Morris v Mcewen & Anor No. DCCIV-01-1418

MORRIS v McEWEN & ANOR
[2004] SADC 54
Judge Bright
Civil

The plaintiff, Mr Morris, is a man with a great deal of experience and expertise in the real estate industry. At one stage he worked for a large project builder. He has particular enthusiasm for selling and appears to be an effective salesman. Later, when working on his own account, his real estate business became insolvent and he had to enter into a Part X (of the Bankruptcy Act) scheme with his creditors. He left the state for a year or so.
He then became interested in that part of the real estate market in which developers purchase suitable blocks of residential units, “dress them up”, “strata title” them and then re-sell the individual units. He (rightly) believed that the market was on the turn and that there were good prospects for profit, with relatively little risk. However, he had neither the assets, nor the income to be able to finance the purchase and re-development of units.
He had been a good friend of the defendant, Mr McEwen; he had been best man at the defendant’s wedding. He and the defendant had not kept in close touch for a year or two, but the defendant was broadly aware of the fate which had befallen the plaintiff.
The defendant also worked in real estate. He had done so for over 30 years. In 2000, he was employed in a large real estate business, mainly dealing with the purchase and sale of commercial properties. In the past, the defendant had bought, re-developed and sold a few residential units. He was familiar with what was involved. He had a good credit record and could borrow from his bank.
The plaintiff noticed advertisements for a block of six units at Milner Road, Richmond. In May 2000, he approached the defendant with the suggestion that, in some sort of joint venture, they develop and re-sell those units. He approached other persons with the idea. While his timing was good, as was his assessment of the units, he did not bring to the defendant an idea so unusual as to amount to a valuable or confidential item of intellectual property. The plaintiff and defendant were by no means the only people in the market to pursue such schemes. To people with real estate expertise and experience they were commonplace. This is not to belittle the plaintiff, but his value to the defendant was what he would be able to do in the implementation of a development, rather than the idea itself.
The defendant made his own assessment of the proposal and was satisfied that it looked a good bet. The defendant was to provide (by borrowing) all of the necessary money. The plaintiff and defendant would both be involved in the routine work of re-development. The plaintiff would be responsible for selling the re-developed units. There is no real dispute about this. Nothing was committed to writing.
Dispute has arisen as to the nature of the relationship between the parties and as to the share of profits or the fees to which the plaintiff is entitled.
The plaintiff wanted to set up a joint venture partnership. He wanted a 50% share of profits, after deducting expenses of the development, plus his telephone, advertising and motor car expenses. It appears the defendant was not to charge his expenses to the venture, so this proposal meant that the plaintiff would get a little more out of the venture than the defendant. There was a series of conversations. The plaintiff would have me believe that, from the outset, all of this was agreed.
The defendant signed the contract for the purchase of the Milner Road units. On transfer, they were put into the name of his wife. However, the plaintiff executed contracts for later purchases in his own name, “and/or nominee”. He asserts that he would not have done so, if he were not a proprietor, or partner, in the business. He asserts that he thereby undertook great financial risk, something he would not otherwise have done, particularly having regard to his recent unhappy experience with the Bankruptcy Act. He says he wanted the Milner Road property, and later properties, transferred into joint names, he being registered as joint owner. “Why”, he asked, “would I put my name to contracts in excess of two million dollars, if I were not a partner?”
In law he was at risk. He was contracting as a principal and would have been liable, had the defendant defaulted. In law, he would have been entitled to indemnity from the defendant. I accept that, in dealing with a claim by a vendor on failure to settle, there would have been expense, as there would in pursuing the defendant for indemnity. The plaintiff was very confident the projects would succeed. He thought the prospects were so good that the defendant could hardly fail to proceed. In fact the defendant did not default. The theoretical risk never became actual. When one recognises that the plaintiff had neither assets nor income, while the defendant did, the position becomes even more theoretical, rather than practical. There was a risk, but it was not so great that I conclude that he thereby entitled himself to significant reward.
