Nanevski Developments Pty Ltd v Slaveski; Mega-Top Cargo Pty Ltd v Nanevski Developments Pty Ltd

[2022] NSWSC 1066

Supreme Court

New South Wales

Medium Neutral Citation:

Nanevski Developments Pty Ltd v Slaveski; Mega-Top Cargo Pty Ltd v Nanevski Developments Pty Ltd [2022] NSWSC 1066

Hearing dates:

29, 30 September and 1, 5, 6, 8 October 2021

Decision date:

09 August 2022

Jurisdiction:

Equity

Before:

Kunc J

Decision:

Partnership declared and receiver to be appointed to wind up partnership and conduct an accounting between the partners

Catchwords:

PARTNERSHIPS AND JOINT VENTURES — Existence of partnership — Agreement of partnership — No issue of principle

Legislation Cited:

Home Building Act 1989 (NSW)

Partnership Act 1892 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Kuhl v Zurich Financial Services (2011) 243 CLR 361; [2011] HCA 11

Mann v Paterson Constructions Pty Limited (2019) 267 CLR 560; [2019] HCA 32

Maria Saravinovska v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964

Category:

Principal judgment

Parties:

In proceedings 2019/153341

Nanevski Developments Pty Ltd (Plaintiff/Second Cross-Defendant)
Ken Slaveski (First Defendant/First Cross-Claimant)
Biljana Slaveski (Second Defendant/Second Cross-Claimant)
James Slaveski (Third Defendant/Third Cross-Claimant)
Mega-Top Cargo Pty Ltd (Fourth Defendant/Fourth Cross-Claimant)
Tom Nanevski (First Cross-Defendant)

In proceedings 2019/95876

Mega-Top Cargo Pty Ltd (Plaintiff)
Nanevski Developments Pty Ltd (Defendant)

Representation:

Counsel:

Dr E M Peden SC with P Knowles (Nanevski parties)
C Robinson (Slaveski parties)

Solicitors:

Everingham Solomons Solicitors (Nanevski parties)
Valorum Law Group (Slaveski parties)

File Number(s):

2019/153341; 2019/95876

Publication restriction:

N/A

Judgment

Summary

1. This judgment resolves, at least as to fundamental matters and some accounting issues, a dispute between two neighbouring families about the terms on which they agreed to purchase and develop two properties in Sans Souci. The venture was conceived in trustful amity, conducted in poorly documented confusion, and concluded in unrelenting acrimony.

2. The parties declined to follow advice from a solicitor, Mr David Glamcevski, given at the outset that they should record the terms of their arrangement in writing. They have now had to leave it to their lawyers and the Court to determine the legal consequences of what became a commercial debacle, much of which could have been avoided or at least simplified if Mr Glamcevski’s entirely correct advice had been followed.

3. The Court has heard two sets of proceedings. The principal proceedings concern the legal relationship between some or all of the parties (the Partnership Proceedings). The second action is a money claim begun in the Local Court and then transferred to this Court (the Local Court Proceedings). The Partnership Proceedings concern a venture between the plaintiff, Nanevski Developments Pty Ltd (Nanevski Developments) and the first defendant, Mr Ken Slaveski, to purchase and develop two properties in Sans Souci. Nanevski Developments is the defendant in the Local Court Proceedings.

4. Nanevski Developments is a building and development company owned and operated by the Nanevski family, which comprises Mr Ivan Nanevski, his wife Mrs Makedonka Nanevski and their son, Mr Tom Nanevski. Ivan and Makedonka are directors of Nanevski Developments and Tom, although not a director of Nanevski Developments, is the company’s Project Officer.

5. Mr Ken Slaveski and his wife, Mrs Biljana Slaveski, are directors of Mega-Top Cargo Pty Ltd (Mega-Top), which is the fourth defendant in the Partnership Proceedings and the plaintiff in the Local Court Proceedings. Mega-Top operates a freight forwarding and customs broking business, of which Nanevski Developments was a repeat client. Ken and Biljana are also the parents of Mr James Slaveski. Biljana and James are respectively the second and third defendants in the Partnership Proceedings.

6. Throughout these reasons, and without intending any disrespect, I shall refer to the parties who are natural persons by their given names. I shall also refer, where necessary, to Tom, Ivan, Makedonka and Nanevski Developments collectively as the Nanevski parties, and to Ken, Biljana, James and Mega-Top as the Slaveski parties.

7. The first property to be developed was at Riverside Drive (Riverside). It was eventually registered in the names of Ken (as to 1%) and James (as to 99%) as tenants-in-common. Riverside was purchased at auction on 7 February 2015 for $2.7 million, with Tom making the successful bid, although his name would not come to be recorded on the title. The purchase of Riverside settled on 8 May 2015.

8. The second property was at Vista Street (Vista Street). It was eventually registered in the names of Ken and Biljana as joint tenants. Vista Street was purchased at auction on 28 March 2015 for the price of $6.05 million, with Tom again making the successful bid. The purchase of Vista Street settled on 31 July 2015.

9. The central issue in the Partnership Proceedings is whether the relationship between the parties was a partnership or something to like effect. Declarations are sought as to interests in property, together with claims in conversion and quantum meruit. By a cross-claim, the Slaveski parties seek, in general terms, an accounting arising from whatever the Court finds the basic legal relationship between the parties to have been. In the Local Court Proceedings, Mega-Top brings a money claim against Nanevski Developments in relation to certain formwork and building supplies.

10. Tom deposed to the following conversation with Mr Glamcevski on or around 4 February 2015, which was not challenged under cross-examination and was corroborated by Mr Glamcevski’s oral evidence (as to which see paragraph [163] below):

“Tom:   David, I’m going to send you through a marketing contract for a property that is going to auction in Sans Souci on Riverside Drive. I’m going to be purchasing and developing this property with my friend Ken Slaveski who I think you’ve met. Ken doesn’t want to be on title but wants to be an investor with me in the partnership. The company will be the other half of the partnership and Nanevski Developments will appear on title.

David:   Tom I’m your lawyer. Really Ken should get his own lawyer and you need to draft a document that sets out what is to happen with this partnership.

Tom:   I know David but Ken wants to save money and just use one lawyer. He trusts me and I trust him. We’re old friends.

