Lichaa v Lichaa

[2010] NSWSC 1510

CITATION:	LICHAA v LICHAA [2010] NSWSC 1510
HEARING DATE(S):	13, 14 and 15 December 2010
JUDGMENT DATE :	23 December 2010
JUDGMENT OF:	Tamberlin AJ
DECISION:	Plaintiffs' claim dismissed with costs
CATCHWORDS:	CONTRACT – formation – whether agreement made – whether an intention to create a binding legal obligation to share losses from development project – effect of statements made at informal family gatherings
CATEGORY:	Separate question
CASES CITED:	Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Watson v Foxman (1995) 49 NSWLR 315
PARTIES:	Kaissar Youssef Lichaa (First Plaintiff) Ces Lichaa Pty Ltd (Second Plaintiff) Joseph John Lichaa (First Defendant) Karen Lee Lichaa (Second Defendant)
FILE NUMBER(S):	SC 2009/290619
COUNSEL:	A F Fernon (Plaintiffs) J M Harris (Defendants)
SOLICITORS:	Gibara Lawplus (Plaintiffs) Saville & Weston (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

TAMBERLIN AJ

23 DECEMBER 2010

2009/290619 KAISSAR YOUSSEF LICHAA v JOSEPH JOHN LICHAA

JUDGMENT

1 HIS HONOUR: The first plaintiff (Kaissar Youssef Lichaa (Ces)) and his company (Ces Lichaa Pty Ltd), claim that the defendants (Joseph John Lichaa (JJ Lichaa) and Karen Lee Lichaa (Karen)) are liable to them in respect of one-third of the losses suffered in connection with the development of an 8 unit development project at Daceyville, New South Wales. The loss is alleged in the statement of claim to be $562,163. The first defendant is the nephew of Ces Lichaa and Karen Lichaa is his wife.

2 The plaintiffs claim that sometime in 2001 an agreement was entered into by Ces or Ces Lichaa Pty Ltd (they are not sure which), with the defendants which was partly oral and partly implied under which the defendants agreed to form a company to purchase and develop real property and share profits and losses incurred in the development of property on the basis of two-thirds for Ces on behalf of his family and one-third for JJ Lichaa on behalf of his family trust. A term of that agreement was that to the extent that the development of the property incurred losses each party would indemnify the other company in proportion to their share of the losses suffered based on the shareholder in the proposed company.

3 The plaintiffs claim that the 2001 agreement followed a conversation between Ces Lichaa, the first defendant, his son JC Lichaa and his nephew, JJ Lichaa, at which time it was orally agreed that two companies would be established, one to purchase properties for development, namely CJJ Properties Pty Ltd (Properties) and CJJ Constructions Pty Ltd (Constructions). The property company would hold the title to the development and Constructions would carry out the necessary construction work. The three parties to this discussion namely Ces, JJ and JC Lichaa are alleged to have orally agreed that they would be directors of the two companies.

4 The two companies were incorporated on 15 February 2002. Two of the three shares in Properties were held by Ces Lichaa Pty Ltd as trustee of Ces’ family trust and one share was owned jointly by JJ Lichaa and Karen Lichaa as trustee of their family trust. All shares in Constructions were held by CJJ Properties at the relevant times.

5 The plaintiffs allege that under the 2001 agreement, or alternatively pursuant to a further agreement entered into between the parties, Properties purchased two adjoining properties known as 1-3 Cook Avenue, Daceyville (Daceyville) for $2.4 million and a term of this agreement was that the parties would share profits and losses earned on the basis of two-thirds for Ces on behalf of his family and one-third for JJ and Karen Lichaa on behalf of their family. A further term of this arrangement is said to be that to the extent that the development incurred a loss the parties would indemnify Ces or his company, Ces Lichaa Pty Ltd, as to one-third of such loss.

6 In the period 2004-2005 the Daceyville property was developed by the construction of 8 units and the renovation of an old police station on the site into a home. The construction work was carried out by Constructions and the property has been sold resulting in a loss which is said to be continuing.

7 The plaintiffs claim that JJ and Karen are liable to indemnify either Ces, Ces Lichaa Pty Ltd, Properties and/or Constructions in respect of one-third of the loss which is in the order of $563,000.