That the plaintiff signed contracts does not establish that the plaintiff must have been a partner. Insofar as it tends to support that conclusion it is greatly outweighed by the other evidence.
The defendant agrees that the plaintiff did request, and, later, demand repeatedly, that this be the arrangement between them. However, the defendant asserts that he flatly refused to enter into any sort of partnership or joint venture with the plaintiff and that he repeatedly told the plaintiff that he would not. He says that, as the provider of all the finance, there was no way he was going into partnership with a person who had no assets and no income other than what might result from the development.
The defendant says that there is no great magic about such developments. He had done some already. He was quite capable of doing them by himself. He did not deny that the plaintiff had skills and time to contribute. The defendant says he always regarded the plaintiff as a consultant, providing services for which he would be entitled to payment. Having regard to his understanding of the plaintiff’s skills, and to a desire, he says, to help the plaintiff get back on his feet, he was quite prepared to work with him. He, too, thought the prospects for a profit were good.
He says that, when he agreed to the development, there was no agreement on the way in which the plaintiff would be paid. He says that he envisaged that the plaintiff would bear his own telephone, advertising and vehicle expenses, as would the defendant. He says that nothing was ever agreed about those expenses; the plaintiff wanted them and the defendant was not prepared to include them.
Clearly, the principal remuneration was not a fee per hour, nor in accordance with the sliding scales of commission often used by land agents, nor was there a flat fee. As time passed, the plaintiff continued to demand agreement on his terms.
From a very early stage, the plaintiff often came to the defendant requesting payment of money. The defendant recognised that the plaintiff had no money and needed money to live and to carry out his work. Without money from the defendant, the plaintiff could not pay for phone, or petrol, let alone eat. The Milner Road project took approximately six months from purchase to last sale of a re-developed unit. The defendant made a number of payments (of quite large sums of money) to the plaintiff during that period. The plaintiff claims that those payments were in respect of expenses he incurred and that they prove his entitlement to be paid those expenses independently of any other entitlement. Of course they do no such thing. They are equally consistent with the defendant’s assertion that they were advances against the plaintiff’s ultimate entitlement, to be adjusted at the end of the project. Certainly the sums paid were far larger than the expenses claimed. They obviously reflect the recognition that the plaintiff needed money to survive.
The defendant asserts that, by the end of the Milner Road project, nothing had been definitely agreed with the defendant about the basis for his remuneration but that, consequent upon increasingly heated demands from the plaintiff, the defendant, de facto, acquiesced in the idea that the plaintiff be paid a fee calculated at 50% of the profits of the venture, but with each party bearing his own personal expenses.
Nothing was reduced to writing.
If decisions about whom to believe were to be made solely on the way in which each presented in the witness box, the case would be easy. The plaintiff was dogmatic, verbose, excitable, aggressive and prone to lengthy condemnations of anyone who appeared to have even the potential to disagree with him. As a lay description, he appeared rather paranoid. He was prone to reconstruction of what must have happened to suit his case. Particularly in cross-examination, he tended not to answer the question asked, preferring to give lengthy, self-justifying statements, apparently intended to forestall what he anticipated would be the next question.
The defendant appeared calm and careful. He sounded reliable. On these considerations alone, I would confidently prefer the evidence of the defendant. However, such appearances can be deceptive. Where possible, judgment should be made on a more objective basis.
There are a few topics on which there is some external evidence. Without objection, Mr Ottewill, the defendant’s long-time chartered accountant, gave evidence of his conversations and dealings with accountants representing the plaintiff. It happens that the new GST/BAS regime began at about the same time as the Milner Road development. The contract to purchase the block of units was signed on 19 May 2000, settlement was in July and all units were re-sold and settled by the end of October. The new tax regime began on 1 July.
