Leared v Lordan
[2019] VCC 364
•8 April 2019
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-17-03687
| John Robert Leared on his own behalf and as Trustee of the Leared McNamara SMSF | Plaintiff |
| v | |
| John Lordan | Defendant |
---
JUDGE: | Lewitan | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4, 5, 6, 8, 11, 12 and 25 February 2019 | |
DATE OF JUDGMENT: | 8 April 2019 | |
CASE MAY BE CITED AS: | Leared v Lordan | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 364. | |
REASONS FOR JUDGMENT
---
Subject: Rectification, Joint Venture Agreement, Damages
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Lithgow | Dwyer Robinson Pty Ltd |
| For the Defendant | Mr D Carlile | Altaee Law Firm |
HER HONOUR:
1 John Robert Leared (Leared) claims that he agreed on his own behalf and as trustee of the Leared McNamara SMSF to lend sums totalling $538,000 to John Lordan and a corporate entity associated with him pursuant to five agreements dated 23 November 2012, 5 June 2013, June 2014 (2 agreements) and March 2014. John Lordan (Lordan) has repaid the sum of $250,000 but has failed to repay the balance of the monies advanced. Lordan denies that he entered into loan agreements with Leared and states that he entered into a joint venture agreement with Leared whereby the joint venture would acquire and develop the property at 7-11 Martin Street, South Melbourne in the state of Victoria (the property). The defendant submits that there was an intention that Leared would have a quarter interest in the property and that accounts would be taken upon completion of the project. The defendant submits that the plaintiff and the defendant entered into an agreement to vary the joint venture agreement in April 2014 and that in lieu of receiving 20% share of the profits the plaintiff would purchase a unit at the property.[1]
[1]Defence and Counterclaim, paragraph 3E.1.
2 Leared has practised as a land surveyor since 1976. In 1983 Leared started a company called Southern Surveys Pty Ltd (Southern Surveys) and has since been an employee of Southern Surveys. Leared is the sole director and shareholder of Southern Surveys. Leared met Lordan on a building site 30 to 35 years ago in Eltham.[2]Leared continued to work with Lordan since that time and Southern Surveys has performed between 20 to 25 different jobs for Lordan at different locations.
[2] Transcript p 28.
3 Lordan had returned to Melbourne after he lost money and property in Port Douglas Queensland after the global financial crisis.[3] In November 2012 Leared’s wife, Annie McNamara (McNamara), saw an advertisement to sell the property in the real estate section of the local paper. The property comprised a large two storey brick building which was then used as an office warehouse. McNamara told Leared that this was a project that Lordan would like.[4]
[3] Transcript p 30.
[4] Transcript p 30.
4 In early November 2012 Leared telephoned Lordan and said “You should come and have a look at this”.[5] Lordan and Leared looked at the property.[6] Leared knew that Lordan did not have much money. Lordan said that he could not afford to pay the deposit for the property and the only way he could go into the deal was if the deposit was found and loaned to him. Lordan also told Leared that he could have a 30 per cent share. Leared said that he could not commit to any sort of dealing without speaking to his wife. McNamara was not happy with taking 30 per cent. Leared and McNamara thought that they could afford 25 per cent at some stage.[7]
[5] Transcript p 31.
[6] Transcript p 31.
[7] Transcript p 31.
5 Leared said that he had a meeting with Lordan in a cafe. Lordan said that he would need the money loaned to him and any other moneys at various stages so that he could finish the project. Leared said that if he and McNamara were going to take any share in the development, it would be 25 per cent. Leared said that he and McNamara would loan the deposit for the property.[8] Leared said in cross-examination:
So the agreement is that you put the loan and you will then take 25 per cent of the project profits?...25 per cent of the project.[9]
[8] Transcript p 32.
[9] Transcript p 66.
6 When cross-examined Leared said that “after we said we’d have 25 per cent…there was no further discussion on how that was going to work.”[10]
[10] Transcript p 98.
7 Lordan approached the real estate agent and negotiated a contract of sale of the property with the vendor, Berean Holdings Pty Ltd (Berean). Berean as vendor entered into a contract of sale of the property dated 22 November 2012 with Lordan and/or nominee as purchaser.[11] The purchase price was $1,800,000 which involved an immediate deposit of $150,000. A further deposit of $150,000 was to be made within 180 days. Settlement was due on 21 February 2014. Special Condition 6 of the contract of sale of the property provided that Lordan could strip out the building before settlement to get it ready for subdivision.[12]
First agreement[13]
[11] Exhibit 1.
[12] Transcript p 32.
[13] Exhibit A.
8 Leared agreed to lend the initial deposit of $150,000 to Lordan for the purchase of the property. On 10 December 2012 the Leared McNamara SMSF entered into an agreement to provide a loan of $71,000 to Lordan.[14] On 12 December 2012 Leared entered into an agreement to provide a loan of $79,000 to Lordan.[15] A total sum of $150,000 was advanced to Lordan on 10 and 12 December respectively. Each of these agreements was signed sealed and delivered by Lordan.[16] Lordan offered the template for the loan documentation which was adapted by Leared to document the loans.
[14] Exhibit B.
[15] Exhibit A.
[16] Exhibit B p 434; exhibit A p 417.
9 The interest rate in the agreements was stated to be 9% per annum. However both parties agree that the agreed rate of interest was 12% per annum.
10 The final repayment date was stated to be 23 November 2013.
Second agreement[17]
[17] Exhibit C.
11 By a written agreement dated 5 June 2013 John Robert Leared and Leared McNamara SMSF agreed to lend the further deposit of $150,000 to Lordan.[18] Lordan and McNamara extended their home loan from an account held by McNamara with the Teachers Credit Union to obtain that $150,000.[19] The interest rate for the loan of $150,000 is 12% per annum. The second agreement was signed sealed and delivered by Lordan. McNamara arranged the provision of the funds through the Teachers Credit Union. The final repayment date for the loan of $150,000 was stated to be 5 October 2013.
[18] Exhibit C.
[19] Transcript pp 36, 86 and 129.
Fourth agreement
12 I accept McNamara’s evidence that in June 2014 Lordan asked McNamara for a loan of $10,000 to assist him in paying for the cost of materials used in renovating the property. The moneys were repayable upon the completion and sale of the property with interest at 12% per annum. McNamara advanced $5000 to Lordan on 25 June 2014 and a further sum of $5000 on 29 July 2014.
Fifth agreement[20]
[20] Exhibit D.
13 On 18 March 2014 the Leared McNamara SMSF entered into a loan agreement to advance the sum of $30,000 to FNQ Developments with interest accruing at 12% per annum. The moneys were advanced by cheque.[21]
[21] Exhibit E.
14 The defendant denied the loan agreements.[22] I do not accept the defendant’s submission. The first, second and fifth agreements were signed sealed and delivered by Lordan and each of those agreements set out the terms of the loans. There are references to loans by Lordan in various emails which include an email dated 6 October 2016 by Lordan to Leared,[23] an email dated 6 October 2016 by Lordan’s bookkeeper Kayla Pollington,[24] a notation that the cheque dated 5 June 2013 payable to Dixon Kestles & Co was “Loan from Annie/Bob”,[25] an email dated 7 April 2015 from Lordan to McNamara and Leared,[26] an email dated 29 September 2015 from Lordan to Leared[27] and an email dated 25 October 2016 from Lordan to Leared.[28]
[22] Paragraph 1, Defence and Counterclaim dated 3 August 2018
[23] Exhibit K.
[24] Exhibit M.
[25] Exhibit Q.
[26] Exhibit R.
[27] Exhibit S.
[28] Exhibit U.
