Guneser v Dolas
[2019] VCC 370
•2 April 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-17-02754
| GENCO GUNESER | Plaintiff |
| v | |
| GULTEKIN DOLAS | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5, 7, 8 November 2018, 12, 13, 14 February, 4, 5 March 2019 | |
DATE OF JUDGMENT: | 2 April 2019 | |
CASE MAY BE CITED AS: | Guneser v Dolas | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 370 | |
REASONS FOR JUDGMENT
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Subject: Contract; Joint Venture Agreement
Catchwords: Joint Venture Agreement; plaintiff entitled to a payout or distribution under a clause of the contract; whether plaintiff disqualified from reliance on clause by principle that a party may not profit from its own wrong
Legislation Cited: Transfer of Land Act 1958, s91A(4)
Cases Cited:Gray v Allan [1977] VR 413; Alguhussein Establishment v Eton College [1988] 1 WLR 587; Manly Property Holdings Pty Ltd v Lisker Pty Ltd [2017] NSWSC 1394 [216]; Mills v Ruthol Pty Ltd [2002] NSWSC 294; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130; Mackay v Dick (1881) 6 App Cas 251; Butt v M’Donald (1896) 7 QLJ 60; SecuredIncome Real Estate (Australia) Ltd v St Martin’s Investments Pty Ltd (1979) 144 CLR 596; United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1; Lien v Clontarf Residential Pty Ltd [2018] QSC 94; Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vict) Pty Ltd (1957) 98 CLR 93; Concut Pty Ltd v Worrell (2000) 176 ALR 693;
Judgment: (1) Adjourned to a date to be fixed to hear further submissions and potentially further evidence as to what relief ought to be granted.
(2)Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person with Mr M Helman (McKenzie friend) | |
| For the Defendant | Mr P Cadman | Atlas Legal |
HIS HONOUR:
Background
1 Mr Guneser has been a builder of houses and residential units for some 15 years. (Transcript (“T”) 93, Line(s) (“L”) 2-23).
2 In 2007, Mr Gultekin Dolas approached Mr Guneser to erect three townhouses on Mr Dolas’ property at 73 Station Road, Glenroy for a price of $440,000. (T93, L24 – T94, L21)
3 The contract was in the form of the Housing Industry of Australia Victorian New Homes Contract October 2004 Edition. (Court Book (“CB”) 1327-1370). According to Mr Guneser, Mr Dolas derived a profit of $853,000. (T94, L22-24)
4 Following on this apparently happy outcome for the development of number 73, according to Mr Guneser, in 2014, Mr Dolas again approached him. (T95, L21) Mr Guneser said that aside from the experience of the successful 2006 development, Mr Dolas and he had the same accountant and the same legal adviser. (T96, L1-3)
5 According to Mr Dolas, it was Mr Guneser who approached him, inviting him to meet in a café. “When we caught up at a café, he said that he knew that I had bought a new property. He meant the property at 75 Station Road, Glenroy”. (Exhibit 2, paragraph 2)
6 According to Mr Guneser, Mr Dolas told him, “I’ve got a quotation, I got it in 2012. I’ve done some ground work.” (T96, L20-22) This “quotation” appears to refer to an estimate of costs and design proposal addressed to Mr Dolas dated 19 July 2012, referring to a “Proposed Multi Unit Development at number 75 Station Road, Glenroy”. (Exhibit 3)
7 Mr Cadman, counsel for Mr Dolas, no doubt upon instructions, put it to Mr Guneser that his client, Mr Dolas, had undertaken no investigations relative to a development at number 75 because he lacked the financial resources. (T311, L25-27)
8 Mr Cadman challenged Mr Guneser to produce the document which was ultimately admitted into evidence as Exhibit 3 and put it to him “that that document does not exist and that you are now just making that up to help yourself”. (T312, L16-18)
9 Mr Guneser said that once he and Mr Dolas joined forces, they consulted four architects. (T96, L27-28) In particular, according to Mr Guneser, he and Mr Dolas attended upon an architecture consultancy known as Archsign, which was Mr Guneser’s architect and who advised that it would be possible to obtain planning permission to erect six units on the property at number 75. (T97, L12-17)
10 Archsign provided a fee proposal and associated documentation under cover of a letter dated 26 June 2014. (CB 365-369) Aside from being the owner of number 75, Mr Dolas was a self-employed renderer. He told the architect at Archsign that he wished to undertake as much rendering as possible in the proposed development. (T98, L3-5)
11 The parties then executed a Joint Venture Agreement dated 20 June 2014.
12 The Joint Venture Agreement recited that Mr Dolas was the registered proprietor of the property at 75 Station Road, which was the subject of a mortgage in favour of National Australia Bank securing approximately $440,000. It was said that Messrs Guneser and Dolas were to form an unincorporated joint venture with interests of 50 per cent each. It was proposed to sub-divide the property into some five units for the purposes of the venture. The property was valued at a market price of $635,000. Recital G stated:
“Each joint venture partner hereby commits his interest to the joint venture and agrees to do all things necessary to enable the project to be carried out”. (CB 351)
13 Mr Dolas warranted that there were no defaults “past or subsisting” under the National Australia Bank mortgage, and that there were no unpaid rates, taxes or other charges owing on the property. (CB 352)
14 Mr Guneser was to be responsible as a registered builder for the “pre-application of the sub-division involving arranging for the conceptional plans and site-analyst [sic]” and for engaging “the architect to draw all plans and documentation required for the sub-division”. He was also to be responsible for the demolition of the house existing on the property and “to arrange for the construction of five units on each of the lots on the sub-division…”.
15 Clause 14 provided that Mr Guneser should:
“be responsible for payment of all fees required for the engagement of the architect and obtaining approval of the subdivision and the construction of the units up to the sum of six hundred and thirty five thousand dollars ($635,000.00), which amount is equivalent to the value of the Property contributed by Gultekin [Mr Dolas]”. (CB 353)
16 Accordingly, whilst Mr Dolas had contributed the value of the property at $635,000, Mr Guneser was to contribute $635,000 “in costs and fees towards the project” with all further fees to be “contributed in equal shares between the parties”. (Ibid)
17 The parties appointed FKM Accountants “to be the accountants for the project”. They were to keep “all usual and proper records for the project…” The joint venturers were not to be regarded as partners. Clause 19 obliged each party to “punctually pay and discharge their separate debts and obligations” and to “ensure that the other party is fully indemnified from any claims arising there from”. (CB 354)
18 The lots on the proposed sub-division were to be sold “off the plan” at the best price reasonably obtainable as mutually agreed between the parties, as determined by a sworn valuer agreed upon by the parties. In default, one appointed by the president for the time being of the Real Estate Institute of Victoria to be appointed on the application of Buller McLeod Lawyers.
19 The net proceeds of the sale of each lot was to be divided equally between Messrs Guneser and Dolas, with Mr Dolas being responsible for the payment of the National Australia Bank mortgage loan “from his half share of the sale proceeds”.
20 Buller McLeod Lawyers were “appointed as the solicitors to handle the conveyancing of the sale of the units”.
21 Mr Dolas would be entitled to rent received from the existing house until the time when a permit was obtained for the demolition of the house and the erection of the five units. (CB 355)
22 Clause 25, under the heading “Security”, provided:
“In consideration of the terms of this agreement and as security for the advancement of money toward the project by Genco [Mr Guneser] pursuant to the agreement, Gultekin [Mr Dolas] does hereby charge all his right title and interest in the Property, in favour of Genco [Mr Guneser] and agrees to execute a second mortgage with Genco [Mr Guneser] and authorise the registration thereof and/or does authorise Genco [Mr Guneser] to lodge a Caveat against the Title to the Property, to protect his interest.” (CB 356)
23 Clause 27 provided:
“If after the five (5) unit development is approved by council, if for any reason this agreement is terminated and the project does not proceed, it is agreed that upon the termination of the contract that a sworn valuation shall be obtained for the value of the Property, by a valuer mutually agreed upon by the parties and failing agreement to be appointed by the president for the time being of the Real Estate Institute of Victoria and Genco [Mr Guneser] shall be entitled to receive from Gultekin [Mr Dolas] payment of one half (1/2) of the difference between the value of the Property at the date of this agreement, namely six hundred and thirty five thousand dollars ($635,000.00) and the new value obtained as at the date of termination of this agreement.” (Ibid)
24 There was a prohibition on assignments of either party’s Joint Venture Agreement and a clause providing that if Mr Dolas should default in his loan from National Australia Bank, with the bank taking possession of the property and the projects not proceeding, then it was agreed “that Gultekin [Mr Dolas] shall reimburse to Genco [Mr Guneser], any money paid by Genco [Mr Guneser] towards the project”. (CB 357)
25 Mr Guneser’s signature was witnessed by Mr Buller of Buller McLeod Lawyers. Mr Dolas’ signature was witnessed by a registered interpreter. (CB 359) Mr Dolas ultimately agreed that he had had the opportunity to discuss terms of the Joint Venture Agreement with the interpreter and did so in a relatively perfunctory discussion over a cup of coffee. He was unable to remember whether this discussion took place before or after he signed the Joint Venture Agreement. (T577, L12 – T580, L22)
26 The draftsman of this Joint Venture Agreement was Mr Peter Buller. Mr Guneser regarded him under the terms of the Joint Venture Agreement itself referred to above, as being solicitor to the joint venture, that is, jointly retained by Mr Guneser and Mr Dolas. (T99, L10-19)
27 This view was not necessarily accepted by Mr Dolas. According to him, the joint venture:
“was all done by [Mr Guneser] and his lawyer. He said at the hearing that Peter Buller was my lawyer and that I had some things that I wanted in this agreement as well as him. I don’t know why he would say that. These are total lies.” (Exhibit 2, paragraph 7)