Mr Ottewill advised the defendant that he must obtain tax invoices for all payments he made for expenses associated with the business of developing units. The defendant referred to the plaintiff’s work as a consultancy. Mr Ottewill specifically advised the defendant to make no payments to the plaintiff without receiving a tax invoice. In fact, the defendant did make a number of substantial payments without invoices. Invoices were not forthcoming. He nevertheless made payments, as the plaintiff needed money to live. To write a tax invoice, the biller needs to have an ABN. The plaintiff did not have one. The defendant says he repeatedly told the plaintiff to get one. The plaintiff denies that.
Apparently, for the first quarter after the new regime commenced, the Australian Taxation Office had a period of amnesty, during which it did not insist on the receipt of tax invoices. However, from 1 October 2000, that ceased. From that date, a person claiming to have paid a business expense had either to produce a tax invoice or to withhold (and forward to the Australian Taxation Office) 48.5% of the amount claimed.
Mr Ottewill advised the defendant to make no further payments. Mr Ottewill had a series of telephone conversations with Mr Perkins, who was the plaintiff’s accountant. The plaintiff told me that these conversations were initiated by Mr Perkins ringing Mr Ottewill to demand payment of amounts allegedly owed. Mr Perkins was not called. Mr Ottewill says that, quite to the contrary, it was he who initiated the calls, demanding that the plaintiff get an ABN so a tax invoice could be provided. He did not discuss what was owed or how it would be calculated. There were no demands for payment of any specific sum, or for an account. Mr Ottewill made it plain that there could be no payment until an invoice could be prepared.
As Christmas approached, so did the end of the second quarter under the new regime. A Business Activity Statement had to be filed. Payments had to be justified by tax invoices. If not, they would not be allowed as business expenses. Some payments had been made to the plaintiff. Others were envisaged. Things came to a head and Mr Ottewill had conversations on three successive days, repeating his demand. He says that Mr Perkins never demurred and merely said he would get the plaintiff’s instructions.
On 22 December 2000, the plaintiff and defendant met at the defendant’s house. The plaintiff had got an ABN. The defendant did some calculations of how much was owing and how much had been paid. He calculated on the basis of 50% of the profits, with no account taken of phone, car or advertising expenses. The payment was, said the defendant, largely able to be calculated at that time, though there were a few expenses still to be sorted out and paid. By then other developments were in train and any adjustment could easily be made in future payments.
The defendant’s wife then typed out a tax invoice. That document is Exhibit P1.72.21 and I set it out.
“TAX INVOICE
FROM:     ANDREW FRANKLIN MORRIS
A.B.N. 36063537105
To:            Glenys Mary McEwen
A.B.N. 18982881371
Re:            Sale of Units 1 to 6, 66 MILNER ROAD, RICHMOND
Consultancy, Advertising expenses, Telephone and Mobile Phone expenses, Car Running costs and Fuel Expenses
Amount     $29,880.00
GST           $ 2,988.00
TOTAL     $32,868.00
Signed:     ANDREW FRANKLIN MORRIS
Dated:       22^nd December 2000”
The plaintiff signed it and was paid. He did not have to do so. The figure included earlier payments. Though the plaintiff needed money, the final payment was not, in my opinion, enough to put him under pressure to sign a document which completely misrepresented the true position. The final payment was probably $3,000.
He did nothing to disavow the document until after the parties fell out. It does not refer to any sort of joint venture or other partnership. No tax invoice is required for a split of profits between partners. No partnership tax return was prepared by Mr Ottewill, who had no belief that a partnership existed. Mr Ottewill said that, had he ever understood that a partnership was intended by the defendant, he would have referred him to a solicitor to document that properly. He, Mr Ottewill, needed something far more formal than oral instructions to justify lodging a partnership tax return.
Inevitably, as Mr Ottewill gave evidence, he spoke of conversations with the defendant. In my view, those conversations were hearsay and inadmissible to prove the truth of the relationship. However, they were admissible to explain why Mr Ottewill did, or did not do various things. They explain how he came to speak to Mr Perkins. Conversations with Mr Perkins, as agent for the plaintiff, are admissible.
