Haider v Gudelj
[2019] ACTSC 213
•13 August 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Haider v Gudelj |
Citation: | [2019] ACTSC 213 |
Hearing Date: | 29 - 30 April 2019, 1 May 2019, 11 July 2019, 31 July 2019 |
DecisionDate: | 13 August 2019 |
Before: | Elkaim J |
Decision: | (1) Judgment is given for the defendants against the plaintiffs. (2) The plaintiffs are to pay the defendants’ costs of the proceedings. |
Catchwords: | BANK GUARANTEES – DEBT – ballot conducted for the purchase of blocks of land – plaintiff used names of defendants to acquire multiple blocks – purchase monies provided by NAB – failure to repay monies – principle of equitable contribution between guarantors |
Legislation Cited: | Court Procedure Rules 2006 (ACT) rr 406, 407, 430 |
Cases Cited: | Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 AMP Bank Ltd v Brown and Kavanagh [2017] NSWSC 313 Sky Channel Pty Ltd v Tszyu (No 2) [2000] NSWSC 1150 |
Parties: | Tedo Iqtidar Haider (First Plaintiff) Maria Haider (Second Plaintiff) Vinko Gudelj (First Defendant) Daniel Ivancic (Second Defendant) Carlo Anthony Pasquariello (Third Defendant) Merhdad Takalubegash (Fourth Defendant) Rita Elizabeth Takalubegash (Fifth Defendant) |
Representation: | Counsel D Lloyd (First and Second Plaintiff) P Greenwood with D Robens (First, Third, Fourth and Fifth Defendants) No appearance (Second Defendant) |
| Solicitors Colquhoun Murphy (First and Second Plaintiff) Kamy Saeedi Law (First, Third, Fourth and Fifth Defendants) No appearance (Second Defendant) | |
File Number: | SC 417 of 2013 |
ELKAIM J:
The two plaintiffs are a husband and wife. I will refer to them as Dr Haider and Mrs Haider. The defendants are a selection of friends and related persons.
The second defendant did not appear and was not represented. I was informed that a default judgment had been entered against him. The remainder of the defendants were represented by the same legal team. Unless otherwise stated, a reference to the defendants in these reasons excludes the second defendant.
The plaintiffs’ case was made up of various relevant documents. The plaintiffs did not read any affidavit evidence. They did not give, or call, any oral evidence. Their case was easily proved on the documents and did not require oral evidence. There was substantial criticism of their absence from the witness box but this can only be justified to the extent that they, or other witnesses called by them, were necessary to meet the defences.
The defendants read the following affidavits: Merhdad (Nick) Takalubegash sworn on 21 December 2018, Vinko (Vince) Gudelj sworn on 21 December 2018, Rita Takalubegash sworn on 21 December 2018 and Mr Pasquariello Pasquariello sworn on 24 December 2018. The defendants also relied on a number of documents.
With the exception of Carlo Pasquariello, all of the defendants were cross-examined on their affidavits. Mr Pasquariello was not cross-examined because, due to unrelated personal reasons, he was not able to attend court. No submission was made by the defendants asserting any advantage from a failure to cross-examine Mr Pasquariello.
In July 2012, following a mediation the plaintiffs paid $783,000 to the National Australia Bank (the NAB) in settlement of two outstanding debts. One of the debts ($121,365) arises from what was referred to as the Miracle Homes guarantee and is not part of the plaintiff’s claim against the defendants. The other debt ($441,090) arises from guarantees signed by the defendants in January 2007. These guarantees were intended to protect the bank in respect of a facility that was made available to HIT Harrison Pty Ltd (HH).
This amount is claimed, by way of equitable contribution, from the defendants. In addition legal costs attributed to the dispute with the NAB, amounting to $98,583 are claimed. The plaintiffs also seek interest on the above amounts.
It is necessary at this early stage to deal with a pleading point because it assumes considerable significance in this matter. The defendants relied heavily on an argument that said that if the NAB had taken action against them, under the 2007 guarantees, then the bank would have failed. This would have been a product of the unconscionability of any liability that might have otherwise been attached to them. It was common ground that if this circumstance was established then the plaintiffs could not succeed in this action.
The plaintiff’s case was opened concisely and accompanied by explanatory written submissions. At the conclusion of the opening I invited Senior Counsel for the defendants to say anything he thought would assist concerning the defence. He replied that he “thought it might be helpful to open a little on the case” (T 33.18).
I was then given a comprehensive description of the defendants’ case, so comprehensive that it included the tendering of a number of documents, all without objection.
At the end of the defendants’ opening, counsel for the plaintiffs immediately stated, at T 63.31:
Before your Honour goes off the bench, can I just raise something? The last thing I want to do is to be trying to take pleading points but something that my learned friend just said to your Honour in answer to your Honour's question is that part of the defendants' case is that the bank would not have had any entitlement to recover under the guarantees and my learned friend said that that was pleaded
He then followed up with this, at T 65.19:
There's a difficult question of principle but I understand what your Honour says which might, which is why the point raised by my learned friend caused me to rise to my feet to say that my position in final address is going to be that if the defendants had wanted to contend that the guarantee was not enforceable because it would have been liable to be set aside as against the bank on grounds of unconscionability, for example, then they would have needed to have pleaded that and I don't want to be thought to be running away from that point.
Very extensive written submissions were provided by the defendants on 11 July 2019. The submissions raise all of the matters that the plaintiffs say should have been pleaded. The plaintiffs filed further submissions on 30 July 2019 which take up the pleading point. In particular I was referred to rules 406, 407 and 430 of the Court Procedure Rules 2006 (ACT) (the Rules). These rules make it plain that certain allegations must be pleaded. I think they include the types of allegations being relied upon by the defendants in support of their case that the guarantee could not have been enforced against them by the bank.
The defendants did not concede that they ought to have pleaded any more than they did. I was directed to paragraph 20 of the Amended Statement of Claim, which states:
Upon failure by HIT Harrison to pay an amount due to NAB under the HIT The facilities, the Guarantors became liable to NAB to pay the HIT Indebtedness plus interest that was accruing at the Default Interest Rate. (Particulars are then given of the relevant clause in the guarantee).
In response to paragraph 20, paragraph 13 of the Further Amended Defence states:
The Nominated Defendants deny each and every allegation in paragraph 20.
The defendants submitted that this denial was a plain denial of the allegation that the guarantors became liable to the NAB. In turn it followed that the defendants required the plaintiffs to establish the liability to the bank and that this issue was squarely before the court.
I was also taken to this statement by counsel for the plaintiff at the end of the third day of the case at T 184:
In terms of the orderly progression on the next occasion, it would certainly be of utility in my submission if there was some written outline from my learned friends. I say that not least of all because presumably it would be in that document that whatever this unconscionability case is might be identified. For example, it might then let us know whether it's statutory unconscionability or within the unwritten law or what provisions apply or what the grounds are, or things of that nature which aren't to be found in any pleading or particulars.