28 Eventually, Mr Dolas came to be represented by Mr Sheriff of RSG Lawyers.
29 Speaking of the Joint Venture Agreement, Mr Guneser said:
“My agreement was I would be the builder, I would not have a builder's profit. As a builder I wouldn't get any profit for building the six units so that's around ten/5 per cent normally so I wouldn't get any profit at all and he'd be contributing the land. I'd be doing all the work. I'd be using all my experience, all my connections. I'd be building and just finishing. That's my responsibility.” (T102)
30 According to Mr Guneser:
“The architect, defendant, [viz Mr Dolas] myself, together with the architect separately. So we said 75 square metres, about 16,000 per square metre, 1.2 metres … About 1.2 million [dollars].” (T104, L1-6)
31 That was to be the cost of construction. (Ibid, L31)
32 Mr Guneser gave evidence and produced documents which he said demonstrated that he was fully funded to meet his contribution under the Joint Venture Agreement. The funds were said to come from a variety of sources, including credit balances held by his sisters which he said he was entitled to draw upon by the use of a power or powers of attorney. There was also a facility which was offered by Arab Bank on the security of a taxi plate. This offer of facility was made some 10 years before the events under discussion but, according to Mr Guneser, remained opened to be drawn down to the tune of $180,000. (T147-56)
33 Given that the rules as to taxis have now been changed, the continuing worth of a taxi plate now (if such still exists), or in 2014 when these changes had either taken place or were well-known to be coming, must be regarded as problematic. (T157)
34 On the same day as the Joint Venture Agreement was entered into, namely 20 June 2014, Messrs Guneser and Dolas entered into a loan agreement whereby Mr Guneser lent Mr Dolas the sum of $50,000 repayable on 30 November 2014. (T157, CB 360-362)
35 The agreement obliged Mr Dolas to “repay the said loan in full to the lender by bank cheque by 30 November 2014, which cheque would be delivered to Buller McLeod Pty Solicitors”. There was no provision in the loan agreement for the payment of interest. The $50,000 was not repaid on that date, or on any date since. (T158, L28-30)
36 Apparently, contemporaneously with the Joint Venture Agreement and the loan agreement, Mr Dolas executed a document styled “General Power of Attorney”, expressly made “on the blank day of blank 2015”. This document was witnessed by the same interpreter who witnessed Mr Dolas’ signature on the Joint Venture Agreement. Despite being described as a “General Power of Attorney”, the document did not, as such general powers customarily do, authorise Mr Guneser to do any act or execute any document which may lawfully be delegated to an attorney. Rather, it authorised him to do on Mr Dolas’ behalf:
“… any thing (sic) that I may lawfully authorise an attorney to do in respect to the carrying out of all building works and to apply for all permits and necessary consents in relation to the construction of six (6) units on my property at 75 Station Road, Glenroy …”. (CB 325)
37 With the $50,000 advanced by Mr Guneser to Mr Dolas not being repaid on the due date, Buller McLeod Pty wrote a letter of demand to Mr Dolas dated 5 December 2014 which stated inter alia:
“We advise that Mr Guneser requires the repayment of the said loan or a satisfactory arrangement for repayment, within seven (7) days from the date of this letter.” (CB 394)
Perhaps ironically the letter concluded with a depiction of a Christmas tree and a message “Merry Christmas and a Happy New Year”. (CB 394)
38 When the parties entered these transactions in mid-2014, Mr Guneser said that Mr Dolas presented himself to Mr Guneser as a prosperous self-employed tradesman who appeared to own a Mercedes Benz motor vehicle and a Nissan Navara work utility. (T226, L24-29, T227, L11-19) The fact was Mr Dolas was in a parlous financial state. He had been obtaining debt counselling from an agency of the Salvation Army known as “Salvation Army Moneycare”. Mr Guneser obtained production on subpoena of the Salvation Army’s debt counselling file for Mr Dolas. This material at CB 1632-1953 showed that Mr Dolas had been receiving debt counselling services from Salvation Army Moneycare in the years 2013 to 2018 and, in particular, at material times in 2014 when he entered into the Joint Venture Agreement. The material demonstrated that he was battling debts of every description including debts owing to the four major trading banks, as well as credit card debts. Mr Guneser asserted, and Mr Dolas and his counsel Mr Cadman did not deny, that in 2014 when the Joint Venture Agreement was entered into, Mr Dolas was incapable of making any financial contribution to the joint venture. Mr Guneser’s case was that Mr Dolas entered the arrangement with him under false pretences. Mr Dolas, however, said:
“I never hid my financial position from him. He asked me what it was and I told him in detail. I even told him about the situation with the Salvation Army – that I had been to see them to help me with my debts. I have nothing to be ashamed of. … My problems with the credit card payments was the cause of all my problems.” (Exhibit 2, paragraphs 3 and 4)
According to Mr Dolas, the subdivision of No 73 Station Road, despite its presentation by Mr Guneser as a profitable project, in fact returned a loss for him. (Ibid, paragraph 4)
39 Against this background, the rationale for the $50,000 loan is somewhat unclear. A successful businessman, as Mr Guneser says he believed Mr Dolas was, would scarcely need a personal loan of $50,000. On the other hand, if, as appears to be the fact, Mr Dolas was virtually insolvent, there would be no reason to believe that he could, by 30 November 2014, have repaid the $50,000 loan where the development project could scarcely have been started, much less finished, so as to generate any profit or income. Mr Guneser said that he intended the repaid $50,000 to be part of the money which he was permitted by the Joint Venture Agreement to invest in the project. It was part of his budget. (T233, L2-18) Buller McLeod sent a second letter of demand dated 4 March 2015 requiring repayment within seven days or “a satisfactory arrangement for repayment” within that time frame. (CB 400)
40 Buller McLeod Pty, who, it will be recalled, were viewed by Mr Guneser as acting jointly for him and Mr Dolas, were, in dispatching the letters of demand, acting solely for Mr Guneser and taking up a position adverse to Mr Dolas. This seems to have led Mr Dolas to seek separate legal representation in the form of RSG Lawyers. A partner of that firm, Mr Oguzhan Sheriff, wrote a letter to Buller McLeod Pty dated 13 March 2015, stating that his firm acted for Mr Dolas. The letter acknowledged the debt due for repayment the previous 30 November, which stated:
“We are instructed that our Client [viz Mr Dolas] is actively trying to obtain credit from financiers to repay the loan amount to your Client. Our client is currently in the process of procuring the funds and has further instructed us to request that your Client provides him with some time to obtain the funds and make the relevant repayment to your Client.” (CB 2265)
This letter was transmitted by facsimile and Buller McLeod Pty responded in a letter dated 18 March stating inter alia:
“we have been instructed by our client to ask for a more definite time frame as to when the loan will be repaid.” (CB 2266)
This led to another facsimile transmission from RSG dated 25 March 2015, stating inter alia:
“We are instructed that our Client is waiting on his broker whom advised him that it would take him ten (10) to twelve (12) weeks to obtain the required loan. Our client understands your client’s requests and their rights in relation to the said loan agreement. Our client further instructs that once he obtains the required loan, he will pay the amount owed together with any reasonably applicable interest.
We therefore ask for a further extension of around twelve (12) weeks for the payment of the said loan amount to your client.” (CB 2268)
41 Meanwhile, the project was continuing and Mr Guneser was outlaying money. (T238, L25-26) Eventually, a supplementary Joint Venture Agreement was executed providing for repayment of the loan amount, together with a further sum of $5,000 from the sale proceeds of the development. According to Mr Guneser, this agreement was entered into “when his lawyer [Mr Sheriff] contacted Mr Buller to say he [Mr Dolas] hasn’t got the money and no-one can lend him the money …”. The agreement dated 10 November 2015 recited the original advance of $50,000 and continued, “The Lender [Mr Guneser] has agreed to lend to the Borrower [Mr Dolas] a further sum of five thousand dollars ($5,000.00)”. This amount was required to “be repaid by the Borrower to the Lender from the proceeds of the sale of the first units [in the 75 Station Road redevelopment] to be sold”. (CB 434-435) There was no clear explanation from Mr Guneser as to the rationale for the advance of the further $5,000.
42 According to Mr Dolas, this represented an amount outlaid for the purpose of “cleaning” his credit rating, a service which could be provided by a finance broker resident in Sydney identified only as “Sarah”, who attended a meeting, according to Mr Dolas, with Mr Guneser and himself at premises in the Jukes Road, Fawkner, shopping centre. Mr Dolas complained that it seemed his credit record had never been “cleaned”. (Exhibit 2, paragraphs 25-26) The meeting referred to by Mr Dolas, however, was said to have occurred in late February 2016, which does not correspond with the date of the supplemental loan agreement.
43 According to Mr Guneser, he and Mr Dolas approached some four architects, including the consultant which he referred to as Mr Dolas’ own architect, named Architectural Ideas. (CB 230) Messrs Dolas and Guneser attended the meeting with an architect, presumably Archsign, who advised that five or six units were possible. (Ibid, L19-29) They agreed that the project would go forward at a costing of $1.2 million. (T231, L9)
44 A draft supplementary Joint Venture Agreement dated 12 October 2015 was drawn by Buller McLeod Pty. It was executed by Messrs Guneser and Dolas (the signature of the latter being witnessed by Mr Sheriff, a Turkish speaking solicitor). This document provided for Mrs Dolas to act as a guarantor of her husband’s obligations. She did not sign and the agreement seems to have been treated as abortive. The estimated construction costs of $1.2 million is shown again in typescript, but the partly executed version of the agreement at CB 444-446 has extensive handwritten amendments, one of which is modifying the construction cost so as to read $1.35 million. Another version of this agreement appears at CB 428-431. It has a line running diagonally across the face sheet from upper right to lower left, with a handwritten statement on that face sheet stating:
“The parties hereby acknowledge and agree that the Victorian New Homes Contract (‘Building Contract’) is signed conditional to entering into a Joint Venture Agreement (‘New Agreement’) with similar terms to a Joint Venture Agreement between the parties dated 12 October 2015. The New Agreement shall incorporate amendments to the amounts specified in Clauses 3, 4 and 7. This New Agreement shall be prepared and signed by the parties within five (5) days.” (CB 428)
There is provision for a signature which remains blank. Precisely what the status of these documents is, is not clearly explained in evidence.
