In the matter of MSU Management Pty Ltd - Urusoglu v MSU Management Pty Ltd and ors

[2011] NSWSC 54

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of MSU Management Pty Ltd - Urusoglu v MSU Management Pty Ltd & ors [2011] NSWSC 54

Hearing dates:

2-5, 8 and 12 November 2010

Decision date:

18 February 2011

Before:

Ward J

Decision:

Equity Division proceedings - plaintiffs' claim dismissed with costs.

Common Law proceedings - order for possession of premises and mesne profits to be assessed

Catchwords:

CONTRACT - whether agreement under which second defendant obliged to transfer shares in first defendant company back to former shareholder - claim for damages for breach of implied term not to diminish benefit of alleged agreement - alternatively, if agreement as defendants contend, whether agreement has been frustrated - HELD - plaintiffs have failed to establish agreement by second defendant to transfer shares in the company - claim for breach of agreement alleged by plaintiffs fails - agreement, as found, has not been frustrated as matter of law - if failure of third party to complete contract for sale of land did amount to a frustrating event it was self-induced

CORPORATIONS - claim for order for rectification of share register - claim of oppression of former shareholder's interests in relation to circumstances in which she ceased to be member of company - claim by former shareholder that second defendant in breach of director's duties - HELD - no rectification of share register - no oppression established - claim by first plaintiff of breach of director's duties in relation to conduct after she ceased to be a shareholder does not arise in light of finding that she not entitled to shares in the company

RESTITUTION - alternative quantum meruit claim in relation to completion of subdivision works - HELD - no entitlement to restitution in face of agreement in relation to those works - value of works not adequately established

TORT - claim for damages in deceit - HELD - claim in deceit not established -

POSSESSION - claim by company for possession of land and mesne profits - HELD - first defendant entitled to an order for possession of land and mesne profits to be assessed.

Legislation Cited:

Corporations Act 2001 (Cth)

Cases Cited:

ABB Power Generation Ltd v Chapple [2001] WASCA 412; (2001) 25 WAR 158
Actwane Pty Ltd (Receiver and Manager Appointed) (In Liquidation) and William James Moss v Hotel Redfern Pty Ltd, Actwane Holdings Pty Ltd and Stephen Michael Larkin [2002] NSWSC 265
Ansett Transport Operations Pty Limited v The Commonwealth of Australia and Ors [1977] HCA 71; (1977-78) 139 CLR 54
Backoffice Investments v Campbell [2007] NSWSC 161; (2007) 61 ACSR 144
Brandi v Mingot (1976) 12 ALR 551
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
Brenner v First Artists Management Pty Ltd [1993] 2 VR 221
Brisbane City Council v Group Projects (1979) 145 CLR 143
British Movietonews Ltd v London & District Cinemas Ltd [1952] AC 166
Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26
Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359
Campbell v Backoffice Investments Pty Ltd [2009] HCA 36; (2009) 259 ALR 402; (2009) 83 ALJR 110
Christiani and Nielsen Pty Ltd v Goliath Portland Cement Company Limited; Goliath Portland Cement Company Limited v Christiani and Nielsen Pty Ltd [1993] TASSC 156 16 December 1993
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24 (1982) 149 CLR 337
Commonwealth of Australia v McLean (NSWCA, 31 December 1996, unreported)
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Davis Contractors v Fareham UDC [1956] AC 696
Dextra Bank & Trust Company Limited v Bank of Jamaica [2002] 1 All ER (Comm) 193
Equity 8 Pty Ltd v Shaw Stockbroking Ltd [2006] NSWSC 1251
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95
ES Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1995) 15 ACSR 536
Farah Constructions v Say-Dee [2007] HCA 22; (2007) 230 CLR 89
Fexuto v Bosnjak Holdings Pty Ltd (1998) 30 ACSR 688
Flett v Deniliquin Publishing Co Ltd (1964-1965) NSWR 383
Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186; (2009) 75 NSWLR 42
Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534; 20 ACLC 1502
Grant v John Grant & Sons (1950) 82 CLR 1
Hangkam Kwintong Woo v Liu Lan Fong (1951) AC 707
Hayward v Timilty [2009] NSWDC 54
HML v R [2008] HCA 16; (2008) 235 CLR 334
Ho v Powell (2001) 51 NSWLR 572
Horton v Jones (1934) 34 SR (NSW)
Horton v Jones [No 2] (1939) 39 SR NSW 305
Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810; [2008] ATPR 42-410
Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1998) 5 BPR 11,110
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd, "The Kingswood" [1942] AC 154
Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181
Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No 2) [2006] FCA 748
Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635; (2008) 247 ALR 412
Mackay v Dick and Anor (1880-81) 6 App Cas 251
Magill v Magill; [2006] HCA 51(2006); 226 CLR 551
Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452
McLaughlin v Daily Telegraph Newspaper Co Ltd (No 2) [1904] HCA 51; (1904) 1 CLR 243
Morningstar Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732 at 735; 23 ACLC 1100
Nocton v Lord Ashburton [1914] AC 932; [1914] All ER Rep 45
Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964] 2 QB 227
Pacific Brand Sports & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221
Placer (Granny Smith) Pty Limited v Thiess Contractors Pty Limited (2000) 77 ALJR 768
Rafeletos v Great Wall Resources Pty Ltd [2009] FCA 1396
Re M. Dalley & Co Pty Ltd (1968) 1 ACLR 489
RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2009] WASC 206; [2010] WASCA 128 (7 July 2010)
Roxborough v Rothmans of Pall Mall Aust Ltd (2001) 208 CLR 516
Scanlan's New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169
Secured Income Real Estate (Australia) Limited v St Martins Investments Proprietary Limited [1979] HCA 51; (1979) 144 CLR 596
Shelton v NRMA [2004] 51 ACSR 278
Southport Tramways v Gandy [1897] 2 QB 66
State Bank of New South Wales Ltd v FCT (1995) 62 FCR 371; 132 ALR 653
The Bell Group Ltd (in liq) v Westpac Banking Corp [No 9] [2008] WASC 239
The Super Servant Two [1990] 1 Lloyd's Rep 1
Thomas v HW Thomas Ltd [1984] 1 NZLR 686; (1984) 2 ACLC 610; (1984) 2 NZCLC 99,148
Vroon BV v Fosters Brewing Group Ltd [1994] 2 VR 32
Watson v Foxman (1995) 49 NSWLR 315
Wilson v Kelly [1957] VR 147
Winspear v MacKinnon [2007] FCA 2077

Texts Cited:

Andrew Marsden in 'Prejudicial relief?' (1994) 15 Company Lawyer 178
Elizabeth Boros in Minority Shareholders' Remedies at p 123
Goff & Jones, The Law of Restitution (7th edn, 2007

Category:

Principal judgment

Parties:

Elif Urusoglu (First Plaintiff)
Mahir Urusoglu (Second Plaintiff)
MSU Earthworks & Heavy Haulage Pty Ltd (Third Plaintiff)
MSU Management Pty Ltd (First Defendant)
Scott Larry Brennan (Second Defendant)

Representation:

Counsel:
S Jacobs (Plaintiffs)
E Cox (Defendants)
Solicitors:
Marando Solicitors (Plaintiffs)
Walker Hedges & Co (Defendants)

File Number(s):

09/288299 (Equity Division) 09/295975 (Common Law Division)

Judgment

1. HER HONOUR : In these proceedings, claims are made by two members of the Urusoglu family (Elif and her brother Mahir) and by a company controlled by Mahir (MSU Earthworks & Heavy Haulage Pty Ltd) against a finance broker and erstwhile family friend (Scott Brennan) in relation to matters relating to a company (the first defendant, MSU Management Pty Ltd) formerly controlled by Elif but now controlled by Mr Brennan. (Without any disrespect, I will refer to the members of the Urusoglu family, including Elif and Mahir's father Huseyin, by their first names. Both Mahir and Huseyin were also referred to on occasion in the evidence before me by Anglicised names - Mike and Sam, respectively - but for consistency I will refer to them by their given names.)