15 There is no dispute that the funds referred to in each of the first, second, fourth and fifth agreements were advanced by the plaintiff to Lordan.[29] There is no dispute that the plaintiff is entitled to have the money back.[30] I find that Lordan had an obligation to repay each of the moneys advanced pursuant to the first, second, fourth and fifth agreements together with interest. Lordan concedes that the plaintiff would be entitled to 12% interest upon the funds he contributed.[31]
[29] Paragraph 15 of written submissions filed on behalf of the defendant.
[30] Paragraph 16 of written submissions filed on behalf of the defendant.
[31] Defence and Counterclaim paragraph 1.2(h).
16 The plaintiff advanced the total sum of $340,000 to Lordan pursuant to the first, second, fourth and fifth agreements. Lordan repaid $250,000 to Leared over a period of just over 12 months commencing in August 2014.[32] I accept the table provided by the plaintiff which sets out the amount of interest owed to the plaintiff after deducting the sums of money paid by Lordan to the plaintiff. This table is annexed to this judgment as Schedule 1. The total amount owed to the plaintiff after deducting the repayments made is $90,000. I propose to make an order that judgment be entered against the defendant for the sum of $90,000 together with interest pursuant to the first, second, fourth and fifth agreements at the rate of 12% per annum to the date of judgment.
[32] Transcript p 49.
Rectification
17 The defendant submits that the first and second agreements[33] should be rectified so that the date for repayment of the loans is the date of completion of the development of the property. Leared was cross-examined about the final repayment date of 23 November 2013 in the first agreement:[34]
In fact the truth is you knew that this money would be sent back to you when there was settlement of the property?...We thought we would get it back when John had sufficient funds, yes.[35]
…
If in fact any of the so-called repayment dates on those documents were true, you would have been telling him to sell everything and sell now?...We trusted John. We thought we’d get our money back when the property sold. [36]
[33] Exhibits A, B and C.
[34] Exhibit A.
[35] Transcript p 103.
[36] Transcript p 112.
18 Counsel for the defendant, Mr Carlile, conceded that nothing turns on the final repayment date and that there was no point chasing that claim. Nevertheless the defendant pursued its claim for rectification. In these circumstances I accept the defendant’s submission that the first and second agreements should be rectified so that the date for repayment of the loans is at the date of completion of the development of the property.
The subdivision of the property into two titles – ground floor and topmost floor (top floor)[37]
[37] Exhibit 38.
19 Southern Surveys undertook a survey of the property with a view to preparing a two-lot subdivision to subdivide the ground floor and the top floor into two separate parts. The top floor became lots 2C and 3C and the ground floor became lots 1C and 4C. The stripping of the building continued and the property was subdivided into the topmost floor and the ground floor on 2 August 2013.[38]
[38] Transcript p 36, Exhibit 38.
20 A number of plans were presented by Bland Connard Menzies (architects) during the demolition and cleaning out of the top floor. At some stage Leared and McNamara thought they would like to have one of the proposed units and suggested to Lordan that they were interested in the downstairs unit at the rear of the property. Lordan subsequently said “Well, why don’t you take the top floor upstairs at the back? That is 25% - or that is half of the top floor, therefore, its 25 per cent total. It is a better unit.”[39] The price was a quarter of the purchase price of $1.8 million dollars plus a share of whatever it cost to separate the two units.[40]
[39] Transcript p 39.
[40] Transcript p 208.
21 Leared gave evidence that to secure separate titles to the topmost floor, a plan of subdivision was registered in the Titles Office and a partition agreement was introduced to the Titles Office transferring the title held as tenants in common into different names. Leared received half of the top floor; Lordan received the other half of the top floor.[41]
[41] Transcript p 41.
22 There was a further subdivision of the top floor into two units on 14 August 2014 which became lots 2C and 3C. Leared became the sole proprietor of what is now called unit 3.[42]
[42] Transcript p 122.
23 Leared said that he had nothing to do with the rest of the project when he purchased unit 3.[43] Leared said that he was to have a 25 per cent share in the project which he took when he took unit 3. “I was in for 25 per cent of the building which I got. Mr Lordan had 75 per cent of the building.”[44] Leared said that his name was not on unit 2 or the ground floor. Lordan had an office downstairs and later moved into a residence at the back of the ground floor.[45]
[43] Transcript p 124.
[44] Transcript p 124.
[45] Transcript p 211.
Third agreement
24 Settlement of the purchase of the property was 21 February 2014. Lordan negotiated a 60 day extension of the settlement date in consideration of the payment of $50,000 to Berean.[46]
[46] Exhibit 37.
25 By Contract of Sale dated 7 April 2014 Berean Holdings Pty Ltd transferred the the land at 2B/7-11 Martin Street, South Melbourne (the top floor of the property) to John Robert Leared and FNQ Developments Pty.Ltd. as tenants in common.[47] The purchase price was $925,000. The contract provided for settlement on 23 April 2014. Lordan retained ownership of the ground floor.
[47] Exhibit F.
26 On 1 May 2014 Lordan forwarded an email to McNamara and Leared. Lordan said that this is an approximate cost to date of what has been spent at Martin Street since 1 July 2013.[48] “Bob and Annie have chosen not to have provided a structure, rather they have decided to keep the unit.”[49] At that stage Lordan was still in the lower building in the office. Lordan said that the figures were taken from the bookkeeper’s ledger and are claimed from “invoices, spreadsheet, bookkeeper, notes.”[50] Leared stated that some of the amounts contained in the spreadsheet were incurred for the sale and presentation of unit 2 and do not relate to unit 3.[51]
[48] Exhibit 7.
[49] Transcript p 317.
[50] Transcript p 318.
[51] Transcript p 124.
27 In June 2014 Leared on his own behalf and as trustee of the Leared McNamara SMSF agreed to purchase one of the 4 units in the property being a half share in the upper floor (unit 3).
28 Lordan was not able to provide the $1.45 million that was required to settle the purchase of the property.[52] In response to the question:
Where did you get the balance of the moneys that you were short for?...In a roundabout manner, Bob directly put more than the purchase price of his unit to the solicitor’s trust account, approximately 170 thousand dollars, which coincidentally was similar to what money I’d laid out on the building already without asking for any money, my own choice I may add at the time.[53]
[52] Transcript p 319.
[53] Transcript p 320.
29 The plaintiff referred to the Contract of Sale of the top floor dated 7 April 2014 between Leared, FNQ Developments Pty Ltd and Berean.[54] The plaintiff submits that as the total purchase purchase price of the top floor was $925,000 the relevant purchase price for unit 3 is 50% of that price which is $462,500. However in paragraph 3E of the Further Amended Statement of Claim dated 2 July 2018 (FASC) the plaintiff states that it agreed to purchase a half share in the upper floor (unit 3) for $475,000.
[54] Exhibit F.
30 Leared on his own behalf and as trustee of the Leared McNamara SMSF agreed to lend a further sum of $175,000 to Lordan to enable the completion of the purchase of the property. The sum then later became $198,000 being the difference between the $673,000 provided by Leared at settlement less the purchase price of $475,000 stated in paragraph 3E of the FASC.
31 Leared and McNamara organised a loan of $650,000 through the Teachers Credit Union.[55] Part of the loan of $650,000 was to pay for the bare shell of unit 3 and the other part of the loan was to enable McNamara and Lordan to finish the shell to make it into a liveable state. McNamara and Lordan were going to pay for the costs of the materials and the work done to fit it out.[56] Lordan arranged for the design to be made by Bland Connard and Menzies. Leared and McNamara ended up paying for the fit out of unit 3 themselves.[57]
[55] Transcript p 209.