45 In cross-examining Mr Guneser, Mr Cadman, on behalf of Mr Dolas, suggested that the handwritten amendments substituting $1.35 million for $1.2 million were indicative of an attempt on Mr Guneser’s part to go back on the proposed $1.2 million building price and increase it to his own advantage. Mr Guneser’s first response was as follows:
“Well, this is your opportunity to give an explanation?---Your Honour, the reason I provided all the documents that Mr Buller had and myself from all the sources, architects, lawyers, Mr Sheriff, all I could find, accountants, is to present the Court evidence that I was being transparent and that - - -” (T452, L11-16)
46 I pointed out to Mr Guneser that that was not an answer to the question. I then repeated the question myself:
“So that's why the 1.35 million higher figure 1 - - -?---That's right. He wanted something else. He wanted to do rendering himself. So he was saying, "I'll do the rendering, take that out", or, "I'll do the gardening, take that out". So I was always - - -” (T453, L1-5)
47 I observed that, were Mr Dolas to take on some of the work himself, that should decrease the contract price rather than increase it. Mr Guneser’s response was as follows:
“Well, sometimes he wanted something else - something else extra, like the three townhouses. He wanted something fancy or some other thing. I'm not sure what he was up to, so every time he wanted something - - - So it's all because of the defendant?---Yes, because I had my money ready. I don't need this contract.” (T453, L7-13)
48 The notes on the drafts are acknowledged to have been Mr Guneser’s. (T454, L6)
49 According to Mr Dolas, in approximately June 2015, Mr Guneser told him that with the planning permit issued, the tenant then occupying No 75 should be removed. This led to the end of a rental income stream for Mr Dolas. As of July 2015, he said that his “financial situation became worse”, with the result that he was unable to keep up the payments on his home loan. Mr Guneser interpreted for Mr Dolas in an attendance at the Brunswick branch of National Australia Bank, at which Mr Dolas applied to the bank for hardship relief. Later in the meeting, according to Mr Dolas, he was connected to a Turkish interpreter by telephone from the bank’s head office. (Exhibit 2, paragraph 17 and 18, T586)
50 In 2015, Mr Jonathan Cu was a business bank manager at the National Australia Bank with authority to approve or reject loan applications, varying in different scenarios but standing generally at a limit of $2 million. (T73-74) In 2015, he met Messrs Guneser and Dolas at the bank’s Preston branch. The discussion took place in English so Mr Guneser was required to act as interpreter. The parties sought loan finance for their development project at No 75 Station Road. Mr Cu said that he was not able to approve it. (T74, L29-T75, L10) He advised Messrs Guneser and Dolas to “go for pre-sales”. (T75, L18‑20) As Mr Cu remembered, Mr Guneser was to be the borrower and Mr Dolas would be guarantor. (T75, L30-T76, L1] Mr Cu said that even if the loan were to be made in joint names or with a guarantee, “We would still need to assess it on both merit [and character]”. (T76, L16-17) Mr Cu remembers putting nothing on paper. (T76, L24)
51 On 7 March 2017, Mr Guneser wrote to Mr Cu referring to the 2015 meeting, stating that six of the six units had been sold and that 10 per cent deposits were held, to which Mr Cu responded seeking further information including copies of contracts of sales lists, confirmation of settlement relative to deposits and so forth. (CB 460-461) There followed a meeting between the parties. Mr Cu checked the bank system “and it turned out that one of the credit cards that Mr Dolas had had been written off with NAB as a bad debt”. (T78, L27-29) The amount written off was in the region of $20,000 to $30,000. (Ibid, L30-31) That write-off occurred sometime between the first meeting in 2015 and the second meeting in 2017. (T79, L1-13) Mr Cu said, following this discovery:
“I didn't bother proceeding with it because I knew it was going to be a no - when a bad debt is written off or when a debt is written off we pretty much stop all lending to an individual or an organisation so, yeah.” (T79, L17-20)
52 He added:
“with NAB, yes, he [Mr Dolas] couldn’t borrow any morning [scil money].” (Ibid, L27)
53 Under cross-examination by Mr Cadman for Mr Dolas, Mr Cu described the “deal” presented to the bank as follows:
“They entered in a builder/owner contract, yes, they did. It was a building contract, right, so it's not a joint venture where - I didn't see a joint venture agreement or anything but all I saw was a building contract.” (T80, L18-22)
54 Mr Cu had no idea that there was a Joint Venture Agreement involved. (Ibid, L25-6) Again, he was unaware that no building contract had been signed at the time of the 2015 meeting. (T80, L31 – T81, L1) Mr Cu was unaware of the obligation on Mr Guneser to contribute $635,000 to the joint venture. (CB 261, T6-11) This was unknown to Mr Cu in 2015 or in 2017. (Ibid, L12-13) Nevertheless, even if Mr Cu had known of these matters, it would not have changed the outcome of the application for loan, either in 2015 or 2017. (T83, L9-12) As long as Mr Dolas was involved in the deal, whether as borrower, joint borrower or guarantor, according to Mr Cu, the application would have been declined. (T84, L10-12)
55 By a supplementary Joint Venture Agreement dated 15 February 2016, Messrs Guneser and Dolas amended the principal agreement, providing first that there should be six units constructed in the redevelopment of number 75, rather than the five referred to in the original agreement. Secondly, it was provided:
“The construction costs for the building shall now be funded by the parties obtaining a bank loan for the construction costs and the parties agree to be jointly liable for the said loan;” (CB 2308, Clause 3(b))
Once again, the signatures of the parties were witnessed, in the case of Mr Guneser by Mr Buller, and for Mr Dolas by his solicitor, Mr Sheriff.
56 A planning permit was issued to Archsign Pty Ltd, the joint venture’s architects, for the construction of six double-storey dwellings and a reduction in car parking on 17 June 2015. A revised permit was issued by the responsible authority, Moreland City Council, on 14 December 2015. (CB 437-442) Condition 14 provided as follows:
“14. This permit will expire if one of the following circumstances applies:
(a)the development is not commenced within two (2) years from the date of issue of this permit;
(b)the development is not completed within four (4) years from the date of issue of this permit.” (CB 440)
57 The letter covering the amended permit in December 2015 stated:
“The expiry date for the commencement and completion of buildings approved by the amended permit are as per the previous planning permit, that is the development was required to be commenced by 17 June 2017 and completed by 17 June 2019.”
58 On 31 October 2017, Member Carol Daicic of the Victorian Civil and Administrative Tribunal ordered that pursuant to 85(1)(f) of the Planning and Environment Act 1987 the time for the commencement of the development in the permit was extended to 31 October 2019, and the time for its completion was extended to 31 October 2021. ([2017] VCAT 1785, CB 509)
59 Mr Guneser explained:
“because of these delays and all these letters gotten from the defendant, the VCAT planning permit was expiring. So Lauren [his then solicitor of Danaher Legal] wrote to them, wrote to the defendant's lawyer, saying, ‘Look, here's a warning. It's expiring.’ It's expiring.” (T272, L10-14)
60 An application by Archsign for an extension from council was rejected by council. (Ibid, L25-29).
61 Mr Guneser said he funded the application for an extension to VCAT. He was advised to do so by his solicitors, Danaher Lawyers, to protect the outlays which he had already made. He said he incurred a fee to counsel of some $37,000. He said, “she [counsel] was the only one who spoke at the hearing. So she had this folder and she prepared and she was the only one who spoke.” (T272, L30 – T273, L17)
62 Mr Guneser continued, “I’m doing everything possible to keep the project going. I succeeded by engaging the barrister. She was perfect.” (T274, L7-9)
63 As to the letters which Mr Guneser “had gotten from the defendant”, Mr Sheriff of RSG wrote to Mr Buller in a facsimile dated 17 March 2017. Mr Sheriff said that the planning permit “has already been issued some 9 to 10 months now”. He said that Mr Dolas had provided the property for the project and authorised the registration of the second mortgage to secure Mr Dolas’ interest pursuant to the Joint Venture Agreement. He said the 15 February 2016 Joint Venture Agreement did not provide any equity “for our client whom (sic) provided the property for the project”. He was asked to obtain a loan for the project in his name and have his wife as a guarantor for that loan.
64 Mr Sheriff said that he was instructed to ask Mr Guneser to provide “a sworn authority permitting [Mr Dolas] the right to register a mortgage and caveat over any property that [Mr Guneser] is a proprietor too.” He said further that the loan application was required. Mr Guneser “is to guarantee any such loan and be held liable for the entire amount equally”.
65 Mr Sheriff asked for “an accurate account of the amount owed to [Mr Guneser] pursuant to the loan agreement so that [Mr Dolas] can settle the loan and [Mr Guneser] withdraw the caveat.”
66 Mr Sheriff complained that it had been almost three years since the agreement was signed and construction had not commenced. He continued:
“In order to mitigate any further loss, we ask that the project begin and that your client fulfil the above requests within 21 days of the date of this letter, failing which our client will rescind the Agreement and any supplemental agreement relating to the project and start the constructions at his own accord.” (CB 2332)
67 Danaher Legal, which firm was by then acting for Mr Guneser, replied on his behalf to Mr Sheriff. They began by outlining what they regarded as the salient provisions of the Joint Venture Agreement:
“From our reading of the Variation, it is clear that the parties have agreed from 15 February 2016 to equally contribute to the construction costs by way of a loan and that your client would be compensated with $635,000 from the net proceeds of the sale of the lots. This compensation would be provided prior to any distribution to our client.”
68 They denied any entitlement on Mr Dolas’ part for a mortgage entitlement over any of Mr Guneser’s property and continued, “your client has no basis for terminating the JVA and Variation …”. They said that Mr Guneser had “performed all of his obligations under the JVA and Variation and has exceeded the parties’ initial expectations”. They said he was ready and able to fulfil his obligations under clause 3(b) by obtaining a joint loan.