1. Elif's principal claim is for the rectification of the company's share register so as to regain the legal ownership of the shares in MSU Management (to which it is said she is in equity entitled) and thus to regain control of the company. She also seeks damages in her own right for breach of contract or alternatively relief on behalf of the company (relying upon an alleged contravention by Mr Brennan of ss 181 and 182 of the Corporations Act 2001 (Cth)) in relation to the use by Mr Brennan of moneys drawn from the company funds, while he was a director, for his personal expenditure. In the alternative, Elif seeks damages (in the pleading claimed in the sum of $680,000 but in the course of closing submissions put at a lesser sum - in the order of $250,000, or lesser still, $179,000) plus interest by way of relief for the alleged oppression of her interest as a former member of the company or in lieu of specific performance of the alleged agreement on the part of Mr Brennan to transfer back to her the shares in MSU Management.

1. Elif's claims broadly rest on the establishment of an alleged agreement on the part of Mr Brennan either to hold on her behalf or to transfer back to her (after obtaining the financing necessary to enable the company to purchase a property in Mt Vernon) the shares in MSU Management.

1. Mahir's claim (and that of his company) is in the alternative to that brought by Elif. Counsel for the plaintiffs, Mr Jacobs, confirmed that this claim is pressed only if Elif does not obtain the relief sought by her. In that event, Mahir and his company seek restitution for the alleged unjust enrichment on the part of the defendants in retaining the benefit of subdivision works said to have been carried out at their request and/or freely accepted by them (those works having been carried out by or at the expense of Mahir or his company) or alternatively as damages for deceit. Mahir's claim is nevertheless said to hinge on the existence of the agreement on which Elif claims (T 388).

1. The nub of the dispute is as to what agreement was reached in 2008 in relation to the purchase by MSU Management of land at Mt Vernon which one or more of the Urusoglu family wanted to retain for the construction of their family home (but also for use as a display home in order to promote a wall panel product - WIPS - created or developed by Mahir and apparently patented by him or by an entity associated with him).

1. In essence (though there seemed to be various iterations of the alleged agreement on which the principal claim is based, to which I will refer in more detail shortly), the Urusoglu claim is that Huseyin and Mahir (acting on behalf of Elif) entered into an agreement with Mr Brennan, the intent of which was to enable the purchase and development of the Mt Vernon land with the benefit of mortgage finance to be arranged by Mr Brennan and that, following the subdivision of the land into two blocks, one block of land (the front block) was to be the Urusoglu family home. It is said that the agency relationship between Huseyin/Mahir and Elif can be inferred from the fact that Elif (somewhat inconsistently with her protestations of independence) left the conduct of the affairs of MSU Management to her father and brother.

1. The land in question had been acquired by Huseyin in 2004. Following his voluntary entry into bankruptcy in late 2007, the land was put up for auction by Permanent Custodians in the exercise of its powers as mortgagee in possession. It was acquired at auction on 5 July 2008 by MSU Management and remains in the ownership of that company (the land having been subdivided into two lots in early 2009). As part (or on Elif's evidence in breach) of the arrangements between the parties for the financing of the acquisition of the land, the shares in MSU Management were transferred to Mr Brennan in 2008 pursuant to a share transfer form dated 16 June 2008 but registered on about 28 July 2008 after the auction sale.

1. It is alleged that Mr Brennan's refusal to transfer the shares back to Elif is in breach of the above agreement. It is further alleged that, in breach of an implied term of the agreement on the part of Mr Brennan (to do nothing within his power to diminish or destroy the benefit to Elif of the agreement), Mr Brennan has diverted (from funds obtained through the later refinancing in 2009 of the initial loan arrangements pursuant to which the land was acquired) funds of the company to his own personal use. (Although initially pleaded as a diversion of funds in the order of $300,000, by the time of the hearing what was claimed as funds utilised for personal expenses was in the order of $179,000.)

1. The alternative unjust enrichment claim arises in respect of the work carried out for the construction of a concrete access road (sometimes described, 'absurdly' in the words of one of the Urusoglu relatives, Mr Mesut Kanli, as a driveway) through the land (to satisfy one of the conditions of the development consent for subdivision) and the provision of landscaping and other services, such as water services, to the land. It is alleged that this work was carried out at the express request of Mr Brennan or, alternatively, that the benefit of the work was freely accepted by Mr Brennan (or MSU Management), and that the work was provided upon the mistaken belief that the shares in MSU Management would be transferred back to Elif (such that the Urusoglu family would obtain the benefit of this work).

1. Further, it is alleged that the making of the alleged agreement constituted a representation that Mr Brennan would reconvey the shares (on which representation Mahir and his company allegedly relied in carrying on the works in question) and that Mr Brennan had no honest intention of so doing - this being relied upon for the claim for damages in deceit.

1. Mr Brennan denies the agreement as pleaded but does admit that an agreement was made in relation to the land in question. That agreement, in summary, is alleged to have been that Mr Brennan would arrange the funding for the acquisition of the Mt Vernon land; that Mr Brennan would acquire the property (it being agreed that he would do so through the corporate vehicle, MSU Management); that the Urusoglu family would carry out the subdivision work at their own cost; and that on completion of the subdivision the front block would be sold to a person or entity nominated by Huseyin at a fair market price (with the logical consequence that the back block, and any profit thereon, to be retained by Mr Brennan through his ownership of the shares in MSU Management). It is said that it was never a term of this agreement that Mr Brennan would re-convey the shares to Elif.

1. Mr Brennan says that after the subdivision was completed Huseyin nominated a newly incorporated company controlled and owned by his brother-in-law (Mr Kanli) to acquire the front block. A Contract for Sale of Land was entered into on 9 February 2009 in respect of the front block, with Sebat Pty Ltd (Mr Kanli's company) as purchaser (for the sum of $850,000) and MSU Management as vendor. No deposit was paid as required by the contract (according to the Urusoglu witnesses, it was agreed that Mr Kanli's contribution to the cost of the subdivision works would be treated as the deposit). That contract was in due course terminated for breach. The land in question remains occupied by Mahir and remains burdened by an equitable mortgage in favour of Trimac (as well as securing the lending by NAB/Homeside). MSU Management seeks an order for possession in respect of the land and mesne profits for the period of its occupation by Mahir.