David:   Tom I can’t say this strongly enough. If this goes south I won’t be able to act for either of you. As a solicitor I’ve seen these sorts of arrangements go very bad even between old friends or family. You need to get everything documented.

Tom:   David I know what you’re saying but I trust Ken like a brother. He is my next door neighbour and we’re family friends. Maybe we will look at getting something drafted later on but at the moment I want you to write to the vendor’s solicitor and see if we are successful at auction if they will accept a longer settlement period and a smaller deposit, say 5%.

David:   Ok Tom I will do this, but I really think that Ken needs his own lawyer.”

11. This evidence epitomises a number of elements which characterised these proceedings. First, and as has been noted already, the apparent informality of the commercial arrangements between the parties, marked by little or no documentation; second, a substantial degree of dispute as to what was said during particular conversations; third, the critical role of Mr Glamcevski as an independent witness; and, fourth, the rapid breakdown of what were obviously once close relationships between the members of the Nanevski and Slaveski families.

12. Another aspect of these proceedings was the complexity and density of the facts which the parties asked the Court to consider and find. On the Nanevski parties’ case, those facts were said to prove their overarching contention that Nanevski Developments entered into a partnership, or an equivalent joint venture agreement, with Ken and/or Biljana and/or James Slaveski as at the respective times that Riverside and Vista Street were purchased, notwithstanding that Nanevski Developments was not registered on the title to either of the properties. It follows, according to the Nanevski parties, that Nanevski Developments holds a 50% beneficial interest in each of the properties, which is held on trust by Ken and James (as to Riverside) and by Ken and Biljana (as to Vista Street) respectively.

13. In answer to the Nanevski parties’ “overarching contention”, the Slaveski parties asserted that the “joint undertaking” between Ken and Nanevski Developments was only to take effect upon “each party contributing 50% to the cost of acquisition of the propert[ies]”. On the Slaveski parties’ case, the facts go to proof that “equalisation” of contributions between the joint venturers did not occur, such that no partnership (entailing equal beneficial interests in Riverside and Vista) ever came into existence between Nanevski Developments and Ken.

14. It is convenient, in summary, to note that the following concessions were made by counsel for the Slaveski parties during the course of closing submissions (both written and oral):

1. There is no serious contest that Riverside and Vista Street were purchased with the expressed intention of the parties that some joint enterprise would be undertaken in their development for sale. That was said to be on a ‘50/50 basis’. Just what that means is unclear;

2. In respect of Riverside, that Nanevski Developments held equity of at least $67,500 in the property (Tcpt, 8 October 2021, p 406(31)); and

3. In respect of Vista Street, that Nanevski Developments had contributed the sum of at least $1.124 million towards the purchase price.

15. In light of these concessions, the Slaveski parties maintained their principal argument that, absent an “equalisation” of contributions to the purchase of each property, Nanevski Developments did not receive a beneficial interest in half of each property. Instead, it was argued that the “minimum equity” for the Court to do justice between the parties was to impose a charge on each property in the sum of Nanevski Developments’ contribution to the purchase price.

16. Senior Counsel for the Nanevski parties contended that, as a matter of law, an equitable charge is an inappropriate remedy in circumstances where it was conceded that Nanevski Developments held a proprietary right (i.e. a beneficial interest) in both Riverside and Vista Street, such that the quantum of such an interest, as opposed to its character, was the primary issue before the Court. So, too, it was submitted that reliance upon the concept of the “minimum equity” is inapt in these proceedings.

17. I should also record that in answer to a request from the Court, each party submitted a list of issues said to arise for determination by the Court. The Nanevski parties’ list had 36 questions and did not refer to the Local Court Proceedings. The Slaveski parties’ list had 23 questions. While there was clearly overlap between the questions posed, the parties were unable to agree on a joint list. Moreover, the parties’ final submissions did not specifically address either of their lists. I intend no criticism in making that observation. In these reasons the Court will address the matters that were specifically raised in the parties’ final written and oral submissions rather than the lists which, in fairness, were prepared before the real issues in dispute were ultimately crystallised by the course of the hearing.

18. In summary, for the reasons set out below, the Court has generally preferred the evidence of Mr Glamcevski and the contemporaneous documentary record (which also largely corroborates the evidence of Tom on critical issues) to conclude that there was a partnership between Nanevski Developments and Ken for the purchase and development of Riverside and Vista Street. Subject to any specific agreement otherwise, the parties rights and liabilities fall to be determined by reference to the Partnership Act 1892 (NSW) (the PA). Ken, James and Biljana hold their respective legal interests in those properties on trust for that partnership, which will now have to be wound up under the control of a receiver, who will also have to conduct an account between the partners as part of that winding up. The Court also makes a number of specific findings concerning payments and other allowances that will be relevant to that account.

19. Dr E M Peden SC and Mr P Knowles of Counsel appeared for the Nanevski parties. Mr C Robinson of Counsel appeared for the Slaveski parties.

Facts

20. The Court finds the facts to be as set out in what follows. Most of those facts appear from contemporaneous documents. Many others were uncontroversial or could not be seriously disputed. Where the Court makes findings below about matters that were seriously in dispute, there is a reference to where the Court’s reasons for that finding can be found. Such findings will also have been made with the benefit of the Court’s conclusions about the credit of the critical witnesses (see paragraphs [148] to [160] below), generally accepting the evidence of Mr Glamcevski and Tom, but not the evidence of Ken (unless against interest, inherently likely or corroborated by an independent witness or contemporaneous document).

21. Nanevski Developments was incorporated in June 1998. It is a private family company, of which Ivan and Makedonka are directors. Tom is not, and was not throughout the relevant period, a director of Nanevski Developments. Instead, he is employed by the company as a Project Manager, in which capacity he works full-time and is responsible for the day-to-day operations of the business and the advancement of its projects. Nanevski Developments had built and developed duplexes, villas, townhouses and single dwelling houses in the St George area in suburbs such as Sans Souci, Ramsgate and Ramsgate Beach.

