Khouri v Nicholas

[2010] NSWDC 205

CITATION:	Khouri v Nicholas [2010] NSWDC 205
HEARING DATE(S):	12, 13 and 14 April 2010 and subsequent written submissions to 27 April 2010
JUDGMENT DATE:	13 July 2010
JURISDICTION:	Civil jurisdiction
JUDGMENT OF:	Johnstone DCJ
DECISION:	1. Verdict for the plaintiff against the 2nd defendant for $18,094.58 plus interest. 2. Judgment for the 1st defendant against the plaintiff on the plaintiff’s claim. 3. Judgment for the plaintiff against the 1st defendant on the cross claim. 4. Costs are to follow each event. 5. Liberty to apply within 14 days for some other costs order.
CATCHWORDS:	CONTRACT - alleged breaches of contract and misleading and deceptive conduct on the part of the defendants - claim for money paid and a motor vehicle delivered to the defendants - alternative claims for money had and received and goods sold and delivered - cross claim by the 1st defendant for alleged breach of contract and misleading and deceptive conduct on the part of the plaintiff - claim for certain alleged losses
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) Fair Trading Act 1987
PARTIES:	Anthony Khouri (Plaintiff) Joseph Nicholas (First Defendant) Lisbon Waste Depot Pty Limited (Second Defendant)
FILE NUMBER(S):	6141/08
COUNSEL:	Mr M Sahade (Plaintiff) Mr I Griscti (Defendant)
SOLICITORS:	Oliveri Lawyers (Plaintiff) Martin Place Lawyers (Defendant)

REASONS FOR JUDGMENT

The proceedings and the issues

1. These proceedings concern disputes between the plaintiff, Mr Khouri, and the defendants, Dr Nicholas, and his company, Lisbon Waste Depot Pty Limited. The two men first met in late 2006 at a church function and discovered they had grown up close to each other in Lebanon. Following that initial meeting they undertook business discussions pursuant to which they entered into various oral contractual arrangements that were never formally documented. It is those discussions and arrangements that give rise to the disputes.

2. Mr Khouri alleges that he entered into an oral contract with the defendants, pursuant to which, and in reliance upon certain representations made to him by Dr Nicholas, he provided various sums of money to them totalling $108,154.18 and provided them with a motor vehicle valued at $14,900.00. He contends that the defendants breached the contract and, as against Dr Nicholas, that the representations he made were misleading and deceptive. Mr Khouri claims damages in a total amount of $123,154.18 plus interest. Alternatively, he makes claims for money had and received in respect of the money, and for goods sold and delivered in respect of the motor vehicle.

3. For their part, the defendants allege a different contract than the one for which Mr Khouri contends. They deny any breach of contract. They dispute the payments and the delivery of the motor vehicle to them. They dispute the claims for money had and received and for goods sold and delivered. For his part, Dr Nicholas denies the representations alleged and denies any misleading and deceptive conduct. In addition, Dr Nicholas cross claims alleging misleading and deceptive conduct on the part of Mr Khouri, and breach of the contract for which the defendants contend.

The plaintiff’s case

4. Mr Khouri alleges that in January or February 2007 Dr Nicholas represented, and the parties agreed, that the company, Lisbon Waste Depot, was to purchase land at Lisbon Street, Fairfield on which it would own and operate various businesses including a waste recycling and transfer station, a truck washing station, and a trucking transport business. Dr Nicholas was to own 51% of the shares in Lisbon Waste Depot. Mr Khouri was to own 49% of the shares and was to be a director. A unit trust was to be established with the company, Lisbon Waste Depot, as trustee of the property. Dr Nicholas or his nominee was to own 50% of the units and Mr Khouri or his nominee was to own the other 50% of the units. Purchase of the property was to be funded by way of a mortgage, with Dr Nicholas to provide any shortfall. Further costs for improvements, repairs and setting up the businesses were to be met by Mr Khouri and Dr Nicholas until the company, Lisbon Waste Depot, became profitable. Once the company became profitable, their respective contributions to the purchase and the setting up of the businesses would be refunded. The plaintiff was to become a 50% owner of the trucking business known as JLJ & Associates that was previously operated by and under the control of Dr Nicholas, which was to be relocated to the property and operated profitably from that location.

5. Mr Khouri further alleges that subsequently, on or around 18 April 2007, Dr Nicholas further represented to him, and the parties agreed that:

(i) For ease of signing paperwork, Mr Khouri should transfer his 49% interest in the company, Lisbon Waste Depot, to Dr Nicholas for $1, and resign as a director.

(ii) Upon the signing of the necessary paperwork to effect the sale of land and any incidental transactions Dr Nicholas would transfer back to Mr Khouri his 49% interest in the company for $1, and Mr Khouri would be reinstated as a director.

(iii) Mr Khouri and the company would sign the share transfer documents and such documents as were necessary for Mr Khouri to resign as a director, and to be reinstated, by presenting and filing such documents with ASIC.

6. It is alleged by Mr Khouri that pursuant to these contractual arrangements and in reliance on the representations made by Dr Nicholas, he provided various sums of money totalling $108,154.18 (as particularised in paragraph 6 of the ASC) to the defendants, or at their direction, between 13 February and 17 May 2007, and he delivered to them a motor vehicle valued at $14,900.00 on or around 1 March 2007.

7. Mr Khouri complains that:

· The defendants failed or refused to reinstate him as a director.

· Upon creation of the unit trust Dr Nicholas made himself or his nominee a 100% owner of the units in the trust, and failed or refused to cause Mr Khouri or his nominee to be the owner of 50% of the units.

· The defendants failed or refused to relocate the trucking business to the property and failed or refused to provide Mr Khouri with 50% ownership of the business.

· Mr Khouri has no opportunity or entitlement to benefit from the unit trust or the businesses set up on the land.

· The defendants have failed or refused to repay to Mr Khouri the money provided by him to the defendants, or the cost of the motor vehicle he delivered to them.

· The defendants have leased the land to third parties, and or operate businesses on the land without consent from or payment to Mr Khouri.

8. Mr Khouri alleges that the defendants breached their contract with him and claims damages. He further alleges that the representations made by Dr Nicholas were misleading and deceptive. He relies on s 52 of the Trade Practices Act 1974 (Cth) and claims relief under s 82. He also relies on s 42 of the Fair Trading Act 1987 and claims damages under s 68. Alternatively, Mr Khouri claims for money had and received and for goods sold and delivered. He claims $123,154.18 plus interest.

The defendants’ case and the cross claim by Dr Nicholas

9. The defendants did not dispute that in January or February 2007 that the parties agreed that the company, Lisbon Waste Depot, would purchase the land at Lisbon Street, Fairfield. They dispute, however, that Lisbon Waste Depot was to own and operate the various businesses to be conducted there. They allege that Mr Khouri represented, and it was agreed, that various businesses would be operated from the property by tenants, and that the defendants would undertake the necessary site works to prepare the property for use by those tenants for those businesses. These were a recycling business that Mr Khouri was to establish, at his own cost, and operate successfully, and an existing business owned and operated by J R Trucking Pty Limited, in which Dr Nicholas had an interest, that would use the property as its base.

10. The defendants’ case is that Mr Khouri represented he knew the recycling business, was familiar with the Lisbon Street property and could establish such a business there that would generate an income of $30,000 to $40,000 per week. He represented he had sufficient funds available to establish the business and he agreed with the defendants that he would take whatever steps were necessary to do so, and would use the income to contribute to paying off the debt incurred in funding the purchase of the property by the company, Lisbon Waste Depot.

11. The defendants did not dispute that the purchase of the property was to be funded by way of a mortgage. They maintain, however, that Mr Khouri resiled from his original commitment to participate in the financing of the purchase and to provide security for the loan. Dr Nicholas therefore agreed to arrange the finance and provide all the security. They deny it was agreed that further costs for improvements, repairs and setting up the businesses were to be met by Mr Khouri and Dr Nicholas until the company, Lisbon Waste Depot, became profitable, or that once the company became profitable their respective contributions to the purchase and the setting up of the businesses would be refunded.

12. It was not disputed that Dr Nicholas was to own 51% of the shares in Lisbon Waste Depot and that Mr Khouri was to own 49%. It was disputed, however, that it was agreed Mr Khouri would be a director. Nor was it disputed that a unit trust was to be established with the company, Lisbon Waste Depot, as trustee holding the property for the benefit of the unit holders. The Defendants deny, however, that Mr Khouri or his nominee was to own the other 50% of the units. They maintain it was agreed that Dr Nicholas or his nominee would be the foundation holder of 100% of the units and only once the recycling business was in operation and its income was contributing to the funding of the property would units in the trust be progressively transferred to Mr Khouri or his nominee.

13. The defendants deny that it was agreed the plaintiff was to become a 50% owner of the trucking business known as JLJ & Associates that was previously operated by and under the control of Dr Nicholas. The also deny that at a meeting on 18 April 2007, Dr Nicholas made any representations that Mr Khouri should transfer his 49% interest in the company, Lisbon Waste Depot, to Dr Nicholas for $1, or that upon the signing of the necessary paperwork to effect the sale of land and any incidental transactions, Dr Nicholas would transfer back to Mr Khouri his 49% interest in the company for $1, and Mr Khouri would be reinstated as a director.

14. The defendants deny that Mr Khouri provided various sums of money to them, or at their direction, between 13 February and 17 May 2007, and deny that he delivered to them, or for their benefit, a motor vehicle on or around 1 March 2007.

15. It is alleged by Dr Nicholas that pursuant to these contractual arrangements and in reliance on the representations made by Mr Khouri, he arranged finance of $3.6m, the security for which was provided by him. He then caused the company, Lisbon Waste Depot, to purchase the Lisbon Street property for $2.975m. Dr Nicholas then incurred various expenses in undertaking works on the property to prepare it for the proposed commercial use.

16. Dr Nicholas complains that:

· Mr Khouri failed to establish the recycling business.

· Mr Khouri did not establish an income from a recycling business from which a contribution could be made to paying off the debt incurred by Lisbon Waste Depot for the purchase of the property.

· Mr Khouri did not have the necessary funds available to establish the recycling business and took no steps whatever to establish a recycling business.