ISSUES

8 The principal issue is whether any legally binding agreement was intended or made between the plaintiffs or either of them and the defendants or either them in relation to the sharing of losses relating to the development project undertaken at Daceyville in the State of New South Wales. A second issue is what were the terms of the agreement. A third issue is whether the plaintiffs or either of them are entitled to recover the amounts claimed from the defendants or either of them by way of indemnity or damages.

EVIDENCE

9 Ces Lichaa says that in 2001 he said to his son, JC, and to his nephew, JJ, that he and they could form a company to purchase properties for development and a company to carry out construction and that he would arrange finance to buy properties and look after the non-construction work and his nephew and son could look after the construction work. He says that he stated that whatever profits or loss were made would be shared between them and that there would be two shares for his family and one share for the family of his nephew. He says that his nephew JJ agreed to this and to the suggestion that a company be set up with Ces or his company holding two shares and JJ and his company having one share. He says this was assented to by his son and JJ. At that time it is common ground that his son was aged about 20 and JJ was aged about 34 and had experience in the building and construction industry.

10 After these discussions the two companies, Properties and Constructions, were incorporated. He says there were ongoing discussions concerning Properties and Constructions wherein it was stated that he or his company would be responsible for two-thirds of losses and JJ and his family would be responsible for one-third with profits to be shared on a pro-rata basis.

11 More specifically the first conversation in about October 2001 is stated by Ces Lichaa to have been as follows:

“’ Instead of working for others, why don’t you two form a company and work together? We could form a company to purchase properties for development and another company to carry out constructions. I will arrange finance to buy properties and look after the non-construction work. You two should look after the construction work. Whatever profits or loss we will share between us. There will be 2 shares for my family and 1 share for your family (referring to my nephew, his wife Karen and their family).’
My nephew said:
‘ That’s great.’
I said:
‘ When we set up the company, my own company will hold two shares in it and you and your company can have 1 share in it.’
My nephew said:
‘ That’s great. ’
I replied:
‘ All three of us will be directors of the two companies. ’”

12 In addition he says that he stated to his son and JJ that would form a shareholders agreement for future developments with a two-thirds, one-third participation and that the arrangement should be formalised and that it would be similar to a partnership agreement except that it is done for individual shareholders. He says that JJ agreed to this and that he emphasised that losses would need to be shared on a two-thirds, one-third basis.

13 The second conversation which took place sometime thereafter, but before March 2002, between the parties is said to have been in these terms:

“[13] I recall saying to the boys:
“ We will form a shareholders agreement for future developments. I will get some advice on that. Our family has two-thirds and your family has one third. We need to formalise that. It is similar to a partnership agreement, except that it is done for individual shareholders. ’
My nephew replied:
“ OK. ”
No query or objection was raised by him.
[14] During this conversation, I also said to the boys:
‘ The profits that we hope to earn will be shared in accordance with the shareholding, namely my family will receive two thirds of the profit and you Joseph [speaking to my nephew] and your family will receive one third. If we incur any losses, then those losses will need to be shared on the same basis, namely two thirds will be borne by my family and one third will have to be paid by your Joseph and your family. ’
My nephew replied:
‘ Yes, I agree with you .’”

14 There is no note or record of any such agreement having been made. There is a diagram of a proposed arrangement dated 14 February 2002 prepared by Mr Sassine, the accountant to Mr Ces Lichaa which is as follows:

15 This diagram sets out the proposed shareholding in Properties and reflects the fact that Constructions is 100% owned by Properties. The box relating to “Partnership” concern the first contemplated venture of the enterprise concerning land at Sylvania and reflects the fact that in that case the property was owned by Ces Lichaa as to 50% and his wife Hayat as to 50% and it states that one-third of the profits are to go to JJ Lichaa “as consultant fees”. The expression “consultants fees” is not spelt out but in his evidence JJ said that he understood the consultant fees to be payments for his work in relation to construction.

16 The Sylvania property was acquired by Ces Lichaa and Hayat, according to his evidence, because the banks would not lend money to JJ or any company associated with him. This presumably was because of his lack of assets and means. Ces claims that the profits earned from the Sylvania project were shared as to two-thirds by himself and his family and as to one-third with JJ and his family. He says that a cheque “representing one-third of the profits” from the Sylvania property was paid to JJ and Karen in accordance with the discussions.