22. At the time of the hearing Tom was 51 years of age and has lived with his parents since 2009. Ivan is 78 years of age and, along with Makedonka, is no longer involved in the day-to-day activities of Nanevski Developments. This is qualified by two matters to which Tom deposed without challenge:

“12   [Ivan and Makedonka] do make the final decisions about which projects Nanevski Developments will take on. I give my advice and recommendations about those projects which they generally accept.

…

14   I also report to my parents and seek approval where there is going to be significant unexpected costs or delay on a project going beyond what was understood when the project was agreed to. These discussions are generally with my father, given his experience in the building industry, but they sometimes involve my mother also.”

23. From around 2006 until August 2018, at which point the tensions simmering between Tom and Ken reached their climax, which in turn has culminated in the present proceedings, the Slaveski and Nanevski families were next door neighbours in Sans Souci.

24. Ken is, and throughout that period was, a director and the company secretary of Mega-Top, which carried on business as a freight forwarding contractor and licensed customs broker. In the course of those operations, Mega-Top operated a warehouse and a fleet of small trucks and drivers, providing limited transportation and delivery services within Sydney. At all relevant times, Mega-Top employed Ms Grace El-Turk as its Financial Controller.

25. As at October 2014, Nanevski Developments had commenced construction of a nursing home on a site that it owned at Lawson Street, Sans Souci (Lawson Street).

26. Over time, the relationship between Ken and Tom developed from that of neighbours to that of friends. Their conversations would often touch upon matters of business, including the development of Lawson Street.

27. It is not in dispute, and forms an aspect of the cases advanced by both sets of parties, that Nanevski Developments engaged the services of Mega-Top for the importation of items including scaffolding, steel and windows which were intended to be used in the development of Lawson Street. For example, on 17 December 2014 a customs broker at Mega-Top sent an email copied to Ken which included:

“2X FCL’s currently has a customs hold, please book on the last free day for now as the client cannot receive this anyway until 31/12, you may also have to store these for a few days.

Also to be delivered by sideloader to … LAWSON ST SAN [sic] SOUCI (residential) empty block of land, thank you.”

28. Another factual matter not in dispute was that, for a period, Ken and Biljana experienced marital difficulties and were separated. However, there was disagreement between the parties as to the duration of that separation, being whether it extended beyond January 2015, as Ken deposed. Nothing turns on when co-habitation resumed. There is certainly evidence that animosity from Ken towards Biljana was still active in 2015 (see paragraph [69] below).

29. Tom gave evidence of the following conversation “towards the end of 2014”:

“Ken:   Tom, you seem to have been making a fair bit of money with your developments recently. If something comes up and you see a good property in the area that you are thinking of developing I’d like to come in on it with you.

Tom:   I only operate through [Nanevski Developments] so I’m not going to do anything on my own. However I would be willing to have a look at a partnership joint venture arrangement if a suitable property in the area came up.

Ken:   Tom, you know that Biljana and I have split. She is now living in our other property located at Banksia. She would never have let me look at doing a development with you but now she’s no longer on the scene this would be a great opportunity for me.

If the divorce goes through it would be also an opportunity for me to hide a bit of money.

Tom:   Ok Ken there’s a few about. They don’t come up often. I’ll let you know if I see something suitable.”

30. This evidence was not challenged in cross-examination and the Court finds this conversation occurred.

31. In early 2015, the principal of Raine & Horne, Sans Souci was Mr Ray Fadel, who was known to Tom from previous transactions.

32. During January 2015, Mr Fadel telephoned Tom and they had this conversation:

“Mr Fadel:   Tom, I think there’s a site you might be interested in. It’s a deceased estate. I don’t have the listing yet but I expect to get it shortly.

Tom:   Ok can you at least tell me the address.

Mr Fadel:   Look Tom, we are not meant to give that information out but go and have a look at a little old blue house on Riverside Drive, Sans Souci.”

33. Following this conversation, Tom attended Riverside and inspected its exterior, which elicited concern as to whether it might be subject to a heritage designation. This concern was allayed following a further telephone conversation with Mr Fadel, who undertook to provide a copy of the contract for the sale of Riverside to Tom.

34. At some time prior to 21 January 2015, Tom got in touch with Ken and had this conversation:

“Tom:   Ken. Are you still interested in buying a site together?

Ken:   I’m interested in investing.

Tom:   I’ve been speaking to Ray Fadel who has the agency for Raine and Horne. There’s a property which is a deceased estate which he is confident he is going to get the listing which is about to hit the market.

It’s on Riverside Drive and I’ve gone and inspected it and I think it has huge potential to develop the site. If there is no heritage listing we could potentially put two duplexes on the site or a number of townhouses depending on what Council is able to approve.

Through Nanevski Developments I have had a fair bit of experience with dealing with the local Council so I think that we can at least develop the site for two duplexes if there is no heritage listing and we are able to do a demolition.

Ken:   Ok Tom well let’s get a contract as soon as we can and see if it’s a possibility.”

35. On 21 January 2015, Mr Fadel emailed a copy of the contract for the sale of Riverside to Tom.

36. Tom also deposed to having this conversation with Ken at some time prior to 4 February 2015:

“Tom:   Ken, I’ve done my homework, I’ve done my research. I’m confident that we can put at least two luxury duplexes on this site. With the river frontage we should be able to get a good price for it.

Ken:   I am interested in investing and developing this site with Nanevski Developments.

Tom:   I will do the bidding at the auction and I will bid on behalf of you and me.

Ken:   I don’t want my name on the property because of Biljana. We will have to have Nanevski Developments on title.

Tom:   Ok Ken that’s no problems.

I will ask my lawyer David Glamcevski if he can request a longer settlement period and we will see if we can reduce the deposit. I’ve done it previously when purchasing properties.

Ken:   Ok I’m happy for you to liaise with David. You know what you are doing and I trust you.”

37. On Tom’s evidence, this conversation was followed shortly thereafter by another to the following effect:

“Tom:   We will develop [Riverside] in partnership, will contribute equally, be responsible together for the expenses and share the profits. I will be able to construct it through Nanevski Developments.

Ken:   This block should allow us to develop two luxury duplexes with pools. We will need to get the development applications going. Tom, with your experience are you able to begin this process?

Tom:   Yes, I can. I can do the consultancy process as well as the construction process. Before the DA is lodged Ken a survey will have to be conducted as well as a geotechnical report. Architects and engineers will also have to be engaged and plans will be submitted with the DA.