69 Mr Dolas, they said, had breached the:
“JVA and Variation by failing to reasonably facilitate the loan as envisioned under clause 3(b) of the Variation. We are advised that this loan is required so that construction can commence.”
70 They complained that Mr Dolas had failed to execute contracts of sale for unit 5. Accordingly, they demanded that within 14 days Mr Dolas:
“(a) do everything reasonably necessary to obtain the loan with our client and satisfy clause 3(b) of the Variation; and
(b) execute the enclosed contracts of sale for unit 5.” (CB 2336-337)
71 Four units had been pre-sold and Mr Dolas had executed the relevant contracts. Mr Guneser complained that there was a 66 day delay in Mr Dolas’ execution of the fifth contract. Mr Guneser said the delay or time required for execution in the case of unit 1 was three days; unit 2, three days; unit 3, 16 days; unit 4, three days. Yet unit 5 entailed a delay of 66 days. (T244, L16-21)
72 Asked to explain this delay, Mr Dolas said:
“in February 2017 we came out … of Peter Buller's office, I had signed off another contract. We had an argument there. I told him I wanted to go to Turkey, that my mother was sick.” (T613, L26-29)
73 According to Mr Dolas, he said to Guneser:
“If we take out the 1.2 million loan, the part that falls into, for me, like the 280,000, I asked him to give me what falls into my hands from that amount. I just wanted that amount.” (T614, L2-5)
74 He continued:
“After the 1.2 million was drawn down, the 280 was going to be given to me, but I didn’t want all of it, and his answer to me was, ‘You could do the rendering and then you can go to Turkey’.” (Ibid, L6-9)
75 Mr Dolas said that he eventually travelled to Turkey but his mother had already died. He said:
“The delay happened because I had gone to Turkey, as well as the contracts, they were not clear. Your Honour, I never stopped him. In 2014, when I signed the first contracts, I even formed a rendering company with him.” (T615, L20-29)
76 He said, “I didn’t avoid signing the contract”. (T616, L9)
77 Speaking of the hearing at VCAT, Mr Dolas said:
“I told the VCAT Member that I did not want him [viz Mr Guneser] to be there as we were fighting in the County Court and he had taken me to the Broadmeadows Court, but the barrister he had brought pleaded with me to let her do the talking as we would lose otherwise. I didn’t want to, but the VCAT Member said she wanted to hear it from the barrister. In the end, the barrister seemed to do a good job and the permit was extended, but I am shocked that [Mr Guneser] now wants that money from us. He never asked us about the case or those costs and if he had started building like he promised we wouldn’t have had to go to VCAT at all.” (Exhibit 2, paragraph 37)
78 Mr Dolas sent two persons whom he regarded as mutual friends of Mr Dolas and himself to “mediate” the impasse between the two men.
79 Meanwhile, Mr Guneser and his father obtained an Intervention Order from Broadmeadows Magistrates’ Court to which Mr Dolas consented without admission. (T618) Mr Guneser’s solicitors, Danaher Legal, alleged that these “friends” had made threats to the Gunesers.
80 Finance broker, Mr Aytac Sakranlioglu, provided a written statement (Exhibit 5) in which he said that Messrs Dolas and Guneser approached him for a loan for the building project at 75 Station Road in January to February 2016. The broker said that his brokerage was “able to organise a Low Doc loan with La Trobe Financial providing the Caveat on the property was to be lifted”. The fees for that loan would amount to $30,000.
81 According to the broker, “Mr Guneser got upset and said ‘I’m not the one with the bad credit rating, I don’t want to have anything to do with these fees. And I refuse to remove the Caveat’.” Mr Guneser, according to the broker, “stormed out of my office”. The broker then informed Mr Dolas that unless the caveat were removed, the loan could not proceed. He said the loan would “most likely have been approved as all the requirements would have been met except for the Caveat”.
This proceeding
82 On 20 June 2017, solicitors acting for Mr Guneser filed the Writ which commenced this proceeding. (CB 9)
Plaintiff’s claim
83 By his Amended Statement of Claim (CB 31), Mr Guneser alleged that he and Mr Dolas had agreed under a Joint Venture Agreement to undertake a real estate development at 75 Station Road, Glenroy. This Joint Venture Agreement was said to be subject to terms that Mr Dolas warranted that number 75 was subject to an National Australia Bank mortgage for approximately $440,000, which loan would not be increased, with Mr Dolas remaining responsible for all payments under that mortgage.
84 Mr Guneser, it was said, was to be responsible for pre-application of the sub-division, arranging the demolition of the house, and the construction of the units. He would be responsible for paying all fees required for the engagement of an architect and obtaining approval for the sub-division and construction up to $635,000. Mr Dolas’ contribution would be the value of the property fixed at $635,000. Mr Dolas, it was said, charged his interest in the property in favour of Mr Guneser and agreed to execute a second mortgage in his favour.
85 Next, it was said that if, after the development to construct five units as approved by the municipal council, the first agreement was terminated for any reason and the project did not proceed, then Mr Guneser was entitled to receive from Mr Dolas payment of one half of the difference of $635,000 and the value of the property as at the date of termination. (Clause 27)
86 Finally, it was said that if Mr Dolas defaulted under the National Australia Bank mortgage and the bank retook possession, and the project was unable to proceed, Mr Dolas would reimburse Mr Guneser for any money paid by Mr Guneser towards the project.
87 According to the Amended Statement of Claim, there were implied terms of the Joint Venture Agreement that Mr Dolas would maintain personal financial resources to contribute to and carry out the joint venture and do all things necessary to enable the construction and sale of the five units to be carried out. These terms were said to be implied from the natural consequence of the express terms because they were obvious and because of the need to give business efficacy to the contract.
88 Next, the advance of $50,000 was by way of a loan, it was alleged, on 25 June 2014, as documented by a loan agreement dated 20 June 2014. The loan agreement provided that the loan was to be repaid before 30 November 2014, with a charge in favour of Mr Guneser, and Mr Guneser was authorised to lodge a caveat. It was said to be an oral term of this agreement that Mr Dolas would use the $50,000 to “pay his debts”.
89 On 3 November 2014, it was said that the parties executed a mortgage over the property in favour of Mr Guneser, which document was in writing, and incorporated the provisions of the Memorandum of Common Provisions retained by the Registrar of Titles number AA689.
90 On 12 October 2015, there a variation to the Joint Venture Agreement which was said to be partly written and partly implied. The implication was said to be required to give business efficacy to the arrangement. The parties agreed to construct six units rather than five and to borrow $1.2 million to fund construction costs. These were express terms. The implied terms were to the same effect as those alleged relative to the original Joint Venture Agreement.
91 Next, it was alleged that the $50,000 was not repaid as required before 30 November 2014. Representation was made that it would be paid in 10-12 weeks from 25 March 2015. On 10 November 2015, Mr Guneser advanced $5,000 by way of loan, and a further agreement was made between the parties on 10 November 2015 providing for this and varying the original loan agreement. The amount of $55,000 was payable and this was to be paid by Mr Dolas to Mr Guneser from the proceeds of sale of the first unit sold. There was a charge in favour of Mr Guneser, and Mr Guneser was also authorised to lodge a caveat.
92 Clause 20 of the Amended Statement of Claim said that there was an implied term of this revised loan agreement, that if the Joint Venture Agreement was terminated, the $55,000 would be due and payable on demand. This was to be implied as a matter of natural consequence because it was obvious and was needed to give business efficacy to the agreement. Alternatively, the provision as to payment from the proceeds of sale was “vague and uncertain”. Accordingly, the $55,000 was repayable on demand. By way of “further alternative”, the second loan agreement was unenforceable as being “vague and uncertain” and the $50,000 remained outstanding under the first loan agreement with the $5,000 being payable as monies had and received. Alternatively, the entire $55,000 being payable as money had and received by Mr Dolas to the use of Mr Guneser.
93 It was said that the Joint Venture Agreement, as varied, was further amended by an agreement dated 15 February 2016 described as the `Supplemental Agreement’. It was in writing and to be implied, in the latter case to give business efficacy to the agreement. The parties agreed to obtain a construction loan for which they would be jointly liable, and if the construction costs were greater than the amount of the loan, the excess costs over and above would be paid by the parties equally. The same terms were said to be implied relative to this agreement as to the Original Joint Venture and the variation agreement.
94 According to the pleading, from 20 June 2014 to 14 March 2017, Mr Guneser took steps to obtain documentation, obtain planning approval, and organise off the plan sales for the six units, outlaying a total of $97,396.94. The permit was issued on 17 June 2015. Mr Guneser sold or procured the sale of all six units in the period 13 December 2016 to 4 March 2017, with those contracts executed by Mr Dolas. It was said that on 17 February 2017, Mr Dolas requested Mr Guneser to commence construction of the units “notwithstanding that the bank loan had not been obtained”.
95 On 17 March 2017, through his solicitors, Mr Dolas demanded that Mr Guneser provide a sworn authority permitting him to register a mortgage and caveat over any property owned by Mr Guneser. This was said to be “an illegitimate demand”. Further, it was said that Mr Guneser was told that if he did not comply with that illegitimate demand within 21 days, Mr Dolas would rescind the Joint Venture and any supplemental agreement. The final sale contract was executed by Mr Dolas on 5 May 2017, following a delay of 66 days.
96 According to the pleading, “in or around early 2017 Mr Guneser and Mr Dolas requested the National Australia Bank to provide them with a bank loan”. Mr Dolas, it was said, failed to make all payments in respect to the National Australia Bank mortgage and, in early 2016, assisted by Mr Guneser, he applied for a hardship arrangement with the bank. Since February 2015, it is said that Mr Dolas has applied for loans from multiple finance providers, all of which were declined. Mr Dolas, it is said, “is unable to obtain bank funding in order to finance the construction costs of the six units to be constructed on the Property because of his personal financial circumstances”.