17. Dr Nicholas alleges that Mr Khouri breached the contract with him and claims damages. He further alleges that the representations made by Dr Nicholas were misleading and deceptive. He relies on s 42 of the Fair Trading Act 1987 and claims damages under s 68. He claims that he has suffered a loss by reason of the shortfall between income generated by the property and expenses, including interest on the loan, and in respect of the amounts expended by him to prepare the property for commercial use: see Exhibit 2.

The evidence relating to the oral contractual arrangements

18. In late 2006 Mr Khouri was introduced to Dr Nicholas at a church function at Fairfield by an acquaintance, Louie Costa. Mr Costa told Mr Khouri that Dr Nicholas was a business partner and that they had a trucking business. Mr Costa was the manager of J R Trucking Pty Ltd, a company of which Dr Nicholas was a director. It transpired that Dr Nicholas and Mr Khouri had grown up and lived close to each other in Lebanon, and they exchanged business cards. Subsequently the two men engaged in business discussions at various meetings and during a number of telephone conversations. Mr Khouri told him he had a number of business interests and that he had also been appointed as the Consul in Australia for Bangladesh.

19. Towards the end of 2006 Mr Khouri was driving past the Lisbon Street property and noticed a for sale sign. He had previously been involved in a waste transfer business conducted on that property known as “Always Recycle” owned by a company of which he was a 10% shareholder (T 28.29). He knew the site very well and had previously contemplated purchasing it himself. In early 2007 Mr Khouri discussed the Lisbon Street property with Dr Nicholas.

20. According to Mr Khouri, he first raised the subject of the Lisbon Street property in a telephone conversation with Dr Nicholas when they discussed how the purchase might be financed and he told Dr Nicholas he might be able to re-activate finance approval obtained when he had looked at purchasing the property himself. Dr Nicholas suggested they go and have a look at the property. The next day he met with Dr Nicholas at his surgery, when Mr Costa was present and they discussed involving him. The three men then proceeded to the site to inspect the property.

21. According to Dr Nicholas, the property was first discussed in January 2007 at a restaurant operated by Mr Khouri’s son in a converted church in Phillip Street, Parramatta, when Mr Costa was also present, and Mr Khouri made known his expertise and experience in recycling, and when the use of the site for the trucking business was also raised. Dr Nicholas said the following conversation occurred:

Khouri: “ There’s a property in Fairfield on Lisbon Street that’s for sale. It’s one I looked into a while back and it’s still available. I think it could suit both our needs and we can make good money out of it. I know the site very well because it used to be a waste transfer station and I was involved in that business. I will use the site to establish a recycling business. We will be paid for accepting the material, sorting it out, and then on-selling the materials to recyclers. I know this business well.”

Costa: “It would also suit our needs for finding a place to park our trucks.”

Nicholas: “How much?”

Khouri: “Around 3 million.”

Nicholas: “We only need a small yard for the trucks. The business is cash poor and I’m propping it up. That’s a very large commitment.”

Khouri: “The recycling business will provide the cash flow. Once we’re established we will easily bring in $30-40,00 per week after expenses.”

Nicholas: “What about funding?”

Khouri: “I’ve already had finance advisors assess the arrangements for the property. The property will need some work but I can raise 130% of the sale price.”

Nicholas: “Who’s your funder? I should speak to him. That sounds extraordinary.”

Khouri: “Jean Pierre Alouan at Link Financial Services.”

Costa: “We need to move quickly because there is other interest. We can secure the place with a $10,000 holding deposit.”

Nicholas: “Fine. We’ll (referring to myself or one of my companies) pay a holding deposit.”

22. Mr Khouri denied he told Dr Nicholas the recycling business would generate $30,000 to $40,000 once established, and that his funder would provide 130% of the sale price. He also denied that Mr Costa suggested that the property would be a good place for parking trucks (T 31 on Day 1).

23. In any event, it does not seem to be in dispute that the three men went to the property and inspected it. Mr Khouri alleges that in a conversation at the site Dr Nicholas suggested that Mr Costa should run the waste recycling station, and that the trucking business could be moved to the site and run as a transport company and a truck washing facility. Dr Nicholas also said that other businesses could be operated as they might arise from time to time. Finance was discussed, as was ownership:

Nicholas: “The price of around $3million seems right. I reckon we could make the waste recycling station work with Louie and his family running it. We could even move our trucking business here. We could operate it as a trucking transport company as well as a truck washing facility. We could also operate any other business as they may arise from time to time.”

Khouri: “How will we fund this? These businesses require a lot of financial commitment. I am already committed in other areas.”

Nicholas: “I have access to top financial people. They used to work for Westpac, now they are on their own. They can arrange a Lo-Doc loan for me. You do the building and improvement works and get 49% ownership and control. I will arrange for the funding for the purchase and if the lenders need any extra security then I can throw in some of my other properties. I will take 51% ownership and control. We can make the business profitable and repay everyone their contributions.”

Khouri: “That’s fine by me.”

24. Dr Nicholas denied that such a conversation occurred. He said it was never proposed that Mr Costa and his family would run the recycling plant and he did not believe they had the knowledge or experience to do so. Nor was the finance arranged on a Lo-Doc basis. He denies offering Mr Khouri a share in the trucking business. He said it was agreed the recycling business and the trucking business would be run separately by tenants on the property. He said further that at that time Mr Khouri was still intending to participate in the funding of the purchase (T 30.8 on Day 1), and it was not until later that Mr Khouri said he could not provide any security and declined to become a borrower or guarantor in respect of the purchase of the property, after he spoke to his brothers some weeks later (T 23 - 24 on Day 2).

25. According to Mr Khouri, a few days after the site visit he went to Dr Nicholas’ surgery at Fairfield Heights to discuss the purchase of the property. Mr Costa was again present. He said that on this occasion Dr Nicholas told him he would get a shelf company with 2 shareholders and 2 directors. He would have 51% of the shares and be a director. Mr Khouri would have 49% of the shares and be the other director. Mr Costa would run the operation with his family. Mr Khouri said he then asked how the shelf company would fund the purchase, and the following conversation ensued:

Nicholas: “The funding for the purchase will be provided from the mortgage of the land and if there is any shortfall, then I will cover that from my other properties. You will have to pay for necessary improvements to be completed on the property such as resurfacing the factory floor, installing the holding bays and the like. Also an amount of $60,000 is needed to pay for your share of the trucking business. Basically you have to pay for fixing up the factory and getting it ready. We can account for it all and you will be paid back.”

Khouri: “How much are we expecting the start-up cost to be?”

Nicholas: “Probably around $150,000 all up. You fund the amount up to the same extent as any shortfall which I will secure from my properties, and then we will fund it dollar for dollar from there if more is needed.”

Mr Khouri said they then discussed various things that needed to be done on the site to get the factory ready for use. He then asked:

Khouri: “We have an agreement?”

Nicholas: “Yes. Well done, Captain. Let’s do it.”

26. Dr Nicholas also denies this conversation. He said he never requested any money for the trucking business. In fact, he never discussed having Mr Khouri involved in the trucking business. Nor was it proposed that Mr Khouri pay for fixing up the factory floor and getting the site ready. The cost of doing so was in fact borne by Dr Nicholas.

27. Mr Khouri said that he went home after that meeting and typed up a document setting out some of the basics of the agreement (AK1 @ 1), which he then forwarded by email to Dr Nicholas. The document is undated. Mr Khouri was unable to locate the email, and Dr Nicholas has no record of ever receiving such an email.

28. After the site visit, Dr Nicholas undertook negotiations with the vendor of the Lisbon Street property and a purchase price of $2.975m was agreed. He then set about organising the finance. He said that within days of the meeting at the restaurant in Parramatta he met with Mr Alouan, Mr Khouri’s funder from Link Financial Services, but he would only agree to arrange for 70% of the purchase price. So Dr Nicholas went back to Mr Khouri, and asked whether he could fund the shortfall:

Khouri: “No. I cannot participate in the security or equity for this as I am committed elsewhere and my properties are encumbered with my brothers as we are developers. If you can secure the property I will have cash to establish the recycling business.”

Nicholas: “I can speak to people I know at CSA, my preferred financial resource, in relation to finance but I need your sincere undertaking that you will establish the recycling business. My wife is a director in the companies that owns the properties that would be security for the loan and I need to tell her you have given me your word.”

Khouri: “You have my word. I have the cash to get the business started and the expertise, experience and contacts to make this work. It’s a great opportunity for us.”

29. It may comfortably be concluded that from this point of time Dr Nicholas knew that Mr Khouri would not be providing any security for the purchase of the property or participating in the equity.

30. According to Mr Khouri he received a phone a phone call from Dr Nicholas on Thursday 1 February 2007 when the idea of a unit trust was raised:

Nicholas: “Anthony, I have been thinking about how we can do this and I have spoken with my accountant and my solicitor. It is better for me not to let my wife know about this venture and also for tax reasons, we should set up a unit trust for this project.”

Khouri: “I don’t know anything about trusts.”

Nicholas: “Don’t worry, you will get 50% of the units and I will get 50% of the units when it is established. And as far as you are concerned, nothing will change, it is as if you own 49% of the shares of the company that owns the land and runs the operations.”

Khouri: “Well I don’t understand anything about trusts so I will take your word for it. Are you sure there is no difference in it for me at all?”

Nicholas: “None whatever, as far as you are concerned. But it is more beneficial for tax reasons and it is a safer way of owning property.”

Khouri: OK.”

31. Dr Nicholas denied this conversation. He said he specifically told Mr Khouri he needed his assurance that he intended to start a recycling business on the property because he needed his wife’s approval for the purchase, as she was a director and shareholder of the company that owned the properties that were to form part of the security for the loan.

32. Dr Nicholas’ version of events is that he consulted his accountant, Mr Tanna, who had been looking after his personal tax and accountancy requirements and those of his associated trusts, since 1981. Dr Nicholas told Mr Tanna he was interested in investing in a commercial property at Fairfield for approximately $3m to facilitate off-road parking for a fleet of trucks, a workshop and a recycling business. Mr Tanna expressed concern about the financing. He said Dr Nicholas told him he had spoken with a person, Mr Khouri, who was willing to be a partner in the purchase, and was intending to establish a recycling business there, and use the profits to reduce the debt on the acquisition. Dr Nicholas wanted his advice on the best structure to facilitate the acquisition and accommodate the profits Mr Khouri anticipated from the recycling business. Mr Tanna recommended a unit trust, which had a number of advantages, including tax benefits and flexibility.