Ken:   Tom, how will we account for your time?

Tom:   For the consultancy work which will involve a lot of toing and froing with Council, architects, planners etc I will charge $120 plus GST per hour. For the construction work which I will do through Nanevski Developments we will charge for cost of material and labour at cost plus 30%.

Ken:   That seems fair Tom and you will be able to do it cheaper as you will be the builder and pass on the materials at cost price.

Tom:   Exactly Ken. We will save money there.

Ken:   We will contribute mortgage payments and invest monies for the development equally.

Tom:   Yes and I will do the building on top of that.

Ken:   How much do you think we should go to at auction Tom?

Tom:   I wouldn’t go anything above $2.5 million. If we get to $2.5 we should pull out.

Ken:   Ok Tom remember I don’t want to be on title and you be the registered bidder when we get there alright.

Tom:   Alright. I want to use my solicitor David Glamcevski. I think you might know him Ken.

Ken:   I’m happy to use your lawyer Tom if that’s who Nanevski Developments uses to keep the expenses down instead of us both using our own lawyers. If we use one then we do not get charged for the lawyers talking to each other.”

38. Whether conversations to the effect of those recorded in paragraphs [34]–[37] above and in paragraph [41] below occurred between Tom and Ken was a significant point of contention between the parties. The Court finds those conversations did occur. The reasons for that finding are set out in paragraphs [166]-[169] below.

39. On 4 February 2015, Tom’s solicitors, McGrath, Dicembre & Company (the responsible solicitor being Mr Glamcevski) wrote to the solicitors for the vendor of Riverside:

“We refer to the abovementioned matter and advise that we act for Tom Nanevski the prospective Purchaser of the abovementioned property.

We are informed that the property is listed for Auction this Saturday, 7 February 2015.

We are instructed our client requests that if he is the successful bidder at the auction that the Contract be amended so that our client:

(a)   pays only a five percent (5%) deposit on exchange; and

(b)   settlement is delayed for a minimum period of six (6) months from the date of exchange.

We request that you obtain instructions in relation to the above matter and advise whether or not the above amendments are accepted [sic] to your client in the event that our client is the successful bidder at the auction.

We await your reply.”

40. There was no dispute that both Ken and Tom attended the auction for Riverside on 7 February 2015 and that Tom put the bids. Mr Fadel issued a receipt in Tom’s name for $135,000 paid by cheque (on whose account is not entirely clear) and described it as “5% deposit balance on settlement” in relation to Riverside, which the Court infers was pursuant to an acceptance of Mr Glamcevski’s request set out in the previous paragraph.

41. This conversation then occurred, on Tom’s evidence, between Ken and Tom:

“Ken:   Tom you know my situation with Biljana. I want to hide some money and I need to do it fast. If I put this property in one of the kid’s names she won’t go after it.

Me:   This is totally different to what we agree to!

Ken:   My son James has never owned a principal place of residence. My accountant has advised me to purchase the property in James’ name so no capital gains would be applicable on the land. If you agree to this it will give us significant saving when we sell the property but I will also be able to borrow at residential rates compared to you getting commercial rates.

This won’t change anything in relation to the partnership. Nanevski Developments will still be 50% owner with me.

Me:   Okay I will agree to this. We will need to let the agent know straight away. I will let my solicitor David know.

Ken:   Yes please do.”

42. On 7 February 2015, James, as purchaser, executed the contract for sale of Riverside.

43. On 9 February 2015, Tom delivered to Ken a bank cheque for $67,500 made out to Ken.

44. Ms El-Turk’s private bank statement for 9 February 2015 records a debit of $135,000 with the reference “Ken” and a deposit of $67,500 to her account, again with the reference “Ken”.

45. While Ms El-Turk was not called as a witness, the Court received into evidence as admissions certain parts of an affidavit Ms El-Turk had sworn on 15 May 2019 in relation to Corporations List proceedings brought by Nanevski Developments against Mega-Top in this Court. There was no dispute that Ms El-Turk was the financial controller of Mega-Top under the direction of Ken. She managed Mega-Top’s accounts and also made payments from Ken’s personal accounts, in addition to sometimes advancing her own funds to Mega-Top. The relevant admissions in relation to Riverside are (and the Court finds):

1. On or about 9 February 2015, Ken told Ms El-Turk that the cheque for $67,500 he received from Tom was for 50% of the deposit for Riverside.

2. Records maintained by Ms El-Turk on behalf of Ken record the $67,500 payment as a contribution to the purchase price of Riverside.

3. Nanevski Developments also paid an amount of $1,650 for tree trimming at Riverside.

4. Prior to settlement of Riverside, Ken told Ms El-Turk that Tom had given him a cheque for payment of his (Tom’s) share of the deposit.

46. On 11 February 2015, Mr Glamcevski wrote to James concerning the purchase of Riverside, including:

“We have pleasure in confirming that contracts in respect to your purchase of the abovementioned property were effectively exchanged on the 07^th February 2015 at the gross purchase price of $2,700,000.00

A deposit in the amount of $135,000.00 was paid on exchange.

Stamp Duty in the sum of $134,010.00 is now payable on the contract and Transfer failing which penalties apply at 13% per annum. So that we may attend to the payment of Stamp Duty on your behalf as soon as possible thereby avoiding a fine being imposed for late payment we would be obliged if you could provide us with a BANK Cheque for this amount drawn in favour of the OFFICE OF STATE REVENUE.”

47. In mid-February 2015, Tom gave Ken $100,000 in cash towards the purchase of Riverside. The reasons for this finding are set out in paragraphs [178] to [187] below.

48. On 4 March 2015, Tom emailed Mr Glamcevski concerning Vista Street, asking “Can you please see if you can get me 12 months settlement and 5% deposit if successful at auction”.

49. Ms El-Turk’s bank statement for 5 March 2015 records a credit from “Mega Cargo” described as “Loan repay” in the sum of $47,782.15. This is but one example of many where Ms El-Turk appears to have made loans to and received repayments from her employer Mega-Top, all apparently effected through her role as the company’s financial controller.

