JUDGE:	MACAULAY J
WHERE HELD:	Melbourne
DATE OF HEARING:	13-17, 21 & 27 November 2017
DATE OF JUDGMENT:	31 January 2018
CASE MAY BE CITED AS:	Loustas v Sier & ors
MEDIUM NEUTRAL CITATION:	[2018] VSC 13

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CONTRACT – Construction – Written agreement – Language susceptible of more than one meaning – Second and third mortgagee purchased land at public auction from first mortgagee in possession – Purchasers entered agreement with previous proprietor to continue development of the land – Profit share arrangement – Whether previous proprietor was a joint venturer or merely a development manager – Whether second mortgagee breached agreement by accepting repayment of mortgage loan from receiver after auction – Electricity Generation Corporation (t/a Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640 applied.

CONTRACT – Termination – Inability to obtain construction finance to complete development – Whether a contractual obligation is incapable of being performed – Shevill v Builders Licencing Board (1982) 149 CLR 620 applied – Frustration – Common assumption that construction finance could be obtained – Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 applied – Breach – Purchasers entered a second agreement with a new syndicate of investors to complete development – Whether first agreement was breached.

EQUITY - Fiduciary duties – Solicitor-client relationship – Second mortgagee had acted for previous proprietor for many years as solicitor – Whether the retainer was terminated prior to auction when solicitor purchased client’s land – Whether the solicitor should have advised his client to receive independent legal advice – Whether the solicitor had a conflict of interest in drafting the agreement entered into with the client – Whether any loss or damage was suffered – Whether the solicitor entering into the second agreement involved a breach of fiduciary duties owed to his former client.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G Parncutt	Kiatos & Co
For the First Defendant	In person
For the Second Defendant	Ms K Anderson	Obst Legal

TABLE OF CONTENTS

Introduction and summary............................................................................................................... 1

Background......................................................................................................................................... 5

Witnesses and credit................................................................................................................... 21

Did Peter Sier or Vincent Sier breach the alleged oral agreement?........................................ 22

Did Peter Sier or Vincent Sier breach the AMS agreement?.................................................... 28

Relevant legal principles........................................................................................................... 29
The AMS agreement................................................................................................................... 30
1^st pleaded breach: Peter Sier’s appropriation of sale proceeds.......................................... 33
Loustas’ alleged equity in the project...................................................................................... 39
Was the AMS agreement discharged?..................................................................................... 42
2^nd alleged breach: entering into the 405 High Street agreement......................................... 47
Summary...................................................................................................................................... 49

Did Peter Sier or Vincent Sier breach any fiduciary duty owed to Arthur Loustas?.......... 49

Did Vincent Sier contravene the Fair Trading Act by making false representations?........ 56

Did Vincent Sier breach his retainer as solicitor for Arthur Loustas?.................................... 58

Did the project make a profit?....................................................................................................... 58

Is…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Loustas v Sier

Details

AGLC: Loustas v Sier [2018] VSC 13
Case: [2018] VSC 13
Decision Date: 31 January 2018

CaseChat Overview and Summary

Loustas was the registered proprietor of land which was subject to a mortgage held by Sier. Loustas borrowed funds from Sier to develop the land. The loan was secured by a second mortgage over the land. A third party held a first mortgage over the land and, defaulting on its obligations, went into possession of the land. Sier foreclosed on its second mortgage and purchased the land at auction. Sier then entered into an agreement with Loustas whereby Loustas would continue to develop the land in exchange for a share of the profits. Sier subsequently entered into a second agreement with a syndicate of investors to complete the development. Loustas sued Sier, alleging that Sier had breached the first agreement by accepting repayment of the mortgage loan from the receiver after the auction and that Sier had a conflict of interest and breached fiduciary duties in entering into the second agreement. Loustas also claimed that the first agreement had been frustrated by Sier’s failure to obtain construction finance to complete the development. Sier argued that Loustas had also breached the first agreement by failing to complete the development.

The court considered whether Loustas was a joint venturer or merely a development manager. The court found that Loustas was merely a development manager. The court considered whether Sier breached the first agreement by accepting repayment of the mortgage loan from the receiver after the auction. The court found that Sier did not breach the agreement as the agreement did not prohibit Sier from accepting repayment of the loan. The court considered whether Loustas’ inability to obtain construction finance to complete the development constituted a breach of the first agreement. The court found that Loustas’ inability to obtain construction finance did not constitute a breach of the first agreement as it was not a breach of a fundamental term of the agreement. The court considered whether the common assumption that construction finance could be obtained frustrated the first agreement. The court found that the common assumption did not frustrate the first agreement as the agreement did not contain a term that assumed construction finance would be obtained. The court considered whether Sier breached fiduciary duties owed to Loustas by entering into the second agreement. The court found that Sier did not breach any fiduciary duties owed to Loustas.

The court found in favour of Sier and dismissed Loustas’ claims. The court ordered Loustas to pay Sier’s costs.

Orders