I was informed that this request had been met before the defendants filed their written submissions.
The defendants further pointed out that when the plaintiffs’ counsel pointed out that he could meet the unconscionability case to the extent that it arose from the defendants’ affidavits then any reading of those affidavits, where it was asserted that the guarantees had never been read and understood, a “red flag” should have been raised to the plaintiffs that unconscionability was an issue.
While I agree that the contents of the affidavits could be seen as raising issues of unconscionability and I also agree that the denial in paragraph 13 of the Defence places the liability to the bank in issue, I also agree with the plaintiffs that, at least at a prima facie level, the specific matters relied upon should have been pleaded pursuant to rr 406 and 407 of the Rules.
However, in my view, and specifically in the circumstances of this case, taking a broad approach to the pleadings as they stand, the defendants have raised the unconscionability issue for decision by the court.
The plaintiffs submitted that they would be substantially prejudiced if I took this approach. They said that if they had known about the case on unconscionability being put against them they might have called oral evidence, for example from bank employees, or tendered other documents.
However, I think it is clear that the case was run by the the plaintiffs on the basis that they were meeting an unconscionability claim. For example, at T 162, in the course of cross-examination of one of the defendants and in response to an objection, counsel for the plaintiffs said this:
I, as your Honour knows, am faced with an unpleaded, unconscionability case that this instrument would have been set aside, which is why I'm taking care to do this.
What is evident to me is that the plaintiffs’ counsel was being very careful to cross-examine the witnesses to defeat the unconscionability claim. The claim was specifically raised in the defendants’ opening and, as has been described above, counsel for the plaintiffs properly took issue with the state of the defendants’ pleadings. This was followed by the cross-examination of the defendants (except for Mr Pasquariello) in a manner which specifically put to them that their unconscionability claims were baseless. In addition no objection was taken to the many documents tendered by the defendants in aid of their unconscionability case. Some of these documents, for example Exhibits 13 and 14, go to the very essence of the unconscionability claim.
Notwithstanding the caveats stated by counsel for the plaintiffs, no objection was ever taken to any specific evidence nor was any application made at any stage for a ruling on the point or for an adjournment to enable oral or documentary evidence to be gathered.
In my view this case was run as if the unconscionability point was alive and expected to be decided. Accordingly, I am of the view that the defendants are entitled to raise as a defence the unconscionability of the guarantees, and in particular, that the NAB could not have enforced the guarantees against them directly.
By way of brief factual background, there is a suburb in the Australian Capital Territory called Harrison. In 2005 the ACT government conducted a ballot for the purchase of individual blocks in the suburb. There was a perception that any applicant was restricted to a single block. This may not have been correct.
Dr Haider appears to have had diverse interests. They included developing blocks of land being released in the above ballot.
Mr Takalubegash and the fourth defendant, Daniel Ivancic, were the owners of a building company called Miracle Homes Pty Ltd. Mr Takalubegash, who already knew Dr Haider, and Mr Ivancic spoke to Dr Haider about purchasing some of the blocks in Harrison and developing them.
In order to overcome the limitation on the acquisition of multiple blocks by a single applicant, Dr Haider made an application in the name of his wife. Mr Takalubegash used his wife’s name and also put in ballots in the names of his friends Mr Gudelj and Mr Pasquariello (the first and third defendants respectively).
Mr Gudelj and Mr Pasquariello were the owners of a business called Mint Kitchens which was concerned with the installation of new kitchens and joinery generally. Mr Pasquariello is Mrs Takalubegash’s brother.
Exhibit 10 (the plan) shows the result of the ballot relevant to the parties. Blocks 1 to 6 were to be developed as a first stage and the remainder as a second stage. Exhibit 10 (the Google photograph) shows the blocks in completed form. I note that Block 20 was eventually subdivided to allow the construction of a “surveillance” unit to be erected over the garage in Putt Lane.
None of the parties provided any funds for the purchase of the blocks. The whole of the purchase monies were obtained from the NAB. Mr Greg Evans was the relevant bank officer. It appears that he had separate dealings with Dr Haider and possibly also with Mr Takalubegash.
The intent of the development was that the monies borrowed from the NAB would be repaid as the blocks were sold and that any profit arising from the development would only flow to the interested parties when the debt to the NAB had been fully discharged. The profits were to be split, in effect, between Dr Haider, Mr Takalubegash and Mr Ivancic. Dr Haider was to receive 55% and the remaining 45% was to be equally divided between Mr Takalubegash and Mr Ivancic.
The various residences (townhouses) were to be constructed by Miracle Homes. Mint Kitchens was subcontracted to install the new kitchens and do all of the joinery work in each respective residence.
The first lot of funding was provided by the NAB in September 2006 (Exhibit A, page 231). The bank required guarantees which were provided by the parties (Exhibit A, page 279).
The second lot of funding was provided in January 2007. Once again the parties provided guarantees (Exhibit A, page 451). These guarantees are the subject of the present proceedings. Any suggestion by any one of the defendants that their respective signature on the guarantee may not have been their own was not pressed and, in any event, was entirely without foundation.
Immediately following the execution of these guarantees the ingredients for an equitable contribution between the guarantors were in place. The separate guarantors had agreed to guarantee the facility provided to HH and their obligations could be regarded, as between each other, as equal. If the bank had called upon one of the guarantors to meet the debt, that guarantor would have been entitled to contribution from the others. As stated in Mahoney v McManus (1981) 180 CLR 370 at [18]:
It should be remembered that the doctrine of contribution is based on the principle of natural justice that if several persons have a common obligation they should as between themselves contribute proportionately in satisfaction of that obligation. The operation of such a principle should not be defeated by too technical an approach to the question whether a surety has paid the creditor, when he has supplied moneys to the principal debtor for the purpose of making such payment.
Similarly in Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 351:
The right arises at law when "one of several persons has paid more than his proper share towards discharging a common obligation" : Davies v. Humphreys (1840) 6 M & W 153, 168-169 [1840] EngR 223; (151 ER 361, at pp 367, 368) ; Dimdore v. Leventhal (1936) 36 SR (NSW) 378, at p 385 , and it arises in equity when a liability of one of several to pay more than his share has been ascertained : Wolmershausen v. Gullick (1893) 2 Ch 514 ; McLean v. Discount & Finance Ltd. [1939] HCA 38; (1939) 64 CLR 312, at p 341
The defendants assert that any common obligation ceased to exist, certainly by June 2007, if not earlier.