50. On 6 March 2015, Mr Glamcevski wrote to the solicitors for the vendor of Vista Street:

“We refer to the abovementioned matter and confirm we act for a prospective purchaser of the above property.

We have been instructed to request the following amendments to the contract should our client be the successful bidder.

1. Completion date to be twelve (12) months.

2. Exchange on o (sic) 5% deposit

3. Special condition 36 rate to be 7% p/a

4. Special condition 37 delete”

51. In mid-March 2015, Tom gave Ken $50,000 in cash towards the purchase of Riverside. The reasons for this finding are set out in paragraphs [178] to [187] below.

52. Sometime before 25 March 2015, Tom contacted Ken to ask if the latter would be interested in joining in the purchase of Vista Street. Ken’s affidavit evidence was that Tom said “Would you like to join me in a 50/50 partnership in the purchase of [Vista Street]?”. Tom’s affidavit evidence was that after telling Ken about Vista Street, the latter said “I would be interested that we can develop it on the same terms as Riverside”. There was no dispute that whatever their arrangement was in relation to Riverside, it also came to apply to Vista Street.

53. A further admission from Ms El-Turk’s affidavit (see paragraph [45] above) is that on or about 25 March 2015, Ken asked Ms El-Turk to transfer $175,000 to Nanevski Developments for his share of the deposit payable if Vista Street was successfully purchased at auction. An email from Ken to Ms El-Turk of 25 March 2015 making that request was in evidence.

54. The auction for Vista Street took place on 28 March 2015. There was no dispute that both Ken and Tom were in attendance and that the latter again put the bids, acquiring the property for $6,050,000 in the name of Nanevski Developments.

55. The unchallenged evidence of the real estate agent, Ms Pollard, was that the $302,500 deposit for Vista Street was paid on the day of the auction by a bank cheque for $150,000 and a company cheque from Nanevski Developments for $152,500.

56. In late March or early April 2015, Tom gave Ken $50,000 in cash towards the purchase of Riverside. The reasons for this finding are set out in paragraphs [178] to [187] below.

57. On 2 April 2015, Ken sent Tom this text message:

“Tom

Don’t me til (sic) to my staff I’m involved in Riverside and Vista Street

Don’t tell my staff”

58. On 9 April 2015, Mr Glamcevski wrote to the proper officer of Nanevski Developments (marked for Tom’s attention) concerning the purchase of Vista Street:

“We have pleasure in confirming that contracts in respect to your purchase of the abovementioned property were effectively exchanged on the 28 March 2015 at the gross purchase price of $6,050,000.00.

A deposit in the amount of $302,500.00 was paid on exchange.

Stamp Duty in the sum of $318,260.00 is now payable on the contract and Transfer failing which penalties apply at 13% per annum. So that we may attend to the payment of Stamp Duty on your behalf as soon as possible thereby avoiding a fine being imposed for late payment we would be obliged if you could provide us with a BANK CHEQUE for this amount in favour of the OFFICE OF STATE REVENUE.”

59. Ms El-Turk’s bank statement for 28 April 2015 records a withdrawal described as “Loan” of $100,000.

60. On 2 May 2015, Ken emailed Tom concerning the purchase of Riverside:

“Hi Tom,

I am signing the NAB loan documents on Weds for the Riverside Drive property.

The loan is for $1,960,000.00

Below are the various interest rates the NAB are offering.

Let me know which one is suitable.

4.30% is variable so if the rate drops on Tuesday we can take advantage.

We will also need to pay $369,500.00 each for the balance on the property on settlement.

Purchase price $2.7m

Less deposit paid $135,000.00

Less loan from NAB $1,960,000.00

Plus Stamp duty applicable $134,000.00

Balance owing $739,000.00

50/50 split $369,500.00 each”

61. I interpose that the fact Ken was asking Tom which interest rate is “suitable” is evidence of the understanding which the Court finds that he had that both parties would be liable for the loan as between themselves.

62. On 3 May 2015, this text message exchange took place between Ken and Tom:

“TOM: Ken the weight of the scaffold from China is approx 4 tonne what’s the difference between air and sea transport

KEN: Hey tom

If the length of each piece is less than 3 meters then it’s possible by airfreight. The airfreight rate is USD3.85/kg plus export handling charges in China and local clearance charges in Sydney approx AUD $0.63 cents per KG Seafreight is much cheaper

TOM: Ok some lengths of the aluminium pipe are between 1m up to 9m and the staircases for the scaffold are fixed then it has to come by sea

KEN: Correct

TOM: One forty foot will be plenty

TOM: There preparing the contract this week so I can pay half now and the other half while I’m there when it gets packed in container

KEN:    Ok

TOM: I’ve also asked Paul to prepare the window schedule for riverside so I can order them and bring back at the same time for lawson is clear anodised aluminium good with you in colour

I have a sample I can show you that I brought back from maco [Macedonia]

KEN: Sounds good. Ok with me. There will be a lot of windows so it should be a good saving.

TOM: Of course

Just need your warehouse if possible to store them

KEN: Ok”

63. Ms El-Turk’s bank statement for 5 May 2015 shows an internet withdrawal with the reference “OSR” (the Office of State Revenue) in the sum of $134,010.00, which the Court finds is for the stamp duty on the purchase of Riverside.

64. Mega-Top’s general ledger headed “Loan Grace El-Turk” records transactions between Ms El-Turk and Mega-Top between 7 January 2015 and 6 May 2015 totalling $350,000.

65. Ms El-Turk’s bank statement for 7 May 2015 records a withdrawal of $300,000 which the Court finds relates to the Riverside settlement. Her bank statement also includes a number of credits which are described as “Megacargo Loan Repay”, which the Court finds are references to repayments to her by Mega-Top of funds she had advanced to it.

66. Ken’s bank account statement for 7 May 2015 includes a debit of $308,016.35 with the particulars “Property Settlement”.

67. Although dated 1 May 2015, there was no dispute that this was an error for 11 or 12 May 2015, Mr Glamcevski wrote to James confirming that settlement of “Your purchase of the abovementioned property …[Riverside] was effected on the 8^th May 2015” and enclosing a settlement statement. The settlement statement recorded an allowance for a deposit of $135,000 (being 5%).

