Makeig v Tucun

[2009] NSWDC 208

CITATION:	Makeig v Tucun [2009] NSWDC 208
JUDGMENT DATE:	22 May 2009
JURISDICTION:	District Court of New South Wales
JUDGMENT OF:	Cogswell SC DCJ
DECISION:	Verdict and judgment for the defendants.
CATCHWORDS:	CIVIL LAW - judgment - contract - promissory estoppel - quantum meruit
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005 R 42.15
CASES CITED:	Brenner v First Artists Management Pty Ltd [1993] 2 VR 221 Franks v Equitiloan Securities Pty Limited [2008] NSWSC 33 Lumbers v W Cook Builders Pty Ltd (in liquidation) (2008) 232 CLR 635 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
TEXTS CITED:	Restitution and Quasi-Contract
PARTIES:	Peter Makeig Tugomir Tucun Stephanie Tucun Stephanie Tucun
FILE NUMBER(S):	5357/07

JUDGMENT

1. Mr and Mrs Tucun owned a house in Gordon. One day Mr Makeig did a leaflet drop in their street. It was about owners developing their properties in conjunction with Mr Makeig. Mr Makeig and Mr and Mrs Tucun had discussions about the Tucuns’ property. The discussions lasted for some months and indeed years. They were accompanied by a good deal of correspondence, mostly from Mr Makeig to the Tucuns.

2. Mr Makeig arranged for two development applications for the Tucuns’ property to be approved by the local council. Now Mr Makeig is suing the Tucuns. He says the legally binding arrangement from the start was that he would do the work on the development of the Tucuns’ property in exchange for a fee. That fee would be thirty percent of the amount by which the Tucuns’ property increased in value as a result of the development consent. He says the property increased in value by $425,000 so that the Tucuns owe him thirty per cent of that, namely $127,500 which is the amount of his claim in this case.

3. The Tucuns say they do not owe Mr Makeig any money for any reason.

4. Mr Makeig pleads three alternative bases for his claim that he is owed the money. His three causes of action are set out clearly in his statement of claim. The statement of claim has been amended at various stages and the one which is relied upon by Mr Makeig is a further amended statement of claim dated 13 October 2008, filed in court on 16 October 2008. In that statement of claim the three causes of action are contract, promissory estoppel and quantum meruit. The question for me is whether Mr Makeig has satisfied me on the balance of probabilities that he is owed the amount which he claims on any of the pleaded bases which he relies upon. I propose to consider each of the causes of action in turn, commencing with the contract.

5. The contract pleaded in the statement of claim is commendably specific. It claimed that the plaintiff and the defendants entered into an agreement in January 2003. The principal terms of the agreement were that the “Plaintiff would assist the Defendants to maximise the value of their property by obtaining a Development Application (“the DA”) approval for subdivision from Ku-ring-gai Municipal Council. In return, the Defendants would pay the Plaintiff 30% of the increase in value of the property resulting from the DA.” In his written submissions, Mr Somerville, who appears for Mr Makeig, says the contract was in fact formed on 16 January 2003.

6. The Tucuns deny that any such agreement was entered into by them. Hence Mr Makeig must satisfy me on the balance of probabilities that the agreement did come into existence. I propose to determine this matter by reviewing first the assertions made in evidence by the parties and then the documentary material which came into existence during the course of their relationship before the commencement of the proceedings.

7. In his affidavit, which is exhibit A, Mr Makeig in para 11 says that a conversation took place between him and the Tucuns on 16 January 2003. It took place at the Tucuns’ house. That conversation occurred after Mr Makeig dropped a leaflet into the Tucuns’ letterbox. I am satisfied that the Tucuns did receive that leaflet which prompted the commencement of discussions between them and Mr Makeig. Mr Makeig’s account is that he said in the discussion on 16 January 2003:

“ My fee is thirty per cent of the enhanced value of your property, which arises from the successful achievement of a development approval. The thirty percent fee is calculated on the difference between the present value of your property and the value of the property when I achieve development approval .”

Mr Makeig says that Mr Tucun’s response was:

“ Well that’s okay, since we don’t have to take any risk. We’ll sell the property and that will show the improvement in the value from the market price as it is now. The present value is somewhere between $750,000 and $1 million .”

8. Hence it will be apparent immediately that on the plaintiff’s own account Mr Tucun thought that there would be no risk involved in working with Mr Makeig on the proposal which he suggested; they would be able to sell the property which would show the improved value.

9. Returning to Mr Makeig’s affidavit, he said that he wrote to them in August 2003 “restating the basis of the success fee”. In due course I will refer to that correspondence.

10. Then Mr Makeig said that there was another conversation on 3 November 2003. The conversation concerned the Tucuns’ desire not to sell the house, but to keep it. Mr Makeig said in his affidavit that he responded by saying that they must settle the method by which the fees owed to him under the success fee agreement will be paid. Mr Makeig says in para 34 of his affidavit that the “simplest way to amend our arrangements” would be to agree that the fees would be based on the market value of the new block of land that would eventually come into existence. In other words the fee which Mr Makeig says he then proposed would be based on an arrangement whereby it would be payable in a way unrelated to any sale of the property. Mr Makeig says in his affidavit that in that conversation he went on to say that he would “provide suitable documentation” to support this amended arrangement.

11. Mr Makeig in para 45 of his affidavit relates a conversation which he had with Mr Tucun in early March 2004. Mr Makeig says that Mr Tucun asked “We are still working on the basis of thirty per cent as discussed early last year?” Mr Makeig’s recollection of his own response to that question is “Yes, that is the only basis on which I work, as I explained to you in January last year.” He recollects Mr Tucun’s response being, “All right, let’s get on with it”.