The plaintiff told me that he and his accountant continually demanded that the defendant and Mr Ottewill account for the profits of the Milner Road venture, but that they would not. The defendant denies ever being asked to account for profits, but agrees that there were many, increasingly, strident demands for payment of money generally. Mr Ottewill denies that either the plaintiff or his accountant ever asked him for an account, or ever said anything to indicate a belief that one was due, or that the plaintiff was a partner.
Inasmuch as payment was eventually made on the basis of 50% of profits, whether there was a partnership or not, the plaintiff was probably entitled to an account in order to check the payment made to him. If, contrary to the defendant, the plaintiff did ever demand an account, that would in no way prove the existence of a partnership.
I accept the evidence of Mr Ottewill. I do not accept the plaintiff’s evidence that, via Mr Perkins, he demanded an account from or suggested a partnership to Mr Ottewill. I find that Mr Ottewill’s actions, and his failure to prepare a partnership tax return support the defendant’s claim that there was no partnership and that the plaintiff was to provide services for fees.
It was submitted that it could not be the case that the defendant demanded that a tax invoice be prepared by the plaintiff as a pre-condition to future payment, because the plaintiff did not have the information to enable him to calculate any entitlement. That is true. However, I find that the emphasis was on the need to get an ABN, following which a tax invoice could be prepared, obviously using information to be provided by the defendant. The ABN was obtained on 15 November 2000, over a month before the date of the tax invoice. When that came to the notice of the defendant I do not know.
I am satisfied that the demand for an ABN was genuine. Unless that was known the defendant could not claim the cost of the plaintiff as an expense of the development for tax purposes. It was not just a delaying tactic. This is also suggested by the fact that most of the money was, in fact, paid over before the tax invoice was created. As the return for the second quarter of the new regime was due, the matter could not be put off further than the end of December. Hence the flurry of calls leading to the meeting and payment on 22 December 2000.
The question whether those fees were to include, or to be in addition to payment of expenses is not easy to answer. Some agents who sell real estate bear such expenses out of the commission they receive. Others do not. Rates of commission vary – no doubt reflecting in part, whether such expenses are to be borne by the agent or the vendor. In each case an agreement must be struck. There is no trade practice established.
The plaintiff says that the agreement was for him to receive expenses in addition to any other payment. The defendant denies that. He did not understand he was to charge his own expenses to the project. The defendant accepts that, because the plaintiff was broke, he did pay various of the plaintiff’s expenses (eg. to reconnect his phone) as well as providing money for living expenses. P1.72.21 is ambiguous. It refers to various expenses, but it does not say whether they have been added to any other entitlement, whether they are included, or whether, simply to avoid any future argument, they have been referred to so no further claim can arise.
There is one other document (Exhibit P3) which is a page from a notebook which the plaintiff used. On it the plaintiff has written amounts for telephone and vehicle expenses. There is writing acknowledged by the defendant, to be his in which he notes percentages of those figures, as if part were to be allowed, presumably as a cost of the development, and part as private expense. If the plaintiff was to bear those expenses regardless of the outcome of the venture, there would be no need to apportion.
It may be suggested that a 50% share of profits is such a high fee that one could conclude that it was intended that the plaintiff bear his own expenses. I have no yardstick. I do not know what agents generally would have charged for the work the plaintiff performed. An agent who took over from the plaintiff after the plaintiff and defendant fell out can be seen to have charged much less for what is claimed to be much the same work. A fee calculated by reference to profits is speculative. One would expect it to be larger than a guaranteed commission. If a project proceeded to plan it would be collected. It might be less, even non-existent, if it did not. I cannot draw any firm conclusion from the way the fee was calculated by the defendant.
The plaintiff kept no log of phone calls or of motor vehicle costs that would enable anyone to accurately determine what were private and what work related – let alone to which work project. The defendant understood he had to bear his own expenses. It is odd that he should do so if the plaintiff was not. It would mean that the plaintiff would get a slightly larger share of the profit than the defendant. It is not proved that agreement was struck to pay these expenses separately.