[56] Transcript p 42.
[57] Transcript p 46.
32 Lordan asked Leared to transfer the whole $650,000 to his solicitors, Morgan Legal. A couple of days later, he was asked for another $23,000. Lordan said that “if I don’t find this extra money, the whole deal will fall over.” On 5 June 2014 the plaintiff paid $672,292.50 to Morgan Legal and obtained a half share in the upper floor which became unit 3.[58] The title to unit 3 was issued in late August 2014.[59]
[58] Exhibit L.
[59] Transcript p 45.
33 Even on the defendant’s case the balance paid in excess of the purchase cost of unit 3 was a “contribution of funds” which (after the deduction of costs associated with unit 3) would entitle the plaintiff to the payment of interest at the rate of 12 per cent per annum.[60]
[60] Defence and Counterclaim paragraph 1.2 (h).
34 The defendant purports to deduct from this the sum of $35,586 for purchase costs. The plaintiff says that there is no evidence for that claim. However in reply the defendant referred to the Cost Calculation Sheet.[61]
[61] Exhibit 68.
35 Having considered the whole of the evidence and the submissions made by counsel, I am not satisfied on a balance of probabilities that the defendant has incurred the purchase costs of $35,586.73.
36 I do not accept the defendant’s submission that the proportion of the purchase price of $925,000 for the top floor attributable to unit 3 is 53.76% being the floor area of unit 3 compared to the total floor area purchased. This figure was not put to Leared or McNamara in cross examination.
37 The defendant claims that the purchase costs for unit 3 was $66,195.56.[62] This sum includes the sum of $13,276.51 for the Statement of Adjustments which is outside the scope of the agreement reached between Leared and Lordan for the purchase of unit 3. The Statement of Adjustments[63] includes an unexplained amount of $10,726.03 for penalty interest. GST on applicable items is not contained in Morgan Legal Pty Ltd Statement of Account exhibit L.
[62] Exhibit 68.
[63] Exhibit 40.
38 The Statement of Account rendered by Morgan Legal Pty Ltd in relation to the purchase by Leared and FNQ Developments from Berean of the property at 2B/7-11 Martin Street, South Melbourne[64] includes an unexplained reimbursement of $15,000 to John Lordan. Lordan was unable to explain why an amount of $15,000 was reimbursed to him.
Why is that?...Well, I can’t answer that right now, but it is what it says there”.
…
I’m putting to you that this is yet another example of money that just never gets accounted for, because it is to your benefit?...You have a way with words. It’s accounted for, as it words it there.
Well, you can let us know when you tell us where it is in the accounts that you’ve presented to this court. Where is that $15,000 accounted for?...It probably won’t need to be. It’s reimbursed to me.[65]
[64] Exhibit L.
[65] Transcript p 449.
39 Given the unsatisfactory evidence in relation to the amount claimed by the defendant for purchase costs, and having considered the whole of the evidence, I have formed the view that the amount to be deducted for purchase costs is $26,422 being 50% of the following amounts:
(a) Morgan legal fees $ 911.69
(b) Land titles office $ 1,362.00
(c) Stamp revenue office $50,570.00
The building costs
40 There is a dispute about the amount of the building costs to be charged to the plaintiff in connection with unit 3.
41 The defendant contended that he had previously produced an accounting for these costs in documentary form. The plaintiff submits that despite the defendant’s contention that he documented the costs to be borne by the plaintiff that related solely to unit 3 and provided such a document to the plaintiff, no such document is in evidence.
42 Lordan referred to a document headed “April ’14 details”[66] and stated that it contained a brief description from a draft of all costs associated generally with the subdivision of upstairs. Lordan said that the document was
presented in my boardroom to both my partners, myself, and a bookkeeper from Tasmania to show the approximate cost in a draft format to show the approximate cost, called it a draft format at the time, to go away, come back and tell us what you think is or isn’t. It was founded from a true costing, piles of receipts. Both Annie and Bob and myself sat in a room. We ticked a – there was provision on the sheet for tick yes, no, yes, no. Nothing definitive. Go away, have a look at it. …[67] And an invoice could have been raised from that upon agreeance. There was no – there was no feedback or comeback on it. They claim to have lost the documents.
So that document there, that was produced by you or your bookkeeper or you and your bookkeeper in combination. How was it produced?...
It was produced collectively from the good records that I have, I have paper records on everything, and with the bookkeeper coming in and out of the room. Doesn’t matter. Maybe a dozen times on the day. It was basically prepared for the meeting.[68]
[66] Exhibit 9.
[67] Transcript p 314.
[68] Transcript p 314.
43 McNamara and Lordan had a falling out in August 2014.[69]
[69] Ms McNamara’s account pp 212 – 214.
44 McNamara recalled a meeting which occurred at Lordan’s offices at the ground floor of the property after there had been a breakdown in the relationship. McNamara said that Leared and Lordan sat around and looked at invoices and spreadheets. One of Lordan’s bookkeepers was there.[70] McNamara said that they discussed costings but not all costings. McNamara said that she was given a large A3 page containing a spreadsheet. McNamara said that she does not have a copy of that spreadsheet.[71]
[70] Transcript p 231.
[71] Transcript p 237.
45 Lordan claimed to have provided “an accounting” particularly at the meeting where his bookkeeper was present and available. No “paperwork” from this meeting is in evidence. Further the bookkeeper appears to have been involved in an “audit of loan accounts”.[72] The bookkeeper has not been called to give evidence and no explanation for her absence has been given.
[72] Exhibits K and M.
46 As stated by the Court of Appeal in Androvitsaneas v Members First Broker Network Pty Ltd[73]:
A Jones v Dunkel inference may be drawn where, as a consequence of the issues raised during the course of the evidence, an unexplained failure to call witnesses may lead to an inference that the uncalled evidence would not have assisted the party’s case.[74] The rule permits the trier of fact to take that into account in deciding whether to accept a particular piece of evidence which has been put in issue.
[73] [2013] VSCA 212, [30].
[74] (1959) 101 CLR 298, 321 (Windeyer J).
47 The bookkeeper could have given evidence about the discussions and spreadsheets produced at the meeting held between Leared, McNamara and Lordan at Lordan’s office at the property and the amount of the construction costs incurred by Lordan at that time. In these circumstances the inference to be drawn from the failure to call the bookkeeper is that the evidence of the bookkeeper would not have assisted the defendant’s case.
48 On 20 March 2017 Dwyer Robinson Pty Ltd as solicitors for the plaintiff wrote to Morgan Legal as solicitors for the defendant requesting copies of documents relating to the construction costs claimed by Lordan.[75] When cross-examined Lordan stated:
It’s pretty obvious he’s asking for the construction costs, isn’t it?...It’s obvious and he’s had them for years.
But you’ve never given it to him in any form that would be called an accounting. You’ve never given it in any form like we now see in relation to the third folder, the red folder?...You couldn’t have given a draft in any better format than what I did.
You’ll take us to that draft document at some stage, will you? …Please allow me, yes.[76]
[75] Exhibit 21.
[76] Transcript p 471.
49 On 27 April 2017 Leared forwarded an email to Lordan[77] estimating the costs to divide the top and bottom floor and then to separate the top floor into two apartments. When cross-examined Lordan said:
…I don’t know why he would estimate. He’s got the full costing spreadsheet for all that.
Well perhaps you can produce this spreadsheet you say you gave him?...There’s no problem producing it. I can show you a draft of that at any moment.[78]
[77] Exhibit X.
[78] Transcript pp 479 – 480.