33. Dr Nicholas said he told Mr Khouri:

Nicholas: “You need to set up a company to run the recycling business. The best thing to do with the property will be a unit trust. This allows flexibility in cross collateralising or if ever one of us had to exit. We would have to create a unit trust and we can use a shelf company to be the trustee. Once the business is up and running and delivering the returns you are talking about and paying off the debt we can look at you having units in the trust.”

Khouri: “That all sounds fine to me.”

34. A meeting was held at Mr Tanna’s office in early February 2007 attended by Dr Nicholas and Mr Khouri, when Mr Tanna recommended that the best structure for the acquisition of the commercial property was a unit trust. He also recommended to Mr Khouri that his recycling business to be operated from the property would best operate under a company structure.

35. During the course of the meeting Mr Tanna demonstrated the financial and tax advantages of a unit trust on a whiteboard. The following conversation occurred:

Tanna: “We need to discuss financing of the commercial property transaction.”

Khouri: “Well I am already debt geared with other investments with members of my family. Consequently I am unable to assist Dr Nicholas, in the initial stages, with the property acquisition. Any available funds are required for equipment acquisitions for my recycling business.”

Nicholas: “Substantial renovations and improvements are needed to the property to facilitate both transport and recycling businesses.”

Tanna: “The property acquisition and capital improvements required will place Dr Nicholas under great financial stress. I really do not see the venture as financially viable and will advise Dr Nicholas against the property acquisition.”

Khouri: “The recycling business will be most profitable. I estimate the weekly net profit will be between $35,000 to $40,000. The weekly net profits can be allocated to purchasing units in the unit trust. Consequently Dr Nicholas’s debt will be reduced and I will have acquired his interest in the property through increased unit holdings. Ultimately I’d like 50 percent on the units in the unit trust. I’ll of course pay rent to the unit trust for the area of the property facilitating the recycling business.”

Tanna: “But this would reduce your weekly net profit from recycling by the amount of the rent.”

Khouri: “Well, myself and Dr Nicholas will pay the unit trust market value rents commensurate with our respective occupied area.”

Nicholas: “Well, once the transport and recycling businesses are established on the property we appoint each other as directors of the other person’s company.”

Khouri: “Yes that is fine. Let’s do that.”

Tanna: “Mr Khouri, discuss these issues with your accountant and solicitor.”

Khouri: “Yes I will.”

36. Mr Khouri did not dispute that the meeting occurred, but he denied this conversation. He said that Mr Tanna went to the whiteboard and drew up numerous schemes that involved linking lines and boxes, but that he did not understand the idea of a unit trust. He went on to say, in his written statement of 1 April 2010:

“I absolutely deny that there was any conversation had by me or others to the effect that I would be purchasing units in the trust either from the business established or otherwise. I also deny that there was any conversation about paying rent for the premises.”

37. A day or so after the meeting with Mr Tanna, Mr Khouri’s accountant contacted Mr Tanna about the unit trust and asked for some details. Mr Tanna told the accountant that the proposal was for Mr Khouri to acquire up to 50% of the units in the unit trust. Until that occurred, Dr Nicholas would hold 51% of the shares in the trustee company and Mr Nicholas would hold 49%. Once Mr Khouri had acquired all of his 50% unit holding, additional shares in the trustee company were to be allocated to Mr Khouri to give him a 50% voting interest in the trustee company (T 81 on 13.4.10). Mr Khouri’s accountant was not called to give evidence.

38. In any event, there was an exchange of emails on Sunday 4 February 2007 in which the proposed structure involving a unit trust was confirmed and agreed (Annexure AK1 @ 10 - 14).

39. Dr Nicholas’ solicitor was Mr Bruce Hocking, from Martin Place Lawyers. He was engaged in relation to the proposed purchase of the Lisbon Street property, organising the shelf company that became Lisbon Street Depot Pty Limited, and the establishment of the unit trust (T 87 on day 2).

40. According to Mr Khouri, he was present at Dr Nicholas’ surgery when he rang Mr Hocking and had a conversation with him on loud speaker:

Nicholas: “We have agreed to go ahead with the project. We will set up a company for it. I will hold 51% and Anthony will hold 49%. We will both be directors. I am talking with my accountant Mark Tanna and for tax reasons, we will make it a trust company. We will benefit equally under the trust. But the effect of it will be that the company will run the businesses for the benefit of the shareholders who will be shareholders in the trust or their nominees.

Hocking: “That is no problem.”

41. Dr Nicholas denied any conversation in those terms. According to him, the sole purpose of Lisbon Waste Depot was to be the trustee company that managed the property and there was never any discussion about it being the manager of any proposed business.

42. After receipt of the draft contract for sale by Mr Hocking, he met with Dr Nicholas and Mr Khouri at the Eastern Suburbs Leagues Club. Dr Nicholas said Mr Khouri confirmed that he wished to establish a recycling business on the property. Mr Hocking said that during the meeting Mr Khouri said:

Khouri: “I know all about the recycling business and I can provide the expertise that we need to ommence the business together.”

43. Mr Khouri did not dispute that the meeting occurred, but he denied the conversation to which Mr Hocking attested.

44. The unit trust was duly established with Lisbon Waste Depot as the trustee company and Ozhale Pty Limited (the trustee of the Joseph Nicholas Family Trust) as the Foundation Unit Holder (Exhibit C). Mr Khouri was appointed as a director and shareholder of the trustee company. Dr Nicholas arranged for the payment of a holding deposit of $10,000 on 5 February 2007. Contracts for the purchase of the property were exchanged on 6 or 7 February 2007 when the balance of the deposit, $140,000, was paid. Additional security on other properties was provided by a company owned and controlled by Dr Nicholas and his wife.

45. Dr Nicholas said he was in regular contact with Mr Khouri, and that they spoke to each other close to every day. Mr Khouri often talked about setting up his recycling business. After exchange he rang Mr Khouri to discuss access:

Nicholas: “I will establish access to the property and the building and fix up the building and you organise the recycling business.”

Khouri: “Okay. I suggest we use road base or tar or a hybrid surfacing.”

Nicholas: “It may become a problem placing the trailer stands on tar on very hot days which could result in sinkage.”

Khouri: “Concrete hard stand will be the best even if it costs a lot.”

Nicholas: “Okay.”

46. Dr Nicholas negotiated early access to enable preparatory work to be undertaken on the property prior to the anticipated date for completion of the contract in early April 2007. He engaged a building and construction business, P & S Maltese, to carry out the work, which involved levelling the site and fixing up the factory and workshop building. The works were supervised by Mr Costa. Mr Khouri, suggested the Maltese brothers were relatives of Mr Costa. They weren’t. Invoices for this work in excess of $300,000 were paid to P & S Maltese.

47. By late February Dr Nicholas began to become concerned that Mr Khouri was making no progress towards establishing the recycling business.

48. Dr Nicholas said he spoke to Mr Khouri, in the presence of Mr Costa, in early March 2007 about his concerns:

Khouri: “To get the business going I will need to go to China to buy a machine for about $1million.”

Nicholas: “That’s fine. I have been doing my part now it is time for you to do yours.”

Khouri: “I don’t have that sort of money lying around.”

Nicholas: “You told me you had the money to invest in this business.”

Khouri: “I don’t have that kind of money. You’ll have to pay for the trip and the equipment.”

Nicholas: “I have committed to the property and engaged the builders to get it ready. You said you had the cash to establish the recycling business. Are you saying now you can’t?”

Khouri: “I don’t have the cash to buy the equipment we need.”

49. Dr Nicholas said that once it became clear Mr Khouri was not delivering on the recycling business he told him he would proceed with the purchase himself without Mr Khouri and he set about looking for an alternative tenant. Through a real estate agent he located a tenant, Recycling Holdings Pty Ltd, and arranged a lease to that company for $240,00 per annum plus GST for a term of 3 years from 1 April 2007 (JN1 @ 86).

50. Mr Khouri denied that he had agreed with Dr Nicholas to establish the recycling plant alone. He said that in early March 2007 his father was admitted to hospital with a prognosis that he would soon die. Mr Khouri was with his father constantly and was not available to attend much to business. His father died on 16 March 2007. In the meantime, on 13 March 2007, Dr Nicholas rang him and after expressing concern about his father, said to Mr Nicholas:

Nicholas: “Anthony, I am moving ahead with the funding of Lisbon Street and I have arranged all the finance through my people. I am buying the property in my own right and I will arrange to get you an option to buy a share later when things settle down with your father.”

Khouri: “What are you talking about? That is not what we agreed. I am in no frame of mind to change our agreement at the moment, I shall speak with you later about it.”

Nicholas: “Don’t worry about it. Nothing has changed. You care for your father and we will talk later.”

51. Mr Khouri said Mr Costa rang him on 15 March 2007 to say he was sorry to hear he was no longer involved in the Lisbon Street Project. He then went home and sent an email to Dr Nicholas, to which a spreadsheet was attached (AK1 @36 - 41):

“This morning I received a call from Louie Costa expressing concern that I was no longer involved in the Lisbon Street project.

Needless to say, I was taken aback by this news and as such I felt that it is important for me to try to comprehend our last telephone conversation which we had at a time when I was not really focused on business and not thinking very clearly.

During that conversation, you made mention of the fact that you would be the only borrower and as such, the property would be yours alone and you would give me an option to purchase my share at some later date.

I really do not understand the reason or logic of this new approach, having regard to all of our previous meetings and discussions and agreements regarding the matter.

It was clearly my understanding that the property would be purchased on a 51% - 49% basis with you holding the majority.

The Trucking business would be 50% - 50% each with some new concessions to be made to Louie Costa.

To achieve this goal, the property was to be mortgaged and the residual funding would be arranged by you offering some personal real estate security. We would do the improvements to the property and the funding would reimburse each person with the money each had spent.

This was made very clear and unambiguous to me at all times.