1. By way of reply, filed by leave at the close of the hearing but foreshadowed during the course of the hearing, it is contended by Elif and Mahir that (in the event that the agreement is found to be as asserted by the defendants and not as asserted by the plaintiffs) on the facts pleaded in paragraph 5(vii) of the Defence to the Amended Statement of Claim (i.e. the termination of the Sebat Contract of Sale on or about 9 March 2009) there has been a frustration of the contract Mr Brennan says he entered into with Huseyin. In those circumstances, the plaintiffs seek practical restitution as between the parties. It is said that such restitution requires the recoupment of the benefit of the works carried out on the land and that one way this benefit may be valued is by reference to the benefit of the company funds Mr Brennan used for personal expenses since becoming a director (on the basis that those funds were only made possible though a refinancing that occurred on the basis of the subdivision that had been effected).

Issues

1. The issues for determination are broadly as follows:

(i) What was the agreement pursuant to which the Mt Vernon land was acquired in the name of MSU Management and Elif's shares in that company were transferred to Mr Brennan (it being neither party's case that there was no agreement at all in relation to the transfer of the shares)?

(ii) If the agreement was as the plaintiffs contend (and Mr Brennan is in breach of that agreement by having refused to re-convey the shares in MSU Management to Elif), what relief should be granted (and is Elif entitled to damages for breach of an implied obligation by Mr Brennan not to diminish the benefit to her of the agreement to re-convey the shares)?

(iii) Alternatively, has Elif established an entitlement to relief on the basis of oppression and/or is she entitled to claim damages in the name of MSU Management for funds diverted from the company to Mr Brennan's personal use?

(iv) If the agreement was as Mr Brennan contends, did the termination of the Sebat Contract of Sale amount to frustration of the agreement and, if so, should practical restitution be ordered and what would it comprise?

(v) Has Mahir established an entitlement to damages for deceit?

(vi)   Are Mahir and his company entitled to relief on the basis of their unjust enrichment claim and, if so, in what amount does their claim in quantum meruit sound?

(vii) On its separate claim, is MSU Management entitled to an order for possession of the Mt Vernon land and for mesne profits?

1. Pressed at the close of the hearing to articulate the damages claimed by Elif, Mr Jacobs said that, if the shares are returned to Elif, then the amount claimed by her is $179,000 plus interest (being the amount of the company funds used for personal expenses of Mr Brennan) but that, if the shares are not returned to Elif, then what is sought is the amount of $250,000 plus interest (being the value of the land, as evidenced by the purchase price stipulated in the Sebat contract - $850,000 - less the amount outstanding on the existing mortgage over the front block - $600,000 - and assuming the Trimac loan over the land had been extinguished).

1. Therefore, when considering the relief claimed, I note that the amount quantified in the pleadings at $300,000 is now said to be $179,000 and the $680,000 claimed elsewhere in the pleading is now claimed as $250,000.

1. Mahir's alternative quantum meruit claim is in the order of $350,000 (a sum of $347,000 being the amount appearing in an invoice rendered by his company, MSU Earthworks, in December 2008 for the subdivision works. That sum includes a component referable to an invoice for $90,000 on the letterhead of All Concrete Constructions Pty Ltd, the authenticity of which invoice is in dispute. Conceding that there might be some difficulty in establishing the figure of $350,000, it is nevertheless submitted by Mr Jacobs that at least $250,000 in value has been shown to have been conferred by reference to the works (that comprised of $130,000 from Mr Kanli, concrete supplied by Western Suburbs Concrete for approximately $30,000 and the disputed invoice of $90,000).

Summary

1. In summary, for the reasons set out below, my views on the above issues are as follows.

(i) What was the parties' agreement?

1. The plaintiffs (Elif, Mahir and his company, MSU Earthworks) have not established on the balance of probabilities that there was an agreement in the terms for which they contend. On the whole, I find Mr Brennan's version of events to be the more credible. I find that the agreement reached between Huseyin and Mahir (on behalf of Elif) in relation to the acquisition of the Mt Vernon land was for Mr Brennan to arrange finance for its purchase by MSU Management; for the shares in, and control of, MSU Management to be transferred to Mr Brennan; for the subdivision of the land at the cost of Mahir (or the extended Urusoglu family); and for the transfer of the front block, at a fair market price, to Huseyin's nominee after completion of the subdivision.

1. In particular, I find that there was no promise by Mr Brennan not to register the share transfers and no obligation on the part of Mr Brennan to transfer the shares in MSU Management back to Elif.

1. The consequence of this is that (subject to the obligation to transfer the front block to Huseyin's nominee) Mr Brennan is entitled through the shares in MSU Management to any profit from the sale of the respective blocks of land.

(ii)   Relief for Elif if agreement in relation to shares were established

1. On my finding in (i) above, this issue does not arise. Had it arisen, I would have been inclined to the view that the appropriate relief depended on the content of Mr Brennan's obligation in relation to the shares. If his obligation was to hold the share transfer form and not to register it, then I would have been of the view that the appropriate remedy was to rectify the register. Had I been of the view that Mr Brennan was entitled to register the share transfer but was thereafter obliged to transfer back to Elif the shares, then I would have considered the appropriate relief to be to order the transfer by Mr Brennan back to Elif of the shares he holds in MSU Management (or damages for failure to do so).

1. In either case, I consider that any relief involving the reinstatement of Elif as a member of the company would have needed to be conditional on the reimbursement to Mr Brennan of any interest or other payments made by him or on his behalf in relation to the land over the period from July 2008 and to the procuring of a release in respect of any liability he or his wife have or may continue to have under guarantees given in connection with the financing of the acquisition or development of the Mt Vernon land.

1. As to the re-financing of the initial loan facilities obtained in that regard, and the use by Mr Brennan of funds derived from that refinancing for his personal use, had I found that the agreement was as contended for by Elif, then any claim for damages suffered for breach of an implied obligation not to diminish the benefit to Elif of the reconveyance of the shares would be referable to the loss of value in the shares which was not established. I would have therefore been inclined to think that the appropriate remedy would be to order Mr Brennan to reimburse to the company the sum of $179,000 (plus interest) being the amount drawn from the company funds to his personal use (in the absence of evidence from Mr Brennan that he was entitled to do so).

(iii) Oppression/derivative claim

1. I am not satisfied that Elif, as a former member of the company, has established any oppression in relation to the circumstances in which she was removed as a member and director of the company and hence has not established any entitlement to relief under s 234 of the Corporations Act .