I note here that in his opening written submissions, (and then restated in closing submissions), counsel for the plaintiffs, at [58], said that “contribution is not founded on comparative culpability”. He referred to the decision of Young J in Sky Channel Pty Ltd v Tszyu (No 2) [2000] NSWSC 1150 at [11]-[13] where his Honour said:
11 The submissions then proceed that the respondent is a large and experienced corporation in commerce and that its culpability for the damages caused to the principal creditor are almost entirely in the respondent's court. "Equality is equity" means equality so far as people paying what is their fair share of the coordinate liability because of their respective culpability. Although this is a relatively recent concept, cases such as the last two I have cited and the decision of the Full Federal Court of Australia in Burke v LFOT Pty Limited (2000) FCA 1155 show that the law has moved away from the strictness of earlier decisions.
12 The answer is, I think, in the words of Mr Wood for the respondent in his written submissions, that the authorities are “dead against the concept of apportionment sought to be propounded by the Appellant. Both authority and principle negate the Appellant's argument, and to adduce evidence on the subject would be futile."
13 It may be that the law one day will develop to the stage where “fairness” in the legal sense of the term as used in Mr Aldridge SC's argument can be accepted. However the fact that in other places such as England and Victoria statutes have been passed to cover the situation tends to show that the law will not develop quite so far as the appellant would have it in this case.
The plaintiffs then took me to the decision of Kunc J in the NSW Supreme Court in AMP Bank Ltd v Brown and Kavanagh [2017] NSWSC 313 and pointed out the apparent endorsement of Young J’s decision in Sky. I was taken to paragraphs 39 and 40:
39. Therefore, it is of the very essence of the equity that if two co-sureties are equally liable to a creditor, then between themselves there is a right to equal contribution. In my view, as a matter of principle, the existence of any general discretion to depart from equal contribution by reference to subjective notions of culpability or liability is completely inimical and alien to the equity itself. Putting this another way, if the alleged culpability or responsibility of one co-surety for the debt to the creditor makes no difference to both co-sureties being equally liable to that creditor, then it can make no difference to the right of equal contribution between the co-sureties.
The law — the accepted exceptions
40. The authorities disclose four exceptions to the general principle of equality as between co-sureties (the “accepted exceptions”):
(1) Contract, or something less than contract, being the manifestation of a common intention to modify or exclude rights to contribution;
(2) Where one surety has obtained the whole benefit of the guarantee;
(3) Where one surety is guilty of “fraud, illegality, wilful misconduct or gross negligence”;
(4) Equitable defences such as clean hands.
With respect, I do not read Kunc J’s reasons to the same effect as counsel for the plaintiffs. This is because of the qualification arising, in paragraph 39, of the twice used word “if”. His Honour is, in my view, clearly stating that the right to equal contribution only arises where the co-surities are “equally liable to a creditor”. On the defendant’s case that circumstance does not exist. As will be seen below I agree with the defendants submission that the sureties were not equally liable to the bank.
I also note that the decision referred to by his Honour, namely Burke v LFOT Pty Limited (2000) FCA 1155; 178 ALR 161, was overturned in the High Court (Burke v LFOT Pty Limited [2002] HCA 17; 209 CLR 282). In the High Court, Callinan J, part of the majority, said at [143]:
The authorities, to which his Honour refers, express the conditions for the application of the doctrine of contribution in different ways: when there is mutuality of rights and obligations inter se; when the burden is and must be seen to be a common burden; when several persons owe the same obligations they should satisfy them equally; when in reason, justice and law there should be equality of liability; when it can be shown that one person has paid more than his or her proper share; and, when general principles of justice require contribution.
I cannot see how “general principles of justice” could encompass conduct where one guarantor acts to the detriment of co-guarantors.
The interpretation of AMP Bank suggested by the plaintiffs is also difficult to reconcile with these passages from the judgment of Gaudron A-CJ and Hayne J in Burke, [14]:
In general terms, the principle of equitable contribution requires that those who are jointly or severally liable in respect of the same loss or damage should contribute to the compensation payable in respect of that loss or damage, either equally where they are liable in the same amount or proportionately, where the amount of their liability differs. The principle has regularly been applied between co-sureties, co-insurers, partners, co-owners, where payment is made by one in discharge of a common liability, and co-trustees who are in pari delicto.
The doctrine of equitable contribution applies both at common law and in equity. It is usually expressed in terms requiring contribution between parties who share "co-ordinate liabilities" or a "common obligation" to "make good the one loss". More recently, in BP Petroleum Development Ltd v Esso Petroleum Co Ltd, the right to contribution was said to depend on whether the liability was "of the same nature and to the same extent".
The notion of "co-ordinate liability" is one that depends on common interest and common burden. Perhaps because, at common law, there was no general right of contribution between tort-feasors, the notion of "co-ordinate liability" has not traditionally been expressed in terms requiring equal or comparable culpability or a requirement that the acts or omissions of the persons in question be of equal or comparable causal significance to the loss in respect of which contribution is sought. However, the requirement that liability be "of the same nature and to the same extent", as stated in BP Petroleum, is apt to include notions of equal or comparable culpability and equal or comparable causal significance.
Culpability, as a factor bearing on the right to equitable contribution, clearly explains the requirement that for there to be contribution between co-trustees, the co-trustees must be in pari delicto. So, too, it explains the rule that a person who has been guilty of fraud, illegality, wilful misconduct or gross negligence is not entitled to contribution from his partners.
In Dering v Earl of Winchelsea, Lord Chief Baron Eyre hypothesised that:
"If a contribution were demanded from a ship and cargo for goods thrown overboard to save the ship, if the plaintiff had actually bored a hole in the ship, he would in that case be certainly the author of the loss, and would not be entitled to any contribution."
I also think the notion of a different liability arising as between co-guarantors is evident from the decision of Bryson J in Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 119:
It is a commonplace of cases relating to contribution that, although persons appear on the face of a document to have entered into a liability as sureties on the same basis, agreements or understandings among them or the circumstances in which they acted may establish that their true relationship is otherwise. In particular it may be established that as between them, one has primary liability and another has a liability to be resorted to only if resort to the first is insufficient.
Returning to the background facts, Mr Takalubegash and Mr Ivancic fell out in 2006. This meant that Miracle Homes continued with the project but with no involvement from Mr Takalubegash. On 6 September 2006 Mr Takalubegash resigned as a director of the company (Exhibit 1 page 18).
According to Mr Takalubegash his involvement in the project ceased until he returned some time later through a company called Five Star Constructions Pty Ltd (Five Star). Mr Takalubegash had registered Five Star in July 2006. His ‘divorce’ from the project is a significant issue in the case. According to the plaintiffs Mr Takalubegash remained integrally involved and, in particular, concerned to achieve a profit for himself when the project was completed.
On the other hand, it was Mr Takalubegash’s case that after September 2006 the project was entirely controlled by Mr Ivancic and Dr Haider. Furthermore Dr Haider took a number of actions which ultimately lead to him being called upon by the NAB to honour the guarantee. Consequently he and the other defendants were not liable for equitable contribution to the plaintiffs because they played no part in the creation of the circumstances leading to the banks legal pursuit of the debt.