17 There is no reliable evidence as to the actual amount of net profit from this Sylvania venture to demonstrate that the $20,000 represented one-third of the profits made. The diagram at [14] indicates that while one-third of “profits” was to go JJ “as consultant fees” there is no reference on the diagram as to the sharing of any losses. The diagram also indicates that the participation of JJ and his family in any ventures was to be as a shareholder in Properties and it does not refer to any collateral, overriding or additional agreement between the parties as to the sharing of losses in their own right as distinct from being shareholders in Properties.

18 The way in which the proceeds of the Sylvania development were dealt with are not the subject of any accounting records which are in evidence so that it is not possible to determine whether any moneys paid to JJ Lichaa represented a payment as alleged by Ces Lichaa or whether JJ ever received an amount equal to one-third of the profits.

19 Following the development of the Sylvania property, Properties purchased two parcels of land at Cook Street, Daceyville for $2.4 million.

20 Shortly after June 2003 Ces Lichaa said he had a conversation with his son and nephew in which they agreed with the proposal to buy the Daceyville property. In this conversation Ces Lichaa says that he stated that if losses were suffered he and Ces Lichaa Pty Ltd would be responsible for two-thirds of the losses and JJ and his wife would be responsible for one-third of the losses. He says that JJ agreed with this. Karen was not present. He also says that at that time JJ did not have regular work and that the project him an opportunity to work. This is in fact contradicted by the diaries in evidence of JJ which indicates that at that time he was not in need of any work because he was evidently engaged in other projects.

21 Ces Lichaa says that he discussed finance for the project and said that they would need to borrow 100% of the purchase and construction costs and he would use his Miranda property as security. He states that the arrangement would be like Sylvania in that at the conclusion of the project he would draw an amount equal to the amount of wages drawn by his nephew and son to compensate for his time in arranging finance and administration and that he would have to put up his property as security and was therefore entitled to compensation for any additional risk. He says that his son and nephew agreed to this. The property was purchased for $2.4 million on 25 July 2003 and settlement occurred in September 2003.

22 Ces Lichaa says that shortly after settlement of the purchase he and his wife, his son, his nephew, Karen, and a daughter of Ces, Belinda, attended a “celebratory” dinner at the Zipp Restaurant in Oxford Street, Darlinghurst and that in the course of raising glasses making a short toast he said that he hoped there would be no losses but if there were any he said that they would be split in accordance with the shareholding and that Ces Lichaa Pty Ltd would be responsible for two-thirds of losses and JJ and Karen for one-third of any losses. He says that Karen and JJ said, “That’s great”.

23 He also refers to a barbeque in December 2003 shortly before Christmas when he made a similar statement and Karen and JJ agreed.

24 Construction on the Daceyville property commenced towards to the end of 2003 and in the course of construction further security was provided by Ces Lichaa. Four of the units were sold in June/July 2005 and the proceeds paid to secured creditors. Further security was provided by Ces Lichaa and guarantees were signed by him, JJ and Karen and funds were used to pay another secured creditor. The house on the property which had been converted from a police station sold in September 2005.

25 One of the units was sold to his son for $495,000 and another to his daughter Belinda for $495,000 in June 2005.

26 Ces Lichaa says that during construction there was discussion of the two-thirds, one-third split in the course of which he stated that he said to JJ and his son that the loss they would have to share would be bigger with the interest unless the job was finished sooner. He says that in the course of the building it became evident that there would be a loss and that he said to JJ that rent was not paying the interest and that he would need JJ to pay his one-third share of the shortfall to which JJ replied that he had no money and could not afford to pay. He says that he sent letters to JJ concerning the payment of his share of the loan moneys towards to the end of 2005 and again in February 2006. No response was received. He also says that he confronted Karen and JJ in mid-2007 demanding payment of their share of expenses in response to which she said they had no money. JJ and Karen claim that they had not received any letters of demand sent prior to August 2009. A letter of demand was sent to them by the solicitors for the plaintiffs on 18 June 2009 which set out in some detail terms of the alleged agreement, and refers to the obligation to pay one-third of the losses. It referred to earlier letters of demand and claimed a specific amount, namely $501,265.00. After consulting their solicitor and giving formal instructions, a reply was sent on 7 August 2009 which did not respond to the specific allegations made and did not deny the agreement or the defendants being party to the agreement. Reliance is placed on this failure to respond indicating that there was agreement on the terms of the arrangement. The statement of claimed was filed in September 2009.