While I accept that some agents, pursuant to specific agreements, bear the cost of advertising properties, others do not. Records exist of the advertising expenses for specific properties. Attribution is no problem. The plaintiff asserts, and the defendant denies, that there was specific agreement that advertising expenses would be repaid to the plaintiff in addition to any entitlement. I prefer the evidence of the defendant, because I find him more credible generally.

However, regardless of agreement, I must consider whether it is proper to regard the cost of advertising as a cost of a development, to be repaid before any calculation of the profit is to be made. It seems to me more probable than not that, in the absence of agreement to the contrary, advertising expenses should be regarded as expenses to be charged to the project to which they refer. I so find.
This brings me back to the question of the relationship at law between the parties. I turn to the probabilities inherent in the situation. No doubt the plaintiff was good at selling. Exhibit D27 shows that re-sales were made promptly of the units as they were developed. I accept that he was enthusiastic. I accept that he took pride in the way in which, for example, boundaries and fences for each unit in a block were determined before new strata titles were applied for. He may have put more hours into the project than some others would have.
But he was not the only person who could run such a project at a profit. Dressing up and re-selling units is quite a common practice. Though the defendant operated in a slightly different way, he was quite capable of managing such projects by himself. The plaintiff likes to persuade sitting tenants in a block to be re-developed to permit him to re-develop around them. The defendant prefers to get them out before he begins. Arguably, the plaintiff’s method achieves a faster turn around, with lower holding costs. Arguably, the defendant’s method cuts down on the time and cost of dealing with and around tenants. Nothing much turns on that beyond the fact that the plaintiff was not bringing some skill or understanding, without which the defendant could not have proceeded. He brought an ability to perform work, for which he was entitled to be paid.
The plaintiff appeared to suggest that part of what he offered was particular skill in locating and negotiating for properties suitable for re-development. That is not a unique skill. Many people experienced in real estate have it. The defendant has it. As succeeding properties were acquired, some were found by the plaintiff, others by the defendant. The plaintiff’s work was useful – but not indispensable to the defendant.
It is clear that the defendant was to bear all the costs – the plaintiff could not contribute, as he had nothing. To say that the plaintiff was prepared to assume risk is meaningless. He had nothing tangible to lose. I accept that further financial problems would not have been enjoyable - but he did not put any asset at risk. A partnership would have been most unequal. The defendant did have assets and income. If things went wrong, it was he who would have paid and who would have had no practical prospect of getting contribution from the plaintiff. The defendant was under no pressure at all to accept such a foolish proposal and I do not think that he did.
Both sides agree that the plaintiff repeatedly demanded that the properties acquired be registered in joint names, to reflect what the plaintiff claimed was his entitlement as partner. In fact that never happened. With one exception, they went into the name of the defendant’s wife or of their company, set up specifically for the purpose. That is consistent with the defendant’s position and is what I would expect.
Because it bears on credit, I turn to one of the later developments, the exception to which I have just referred. The plaintiff told me that, at the time it was decided to develop a property at Arthur Street, Richmond, the defendant was so over extended that his bank would not advance the money needed to buy it. He said he was told that by the defendant and also by the defendant’s banker, Mr G. Morris. He told me that, because the defendant could not get finance, he, the plaintiff, came to the rescue, borrowed the money himself and did the development on his own account. He agrees that the defendant introduced him to Mr G. Morris who then arranged for the money to be advanced to the plaintiff.
The defendant says that there was never any problem with finance. Mr G. Morris gave evidence and confirmed that. Mr G. Morris did not have the final say on whether a loan could be granted. He had been with the Commonwealth Bank of Australia for many years and was very familiar with its practices. He was the defendant’s personal banker, and was familiar with the defendant’s affairs, including his assets, borrowings and income. He maintained a spreadsheet in his computer covering all of the properties the defendant was re-developing, showing anticipated cash flows and total amounts outstanding at any given moment over the anticipated life of the various projects.
None of the defendant’s borrowing was much out of the ordinary. Mr G. Morris obviously dealt with many such loans and was in a good position to say what the probable response to recommendations made by him to his superiors would have been.