1. As to the question of any breach by Mr Brennan of his duties as a director of MSU Management by reason either of his conduct (after Elif ceased to be a shareholder) in not paying down the so-called Trimac loan at an earlier time or in drawing down company funds for his personal use, those issues do not arise on the suit of Elif (since I am not satisfied that she has any entitlement to the shares of the company). Had the issue arisen, then it would have been necessary to consider Elif's application for leave to bring a derivative suit in the name of the company (problematic in that it could be assumed that if Elif were the sole director and shareholder then there would be no basis for thinking that the company would not itself prosecute the claim and because it was not explained how the overlap between Elif's personal claim for damages and the cause of action asserted on behalf of the company would be addressed in the context of what whether it would be in the best interests of the company to bring the claim). I am inclined to think that the requirements for leave to bring a derivative suit in those circumstances were not satisfied.

1. In passing I note that I would not have been satisfied that the evidence before me enabled me to form a conclusion (had it been necessary) that the delayed repayment of the Trimac loan was a breach of director's duties since I was not privy to all of the circumstances in which that loan was not paid down (there having been, I was told, litigation last year in relation to that loan) and the commercial prudence or otherwise of deferring repayment in the anticipation of a sale of one or both of the blocks is something that seems to me to fall within the realms of a business judgment that I am simply not in a position on the evidence to assess. However, I accept that the evidence would have allowed the conclusion that there was a serious question to be tried on that issue.

1. As to the payment by Mr Brennan from company funds of personal expenses, it was suggested that this could legitimately have been effected by way of a loan account with the company or as a payment at the direction of Mr Brennan of directors' fees. However, in the absence of evidence as to those issues, a payment out by Mr Brennan of company funds for personal expenses would prima facie seem to be in breach of his duties as a director and there would have been a serious question to be tried also on that issue.

1. In light of the finding in (i) above, I can usefully take the matter no further (other than to note that had Elif succeeded on her principal claim in relation to rectification of the shares, and been reappointed as sole director it would then have been open to her in the name of the company to pursue claims for breach of director's duties against Mr Brennan, if so advised, and hence there would not seem to be a need for leave to bring a derivative suit).

(iv) Frustration

1. I am not satisfied that the termination of the Sebat Contract of Sale operated to frustrate the agreement that I have found was reached in relation to the transaction (namely that the front block would be subdivided at Mahir or the Urusoglu family's expense and sold at a fair market price to Huseyin's nominee).

1. The front block remains in the ownership of MSU Management. I am not satisfied that the agreement has become impossible of performance. (It seems to me that there is a reasonable argument that, the sale to Sebat having fallen through, it remained open at least for a reasonable time after termination of the Sebat contract for Huseyin to nominate another purchaser of the land for fair market value.) Nor am I satisfied that performance of the contract has become a radically different thing, so as to give rise as a matter of law to frustration of the contract. The performance by Mahir of his obligations to carry out the subdivision works may not have had the outcome Mahir desired but his performance of the subdivision works was always to be in circumstances where the benefit hoped to be achieved was dependent on Huseyin's nominee being able and willing to complete the contract.

1. In any event, I have concluded that the failure of Sebat to complete the 2009 contract was due to a decision by Huseyin (or in which he acquiesced) for his nominee not to proceed with that sale or an inability on the part of Huseyin to arrange the necessary finance for that to occur. I am satisfied that Sebat, in entering into the contract for sale, was doing so on behalf of Huseyin. Any frustration of the agreement by reason of the failure by Sebat to complete the contract in those circumstances seems to me to be self induced.

(v) Damages for deceit?

1. I am not satisfied that it has been established that Mr Brennan has any liability in tort for deceit.

(vi) Mahir's alternative quantum meruit claim

1. I am not satisfied that Mahir (or his company) has established a claim based on the unjust enrichment of Mr Brennan or MSU Management (and, even if there had been such a claim I could not be satisfied that the quantum of the benefit to be restored to Mahir or his company had been adequately established).

(vii) Claim for possession

1. In light of the above findings, MSU Management is entitled to an order for possession of the Mt Vernon land. I consider that it is also entitled to an order for mesne profits. I think it appropriate that the quantification of those profits be referred to a referee or to an Associate Justice but will hear submissions in relation to the most expeditious way of carrying out such an assessment.

Facts

1. Prior to his entry into bankruptcy, Huseyin had carried on business as a property developer. (According to Huseyin's evidence in the witness box, in explanation for his assertion that he did not care what happened to the Mt Vernon property after his bankruptcy, Huseyin said that he had been involved in millions of dollars worth of property development.) He was described by Counsel for the plaintiffs, Mr Jacobs, as an entrepreneur (and there was no suggestion to the contrary).

1. Mr Brennan is a finance broker and had, over the years, arranged to procure finance for Huseyin for various property developments. Mr Brennan conceded that there had been a commercial relationship with Huseyin over the years and did not deny that he had derived commission or brokerage fees from his dealings with Huseyin. Though the precise quantum was not admitted, Mr Brennan accepts that he had received at least $120,000 in that regard. Nevertheless, the receipt of commissions seems to be only one side of the equation. Mr Brennan claims to have suffered considerable (and far more extensive) losses in at least one project in which he says he (and his colleagues) had invested funds (referred to as the Granville development), something not acknowledged either by Huseyin or by Mahir (other than that Huseyin said that "everybody" had lost in that project and appeared to acknowledge that Mr Brennan had been pressing him for repayment of money in respect of the project).

1. It does not appear to be disputed that the two men and their families had had a social relationship for some time (though the extent of it may be in dispute). Both Elif and Mahir said that they had called Mr Brennan "Uncle". (Their trust in Mr Brennan, which I consider likely to have been overstated by both, was given as the explanation for Elif's preparedness to sign documents that she now says she knew were incorrect at the time and which she says her father's accountant had advised her at the time not to sign.)

1. In around 2004/2005, Huseyin bought the land at Mr Vernon which is the subject of the claims in the present proceedings. At that time, the land had the benefit of a Development Consent for subdivision into two lots. One of the conditions of the subdivision consent was the creation of a 3.5m sealed driveway or access road along the boundary of the land. Mahir's evidence is that he carried out substantial work to clear the Mt Vernon land in 2006 (and he estimated that work to be worth around $300,000). Mahir's evidence in the witness box was that much of the work done prior to the events in question in 2008 (or at least the works in relation to the access road) was rendered worthless (and later had to be re-done) due to the delay occasioned by the mortgagee taking possession of the property (that arising by reference to the impact of the weather on the incomplete roadworks).

1. Huseyin says that he wanted to build a family home on the Mt Vernon land and to do so by using an insulated wall panel system ("WIPS"). Mahir said that he had created or invented the idea of WIPS. He was enthusiastic and expansive in his description of it in the witness box, (as compared with his evidence in relation to other matters in which he displayed an attitude of distinct disinterest). Huseyin's plan was to live in the home but also to use it as a display home in order to demonstrate the features of the WIPS product. In the witness box, Huseyin emphasised that the only way that "they could all get back trading" was for the WIPS project to "get off the ground" (T 74) and that for that to happen it was necessary to have a display home to demonstrate the benefits of WIPS.