97 The following breaches of contract are said to have been committed by Mr Dolas. First, he failed to make all payments under the National Australia Bank mortgage as they fell due. Secondly, he failed to maintain personal financial resources to contribute to and carry out the joint venture or to do all things necessary to enable the construction and sale of the six units to be carried out. He defaulted in the performance of his obligations under the National Australia Bank mortgage as they fell due. As a result, the parties were said to be unable to obtain the construction loan and to begin to construct the six units.
98 As a result of those breaches, it was said that Mr Guneser suffered loss and damage, being represented by the amounts which he outlaid towards the project and loss of profit on the sale of the six units to be constructed. Mr Dolas was said to have “persistently and continuously refused and/or failed to do all things necessary to enable the construction and sale of the six units to be carried out”, and accordingly has repudiated the agreement, which repudiation was accepted by Mr Guneser by letter from Danaher Legal to RSG Lawyers on 26 May 2017. He suffered loss and damage as a result. Mr Guneser also claimed repayment of $55,000.
99 In reliance on clause 27 of the Joint Venture Agreement referred to above, in the events which occurred, the pleading says, Mr Guneser is entitled to receive from Mr Dolas one half of the difference between $635,000 and the value of the property as at the date of termination said to be $307,500, being half the increased value of $615,000. Alternatively, it was said Mr Guneser should:
“receive the benefit of the increase in value of the Property as a result of the entry into the Joint Venture with Mr Guneser and more particularly, the effort and money expended by Mr Guneser including but not limited to the obtaining of the planning permit … and the plans associated therewith.”
100 Mr Guneser, it was said, expended effort and money “in the expectation that he would share with Mr Dolas in any increase in the value of the property”. It was said it would be unconscionable for Mr Dolas to obtain the full benefit of the increase in value of the property. The Amended Statement of Claim concludes by saying:
“By reason of the above, Mr Dolas holds one half of the increase in value of the Property, namely $307,500 on a resulting, implied or constructive trust in relation to Mr Guneser.”
101 The prayer for relief referred to sums of money which, in the printed version in the court book, is illegible. Secondly, the prayer seeks a declaration that the second loan agreement contains an implied term that if the Joint Venture Agreement was terminated, the loaned amount of $55,000 would be due and payable by the plaintiff on demand. Damages in the sum of $307,500 was sought or, alternatively, damages in a sum determined by the court. Finally, a declaration that Mr Dolas holds 75 Station Road “on trust in favour of [Mr Guneser] to the extent of the sum of $307,500 or such other sum as is determined by the court”. There was also a claim for interest, costs and further or other relief.
102 In his opening statement, counsel then appearing for Mr Guneser agreed with me that the basic relief which the plaintiff was seeking was a finding that Mr Dolas “has repudiated the joint venture agreement as amended and seeks damages, $307,500 calculated in accordance with clause 27” (T27, L16-18), repayment of $55,000 and a declaration that the property was held by Mr Dolas on constructive trust for Mr Guneser to that extent.
103 There was disagreement between the parties towards the end of the trial. Mr Guneser then representing himself with McKenzie friend, solicitor Mr Helman, and the defendant, represented by Mr Cadman of counsel, as to the production for cross-examination of the plaintiff’s valuation witness.
Defence and Counterclaim
104 In his Amended Defence and Counterclaim dated 16 November 2018, Mr Dolas generally admits the execution of the various agreements and other instruments alleged by Mr Guneser and denies the terms which, according to the Amended Statement of Claim, ought to be implied into them. This is somewhat surprising, as the supplementary or “Second Loan Agreement” alleged to have documented the $5,000 additional advance by Mr Guneser to Mr Dolas and the deferral of the repayment date for the revised principal sum of $55,000 until after completion of the real estate development. This document is not admitted because Mr Dolas said, in paragraphs 18-18.3 of his Defence, that he did not recall the document and has not “sighted” it. Given that this pleading dates from 16 November 2018 and the agreement is in the Court Book (and had presumably already been discovered by November 2018), this plea is somewhat astounding.
105 As to what is described in the “Supplemental Agreement” said to have been executed on 15 February 2016, Mr Dolas admits its execution “but says that it is void and unenforceable against him”. (Paragraph 21)
106 According to Mr Dolas, the execution of the variation to the Joint Venture Agreement and the “Supplemental Agreement” operated to vary the Joint Venture Agreement not to terminate it, and constituted an election to waive all breaches down to the date of those agreements.
107 Mr Dolas alleged that under the supplemental agreement the costs of construction were to be funded by obtaining a bank loan “under which the parties were jointly liable”. (Clause 21.5) He said that “since about 2015” Mr Guneser had demanded that he (Mr Dolas) “borrow further funds to contribute toward the joint venture”. He referred to an oral demand in late January, and an arrangement for a finance broker from Sydney named Sara to procure that Mr Dolas’ poor credit history be erased.
108 Next, it was said that in or about June 2015, Mr Guneser demanded that Mr Dolas “borrow $200,000 for the joint venture from [Mr Dolas’] brother, or that [Mr Dolas] borrow money from his wife’s family”.
109 In or about December 2015, it was said that Mr Dolas (at Mr Guneser’s insistence) “applied for hardship payments” under his mortgage with National Australia Bank.
110 The variation agreement provided for the parties to agree to borrow additional construction funds of $1.2 million and the supplemental agreement provided for the borrowing of an unspecified amount.
111 Next, it was said that Mr Dolas had requested Mr Guneser to permit him to draw down further funds under the National Australia Bank mortgage. Also, to allow other security interests to be registered and remove mortgage number AL464462C said to have been registered over the property at 75 Station Road “purportedly pursuant to the Joint Venture Agreement”, so that Mr Dolas could approach other lenders to facilitate borrowings to meet Mr Guneser’s demand.
112 It was said that he also asked Mr Guneser to remove caveat AL491709Q lodged “purportedly pursuant to the Joint Venture Agreement”. This was so that Mr Dolas could approach other lenders to raise money in response to Mr Guneser’s further funds demand, and to remove caveat AN878624B lodged “purportedly pursuant to the second loan agreement” for the same reason. Particular reference was made to the letter of RSG Lawyers of 17 March 2017.
113 Next, it was said there was an implied duty of cooperation under the Joint Venture Agreement, its variations and supplements implied by law. This obligation was said to have been breached by failure to respond to the requests as to the removal of mortgages and caveats, and failure to arrange demolition of the existing house at number 75, or raising finance for the project “either alone or jointly with [Mr Dolas]”.
114 Further, it said that there was an implied obligation of good faith implied by law which imposed similar obligations. This obligation it was said had likewise been breached by Mr Guneser.
115 According to paragraphs 21.16 and following, Mr Dolas’ obligation relative to raising further finance under clause 3(b) of the supplemental agreement were “interdependent on [Mr Guneser’s] performance” of his obligations of cooperation and good faith. Therefore, it was said, Mr Dolas was not required to perform his obligations until Mr Guneser performed his.
116 Due to the alleged breaches by Mr Guneser of duties of good faith and cooperation, it was said he “evinced an intention no longer to perform his obligations under the supplemental agreement”. He repudiated it and brought it to an end, according to clause 21.19 of the Amended Defence and Counterclaim. As a result, “the supplemental agreement has been terminated by the plaintiff”. [Interestingly, whilst this and the previous paragraph [21.18] allege repudiation by Mr Guneser, there is no allegation that such repudiation was accepted by Mr Dolas.]
117 There were a series of allegations alleging unconscionable dealings in equity and the existence of a special disadvantage under which Mr Dolas was labouring when entering into relevant agreements. Those matters were not relied upon. (T226, L1-2)
118 Next, as part of the “Defence” section and under the heading “Relief”, there appears the following paragraph:
“21.27By reason of the matters pleaded in paragraphs 21.1-21.7, the plaintiff is entitled to:
(a)a declaration that the supplemental agreement has been terminated by the plaintiff;
(b)an order that the plaintiff’s registered mortgage and second caveat be removed from the register.”
119 In context, this paragraph is incomprehensible. In the defendant’s pleading there is an allegation that the plaintiff was entitled to relief.
120 As to the following allegations in the Amended Statement of Claim as to performance of the Joint Venture Agreement, these matters are largely admitted by Mr Dolas, though implied terms alleged are denied as being too vague. Mr Dolas admits what was said to be the “illegitimate demand” in the letter from RSG Lawyers of 17 March 2017.
121 As to an earlier letter from RSG Lawyers dated 17 February 2017 (which is in the Court Book), the plea is that this letter is not admitted because Mr Dolas “has not sighted the letter and therefore cannot admit its content”. Mr Dolas admitted that he failed to make all payments under the National Australia Bank mortgage “immediately as they fell due”.
122 As to the allegation in paragraph 37 of the Amended Statement of Claim that, since February 2015, Mr Dolas “has applied for loans from multiple finance providers in order to finance the construction costs of the units to be constructed on the Property”, Mr Dolas responded that he does not admit this allegation because it is “vague and makes no allegation against him”. He did not admit that each loan application was declined or that he is unable to obtain bank funding to finance the construction costs.
123 As to Mr Guneser’s reliance on paragraph 27 of the Joint Venture Agreement, he said that:
“the necessary preconditions contained in clause 27 … were not fulfilled either by [Mr Guneser], or at all”
in that there had been no attempt by Mr Guneser to agree on a valuer or to attempt to reach agreement on a valuer with Mr Dolas, either by proposing a valuer or requesting that Mr Dolas propose a valuer or by any other means, nor had there been any attempt by Mr Guneser to obtain an appointment of a valuer by the president for the time being of the Real Estate Institute of Victoria. No sworn valuation had been obtained from either a mutually agreed valuer or a valuer appointed by the president of the Real Estate Institute of Victoria.
124 Finally, by way of defence, it is said that Mr Guneser, as plaintiff, is precluded from relying upon his own wrongdoing by way of default under his contractual obligation “to prosecute contractual rights based upon that non-fulfilment”.