He told me that he was not aware of any reason to think that the Commonwealth Bank of Australia would not have advanced money to the defendant to finance Arthur Street. He was planning on the basis that it would. He did not tell either the plaintiff or the defendant that there would be a problem.,
He arranged, at the request of the defendant, for the finance to be granted to the plaintiff, in the plaintiff’s name. There was no problem. He required a special condition that at least four units in the development be pre-sold before settlement on the property and the release of the finance. He would probably have required that of the defendant.
It was submitted that the defendant did not disclose to the bank that a fee of 50% of profits was to be paid to the plaintiff in respect of any of the developments. One bank document suggests an allowance of $30,000 was made for “commission” on the sale of the units in Milner Road. That sum was not much different to the amount confirmed by the tax invoice. There is no indication of allowance for subsequent developments.
It is now known, though the plaintiff may not have known it then, that, on settlement on sale of redeveloped units, net profit was to go to the bank in reduction of the overall advance. It followed that those would not be funds available to pay out the plaintiff. Alternatively, if he were to be paid out, the bank would not be repaid at the rate it expected. That could be a reason to refuse to make a further advance in respect of Arthur Street.
The trouble with that is that it was never put to Mr G. Morris, who would have been in a position to say whether that would have altered the situation. I do not know whether the entitlement of the plaintiff was built into expenses to be paid before ascertaining the net profit to go to the bank.
At best it could be a reason why, if the bank had known, it might have refused a further loan. But that money was advanced to the plaintiff, so the point was never tested. Of importance to me, I have the evidence of Mr G. Morris that, contrary to what the plaintiff claims, he did not tell the plaintiff that the bank would not lend further to the defendant. This bears on credit.
The suggestion that the Commonwealth Bank of Australia saw the plaintiff as a better bet than the defendant when advancing finance is ludicrous. The plaintiff had neither assets, nor assured income. The defendant did. I cannot see how the bank could have imagined it would improve its position by lending to the plaintiff rather than the defendant.
The defendant says that this all occurred, not because he could not get finance, but because the plaintiff was anxious to do a development in his own name. Having had to enter a composition with his creditors, without assets and without income, it was impossible for him to raise the finance needed to go into business on his own. He needed to “put some runs on the board” – to demonstrate that he was a good risk. To manage a successful development was a good way to do that. The defendant was content to assist his old friend to do that. The defendant had already paid the deposit and a number of other expenses in relation to Arthur Street. He was quite prepared to carry it through. He was equally prepared to have it done in the plaintiff’s name to assist him. Otherwise, it was just another in the series of developments. I reject the claim that the plaintiff took over this development because the defendant could not finance it.
During the development of Milner Road, the defendant introduced the plaintiff to a Mr Medlen, the C.E.O. of a company which supplied fences. Mr Medlen was about to retire and had sold his interest in the company. He told me he was startled to be telephoned by the plaintiff with a proposal that they do a development together, he to finance it. Mr Medlen thought it so odd that he telephoned the defendant, whom he had known for some time, to report it. When asked about this in cross-examination, the plaintiff claimed that it was Mr Medlen who had approached him and that he, the plaintiff, had thought that odd. The cross-examination was in the context of allegations that the plaintiff was in breach of a fiduciary duty to the defendant.
To me it has more significance on credit. I can see no reason why Mr Medlen would lie about it. He took the initiative to report it to the defendant – something he surely would not have done if he were doing something underhand. The plaintiff lied to me about the sequence of events. He did so in an attempt to conceal the fact that he initiated the proposal to Mr Medlen.
In the same context, it was put to the plaintiff in cross-examination that he had put a proposal to the broker used by the parties, Mr Bidstrup, to do a development with him in late 2000. He said that this followed conversations in which Mr Bidstrup alleged that the defendant was untrustworthy and that the plaintiff should insist on getting an account. He said that Mr Bidstrup was also untrustworthy in that, misusing information gleaned from working for the defendant, he did a development just around the corner from one being done by the plaintiff and defendant. The plaintiff recommended to the defendant that they no longer use Mr Bidstruup. He did admit that he looked at a property to develop with Mr Bidstrup, but did not proceed.