27 I do not consider that the evidence of Ces Lichaa as to the conversations is reliable and I am not satisfied that such conversations took place as alleged or substantively to the same effect as alleged. His recollection was not consistent with his affidavit evidence in relation to the conversations. It was apparent that he could not recall with precision the exact terms of conversations over 7 years ago and that he had no diary notes or records to substantiate his version. He denied writing a letter which he admitted he signed. He could not account for the absence of any declaration in his tax returns of gains in respect of the Sylvania project nor could his accountant Mr Sassine give any plausible explanation. He misrepresented his ownership of properties to the AMP Society in a loan application and denied that he had spoken to his nephew JJ about taking ownership of some of the units in the development. Having regard to these considerations I do not accept his evidence in the light of denials by the defendants.

28 Evidence was also given by JC Lichaa, the son of Ces, to the effect that there had been a close family relationship between the plaintiffs and the defendants. He says that at the 2001 meeting Ces referred to a failed Mascot development in which he had suffered losses and said that it was understood if any losses were suffered they would be shared in accordance with the shareholding. He also refers to the setting up of the two companies and the appointment of Ces, himself and his cousin as directors and shareholders with a one-third and two-third interest. He also refers to the receipt of a cheque for $20,000 on the Sylvania. In relation to Daceyville he refers to estimating the cost of building the units as between $250,000 and $300,000 and $500,000 for refurbishment of the house and the possibility of making a good profit. He again refers to the sharing of profits and losses being referred to by Ces in a discussion concerning Daceyville. He quotes conversations with Ces in detailed terms which very closely resemble the precise words used in his father’s statement.

29 In addition he refers to the alleged statements of his father at the Zipp Restaurant and later at the barbeque. He also refers to the need to finish on time to minimise interest payments and limit losses and the sharing of losses. In addition he refers to a meeting at the end of 2004 where Ces said the project was taking too long and that losses were going to be incurred and stressing that there was a need to pay money back into the project. His own recollection was very imperfect and he had no notes or records of the conversations 7 years ago. I do not consider his evidence provides any effective corroboration of his father’s statements as to the conversations.

30 The daughter of Ces, Belinda Sanhueza, gave evidence in relation to the statement at the Zipp Restaurant in Darlinghurst in October 2003 to the effect that Ces said he hoped there would be no losses but if there were they would be shared accordingly. This was in the course of a celebratory dinner in an informal context in which alcohol was being consumed and at a time when glasses were raised to celebrate the purchase of the Daceyville property. She says that she recalled JC and Karen nodding in agreement when reference was made to the sharing of profits and losses.

31 I consider that the evidence of Belinda should be approached with caution having regard to her statements as to the First Home Owners grant of $7,000 in respect of the unit in the project which she purchased where it appears she was far from frank in relation to her intended and actual use of the unit. Also, she is obviously very close to her father. She made no note and had no particular reason to remember the reference to losses and the sharing of them as a significant matter where the conversation took place over 8 years ago. She also gave evidence that at the barbeque alcohol did not appear to affect her father or brother. The comments and discussions were in an informal celebratory context in which the probability is that the principal emphasis would have been on the making of profits and it is unlikely that there would have been expressed any statement of an arrangement in relation to the sharing of losses in a celebratory or informal family gathering. I am not persuaded that the statements referred to were made by Ces at either the celebratory dinner or the family barbecue around late December 2003 and that the probability is that reference may have been made to profits and a successful venture but no reference to losses. The informal environment indicates that there was no intention to describe formal legal relationships with any precision or at all even if there was general reference to “losses”.

32 Moreover, the suggestion of agreement by JJ or Karen that they agreed with the remarks as to the sharing of losses in particular proportions as stated by Ces at paragraph 51 of his 30 April 2010 affidavit is highly unlikely and somewhat contrived as are the alleged responses of JJ and Karen to the effect that “that is great that is the way it should go”. Statements in the form of casual remarks at a family gathering are not matters which are likely to be remembered with any degree of precision and there is no particular reason given for remembering the reference to “losses”.