Now I understand that because I am not one of the borrowers, you will own the property outright and I will have an option to enter at some later date.

This is not acceptable to me as I am not at all sure as to the method of funding you are trying to access.

Please refer to my attached spreadsheet which shows that this project, including the trucking business can be easily financed on its own merits with minimal input from the shareholders.

Therefore, my suggestion is that we maintain our original agreement and if you feel that the funding has now become a difficulty, then I am happy to activate my own resources and seek the necessary finance in a manner which will reflect and secure our original agreement.

I look forward to a long and mutually rewarding business future together…”

52. Mr Khouri said that he subsequently received a phone call from Dr Nicholas in which the following was said:

Nicholas: “I received your email. Don’t worry about it. Everything is exactly as we have agreed. Don’t worry, nothing has changed.”

Khouri: “Thank you. We will continue as we were.”

53. Dr Nicholas denied such a phone call. He said that after the death of Mr Khouri’s father he had a conversation with him as follows:

Nicholas: “I have had to find a tenant for the property because you didn’t make good on your promise to start a recycling business. I will be losing money on the transaction. They have a three year lease and if they don’t renew you are welcome to start your recycling business then if you are able to do so.”

Khouri: “Maybe I can do that.”

Nicholas: “If you do that or want to buy in you can acquire some units in the unit trust.”

Khouri: “Okay.”

54. Dr Nicholas denied a 50/50 split of the trucking business was ever discussed and he did not understand the spreadsheet attached to the email.

55. In his later statement of 23 July 2010, Mr Khouri said that before settlement he had a conversation with Dr Nicholas as follows:

Nicholas: “The agent who negotiated the purchase for us has advised me that he has a tenant involved in the cardboard recycling business who is desperate for this property and is willing to take it on immediately for very good rent. They want nothing done to the factory other than minor adjustments and a pit that they are prepared to pay for. I reckon this would be a great idea because they don’t need the whole property and we could use the other part of the property for our trucks. That way, we don’t have any hassles with the recycling business and the property would become self-supportive with that rent and the trucking business.”

Khouri: “Sounds alright to me if you are happy with that and it makes the property self-supportive.”

56. Mr Khouri went on to say that from that moment on the recycling business was over.

57. It may comfortably be concluded that from this point of time Dr Nicholas knew that Mr Khouri would not be establishing the recycling business and believed that Mr Khouri’s involvement in the Lisbon Street venture had come to an end. (T 41)

58. Dr Nicholas said he therefore invited Mr Khouri to resign as a director of the trustee company and that he would buy his shares back, in the following conversation:

Khouri: “I want to know where I stand in relation to Lisbon Street.”

Nicholas: “What do you mean?”

Khouri: “In relation to the property.”

Nicholas: “You invested some money and then changed your mind. You can’t expect anything from me now. I kept my part of the deal. If you want to buy units in the trust you are welcome at $1 per unit but your venture failed to materialize. In fact I think you should resign as a director of the trustee company and I will buy your shares back.”

Khouri: “I know the recycling business didn’t eventuate but I have spent money on the property and I should have some part of the title.”

Nicholas: “You put up nil towards the acquisition. I would never have burdened myself and my wife with the huge debt and tying up properties if you hadn’t given your word about the recycling business. My wife and I are committed because of you. We do not want to lose our deposit and get sued for breaking the contract. Like I said, you can buy units or if you start your recycling business some time down the track and it contributes as you say it will, then we can look at allocating units to you.”

59. Mr Khouri then resigned as a director and transferred his shares in the trustee company to Dr Nicholas.

60. Dr Nicholas said he always left it open to Mr Khouri to come back into the venture in the future by acquiring units in the unit trust (T 51; see also AK1 @73), hence he sent paperwork for the reinstatement of Mr Khouri in the future if he purchased units in the unit trust.

61. Mr Khouri gave a different version as to why he resigned and transferred his shares to Dr Nicholas. He said that on or around 17 April 2007 Dr Nicholas rang him and the following conversation ensued:

Nicholas: “Anthony, to make things easier for signing documents, I will need to be the sole director and shareholder of the company. That way, only I will need to sign the paperwork and won’t have to get you in every single time to sign the same papers. Do you mind if I send you paperwork to sell your shares to me for $1 - and to resign as a director. At the same time, we will also sign paperwork to transfer back to you your shares from me for $1 - and to be re-instated as a director.”

Khouri: “Does that make it easier and does it work like that?”

Nicholas: “It is very simple. You sign the papers and you are off the paperwork. We then settle the property, and we then file the papers and you will be put back exactly as agreed. There is no change, it is only for ease of signing documents.”

Khouri: “OK, send me the paperwork and I will sign it.”

62. Mr Khouri said there was a further telephone conversation on 18 April 2007, after he received the paperwork:

Khouri: “Dr Joseph, the paperwork seems incomplete. It says nothing about my reinstatement.”

Nicholas: “Don’t worry, it is just a mix-up at this end. I will send you a fresh fax.”

63. Dr Nicholas denied these conversations.

64. The purchase of the property by Lisbon Waste Depot was completed in April 2007. The exact date is unclear but the Transfer is dated 27 April 2007 (AK1 @ 66).

65. Soon after, Mr Khouri sent the following email to Dr Nicholas on 2 May 2007 (AK1 @ 67):

“Hi, Doc. Joseph,

Congratulations on the settlement of the Lisbon St. Property.

Well done!!

Sorry I could not meet up with you last Monday but night meetings have become extremely difficult for me after Dad’s passing as we are having some problems with mum at home alone.

Daytime anytime is OK by me.

I have been going to the site and am pleased that the tenant is in full operation at last.

We are so close to completing the rest of the site works yet we seem to be so far. As you know, this is very important to complete as the truck wash income cannot start till this is complete.

Louie Costa’s problems do not seem to be getting any easier…

He is very depressed…

Needless to say, his involvement at this early stage in the business is very important and necessary for the ultimate success of the business...”

66. Mr Khouri sent another email to Dr Nicholas on 8 May 2007 (AK1 @ 69):

“Hi, Doc. Joseph,

It’s been some time since we last spoke. I am sure you have been very busy as I have been. Unfortunately, my busyness has not been very productive. Mainly family and Consular matters.

In regards to the Lisbon St. Project, I was pleased today when I saw that the conc. Slab for the office and workshop area is to be poured tomorrow.

In regards to the ASIC matter, since settlement has now taken place, I would be pleased if you would kindly ask Mark Tanner to reinstate my position as previously agreed.

In regards to the share price, what’s happening?? We are down to $0.62 today!! …”

67. Mr Khouri sent a further email to Dr Nicholas on 31 May 2007 (AK1 @ 72):

“Hi, Doc. Joseph,

Further to our meeting in your office with Louie Costa last Tuesday and since the Lisbon Street property has now settled, would you please instruct Mark Tanner to reinstate my position as agreed prior to settlement.”

68. Dr Nicholas said these requests to “reinstate” Mr Khouri’s position made no sense to him. He said:

“I recall being frustrated that Mr Khouri had appeared to me to accept in our discussions that when he abandoned the recycling plant project and his entitlements in respect of the property but then he sent emails which were inconsistent with this.”

69. In an email to Mr Khouri on 13 June 2007, Dr Nicholas told him (AK1 @ 73):

“Dear Anthony, …

As far as Lisbon Waste goes I fail to see the relevance of a directorship when you are not a holder of any units in the unit trust. Lisbon Waste as you remember is only the trustee and as such has no assets or income in its own right. Units in the trust are fully paid up by Ozhale via the injection of nearly $4 million in cash. Ozhale is not selling any of its units.

As stated previously, if (you) wish to come up with cash I am happy to look at any proposal.

Anthony I am fully occupied with this project and my practice and the Medical co-operative. I trust you understand that I do not have time for myself. I apologise for the delay in responding…”

70. Mr Khouri responded later that same day in a long and detailed email (AK1 @ 75), which reads:

“Hi, Doc. Joseph,

Thankyou for your e-mail which you sent to me today.

Thank you for taking time from your busy schedule to respond to my e-mail.

This entire matter appears to be getting somewhat out of hand as I am no longer able to understand the position as outlined in your e-mail today.

When we originally entered into this venture it was because I had told you that I had earlier intended to purchase the property at auction but was unsuccessful but as it had come back onto the market, I informed you about the property and its potential.

After we visited the site with Louie Costa, we agreed to purchase the property by starting a new company and entering into a joint partnership in which we would secure the necessary funding to purchase the property by mortgaging the property itself and any shortfall in the necessary funding you would meet by you offering some of your other property as security. Any additional shortfall would be met by each of us personally. For this reason we agreed that because of your additional injection, you would own 51% of the property and I would own 49% and our focus would be to clear your additional security as top priority.

We and the vendor signed contracts to purchase the subject property and those contracts were exchanged. The contract for sale reflected our relevant position in ownership.

Before any funds were secured, we were advised by the agent that there was an offer to lease the property by a paper recycling company. We discussed this matter together and after several meetings with the agents, the vendor and the potential tenant, we agreed that letting the property was a good way to proceed.

At almost the same time, you advised me that you held an interest in a transport company which we should purchase and would form part of our partnership. However, this company would be held on a 50% - 50% each basis. For this you advised that the cost would be $600,000 which would be partly funded with the property funding and the residual to be met by us on an equal basis.

These funds were to be used to pay out yourself, your accountant, Mr. Boulos, Mr Louie Costa and the other person who was the current owner of some of the truck assets of the business.

After we agreed on all of the above, you suggested that in order to achieve the best method of completing this transaction we meet with another of your accountants, Mr Mark Tanner. You advised that Mr Mark Tanner was a taxation expert and would advise us of the best and most tax effective way in which our venture should proceed.

We met with Mark Tanner as suggested and he gave us a number of suggestions about superannuation, trusts, tax minimisation and long term security.

Mark Tanner’s suggestions were only that and nothing was agreed at that meeting as Mark most correctly suggested that he would be far more comfortable if I sought independent advice before accepting any of his suggestions. He then suggested that I discuss this venture with my own accountant to seek his advice and input.”

71. Dr Nicholas said he had a general but not specific memory of receiving an email of this nature, but as far as he was concerned Mr Khouri had no further involvement in the project after abandoning the recycling plant and, as regards the trucking business, had never discussed his joining that business.