12. The Tucuns’ recollection of the conversations between them and Mr Makeig contain some significant differences from Mr Makeig’s recollection. Mrs Tucun’s recollection of the conversation which occurred on 16 January 2003 was that it concerned their site being ideally suited for development and a reference to building townhouses. It was a conversation, she thought, about consolidating their block of land with the neighbours’ blocks and there was a reference by Mr Makeig to the “combined land mass could be enough for a retirement village of fourteen villas”. There was reference to it being part of a “larger project”. Her recollection was that Mr Makeig said that his fee would be “thirty per cent of the nett agreed profit on completion”. Her recollection was that her husband said that they would think about it.

13. As it turned out, the neighbours were not interested in a joint development of their property with the Tucuns’ property. So Mrs Tucun’s recollection is that she and her husband had another conversation with Mr Makeig in the middle of February 2003. She recalls him talking about an alternative development admittedly on “a smaller scale”, but he said that he believed “that I will be able to get six villas on your site”.

14. Mr Tucun’s recollection of the first conversation with Mr Makeig was that he presented them with what Mr Makeig described as a “wonderful opportunity to make a lot of money”. He recalled Mr Makeig saying that he would “expect a success fee of thirty per cent of the net profit achieved from the sale of the developed properties”. Mr Tucun emphatically denies in his affidavit in para 33 Mr Makeig’s explanation of the basis upon which Mr Makeig says they agreed on the success fee.

15. Mr Makeig was cross-examined by Mr Kalyk, counsel for the Tucuns. When it was put to Mr Makeig that he never discussed at the initial meeting a proposal that he would obtain thirty per cent of an increase in value upon obtaining a DA, Mr Makeig replied “Well, no, not specifically”. Later on in the cross-examination Mr Kalyk put to him that the success fee he talked about was referable to the profit on the project and Mr Makeig responded “Yes it was”. When Mr Kalyk followed up with a question that the success fee “was never referable to just obtaining DA, was it?”, Mr Makeig’s response to the distinction contained in that question was “That was - the truth was, it was the same thing”.

16. Mr Somerville cross-examined Mr Tucun about the understanding concerning the success fee. Mr Tucun agreed that it was “very clear that he would ask for a thirty per cent success fee”. When asked whether “part of the topic that you were discussing was getting a development approval from the council for a development on your property”, Mr Tucun’s response, after acknowledging that he believed so, was that they “didn’t get down to very specific terms. We didn’t get down to that degree. He was talking about the construction of units.” When Mr Somerville pressed him about it being clear at the first meeting that part of the job that Mr Makeig said he would do would be to get the council’s permission to carry out the development work, Mr Tucun said that Mr Makeig “didn’t specifically put it that way. It was inferred that that would be part of his job.” When Mr Somerville suggested that there was absolutely no doubt what he was talking about when there was discussion about getting development approval, Mr Tucun said:

“ Yes I would have assumed that that was - whether he specifically mentioned it or not I can’t recall, but I would have to say yes, I would assume that that’s part of the job and will be a requirement.”

He agreed that there was mutual financial benefit in an arrangement for a thirty per cent net profit on the sale. Mr Somerville relies in particular upon this series of questions and answers between him and Mr Tucun:

“ Q. And it was clear that that financial benefit would be equal to thirty per cent of the financial benefit you would otherwise receive?
A. Thirty per cent of -

Q. Of the financial benefit you would otherwise receive?
A. Yes, yes.

Q. That was a yes?
A. Yes.”

I think it is important to understand that that series of questions followed very shortly after the following question and answer:

“ Q. But even though the detail of the project wasn’t worked out, it was clear that Mr Makeig would get thirty per cent of the net profit of that project?
A. Net profit on sale.”

17. I turn now to an examination of the documents which were exchanged between the parties, most, if not all, of which are contained in an exhibit marked PJM1, which is an exhibit referable to Mr Makeig’s affidavit.

18. The first document which appears at PJM1-01 is the flier dated January 2003 which I am satisfied on the balance of probabilities the Tucuns received. The exhibit will speak for itself, but I make the following observations about that flier. First, it does refer to enhancement of the value of properties. Secondly, it does refer to a success fee based on achieving a development approval. Thirdly, it also refers to “funds to pay our costs are actually generated for the owner by the service we provide” and that arrangements “can be tied to the receipt of funds from the eventual property sales.” It asserts that the proprietor “is not obliged to find any cost.” The fourth thing to observe about the document is that the proposed success fee payable when development approval is obtained would be “based upon an appropriate agreement between ourselves and the owner”.

19. It is clear from that document that it envisages an agreement - which could only be understood as a legally binding agreement - between Mr Makeig and the owner of the property with whom he is dealing. It is also clear that the payment of the fee is unlikely to be accompanied by any financial burden to the property owner.

20. The next document was a standard form letter which accompanied the leaflet. It appears at PJM1-02 and is dated 8 January 2003. Two things are to be noted about that letter. One is that it asserts that the proprietor incurs no financial obligation until approval is obtained, thereby suggesting that a financial obligation may accrue upon the approval being granted. The second thing to note about that letter is that the author, Mr Makeig, invites discussion of his ideas with the property owner “without any obligation”. It is important to appreciate that Mr Makeig now relies upon that document as one of the documents evidencing the contract between him and the Tucuns.

21. The third document which I refer to is a letter dated 19 January 2003, which appears at PJM1-05-07. This is the letter which Mr Makeig wrote to the Tucuns after the meeting which they had on 16 January 2003 and which has been the subject of the evidence in the affidavits by the Tucuns and by Mr Makeig which I have already referred to. A number of things are to be noted about that letter. The first is that the meeting occurred on 16 January 2003, which is a Thursday. The letter itself was sent off very promptly and was dated Sunday 19 January 2003. Next, the letter does refer to the Tucuns having an excellent site for “value-enhancement by itself.” Although that is consistent with the assertion made by the plaintiff that his proposal related to enhancement in the value of the property, the letter then goes on for some three pages to develop ten numbered points regarding an envisaged “joint venture” with Mr Makeig as project manager and discussing the prospect of receiving up to two million dollars for their site. The last and most significant thing to observe about that letter is that it contains no mention of any binding agreement reached between the Tucuns and Mr Makeig on 16 January 2003. Mr Makeig now claims in these proceedings that the binding agreement was entered into on that Thursday, 16 January 2003. In fact he concludes his letter of 19 January 2003 saying that he was looking forward “to having further discussions with you after you have reviewed the comments in this letter.”