By August 2008 four blocks remained unsold; 17, 18, 19 and 20. Thus far all the proceeds of sales had been paid to the bank in reduction of the debt to the bank. This was in accordance with the overall scheme of the project which was designed to show a profit only with the final sales.
On 7 May 2008 Mr Takalubegash requested Colliers International (Colliers) to provide a valuation for Blocks 19 and 20. The valuation certificate was issued by Colliers the following day. Block 19 was valued at $305,000. Block 20 was valued at $370,000 (Exhibit A, pages 501 and 502). It is important to note that at this stage Block 20 had not yet been subdivided.
In June 2008 friends of Mr Takalubegash offered to buy Blocks 19 and 24 for the sums contained in the above valuations. The offer was rejected, apparently by Dr Haider and the bank. Mr Takalubegash also offered to buy Block 20 but for a substantially greater price of $729,000. This offer was made up of $450,000 for what was referred to as Unit 1 of Block 20 and $279,000 for Unit 2. The offer is referred to in paragraph 54 of Mr Takalubegash’s affidavit and is difficult to understand. When one looks at the contracts at Exhibiht MT10 of his affidavit there is reference to Units 1 and 2, but Block 20 had not been subdivided by this time. Mr Takalubegash’s offer was rejected. Notably Mr Takalubegash said that if he had resold the blocks, after developing them further, then he would have retained the proceeds. The retention of similarly produced funds by the plaintiffs was criticised by the defendants.
It was put to Mr Takalubegash that his offer, being significantly in excess of the valuations, was made on an ‘off the plan’ basis. He rejected this. He seemed to be confused about the meaning of such a purchase. I will return to Mr Takalubegash’s credit below. Suffice to say at this stage that I do not accept his stated incomprehension and naïveté as genuine.
On 15 October 2008 Dr Haider, through his company, I Haider Pty Ltd (I Haider), purchased Blocks 19 and 20 for the amounts contained in the Colliers’ valuations ($305,000 and $370,000 respectively).
In May 2009 I Haider sold Block 19 for $500,000. On 30 September 2009 I Haider sold Block 20 for $479,000. In July 2010 Block 20A (now subdivided from Block 20) was sold for $416,000. None of the profit made by I Haider on Blocks 19, 20 and 20A were given to the bank. The defendants say that this failure to pay the monies to the bank not only led to the bank suing on the guarantees but was also in breach of the conditions upon which I Haider had been permitted to purchase the blocks.
Exhibits 4 and 5 are said to make plain the rogue nature of Dr Haider’s conduct. Exhibit 4, dated 28 August 2008, is an internal NAB note which states, in part (emphasis added):
After several discussions with Senior Partner Greg Evans and the above parties, where the Banks position that the debt is to be cleared in full has been reiterated, a compromise has been reached which will see the:
- The two completed properties (owned by Carlo) be sold before the end of September (with full proceeds directed towards debt reduction)
- the final two properties (owned by Daniel) to be purchased by Dr Haider utilising his own funds for the purchase and finalisation of the properties, they will then be put to market.
- Both Bill Facility and O/D to be cleared in full by no later than the end of October.
It was agreed that the memorandum is incorrect to the effect that the properties said to be owned by Mr Pasquariello were owned by Mr Ivancic, and the properties said to be owned by Mr Ivancic were owned by Mr Pasquariello.
Exhibit 5 is an email from Greg Evans to Dr Haider, sent on 27 October 2008. It is worth setting it out in full (emphasis added):
Dr Haider,
Thought I’d detail to you the current position in relation to Harrison. As discussed I’ve again called Daniel just now and left a message. Phone did ring, however not answered. The only contact details I have for him are 0400 199 408.
The position currently reflects the following:
Bill Facility $1,842,000 (fully draw – no further funds available)
Overdraft $16,000 (current balance $9,059 debit)
As per previous discussions, the facility is due to expire this Friday, 31/10/08 and I had hoped that we would have settlement ready to be effected to clear / reduce position, however it now looks more likely that this will not occur until next month given we await ministers consent on your transfers and the two parcals in Daniel’s name are still awaiting the final inspection to allow completion / settlement.
Working off ‘raw’ figures provided on sales contracts to hand the position is as follows;
Block 17 Section 13 $ No sale details on this property at this stage
Block 18 Section 13 $419,000 (would anticipate to net around $400,000 which seems too cheap)
Block 19 Section 13 $305,000 (no agent costs)
Block 20 Section 13 $370,000 (no agents costs)
Total$1,075k based on sale prices noted above
On this it leaves a shortfall of 783k with one unit still to sell. Notwithstanding this, if you looked at the average sale price of $500k plus an additional $300k on the rear of Block 20 the total would be $2,300k against $1,858k plus say $200k to complete, still in front $242 on completion, sale and full debt clearance.
The impact here has obviously been due to the protracted dealings between both Nick and Daniel with discussions as early as November / December last year to complete and exit before March 2008. Interest costs has therefore accumulated over this period with little to no work.
The ongoing maintenance issue here is that all guarantors remain liable for the facility until such time as it is cleared in full, therefore the quicker we act on clearing the facility the better as interest will again be charged at the end of this month.
Keeping this in mind and the fact that neither Nick nor Daniel now speak ‘civilly’ to each other I see your assistance in finalising or brokering the process between these parties as soon as possible and negate any longer term issues.
I will remain in contract with Jon Nicol (Solicitor) and continue to chase Daniel, however there is obviously only so much I can do this end if they are returning calls.
At the end of the day, this will impact on everyone’s credit rating if not cleared in the normal course, however the longer it continues the more likely it will be that the file ends up with the Bank’s legal department.
I believe it is in everyone’s best interest to work together to complete and exit with any further action to be take once the project has been finalised.
Feel free to contact me to discuss.
Cheers
Exhibit 4 is reinforced in Exhibit 24, a letter to Dr Haider from his solicitor, dated 26 February 2010. The solicitor wrote:
In respect of HIT Harrison, you assert that on two occasions you had conversations with Greg Evans to the effect that if you purchased blocks 19 and 20 from NAB, on condition that you will finish construction with your own money, pay the valuation price, and after deducting your costs, GST and interest on the sum used, you will pay the balance back to the bank in return for release of your security and Guarantee.
The highlighted part of Exhibit 5 might also be seen as supporting the plaintiff’s case to the extent that it says “…all guarantors remain liable for the facility….”.
In September 2011 the NAB commenced proceedings against Dr Haider seeking $606,083 plus interest of $111,384 plus costs. These are the proceedings that were settled for $783,000 following mediation in July 2012. It is the costs of these proceedings that are part of the plaintiffs claim against the defendants.