1. It is not clear to me when the WIPS product was first developed or what, if any, arrangements were made as between the parties for the development or commercialisation of WIPS. However, Mr Brennan seems to have been approached to become involved in the WIPS project, at least in relation to the financial side of that project, at some time in 2007. Huseyin said that there were discussions as to Mr Brennan obtaining a commercial interest in the product. (Huseyin said that he had promised both Mr Brennan and another person, who he described as a friend, Mr Ashish Patel, a percentage of the company to be set up to commercialise WIPS although no such shareholding was ever transferred and it seems clear that WIPS did not ever 'get off the ground' at least in the Urusoglu family's hands). Huseyin says that he set up WIPS Management (T 74), although this is not clear from the ASIC search. Mahir said in the witness box that WIPS had been patented and that the patent was owned by a company but that it had been sold - though he claimed to have an entitlement to some management and royalty fee. He accepted that to date WIPS has not made money (T 30) and there is nothing to suggest that there was any mechanism in place by which, if it did, Mr Brennan would benefit therefrom.

1. The relevance of WIPS to the dispute at hand is that Mr Jacobs submits that the prospect of a profit being made out of the WIPS product (together with the commission to be generated from the raising of finance for the acquisition of the Mr Vernon land) was the commercial incentive for Mr Brennan to enter into the agreement that Huseyin and Mahir say was reached in mid 2008. (For Mr Brennan it is said that there was no commercial purpose served in him entering an agreement in the terms contended for by the Urusoglu family and hence it is objectively unlikely that there was an agreement in such terms).

1. In any event, in August 2007, a company was incorporated (WIPS Management Pty Ltd) by Mr Brennan, which suggests that at that time he anticipated in some fashion becoming involved in the promotion and sale of WIPS in the future (since otherwise the use of WIPS in the company name seems hard to explain - it might be thought likely that Mahir or his father would take objection to the use of the WIPS name by a party not involved in some way with the project). This company did not, however, ever trade. In June 2010, Mr Brennan resigned as a director and secretary of the WIPS Management company and transferred his shares in that company to his wife. Mr Brennan, in cross examination, said that WIPS Management was just "lying around unused" and had been put into his wife's name so some good use could be made of it, though it is not clear what use that might be.

1. In late 2007, Huseyin declared himself bankrupt. Chronologically, this followed (and Huseyin says it was caused by) the failure of the Granville project. In cross-examination, Huseyin became visibly upset when talking about his current financial position (saying that he had lost everything) and at one stage seemed to attribute his bankruptcy to following Mr Brennan's advice, though there was no evidence as to this and nothing turns on it for the purposes of this proceeding. For his part, Mr Brennan says that he (and his colleagues, collectively) lost about $2.8m in the Granville project. He deposed to having made a number of attempts to procure repayment of moneys lent for the project from Huseyin (and Huseyin does not seem to dispute that Mr Brennan was upset and demanding moneys around this time). Huseyin's attitude in the witness box seemed to be that he, Huseyin, had lost his 'life' over the project and thus he had little room for sympathy for Mr Brennan's position; further, he maintained that he was not aware whether there had in fact even been any losses sustained by Mr Brennan (apparently solely on the basis that he had not been shown all the financial documents he had requested in relation to this issue.)

1. The first registered mortgagee (Permanent Custodians) in due course exercised its power of sale and put the property up for auction on 5 July 2008 as mortgagee in possession.

1. According to Mr Brennan, in early June 2008 he had conversations with both Huseyin and Mahir in relation to the forthcoming sale of the land in which he was asked to assist them to purchase the land and it was suggested to him that there was potential to buy the land for a low price, complete the subdivision and make a profit (Mr Brennan says that it was put to him that he could thereby recoup some of his losses on the Granville project). Huseyin and Mahir deny this. Huseyin says that it was Mr Brennan who offered (after the auction) to help.

1. At T 110, Mahir denied asking Mr Brennan for help to buy the Mt Vernon property but "vaguely" remembered a conversation "maybe saying I buy it back: He said he didn't really remember any conversation, but "may" have mentioned buying the property. (I had the impression that the vagueness with which Mahir answered this and other questions in similar vein, was because he thought it was at least possible, if not likely, that there had been such discussions and did not wish to be caught out in a straight denial of those conversations.)

1. Mr Jacobs submits that Mr Brennan has distorted what happened in relation to the Granville project. Whether or not that is the case, on the oral evidence given by Huseyin and Mahir (albeit perhaps influenced by subsequent events, not least being this litigation), it was difficult to discern any sympathy on the part of either Huseyin or Mahir for the fact that Mr Brennan may have suffered losses on the project (which belies any suggestion that they were earlier anxious to help him in this regard). Nevertheless, the context of the failure of the Granville project does provide not only a basis on which they might well have sought to persuade Mr Brennan to be involved in the purchase of the Mt Vernon land but also a reason why Mr Brennan might be reluctant to do so (as he says was the case). Indeed, Huseyin accepted that Mr Brennan did not want to enter into any further business venture with him unless there was an expectation of profit, which makes Huseyin and Mahir's version of the agreement less likely.

1. Notwithstanding Mr Brennan's professed reluctance to become involved in another commercial or property project with Huseyin (after his experience with Granville), he says that he was prepared to make some enquiries in relation to the property and the possibility of arranging finance for the property. He could not recall whether he had filled in an application before or after auction and could not remember date started making enquiries (T 351.46). There is no documentary evidence of such enquiries, although Mr Brennan said that he had commenced them prior to the auction (T 352.19). There was certainly no application for finance from any external finance-provider made prior to the auction (whether by Mr Brennan or by the members of the Urusoglu family) although the speed with which finance was later arranged might support the inference that some enquiries had been made prior to the auction (albeit on an informal basis). In any event, Mr Brennan does not seem to have been in a position to commit to the purchase of the property as at the date of the auction (which is consistent with his denial of an intention to bid on that occasion.)

1. Somewhat surprisingly (since the importance Huseyin places on the acquisition of the front block to enable the family to get back on its feet), Huseyin denies that he had any interest in the Mt Vernon property or its potential at that stage - he says he was overseas a lot and that he had much more valuable properties, such as an interest in a business park, that he was concerned about at the time. He denies that he had the relevant conversations with Mr Brennan.

1. Whatever his father's attitude to Mt Vernon at that time (and it is hard to accept Huseyin's evidence that he did not care at all about the fate of the land that his Counsel described as the 'family dream' and on which the hopes of the WIPS product - and the only way to get trading again, T 74) apparently rested, Mahir seems to have been keen to keep the land in the family. Mahir says that he spoke to his father before the auction about acquiring the land and that also he spoke to his uncle, Mr Kanli, to arrange funds for its acquisition. Mr Kanli confirmed that Mahir had asked him before he went to the auction (T 236) to help get the money but it seems that any such promise of financial assistance was in very general terms (not least because there was no information provided as to the amount in question). In the witness box, Mr Kanli said Mr Brennan was going to fund it (the acquisition) (T236.27) and that he agreed to help get the money, which is inconsistent with the purchase being financed solely by Mr Kanli (yet on Mahir's evidence that is the only source of finance he had arranged before the auction).