22. This document to my mind is not consistent with the present assertion by Mr Makeig that what occurred at the meeting on 16 January 2003, amongst other things, was that he entered into a binding contract with the Tucuns whereby they committed themselves to pay him thirty per cent of the increase in value of their property which would result from the successful obtaining of development approvals from the local council.

23 The next significant documents are those which appear at PJM1-40 to 45 and comprise a letter dated 16 July 2003 from Mr Makeig to the Tucuns with a document called “Cost Benefit Analysis Number 8” and another document called “Proposed DO Development”, relating to the Tucuns’ property, that is dated August 2003.

24. I make the following observations about those documents. The first is that importantly that letter - and most significantly the document dated August 2003 - comes to be relied upon at a later stage in their dealings by Mr Makeig as providing the basis for their contractual arrangements.

25. Next is that the document at PJM1-42, which is part of the cost benefit analysis, refers to a proposed double dual occupancy development of the property with reference to the plaintiff “when appointed project manager, under an agreed contractual arrangement”. The undertaking would be managed by Mr Makeig, PJM1-45 says, “upon appointment as project manager.” I accept Mr Somerville’s argued distinction between a proposal developed between the parties for the development of the site between the Tucuns and Mr Makeig as joint venturers and, on the other hand, the proposal by Mr Makeig which he claims resulted in the legally binding contract upon which he sues in these proceedings for his thirty per cent of the increased value of the property brought about by the development approval.

26. Next, it should be noted in the context still of the observation that I have just made that the document at PJM1-45 concludes by asserting that it “would be of mutual benefit to draw up a formal agreement.”

27. Next I observe that none of those documents refers to any arrangement or agreement between the parties for a thirty per cent increase in the value of the property resulting from the development approval. In other words, accepting the distinction made by Mr Somerville, the letter and the two accompanying documents - being the cost benefit analysis and the proposed DO development notes - which appear to contain seminal information about the proposal, does not make any reference to the contract upon which Mr Makeig now sues. The document contained the first mention of the figure of thirty per cent; that is, the first mention in writing between the parties so far as I can determine. It is referred to in the context of a success fee “usually on the basis of thirty per cent of the net profit.”

28. The next document is a letter which appears at PJM1-51 to 52. It was written by Mr Makeig to the Tucuns and dated 4 November 2003. That letter is very significant for the following reason. It follows by one day the conversation which Mr Makeig says that he had with Mr Tucun during which Mr Tucun said that they no longer proposed to sell their house, and during which Mr Makeig claims to have said that they should amend their arrangements so that the fee would be based on the market value of the new land that would come into existence, namely thirty per cent assessed on the value of that new allotment, and Mr Makeig’s assertion that he would “provide suitable documentation to support this amended arrangement”. The letter, dated 4 November 2003, makes no mention of any amended arrangements. Furthermore, it provides no documentation supporting the amended arrangements.

29. At PJM1-226 Mr Makeig wrote a letter to the Tucuns on 13 February 2005 sending copies of documents submitted to the local council in support of the development application. This was another opportunity for him to provide suitable documentation to support the amended arrangement which he said occurred on 3 November 2003. But there were no such documents, nor any mention of the agreement.

30. There was still no mention of any amended arrangement or documents to support such an amended arrangement in a letter dated 9 June 2005 advising the Tucuns of the successful development consent. That appears at PJM1-247.

31. In a letter dated 13 July 2005, which appears at PJM-292-295, Mr Makeig sent to the Tucuns a copy of the new subdivision development application for their records. He raised the topic - under a specific heading in the letter - of the financial arrangements between the parties. A number of things are to be observed about that letter. First, there is still no mention of the amended arrangement which Mr Makeig claimed occurred in their discussion on 3 November 2003. Next, it seems to me that Mr Makeig has claimed, for the first time in writing, that his fee would be based on “30% of the market value of the new Lot 2.” Immediately after that reference to the calculation of his fee is the sentence “See documents dated August 2003 (page 4 attached hereto).” That is clearly a reference to the documentation which appears at PJM1-40 - 45, and in particular the last few pages. The letter does say that the fee “would be payable when the job was completed, or subject to circumstances and agreement, payable on settlement of the sale of Lot 2.” It goes on to propose that the parties “formalise the arrangements” and invites the Tucuns to sign a copy of the letter at a place at the end of the letter where provision is made for their signatures.

32. It is to be noted that that letter - which refers back to the August 2003 document as support for the basis of the fee calculation - is referring back to a document which discusses a completely different project. As I said previously, the substance of the document in August 2003 concerned a joint venture between the parties. This joint venture is something which, as Mr Somerville points out, needs to be distinguished from the claimed binding contract between the parties which is the subject to these proceedings and yet in this letter dated 13 July 2005 Mr Makeig refers to that earlier correspondence some two years previously in support of his present claim. That earlier document does not in my opinion support that claim. In addition, it should be noted that the letter of 13 July 2005 is, on the face of it in my opinion, a proposal for an agreement, rather than the terms of an agreement.

33. There was a letter dated 12 September 2005 which appears at PJMI-330 -331. In that letter Mr Makeig discussed, or rather suggested, that the parties “would need to have a firm agreement in place tied to the property settlement that would provide for the completion of my professional fees agreement with you.”

34. At PJM1-336 appears a letter written by Mr Makeig to the Tucuns, dated 7 October 2005. Mr Makeig is seeking contact about the Tucuns’ latest position regarding finance. In the letter he referred back to a letter between him and the Tucuns some weeks before, recalling that “they were a little hazy on the arrangements we made at the start of our business together.”