68. On 20 May 2015, Tom and Ken had the following text message exchange:

“KEN: Hi tom

Expecting $500k from Hong Kong money tonight from my mobile phone customer and will draw another $300k from the Megatop overdraft.

I Will ask for my Kuma [“godmother” in Macedonian] to pay the balance of $250k I lent them.

I’m having trouble getting money from Biljana at this stage.

TOM: Ok I hope I’m not causing you too much hassle

KEN: All good

Will do everything possible and glad to assist.

TOM: Thanks ken wont’ be forgotten I’ll pay you interest as well

KEN: No interest.

The company Megatop can write it off.

TOM: I’m getting the window schedule for riverside emailing to maco [Macedonia] so they can send with the nursing home ones”

69. On 21 May 2015, Ken sent text messages to Tom which included:

“KEN: Hey tom

I asked my Kuma for the $250k plus $250k from my overdraft plus Hong Kong money $250 …. Total $750k so far.

Billie [Biljana] and I are not working out and she won’t budge on releasing money to me.

She is still stubborn and I don’t want that because it was the reason I split from her in the first place.

TOM: I don’t want to cause you grief ken

Tell Biljana I’ll pay her better interest that she’s getting and I’ll give her the deeds to lawson st

KEN: Don’t worry about her. She is an idiot. Can’t put brains in statues.”

70. The evidence included minutes of meeting which Ken admitted he prepared for Mega-Top of a meeting dated 22 May 2015 at which he, Bilyana and Grace were present. The first item was:

“Loan to Nanevski Development

Mega-Top Cargo agrees to lend Nanevski Development $500,000.00 for the purposes of their Nursing Home development at Lawson Street, Sans Souci.

Tom Nanevski requested this loan and will pay it back with interest once his company has secured funding from their bank. Anticipated the loan will be for duration of maximum 6 months. Interest will be charged at 4.5% paid at the end of the term.

The loan will be paid from the Mega-Top Cargo overdraft.”

71. On 25 May 2015, Ken emailed Grace at 10.44am:

“Hi Grace

I’ll probably go with the venture in Vista st.

Will apply with council for townhouses (probably 8).

Each would go for min $2.5m each minimum worst case scenario (Total $20m)

Land plus stamp duty $6.350m plus building cost $3.5m …. Total cost approx. $10m.

On Saturday 1300 square meters land in Alfred st Ramsgate sold for $4.0m auction. Its two streets back from Ramsgate beach up the road from Coles. DA approved for 6 x townhouses.

Vista st is 2200 square meters backing on to the water.

I will throw in $500k now and another $500k when I get the NAB money.

I have also requested my lawyers to demand half of the $1.8m Billie has received which is/should be in joint names until settlement is reached.

Settlement on the property is end of June.

Can you arrange $300k received from peter ($200k last week and the cheque today for $100k) and further $200k from the Suncorp to the following account.

St George

BSB [XXX]

Account [XXX]

Nanevski developments

Worst case if it isn’t approved for townhouses, it can be subdivided into 6 lots, two lots or built for over 55’s retirement but that’s more complicated.”

72. At 12.09pm on 25 May 2015, Ken sent this text message to Tom:

“I have 500k Tom

Looks like the balance from the nab next week plus from my HKG client.

You may want to get Greg to provide the balance $600k and we can sort it out next week.

I’m really sorry but the $250k from my Kuma is tied up and I will have 50% of billies money soon because I am entitled to it.

I’m really really sorry!!!

Grace has your bank details

sending through today.”

73. Three different bank records, all dated 25 May 2015, record total transfers with reference “Ken Slaveski” from Mega-Top to Nanevski Developments totalling $500,000.

74. Mega-Top’s bank statement for 25 May 2015 includes a deposit to the account of $100,000.

75. Also on 25 May 2015, Ken emailed Mr Jeff Schembri, a financial consultant, which included:

“Tom asked if you can start working on a residential loan for Vista st.

I will go in with Tom 50/50 on the venture.

Maybe arrange for a valuation this week if possible.

Let me know your thoughts.

Try and do your best to get a good interest rate.”

76. Mr Schembri replied:

“No Problem.

I will get onto it..

Presume that we are looking at 80% of the Purchase price … or the Valuation..

Got to say though it may be hard to get a housing loan for this as you both need to prove a capacity to service principal and interest which is going to be very hard..

I could look for 80% lend but it definitely may be looked at as a commercial transaction … rates are very good though and the servicing requirement will not be as tough ..

As an example … If I got the same rates for this as I got for Magatop (sic) it would at 4.34% today with $100 per month Service Fee. That’s pretty good considering we are getting a home loans for around the 4.39% - 4.5% mark at present

Give me a call to discuss..

The structure etc…

Is it going to be you and Tom as joint borrowers with the property in Joint Names or are each borrowing 50% with the property securing the transaction for each of you by way of a guarantee.

Not too difficult but need to know how we are going to approach it.”

77. Ken sought advice from a business consultant, Mr Mark Bonney, about how to structure the purchase of Vista Street. On 3 June 2015, Mr Bonney emailed Ken and Mr Schembri, including:

“Ken and Jeff

Facts

Vista $6m

Buying 50/50 with builder.

Funds being introduced by Ken Slaveski super fund and Tom builder entity

Funding for land purchase initially and future development. …

Rules of conduct – you are getting legal advice on preparing a unit holders agreement Setting up the different vehicles, Company and Trust etc will require Legal Advice as will other matters associated with this transaction … I have a good lawyer who specialises in this type of transaction who I could get to quote if you like ..”

78. Ken accepted that he gave the instructions set out under “Facts” to Mr Bonney. He also acknowledged that he did not take Mr Bonney’s advice about obtaining legal advice for the purposes of preparing a unitholder’s agreement. The subject of the email was “Slaveski Super fund Property purchase and development using SMSF”.

79. Mr Schembri obtained a valuation report for Lawson Street as at 16 June 2015 which described the property as “The property comprises a vacant parcel of land that has been excavated for basement parking”. The report included photographs showing the site had been “excavated and piled”.

80. It appears that difficulties with obtaining finance caused a delay in the settlement of the purchase of Vista Street and, ultimately, a change in the purchaser.