1. Mr Kanli did not have $96,000 in a bank account in October/November (T 236.23) with which to meet the deposit (and seems to have been relying on undisclosed sources of cash as the basis for any such financial assistance that he did provide to Mahir).

1. Mahir was equivocal as to whether he had had any discussion with Mr Brennan prior to the auction about the purchase, although suggesting he had a 'very vague recollection' that there might have been such a discussion. He certainly denies any agreement with Mr Brennan in relation to the proposed purchase.

1. Mahir did not, personally, have the funds to acquire the Mt Vernon land and accepted that he did not have a good credit history (T 106.45) (though he was not willing to admit that, had he tried, he would not have been able to borrow the funds. Nor did MSU Management (which seems never to have traded) have the ready funds to acquire the land.

1. On Mahir's version of events, therefore, he attended and bid at the 5 July 2008 auction without any ability to meet the deposit (let alone the purchase price) other than by relying on his uncle's largesse (conduct that seems foolhardy in the extreme and tends to make Mr Brennan's version of events the more objectively credible).

1. There is a live dispute as to the ownership of the shares in MSU Management as at the date of the auction (5 July 2008). MSU Management, according to the historical company records, was incorporated in December 2006. Elif was the sole shareholder and director of the company. According to Mahir (who said that he did not understand much about incorporation - T 126), the company was set up to act as trustee of the MSU Holding Trust, of which he was a beneficiary - T126 - and he paid the costs of its establishment. Prior to 5 July 2008, there is no suggestion that there were any assets of the trust or that MSU Management had traded or actively carried on any business. (Mahir was not able to say whether the trust had been registered for GST purposes - T 125 - and dismissed questions as to its status by saying that Mr Brennan's accountant had set it up and "he did it all" (T 125).)

1. Mahir accepted that he was "not that experienced" in relation to corporations and that his sister Elif (who says she made the decision to incorporate the company) was less experienced than he (T 127). However, Mahir was not prepared to concede that Elif was not actively going to be involved in the running of the company. Elif (who seemed intent in establishing that she was an independent decision-maker) could not point to any real purpose for the existence of MSU Management but then, somewhat inconsistently, said dogmatically that the company was "never to be separated from the trust". (It is difficult to know what Elif understood by such a proposition, since she was not able to explain what a trust was and gave no reason for the requirement that the company remain trustee of the trust, if this is what she meant by it not being separated therefrom.) It was not suggested that the MSU Holding Trust itself had any assets at the relevant time. Elif seems to think it was there to put funds into if the occasion so arose but it is not clear from where or when it was expected that any such funds would have been derived.

1. Mr Brennan deposes (in paragraph 28 of his 23 May 2010 affidavit) to a conversation with Huseyin (denied by Huseyin), to the effect that Huseyin had said to him that MSU Management could be used as the vehicle for Mr Brennan to acquire the Mt Vernon land. (Huseyin, however, says that Mr Brennan only offered to help after the auction and seems to deny that there was any discussion about the role of MSU Management in the acquisition of the land prior to the auction.)

1. What is clear is that Huseyin (then an undischarged bankrupt) could not himself buy the land and he readily acknowledged that he could not borrow any funds to do so. He seems to have been under the impression that because of his bankruptcy his children would not have been permitted themselves to bid at the auction (which lends some weight to the suggestion that he or his son would have approached Mr Brennan to assist in that regard and may explain the suggested use of MSU Management as a vehicle for the purchase).

1. Why the use of MSU Management would be suggested if the purchase was to be by Mr Brennan in his own right (rather than as a means for the Urusoglu family to acquire the whole of the land) as Mr Brennan contends is not clear. Mr Brennan suggested in his affidavit that he had a difficulty being seen to be involved in the acquisition as he had procured the initial mortgage for Huseyin and his wife, but it was not made clear why that would necessarily cause a difficulty if the subsequent sale was to occur at a public auction. However, if Mr Brennan had such a concern it might explain the use of the corporate vehicle. Counsel for Mr Brennan (Mr Cox) submitted that the corporate vehicle was simply used as a matter of convenience.

1. Mr Brennan says that on 16 June 2008 there was a meeting in which Elif (the then sole director, secretary and shareholder of MSU Management) resigned as a director of the company and agreed to transfer the shares to Brennan. (A minute of meeting subsequently prepared by Mr Castino records a meeting on that date at the registered office and principal place of business of MSU Management at which both Elif and Mr Brennan are noted as being in attendance. Interestingly, the minute contains the same misspelling of Elif's surname as is found where her name first appears in the 5 July letter.)

1. Elif was adamant that she had not attended any such meeting and her conviction on this issue (compared with rather more uncertain evidence on other matters) led me to believe her on this issue. She produced in the witness box a pay slip that she contended proved that she was at work on that day (although the pay slip simply indicated hours worked over the period) and explained that the hours of travel to and from work made such a meeting impossible. Mr Cox submits that Elif's evidence on the physical impossibility of attending the meeting was exaggerated. While it is conceivable that Elif could have attended such a meeting, outside of her day-to-day work commitments, it seems to me unlikely (if, as it seems they were, Huseyin and Mahir were the moving parties in relation to the sale) that Elif had any active role. (Huseyin, while saying that she made her own decisions, cast doubt on that by referring to the 'ethnic brain', by which I understood him to be suggesting that he regarded his daughter as not having as much independence or responsibility as his son.)

1. The real difficulty I have in accepting that there was a formal meeting convened (at some time prior to the 7 July 2008 meeting with Huseyin's accountant, Mr Castino) at which Elif resolved (whether at her own initiative or at the direction of her father or brother) to resign as director and shareholder of MSU Management and to transfer her shares to Mr Brennan is that (and I say this without any criticism of her) Elif seemed to have very little idea of anything to do with the company or its role as trustee of the MSU Holding Trust or of what a trust was. In matters of that kind I strongly suspect that Elif simply followed whatever instructions were given to her by her father or brother and there is nothing to suggest they paid any attention to the need for the passing of resolutions of this kind at that stage. I doubt that much attention was paid to the formalities of corporate life by Mahir and Huseyin was overseas around the time of the auction.

1. Mr Jacobs relies, in support of the plaintiffs' assertion that Elif was the owner of the shares in MSU Management as at the date of the auction, on two matters: a letter dated 5 July 2008 in its terms authorising Mahir to bid on MSU Management's behalf at the auction and, secondly, the fact (as to which there can be little doubt) that the share transfer and accompanying documentation was not prepared until 7 July 2008.

1. As to the first, a copy of the letter (headed "Director's Minute") signed by Elif, authorising Mahir to bid at the auction, was produced at the hearing. (Although Mr Jacobs placed emphasis on the fact that the letter was dog-eared, stained and appeared to be a few years old, that could equally be the case whether it was produced before the auction, as Elif and Mahir say it was, or after the auction, as I am invited to infer by Mr Cox.)