35. As late as 28 October 2005, in a further letter to the Tucuns from Mr Makeig which appears at PJM1-339, when relations amongst the parties had commenced to deteriorate, Mr Makeig in support of his claimed success fee said that the Tucuns would “recall on page 4 of the proposal dated August 2003, that I referred to the success fee in the third paragraph”.

36. To my mind, the plaintiff himself encapsulated in his letter of 7 October 2005 an apt description of the contractual arrangements between the parties when he accused the Tucuns of being “a little hazy on the arrangements we made at the start of our business together”. In my opinion it is apparent from the evidence that I have referred to that that assertion of haziness reflected the fact of the arrangements between the parties and not just the point of view of the Tucuns.

37. The arrangements between the parties are also to be seen in the context that the Tucuns were very busy for a good part of the time that they were having discussions with Mr Makeig. They had bought a large business in Western Australia in June 2004. They were preoccupied with travelling between Sydney and Western Australia. They were both very busy and they were preoccupied with financial issues to do with that business. That preoccupation was, it seems to me, clearly one of the reasons that they were interested in what Mr Makeig was proposing.

38. Mr Makeig, on the other hand, was floating very attractive figures to the Tucuns in a persistent and early series of letters which referred to significant profits, joint ventures and other arrangements which would release significant funds from their property.

39. The documents themselves, in particular the documents which came from Mr Makeig, are, in my opinion, the most reliable source of information to determine what the contractual arrangements were between the parties. Those documents, in my opinion, fall far short of establishing that there was a binding contract between the parties in the terms which Mr Makeig now relies upon. There is a vast difference between thirty per cent of the realised profit on a sale, which was to the forefront of the discussion for much of the time, and thirty per cent of the estimated increased value of the property which would be payable - without the property being sold - by a cash strapped owner of the property. The evidence does not satisfy me on the balance of probabilities that the parties formed any contract to the effect pleaded by the plaintiff in his statement of claim.

40. The next cause of action relied upon by Mr Makeig is based upon promissory estoppel. Once again the statement of claim is commendably clear in setting out assertions which form the basis of such a cause of action.

41. Mr Makeig asserts that he assumed that a contract existed between himself and the Tucuns from January 2003. The terms of the assumption are the same as the terms of the contract which was pleaded earlier in the statement of claim. He pleads that the Tucuns induced him to adopt the assumption about a binding contract between the parties, that he acted in reliance upon the assumption to the knowledge of the Tucuns. He went on to plead that if the assumption is not fulfilled he will be occasioned deficit and that the Tucuns had failed to act to avoid that detriment, hence he pleads that the Tucuns are, “estopped by [their] conduct from denying that a legally binding agreement exists between the defendant and the plaintiff.”

42. Mr Somerville correctly draws my attention to the authorities on the cause of action in equitable estoppel. As Brereton J said in Franks v Equitiloan Securities Pty Limited [2008] NSWSC 33, at [71], the doctrine of equitable promissory estoppel “has since expanded beyond pre-existing contractual relations, and in Australia has been authoritatively described by Brennon J, in Waltons Stores (Interstate) Limited v Maher 1988 at 164 CLR 387, 428-9”. Brereton J then set out the passage from Waltons v Maher from the judgment of Brennan J, as his Honour then was. It will be helpful to set out that passage because it contains a number of components which a plaintiff must satisfy in order to rely upon this cause of action. His Honour said, over 428 - 429 of Walton v Maher:

“ In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”

43. Mr Somerville made it clear in his submissions that it is an assumption, in this case, made by his client that a particular legal relationship existed between him and the Tucuns, rather than an expectation that a particular legal relationship would exist between them.

44. Mr Somerville in his submissions addressed arguments to each of the six components or elements of the cause of action in promissory estoppel. First he argued that the leaflet, which appears at PJM1-01, gives a lot of insight into what his client assumed the legal relationship was as a result of the first meeting between the parties and their later conduct. However, it is to be observed in this context that that leaflet refers to “an appropriate agreement between ourselves and the owner” and to the fact that “arrangements could be tied to the sale of property”. Mr Somerville argues, when looking at the standard form letter of 8 January 2003 from his client to the Tucuns, that it makes reference to no financial obligation being incurred by a property owner until development approval was obtained. He argues that the corollary of that assertion is that a financial obligation would accrue upon approval being obtained. That may or may not be the case but what that financial obligation is, at that stage is undefined and is - in accordance with the accompanying brochure - to be based upon an appropriate agreement.

45. Mr Somerville argued that it was abundantly clear from Mr Tucun’s evidence that his client would be asking for a thirty per cent success fee. That is true and Mr Tucun acknowledged as much. But what is not clear is what is constituted by the expression “success” and upon what basis the thirty per cent would be paid.

46. Mr Somerville’s cross-examination of Mr Tucun also referred to part of his client’s job being to obtain permission from the council and that being clear. Once again, in my view, it is far from clear that the Tucuns understood that what Mr Makeig now relies upon as his assumed legal relationship was the proposal that he would be paid once the development approval was obtained resulting in the increased value. So far as Mr Tucun was concerned - and this is perhaps important so far as the element of a defendant inducing a plaintiff to adopt an assumption - it is clear and I accept that he was under the impression that the proposal was a large project. Discussion about the obtaining of development consent was, in Mr Tucun’s terms, “assumed” or “inferred”. As Mr Tucun acknowledged, any project of this nature would involve getting approvals but the discussion did not get down to those “tintacks” or “nuts and bolts”.