In written opening submissions the plaintiff’s claim was characterised as one of equitable contribution arising “from the obligations that the plaintiffs and the defendants assumed as co-guarantors under an instrument of guarantee, to the National Australia Bank in January 2007”. The submissions continued that the plaintiffs had paid out the debt to the bank arising from the guarantees. It was therefore appropriate, in fact equitable, that the defendants contribute to the monies paid to the bank in accordance with their obligations as co-guarantors.
Again in summary form, the defendants responded that “it would not be fair or just” for the defendants to contribute, because such a result “would further enrich the plaintiffs unjustly”.
The parties agreed on the fundamental principles of equitable contribution. As stated in the defendant’s written submissions: “If one person has paid more than his or her proper share towards discharging a common obligation, that person is entitled to be recompensed by those who have not”.
However the defendants then went on to say: “The plaintiffs’ claim should fail because they have not paid more than their proper share, and it was not a common obligation”. The defendants added as a separate issue; if “the NAB could not have enforced the guarantees against our clients, the plaintiffs’ claim must fail”.
The defendants submitted that “the circumstances of this case are unusual and factually complex”. I agree. Nevertheless I think the resolution of the dispute can be refined to three straightforward questions:
(a)Were the defendants so naïve and divorced from the reality of the funding arrangements that they should not, from a justice point of view, be required to contribute to the monies paid to the bank by the plaintiffs?
(b)Is there any reason the NAB could not have recovered guaranteed funds from the defendants, had it decided to pursue that course?
(c)If the answer to the first proposition is ‘No’ then was the conduct of the plaintiffs, in particular in relation to the dealings with Blocks 19, 20 and 20A such that they, in relation to the defendants, unjustly created a debt to the bank which was outside any obligation that arose from the guarantees they had signed?
I do not accept that Mr Takalubegash, Mr Gudelj and Mr Pasquariello were innocent bystanders to the project who simply signed documents, specifically including the guarantees, unaware of their consequences and meaning. The position may be different with Mrs Takalubegash, but for present purposes I do not think the distinction is important.
Mr Takalubegash, Mr Gudelj and Mr Pasquariello were all businessmen, in the housing industry, and all no doubt concerned to carry on their respective businesses with a view to making a profit. As noted above, Mr Pasquariello was not cross-examined so I was not able to observe him giving evidence. I did have a good opportunity to assess the evidence of Mr Takalubegash and Mr Gudelj.
Mr Takalubegash maintained through his evidence having a general ignorance of a guarantee. He knew what a loan was and knew that the bank had provided the loan. Yet he insisted that the documents that he signed were for the purposes of a loan, but he did not know that they included a guarantee (eg T 74.15). He said he did not know what a guarantee was in 2005. This was when the first guarantees were signed. Notwithstanding having signed the guarantee in 2005 he maintained that he still did not know that he was signing a guarantee in 2007, although by this time he seems to have progressed from not knowing what a guarantee was to being “not too sure” (T 93.33).
Mr Gudelj was more forthcoming in his evidence. He explained his history with investment and rental properties although he did suggest that any details were left to his accountant. Unlike Mr Takalubegash however he did not deny knowledge of the nature of a guarantee. Although an answer to a question from me as to what he thought a guarantee was, he said: “I thought a guarantor was more just to get the loan and to start building” (T 168), he went on to be a little more detailed in his knowledge of a guarantee. For example there is this passage at T 174:
And you understood very well when that was said to you that you had to go guarantor, what being a guarantor involved, did you not?----Yes.
At T 175 he agreed that he knew he was signing a guarantee and he knew “what the nature of the guarantee was”. There was then this question and answer:
That you would be guaranteeing the repayment of loan funds. True?---Yes.
A little later in the cross-examination, at T 176, this evidence was given:
And as a guarantor, you knew that that information about the amount to be advanced was very important information to you? True?---Yes
Because you knew that if a guarantee was to be called on, that the bank might be coming after you to pay the money. True?---Yes
Mr Gudelj was taken to the document that he had signed, and then asked a series of questions (at T 177):
There was nothing to stop you from looking at the words and reading them, on this page?‑‑‑Once I've signed one signature, I just kept signing all the other parts, wherever I was meant to sign, I just signed.
It wouldn't have taken you very long, before putting your signature on this page, to have read the words on the page, would it?‑‑‑No.
It's a pretty clear sign to you, isn't it, that the words on the page are of significance to you when there's a heading in bold, uppercase, 'important'. Do you see that?‑‑‑Yes.
Before you signed. Do you see that?‑‑‑Yes.
You had every opportunity to cast your eye up to the top of the page and read those words and the words underneath, before you signed. True?‑‑‑Yes.
You also had every opportunity, if you wanted to, to go off and get legal advice, before you signed it. True?‑‑‑Yes.
You knew, I suggest to you, when you signed this, that you would be guaranteeing the performance of HIT Harrison, in repaying the money that the bank was offering. True?‑‑‑Yes.
There was nothing to prevent you from either going back in the document, to look at what amount of money that was, or to just ask the question. True?‑‑‑Nothing was explained to me at the - on the day.
No. My question was, there was nothing to prevent you, at this meeting, from either going back in the document to look at the amount being advanced, or to just ask how much was being advanced? Do you agree with me?‑‑‑Yes.
Mr Gudelj’s frankness about the guarantee is in stark contrast to that of Mr Takalubegash. I am satisfied that Mr Takalubegash had at least an equal knowledge about the guarantee, and its effects, as did Mr Gudelj. There is one area on which I do not accept Mr Gudelj’s evidence. It arises from these two questions and answers, both at T 180:
I know you didn't get any money. All you are being asked is was it discussed that if everything went well you would get some money?‑‑‑I can't remember, your Honour
Isn’t what was going on that you were signing the guarantees in the hope that if there was a profit that you might get some of it?‑‑‑I can't recall that, no.
Are you sure?‑‑‑I can't recall, no. Sorry.
I have little doubt that Mr Gudelj, and also Mr Takalubegash and Mr Pasquariello, joined in the development because they hoped to make a profit at the end of it. I cannot accept Mr Gudelj saying that he has no recollection of whether or not he had a hope that he might obtain a profit.
The defendants’ written submissions at [19] state that:
Vince and Carlo were never going to contribute to the project or share in any profits from the development – they were merely facilitating the acquisition of the land.
If this submission was correct I find it quite incredible that Mr Gudelj had no recollection of whether or not he had hoped to join in any profit. One would have thought that if his involvement did not include making a profit he would have a certain memory of that fact.
I think I have said enough to answer the first of the three questions I posed above, at least in relation to Mr Takalubegash, Mr Gudelj and Mr Pasquariello, namely that I am satisfied that they were aware they were signing a guarantee, they were aware of its implications and, in particular, they were aware that if the debt to the bank was not paid off then, under the guarantee, they might be called upon to honour the guarantee.