50 In November 2018 the plaintiff was provided with 3 volumes of the account files for the development of the property (bundle 1),[79] one volume of the project documents (bundle 2),[80] and one volume of the fit-out costs of unit 3 (bundle 3).[81] When cross-examined Leared said that these documents had not been provided to him until November last year.
The position is those documents have been available and you just haven’t seen fit to look at them?
…We haven’t had the chance. I think if you look at the first time they were available, they were only available for a week.[82]
[79] Exhibit 62.
[80] Exhibit 63.
[81] Exhibit 64.
[82] Transcript p 136.
51 On Wednesday 6 February 2019 (the third day of the trial) the defendant produced a sheet headed “Lordan Simplified Whole of Project costing.”[83] Counsel for the plaintiff, Mr Lithgow, submitted:
The production of this sheet today halfway through the trial is a complete surprise to us. It appears to us to be an attempt to provide an accounting for the project. This is the first accounting we have ever had in this form and it is only in the summary form. So here we are, and Mr Lordan should have known, if this was a joint venture he had an obligation to account to us. And showing us bundles of invoices at some point in spreadsheets is not an accounting. This is an accounting and this is the first accounting that has ever been attempted and given to us, halfway through the trial.
So we are taken by surprise. …That is the reality of springing an accounting halfway through a trial when this matter. Mr Lordan’s case is this is a joint venture. He has never accounted to us. Where is – my client put $1.13 million into this project. Where is that in the spreadsheat?
…This is a joint venture that has now been on foot for seven years. It takes “a trial”, not even a pleading, not even the commencement of a proceeding but a trial to get halfway through the trial and then we get the first attempt to provide an account.[84]
[83] Exhibit 67.
[84] Transcript pp 258-259.
52 There are discrepancies between the sums claimed in the Lordan Simplified Whole of Project Costing and the sums stated in the defendant’s answers to the plaintiff’s request for further and better particulars dated 12 November 2018 (the defendant’s further particulars). In paragraph 2(a) of the further particulars, the defendant claimed that the total cost of completing the project was $3,710,230. The amount of the “total cost of JV project” stated in the Whole of Project Costing is $3,671,873.31. Lordan admitted that that is a difference of $38,356 for that amount.
The project started in 2012?...Yes
The project finished in 2018?...Yes
And you still can’t get the figures right, even a simple figure like that?...If you say so.[85]
[85] Transcript p 374.
Total income from sales
53 The total income from sales in the Lordan Simplified Whole of Project Costing is $3,407,280. In paragraph 2(c) of the defendant’s further particulars the defendant claimed that the total income from sales of the units was $3,385,000. The following questions were put to Lordan in cross-examination.
Further particulars paragraph 2 (c) states that the total income from sales of units was $3,385,000.
That doesn’t appear on your Lordan simplified whole of project costing sheet? One is simplified and one is more accurate, isn’t it?
How much is the difference?...I’d have to refer to all the documents.[86]
The difference is another 30 or 40 thousand dollars?...No different to the other amount.
[86] Transcript p 375.
Commercial interest paid.
54 The Whole of Project Costing claims an amount of $568,568.58 as part of the commercial interest paid. When questioned about this claim, Lordan gave the following answers in cross-examination:
Now, this is moneys that you have borrowed to put into the project and you have had to pay interest on it, you’re claiming as an expense against the building project?...Definitively
…
Mr Leared had to borrow money to put into the project. Is he entitled to claim his interest costs?...Certainly.
He is, is he?...Certainly.[87]
[87] Transcript p 382.
Amount claimed for interest owed to John
55 Item (h) of the terms of the joint venture agreement contained in paragraph 1.2 of the Defence and Counterclaim dated 3 August 2018 and filed in these proceedings (Defence and Counterclaim) states that “the plaintiff would be entitled to 12 per cent of interest upon funds he contributed.” Lordan conceded that the terms of the joint venture agreement contained in paragraph 1.2 of the Defence and Counterclaim do not state that Lordan would be entitled to 12 per cent on moneys Lordan contributed.[88]
[88] Transcript pp 386 -387.
56 Lordan was cross-examined about his failure to claim that he was entitled to 12 per cent on the moneys he contributed in the defendant’s further particulars:
You have never made a claim for 12 per cent for moneys that you contributed?...Quite possible.
Nowhere have you ever made a claim that you can recover interest that you paid on moneys that you borrowed?...Are you saying nowhere?
Nowhere. Nowhere, until ---? --No, no. Nowhere in the book. The agreement was 12 per cent for all funds in the project.
Well, that’s not what your pleading says. It’s very specific, your pleading?...It was a contract that we entered into.
Nowhere does it say that in your pleadings. You know what they are, the court documents?...No, I know what they are.
Nowhere does it say it in any email?...It says some things were verbal and some were not in many areas.
I’m just asking you, is there a single written example, written by your lawyers or written by you, where you say you’re entitled to 12 per cent on moneys you contribute?...I don’t believe it’s written in there.
Nowhere. So in the course of six years, since 2012 – seven years, in the course of all the emails, in the course of the loan agreements which were produced, everything, nowhere does it say you’re entitled to 12 per cent?...Seems not.[89]
[89] Transcript p 387.
57 Leared and McNamara gave evidence. It was never put to them that Lordan was entitled to 12 per cent of the moneys he contributed to the joint venture agreement.[90]
[90] Transcript p 389.
You sat in court through their evidence?...Correct.
Her Honour adjourned the court on Monday so that no part of their evidence would be given in your absence. You’ve seen all their evidence?...Correct.
There was no question to either of them that you also were entitled to 12 per cent interest?... It’s set in concrete from the start. There’s no need to question it.
The question was did you hear your counsel put a question to either of them that you were entitled to 12 per cent interest on money you put in?...I didn’t hear him say that.
Did you think you might remind him that that was an important question?...Not necessarily. All the spreadsheets have been at hand for months and years.
This spreadsheet appeared on Wednesday, didn’t it?...Well that’s one version. Correct.[91]
[91] Transcript pp 389-390.
58 Mr Lithgow asked Lordan to produce the spreadsheet that predates the Whole of Project Costing spreadsheet that includes an item that Lordan is entitled to 12% of moneys he put in.
This is the first time these two items have appeared and they appeared on Wednesday, the third day of the trial?...If that is the case, that’s the case.[92]
Nowhere was it put to Mr Leared or Ms McNamara that you were entitled to claim your costs of finance against the project. You were here. You didn’t hear that question?... No.[93]
[92] Transcript p 390.
[93] Transcript p 391.
59 I accept the plaintiff’s submission that there was no verbal agreement that the defendant would receive 12 per cent of the funds he contributed to the development of the property.
The costs claimed by the defendant for the construction of unit 3[94]
[94] Exhibit 64.
60 The defendant’s position is that the plaintiff paid $672,000 towards the acquisition of unit 3.[95] The defendant’s position is that $108,701 of that sum went towards building costs.[96] And the balance therefore constitutes money for which Leared is entitled to receive interest at the rate of 12% per annum.[97]
[95] Transcript p 516.
[96] Transcript p 516; exhibit 67.
[97] Transcript p 516; exhibit 67.
61 The plaintiff disputes the sum claimed for construction costs. The plaintiff submits that there has never been a proper accounting.
62 Lordan was questioned about the first bill on the file tendered as exhibit 64 which was dated 26 May 2014. On the face of that invoice, the work had nothing to do with Martin Street. The invoice was prepared by David Clark (Bricklayer) and has the job reference “21 Stone Street, Diamond Creek”. Lordan stated that this was David Clark’s error and that the invoice related to the job at Martin Street.[98] Lordan was also questioned about the 50/50 notation on the face of the invoice.
You have also put a notation on there, 50-50…correct.