47. As will be apparent from my review of the documents, when I was considering the cause of action related to the plaintiff’s claim in contract, they do not, in my opinion, make out that the plaintiff was aware or under the assumption at the relevant time that the arrangement or legal arrangement between him and the defendants was as he now asserts. There is in the correspondence, in my opinion, nothing from the plaintiff which is consistent with an assertion of an assumed legal relationship which he now claims until relations between the parties deteriorated and, even then, the document which he relied upon to support his claimed assumed legal relationship, namely the document dated August 2003, was not consistent with what he now claims was his then assumption of the legal relations between the parties. I am not satisfied on the balance of probabilities that Mr Makeig assumed that a contract existed between himself and the Tucuns in the terms which he relies upon in the statement of claim.

48. I will briefly refer to some of the relevant other elements of this cause of action. Mr Somerville argued that the Tucuns actively induced his client by signing the development applications and various authorities and by permitting visits to their property by various consultants. Even assuming that such action constituted an active inducement by the Tucuns there is to my mind no clear assumption - for the reasons that I have given - of the terms of the legal relationship between the parties. In other words, what a plaintiff has to establish is that a defendant has induced a plaintiff to adopt a claimed assumption that a legal relationship existed between them. The evidence is consistent with the legal relationship between the parties at the time that they were dealing with each other being far from clear. Once again I think that Mr Makeig accurately described it: the term used by him - “hazy” - actually describes the state of the legal relations between the parties. Hence, whatever action the Tucuns might have taken was not effective in inducing any assumption.

49. As for reliance, Mr Makeig clearly incurred expenses and was undertaking a lot of activity. A good number of the documents contained in PJM1 evidence such activity. However, he has to satisfy me that in undertaking that activity he was relying upon the assumption that he says he had about the legal relations between the parties. To my mind the evidence is more consistent with Mr Makeig seeing an opportunity to engage in some property development with the owners of a property, to their mutual benefit. I do not criticise him for that; it would be quite a legitimate undertaking. But the evidence to my mind is more consistent with a speculative venture on Mr Makeig’s part rather than Mr Makeig acting in reliance upon any assumed legal relationship. He had not, as I have said, articulated that legal relationship which he now says existed. Indeed, his articulation of the relations between the parties was inconsistent with what he now asserts.

50. Mr Somerville points to evidence that the Tucuns knew that Mr Makeig was relying upon the existence of the relationship between the parties. An example of this knowledge was in Mr Somerville cross-examining Mr Tucun in the following series of questions and answers:

“Q. And you knew that Mr Makeig was doing a substantial amount of work in the period between January 2003 and July 05 in respect of the subdivision of your property?
A. A lot of the work that he was doing I was of.

Q. But even of the work that you were aware of, you knew he was doing quite a lot of work--
A. I knew he was doing something--

Q. Listen to my question, you knew he was doing quite a lot of work in respect of the subdivision of your property?
A. I assumed that he was doing some work, yes. To what degree, I’m not sure.

Q. And it’s your view, is it, that because the original proposal involving the three lots of property never went ahead, there was never any binding arrangement between you and Mr Makeig relating to any subsequent work?
A. There was never any binding arrangement.

Q. So you thought there was never ever a binding arrangement between you and Mr Makeig relating to the work he was carrying out?
A. Correct.”

It seems that the Tucuns knew that Mr Makeig was engaged in a deal of activity and some of the passages referred to by Mr Somerville illustrate that they expected that he probably incurred financial obligations as well. But what is clear from the passage I have just quoted is that the knowledge did not include a knowledge that Mr Makeig was acting in reliance on a binding agreement between them to the effect that he now claims. The answers given by Mr Tucun that there was never any binding arrangement is consistent with what I have found. More importantly, nothing in the correspondence from Mr Makeig to the Tucuns was able to provide a basis for the Tucuns knowing that he was relying upon a legally binding arrangement of the kind or in the terms which he now claims he was relying upon.

51. I do not need to address elements five and six.

52. It is clear from what I have already said, and for the reasons that I have already given, that I am not satisfied on the balance of probabilities that Mr Makeig has made out his claim that the Tucuns are estopped by their conduct from denying that a legally binding agreement existed between them and him.

SHORT ADJOURNMENT

53. I turn now to consider the third cause of action relied upon by Mr Makeig in his claim that the Tucuns owe him the amount claimed in his statement of claim. That is the cause of action referred to as quantum meruit. There have been a number of expressions of the nature of that cause of action which Mr Somerville has referred me to. He referred me to a passage in Mason and Carter’s Restitution and Quasi-Contract. At para 141, at 43, referring to unjust enrichment as a cause of action, the learned authors say:

“ Although the cases do not provide an authoritative statement of the content of unjust enrichment, it is clear that there are three basic elements to the concept, analysis of which is required in any claim to restitution for an unjust enrichment because they did limit the concept of an enrichment which is unjust, all must be satisfied in most instances. The elements are:

(1) ‘Benefit’;
(2) ‘At the plaintiff’s expenses’; and
(3) ‘Injustice.’ ”

54. In Lumbers v W Cook Builders Pty Ltd (in liquidation) (2008) 232 CLR 635 the High Court had occasion to consider the cause of action of restitution based upon unjust enrichment. In a joint judgment at 663 ([79]) Gummow, Hayne, Crennan and Kiefel JJ said the following:

“ The doing of work, or payment of money, for and at the request of another, are archetypal cases in which it may be said that a person receives a ‘benefit’ at the ‘expense’ of another which the recipient ‘accepts’ and which it would be unconscionable for the recipient to retain without payment.”

55. Another description of the cause of action relied upon by the plaintiff is contained in Brenner v First Artists Management Pty Ltd [1993] 2 VR 221, a decision of Byrne J in the Supreme Court of Victoria. At 257 his Honour said:

“ In such a case, the gist of the claim is that the defendant has actually or constructively accepted the benefit of the plaintiff’s services in circumstances where it would be unjust for that party to do so without making restitution to the plaintiffs.”