125 By way of counterclaim, based on the matters alleged in the Defence, Mr Dolas claimed an entitlement to relief against Mr Guneser and the second defendant by counterclaim, namely the Registrar of Titles, appointed under the Transfer of Land Act 1958, or declarations that the “supplemental agreement has been terminated by the plaintiff [Mr Guneser]”. Mr Guneser’s registered mortgage does not secure any obligation. Therefore, the first caveat should be removed, and it should be removed in any event, in light of the registration of the mortgage.
126 By way of relief, Mr Dolas sought a declaration that the Joint Venture Agreement, the variation agreement and the supplemental agreement “had been terminated by the plaintiff”. He sought an order that Mr Guneser provide him with a statement of account of those monies which Mr Guneser says Mr Dolas owes him “under any personal loan agreements”. He sought an injunction against Mr Guneser, restraining him from lodging caveats or making application “with a view to staying any refinance or sale of the property”, damages, interest, costs and other relief. Against the registrar, an order was sought removing mortgage AL464462C under the Transfer of Land Act, along with caveat number AL491709Q.
Relief
127 Upon suggestion by defendant’s counsel, Mr Cadman, concurred in by Mr Helman, solicitor, who acted as Mr Guneser’s McKenzie friend, I have been asked to hand down a judgment on issues of liability and defer the question of damages or other relief for further submission with the potential of introducing further evidence or ordering the appointment of a special referee under the court’s rules.
Plaintiff’s case at trial
128 When this matter was called on for hearing on 5 November 2018, Mr Guneser was represented by counsel (not Mr Mark Black who appears to have settled the Amended Statement of Claim). Counsel handed up a document of some 12 pages styled “Written Submissions of the Plaintiff” in the course of a detailed opening given on the first day of trial.
129 Counsel said the plaintiff sought repayment of the $55,000 loan and “damages pursuant to clause 27 of the Joint Venture Agreement ($307,500)” and a declaration that number 75 Station Road was sold by Mr Dolas on constructive trust for Mr Guneser to the extent of the monies or damages payable by Mr Dolas to Mr Guneser.
130 Alternatively, common law damages for repudiation calculated in accordance with calculations to be found at CB 610, which would have provided a share distributable to Mr Guneser of $299,469. If there were no finding of a constructive trust, then there should be a finding of an equitable charge existing in favour of Mr Guneser over the property at number 75. (T27-28) These latter calculations were derived from an expert report by Mr Brian N Jones of Forensic Accountants Australia Pty Ltd.
131 There were delays in the commencement of the trial. I was given to understand on at least two occasions that arrangements had been made for the taking of a transcript of the trial. It turned out in reality that those arrangements had not been made. All this led to the waste of a number of days, leading to a concern that the trial could not complete in the period allotted to it in the court’s list for November.
132 Counsel for the defendant, Mr Cadman, submitted in the circumstances that the trial should be adjourned over to February, which was in fact what I ordered. I felt that the arguments put by Mr Cadman, that it was better to seek to conclude the trial in one go in February, were realistic and well-made.
133 Plaintiff’s counsel said, “Insofar as it's said that we're unlikely to finish by Monday I would probably have to agree with your Honour's observations and what my learned friend says”. (T183, L15-17)
134 At that stage, Mr Guneser leapt to his feet and said, “No, that's not what I instructed him”. (T183, L18)
135 Mr Guneser continued to dissent from his counsel. In an email to the court dated 22 November, Mr Guneser made wide-ranging allegations against a variety of people, including defence counsel, Mr Cadman, his instructing solicitor and Mr Guneser’s own counsel. He said, “Counsel Cadman sought adjournment and had agreement with [plaintiff’s counsel] incontrary (sic) to plaintiff’s interest and instructions”.
136 He accused his counsel of an attempt to overcharge him and of failing to carry out his instructions. He asked the court “to exercise its summary professional disciplinary jurisdiction to commence disciplinary proceedings against counsel Cadman and [plaintiff’s counsel]”.
137 When the matter resumed on 12 February this year, Mr Guneser was representing himself. He renewed in open court the allegation that his own counsel and defendant’s counsel had “colluded” in the adjournment of the case. (T253, L22-23)
138 Mr Guneser’s solicitor, Mr Hellman, appeared to assist him. I granted him leave to act as Mr Guneser’s “McKenzie friend”. In the event, he ultimately undertook far more extensive activities in advancement of Mr Guneser’s case than a traditional McKenzie friend might. He examined and cross-examined witnesses. Despite being obviously in poor health and attending the court only with the assistance of a cane, he did a sterling job in representing Mr Guneser’s case.
139 When the trial resumed on 12 February, Mr Guneser, having commenced his evidence-in-chief the previous November, was recalled to the witness box. He was at this stage without counsel or anyone to perform the role of counsel, and so I invited him to put all the evidence before the court which he wanted me to consider. (T215, L11-12)
140 Mr Guneser said:
“Your Honour, the evidence, what I suggest is that the case, because of their attempts at attacking me and the rest – throughout the court hearing their conduct has been terrible, intimidating. So I propose that everyone give their side of the story in writing with the submissions to the court. Then Your Honour can decide on the written submissions, because I won't tolerate being intimidated, trying to get killed, and Mr Cadman agreeing with the other side matters outside of my control.” (Ibid, L13-21)
141 This course was initially opposed by Mr Cadman for the defendant.
142 Mr Guneser returned to this theme the following day. (T413, L15-16)
143 Eventually, the defendant and his counsel dropped their opposition to the matters being concluded with written submissions. This concession was made after both the plaintiff and the defendant had been examined, cross-examined and re-examined.
144 Mr Guneser’s expert valuation witness, whose valuation of number 75 Station Road formed the crucial basis for Mr Guneser’s asserted entitlements under clause 27 of the Joint Venture Agreement, had not and has not been produced for cross-examination by the defendant’s counsel.
145 Mr Guneser took the view that since the defendant, Mr Dolas, had not filed any expert witness statement on the subject, his counsel had no right to cross-examine Mr Guneser’s expert.
146 At that stage, both Mr Helman (on behalf of Mr Guneser) and Mr Cadman (on behalf of Mr Dolas) invited me to make determinations on liability only, leaving it a matter for further submissions and potentially further evidence as to what relief ought to be given. (T535)
Clause 27
147 Clause 27 of the Joint Venture Agreement is set out at [23] above. The parties, according to their pleadings, are agreed that the Joint Venture Agreement has been terminated. (Plaintiff’s Amended Statement of Claim, paragraph 47, and defendant’s Defence and Counterclaim, paragraphs 21.18 and 21.19) Effectively, each accuses the other of being the repudiating party.
148 A permit for the redevelopment has been granted by the responsible authority. On the face of it, the circumstances which would engage the operation of clause 27 have occurred. Whilst Mr Guneser has engaged his own valuer, his valuation forms the basis for his claim of $307,500 as a liquidated sum or damages, there has been no attempt to engage a valuer “mutually agreed upon by the parties”, or appointed by the president of the Real Estate Institute.
149 Leaving to one side these last issues as being machinery considerations which, subject to submissions from the parties might be remedied by orders of the court, why is Mr Guneser not entitled to a “payout” in accordance with the clause?
150 The answer propounded by Mr Cadman on behalf of the defendant, Mr Dolas, was that reliance by Mr Guneser on clause 27 in the circumstances of this case would entail Mr Guneser impermissibly relying on, and taking advantage of, his own default. (Amended Defence and Counterclaim, clause 50B(a))
151 This “wrong” according to Mr Cadman’s closing submissions resided, in Mr Guneser’s purported performance of the Joint Venture Agreement which he said “was deceptive and manipulative, and involved breaches of the duties of good faith and cooperation that exist in joint venture agreements”.
Taking advantage of one’s own wrong
152 Mr Cadman cited Gray v Allan [1977] VR 413, Alguhussein Establishment v Eton College [1988] 1 WLR 587, 594 and Manly Property Holdings Pty Ltd v Lisker Pty Ltd [2017] NSWSC 1394 [216] as authority in support of the propositions. In Mills v Ruthol Pty Ltd [2002] NSWSC 294, Palmer J referred to and gave effect to:
“the principle of law, applicable equally in courts of law and in courts of equity, that no one shall be permitted to take advantage of his or her own wrongdoing: see Broom’s Legal Maxims 10th Ed, p.191.”( [2002] NSWSC 294 [112])
153 The wrongdoing which Palmer J found to have occurred in the case before him was that the grantor of an option deceived the grantee into believing the option had been terminated.
154 In light of his Honour’s finding, he concluded that despite the option’s being exercised outside the contractual timeframe it was, nevertheless, validly exercised because to hold otherwise would have entailed allowing the grantor to rely upon his own wrongdoing.
155 On appeal, the Court of Appeal did not deny the principle but reversed his Honour’s determination because his judgment entailed applying the maxim against an innocent third party, namely, the holder of another option over the same property. ([2003] NSWCA 56)
156 The principle is well-established. In Alghussein Establishment v Eton College [1988] 1 WLR 587, 591 Lord Jauncey of Tullichettle with whom Lords Bridge of Harwich, Elwyn-Jones, Ackner and Goff of Chieveley concurred said:
“My Lords it is well established by a long line of authority that a contracting party will not in normal circumstances be entitled to take advantage of its own breach as against the other party.”
157 His Lordship referred at length to authorities dating back to 1817 and reaching to the 1980s. He said:
“I have no doubt that the weight of authority favours the view that in general the principle is embodied in a rule of construction rather than in an absolute rule of law.” ([1988] 1 WLR 587, 595
158 Another example of the principle is to be found in the decision of the New South Wales Court of Appeal in TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130.
159 The principle relied on by Mr Cadman being well-established, does it apply to the present dispute? To determine that it does would require a finding that the circumstances which engage clause 27 of the Joint Venture Agreement had been brought about by the wrongful act or acts of the plaintiff, Mr Guneser.