That’s now what you’ve purported to do, is it?...Well now you’re taking note of my notes? I’m confused.
Just answer the question, Mr Lordan. You’ve put a notation on it, 50-50?...I’ve put a notation on it, fifty-fifty.
That is not what you’ve in fact done. You’ve purported to apportion it 26.88 per cent. Is that right?...No, that wouldn’t be right.[99]
[98] Transcript p 406.
[99] Transcript p 407.
Invoice by Bland Connard Menzies dated 3 April 2013 for $13,200[100]
[100]Exhibit O.
63 The summary of the fit-out costs for unit 3 tendered by the defendant[101] attributes the following expenses to the plaintiff:
[101] Exhibit 64.
Date Invoice No. Payee Amount % Due Charge to Bob 3/04/13 5232 Bland Connard Menzies $13,200 26.88% $3,548.16 13/03/14 3590 Southern Surveys Pty Ltd $ 6,600 100% $6,600 11/09/14 3648 Southern Surveys Pty Ltd $ 6,600 100% $6,600
64 That bill was in fact paid by Leared. The notation on the bill “paid via RLSS” which stands for paid via Robert Leared, Southern Surveys.[102] “The situation is that this bill was paid for by Leared and subsequently he billed you to be reimbursed?... That would be correct.”[103] Lordan admitted that Leared paid $13,200 and then invoiced FNQ Developments with two invoices, each of $6600 to get reimbursed.[104]
When we look at your list of what you have charged. Mr Leared, you have charged him as part of the costs of unit 3 $13,200, $6,600 and $6600?… Yes
He should only have paid one-quarter of the $13,200?... Not really.[105]
[102] Transcript p 409.
[103] Transcript p 410.
[104] Transcript p 410.
[105] Transcript p 411, Exhibit O.
65 Lordan agreed that
And the invoices that were rendered for surveying are all Southern Surveys Pty Ltd?...There was no surveying invoice for this job. They’re reimbursements. Invoice is wrong.[106]
[106] Transcript p 438.
66 I accept the plaintiff’s submission that the building costs ought to be reduced by $13,200 being the amount charged at 100% in relation to Southern Surveys invoices numbered 3590 and 3648 being the reimbursement of the Bland Connard Menzies invoice.[107]
[107] Exhibit O.
67 Lordan was also questioned about the amounts he attributed to Leared in relation to the following invoices:
(a) Property Maintenance – Invoice dated 30 July 2013 for $934[108]
[108] Exhibit P.
Paint front door and windows, plus two office doors in white enamel paint, remove frosting from two front windows.”That is all work downstairs?...That’s not all work downstairs.
Removing the frosting from the front windows is?...That is
Painting the front door plus two office doors” that’s downstairs?...That is.
So once again you haven’t apportioned any of this to downstairs. You’ve simply apportioned it all upstairs?...In this case I have simply put it to upstairs.
…
I would invite you to find one example where you have given Mr Leared the benefit rather than yourself?...I have that. I have that for you.[109]
[109] Transcript p 423.
(b) Prosparx Electrical Solutions Invoice numbers 102 (11 August 2013) ,131 (30 September 2013) [110]
[110] Exhibit P.
Once again this is work on upstairs and downstairs, because it’s replacing power points in the entry foyer, and entry lights. Is that right?...Yes, a power circuit from upstairs was complicated.
This is clearly upstairs and downstairs work. Is that right?...Yes, as I said before, many switches were two-way supplies.
It’s clearly upstairs and downstairs work?...Yes.
And you have allocated entirely upstairs?...Yes.[111]
[111] Transcript pp 424-425.
(c) Dobbs Doherty Pty Ltd Invoice Number 0474 dated 27 June 2014 (Fire engineers)
Once again they have charged a bill together with a late fee?...Correct.
And you’ve apportioned the entire bill, including the late fee, against upstairs?...Correct.
And you’re responsible for the incurring of the late fee as the project manager?...The project is entitled to. It’s a project cost.
…
You’ve apportioned it entirely, including the late fee, against upstairs?...Correct.[112]
[112] Transcript p 428.
68 Another issue in dispute is the apportionment of costs. The plaintiff has purported to attribute to Leared 26.88% of the costs for unit 3 and 53.76% of the costs he attributed to the top floor. The plaintiff submits that the invoices should have been attributed as to 25% to unit 3 or 50% to the top floor. Lordan conceded that the apportionment was not pleaded but stated that the deal was struck at our offices and at the cafes.[113]
[113] Transcript p 404.
69 It was put to Leared that unit 3 was larger than unit 2. He disagreed and said that they were both the same.[114]
[114] Transcript pp 250-251.
70 Having considered the whole of the evidence, I have formed the view that Lordan was a witness who in effect, would say what he thought would assist the defendant’s case as opposed to a witness who was endeavouring at all times to give a truthful and accurate account of the facts.
71 In my view there are discrepancies in the figures given for the total cost of completion of the development. Some of the costs were incorrectly attributed to the plaintiff. A number of small items attributed to unit 3 were questionable. In my view the amount charged to Leared should be reduced from $108,701 to $93,000 being the amount charged at 100% in relation to Southern Surveys invoices numbered 3590 and 3648 being the reimbursement of the Bland Connard Menzies invoice[115] together with a further sum of $1,800 to allow for the ad hoc nature of the apportionment.
[115] Exhibit P.
72 The calculation to account for the excess of funds in the payment of the $672,292.42 paid at settlement is:
$672,292.40 paid at settlement
$475,000 less purchase cost for unit 3[116]
[116] FASC, paragraph 3E(a).
$197,292.4
$ 93,000 less costs as allowed
$ 26,422 less purchase costs
$ 77,870.4
73 The defendant concedes that the plaintiff is entitled to 12% interest per annum upon the funds the plaintiff contributed.[117] The money was advanced on 5 June 2014.[118] Accordingly the plaintiff is entitled to interest at the rate of 12% per annum on the sum of $77,870 from 5 June 2014 until judgment.
[117] Defence and Counterclaim, paragraph 1.2(h).
[118] FASC, paragraph 3F; Exhibit L.
The defendant’s counterclaim for GST
74 The defendant claims that Lordan paid the GST applicable to purchase unit 3 being $45,740 together with interest of $1,023.95. Lordan also paid legal costs of $1520 to Berean’s Lawyers (SLM Law) to resolve the dispute with the Australian Tax Office.[119] The defendant claims that it is entitled to be indemnified by the plaintiff for the sum of $48,283.95 in relation to the GST claim.[120]
[119] Exhibit 70.
[120] Counterclaim paragraph 14.
75 Berean placed a caveat on the top floor of the property. The vendor would not remove the caveat until the GST was paid. Lordan had entered into a contract to sell unit 3 on the top floor of the property to Louise Lorkin. Settlement of the property was due on 6 August 2015. Settlement of the property could not occur until Berean removed the caveat. Berean refused to remove the caveat unless the GST money owed under the Contract of Sale between Berean as vendor and Leared and FNQ Developments of 2B/7-11 Martin Street South Melbourne[121] was paid. Lordan paid the GST.[122] As a result of that payment the caveat was withdrawn.[123]
[121] Exhibit F.
[122] Transcript p 84.
[123] Transcript pp 333 – 334.
76 The plaintiff conceded that the plaintiff is liable for the GST. In its written submissions the plaintiff conceded that the defendant is entitled to a credit for the “GST claim: in the sum of $46,764.50.”[124] In his oral submissions Mr Lithgow stated that the defendant would be entitled to an order for $46,764.50 together with interest pursuant to statute.
[124] Plaintiff’s written submissions dated 12 February 2019, paragraph 22.