1. The letter (Exhibit 4) provides as follows:

DIRECTOR'S MINUTE"

ELIF URISOGLU [sic] appoints and gives/confirms authority to Mahir Urusoglu to execute the contract for the purchase of ... Mt Vernon on behalf of the company MSU Management Pty Ltd (ACN 122 996 525)

(Signed)

Elif Urisooglu [sic]

Sole Director and Secretary

5 July 2008

1. Mr Jacobs points out that Elif only needed to provide a letter to authorise Mahir to bid at the action and sign the contract if she were still the director of MSU Management on 5 July 2008.

1. As to the letter, although I accept Elif's evidence that she typed it herself (T177.43) (though twice apparently misspelling her own name), I have difficulty accepting that Elif drafted the text of the letter, particularly when she had no real concept of what a Director's Minute might be in a corporate context. At T I78 she said "it was a meeting that would have taken place with a director". She also said at T 179 "If I had a dictionary and time I possibly could have [known what the language meant]" (hardly a ringing endorsement that she had any understanding of the document being described by the heading to the letter).

1. I think it more likely that Elif was told by someone else what the letter was to say, at least in general terms. (That person seems unlikely to have been Mahir, whose evidence was that he was "pretty sure" a director's minute meant "a director, you know makes a note" - T 213 - and his evidence that his sister used language of the kind in the note was not convincing in light of her own evidence - T 213.31)

1. The copy letter in evidence bears a fax imprint on the top (dated 8 July 2008) with a fax number which appears to be that of someone I was told was Huseyin's lawyer (a Mr Matthew Grew), suggesting that the letter was faxed to or by Mr Grew on that date. I cannot see the need for a copy of the letter to be sent to Mr Grew if it had been earlier given or shown to the auctioneer at the auction - hence the fax imprint suggests the letter was prepared after the auction. (Mahir's evidence showed a tendency to speculate on this point. In cross-examination he said at T 97.35 that the letter was given to Mr Grew "because when the property was bought and my signature on there it had been given to Grew to say it was brother on the day"; he later said that he did not give the letter to Mr Grew, which begs the question as to how it came to be faxed to or by Mr Grew on 8 July 2008, (T 215) and said that he had a copy of the letter in his pocket at the auction T 213.37, before suggesting that there might have been a number of copies in existence.)

1. According to Mahir, there was a discussion at the time the contract was signed as to whether the contract was to refer to the purchaser, MSU Management, as a trustee. However, he does not refer to any discussion as to the need for evidence that he was bidding on behalf of the company. Mahir signed the contract on 5 July 2008. In the contract he is described as the sole director of MSU Management. Having regard to the fax imprint on the 5 July letter, it seems to me more likely that a request for evidence of authority to bid was made only when it was realised that Mahir was not a director of the company, i.e. after the auction and that at that stage Mr Grew asked for and was given a letter of authority to send to the real estate agent. (Mr Grew was not called to give evidence in the proceedings.)

1. I am not persuaded that the 5 July letter was in fact prepared and signed prior to the auction on 5 July 2008. If, as Mahir suggests, he attended the auction and bid for the property on his own bat, then it seems to me quite likely that he did so without realising he would need a letter of authority to bid for the company (whether or not there had been the meeting on 16 June at which Elif had agreed to resign and to transfer her shares). Elif's suggestion that the letter was needed for Mahir to register prior to the auction as a bidder is not supported by any evidence from a real estate agent as to any pre-auction registration requirement (nor for that matter was this the evidence of Mahir). Mr Cox points out that Elif's evidence as to when the letter was provided (as to whether it was provided on 5 July 2008 or the day prior to the auction) was also contradictory.

1. Mr Cox submits and I agree that it is reasonable to infer that on around 8 July 2008 (the date of the fax imprint) someone on behalf of the vendor (presumably having conducted a corporations search of MSU Management) discovered that the director/secretary of the company records was Elif and made enquiries as to Mahir's authority, which resulted in the production of the letter.

1. The second matter relied on by Mr Jacobs as pointing against a meeting on 16 June having taken place as Mr Brennan contends, is the evidence of the accountant who had prepared the documents for the share transfer (Mr Dennis Castino) as to what occurred on 7 July 2008. I will consider that evidence shortly.

1. According to Mr Brennan, throughout June 2008 and up to the auction on 5 July 2008, he had explored the possibility of obtaining finance to purchase the Mt Vernon land without success. (Although it was put to him that the manner in which this was phrased in his affidavit had been intended to convey that there had at least been an application for finance made but just not finalised, and I accept that his affidavit might well be thought to convey such an impression, the fact is that there had been no formal application.) It is unclear precisely what enquiries Mr Brennan had made or which he thought were necessary to enable an application for finance (something he said was a lengthy process, although the only evidence of such a process in this case - in relation to the application for finance for Sebat - seemed to take a matter of 2 or 3 weeks).

1. Mr Brennan, not unreasonably in my opinion, was not prepared to bid at the auction without finance being in place. He said, but Mahir denies, that Mahir continued to pressure him to do so (paragraph 30 of Mr Brennan's affidavit).

1. The auction took place on a Saturday. Huseyin says that he was in China at the time and there was no suggestion that this was not the case. Mr Brennan attended the auction (he says reluctantly and with no intention of bidding). Both Huseyin and Mahir suggested that Mr Brennan had attended the auction simply out of interest (in Huseyin's words, "to sticky beak") because he held a caveat. (Mahir at first said that he remembered Mr Brennan had a caveat on the land but then later said that he was informed by his father that there could have been caveats - T 130.40/T 134). There was no evidence of any caveat that had been lodged by Mr Brennan over the property. (There was, however, evidence in the form of a 3 August 2006 loan agreement that permitted the lenders - who included a Mr Colles and Mr Brennan - to take security by way of a mortgage over the Mt Vernon land. Therefore, although Mr Brennan was not a caveator, it might have been understood by Huseyin that he had some form of security interest under the 2006 arrangements over the land by reason of which he might conceivably have had an interest in attending the auction to ascertaining at first hand the outcome of the sale). Whatever may have been the case in that regard, it is clear that Mahir's information as to any caveat can only be attributable to whatever his father had told him.

1. Mr Brennan says that, without prior agreement or notice to him, Mahir successfully bid at the auction with an offer of $960,000 for the property. Mr Brennan says that he immediately confronted Mahir and challenged his authority (paragraph 31 of Mr Brennan's 23 May 2010 affidavit). Mahir denies this account of the conversation. I have to say that Mr Brennan's version of events would be consistent with the attitude that Mahir displayed in the witness box of apparent disregard for, or lack of appreciation of, the serious financial consequences that might flow from signing a contract for such an amount of money when he had no firm finance in place (and was doing so on behalf of a company in which he had no interest and was not a director). Mahir was, to my observation, casual and disinterested in his approach to giving evidence (described by his Counsel as being "emotionally flat") - he did not appear to think carefully about the questions he was being asked and had an air of disinterest about the process of giving evidence. (His attitude to the production of documents called for by the defence is an example of this - documents seemed to be produced in dribs and drabs as and when Mahir bestirred himself to make searches for the documents.)