81. On 19 June 2015, Makedonka contacted Mr Glamcevski. They had a discussion in Macedonian. Mr Glamcevski recorded the attendance in a file note under the hearing “Nanevski Developments – purchase [XX] Vista Street”:

“19 June 2015

Telephone attendance with Makedonka Nanevski

She was enquiring about the status regarding the settlement, explained to her that settlement was in due today, 19 June 2015. Tom apparently has almost finalised the finance arrangements but looks like he may not be able to get the whole amount because of Companies accounts and financials being not up to date.

I explained to her that in accordance with previous discussions Ken and Biljana Slaveski will be put on title so as accommodate funds noting that they were joint venture partners anyway, they contributed equally to the deposit.

She said to me that she would prefer if Ken and Biljana took over the whole matter themselves. She and Ivan are too old, they would just rather finish off the Nursing Home Centre and the other Riverside property.

Told her they’ve committed now, Contracts have been exchanged and in fact the matter in for settlement there is not much they can do about it now.

Potentially I thought that there was great potential in making profits in relation to this development with which she agreed. Told me that if it is at all possible to remove Nanevski Developments out of the Contract and they will make their own private arrangements via a joint venture agreement with the Slaveski’ s in relation to contributions and sharing of profits.

I explained to her that the best way to do that is to remain on title as registered owner, just for example one day if Ken and Biljana have a family law dispute then being on title Ken and Biljana can just fight about their share and not touch the Company share.

Being just a joint venture you can still claim an equitable interest but then you become involve in their proceedings.”

82. Also on 19 June 2015 at 11.17am, Mr Glamcevski emailed Tom and Ken concerning Vista Street:

“Dear Tom, Ken and Biljana

As per recent discussions regarding this matter I have now finalised relevant documentation including Deed of Rescission, fresh Contract and Transfer which will effectively result in the purchaser of the property being Nanevski Developments Pty Ltd as to a half share and Ken and Biljana Slaveski as to the other half share as joint tenants as per our discussions.’

At this stage I am waiting for approval of the draft documents from the Vendor’s Solicitors.

I confirm my advices also that as part of the agreement as you can appreciate the Vendors will be insisting on penalty interest being paid nothing that settlement of the purchase was due today, 19 June 2015.

Penalty interest in accordance with the Contract is running at $1,408.90 per day. In this regard therefore please ensure that your financier organises documentation and is ready to proceed to settlement as a matter of urgency. …”

83. At 12.56pm on 19 June 2015, Ken emailed Mr Glamcevski and Tom:

“Hello David, Tom

Will the vendor accept 100% ownership KB Slaveski?

$175k of the deposit to secure the purchase was under Slaveski which may be evidence enough to suggest I was involved in the purchase and owner. If that’s the case, then maybe we can use this as leverage to secure the asset under Slaveski without the risk of defaulting. We can argue it was always intended to include Slaveski as an owner whether 50% or 100%.

The reason I ask is that we can secure a loan with the CBA under my personal name over almost overnight. This will avoid having to pay the exorbitant penalty fees for late settlement and private lenders fees/interest rates.

Securing a loan in joint names/ownership under slaveski and nanevski will be very difficult if not impossible.

I am not sure what other solution is available.

This morning I sent an email to my contact at Suncorp to see what he can do in joint names Slaveski and Nanevski. Hopefully they will accept.

An agreement can be drafted between Slaveski and Nanevski going forward so that both parties benefit from the joint venture.

Your feedback would be greatly appreciated.”

84. On 24 June 2015, Mr Glamcevski wrote to the solicitors for the vendor of Vista Street:

“We refer to the abovementioned matter and to previous communications herein.

In particular we refer to numerous discussions with Mr. Stockman in relation to the matter and confirm our instructions in relation to the matter as follows:

1.   First and foremost our clients have instructed us to convey to your clients their gratitude for entertaining these changes in relation to the current contractual arrangements. The changes as advised and considered will result in substantial benefit to our clients in relation to what they propose to do with the subject property.

2.   As discussed with Mr. Stockman the Purchasers will now be Ken Slaveski and Biljana Slaveski as joint tenants with no reference to Nanevski Developments Pty Ltd. On our instructions this is designed so as to enable settlement to occur as has been aimed for Friday, 26 June 2015. In this regard unfortunately as per our discussions the Writer is unable to recommend and our clients are unable to accept time being of the essence in relation to same. The Writer has discussed the matter with Mr. and Mrs. Slaveski and the representatives of Nanevski Developments Pty Ltd at great length. Whilst the Writer’s clients have been assured by the incoming Mortgagee, particularly the Commonwealth Bank can be ready without forty-eight (48) hours the Writer unfortunately does not hold such confidence primarily based on previous experience with representations being made by Banks in relation to their abilities to meet deadlines. In this regard our clients will endeavour and are endeavouring to make sure that settlement will take place by Friday, 26 June 2015, time not being of the essence. However in the Writer’s respectful view it is more likely than not that this matter will be ready for settlement some time during the course of next week. This is the Writer’s opinion for the record. …

For the records our clients are also aware that the Notice to Complete requires completion of the Contract by 10 July 2015. For the record neither Nanevski Developments Pty Ltd nor Mr. and Mrs. Slaveski intend or wish for settlement to take place anywhere near or close to the timeframe of the Notice to Complete. …”

85. Mr Glamcevski’s evidence, which the Court accepts, was that the reference to “our clients” was to Nanevski Developments (Tom, Makedonka and Ivan) and Ken and Biljana.

86. On 29 June 2015, Mr Glamcevski emailed Tom and Ken about the subject “Nanevski Developments Pty Ltd” and including:

“Dear Tom/Ken

Further to our discussions regarding this matter I can confirm that I have received further communications from the vendors solicitor and now have amended all documents to reflect the new purchasers as being Ken and Biljana. …

On this point and purely on a cautious note it is my respectful view that Nanevski Developments Pty Ltd should ensure in any event that if necessary it is ready to proceed to completion under the existing Contract which as you are aware is subject to a Notice to Complete requiring settlement by the 10^th July 2015. I make this point on the basis that if for any reason Ken and Bilijana are unable to complete by the 10^th July 2015 the company Nanevski Developments Pty Ltd be able to proceed to completion of the purchase to avoid the risk of rescission of the Contract for not complying to the Notice to Complete and the forfeiture of the deposit already paid and pursuit of the balance of the 10% deposit against Nanevski Development Pty Ltd.