56. The question for me posed in terms analogous to the High Court’s judgment is whether Mr Makeig did work for and at the request of the Tucuns, and whether the Tucuns received and accepted a benefit at the expense of Mr Makeig, in circumstances were it would be unconscionable for them to retain that benefit without payment. In terms of Byrne J’s formulation from Brenner, the question for me is whether there are circumstances in this case such that the law would consider it unjust for the Tucuns to accept a benefit without payment to Mr Makeig.

57. It will be seen that a common feature of all of the formulations of the cause of action is that the circumstances of a defendant keeping a benefit are unconscionable or unjust. I am not satisfied in this case that any benefit, which might have accrued to the Tucuns, was in circumstances in which the keeping of any such benefit would be unconscionable or unjust.

58. The assessment of injustice or unconscionability must be made in the context of the circumstances of the dealings between the parties involved. In this case Mr Makeig is asserting that it is unconscionable or unjust for the Tucuns to keep back from him thirty per cent of what he claims is the increased value of their land, brought about by the obtaining of a development approval from the local council.

59. Once again it is important to make reference to the document that Mr Makeig himself kept referring to in supporting what he claimed was the legal basis of the arrangement between the parties, namely the document dated August 2003, under the heading “Proposed DA development”. It refers to a success fee “usually on the basis of thirty per cent of the net profit”. It seems to me that it was within the reasonable contemplation of all the parties, so far as the documents indicate, that the thirty per cent would be paid from the profit on the sale. Although that may have changed, there was no shared contemplation amongst the parties that the Tucuns would pay to Mr Makeig thirty per cent of the estimated increased value in the land. Those conclusions are apparent from the findings which I have already made concerning the contract and the equitable estoppel.

60. It follows, in my opinion, that the claim in quantum meruit cannot be made out because it cannot be regarded as unjust or unconscionable that the Tucuns do not pay Mr Makeig thirty per cent of what he claims is the increased value in their property, resulting from the development consents, when that was never a shared understanding amongst the parties. For that reason I am not satisfied on the balance of probabilities that Mr Makeig has made out his cause of action in quantum meruit.

61. Before concluding these reasons, I should make a reference to the valuation evidence. Mr Makeig’s case was that the value of the Tucuns’ land increased by $425,000 as a result of the development approval which he secured. The basis for that figure was contained in two valuations prepared by a valuer Richard Twigg. Both of those valuations were in evidence as annexures to exhibit D. A valuation of the land undertaken by Mr Twigg, dated 2 July 2004, estimated the market value as $1,100,000 and a valuation dated 23 September 2005 estimated the market value as $1,525,000.

62. The increased value was attributable, Mr Makeig argues, by Mr Twigg taking into account the development consent which had been granted in between the two valuations. The second valuation, which is annexure C to exhibit D, records as a comment made by Mr Twigg that he was “asked to assess the subject property now subdivision has been approved by council.” He indicated that he had been supplied with a subdivision plan, and that his valuation was based on the details contained in the plan “and that there are no onerous conditions required in the DA”. The calculations took into account that the two lots were to be sold in one line and new titles are issued.

63. Mr Twigg was called on behalf of the plaintiff to give evidence. There were some unsatisfactory aspects to his evidence. In referring to those aspects it is important to appreciate that two development approvals were secured by Mr Makeig. The first was in June 2005 and the second was in August 2005. The first was for a dual occupancy and the second for a subdivision of the property. There were conditions attached to the dual occupancy consent. One condition was that a property be constructed on the additional lot. A second condition - of many - was that a drainage easement be obtained from neighbours. The subdivision which was the subject of the second development consent could not proceed without the fulfilment of the conditions contained in the first development consent.

64. I return now to considering Mr Twigg’s evidence. Mr Twigg acknowledged that he could not recall whether or not he had seen both development consents. His recollection was that he had seen only the second development consent for the full subdivision. He acknowledged that he did not believe that he was aware of the first consent concerning the dual occupancy. That recollection is consistent with the second valuation - which as I said is annexure C in exhibit D - which makes no mention of a dual occupancy consent requirement for the construction of a building or of any drainage easement. Mr Twigg seemed to acknowledge as much “from reading the report”.

65. Another unsatisfactory aspect about his evidence - which is not a criticism of him - is that he did not have access to the relevant file which he compiled when doing the valuations when he swore his affidavit.

66. Another aspect of his evidence which is unsatisfactory is that he acknowledged at first that he had approached the valuation on the basis of attributing value to a vacant lot. He acknowledged that he was asked to assume that a property would be required to be built on the second lot and asked whether it would cause him to change the opinion set out in his report. He fairly acknowledged that it did make a difference “because if you have a second property - a second dwelling built on the property - then valuation figures are going to be vastly different, because you are not valuing a separate lot of land. You are valuing a separate a separate property or separate dwelling.” In cross-examination he acknowledged that a dual occupancy subdivision requires there to be a construction of the dual occupancy dwelling before there can be a subdivision and he agreed that it was inappropriate to compare the Tucuns’ property as being a house plus a vacant lot with another property as being a house with a subdivided lot.

67. Another aspect which is evidence which is unsatisfactory is that his stated assumption in the valuation was that there were no onerous conditions. What he may or may not have known was that there was an unco-operative neighbour so far as the granting of the drainage easement was concerned.

68. He also acknowledged in his evidence that if the property could not be sold without a second building being constructed, “then there is an implication there”, although he felt the consent was still of some value to the property.

69. I hasten to add that I am not being critical of Mr Twigg. It seems to me that he made an effort to give his evidence as best as he could but had limited material to draw upon and was being confronted with assumptions which he had not earlier taken into account. But I find that as a result of the limited information he performed his valuation on an admittedly inappropriate basis and not on the admittedly correct basis. I am not satisfied, and I think he acknowledged as much, that he was aware of the dual occupancy development consent. Although a drainage easement he regarded as a normal condition, in my view the uncooperative neighbours made a difference in this case. His approach to the valuation was to value a vacant lot, whereas he himself said that that approach is “vastly different” to valuing a property with a second building constructed on it and agreed that an approach valuing the property with a vacant lot was inappropriate.