72. In early January 2008, Mr Khouri sent an email to Dr Nicholas asking him to advise on the status of his position in relation to Lisbon Street. Dr Nicholas replied (AK1 @ 77):

“dear Anthony, happy new year to you too. I hope your issues late last year are all resolved. The position at Lisbon St is that the 3 Banks financed the whole property with all my assets as security plus the land. As you remember the purchase was via a unit trust. The trust units have all been purchased by my family trust at $1 each. As such there are no other unit holders. As it turns the proposed use of the property as a waste recycling plant as you indicated did not eventuate and even the opportunity to run trucks out of there became impossible. We have had to take on the large burden of another rental property from which to operate JR Trucking. We are in the establishment phase with rising interest rates.

You have no current standing in relation to Lisbon Street. Please advise if you are not in agreement.”

73. Mr Khouri did not respond until 2 April 2008 when he sent the following email to Dr Nicholas (AK1 @ 77):

“Dear Dr. Joseph Nicholas,

As it now seems that my involvement with you on the Lisbon Street project has come to nothing, I would be pleased if you would kindly refund the money which I expended into this venture to date.

I understand that Louie Costa has kept a diary on the payments and materials which equate to approximately $120,000.”

74. Dr Nicholas responded by email on 6 April 2008 as follows (AK1 @ 79):

“Dear Anthony, i will get the diary details from Louie...”

75. Dr Nicholas sent a further email on 9 April 2008 as follows (AK1 @ 80):

“dear Anthony, nice to hear from you. Louie is very happy to deal with this matter and has the records as you clearly state. His mobile is 0407665884.”

76. Mr Khouri sent an email to Dr Nicholas on 31 July 2008 (AK1 @ 81):

“Dear Doc Joseph,

Further to my last email to you and your response of 9 April 2008, I have quantified the payments that I have made for and on behalf of the Lisbon Street Property. These are particularized in the attachment.

I now request that you pay this amount to me within 14 days.”

The evidence relating to the proposed trucking business

77. Mr Khouri said that early in February 2007 in a meeting at the surgery of Dr Nicholas the following conversation occurred:

Nicholas: “Louie, my accountant, Mr [John or Joe] Bolous and myself own a trucking business called JLJ Trucking which will be incorporated into the Lisbon Street project. You have to contribute $60,000 to obtain a 50% share in this trucking business that will form part of the Lisbon Street project. This trucking business is very successful, it owns trucks and has some excellent contracts. Louie will be running this business at Lisbon Street you have to make a contribution in accordance with our agreement. I will tell you when I need it.”

Khouri: “OK.”

78. Mr Khouri said that the money was requested by Dr Nicholas on Friday 15 February 2007, and on the following day he drew a cheque made payable to JLJ & Associates on his superannuation account in the name of Bretant Pty Limited (the trustee for The Khouri No 1 Superannuation Fund and The Khouri No 2 Superannuation Fund). He gave to the cheque to Dr Nicholas at his surgery (AK1 @ 16). He also handed a handwritten document to Dr Nicholas that read:

“16/2/2007
BRETANT super, share in Trucking Business
50% - Bretant
50% - Dr J NICHOLAS

A.K. Paid - $1,500 cash (Ex Lened Suncorp A/C
For Site Cleaning at Lisbon St. FAIRFIELD”

79. Later that day he received a facsimile from Dr J Nicholas/Louie Costa attaching a copy of the handwritten document (AK1 @ 17 - 18). The notes at the bottom of the handwritten document are in the handwriting of Mr Khouri’s accountant and make reference to “double entries” in the books of Amflo Holdings Pty Ltd, a company with which Mr Khouri was associated in relation to property development activity. The accountant was not called to explain the entry.

80. Mr Khouri was cross-examined about the claim he was offered a 50% interest in JLJ Trucking (T 47 on Day 1):

“ Q. Do you just agree to make that $60,000 contribution on the basis of what you were told?
A. Yes.

Q. Did you ask to see any details of income in relation to that business?
A. No, not at all.

Q. Any profit and loss statements?
A. No.

Q. Nothing at all?
A. No.

Q. You didn’t perform any form of due diligence?

A. No.

Q. You’re willing to obtain a 50% share in the trucking business without knowing anything about it?

A. Yes.

Q. Isn’t that rather unusual?

A. That’s the way it was.”

81. Dr Nicholas denied that he ever offered Mr Khouri a share in a trucking business called JLJ Trucking. In any event he did not have the authority to do so. He also denied asking Mr Khouri to write a cheque for $60,000, or that he ever received such a cheque, in his surgery or otherwise.

82. Dr Nicholas believed the $60,000 payment was in fact a loan or advance made by Mr Khouri to Mr Costa, who was experiencing solvency problems at the time, and that it went into the JLJ Trucking account and was then paid out to a third party. He recalled a conversation at the time with Mr Costa as follows:

Costa: “Anthony is giving me a cheque for $60,000 for me to help pay off Carbone. I’ve asked him to pay it to JLJ and I’ll draw it from there.”

Nicholas: “Lou how are you going to pay him back?”

Costa: “I’ll take it off what he owes me.”

83. When asked why the handwritten document was faxed from his surgery to the Consulate of Bangladesh, Dr Nicholas said it was never given to him and he had no idea why, but that it was probably faxed at the request of Mr Costa by his daughter, Josephine, who was then working as Dr Nicholas’ receptionist (T 7 on Day 2).

84. The irony was that it was not JLJ & Associates that it was intended should operate from the Lisbon Street property. JLJ & Associates was a management company that did not own any trucks. The company to be operated from Lisbon Street was yet to be set up (T 13 on Day 2).

The evidence relating to the motor vehicle

85. Mr Khouri said that around 1 March 2007 he received a phone call from Dr Nicholas to the following effect:

Nicholas: “We need to arrange for a ute for Louie because he can’t work from the back of his car while he is supervising the repairs at Lisbon Street.”

Khouri: “I have a Rodeo Duel Cab Ute in very good condition which I can sell to the venture for $14,900.”

Nicholas: “That is fine, when can you deliver it to him?”

Khouri: “He can have it in a couple of days.”

86. Mr Khouri claimed that he delivered the vehicle to Mr Costa a few days later and gave him the signed registration slip. He did not write a name on the transfer so as to allow Dr Nicholas and Mr Costa to insert the relevant company details. He then rang Dr Nicholas to let him know that he had dropped off the ute.

87. Mr Khouri produced registration papers relating to the motor vehicle (AK1 @ 22). These were dated 30 June 2008 and showed the registered owner as Bretant Pty Ltd. There was no evidence that the vehicle was ever transferred out of that name. According to Dr Nicholas he was told by the RTA that the vehicle was never registered in the name of Lisbon Waste Depot, or JR Trucking.

88. Dr Nicholas denied the conversations alleged by Mr Khouri about the motor vehicle. He said the first he knew about it was when Mr Costa showed up one day at Lisbon Street driving a Holden Ute. He asked Mr Costa about it and was told that Mr Khouri had lent it to him:

Nicholas: “Did you buy it from him?”

Costa: “No, he’s loaned it to me. It’s the least he could do as he owes me so much money.”

89. Mr Khouri also relies on a handwritten entry at the front of the diary kept by Mr Costa which reads: “Car Rodeo $14,000”. Dr Nicholas saw the entry and discussed it with Mr Costa, who confirmed the ute was lent to him by Mr Khouri.

Credit

90. In his opening address, counsel for the plaintiff said:

“…the matter before the court is actually quite complex, it’s quite factual and a lot of it is oral conversations, so there’s going to be a lot of contested matters and cross-examination…”

91. In his closing address, counsel for the defendants said:

“Your Honour, using that as a segue, as it were, to dealing with issues regarding credit, and it is inevitable that this be addressed, first I make the general observation which applies to the evidence of all the witnesses in this case, and indeed it applies to all the witnesses in every case, and that is of course in circumstances where the evidence is based very largely on the recollection of oral conversations, it can never be expected that there be 100% accuracy of all parties. Obviously human nature being what it is, people’s recollections differ often, in circumstances where one party will recollect things more beneficial to him or herself and vice versa.”

92. Having regard to the opposing versions of the events and the conversations in this litigation, a determination of the factual issues must inevitably involve a consideration of the credit of the two main protagonists, Dr Nicholas and Mr Khouri. In assessing their credit, I have sought to rely predominantly on contemporary materials, objectively established facts, independent support from other witnesses, and the apparent logic of events, and I have placed limited reliance on an assessment of their demeanour and appearance: Fox v Percy [2003] HCA 22. Ultimately, however, I was comfortably satisfied about which of these two witnesses was the more reliable.

93. In my assessment, the evidence of Mr Khouri was unconvincing and beset by improbabilities in a number of key respects. He placed himself in direct conflict with two important witnesses: Mr Tanna and Mr Hocking. These two witnesses impressed me as men of integrity who gave straightforward honest accounts of conversations and events. Their evidence was unshaken. Mr Khouri contrived to present himself as commercially naïve, for example his professed lack of understanding of a unit trust. But when one reads his later emails, such as the email of 13 June 2007 (AK1 @ 75), it became very clear that he is a sophisticated businessman who was well able to understand and appreciate the nuances of events. His later emails demonstrate as much. It was also apparent that he was at pains to play down the extent to which he had represented himself to Dr Nicholas as someone knowledgeable about and experienced in recycling operations. His failure to disclose the need for the $1m piece of equipment, from overseas, until after exchange, was a telling example of his ability to prevaricate. The complete absence of any due diligence in relation to a supposed payment of $60,000 for an interest in a trucking business had a strong air of improbability. His evidence about the one-sidedness of the deal for which he contends was unconvincing, particularly his response to the question as to why Dr Nicholas would be so generous, when he said, “Well that was the deal” (T 35.1 on Day 1). His explanation for resigning as a director and transferring back the shares in the trustee company immediately prior to completion of the purchase was similarly unconvincing and improbable.