Duty of cooperation
160 In Mackay v Dick (1881) 6 App Cas 251, 263, Lord Blackburn said that where in a written contract:
“it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”
161 In Butt v M’Donald (1896) 7 QLJ 60, 70-1, Griffith CJ said:
“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”
162 This statement was approved by Mason J (as he then was) in SecuredIncome Real Estate (Australia) Ltd v St Martin’s Investments Pty Ltd (1979) 144 CLR 596, 607.
163 Given the objective of the present Joint Venture Agreement requiring the cooperation of the two parties to carry out a property development, these authoritative dicta operate with their full force. An implied term to similar effect was alleged by Mr Guneser in clause 4(b) of his Amended Statement of Claim. Paragraph 4 of Mr Dolas’ Amended Defence and Counterclaim declined to admit this implied term and alleged that it was “vague”. Nevertheless, Mr Cadman’s submissions assert that an obligation of cooperation exists “in joint venture agreements” (paragraph 2).
164 In light of the statements of high authority just quoted, in my view, there was an obligation of cooperation between these parties. (See also Carter on Contract [29-070] 74,121-74,149 [service 9])
Duty of good faith
165 Mr Cadman submitted, “the present joint venture arrangement attracts the higher duties of utmost good faith and cooperation of a fiduciary nature that were described by the High Court as existing in a particular joint venture relationship that can be characterised as akin to a partnership in United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1”. He also referred to Lien v Clontarf Residential Pty Ltd [2018] QSC 94 [169]-[177].
166 In the United Dominions case, Mason, Brennan and Deane JJ said:
“The term ‘joint venture’ is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots' law, ‘adventure’) will often be a partnership. ... The borderline between what can properly be described as a ‘joint venture’ and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other.” [(1985) 157 CLR 1, 10]
167 I accept the submission of Mr Cadman that the description of the joint venture employed by their Honours can be seen as applicable to the present Joint Venture Agreement. Consequently, the parties owed fiduciary duties to one another, including a duty of good faith.
Which “wrong”?
168 In what respect, therefore, is it said that Mr Guneser has been guilty of breaches of these implied obligations so as to disable him from reliance on clause 27?
169 According to Mr Cadman, Mr Dolas:
“considers that Mr Guneser did the minimum required to establish his rights under clause 27 and no more, because Mr Guneser sought to shift the entire financial liability for the project onto Mr Dolas – operating consistently in breach of his obligations of good faith and cooperation”.
170 Mr Cadman conceded that Mr Guneser took the steps necessary to obtain planning permission, but he:
“did not arrange for the demolition of the house. He did not apply for or obtain a building permit, nor did he commence construction of the units. He did place security interests on the title of the Property, to secure both his loan to Mr Dolas and his interest in the outcome of the joint venture.”
171 Further, said Mr Cadman, the evidence of Mr Cu of National Australia Bank, showed that Mr Guneser “breached his duties of good faith and cooperation by failing accurately and fully [to] describe the project to relevant third parties”. He noted that, according to the evidence of Mr Cu, there was no reference in the interview with him to a joint venture. Rather, what was conveyed was that there was a relationship of owner and builder based on a building contract. Nor did Mr Guneser tell Mr Cu that he (Mr Guneser) was responsible to fund $635,000 worth of fees and costs of construction, or that he had effective control of significant funds to contribute to the joint venture.
172 Mr Cadman continued, “nor, it must be necessarily inferred, did he tell Mr Dolas that he was presenting the project in this way to Mr Cu”. Again, Mr Cadman conceded that Mr Guneser had taken action in accordance with the recommendations from Mr Cu to obtain pre-sales of the relevant units by engaging an estate agent, Mr Frank Ktenas of Victoria Real Estate Agency, and arranging for sale. Nevertheless, he complained that Mr Guneser did this presumably under the power of attorney which he held for Mr Dolas, and failed to brief Mr Dolas on progress. (Closing submissions, paragraph 28)
173 Mr Cadman referred to the variation agreements which were executed modifying the terms of the Joint Venture Agreement, most notably the October 2015 variation, which relieved Mr Guneser of the obligation to contribute fees and costs of construction up to $635,000, but provided that construction would be funded by a construction loan secured against the property. (Closing submissions, paragraphs 29-30)
174 Insofar as these variations were said to have been motivated by concerns on Mr Guneser’s part, that the $50,000 or $55,000 loan had not been repaid, according to Mr Cadman, this explanation should be rejected because, in the course of regular conversations in 2014 and 2015, Mr Guneser did not tell Mr Dolas that he was worried about the $50,000. By 10 November 2015, the loan issue was resolved by the parties entering into a second loan agreement that allowed Mr Dolas to repay the amounts advanced from his share of profits from the development of the units. (Closing submissions, paragraph 31)
175 Mr Cadman referred to the variation in the costing of the building work provided by Mr Guneser. The figures varied, he said, from an initial $700,000 to $800,000 to $1.2 million, representing a costing provided to forensic accountant, Mr Jones, to a high of $1.35 million. (Closing submissions, paragraph 32)
176 According to Mr Cadman, it was not necessary to resolve these matters in favour of Mr Dolas to conclude that Mr Guneser was under an obligation to remove his security interests to facilitate a borrowing from an outside lender to fund the development. (Closing submissions, paragraphs 38-39)
177 In any event, he said, the inclusion of Mr Guneser’s security claims in the Joint Venture Agreement “was itself in breach of his duties of utmost faith and cooperation under the joint venture”, (Closing submissions, paragraph 39(b)) as was found, he said, in analogous circumstances by the High Court in the United Dominions’ case.
178 Mr Cadman continued:
“Mr Dolas knew of the rights he was granting to Mr Guneser and did so contractually, he did so in circumstances where he understood the price of construction was not to be much greater than the value of his property, so that he would not be required to borrow against the Property. His evidence was that he did not anticipate having to borrow against the Property to pay back the $50,000 loan either. It is a necessary inference that Mr Dolas did not realise that the encumbrances would interfere with the joint venture he was entering at the very same time. If Mr Guneser knew that his security interests would frustrate the joint venture, he was in breach of his duties in arranging for the right to register them, and by registering them.”
179 Mr Cadman said further:
“Mr Guneser was required to act so as to prevent the frustration of the joint venture by lifting his security interests and thereby facilitating the borrowing he had committed to.” (Closing submissions, paragraph 39(c))
180 He said:
“Mr Guneser cannot now rely on his maintenance of his security interests at the expense of his joint venture partner in order to recover monies said to be due under the joint venture agreement.”
181 He said this followed “by analogy” with the United Dominions case. (Closing submissions, paragraph 39(d))
182 I reject the contention that Mr Guneser’s actions in stipulating for and obtaining security over the property at number 75 Station Road as part of the Joint Venture Agreement are to be equated with the security arrangements which the High Court regarded as a breach of fiduciary duty and, therefore, ineffective in the United Dominions case. In that case, the two parties were, as in the present, joined in a venture to develop real estate – in that case, a shopping centre. The subject property was vested in one of the venturers referred to in the judgments as “SPL”. One of the other venturers, United Dominions Corp provided loan finance which was secured by a mortgage over the land. Unknown to the aggrieved venturer, Brian, the mortgage given to United Dominions Corp included what was described as a “cross collateralisation clause”, whereby the mortgage secured to United Dominions Corp not only the repayment loan finance which it had provided for that venture, but also obligations relative to other ventures in which Brian was not a participant. The existence of this clause was unknown to Brian. On the basis of these facts, the High Court’s finding that the inclusion and reliance upon the cross collateralisation clause constituted a breach of fiduciary duty is unsurprising.
183 In contrast in the present case, as his counsel conceded, Mr Dolas was aware of the Joint Venture Agreement provision granting security to Mr Guneser, and agreed to it. The taking of the security interest by Mr Guneser was not, in those circumstances, a breach of fiduciary duty.
184 Nor, in my view, was any misrepresentation, non-disclosure or mischaracterisation of the arrangements between the parties which might have been made by Mr Guneser to Mr Cu a “wrong” of the type which would invoke the maxim relied on by counsel for Mr Dolas. Without expressing any view as to whether, in the abstract, these matters could be considered a “wrong” committed by Mr Guneser, they were not, upon the evidence, matters upon which he can be regarded as relying in invoking clause 27 of the Joint Venture Agreement. Mr Guneser would only be “profiting” by his own wrong if there were a causal connection between these alleged wrongs and the “profit”, viz the ability to rely on clause 27.
185 The evidence of Mr Cu was that Mr Dolas’ involvement in the finance in any capacity, whether as sole borrower, joint borrower or the provider of a guarantee mortgage, would have been sufficient to lead his bank to refuse any loan application. (See [51] above.) Whether Mr Guneser was also to be a borrower was neither here nor there. The same may be said of Mr Cu’s ignorance of any obligation on the part of Mr Guneser to contribute $635,000 to the joint venture. (See [55] above.)
186 Another “wrong” by Mr Guneser which might be regarded as having caused or contributed to the state of affairs where clause 27 might be invoked was his alleged refusal to remove the caveat or caveats and mortgage which he had lodged on the title to number 75 Station Road.
187 Mr Guneser continues to assert the validity of these security interests and declines at large simply to remove them. In one sense, this must be appropriate. They are provided for in the Joint Venture Agreement as a matter of contract. Subject to what I will say in moment, he remains entitled to continue to assert these claims.
188 Whilst neither party has pleaded a particular implied term as to what is to happen to these security interests and claims in the event that an outside lender were to provide developmental finance, it must be implicit that Mr Guneser would have to either remove these security claims altogether or enter into some arrangement giving full priority to the securities to be held by that third party financier. One supposes that this must have been implicit in the discussions which were had with Mr Cu of the National Australia Bank.
189 As a matter of practical conveyancing, as and when the third party would make available the outside finance, then the discharges, withdrawals or priority arrangements would take effect. It would be contrary to ordinary business and conveyancing practice for the caveats and mortgage simply to be withdrawn unless and until the third party finance was forthcoming.