77 I accept the defendant’s submission that the plaintiff is indebted to the defendant in the sum of $48,283.95 in relation to the GST claim.
78 The difference between the plaintiff and the defendant is $1519.45 being the costs paid to Berean’s solicitors in October 2015 to lift the caveats placed on the building to the non-payment of GST. I accept Lordan’s evidence that “in addition to the ATO payment he also paid $1,520 to the solicitors of Berean in October 2015 to lift the caveats placed on the building due to the non-payment of GST.”[125] Lordan’s evidence was not challenged in cross-examination. By email dated 17 September 2015 David Casey director of SLM Law states that $1,520 will be required for the withdrawal of the Leared caveat.[126]
[125] Exhibit 26.
[126] Exhibit 70.
Subdivision of Ground Floor
79 The ground floor was subdivided into two lots. The plan of subdivision for the ground floor was digitally signed by John Robert Leared (Southern Surveys Pty Ltd) and the Port Phillip City Council on 20 January 2016. [127] It was necessary for Southern Surveys to lodge the certified plan for registration together with the Statement of Compliance at the Office of Titles in accordance with s5(3)(e) of the Subdivision Act 1988. Once a permit is approved, the plan is certified and the council issues a certificate of compliance.
[127] Exhibit 14.
80 A Statement of Compliance was issued by the Port Phillip City Council dated 26 August 2016. Southern Surveys was required to file that Statement of Compliance with the Surveying and Planning through Electronic Applications and Referrals (SPEAR) website. Once the certificate of compliance has been issued by the council, it should only take five or six weeks until the titles are issued.[128]
[128] Transcript p 75.
81 Leared admitted that Southern Surveys received the Statement of Compliance (Form 15) issued by Sandra Stewart of Port Phillip City Council on 26 August 2016 (the Statement of Compliance).[129] Lordan said that all the hard work by the surveyor is done prior to compliance. [130] Leared agreed that it would have taken “five minutes” for the Statement of Compliance to be filed on SPEAR.[131] Leared agreed that the title could have been issued six weeks later (by 31 October 2016).[132]
[129] Exhibit 15.
[130] Transcript p 334.
[131] Transcript p 166.
[132] Transcript p 170.
82 Southern Surveys did not release the Statement ofCcompliance because it claimed that Lordan owed Southern Surveys the sum of $9000 for outstanding accounts.[133] Leared said that if Lordan paid the sums he owed to Southern Surveys, Southern Surveys would have released the statement of compliance straight away.[134] The outstanding accounts did not relate to the job at Martin Street.[135] One of the alleged outstanding accounts related to 1252 Main Road Eltham and another account related to 21 Stone Street, Diamond Creek.
[133] Transcript p 169.
[134] Transcript p 169.
[135] Transcript p 169.
83 By email dated 15 March 2017 Morgan Legal advised Leared[136] that
The delay in release of the SPEAR notification is holding up the registration of Subdivision and settlement of the property sales, causing additional mortgagee costs and damages.
[136] Exhibit 23.
84 Leared agreed that by March 2017 he knew that there were two contracts in relation to downstairs that could not settle because of inaction by Southern Surveys.[137]
[137] Transcript pp 186-187.
85 By email dated 9 April 2018[138] Damin Murdock of MurdockCheng Legal Practice confirmed that he had transferred $9000 to the client’s nominated account under protest. Once Lordan paid $9000 to Southern Surveys, the Statement of Compliance was released and the titles were issued.[139] I am satisfied that the Plan of subdivision was registered with the Land Titles Office on or about 21 February 2018.[140]
[138] Exhibit 32.
[139] Transcript pp 168, 199-200.
86 The plaintiff submits that the defendant’s case is against Southern Surveys Pty Ltd and not the plaintiff. The plaintiff submits that Southern Surveys was engaged by Lordan as the surveyor regarding building works at the property.
87 Leared is the sole director, sole shareholder and sole employee of Southern Surveys.[141] Leared was cross-examined about his role in the joint venture.
Mr Leared, I put to you that your deal was between Bob Leared and John Lordan and that each of you had your roles to play in relation to Martin Street, and your role was to organise, however you did it, the surveying and the release of title. That was your obligation under the agreement you had with Mr Lordan?...I disagree.[142]
[141] Transcript pp 166-167.
[142] Transcript pp 169 – 170.
Was there a joint venture agreement?
88 The defendant alleges that the plaintiff and Lordan entered into a joint venture agreement and that the terms of the joint venture agreement were:
(a) Lordan would contribute 80% of the funding for the joint venture agreement;
(b) the plaintiff would contribute 20% of the funding for the joint venture agreement;
(c) the plaintiff would be the surveyor and prepare subdivision plans (the plans) for approval by the Port Phillip City Council (the Council) at no cost;
(d) the plaintiff would comply with the Surveying Act, 2004 and the Regulations;
(e) the plaintiff would do all things necessary to complete any subdivision within a reasonable time;
(f) the defendant would render project management services at no cost;
(g) the funds contributed by either party would be repayable when the development of the property was complete in that all of the property, either subdivided or not subdivided, was sold (the completion of the development);
(h) the plaintiff would be entitled to 12% interest upon the funds he contributed;
(i) at the completion of the development, the plaintiff would be entitled to 20% and the defendant would be entitled to 80% of the profits upon sale of the property;
(j) at the completion of the development, if there were a loss then the plaintiff would be liable for 20% and the defendant would be liable for 80% of any loss.
89 Lordan claims that in April 2014 the plaintiff and the defendant entered into an agreement to vary the joint venture agreement so that :
(i) in lieu of receiving 20% share of the profits the plaintiff would purchase a unit at the property;
(ii) Instead of contributing 20% the plaintiff would contribute 25% of the funds for joint venture agreement and the defendant would contribute 75%.[143]
[143] Defence and Counterclaim paragraph 3E.1.
90 In United Dominions Corporation Ltd v Brian Pty Ltd.[144] the High Court considered the question of whether the parties in that case had entered into a joint venture. The plurality (Mason, Brennan and Deane JJ) stated:
The term “joint venture” is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, “adventure”) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a “joint venture” and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other. One would need a more confined and precise notion of what constitutes a “joint venture” than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint venturers is necessarily a fiduciary one: but cf. per Cardozo C.J., Meinhard v Salmon. The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken. If the joint venture takes the form of a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers from being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship. see, generally, Birtchnell v Equity Trustees, Executors & Agency Co. Ltd.[145] (citations omitted)
[144] (1985) 157 CLR 1.
[145] (1985) 157 CLR 1,10 – 11.
91 In relation to the joint venture, the plaintiff says that there was a discussion about 25 per cent. There was no discussion about whether it was in relation to splitting profits or anything else. And during the course of the job it was agreed between the parties that Leared would take one of the units and pay for it, and that was his 25 percent. The plaintiff says that whatever happens after that, that brought to an end the arrangement about the 25 per cent. The plaintiff says that if there is any loss attributable to the plaintiff personally, the defendant has failed to prove what that loss is. The figures submitted are vague. The defendant did not put his bank records in evidence.
92 Having considered the whole of the evidence, I find that the plaintiff and the defendant entered into an agreement with a view to mutual profit. I accept the defendant’s submission that pursuant to the terms of that agreement the plaintiff would do all things necessary to complete any subdivision within a reasonable time. I do not accept the plaintiff’s submission that the plaintiff did not have an obligation to carry out all the necessary steps to complete the subdivision of the ground floor of the subdivision within a reasonable time. I do not accept the plaintiff’s submission that the plaintiff was entitled to refuse to release the Statement of Compliance because Lordan owed money to Southern Surveys in respect of invoices which did not relate to the property.