33 The plaintiffs have also filed an affidavit by Mr Isaac, a friend of Mr Ces Lichaa for 45 years, who is a bricklayer and says he recollects a conversation about 10 years ago on the telephone referring to a proposed investment by Ces and nephew for an amount of $100,000 and complaining about the slowness of the work Daceyville. Mr Isaac was not required for cross-examination. His evidence is peripheral and does not advance in any significant way the case of the plaintiffs.

34 There is also evidence for the plaintiffs from Mr Sid Sassine who was and is the accountant for Ces Lichaa and for Properties and Constructions. His first report concerns the losses and expenses in respect of Daceyville by Properties and Constructions. In view of my conclusion, it is not necessary to discuss that report. In his affidavit of 13 September 2010 he says he recalls a meeting with Ces, his son and nephew prior to the creation of Properties and Constructions and a family trust referring to setting up a structure owned one-third by each of them to allow them to carry out future property developments which was intended to be a long term structure. Mr Sassine suggested separate discretionary trusts whereby JJ would own one-third of future profits and Ces and his son would own each of their one-third interest collectively. He says the nephew was happy to proceed with the family trust. Mr Sassine drew up the diagram referred to which I have set out at paragraph [14] above.

35 He also says that he recollected a conversation with the nephew and his wife in relation to Daceyville in which he said to them they had financial commitments to meet one-third of the costs and they said they had no financial capacity to pay money to meet the obligation. This conversation does not in my view significantly advance the plaintiffs’ case and that it does not support the existence of an agreement to share losses. Moreover, it is consistent with their position that they would not enter such an arrangement because they had no assets to meet the possible claims.

DEFENDANTS’ EVIDENCE

36 JJ Lichaa, the first defendant, says that sometime in 2001 Ces Lichaa, in relation to the Sylvania job, said he wanted to form a company so that his nephew and son could work together in order for his son to gain some building experience. At about that time his father, the brother of Ces, had died and the two brothers were very close. He also says that he had many years of building experience which would help to give his cousin JC Lichaa some practical experience in construction. JJ says he stated he had no money to give but all he had was his experience in the building industry as he had lost $100,000 which he had previously loaned to Ces Lichaa. Ces agreed to be the financier. JJ denies there was any agreement to share profits and losses at the Sylvania job and points out that the property was purchased by Ces and his wife. He says he was not aware how much money Ces and his wife made out of the Sylvania project and that he has never seen any accounting records detailing the profit he made at Sylvania. He states that he did not need to know the profits as he was hoping to get a bonus at the end of the job and did not consider he was sharing profits.

37 In relation to Daceyville he says that Ces Lichaa said to him “You will get a third of the profits if we make any and I will keep a third for me and a third for my son. This will make up for the $100,000 you lost at the Mascot job. It will also get you a wage at the end of the project.” He agrees that Ces may have mentioned losses, but he says that he explained his circumstances to Ces Lichaa and that as he had already lost $100,000 he made it quite clear he could not afford to pay any losses. He denies he said that he would responsible for one-third of the losses. He denies there was any discussion about any risk to him as he understood he had none and he denies saying that the Daceyville project should be undertaken on the same basis as the Sylvania project. His evidence is that he did not remember the dinner at the Zipp Restaurant and he denies that statements were made as alleged by Ces Lichaa. He also denies the conversation at the barbeque and says that it was an informal event and there was some drinking of alcohol. He admits that in 2005 he signed a guarantee but says that Ces assured him that there was no need for him to worry and they would come after Ces first as he had properties at Coogee and Miranda.

38 He also deals with the evidence of the other witnesses for the plaintiff and basically denied the alleged conversations.

39 The wife of JJ Lichaa, Karen, swore an affidavit. She says that she knew nothing about the company, Ces Lichaa Pty Ltd, until she received a letter of demand in June 2009 and until that date she did not know that the plaintiffs were claiming moneys in relation to losses for Daceyville or the extent of any losses. She denies that she entered into any agreement with either of the plaintiffs. She recollects that a trust document had been prepared by Mr Sassine in 2001 but did not know what it was for. Nor did she know that she owned a share until she was told this by Mr Sassine in 2006. She says she was not a party to any conversation with Ces Lichaa in relation to the Sylvania property and denies making the statements as asserted by Ces Lichaa.