70. I make no adverse finding about Mr Twigg’s credit or credit-worthiness. He was making an effort to reconstruct the material which he had taken into account and to give answers based upon information which he had not earlier taken into consideration.

71. His evidence in my opinion cannot form a basis for me to be satisfied on the balance of probabilities that the result of the development approvals secured by Mr Makeig was an increase in the value of the defendants’ property in the region of $425,000.

72. For the reasons which I have just given and now conclude I am not satisfied that the plaintiff has made out any of his causes of action and the proceedings which he has brought must therefore fail.

73. Accordingly I enter a verdict and judgment for the defendants in these proceedings.

KALYK: Your Honour do you propose to hear the parties on costs? It will be very brief.

HIS HONOUR: Go ahead. What are you seeking?

KALYK: We seek costs but on an indemnity basis from 9 September 2008 and that your Honour is as a result of an offer of compromise in accordance with the court rules which was served upon the plaintiff on 8 September 2008. It’s common ground between the parties that such an offer was made and I hand up an affidavit which I rely upon. I take your Honour--

SOMERVILLE: There’s no dispute about the service of the notice.

HIS HONOUR: You want to have it on the record?

KALYK: Yes we do. And we refer your Honour to paragraph 9 and the annexure A.

SOMERVILLE: Your Honour can I indicate that I really don’t have any submissions to make in opposition.

HIS HONOUR: Yes. So what’s the order that you seek Mr Kalyk?

KALYK: Plaintiff pay the defendant’s costs, such costs are to be on an indemnity basis from and including 9 September 2008.

SOMERVILLE: I don’t have any submissions to make on that your Honour.

74. I order the plaintiff to pay the defendants’ costs, such costs to be assessed on an indemnity basis in accordance with R 42.15 of the Uniform Civil Procedure Rules 2005 from and including 9 September 2008.

EXHIBIT “#COSTS 1" AFFIDAVIT OF MR HARRY PAPADOPOULOS TENDERED, ADMITTED WITHOUT OBJECTION

HIS HONOUR: Anything else Mr Kalyk? Mr Somerville?

SOMERVILLE: Your Honour I am instructed to seek a stay conditional upon the filing of the notice of bill within 28 days.

HIS HONOUR: Sure.

KALYK: The effect of your Honour’s decision is that the only matter left outstanding is costs. We’d be content if your Honour were to order that no bill of costs be served before the expiration of fourteen days from today. That will give my friend ample opportunity to make any application he wishes for appeal. At the moment your Honour has no reason before him which would justify the granting of the stay. And really what is a practical matter what will occur will be that it will take some time for any costs assessment to be--

HIS HONOUR: So what’s the stay that you’re seeking?

KALYK: Well the procedure for costs would be that the defendant would need to prepare a bill.

HIS HONOUR: I’ll just stop you there. What is the stay that you are seeking? Stay of what? Because I’ve entered a judgment for the defendants.

SOMERVILLE: Yes your Honour.

HIS HONOUR: And I’ve ordered costs. So what are you seeking a stay of?

SOMERVILLE: The technical stay I’m seeking is that of a stay of the judgment but that will automatically stay the process for the assessment of costs.

HIS HONOUR: Do I stay a judgment?

SOMERVILLE: With respect your Honour has entered a judgment and if the judgment isn’t stayed and there is an appeal it means that the way the Court of Appeal works these days with its timing there would be an assessment of costs and followed by enforcement prior to the matter being considered on appeal.

HIS HONOUR: I just wasn’t sure whether you stay judgments as distinct from orders. I can understand you seeking stay of the order for costs.

SOMERVILLE: Perhaps the term should be order rather than judgment.

HIS HONOUR: Yes that’s what’s confusing me. You are seeking a stay of the judgment and without looking it up I’m not sure that that can happen. I can understand you seeking a stay of an order.

SOMERVILLE: I think that’s more correct your Honour, a stay of the order.

HIS HONOUR: Yes, so you are seeking a stay of the order that your client pay the defendant’s costs.

SOMERVILLE: Yes your Honour.

HIS HONOUR: And Mr Kalyk has made a proposal that I don’t fully understand but you may have understood better than I do. Did you understand what his proposal was and what do you have to say about it?

SOMERVILLE: Well as I understand my friend is suggesting that the issue on appeal will be determined within the next 14 days in which case there is no need for a stay beyond 14 days. It’s my understanding the procedure of the Court of Appeal that it takes way, way longer than that. That the normal procedure is and even to file a holding appeal notice and that’s required within 28 days, one then has three months to file the proper notice of appeal once one has the transcript et cetera of the judgment. And then it takes at the moment the best part of a year to get an appeal on. So that my friend’s suggestion of a 14 day stay with respect I don’t think solves the issue. It just means we are going to be back here in 15 days asking the same thing.

HIS HONOUR: Mr Kalyk?

KALYK: Your Honour prima facie the defendant’s entitled to the benefit of your Honour’s orders.

HIS HONOUR: Yes.

KALYK: My friend needs to put before your Honour a ground to displace that prima facie position.

HIS HONOUR: Yes.

KALYK: The only matter that’s put is there might be a potential of appeal. We’re prepared to concede that that’s a possibility and we put to your Honour that within 14 days the plaintiff will be aware of whether it is making such application to appeal. If it is then it can make an application for a stay pending appeal. At the moment we’re prepared to accept that we should not serve a bill of costs which would be the first step consequent upon your Honour’s orders for 14 days.

HIS HONOUR: What you want to do is you say well look you make up your minds about whether you are going to appeal or not and when we see that you are going to appeal then make your application and it can be agitated at that stage.

KALYK: That’s so.

HIS HONOUR: Will that be before me or before the Court of Appeal?

KALYK: That application can be made before your Honour or it can be made before the Court of Appeal.

HIS HONOUR: All right, and you are to facilitate that process offering not to serve a bill of costs for 14 days?