1. Mahir was cross-examined as to the fact that the first page of the contract he signed on the day of the auction had falsely described him as the 'sole director' of MSU Management. Those words were handwritten on the contract. Mahir denied that they were in his handwriting (and speculated that they had been mistakenly added by the real estate agent, not knowing that he was not the sole director (T 98.42) i.e. simply on the basis of an assumption that he was the sole director).

1. Mahir said that the contract was blank when he signed it (including as to the price). If that was the case, then this seems to me not only to be remarkably nave or careless on his part (in entering into such a contract without such details) but inconsistent with ordinary conveyancing practice. There would be no need for the price to be left blank (and every reason for both purchaser and vendor for that not to be the case). The contract was on all accounts signed after the completion of the auction when the purchase price should by then have been well known to all. (It was not therefore a situation where blank contracts were signed as some form of assurance of intent to bid, which might explain Mahir's evidence.) One would think that price would be the first detail that a vendor and purchaser would want to ensure was correctly entered into the contract (particularly a vendor selling as mortgagee).

1. In Christiani it was noted that a commercial decision had been made to perform the work the subject of the subcontract and to look to another party for payment (a decision that might have been wise or foolish) but that, regardless of the wisdom of the commercial decision, there was no occasion to relieve the consequences of that decision by imposing a liability on that other party that, had Christiani wished to protect itself against the risk that had eventuated, Christiani could have sought to include in the initial contractual arrangements. Here, similarly, had Mahir wished to ensure that, if sale of the subdivided block to Huseyin's nominee did not proceed, he would be reimbursed for the works carried out by his company to effect the subdivision, then he could have sought Mr Brennan's agreement to such an arrangement. He did not. Therefore, it seems to me that Mahir assumed the risk that he or his family might not ultimately enjoy the fruits of his labour.

1. Reference was made to the statement by the Court of Appeal (at para [123]) in Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186; (2009) 75 NSWLR 42 to the effect that the question of request, payment, receipt and benefit should be viewed as matters of substance and not form or legal technicality, in the context of restitutionary actions.

1. Insofar as Mr Jacobs invokes the terminology of "free acceptance" of the benefit conferred by the works, Beech J in Baker Nominees (at [174]) noted the test as to when services have been accepted, applied in Brenner v First Artists Management Pty Ltd [1993] 2 VR 221 (at 257-261) and ABB Power Generation Ltd v Chapple [2001] WASCA 412; (2001) 25 WAR 158 (at [15],[20]-[21]), is that stated in Goff & Jones, The Law of Restitution (7th edn, 2007) [1-019] as being where a reasonable person "should have known that the claimant who rendered the services expected to be paid for them, and yet he did not take a reasonable opportunity open to him to reject the proffered services". (His Honour also noted (at [177]), but did not need to address, the doubt as to whether acceptance of a benefit, without a request, would be sufficient to found an action for quantum meruit for work done (as opposed to services provided) referring to paras [82] and [86] of Lumbers .)

1. Here, there was no suggestion that Mr Brennan had any expectation that he or MSU Management would be required to pay the cost of the works to complete the subdivision. Those were to be provided by Mahir or his company in order to enable the Urusoglu family to obtain the front portion of the land.

1. In conclusion, a claim in restitution does not lie where there is an enforceable contract and the parties' rights can be determined in accordance with that contract. Here, to grant relief on a restitutionary basis would subvert the contractual arrangements as I have found them to be. Mr Brennan did not undertake to pay the cost of the work, nor did Mahir expect him to do so. That is clear from Mahir's own evidence. Mahir must be taken to have accepted that any remuneration for those works/services was to come through the acquisition of the front block by or on behalf of the Urusoglu family and to have (knowingly or otherwise) accepted the risk that if that did not come to fruition, the works would have been carried out at his expense. There is not a question of any free acceptance as that concept is referred to in the authorities, as there was no opportunity to refuse the benefits knowing that otherwise they would have to be paid for by Mr Brennan.

1. Therefore I am not satisfied that Mahir has established his quantum meruit claim. Had I been so satisfied, I would nevertheless not have been satisfied that Mahir had established the quantum of that claim at anywhere near the $347,000 asserted by him. While I accept that the payments made by Mr Kanli to third parties (such as the contract supplier and the Council) can be relied upon in establishing the value to Mr Brennan of the works, I am not satisfied that the concrete supply invoice of $90,000 is genuine nor do I consider that the evidence of "cash" payments or cash cheques (unsupported by independent evidence) is sufficiently reliable to accept. Therefore, any quantum meruit claim in my view would have been restricted to the Council fees, cost of the Western Suburbs concrete supply and the total of the invoices that were ultimately produced and marked as Exhibits in the proceedings, those being amounts that I am satisfied were directly referable to the subdivision works. (I do not regard Mahir's assertions as to the cost of such works to be reliable.)

1. In my view it cannot be said that there is anything that warrants the conclusion that it is inequitable or unconscionable for Mr Brennan now to retain the benefit of the subdivision works in circumstances where there was no expectation at the time the works were carried out that that he would be required to make payment for those works and he had honoured his side of the bargain by entering into a contract to sell the front block to Huseyin's nominee.

(vi) Possession

1. Mr Cox submits that if Mr Brennan remains the beneficial owner of MSU Management then he is entitled to an order for possession and mesne profits and that the assessment of the quantum of reasonable rent should be referred for assessment. He points out that no defence was raised to this claim.

1. Mesne profits are payable where the defendant occupies the premises as a trespasser. They represent in substance damages for trespass ( Wilson v Kelly [1957] VR 147). They are recoverable until such time as possession is delivered up ( Southport Tramways v Gandy [1897] 2 QB 66).

1. While mesne profits may be assessed by reference to the rent that would be payable for the premises, it seems that this is where it represents the fair value of the premises and that there may be a different basis for assessment in appropriate cases. Where the occupant fails to keep the premises in repair then this may also be taken into account.

1. I have given some consideration to whether an order for mesne profits should take into account (perhaps be way of offset) reimbursement of those sums that I can be satisfied were expended by Mahir on the subdivision works. However, I have not done so because that would then not take into account the interest payable by MSU Management on the mortgages securing the land during such time as MSU Management has not been able to sell the land to reduce the mortgage because of Mahir's unauthorised possession of the land.

1. In the event, I consider that the appropriate order is to order that Mahir pay mesne profits for the period of his occupation until possession is delivered up in accordance with my orders and to refer the assessment of those profits to a referee or associate justice for determination.

Orders

1. For the reasons set out above, in proceedings in the Equity Division I dismiss the plaintiffs' claims with costs and in the Common Law Division proceedings I will make a declaration that MSU Management Pty Limited is entitled to possession of the premises and order vacant possession to be provided within a time to be determined following any submissions by Counsel.

1. I order Mahir Urusoglu pay to MSU Management Pty Ltd reasonable rent for his occupation of the premises by way of mesne profits and will refer the matter for assessment of such rent. I will hear submissions as to the form of orders and costs.

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Decision last updated: 22 February 2011