliquot part being more than a 50 per cent share.  Once this site office rental is excluded as the likely purpose of the payment the only other possibility is that it was made against EVT’s liability under the building contract albeit that there was no explanation as to why this “odd” sum would have been the subject of an individual payment.  EVT should have credit for that amount.

Disposition

62I will direct the parties to bring in short minutes to give effect to these reasons.

Costs

63I have heard no submissions on the question of costs and so I will reserve them.