KALYK: That’s so your Honour. And even when we serve the bill of costs the reality is that the plaintiff has a time within which to object to it and the assessment process itself takes three months. So there is no real probability of the plaintiff having to pay money in respect of the costs orders for three or four, maybe six months.

HIS HONOUR: That makes sense Mr Somerville. It just means you make up your mind as to whether you are going to appeal or not unless you are getting instructions.

SOMERVILLE: Well your Honour realistically - sorry your Honour.

HIS HONOUR: And then I was going to say but then by the sounds of it I don’t know whether a stay on a costs order on the basis that there’s going to be an appeal against a verdict for the defendant, judgment for the defendant, be something which is discretionary, that I may or may not grant. Perhaps I should ask Mr Kalyk. Is that assuming that they did appeal and put as a basis for their stay order that they were appealing, it’s not an automatic stay is it?

KALYK: No your Honour, it’s not.

HIS HONOUR: And you wouldn’t want to agitate that.

KALYK: That’s so your Honour. The appropriate course is for that to be done by way of notice of motion properly supported by evidence relied upon.

HIS HONOUR: Mr Somerville that’s what I’m thinking, that it makes sense that you decide to get instructions about whether you are going to appeal or not and if you do and you lodge your notice of appeal and you have instructions or so for a apply which you then apply for the stay before me or the Court of Appeal supported by evidence as to whatever evidence is appropriate on a stay application regarding costs order. So tell me what you have to say about that?

SOMERVILLE: Well my concern is for the timing my friend referred to. Realistically we’d obviously need a transcript of your Honour’s reasons.

HIS HONOUR: Yes.

SOMERVILLE: Subject to instructions I’m sure my client would want to have the benefit of counsel’s advice.

HIS HONOUR: I understand that.

SOMERVILLE: As I say the normal procedure is to lodge a short document as a holding appeal within 28 days and then to lodge a full notice of appeal within three months. And I’d respectfully submit that we will need that sort of time.

HIS HONOUR: What sort of time. So you are looking for a stay for what, three months?

SOMERVILLE: Yes your Honour.

HIS HONOUR: I mean effectively you are looking for a stay until your client makes a final decision which he would make after reviewing my reasons for judgment and getting advice.

SOMERVILLE: Yes your Honour.

HIS HONOUR: And that process could take up to three months?

SOMERVILLE: Yes your Honour. Most of it’s taken up by waiting for the transcript.

HIS HONOUR: Yes, and the judge revising it, because a judgment like this is very substantial. And I do make a practice of appropriately revising judgments, not inappropriately but revising them and giving them paragraph numbers and tidying up the grammar and punctuation and stuff like that so it reads sensibly. And a judgment of this length it could take some time. Mr Kalyk I’m inclined to allow a bit more time, perhaps in the order of three months for that process.

KALYK: Your Honour in my submission it would be most unusual to allow three months in those circumstances. The rules require that any appeal or a holding appeal be filed within 28 days of today. So within that time the plaintiff must decide whether it’s on the cards that it will appeal and in it’s application, in it’s notice of holding appeal please set out where it’s coming to. At that stage the plaintiff is in a position to argue that those grounds that it discloses have sufficient prospects of success and there are other reasons, if applicable, as to why a stay should be granted. But in our submission a three month stay, and we are talking about the cost of this trial your Honour has exceeded all expectations. We are talking about a significant burden on the defendants whilst the plaintiff as it were tarries. And given the practical realities that--

HIS HONOUR: When does he have to file his holding appeal, within 28 days?

KALYK: It’s required that the plaintiff appeal either by a notice of appeal or by lodging his notice of holding appeal within 28 days. In our submission that’s the appropriate time or not later than that is the appropriate time that the plaintiff should make any application for stay pending appeal. It’s with respect, inappropriate to give the plaintiff three months--

HIS HONOUR: So you say that really he has to make up his mind on what he’s heard today in my reasons from the notes which have been taken and that’s sufficient and he doesn’t really need the revised transcript in order to work out whether there are grounds for appeal or not?

KALYK: That’s so your Honour. Time runs as from today.

HIS HONOUR: All right. I’m thinking 28 days Mr Somerville.

SOMERVILLE: Your Honour can I suggest a middle course that any stay should be conditional upon filing a notice of appeal within 28 days. I think it is highly likely that at least a holding appeal document would be filed to save us having to come back here in 29 days. My suggestion is if it’s conditional upon filing a notice of appeal within 28 days if we don’t do it then my friend proceeds. If a notice of appeal, at least of a holding appeal is lodged then I would respectfully suggest that it is reasonable the defendant should have the three months to consider to file a full notice of appeal.

HIS HONOUR: But why? Why wouldn’t he start considering it - so you mean the plaintiff, your client, have opportunity to consider? The three months you’re saying he should have three months to consider whether he’ll appeal or not. Why couldn’t he start that process now from notes and--

SOMERVILLE: He should and will in my respectful submission at least file notice of appeal within 28 days. If he doesn’t do that he shouldn’t get the stay I agree. So the stay should be conditional upon filing a notice of appeal within 28 days. Thereafter the stay in my submission should be for three months and my suggestion is that your Honour orders a stay of the order for three months but conditionally upon filing a notice of appeal within 28 days otherwise we’ll be back here on the twenty-ninth day.

HIS HONOUR: Mr Kalyk your position? He’s asking the same thing.

KALYK: The usual course your Honour as my friend would say I have this basis for seeking a stay. That is we are appealing. That decision will be made within 28 days. On the twenty-eighth day my friend is in a position to put to your Honour the reason why he should be given a stay pending appeal. No further time is required. That matter should be argued before your Honour before the Court of Appeal at that time. Those are out submissions your Honour.

HIS HONOUR: I order a stay on the order of costs which I have made to be until 30 June 2009 provided in the meantime that the plaintiff files a notice of appeal.

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