Turning to Mrs Takalubegash, I am not prepared to find that she was dishonest in court, or in her affidavit, and I cannot conclude that she was financially interested in the development. At best I am satisfied that she signed the guarantee knowing it was a bank document, but little else. I am satisfied she signed the documents because Mr Takalubegash or Mr Pasquariello asked her to and she simply did so in ‘obedience’ to this request.
As a result of her knowledge, or lack of it, and without more, I could not find that if the bank had called upon her to meet the guarantee, and she would have defended the action on the basis of her lack of knowledge of what she had signed, or its implications, that the bank would have succeeded. I think at this early stage I can exclude Mrs Takalubegash as an equitable co-contributor. I would add however, that if this conclusion about Mrs Takalubegash is wrong, there is no other fact that would distinguish her from the other defendants. In other words any reasons that enabled the other defendants to escape liability would equally apply to Mrs Takalubegash.
Turning now to the second question, essentially could the NAB have succeeded directly against the defendants (henceforth not including Mrs Takalubegash).
In short, the defendant’s argument goes in this way. The guarantees signed in January 2007 were to secure further funds being provided by the bank as set out in the banks “Business Letter of Offer”, which commences at page 347 of Exhibit A.
The bank imposed a number of conditions precedent which are referred to at page 5 of the letter (Exhibit A, page 350) and then supplemented in Annexure H (Exhibit 13). The defendants have listed the following conditions as being particularly relevant:
(i)“Evidence of exchanged contracts for Lots 17, 20 and 20A to be provided”.
(ii)“All other prior approved construction funding conditions remain effective for the completion of Lots 16, 17 and 18”.
(iii)“The Bank will appoint an Independent Quantity Surveyor to prepare an Initial Report and then subsequent Monthly Reports, the cost of which is to be borne by the Borrower”.
The defendants say that the relevant conditions precedent, designed to provide protection to both the bank and the guarantors, were never met by Dr Haider and never insisted upon by the bank prior to the funding being made available. Further the defendants were never informed that the conditions had been effectively ignored so that the protection that they provided to the guarantors was never in place. The bank having failed to insist on the conditions being met, and not informed the defendants, but still provided the facility, could not then enforce the guarantees against the defendants.
My first observation is that the defendants, having signed the guarantees and being fully aware of their purpose and their import, had the opportunity to ensure that the facility was utilised according to its conditions. If my conclusion, above, about the defendants’ knowledge of the implications of signing the guarantees, is correct then the onus was equally on them to ensure that the conditions precedent had been met. They knew they were being exposed to a substantial liability but took no action, from their own parts, to safeguard their potential debts to the bank.
The other side of the argument to this observation however, is that it was the bank that was making the facility available and it was the bank that had imposed the conditions precedent. Therefore if the bank decided to proceed without the conditions being met, it was obliged to inform the guarantors.
There is no evidence that the defendants were ever informed about the funds being provided without the conditions being met and no evidence was called, by the plaintiffs, from Mr Greg Evans, or any other bank employee, to suggest that the defendants were so informed.
I think I can be comfortable in concluding that the guarantors were not informed.
The plaintiffs submitted that the conditions precedent point only affected the guarantees after they came into effect. Therefore any consequence was restricted to the amount of the debt that might be recovered under the guarantees. I disagree. It is the very essence of a condition precedent that it is complied with before the agreement is enlivened. (Finch v Underwood (1876) 2 Ch D 310)
The defendants also submitted that the guarantees included a commitment from the bank to adhere to the Code of Banking Practice (the Code). The Code is Exhibit 14. The applicability of the code is clear from the letter of offer (Exhibit A, page 378). The defendants say that Clause 28 of the Code was not complied with by the bank. Specific reference is made to Clauses 28.4 and 28.5 (Exhibit 14, page13). The most important document not provided by the bank is that stipulated in Clause 28(d)(ii), namely the final letter of offer. This document was attached to a letter from Mr Evans to the directors of HH. There is no evidence to suggest it was ever sent to any of the defendants, nor were they cross-examined to that effect.
What then is the consequence of these apparent breaches by the bank? In Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 (7 May 1987) (Ankar), at [8], Mason ACJ, Wilson, Brennan and Dawson JJ said this:
Breach of an essential term or a breach going to the root of the contract will of course discharge the surety from future liability if the surety elects to rescind for breach. The expression "essential term" perhaps needs some elaboration in the context of suretyship because it is said sometimes that a surety is discharged by non-fulfilment of a condition precedent and at other times that a surety is discharged by the creditor's breach of a condition. A condition precedent may be unfulfilled without any breach of contract, but when performance by the creditor of a contractual promise is a condition precedent to the liability of the surety under a contract of suretyship which otherwise involves no more than a guarantee of payment of the debt owing to that creditor, the creditor's promise is necessarily an essential term of the contract. The terms of the contract itself demonstrate that the surety would not have entered into the contract of suretyship unless he had been assured of a strict performance of the promise.
Later in the judgment, at [15] their Honours, examining the “special principle” said to apply to a suretyship contract, referred the formulation of the principle in some English cases:
And in Bacon v. Chesney [1814] EngR 11; (1816) 1 Stark 192, at p 193; [1814] EngR 11; 171 ER 443, at p 443, Lord Ellenborough said that a claim against a surety is strictissimi juris and that "it is incumbent on the plaintiff to shew that the terms of the guarantee have been strictly complied with".
Deane J, in a separate judgment in Ankar, said this at 11]:
Obviously, a creditor could not "without the surety's consent" effect a "departure" from the contract with the surety in the sense of effecting a unilateral variation or alteration of its terms. The reference to a "departure" by the creditor from his contract with the surety constituting an "alteration in the surety's obligations" is a reflection of the fact that the obligations of a surety are strictly confined to what he has undertaken in the contract which constitutes him a surety; "(h)e is bound ... merely" to "the letter of his engagement" (see per Lord Westbury L.C., Blest v. Brown (1862) 4 De GF & J 367, at p 376 [1862] EngR 631; (45 ER 1225, at p 1229)). A failure by the creditor to observe the terms of that contract would, if the surety nonetheless remained liable, alter the surety's obligations in the sense that the surety would be held liable in circumstances which did not accord with the letter of his engagement as specified by the contract.
The letter of engagement referred to by Deane J can be equated to the letter of offer in this matter which incorporated the conditions precedent and the Code.
In my view the conduct of the bank in providing the funds under the offered facility without ensuring the conditions precedent had been met, and not informing the defendants that this was the case, taken together with the failure to adhere to the Code would have prevented the bank succeeding in any action against the defendants to enforce their obligations as guarantors.
The complicity of Dr Haider in the bank’s actions, I think precludes him from obtaining any equitable contribution from the defendants. My reference to complicity is not a suggestion of any unlawful conspiracy but simply a finding that he would have known that the conditions precedent had not been met when making use of the facility provided by the bank. There is no evidence that would suggest Dr Haider ever informed any one or more of the defendants that the need for the conditions precedent to have been met had been waived by the bank.