94. The inherent improbability of the plaintiff’s case was well articulated by Mr Griscti, counsel for the defendants, in his closing address:

“Your Honour, before delving into the particularity of the actions brought first by way of the plaintiff in the Amended Statement of Claim and, secondly, of course by Dr Nicholas in his Cross Claim, it’s in my submission useful to stand back and perhaps to some degree have an overview as to what the two respective views of the world are in a nutshell, as it were, and to my understanding the plaintiff’s primary case is in broad terms as set out in paragraph 14 of his statement, and that is namely that there was an oral agreement between the parties which was to the following effect. First of all that there would be a shelf company created that would purchase the property at Lisbon Street, secondly, that Dr Nicholas would be wholly responsible for the financing of that property, thirdly that the plaintiff, Mr Khouri, would be responsible for certain start up costs, at that time estimated to be $150,000, in that region, and, further, that Mr Khouri would also pay the sum of $60,000 for a share in a trucking business that it was proposed would be one of the enterprises, to put it like that, that would be conducted at the premises in Lisbon Street. And in return for all of that, the plaintiff would then enjoy 49% of the interest in the property and a 50% interest in the trucking business.

In my submission, on any view, it’s quite a remarkable agreement that is pressed by the plaintiff. It envisages effectively a half share in a property, which after improvements would have a value certainly conservatively in excess of $3 million for a meagre commitment of $150,000. Viewed like that, in my submission, it fails what is colloquially often referred to as a sanity test, with standing back and looking at it and saying, well does this agreement make common sense? It obviously doesn’t. That of itself doesn’t mean it didn’t happen, but at a very basic level we say it really does fail the sanity test. It was put to the plaintiff that it was a remarkable agreement, an extraordinary one, and to which my note of the response was simply that the plaintiff says words to the effect of, “That was the deal that was struck, that was the agreement,” words to that effect.

On this version of events the plaintiff’s case requires us to come to a conclusion that Dr Nicholas, a man who is obviously an intelligent human being, a man who has experience in being involved in business, he has business interests, a man who has the wherewithal to obtain professional advice from a solicitor and accountant prior to proceeding with this particular purchase, and a man who also has the wherewithal to seek advice as to the most tax effective way to structure the deal, that is to say, in order to properly minimise tax exposure he implemented a unit trust. We are required to come to a conclusion that a man who, in those circumstances, will agree to virtually - I use the term in inverted commas - “gift” an interest in a property, that interest being worth in excess of $1.5 million for the mere payment of $150,000 or thereabouts without any risk flowing to the plaintiff, without any burden, without any ongoing commitment. And bear in mind the plaintiff’s evidence was also to the effect that once the property was producing income, this is what it was alleged that Dr Nicholas has represented, once the property was producing income, then Mr Khouri could have his expenses paid back out of that income. So that, in effect, virtually for free, for nothing, he would get this half interest in this commercial property worth in excess of $3 million after improvements. In my submission it simply beggars belief.”

95. In my view, much of Mr Khouri’s evidence was a reconstruction of events, designed to advance a case that fitted the available documents but avoided their consequences.

96. For these reasons I have concluded that much of Mr Khouri’s evidence was unreliable such that it is not possible to readily discern which allegations are accurate and which are not. The result is that I am not prepared to accept his evidence where it has not been otherwise independently supported or corroborated.

97. Mr Louie Costa would no doubt have given evidence if he was still alive. Unfortunately, he died in an accident before the trial, prior to the parties obtaining a statement from him. It was agreed that I should not draw any inferences one way or the other as to whether his evidence would have favoured one side or the other. But there is one piece of evidence from him that survives his death, namely the diary he kept in which he recorded various payments made in respect of the Lisbon Street project. I will come to this diary later in these reasons.

98. For his part, Mr Khouri attacked the credit of Mr Tanna, Mr Hocking and Dr Nicholas. I have already addressed the credit of Mr Tanna and Mr Hocking and I am comfortably satisfied that I should prefer their evidence to that of Mr Khouri.

99. In his closing address, Mr Sahade, counsel for Mr Khouri, submitted that Mr Khouri should be accepted in preference to Dr Nicholas. He developed what he described as 6 factors in support of this submission:

“I do need to address your Honour as to why we say that Mr Khouri would be accepted over and above that of Dr Nicholas and I say, with respect, it goes further, that Dr Nicholas would not be accepted as a witness or that little weight would be given to his evidence unless it was independently corroborated. We make that bold submission based on at least six matters which flow from the cross-examination of Dr Nicholas and all of which or any of which of those matters impact greatly on the credit of Dr Nicholas and to that extent that if there is then an inconsistency between Dr Nicholas and Mr Khouri, Mr Khouri would be accepted and indeed Dr Nicholas wouldn’t be accepted.”

100. The first factor asserted was said to arise from the evidence of Dr Nicholas that he did not look to see what happened to the $60,000 that was banked into the account of JLJ & Associates, and he conceded it could still be there. Counsel submitted:

“We say the normal, natural and honest thing to do, because he is a defendant in these proceedings and a plaintiff has brought an action against him saying that $60,000 doesn’t belong to you, is really to look to see whether it is still there or not and if it is there you either pay it back, it doesn’t belong to you, or if you think some other party has a claim to it …”

101. In my view, the criticism is superficial. Dr Nicholas’ evidence was that he had been told by Mr Costa that the money had been paid out to a third party. The occasion for Dr Nicholas to check the detail of the financial records never arose.

102. It was equally open to the plaintiff to make enquiries or check the company records as to whether the $60,000 remained in the company accounts or not, or if paid out, to whom it was paid. I draw no inference adverse to Dr Nicholas in respect of this matter.

103. The second factor relied upon was said to arise because Dr Nicholas gave evidence to the effect JLJ & Associates was a company set up to provide administrative support for J R Trucking. The submission was:

“J R Trucking Pty Limited, is a company that’s pleaded in the Cross Claim and it came out in evidence that the name of that company was something else, it was J R Trucking Conglomerate - well whatever that is, but that’s not the point. The point is the evidence shows that JLJ and Associates was incorporated on 3 November 2006. J R Trucking Conglomerate, whatever it was, was brought about as a shelf company for the purpose of this venture and therefore did not own trucks, at least not yet and JLJ couldn’t have been servicing it. So that statement in the affidavit that JLJ is a company that was set up to provide administrative support for J R Trucking just didn’t make sense. And when Dr Nicholas was questioned on that, “Well what trucking companies did it support”, and we had a salvo of others, Unique Transport, Sevaco, Carbone… Carbone a company and not a Mr Carbone. Although it looks as if in the affidavit it’s a Mr Carbone, but Dr Nicholas told me it was a company and none of that was in the statement, none of that is pleaded. And the only objective evidence on this is at p 48 of Mr Khouri’s affidavit, which is an invoice made out to JLJ and Associates for tyres and you don’t put tyres on typewriters. So we say the trucks belong to JLJ exactly as was represented to the plaintiff and it’s just a statement which we say the court could not accept. He couldn’t have got that wrong, that JLJ was set up as a company to provide support and it was set up back then and a company that the company that they’re talking about was this company that was brought into existence which was not disclosed in the affidavit and only emerged in cross-examination.”

104. The proposition seems to be that JLJ & Associates owned trucks, which I am to accept as a fact based on the evidence of Mr Khouri, and therefore Dr Nicholas’ evidence was unreliable. Having regard to the paucity of effort on the part of Mr Khouri to make any enquiries as to the nature of the trucking business he contends he bought into, the proposition is somewhat ironic and is in my view wholly tendentious. I draw no inference adverse to Dr Nicholas in respect of this matter.

105. The third factor relied upon in the attempt to discredit Dr Nicholas was said to arise because of the date on the lease. The submission was:

“…he was shown the lease which is at 87 of his affidavit. There was a slight amendment to the date, but just going on what the date actually showed, even as amended, the lease seemed to have been signed on 10 April 2007. That was shown to Dr Nicholas and it was suggested to him that he improperly signed it as sole director when at that point in time Mr Khouri was still a director. And he was taken to the exhibit which is at 50 of Mr Khouri’s affidavit. 50 is an exhibit which is dated 17 April 2007, sent by Dr Nicholas himself through Josephine. And on that fax there is a request for Mr Khouri to resign as a director. It’s signed by Dr Nicholas and not signed by Mr Khouri and that’s dated 17 April 2007. The next exhibit was more telling, it was 18 April 2007 and it had the message, “Mr Khouri please sign and fax back ASAP so that I can fax to CSA, thanking you, Maria.” And that also contained a signature from Dr Nicholas and a witness of 19 April 2007, with a handwritten date of 15 March which was suggested it was back dated because this paper was brought into existence on 18 April 2007. Dr Nicholas was given a very clear opportunity to think about it, tell the truth and “Do you concede that, that was not signed on 15 March?” It was like extracting teeth and the concession did not come, it was “No, I still concede that, that was actually signed on 15 March 2007.” Even though it was faxed on 18 April 2007, with a request from his office that Mr Khouri please sign it. And it was stated with a degree of confidence on the face of Dr Nicholas as if he failed to see that there was any problem here. We say the court take that into account in dealing with the evidence of Dr Nicholas as it fell in these proceedings.”

106. Even if the factual premise were to be accepted, which may be doubted, at worst the criticism to be levelled at Dr Nicholas would be confusion and mistaken memory due to the considerable effluxion of time. For my part, I am not persuaded this would be something upon which I should rely to prefer the evidence of Mr Khouri to that of Dr Nicholas.

107. The fourth factor relied upon in the attempt to discredit Dr Nicholas was said to arise because his explanation about the share transfer dated 19 April 2007 from Dr Nicholas to Mr Khouri (AK1 @ 55) was wholly implausible. The submission was:

“…55, on its face, is a document purporting to put Mr Khouri on as a 49% shareholder in the trust and to be a director of Lisbon Waste Depot Pty Limited as at 19 April 2007. Why was this document sent to him? The explanation given by Dr Nicholas, the implausible one, was, “Oh if he paid for it in the future it got activated.” We say, it was none other than to hoodwink the plaintiff into thinking that he did have an interest in this property 49% of Lisbon Waste, the registered owner of the property and that the explanation given by the plaintiff stands to reason, come off, come back on. It perhaps assists in funding or the purchase and you’re back on, when it’s all over and that Mr Khouri could rely upon this document for his re-instatement. The explanation that he gave to that court about that we say, is just inconceivable.”