40 In cross-examination Karen stated that she left business dealings to her husband JJ Lichaa and did not take any active part or have any knowledge of the details of his dealings. She said that she knew nothing about the Daceyville property. She does not recollect the alleged statements at the Zipp Restaurant nor at the barbeque in relation to sharing losses and profits. She states that they had minimal funds and in 2003 their equity in the home was about $60,000 so she could not afford at that time to share losses in a big building project. Whilst she did have some very limited financial experience working in the Qantas Credit Union doing teller work, her financial experience was limited and she had no experience in relation to building work or significant building experience nor has she ever owned shares except the share in Properties.

41 Neither of the defendants had a precise recall as to the conversations. Nor did they have any notes or records relating to the discussions. However, it is evident that in the period 2001-2005 they do not appear to have been persons of significant financial substance such that they would be capable bearing potential losses on multi-million dollar developments.

42 JJ at that time had some substantial experience in building and construction work but did not have access to financing sources or financial experience and relied on the experience of Ces. Karen, while she may have had some contact with financial affairs could not be described as experienced in building ventures. I am satisfied that she left the conduct of business dealings in relation to any building projects to her husband but the evidence does not persuade me that he was acting in any way as her agent in entering into any specific business transactions or contracts, such as Sylvania or Daceyville.

43 I accept that at the time of the relevant discussions in the period 2001-2005, Mr Ces Lichaa was well aware of their limited financial resources and that while there may have been some mention of losses, I do not consider it was made clear to either of them that the Daceyville project was to be entered into on the basis that they would share one-third of the losses of the project with Ces Lichaa or the trustee of his family trust in the event that the venture was a financial failure. I also find that Ces was keen for his son, JC Lichaa, to gain some practical construction experience by engaging in building projects with his cousin.

REASONING

44 In Watson v Foxman (1995) 49 NSWLR 315 at 319 McLelland CJ in Eq said:

“Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the process as of memory are overlaid, often subconsciously, by perceptions of self-interest as well as conscious considerations of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

45 These remarks have particular significance in the present case where the plaintiffs’ case depends on the recollection of conversations dating back to 2001 and 2002. His Honour also emphasised the need for precision.

46 For reasons expressed in paragraphs [27], [29] and [31] above I approach the evidence of Mr Ces Lichaa, his son JC and his daughter Belinda with caution and I am not persuaded that the evidence for the plaintiff is sufficient to persuade me that an agreement outside the company framework as set out in the diagram of 14 February 2002 was entered into by the defendants whereby losses were to be shared by the defendants’ family trust as to one-third. The case as advanced turns on the acceptance of the evidence in the form of oral conversations cast in vague and imprecise terms said to have taken place over 7 years ago. Corroboration has been attempted for acceptance of such conversations on the strength of two informal occasions where there was allegedly mention made in the course of relaxed social gatherings of sharing of losses in relation to Daceyville. I am not persuaded that these conversations took place. It is highly unlikely that at a celebratory dinner or an informal barbeque, such as those referred to, when the parties were no doubt optimistic and relaxed, that any reference made as to losses would be taken as intended to create or support the existence of legal obligations to share losses from a building venture.

47 The terms of the alleged oral agreement are not evidenced by any contemporary record, diary entry or note or writing of any kind as to what was asserted to be an agreement covering a long term series of projects and relationships involving investments with potential losses and profits of many millions of dollars.

48 The alleged agreement was said to have been reached in the context where the plaintiffs knew that the defendants did not have any significant financial resources. This knowledge is evident from the fact that Ces Lichaa states in his first affidavit that the banks would not lend money to the nephew or to any companies associated with him. If the nephew or Karen indeed had any substantial assets presumably the banks would have been ready to lend money to the nephew or the companies associated with him.

49 In view of their limited means, it is highly improbable, and I am not persuaded, that the nephew’s wife gave her husband authority to contract on her behalf. Nor am I satisfied that she was a party to the alleged agreement.