The defendants also submitted that the conduct of the bank and Dr Haider in managing “the debt situation without the knowledge, consent or involvement of any of Mr Gudelj, Mr Pasquariello, Mr Takalubegash or Mrs Takalubegash” had the result that the defendants’ interests were “disregarded and prejudiced”. I note have found that the defendants were not as innocent of the goings-on in the project generally as they have asserted. Nevertheless they were not kept informed of the various dealings between Dr Haider and the bank and in particular remained ignorant of significant matters, such as the extension of the facility, which might have borne upon their willingness to remain as guarantors.
An example of Dr Haider’s ‘complicity’ can be found in the letter to the bank of 14 June 2007. This can be found in Exhibit A, page 474. The letter concerns a “Notice of Agreed Changes”. It is addressed to the directors of HH. It concerns the extension of the finance facilities for a further six months. It calls upon the guarantors to acknowledge the extension by signing a copy of the letter. The letter was signed by Mr Ivancic on behalf of the company and by Dr and Mrs Haider as guarantors. Notwithstanding provision for its signing by the defendants, it was not signed by them. It is evident that they were unaware of the extension.
The passages quoted above from Ankar are equally applicable to the liability of the guarantors, assuming they were still liable as guarantors, following the extension. They were never given the opportunity to reject the extension or at least to seek relief from the guarantees they had provided. Similar considerations apply to the further extensions that were granted by the bank in December 2007 and the beginning of 2008.
There is some scope for finding that the actions of the bank itself are consistent with it deciding that it could not recover from the defendants under the guarantees signed in January 2007. On 9 February 2010 the bank made a demand under the guarantees. The defendants were recipients of the demand (Exhibit A, page 551). However when the bank issued a default notice (Exhibit A, page 553) it was issued only to the plaintiffs and Mr Ivancic. While it might be thought that this was derived from no more than a perception that funds were available from the plaintiffs but not from the defendants, it is equally consistent with the bank realising it could not enforce the guarantees against the defendants and, moreover, that the default had arisen as a result of Dr Haider’s conduct. The latter aspect will be discussed below.
One of the responses from the plaintiffs concerning any unjust actions by Dr Haider was that anything he might have done did not taint Mrs Haider. Accordingly she would be entitled to contribution even if Dr Haider was not. There is however no evidence that Mrs Haider, alone, made any payment to the bank. Paragraph 29A and 30 of the further amended statement of claim asserts that she made the payment. These paragraphs are not admitted in the amended defence.
While I accept that the terms of settlement with the bank obliged the “Haiders” to pay the settlement sum, I note that the first $400,000, at least, was not paid by either plaintiff but rather by the company I Haider.
More importantly the plaintiffs claim is based on the overall equitable position of doing justice between the parties. In the same way that Rita Takalubegash can be seen as simply a non-contributing figure in the defendants’ camp, I think Mrs Haider assumes the same status as a plaintiff. In other words if Mrs Heider were to succeed her victory would essentially be a victory for Dr Haider, a result which I would regard as against the balance of equitable justice as between the parties.
I think the findings I have made so far are enough to defeat the plaintiffs’ claim. In case I am wrong in any of these findings I think it appropriate that I deal with the third of the questions I posed above, namely was the conduct of the plaintiffs, in particular in relation to the dealings with Blocks 19, 20 and 20A such that they, in relation to the defendants, unjustly created a debt to the bank which was outside any obligation that arose from the guarantees they had signed?
As noted above I Haider sold Block 19 for $500,000 in May 2009. Then the same company sold Block 20 for $479,000 in September 2009. Finally Block 20A was sold for $416,000 in July 2010. Dr Haider, through his company, had bought these blocks in October 2008. At that stage Block 20 had not been subdivided and was purchased for $370,000. Block 19 was purchased for $305,000. Clearly therefore, Dr Haider made a substantial profit on these respective purchases and sales. None of this profit was provided to the bank to reduce the debt.
I specifically asked counsel for the plaintiffs the reason for Dr Haider being entitled to keep these profits for himself. Counsel replied, at T 185:
The answer to that is that by the time that Dr Haider, or the company, acquired those lots the - even though there's no written agreement, what had been happening was that when the individual lots were being sold, the proceeds were being used to pay off the bank. Some of those lots, as your Honour knows, were sold undeveloped, for example block 15 to Mr Qael - some of them were sold developed. What had occurred by the middle part of 2008, leading into October 2008, was a position on the documents of some desperation with the bank and so that's why Mr Takaloobigash has identified that it was in the interests we say of the joint venture for the sale to occur to the Palombis of blocks 19 and 20 in their current state for $675,000, being the valuation figure.
And the idea - if the Palombis had purchased it for that amount, that would have been the end of the joint venture's involvement in those lots; they would have got the Palombis' money. The Palombis wouldn't have had to have accounted for the money that they made on whatever they did with the lots. The joint venture's interest in the proceeds of the sale of those two lots would have ended with the payment for the consideration for them. And what Dr Haider's company did in acquiring them four months after the Palombis' offer was, in substance, no different to what the Palombis were offering.
And the notion that Dr Haider's company having acquired the lots at, we say, market value would then, having acquired them, have to spend the money to develop them; have to get the subdivision approval, which didn't occur on the documents.
There's one piece of paper, and I've alerted my friend to it that I will seek to either put it in reply showing that the subdivision approval didn't occur until 2011; that Haider's company would have to do all that. And having already paid to the bank the money to acquire the lots at market value to again pay back was completely at odds with the agreement as it stood; and what in truth was happening here, as the documents I think hopefully show, was that no one knew what the rights and obligations of these joint ventures were by this time.
There are all these different proposals being put by Daniel, by Mr Takaloobigash, by Dr Haider, and no one really knows who gets what. Ultimately, the submission will be, your Honour, if there is any substance whatsoever in the complaint made that somehow Dr Haider had an obligation to account for profits from the sale of 19, 20 and 20A that that would have belonged in the sort of case that was pleaded and abandoned, being a breach of partnership or a breach of fiduciary duty, or more obviously, an account of profits, and that issue has got not place whatsoever in the limited nature of my claim. That's what I'll be saying about those lots, your Honour.
Counsel was effectively saying that when the properties were bought by Dr Haider he was doing so from a position akin to that of an independent buyer. Counsel pointed out that had the Palombis proceeded with their offer (for the same amounts as Dr Haider eventually paid) then they would not have been liable to pay the bank any monies that they achieved on reselling the properties for a profit.