However, it then transpired that that plan got to the stage of signing a contract to purchase the units to be developed. The plaintiff and Mr Bidstrup put in cheques of $6,000 each, to cover the deposit, but that from the plaintiff was dishonoured, after which the development did not proceed. Mr Bidstsrup had to forfeit his $6,000. The plaintiff paid him $3,000 towards that. Mr Bidstrup denied telling the plaintiff that the defendant was untrustworthy. He claimed that the plaintiff told him he had put the proposal to the defendant, who was not interested. Accordingly he felt comfortable to proceed. In fact, nothing was told to the defendant about this.
Again, the alleged breach of a fiduciary duty seems less important to me than the differences between Mr Bidstrup and the plaintiff. I found Mr Bidstrup more credible and I think the episode, and the way the plaintiff described it to me reflect little credit on him.
Having regard to the matters I have discussed, I find that the defendant is a much more credible witness than the plaintiff. On the basic claim that there was a joint venture partnership in relation to the first development at Milner Road, I find that that was not the true relationship. The true relationship was not finally agreed in any formal sense. I find that the defendant, as he put it, eventually acquiesced in a claim for 50% of the profits after expenses, as a fee for services. The costs of advertising are to be allowed as expenses of the project, rather than personal expenses of the plaintiff.
As I have mentioned, a series of other developments followed. No new discussions or new agreements about how the plaintiff was to be paid were entered into. Viewed as an estoppel, there are difficulties in concluding that any agreement about Milner Road applied to later developments. Most obviously, the plaintiff did not purport to rely on any representation by the defendant that there was a partnership, thereby acting to his detriment. He says he did the work pursuant to an agreement to be partners. I have found that there was no such agreement.
However, it was certainly never contemplated by either party that the plaintiff would work as a volunteer. The whole history confirms that he needed money, to the knowledge of the defendant, who wanted to help him. It is the basis for remuneration which was not agreed, rather than whether or not there should be any remuneration.
The plaintiff clearly wanted to be paid 50% of profits, though as partner, rather than as a fee. I have found that there was no representation or agreement that he would be a partner. There was eventual acquiescence to paying 50% of profits, at least in respect of Milner Road. I have mentioned that money received on settlement on sale of units was intercepted by the bank. The defendant may have found it hard to pay out the plaintiff. There does not appear to have been any discussions about that possible problem. Nor is it clear that there was a problem – it was not put to either the defendant or to Mr G. Morris. Clearly the defendant was aware that the plaintiff had an urgent need for money and was not interested in waiting any substantial length of time to be paid.
It does not make sense to me that the defendant would be entitled, as I apprehend him, to complete the series of developments and then assess his overall situation, after which he would decide what he should pay the plaintiff. No one seems to have discussed what would happen if a development created a loss. Obviously, the defendant was the one with funds to meet it. But, whether a share of such a loss was to be debited to any entitlement of the plaintiff on another development was not considered. Each, correctly, assumed there would only be profits. I cannot accept that payment was simply to be at the option of the defendant.
In the absence of any further agreement, it seems to me more probable than not that the acquiescence in a 50% payment carried through to later developments. I find that there was tacit agreement to that extent. Arguably, there is an estoppel as to the rate of payment, as distinct from the legal basis for it. Probably it is preferable to view the continuing relationship as one in which there was that limited extent of agreement.
The parties finally fell out in April 2001. By then developments at Angwin Avenue, Blair Athol, Tapleys Hill Road, Seaton and Churchill Road, Prospect had been, substantially, completed and sold. Unit 2 at Churchill Road was not sold until two months later. Virtually all of the work followed the payment on a 50% basis for Milner Road. It seems to me that the plaintiff should be paid on the same basis for those projects, except that any cost incurred in selling Unit 2 should be charged to the project.