The defendant’s claim for damages for delay in settlement of unit 1
93 The defendant claims that the plaintiff in breach of his obligations pursuant to the joint agreement as varied failed to complete all necessary steps to complete the subdivision within a reasonable time by refusing or neglecting to complete the subdivision until February 2018.
94 By Contract of Sale dated 6 August 2016 Lordan (as vendor) agreed to sell the downstairs front unit being Lot 1D, 7-11 Martin Street South Melbourne (unit 1) to Lynda Margaret Bourne (Bourne) (as purchaser) for $1,150,000 (the unit 1 contract).[146]
[146] Exhibit 48.
95 There was no auction or sworn valuation of unit 1 prior to the sale to Bourne.[147] A Deed of Agreement was entered into between Lordan and Bourne and dated the same day, 6 August 2016 (the Lordan Bourne agreement). Lordan and Bourne agreed to exchange ownership of their respective properties being Unit 1, 7-11 Martin Street South Melbourne Vic 3205 (unit 1) and the property owned by Bourne at 13 Martin Street South Melbourne Vic 3205. The parties agreed that the two properties were of equal value.[148] The parties agreed that there would be no monetary payment made by either party to the other.[149] Unit 1 is two thirds of the ground floor and is substantially bigger than the other units in the complex.[150]
[147] Transcript pp 376- 377.
[148] Exhibit 49.
[149] Exhibit 49.
[150] Transcript p 377.
96 The Particulars of Sale under the unit 1 contract record the purchase price as $1,150,000.00. The Purchaser paid a deposit of $100.00 leaving a balance of $1,149,900.00 payable upon settlement. The unit 1 contract does not specify a date for settlement, but records that settlement would be due 14 days after the latter of the vendor giving notice in writing to the purchaser of registration of the plan of subdivision, or the issue of an occupancy permit. The unit 1 contract does not provide for the consequences of a default by either the purchaser or the vendor.
97 Clause 5 of the Lordan Bourne agreement provides:
Within 30 days of receipt of the title to Unit 1, 7-11 Martin Street, Lynda Bourne agrees to provide John Lordan with unencumbered title to 13 Martin Street by having Westpac Banking Corporation release its current charge over 13 Martin Street, South Melbourne and substitute a mortgage over Unit 1, 7-11 Martin Street. In the unlikely event the Bank fails to effect this substitution, Lynda Bourne agrees to lift the existing mortgage by paying out the Bank loan facility.
98 The unit 1 contract does not provide for any form of liquidated damages for breach. Further, a concrete settlement date under the contract would only be established once Lordan gave notice that the subdivision was registered (i.e. upon the issue of Title by the Land Titles Office) or on the release of the Statement of Compliance by Leared/Southern Surveys. Accordingly, the purchasers were not obliged to perform the contract and any concession from Lordan in relation to the payment of Stamp Duty did not relate to an obligation under the unit 1 contract.
99 It is unclear when settlement on Unit 1 occurred, however an email from the Purchaser’s conveyancer Andrina Hamer to the Purchaser, dated 31 July 2017, indicates that settlement was to take place at 10.30 AM on 3 August 2017.[151] By email dated 6 October 2017 Lordan indicated that unit 1 was eventually settled on 7 August 2017.[152]
[151]Exhibit 52.
[152] Exhibit 27.
100 In the defendant’s answers to the plaintiff’s request for further and better particulars the defendant claims:
The property ought to have been available for immediate Settlement. The sale price was $1,150,000. Settlement was not finalised until 21 July 2017 causing the defendant loss and damage as follows:
(a) Stamp duty on sale as compensation to purchaser $63,250;
(b)Legal fees unnecessarily incurred to facilitate settlement $9,100.39.
(c)Additional stamp duty $257.00.
(d)Interest on sale price of $1,150,000, $69,945.20.
(e)Extra interest incurred at Westpac $13,629.98.
Loss on Unit 1 $156,182.57
Stamp Duty - $63,250.00
101 I do not accept the defendant’s claim that he was required to pay $63,250 to Bourne because of the delay in settling the unit 1 contract. No proper grounds were put forward for this claim. Ordinarily stamp duty is payable by the purchaser. When asked in cross-examination about the payment of stamp duty, legal fees, and additional stamp duty, Lordan accepted that these are ordinarily incurred in every settlement.[153]
[153] Transcript 434 [19].
102 Lordan gave oral evidence about why he decided to pay the stamp duty.[154] He said that “his” funders were threatening to call the loans in.
The Bournes had a loan on the place they were selling, and for the Bournes to keep the very small – it was $180,000, to that effect. To keep that loan in place, their bank agrees to substitute the security, because there’s no home loan. It was just a facility. And on the day of settlement, that mortgage document encumbers the new title. Because we couldn’t settle as sole owners and it was tenants in common, the bank has nothing to do with tenants in common, so the Bournes also lost that facility. So I had to compensate them to get them to hand the money over and be rid of my financier’s closing in on me, which was inevitable. They paid out the mortgage.[155]
[154] Transcript pp 342-343.
[155] Transcript p 343.
103 I am not satisfied that Lordan was required to pay the stamp duty of $63,250 because of the delay in settling the unit 1 contract. The explanation given by Lordan is vague and contrary to clause 5 of the Lordan Bourne agreement that if the Bank fails to effect substitution of the mortgage, Bourne agreed to pay out the Bank loan facility.
104 The defendant failed to call Bourne to substantiate his claim and no explanation for her absence has been given. In these circumstances the inference to be drawn from the failure to call Bourne is that her evidence would not have assisted the defendant’s case.
105 The defendant conceded that the loss arising from the delay of the subdivision was a loss to the joint venture and not Lordan.
Legal Fees – $9,100.39
106 The second loss item relates to an amount of $9,100.39 for ‘legal fees’ allegedly paid from the Lordan-Bourne joint bank account. Aside from an email dated 6 October 2017 by Lordan to Leared claiming an estimated $9500 for legal costs,[156] there are no documents in evidence relating to any legal fees for or totalling $9,100.39 in relation to Unit 1. A Letter from Morgan Legal to Lordan dated 2 August 2017 enclosing a tax invoice relating to the sale of Unit 1 lists a number of legal fees and disbursements amounting to $1,641.98.[157]
‘Interest Forgone’
[156] Exhibit 27.
[157] Exhibit 61.
107 An amount of $69,945.20 is claimed for ‘Interest Forgone’. This amount presumably relates to the Defendant’s claim for 12% interest on monies that would be due under the Contract of Sale but for the delay by Leared to enter the Statement of Compliance into SPEAR in order to be submitted to the Land Titles Office.
108 The defendant has not provided an explanation as to how the figure of $69,945.20 was calculated.
‘Westpac Interest’
109 As acknowledged by Lordan and his counsel, there are no documents in evidence to support that any interest was incurred or paid in relation to a Westpac bank account. [158]
[158] Transcript 434 [28]-[29]; 533 (Mr Carlile’s oral address).
110 The Defendant has failed to substantiate its claim for an amount relating to interest incurred on the Westpac bank account.
111 The defendant’s submissions about the loss and damage suffered as a result of the delay in settlement of unit 1 are vague. The defendant submitted that “Once the subdivision has been delayed then there is clearly a loss to the joint venture or to Lordan”. Lordan’s claim for damages appears to be contrary to the Bourne Lordan agreement which provided that Bourne and Lordan were to exchange properties and “there will be no monetary payment made by either party to the other.”[159]
[159] Exhibit 49.
112 Even if any loss has been suffered attributed to the plaintiff personally, the defendant has failed to prove any such loss.