50 Notwithstanding that I am satisfied that Mrs Karen Lichaa was prepared to leave the conduct of business affairs generally to her husband, I am not satisfied that she gave authority to him to enter into any particular arrangements such as the arrangement alleged by the plaintiffs as to the sharing of losses having regard to her evidence as to her limited means in the relevant period. Even if there was a general authority, contrary to my conclusion, I do not consider any specific authority to enter into the Daceyville property undertaking on the basis of sharing unlimited unspecified losses has been made out. Accordingly, regardless of the outcome in relation to her husband, I do not find that she is or could be liable under any such arrangement: see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [77].

51 Significantly, the conversations alleged to have taken place are said to have occurred in a context where elaborate steps have been taken to deal with specific aspects of the relationship and entitlements of the parties and companies and family trusts have been set up and shares have been issued and company records duly lodge. Yet there is no document or record of any kind dealing with or even referring to the sharing of losses by the defendants in any particular proportion or otherwise.

52 If such an agreement had ever been made, it would have been considered by a reasonable advisor to be appropriate to undertake the simple task of including such a fundamental arrangement in a document or at least making some specific record.

53 The diagram at [14] above, which in my view is the most reliable documentary evidence of what was proposed, discloses no such intent or arrangement as alleged. It simply records that the defendants as trustees for a family trust are shareholders in Properties and discloses no further liabilities than as shareholders. There is no suggestion that a related or collateral agreement as to unlimited future losses has been arrived at. It would be an unusual arrangement and surely worthy of some record if a specific shareholder agreement had been reached to indemnify losses or create liabilities as between shareholders in proportion to the shareholdings of the parties. This is an unusual relationship and not implicit in an arrangement to take up shares in a company.

54 The attempts to support the making of such arrangements by suggesting that there were references to “losses” in the two informal gatherings at Zipp Restaurant and the barbeque signal a sense of need to support the existence of an arrangement in the terms alleged. In my opinion it could not be spelt out of the statements made at these gatherings either, taken alone or in the context of past discussions, that they evidenced any intention to create a binding legal relationship in the terms alleged.

55 The plaintiffs’ have referred to the letter of demand of 18 June 2009 to the defendants’ solicitor and to the failure by the defendants’ solicitor to reply in detail to the alleged agreement notwithstanding that he had obtained formal instructions from them. This submission is not persuasive because the solicitors’ letter in reply makes it clear that the matter would be strenuously defended and the lack of specific denial does not amount to an acceptance nor does it evidence that there was an agreement in the terms alleged made in 2001-2002.

56 Another factor which indicates the parties did not arrive an agreement or meeting of minds as to terms of an agreement is the lack of precision as to the ways in which the losses were to be calculated or the absence of any evidence as to other provisions which one would normally expect in such a far reaching commercial arrangement. In particular, there is no description as to how losses would be calculated or what items of expenditure would be taken into account, or as to the times when payment should be made or whether interest should accrue in relation to overdue payments and at what rate. This low level of precision is consistent with a casual reference to the possibility of losses but this is a long way from evidencing a binding legal agreement between shareholders in Properties to share one-third of the losses of the venture. Indeed, the nature of the ventures themselves is not spelt out in any detail.

57 It is not of great assistance, to say, as the plaintiffs submit, that the defendants must have realised that there can be no profit without an accompanying risk and therefore that one can infer from this broad underlying principle support for the proposition that they probably agreed to share the losses of the project. It is essential to carefully examine the factual context in each case.

58 A submission is made that the arrangement for Daceyville was to be the same or substantially similar as that reached for Sylvania in respect to the sharing of profits and losses. However, the Sylvania project was undertaken on a different basis with Ces and his wife owning the property and it cannot be considered a precedent. Moreover, the way in which the Sylvania project was implemented and profits were calculated is not established in any detail such that it could be used as a basis for clarifying the terms of a future arrangement such as Daceyville. Indeed there is no reference to any gain at all in the tax returns for Ces Lichaa for the relevant periods and this impacts significantly on the credibility of his evidence.

CONCLUSION

59 I am not satisfied on the balance of probabilities that any agreement was reached that the defendants and the plaintiffs reached any legally binding agreement either in the terms alleged or at all as to the sharing of losses. Accordingly, I dismiss the plaintiffs’ claim with costs.

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