By the time the parties fell out, certain other properties had been acquired, but little work had been done to develop them. They were the properties at Aroona Road, Kilkenny and at 104 and 105 Ledger Road.
As I have noted, a good deal of evidence was directed to alleged breaches of the fiduciary relationship between the parties by the plaintiff in the event that I should find that there was a partnership. I have found that there was no joint venture or other partnership. The matters canvassed in evidence may well have amounted to breaches of a fiduciary relationship in such a context; but they do not do so in the context of an agreement to provide services for a fee.
Likewise, in the context of a partnership, the rights or wrongs of the ultimate falling out might be very relevant to claims to participate in profits from ventures begun, but not yet complete. That is not the case in the context of an arrangement to provide services for a fee. True it is that it was the defendant who actually said that the arrangement was over. But that was in the context of a rapidly deteriorating relationship, in which much of the trouble was being generated by the plaintiff’s increasingly aggressive demands. In the absence of any more specific agreement, it must have been terminable on a breakdown of relations between the parties. In my view, neither has a claim on the other for profits earned after the breakdown or for damages.
The most probable date for the final breakdown is 17 April 2001. On that day, at 3.05 pm the plaintiff spoke to the defendant for 15 minutes and 49 seconds. Both were on mobile phones. The defendant particularly remembers receiving this call as he was parking his car in a car park at a particular supermarket. I find that that was the moment.
I am not sure what work the plaintiff had done on the properties I have just mentioned by that time. He had signed contracts, examined the properties and may have done some other work. If so, he should recover a reasonable fee for that work. He is not entitled to anything else in respect of those properties.
This leaves Arthur Street. I have noted that this development began as just another in the series. The defendant did some work, incurred some expenses and put in the initial finance. The plaintiff completed the development. He repaid much of the money put in by the defendant. Most of the work on this development followed the breakdown of relations between the parties.
There was no partnership or joint venture. The defendant is entitled to be paid any money put in as expenses by him, which has not already been repaid. He is to be paid a reasonable fee (at the same rate as seems reasonable for the plaintiff’s services on other developments) for time he put into this development. It may be that the entitlement of the defendant to fees in respect of Arthur Street cancels out the plaintiff’s entitlement for the other developments not complete at 17 April 2001.
I summarise:-
1.In respect of Milner Road, the plaintiff is to be paid any amount outstanding when his fee is calculated at 50% of profits, less expenses, those expenses including advertising fees.
2.The plaintiff is to be paid on the same basis in respect of Angwin Avenue, Tapleys Hill Road and Churchill Road. Any costs for selling Unit 5, Churchill Road are to be charged as expenses of that project.
3.In respect of Aroona Road and 104 and 105 Ledger Road the plaintiff is to be paid a reasonable fee for any work he actually did.
4.In respect of Arthur Street, the plaintiff is to repay any of the money expended by the defendant which has not already been paid back and is to pay a reasonable fee for any work actually done by the defendant.
5.The plaintiff is to give credit for all amounts paid to him by the defendant.
6.The plaintiff is to account and give credit for all amounts paid to him as rent in any of the developments, other than Arthur Street. For the purposes of this calculation, I accept the evidence of the defendant that he has not been paid anything in respect of rent, either directly, or via the plaintiff. Such payments of rent are to be credited to the developments to which they relate. The plaintiff may retain any rent collected from Arthur Street.
I do not have enough information to be able to calculate the payments necessary to implement this judgment. I shall adjourn further consideration to enable the parties to attempt to do so. I express the hope that relatively broad axe calculations may show that amounts remaining in dispute do not justify the cost of precise proof and calculation. If either party wishes to address me on whether separate or different orders should be made in respect of each defendant, I will hear them.
I adjourn further consideration to a day to be fixed. I will have the matter called on for mention in about a month and will then, if necessary, set a date to resume the hearing.

The parties have liberty to apply – and may do so by telephoning my chambers to make arrangements.
I reserve all questions of costs.

[2004] SADC 54

26 March 2004