The defendant’s claim for damages for delay in settlement of unit 4
113 By Contract of Sale dated 27 April 2016, the defendant agreed to sell Unit 4, 7-11 Martin Street, South Melbourne to 2 Emily Close Pty Ltd (unit 4).[160] The contract was signed by Timothy Hunt and Kristina Hunt as directors of 2 Emily Close Pty Ltd. Unit 4 is the back unit on the ground floor of the property.
[160] Exhibit 47.
114 The Particulars of Sale under the Contract record the purchase price as $600,000.00. The purchaser paid a deposit of $30,000.00 leaving a balance of $570,000.00 payable upon settlement. The unit 4 contract does not specify a date for settlement, but records that settlement would be due 14 days after the vendor gave notice in writing to the purchaser of registration of the plan of subdivision. The unit 4 contract does not provide for the consequences of a default by either the purchaser or vendor.
115 Settlement took place on 29 March 2018.[161]
[161] Defendant’s Further and Better Particulars dated 12 November 2018, paragraph 1.
116 As stated in the above paragraphs 79 – 87, the defendant submits that the delay in the settlement of Unit 4 was caused by Leared’s failure to provide building surveying services in order to facilitate the subdivision of the ground floor into two lots being Unit 1 and Unit 4.[162]
[162] Defendant’s written submissions, paragraphs 32-33.
117 The defendant claims damages for loss suffered due to the delay on settlement of Unit 4. The amount claimed is $131,100.00, being an amount calculated at 12% on the balance of the purchase price of $570,000.00.
118 The defendant submitted that the figure of 12% was based on a verbal agreement with the plaintiff. During cross-examination, the plaintiff questioned the defendant as to whether the defendant was entitled to the 12% interest on the profits of the development.[163] When questioned in this regard, the defendant stated:
That is upon the orally agreed contract and I am entitled to 12 per cent, as your own client has stated, “orally and/or in writing” in different cases. There was an oral contract.[164]
[163] Transcript, p 435-437.
[164] Transcript, p 437 [15]-[18].
119 Lordan was also asked whether his claim for damages for the “delay in settlement unit 4” is entirely dependent upon you having an entitlement to interest at 12 per cent. Lordan replied:
I’m entitled to 12 per cent on the whole project, as is penalty interest.”
All right. We had a long discussion about this on Friday, about whether there was any indication, document, discussion, memorandum, email or letter talking about your entitlement to 12 percent. Correct?...Correct, and I told you it was verbally agreed.
…
There’s no document.
And there is no reference to you being entitled to 12 per cent in your pleading?...There is no reference to it.[165]
[165] Transcript p 435.
120 The Plaintiff submits that if any damage was suffered by the Defendant in relation to a delay to settlement on Unit 4, this damage was due to the failure of Southern Surveys to complete its work, and therefore not attributable to Leared.[166]
[166] Transcript p 438; plaintiff’s written submissions, paragraph 21.
121 As stated in the above paragraphs 88-92, Leared had an obligation to do all things necessary to complete any subdivision within a reasonable time. However in my view the defendant has failed to prove any loss suffered by the defendant by reason of the delay.
122 As stated in McGregor on Damages:[167]
A claimant claiming damages must prove his case. To justify an award of substantial damages he must satisfy the court both as to the fact of damage and as to its amount. If he satisfies the court of neither, his action will fail, or at the most he will be awarded nominal damages where a right has been infringed. If the fact of damage is shown but no evidence is given as to its amount so that it is virtually impossible to assess damages, this will generally permit only the award of nominal damages…
[167] Harvey McGregor, McGregor on Damages (18th ed., 2009) 325-326.
123 That principle however must be weighed up against the principle as stated by Sheppard, Morling and Wilcox JJ in Enzed Holdings Ltd. v Wynthea Pty. Ltd. that:[168]
The principle is clear. If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved. Furthermore, if actual damage is suffered, the award must be for more than nominal damages. .. We emphasize, however, that the principle applies only when the court finds that loss or damage has occurred. It is not enough for a plaintiff merely to show wrongful conduct by the defendant.
[168] (1984) 57 ALR 167, 183.
124 In Commonwealth v Amann Aviation Pty Ltd,[169] the High Court again made it clear that “mere difficulty in estimating damages does not relieve a court from responsibility of estimating them as best it can…[w]here precise evidence is not available the court must do the best it can.”[170]
[169] (1991) 174 CLR 64.
[170]Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 83.
125 The defendant has provided little material evidence in relation to the settlement, either with regard to the actual date that settlement took place, the final amount paid, and the basis on which loss was suffered to the defendant in circumstances where neither party to the Contract of Sale was in default as a settlement date would not be set until the plan of subdivision was registered by submission to SPEAR by either the plaintiff or Southern Surveys Pty Ltd.
126 It appears that due to the drafting of the settlement clause in the unit 4 contract, a delay to registration, even one caused by the plaintiff, would not necessarily give rise to a breach by the defendant under the contract. In these circumstances, no damage would flow from the delay in registering the plan of subdivision.
127 Even if there was a delay in settlement of unit 4, any loss due to that delay would be a loss suffered by the joint venture. In the defendant’s particulars the defendant states that “the defendant suffered loss and damage of interest incurred or foregone on the balance of $570,000 at 12% being $131,000.” I am not satisfied on a balance of probabilities that the defendant suffered the loss and damage claimed. I am not satisfied on a balance of probabilities that the defendant is entitled to interest at the rate of 12% on the balance of $570,000.
128 The defendant has abandoned his claims for consequential damages on other acquisitions.
129 In paragraph 13 of the Defence and Counterclaim the defendant claims that the plaintiff has failed to contribute 25% of the funds necessary to complete the development of the property, particulars which will be supplied prior to trial.
130 In the defendant’s answers to the plaintiff’s request for further and better particulars of paragraph 13 the defendant claimed:
(a) The total cost of completing the project was $3,710,230.15
The plaintiff contributed $538,000
The defendant contributed $3,172,230.15
25% of the cost was $927,557,38
Therefore the plaintiff has failed to contribute $389,557.53
(b) The plaintiffs have received $250,000
(c) The total income from sales of the units was $3,385,000.00
Therefore, the project had a total net loss of -$325,230.15
The plaintiffs’ share of the net loss is $81,307.53 which has not been paid.
131 Mr Carlile did not pursue the claim for failure to contribute 25% of the funds necessary to complete the development of the property in his written or oral submissions. The claim is not included in the Loss and Damage Table handed to the Court as part of the defendant’s written submissions. Further the defendant’s claim for contribution is not borne out by the table headed “Lordan Simplified Whole of Project Costing” tendered by the defendant to substantiate its claim. The bottom line of that costing states that the “Net owed to Bob by John” is $107,873.66.[171]
[171] Exhibit 67.
Orders
132 Having regard to the above matters, I propose to make the following orders:
The plaintiff’s claim
(1) Judgment be entered for the plaintiff against the defendant for $90,000 in respect of the first, second, fourth and fifth agreements together with interest pursuant to the agreements at 12% per annum to the date of judgment being $114,828 interest.
(2) Judgment be entered for the plaintiff against the defendant for $77,870 in respect of the third agreement together with interest at 12% per annum from 5 June 2014 to the date of judgment being $45,158 interest.
The defendant’s counterclaim
(3) An order for rectification of the first and second agreements so that the date of repayment of the loans is at the date of completion of the property.
(4) Judgment for the defendant on its counterclaim for $48,283.95 for the GST claim together with interest pursuant to statute of $17,093.
(5) The defendants claims for loss and damages are otherwise dismissed.
(6) Reserve costs.
133 I will hear counsel on the question of costs.
0
5
0