108. To my mind, the proposition that Dr Nicholas was trying to trick Mr Khouri out of his claimed interest in the property ran totally contrary to the evidence. On the one hand I was asked to accept that Dr Nicholas was prepared to enter into an entirely one-sided arrangement favouring Mr Khouri, and then, on the other hand, within weeks, he tries to trick Mr Khouri out of it. What the evidence actually establishes is that Mr Khouri never acquired an interest in the property. So much was evident from the time he pulled out of the funding of the purchase, when he renegued on the agreement to provide part of the security. By the time it also became clear that Mr Khouri was also resiling on his undertaking to establish the recycling operation there was simply no longer any reason for him to remain a director or a shareholder of the trustee company. It is evident from the emails that even after that, relations between the two men remained cordial, and that they were still involved in other businesses.

109. Dr Nicholas did not trick Mr Khouri into resigning and transferring his shares. Rather, he was recognising the reality of Mr Khouri having made no contribution, and to his credit, Dr Nicholas was trying to keep the door open by offering Mr Khouri the ongoing opportunity to take up units in the unit trust. But he never did.

110. The fifth factor relied upon in the attempt to discredit Dr Nicholas was said to arise from inconsistencies between the pleadings and his evidence. The submission was:

“But there is this problem, the contention here is that on the one hand the plaintiff says he was being in effect used as a cash cow, told a whole lot of things and then being used to pay off debts of the defendant and improperly so. The defendant comes to court and says:

‘No, no the situation is this, this is what we’ve pleaded in our defence, this is what we’ve pleaded in our Cross Claim. There’s a genuine dispute about whether you’re owed this money back, because we had an agreement to what you say and due to your breach you’ve been terminated out of the joint venture. You failed to bring about the things that you promised to bring about and when we signed up the new tenant you were out. There was no need for you to have any further role in this matter.’

Now the payment of monies after a certain date is not relied upon in any respect for post contractual conduct and determining whether a contract existed or not, the payment of monies after a certain date we say is evidence of the implausibility of the explanation given by the defendant. The defendant says, come the introduction of the tenant to the site, in effect the plaintiff had repudiated and he’s been terminated from the venture and he’s got no further role to play. But the plaintiff shows objectively, he’s still paying bills, still sending emails saying, “We’re pleased the tenant is on the site.” That’s at 67. Still requesting to be re-instated as a director on 8 May 2007, at 69 and 31 May 2007, 72. And what you don’t get from the defendant, you don’t get a statement of a re-iteration of the termination of the plaintiff, but you get a pretence in the email at 73, with the words, “as stated previously.” And it goes on to says, “You can buy shares in the trust.”

But what cuts across the credit of Dr Nicholas in the witness box on this issue, if he wasn’t aware that bills were being paid, he said he was overseas, he was aware that Mr Khouri was visiting the site. We know that $6,000 cash was paid to Mr Maltese in May, which is well after the tenant was negotiated in March and signed in April and that Mr Khouri was sending emails to Dr Nicholas. There’s not one word or hint of suggestion that corroborates in anyway Dr Nicholas’s suggestion that the plaintiff was in breach of his agreement by failing to set up the waste re-cycling plant, that he was losing the benefit of thirty to forty thousand dollars per week and that there’s going to be a shortfall and that he was in effect conned or tricked into buying this property any of the nature pleaded in the Cross Claim. It would have to have been there if that evidence of breach of contract as alleged by the defendant was so and we say it’s not.”

111. It is true that Mr Khouri kept visiting the site and maintained an interest in the activities being carried out. But that was not because of any legal interest in the property. His involvement ended when he failed to set up the recycling operation. It is clear, however, that he was much closer to Mr Costa than he was prepared to concede. The evidence about trying to buy his house to help him out financially adequately demonstrates the closeness of their relationship. And it is clear that Mr Khouri was hoping to stay involved. It was not until 2 April 2008 that he finally accepted he was no longer involved when he sent the email of that date to Dr Nicholas (AK1 @ 77).

112. The sixth factor relied upon in the attempt to discredit Dr Nicholas was also said to arise from the pleadings. The submission was that the Defence and Cross Claim quite specifically and unequivocally pleaded that a representation was made by the plaintiff that he would set up the recycling plant, that it would generate thirty to forty thousand dollars per week and that he would not provide funding for the purchase of the property, and, acting in reliance on that, he exchanged contracts. But:

“...in cross-examination, when this proposition was put to him, Dr Nicholas swore black and blue that it was twofold, it was not merely the $30,000 to $40,000 per week, but that Mr Khouri was going to contribute towards the purchase price, be a borrower and a guarantor and that it was on that basis that he exchanged…”

113. There was an inconsistency here, but it is in my view more apparent than real, having regard to everything else, and not one that would cause me to disbelieve Dr Nicholas. In my view the evidence is clear that by the time of exchange of contracts Mr Khouri had made it clear he was not going to provide any additional security, and there can have been no reliance on that by Dr Nicholas. But it is equally clear that he hoped Mr Khouri might contribute capital, by purchasing units. At the time of exchange, it was in Dr Nicholas’ mind that this would come from the recycling business. It was not until after exchange that it became evident that was also a pipe dream. But even after that he left the door open for Mr Khouri to re-involve himself, by purchasing units.

114. I reject the submission that the credit of Dr Nicholas’ evidence was impugned. The reliability of his evidence may suffer from confusion as to the order of events and the date of certain conversations, but the essential thrust of his evidence was in my view honest, consistent and plausible.

115. For these reasons I find that Dr Nicholas’ evidence is generally to be preferred to that of Mr Khouri.

Mr Costa’s diary

116. There is one piece of evidence that might be taken to be objective, namely the diary kept by Mr Costa. Ironically, this was put into evidence by Dr Nicholas (JN1 @ 117 - 129). This was kept by Mr Costa at the request of Dr Nicholas to record payments made in respect of the Lisbon Street property.

117. I will return to the diary later in these reasons.

Findings and conclusions

118. I am not satisfied that Dr Nicholas represented, and the parties agreed, that the company, Lisbon Waste Depot, was to purchase land at Lisbon Street, Fairfield on the basis it would own and operate various businesses on that land. Rather the agreement was that the land would be purchased by a shelf company that would operate as the trustee of a unit trust. Originally, Dr Nicholas was to own 51% of the shares in the trustee company and Mr Khouri was to own 49% of the shares and was to be a director.

119. The unit trust was to be established with the company, Lisbon Waste Depot, as trustee of the property. I am not satisfied that Dr Nicholas represented, and the parties agreed, that Dr Nicholas or his nominee was to own 50% of the units and Mr Khouri or his nominee was to own the other 50% of the units. Rather, it was agreed that Dr Nicholas or his nominee would be the foundation holder of 100% of the units and only once the recycling business was in operation and its income was contributing to the funding of the property would units in the trust be progressively transferred to Mr Khouri or his nominee.

120. Purchase of the property was to be funded by way of a mortgage. Originally, any shortfall in security was to be provided by both men, but after Mr Khouri resiled from his original commitment to participate in the financing of the purchase and to provide security for the loan, Dr Nicholas agreed to arrange the finance and provide all the security.

121. I am not satisfied that Dr Nicholas represented, and the parties agreed, that further costs for improvements, repairs and setting up the businesses were to be met by Mr Khouri and Dr Nicholas until the company, Lisbon Waste Depot, became profitable, or that once the company became profitable, their respective contributions to the purchase and the setting up of the businesses would be refunded. Rather, it was agreed, that various businesses would be operated from the property by tenants. Each tenant would undertake the necessary site works to prepare the property for use by those tenants for those businesses.

122. I find that Mr Khouri represented he knew the recycling business, was familiar with the Lisbon Street property and could establish such a business there that would generate an income of $30,000 to $40,000 per week. He further represented he would take whatever steps were necessary to establish such a business there, at his own cost, and that he had sufficient funds available to do so. He also represented that he would use the income from the business to contribute to paying off the debt incurred in funding the purchase of the property by the company, Lisbon Waste Depot.

123. I am not satisfied that Dr Nicholas represented, and the parties agreed, that the plaintiff was to become a 50% owner of the trucking business known as JLJ & Associates that was to be relocated to the property and operated profitably from that location. Rather, Dr Nicholas represented that another business in which Dr Nicholas had an interest would use the property as its base and develop its operations at that site. I find that Mr Khouri was never offered any interest in a trucking business, nor was any payment of $60,000 made for the purpose of acquiring such an interest to Dr Nicholas or to Lisbon Waste Depot.

124. I am not satisfied that Dr Nicholas represented, and the parties agreed that Mr Khouri should resign as a director and transfer his 49% interest in Lisbon Waste Depot for ease of signing paperwork. Rather he agreed to do so because, having failed to establish a recycling business, he had no further involvement in the Lisbon Street property or the operations to be conducted there.

125. I am not satisfied that Dr Nicholas represented, and the parties agreed that Dr Nicholas would transfer back to Mr Khouri his 49% interest in the company for $1, and Mr Khouri would be reinstated as a director after settlement. Rather, Dr Nicholas represented to Mr Khouri that he could return as a director and a shareholder when and if he took up and purchased his proportion of the units in the unit trust.

126. I am not satisfied that Mr Khouri provided various sums of money to the defendants pursuant to contractual arrangements between them, or in reliance on any representations made by Dr Nicholas. I am not satisfied that Mr Khouri delivered to them a motor vehicle on or around 1 March 2007 pursuant to contractual arrangements between them, or in reliance on any representations made by Dr Nicholas.

127. I find that neither of the defendants breached any contract with Mr Khouri. I find that Dr Nicholas made no representation to Mr Khouri that was misleading and deceptive.

128. It follows that the plaintiff’s claims in contract and pursuant to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 must fail.

The claim for $60,000 in relation to the trucking business

129. I have already found that Mr Khouri was never offered any interest in a trucking business, nor was any payment of $60,000 made for the purpose of acquiring such an interest to Dr Nicholas or to Lisbon Waste Depot. But even if the finding was otherwise, the plaintiff’s claim is flawed for other reasons. Firstly, at best the evidence only supports a payment to JLJ & Associates, not to either of the defendants. Secondly, the payment was not made by Mr Khouri, rather it was made by Bretant Pty Limited. It was not established that Mr Khouri was the purchaser, or that he made the payment.