190 In his written statement, finance broker Aytac Sakranlioglu described a refusal by Mr Guneser to take that action. He described him storming out of the broker’s office, concluding “and I refuse to remove the Caveat”. (Exhibit 5) I take this refusal to be a refusal to withdraw or discharge adverse security interests unless and until satisfactory third party finance was available.
191 Mr Sakranlioglu said that the fees for the loan which he was seeking to broker “would have come to the amount of $30,000” and this was the point which led to the break-up of negotiations with Mr Guneser storming out of the office.
192 If, upon the true construction of the Joint Venture Agreement and related obligations, it was incumbent upon Mr Guneser to go along with the loan proposal provided by the broker, his refusal to do so could be regarded as a “wrong”.
193 Mr Helman, on behalf of Mr Guneser, ultimately determined that it was unnecessary to cross-examine the broker on his written statement. He said that it was clear “they were going low doc which basically means … high interest rates”. (T612, L7-9)
194 Counsel for Mr Dolas did not disagree. The Joint Venture Agreement did not stipulate precisely what form of joint borrowing should be undertaken. However, I am not persuaded that it should be construed as obliging one venturer to join in a borrowing arranged by the other venturer on whatever terms might be offered.
195 The broker’s concession as to fees of $30,000 leads me to the view that the terms of this loan were so onerous that Mr Guneser was not obliged to join in the transaction. His refusal to do so, therefore, cannot be characterised as a “wrong”. In any event this loan proposal (Exhibit 1) was unsatisfactory for a number of other reasons as Messrs Guneser and Mr Helman pointed out. The mortgage was to be a “first” mortgage. This would fail to allow for the $440,000 already charged on No 75 and owing to the National Australia Bank. The loan offer refers to $600,000 as the loan amount. Even if this is taken to extend to $1.2m it is insufficient if the NAB existing first mortgage needed to be paid out.; and then there was the desire of Mr Dolas to withdraw some figure up to $280,000 for some extraneous purpose which he declined to identify (T614).
196 After the failure with Mr Cu, Mr Guneser seems to have made no further attempt to raise prime bank loan funds from any quarter other than National Australia Bank. Implicit in Mr Dolas’ case is that all such matters were in the province of Mr Guneser and he, Mr Dolas, was under no obligation to make his own attempts to raise finance. This view tends to be invalidated by the fact that Mr Dolas made contact with the broker who made the abortive finance proposal. Whatever linguistic limitations Mr Dolas laboured under, as Mr Guneser and Mr Helman observed, he has been able to retain professional advisors such as Mr Sheriff (a solicitor) and the architect who provided the first opinion on number 75 Station Road in 2012, and was presumably able to converse with Mr Dolas in Turkish. In paragraph 37 of his Amended Statement of Claim Mr Guneser asserted that Mr Dolas after February 2015 made numerous unsuccessful finance applications to a number of lenders.
197 Further, the material which was produced on subpoena from the Salvation Army Debt Counselling Service demonstrates, as Mr Guneser observed, that Mr Dolas has a poor credit history with all major bank lenders and other credit providers as well. There was no suggestion, for instance, that an attempt to raise loan funds from the Commonwealth Bank of Australia, Australia and New Zealand Banking Group Limited, Westpac Banking Corporation or other major banks would have offered significantly more hope. Once again, I am not persuaded that the failure to raise finance, in itself, constitutes a “wrong” by Mr Guneser.
198 Mr Cadman, on behalf of Mr Dolas, cross-examined Mr Guneser, putting to him that in accordance with the original Joint Venture Agreement he failed, when he was able to do so, to commence construction and apply the $635,000 representing his contribution to the scheme by way of development costs. This obligation was, however, set aside by a supplementary Joint Venture Agreement made 15 February 2016. (CB 2307-2310)
199 Where a variation of an original contract is undertaken, it may operate completely to discharge the original contract and to create a new “charter of rights” between the parties, or it may leave the original agreement in force subject to the modification effected. It may be difficult in a particular case to determine which of these things has occurred by reason of any particular variation agreement.
200 In the famous case of Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vict) Pty Ltd (1957) 98 CLR 93, the High Court was divided as to the effect of an alleged variation. The parties had entered into an agreement in Victoria for the sale and delivery of a large quantity of ammunition. There was subsequent correspondence between the parties which was alleged by one of them to operate as a variation of contract or as a new contract. Tallerman & Co Pty Ltd commenced proceedings in the Supreme Court of New South Wales. That court’s jurisdiction was dependent upon a finding that a new contract had been made by the correspondence which, if it had been made, would admittedly have been made in New South Wales.
201 Two of the justices, namely Dixon CJ and Fullagar J held that the correspondence did not affect a variation of contract or new contract, but merely an accord executory. Williams and Kitto JJ held that there was a new contract made in Sydney and that the Supreme Court of New South Wales therefore had jurisdiction. Taylor J considered that the correspondence brought about either an accord executory or a variation of the original contract, but not a new one, with the result that the Supreme Court of New South Wales did not have jurisdiction to deal with the plaintiff’s claim.
202 The court considered a similar issue in Concut Pty Ltd v Worrell (2000) 176 ALR 693. In that case, the court was concerned to decide, in the context of a claim for wrongful dismissal, whether a written service agreement constituted an entirely new contract or merely a variation of a pre-existing oral contract. Gleeson CJ, Gaudron and Gummow JJ, with whom Kirby and McHugh JJ agreed, reviewed the judgments in Tallerman’s case and, in the course of an appeal from a determination of the Court of Appeal of Queensland that the service agreement represented a new contract not merely a variation of the old, observed:
“The decision of the majority in the Court of Appeal in the present case appears to involve the holding that there was a discharge of the prior contractual relationship between Concut and Mr Wells, that the Service Agreement became the exclusive charter of the contractual rights and duties of the parties, and that subsisting rights and liabilities under the prior contract, including those arising by reason of breach thereof, were compromised or released. However, the text of the Service Agreement itself, as well as the surrounding circumstances, indicate that such a conclusion would not be in accord with the manifest intention of the parties.” ((2000) 176 ALR 693, 699)
203 In this case, it is unnecessary to determine which of the competing analyses is the correct one; though, given that the 2016 Joint Venture Agreement does not state comprehensively the terms of the joint venture, but operates referentially to the original agreement, one would have thought that it is more likely to be regarded as a variation rather than a discharge of the original agreement and creation of a new one.
204 In either event, the provision to be found at clause 3(b) (CB 2308) introduced by the words at the beginning of clause 3 “The terms of the Joint Venture Agreement dated 20th June 2014 are to be varied as follows:” means that any obligation on the part of Mr Guneser to contribute $635,000 in cash or kind, which obligation was referred to in recital D of the 2016 variation agreement, was discharged.
205 Professor Carter, in his work Carter on Contract, observes that the consequences of an agreement to discharge a contractual obligation depend crucially “on the terms of the agreement for discharge”. Nevertheless, “the principal objective of the [discharge] agreement is simply to discharge, rescind, abrogate or abandon the contract to which the agreement relates”. ([32-020] 82,023 service 26)
206 As at the date of commencement of this proceeding, there remained no extant obligation upon Mr Guneser to contribute the $635,000 development share in cash or kind. If he could be regarded as having acted in breach of contract in failing to do so before the execution of the variation agreement, that breach was, in Professor Carter’s language, discharged or abrogated.
207 Mr Cadman was also critical of Mr Guneser’s actions with regard to the engagement of a selling agent and the negotiation of the “off the plan” pre-sale. Assuming, without deciding, that Mr Cadman’s criticisms were justified, it is not evident that these “breaches” or “wrongs” on the part of Mr Guneser led to the circumstances which, on the face of it, entitled him to invoke clause 27 of the Joint Venture Agreement.
208 Mr Cadman did not rely upon or elaborate on the allegation in the Amended Defence and Counterclaim that Mr Guneser had himself and apparently unilaterally terminated the Joint Venture. A party might terminate a contract unilaterally pursuant to a special clause but otherwise the other party would necessarily be involved in a termination either by agreement or by acceptance of a representation.
209 In the circumstances, I am not persuaded that the principle that no man may profit from his own wrong should disable Mr Guneser from reliance on clause 27.
Special disadvantage
210 Mr Dolas’ defence based on special disadvantage was not pressed. (T522, L28 – T523, L1)
The $55,000 loan
211 Mr Cadman conceded Mr Dolas’ liability to repay $55,000 advanced to him “plus any interest available under the relevant memorandum of common provisions”. (Closing submissions, paragraph 44)
212 The covenants in Mr Guneser’s mortgage on number 75 Station Road are to be found in the Memorandum of Common Provisions deposited with the Registrar of Titles No AA689. Those clauses were not put into evidence before me. These provisions are, however, a matter of public record. (Transfer of Land Act 1958, s91A(4))
Damages for repudiation
213 It is not clear to me if the claim for damages for repudiation brought by the plaintiff against the defendant is persisted in. These damages depend for their calculation upon the evidence given by forensic accountant, Mr Jones. Mr Cadman challenged the ability of Mr Jones to express the views upon which his calculations were based. If this matter is to be pressed, conceivably there should be further argument and potentially further evidence. As I understand the claim under this head, it is advanced alternatively to the claim under clause 27 of the Joint Venture Agreement.
Disposition
214 It will be seen that broadly I have accepted the plaintiff’s claim based on clause 27 of the Joint Venture Agreement. Based on the concession by defendant’s counsel, there should also be judgment for principal and interest relative to the $55,000 loan. In light of the discussion of the parties, it should be open to them to put further arguments and potentially adduce further evidence as to how these matters should be carried into effect and if there are any other matters which should be provided for by way of determination and order of the court. In particular, I will hear submissions as to the relief sought by way of counterclaim by the defendant.
Costs
215 I have heard no submissions on the question of costs and so will reserve that issue.
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