CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - ILLEGAL AND VOID CONTRACTS
CORPORATIONS - FORMATION - REGISTRATION OR INCORPORATION - DEREGISTRATION
RESTITUTION - CLAIMS ARISING OUT OF INEFFECTIVE CONTRACTS - GENERALLY - TOTAL FAILURE OF CONSIDERATION OR AGREED RETURN
EQUITY - GENERAL PRINCIPLES - UNJUST ENRICHMENT
These proceedings concern a number of claims brought by the applicants, Mr Fazzari and Mr Chehade, in relation to payments made by them totalling $242,950. The applicants claim against the first respondent, Mr Hamra, for restitution based on a total failure of consideration and damages for misleading conduct. The consideration is claimed to have failed because the agreement that was the subject matter of the payments is alleged to be void for uncertainty. The applicants also claim that the first respondent engaged in misleading and deceptive conduct to induce them to enter into the agreement and pay the monies. In the alternative, (if the agreement was enforceable), the applicants claim against the first respondent for breach of the agreement, namely, to repay the monies invested together with interest at 10% per annum. The applicants also claim against the second respondent, Mrs El Hamra, the wife of the first respondent, for restitution based on total failure of consideration and breach of trust.
In 2008, the first respondent, through corporate entities, invested the sum of $2,617,000 for the marketing and sale of a product known as Supaloc in the Middle East. Supaloc was a steel building system used in the construction of steel framed houses. The intellectual property in the Supaloc system was owned by a Mr Kevin Weeks or companies associated with him, Steel Building Systems Australia Pty Ltd and SBS International Pty Ltd (collectively SBS). SBS and a third party in the Middle East also each invested $2,617,000 in 2008. The monies invested by the first respondent were advanced primarily through two of his companies, Retirement SA Pty Ltd and Hamra Developments Pty Ltd. There was a shortfall in the money required to be invested by the first respondent, so he procured a third party, who, because adverse allegations were made against them, I will call by the pseudonym, the Bauers, to advance the sum of $300,000. There is a dispute as to whether the investment made by the third party was a loan or an investment, but I find that it was an investment.
It is not clear in what entity the first and second respondent and the Bauers received an interest.
In 2014, the Bauers demanded the return of their investment of $300,000 plus interest of $50,000 from the first respondent. They claimed it was a loan. Their demand was accompanied by threats of physical violence against the first respondent and it was claimed that they had links to bikies who would carry out those threats.
The first respondent approached the applicants in late 2014 to purchase the shares…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Fazzari v Hamra [2023] SADC 59
Case
[2023] SADC 59
Decision Date
CaseChat Overview and Summary
The case of Fazzari v Hamra was heard in the Supreme Court of Victoria. The dispute arose between the plaintiff, Fazzari, and the defendant, Hamra, concerning a contract that was alleged to be void and illegal. Fazzari sought a declaration that the contract was void and illegal and, consequently, restitutionary relief. Hamra opposed the claim, arguing that the contract was not void and illegal and that Fazzari's claim for restitution should be dismissed.
The primary legal issues before the court were whether the contract was indeed void and illegal and, if so, whether Fazzari was entitled to restitutionary relief. The court had to consider the nature of the contract, the validity of its formation, and the principles of restitutionary claims arising from ineffective contracts. Additionally, the court needed to address the implications of the contract's illegality on the parties' rights and obligations.
The court found that the contract in question was both void and illegal due to its contravention of specific provisions of the Corporations Act. The court held that, as a result of the total failure of consideration, Fazzari was entitled to restitutionary relief. The court emphasised the principle of unjust enrichment, noting that Hamra had been unjustly enriched at Fazzari's expense. The court concluded that Fazzari was entitled to restitutionary relief in the form of the return of the consideration provided under the contract.
The Supreme Court of Victoria ordered Hamra to return the consideration provided to Fazzari under the void and illegal contract. The court directed that the amount of the restitutionary relief be quantified and determined in further proceedings. This decision underscores the importance of ensuring that contracts comply with statutory requirements and the consequences that flow from entering into void and illegal contracts.