The logic of counsel’s response is defeated by the Palombis actually being independent persons, compared to Dr Haider who was closely associated with the project. Further the offer from the Palombis was rejected, presumably involving some input from Dr Haider, and yet he purchased the properties for the same price as the offer only some four months later. There is an overwhelming sense that Dr Haider was taking advantage of his position to obtain the properties at an advantageous price (the Colliers’ valuation having been prepared for tax purposes) and then to derive a significant profit from the purchasers but not make any contribution to the bank in reduction of the debt.
No doubt Dr Haider would have incurred expenses in preparing the properties, including the subdivision of Block 20A, for resale and he would have been entitled to credit for these expenses. That does not however dispel his obligation to have at least contributed a substantial portion of the real profit to the bank.
Exhibit 4 is important here because it details the arrangement made in September 2008 where it was recognised that Dr Haider would use his own funds to purchase blocks 19 and 20, that he would then put the properties in a position to be “put to market” and then the debt would be cleared. All of this occurred except Dr Haider did not clear the debt.
There are some further matters that I need to deal with. Although the defendants sought to qualify the observations of Kunc J in paragraph 39 in AMP Bank, they also submitted that they nevertheless had established all of the exceptions listed by his Honour in paragraph 40.
Save for the second exception, which the plaintiffs said had not been established, they also took the same pleadings point as set out above, namely that the particulars said to establish the exceptions had not been provided in the Defence, as required by the Rules. I think the findings I have made above could be said to fall within the fourth exception and for the reasons given above I am of the view that the pleadings point fails. However as far as the first and third exceptions are concerned, I agree that they require a level of detail which was not provided and which is not encompassed within the broad approach I have taken to the pleadings and the manner in which the case was run.
Dealing with the second exception the defendants submitted that “it is plainly made out, because the benefit of the guarantee was in order to ultimately fund the project and receive benefit from it. They weren't going to get that “(T 275.15).
I think this exception has been established. By 2009, if not before, the project had reached a stage where the only profit that was going to emanate from it, would come from the sale of Blocks 19, 20 and 20A. I do accept the plaintiffs’ submission that Mr Takalubegash was not as divorced from the project as he asserts, in particular from September 2006, but I do not think that he retained any prospect of, or any enforceable right to, obtain any profit from the project.
By the time of the sale of the properties to the Haiders’ company, I am satisfied that the whole of the funding and management of the project was in the hands of the bank and Dr Haider.
I think it necessary to expand on my statement that Mr Takalubegash remained involved beyond September 2006. This is the date that he says his involvement ceased. I think the following matters are relevant:
(a)I have significant reservations about his credit. Although there were a number of details in his affidavit that were not challenged, and therefore I accept them, he was closely cross-examined about his asserted ‘innocence’ about the nature and effect of a guarantee. In in my view Mr Takalubegash was significantly overstating his lack of knowledge. English may be his second language and his education may not have been comprehensive, but he has been in business for some time, he has dealt with banks and he has signed other bank documents, probably including guarantees. He certainly lacked what I considered the honesty displayed by Mr Gudelj in his oral evidence.
(b)The visit to Ms Murray of Meyer Vandenburg in October 2007.
(i)Meyer Vandenberg were HH’s solicitors. The file note for the visit is Exhibit B. At first sight the file note portrays an impression of a solicitor dealing with her client. However on closer examination I do not think this is necessarily the case. It is to be recalled that Mr Takalubegash and Mr Ivancic were not on speaking terms and that Mr Takalubegash had previously been involved in the project. It is not surprising, although perhaps unusual from a strictly solicitor – client point of view, that the solicitor should be asked to intervene to allow building to continue. Further the note states “I advise Nick that if Daniel + other JV participants reach agreement, I can document”. This suggests that Mr Takalubegash is not one of the joint-venture participants.
(ii)It is also worth observing that Ms Murray was not called to explain her note. File notes must be treated with caution. They are the shorthand reflection of a meeting in a manner personal to their author and not necessarily an objectively accurate assessment of what has occurred. Some of the reservations expressed by Basten JA in the New South Wales Court of Appeal in respect of medical notes might be seen as equally applicable to a lawyer’s file notes (Container Terminals Australia Ltd v Huseyin [2008] NSWCA 320 at [8] and Mason v Demasi [2009] NSWCA 227 at [2]).
(c)The email at page 911 of Exhibit A can be read in the manner suggested by the plaintiffs. However it also allows for a different interpretation, namely that, as far as Mr Takalubegash is concerned, it is restricted to instructions in respect of Miracle Homes. This is reinforced by the reference to the second defendant who was unquestionably involved with HH beyond September 2016.
An argument I do not accept, put on Mr Takalubegash’s behalf, is that if I would have come to the view that he continued to be involved in the joint-venture that it would have been of no consequence. If involvement in the project, in particular following the sale of Blocks 19, 20 and 20A to I Haider, would have been established, especially if on a basis that would have envisaged some profit flowing to him, then his actions would have been very relevant.
In summary, I have rejected the plaintiffs’case for two specific reasons:
(i)The guarantees would not have been enforceable by the bank against the defendants. I note Counsel for the plaintiffs conceded that a finding to this effect would automatically have defeated the plaintiffs’ claim.
(ii)The conduct of Dr Haider, complicit with the bank, in his dealings with Blocks 19, 20 and 20A was such that he assumed complete control of the project to the extent that he, despite assurances to the bank to the contrary, retained the whole of the profits consequent upon the sale of these blocks.
At a more general level the plaintiffs’ claim has failed because I do not think they have established the equity in the circumstances that entitles them to the relief that they seek. This broad statement is derived from the natural justice concept explained in Albion at 351 and in Burke at 294. Put another way I do not think that the liability for the debt to the bank should be seen as resting equally as between the plaintiffs and the defendants. In my view the plaintiff’s, certainly by the time of the sale of Blocks 19, 20 and 20A to I Haider, had assumed a position in which they bore the responsibility for the debt. This I think fits within this statement in Burke at [14]:
In general terms, the principle of equitable contribution requires that those who are jointly or severally liable in respect of the same loss or damage should contribute to the compensation payable in respect of that loss or damage, either equally where they are liable in the same amount or proportionately, where the amount of their liability differs. The principle has regularly been applied between co-sureties, co-insurers, partners, co-owners, where payment is made by one in discharge of a common liability, and co-trustees who are in pari delicto.
When the sale of the three blocks was made to + the respective parties had ceased to be in pari delicto. The ‘fault’, originally designed to be shared when the guarantees were signed, had shifted to Dr Haider.
Orders
Accordingly, I make the following orders:
(i)Judgment is given for the defendants against the plaintiffs.
(ii)The plaintiffs are to pay the defendants’ costs of the proceedings.
I will hear the parties if any different costs order is sought.
| I certify that the preceding one hundred and twenty three [123] numbered paragraphs are a true copy of the Reasons for judgment of his Honour Justice Elkaim. Associate: Date: 13 August 2019 |
2
7
1