130. I find that the $60,000 was never paid to the defendants. This money, paid by some entity other than Mr Khouri, was given to Mr Costa for some purpose not associated with the Lisbon Street venture. The claim for the return of that money by the defendants fails.

The claim for goods sold and delivered

131. I am not satisfied that Mr Khouri sold a motor vehicle to either of the defendants. Even apart from the question of credit, the vehicle in question was not registered in the name of Mr Khouri, and there was no objective evidence that he owned it.

132. The evidence failed to establish that either defendant received the vehicle. Nor is there any evidence that the registered owner ever changed. It certainly wasn’t ever transferred to one of the defendants, or to Mr Costa for that matter.

133. The evidence does not establish what happened to the motor vehicle. The high point of the evidence was that a ute, owned by Bretant Pty Limited, was loaned to Mr Costa at some stage in 2007.

134. The claim for goods sold and delivered to the defendants fails.

The claim for money had and received

135. As an alternative to the claims in contract and for misleading and deceptive conduct, Mr Khouri claims the recovery of the amounts he paid on the basis of money had and received.

136. I am not satisfied that any of the payments claimed by Mr Khouri were made to Dr Nicholas. Whether some payments were made to Mr Costa on behalf of Lisbon Street Depot is another matter, and I will come to that. But I find that Dr Nicholas never had or received any money from Mr Khouri. The claim against Dr Nicholas fails.

137. The Costa diary records various payments having been made by Mr Khouri in connection with Lisbon Street. The record is not specific as to the reason for the payments and whether they were made in connection with the failed recycling business, or whether they could be construed as money expended by way of improvements to the property, the benefit of which has accrued to the second defendant, and for which Mr Khouri has received no benefit, such that the second defendant has been enriched at Mr Khouri’s expense. It was submitted that unless the second defendant proved any change of position, or that the benefit has dissipated, it would not be unjust to order the return of the payments if they were expended by way of capital improvement to the land for which the second defendant now enjoys the benefit.

138. In my view there is merit in that submission.

139. I am not prepared, however, to accept that any payments fitted those criteria solely on the evidence of Mr Khouri, and will only do so where there is some objective corroboration to that effect.

140. In my view, the listing by Mr Costa in his diary constitutes sufficient corroboration, on the balance of probabilities, to establish the making of some payments. This requires a comparison of the payments claimed in paragraph 6 of the Amended Statement of Claim with the entries in Mr Costa’s diary.

141. If the payment was made, the question then becomes whether it resulted in some capital improvement to the property as to which the second defendant enjoys the benefit.

142. The plaintiff’s list at paragraph 6 of the Amended Statement of Claim, compared to the entries by Mr Costa in his diary, reveals:

13.2.07 Cash drawings for Lisbon Street $7,175.00
16.2.07 Paid cash for site cleaning at Lisbon Street $1,500.00 Diary @ 119
26.2.07 Paid to Universal Mobile Tower Hire $ 988.90
02.3.07 Payment to TradeLink $4,750.00 Diary @ 125
05.3.07 Cash drawings for Lisbon Street $7,175.00
08.3.07 Paid to Universal Mobile Tower Hire $ 735.90
19.3.07 Paid to Universal Mobile Tower Hire $ 735.90
19.3.07 Pump $3,700.00
23.3.07 Universal Mobile Tower Hire $1,200.00
23.3.07 Payment to Lisbon - Drawings $2,500.00 Diary @ 121
04.4.07 Paid to Smithfield Tyre Service & Exhaust $4,810.00
13.4.07 Payments to Contractor for Lisbon Street $6,000.00 Diary @ 121
03.5.07 Paid to Universal Mobile Tower Hire $ 207.68
17.5.07 Paid to Laws Auctions $1,360.80
Undated miscellaneous cash payments $5,000.00 Diary at 119

143. Hence, several of the claims made by Mr Khouri as being associated with the Lisbon Street works are substantiated in the Costa diary. I will now consider the evidence relating to these four payments:

The cash payment of $1,500.00 on 16.2.07
144. Mr Khouri said he made a payment of $1,500 in cash to Mr Costa, at his request, ‘to pay for the boys for cleaning up the site’. He later wrote a cheque to replace the cash payment from a cheque account in the name of Lened Suncorp (AK1 @ 19).

The payment to TradeLink of $4,750.00 on 2.3.07
145. Mr Khouri said he made a payment of $4,750 on 2 March 2007, at the request of Mr Costa, to buy a stormwater pit from Tradelink (AK1 @ 23).

The cash payment of $2,500.00 on 23.3.07
146. Mr Khouri said he made a payment of $2,500 in cash to Mr Costa, at his request, ‘to pay for the boys at Lisbon Street’. He cashed a cheque for the payment (AK1 @ 47).

The cash payment of $6,000.00 on 13.4.07
147. Mr Khouri said he made a payment of $6,000 in cash to Mr Costa, at his request, ‘to pay the concreters’. He cashed a cheque for the payment (AK1 @ 49).

The miscellaneous cash payments
148. Mr Khouri said he made a number of other cash payments in respect of the works at Lisbon Street, in excess of $5,000, ‘because I recall that such payments occurred at least 6 times and the minimum payment was approximately $800’. This is not substantiated by the Costa diary. There are, however, two entries in the diary at 119 for $660.00 and $184.58 attributed to payments made by Mr Khouri. There is another entry at 125 for $2,500.00, but it is not clear whether that was a duplicate of the entry at 121.

149. Adding these entries to the other amounts brings the total entries for payments made by Mr Khouri to $18,094.58, which is only $60 shy of the entry in the diary at 127 of $18,154.58 that Mr Costa appears to have recorded as the total ‘put in’ by Mr Khouri. I have looked in vain for the $60 and can only assume Mr Costa added the entries up wrongly. But the cents involved tend to confirm that total relates to those entries.

150. All these entries in the diary pre-date 15 April 2007. In my view, it is no coincidence that it was on 15 April 2007 that Mr Costa rang Mr Khouri to say he was sorry to hear he was no longer involved in the Lisbon Street project.

151. I am satisfied that Mr Khouri paid $18,094.58 to, for or on behalf of the second defendant in relation to the Lisbon Street works. I am also satisfied that each of the payments related to improvements on the property as to which the second defendant enjoys the benefit, but for which Mr Khouri has received no benefit, such that the second defendant has been enriched at Mr Khouri’s expense. In my view it would not be unjust to order the return of the payments on the basis of money had and received by the second defendant.

152. I therefore find the plaintiff’s claim for money had and received proved as against the second defendant for an amount of $18,094.58.

The Cross Claim by Dr Nicholas

153. I come then to the cross claim made by Dr Nicholas against Mr Khouri. I have already found that Mr Khouri made a number of representations to Dr Nicholas about establishing a recycling business. I am not, however, satisfied that these representations were misleading and deceptive, or that Dr Nicholas relied upon them to enter into his agreement with Mr Khouri, or in the purchase of the Lisbon Street property. Nor am I satisfied that Dr Nicholas would not have proceeded with the purchase if he had known that Mr Khouri was either unwilling or unable to establish his recycling business to the level of success assumed. In my view, it was obvious that there would be a considerable lead time before any revenue could be generated from a recycling business. Objectively viewed, one of the purposes of the unit trust structure was to accommodate this circumstance and Dr Nicholas decided to proceed irrespective of any representations by Mr Khouri.

154. Equally important is that Dr Nicholas did not prove any loss. The property purchased is owned by the second defendant on trust for the unit holder, Ozhale Pty Limited. Dr Nicholas’ interest in that company was never explained. Nor was there any evidence as to whether Dr Nicholas had some arrangement with that company for him to be reimbursed out of profit any expenditure made by him on its behalf. But even assuming in his favour that he can somehow claim through that company, there was no evidence as to the value of the property.

155. Dr Nicholas did not advance his cross claim as one for damages for lost commercial opportunity, namely the opportunity to decide not to purchase the property.

156. Damages for breach of contract are awarded to put a claimant in the position in which he or she would have been had the contract been performed.

157. Damages for misleading and deceptive conduct are awarded to compensate for any loss suffered by comparing the actual position of the claimant with the position he or she would have been in had there not been any such conduct.

158. The claimant has the onus of proving any loss, by reference to his or her own particular circumstances. This is not a case where the claimant is entitled to ‘reliance damages’ based on any supposed diminution in bargain. It is impossible to know whether, by requiring the plaintiff to compensate him for the finance costs or the improvement expenditure, Dr Nicholas would be in the same position or a better position than he would have been but for the representations and breach of contract. Simply put, it was not proved that the value of the property at the relevant date was greater than the total amount paid for it, including the cost of the works and improvements carried out to prepare it for occupation by tenants, or whether indeed an asset was acquired that was more valuable than what was paid.

159. For these reasons I find that Mr Khouri did not breach his contract with Dr Nicholas, nor did he engage in any misleading or deceptive conduct upon which Dr Nicholas relied. Nor did Dr Nicholas prove any loss.

160. The cross claim fails.

Interest

161. The parties agreed that any interest was to be assessed after I had made my findings in relation to the various claims.

Costs

162. Orders for costs are to be made in accordance with r 42.1 and r 42.2 of the UCPR, unless some other order or orders are appropriate. There is nothing before me, at this point, to indicate that some other order is appropriate but I will reserve leave to either party to apply in that regard.

Disposition

163. There will, therefore, be a verdict for the plaintiff against the 2nd defendant for $18,094.58 plus interest to be agreed or assessed.

164. There will be a judgment for the 1st defendant against the plaintiff on the plaintiff’s claim.

165. There will be a judgment for the plaintiff against the 1st defendant on the cross claim.

166. The unsuccessful parties are to pay the costs of the successful party in any claim against them.

167. The parties are to bring in short minutes of order within 14 days in respect of the interest on the plaintiff’s verdict against the 2nd defendant.

168. I give leave to the parties to apply for some other costs order or orders provided any such application is notified to the other party and the court within 14 days, in writing, specifying the order sought.