As indicated this is my advice and purely on a caution basis as we do not want a situation where something happens or Ken and Bilijana or their bank is not ready by the 10^th July 2015 and Nanevski Developments is called upon the settle and Nanevski Developments cannot settle because they have relied on the expectations that Ken and Bilijana will be purchasing the property. Please ensure that you take appropriate action and if you need me to get involved in any form please let me know. I note however your advices that finances in respect of the purchase by Nanevski Developments Pty Ltd of the property are in order and on your instructions in the past Nanevski Developments Pty Ltd is in an position to proceed to settlement and has finance approval but the change was precipitated by the fact that under the new arrangement substantial savings in respect to interest and other costs will be realised by the joint venture partners.”

87. On 6 July 2015, Mr Glamcevski forwarded to Ken and Tom a letter from the vendor’s solicitors in relation to Vista St which included:

“If our clients are minded to grant the extension sought then one of the conditions will be the immediate payment into our trust account of the balance of the 10% deposit … Your clients should not be under any misapprehension as to the result of either there being no agreement for the extension of the time for settlement or in the alternative no settlement effected in accordance with the Notice to Complete already served. If this were the case our clients will, on Monday next, terminate the contract, forfeit the deposit and then take proceedings for interest, damages and the like.”

88. On 8 July 2015 at 11.43am, Mr Glamcevski emailed Ken, Biljana and Tom:

“Just to let you know I just got off the phone with the vendor’s solicitor regarding the extension of time.

The extension of time has been granted to the 31^st July 2015.

In accordance with the agreement however the balance of the 10% deposit has to be paid now.

Biljana & Tom can you please organise the payment of a further $302,500.00 into the Agent account. I would prefer if possible for a bank cheque in favour of McGrath St George or is you wish to do a direct debit please provide me with details including deposit slips etc, so I can show the vendor’s solicitor that the payment has been made.”

89. Mr Glamcevski’s evidence, which the Court accepts, was that he had referred in the email to “Biljana & Tom” because he understood they were contributing equally.

90. By email sent at 4.55pm that day copied to Biljana and Tom, Ken replied “I will get grace to arrange the bank cheque”.

91. The evidence included a receipt signed by the real estate agent Ms Pollard in relation to Vista Street dated 9 July 2015 for $302,500 which noted “Received from Tom Nanevski, Nanevski Developments Pty Ltd”.

92. On 9 July 2015 at 9.55am, Mr Schembri emailed Ken, including:

“Things are progressing well with vista. Had to sort out something about the contract in order for the bank to order a valuation but the solicitor wrote a letter and I believe that was satisfactory for the valuation to go ahead. Anyway I haven’t heard anything to the contrary.

Just had Tom on the phone having a go at me. Mainly about Lawson and Greg and that I told him that it would all be ok etc. I said that I only relayed Gregs comments that he felt he could arrange the finance. Anyway I told him that the investors are reluctant to lend against Lawson but GREG is still trying to source finance.

He also told me that he got an email from you saying that finance was not approved and that you were upset.

I said that I was unaware of anything like that and asked him to send me the email so I can understand what he is talking about. He said that he won’t send it though so I’m not sure what he is on about.

Is everything ok. My last conversation with NAB was that the application was progressing well pending the hiccup with the valuation but as I said earlier I believe that has been resolved following the work with David.

If you get a chance please get back to me to clarify what Tom was talking about.”

93. Later that evening, Ken (who was overseas at the time) replied to Mr Schembri, including:

“Don’t worry about Tom. I asked him to look at getting finance approved for Lawson st ASAP in case there is a hiccup with my application …even if he goes to his Chinese lenders (if Greg can’t) and gets a loan so he can pay something towards Vista St.

If Greg can assist it would be great. Tom will then dump a good portion of that towards Vista and it will relieve me from having to pay cash towards the balance of the 20 pr 30% required.

It would help immensely if the valuation from NAB comes in close to the purchase price.

I guess the sooner the application goes through the better … so I can minimise the penalty fees I am paying for the late settlement.”

94. On 28 July 2015 at 3.55pm, Mr Glamcevski emailed Biljana, Ken and Tom confirming that settlement of the purchase of Vista Street would occur within a day or two. His email continued:

“Of note are the total settlement figures.

I enclose herewith settlement sheet on which you will note the balance due and owing on settlement to be $5,500,609.52.

I note that you have secured from NAB the sum of $4,360,000.00 leaving a balance due on settlement of $1,140,609.52.

As are you aware in addition to an amount of $364,010.00 is due and payable for stamp duty in favour of the Office of State Revenue.

In addition to this we are awaiting receipt of the tax invoice for the vendors solicitors for all the additional costs incurred and shall advise you of same once received. We will also calculated our costs and disbursements in relation to our involvement in this matter as well.

I thought that I would bring this to your attention so that whatever arrangements need to made (sic) insofar as securing the balance of purchase monies needed are attended to in the next day or two.”

95. Later that evening, Ken emailed Tom and Biljana with the subject heading “Vista Street/NAB Loan”:

“Hello Tom

Purchase price             6,050,000.00

Stamp duty                 364,000.00

Total cost to purchase Vista Street property    $6,414,000.00

NAB WILL LEND KEN SLAVESKI $4,355,000.00 ($4,360,000.000 less bank fees of $5330.00) BASED ON 80% VALUATION OF $5,445,000.00

Kens contribution so far as follows:

$500k (payment by Ken to Tom to secure Vista Street)   500,000.00

$175k deposit paid at Auction             175,000.00

$302.5k deposit paid July balance of the 5% as request by seller   302,500.00

TOTAL      977,500.00

Toms contribution so far

$127.5k deposit paid by auction

Balance owing on Settlement $1.454m

Balance of kens share $52000.00

Balance of toms Toms (sic) share $1402000.00

Kens share is $52000.00 ………………$1,029.500.00 less already paid of $977,500.00

Toms share is $1,402,000.00 ……… $902000.00 ($1029500.00 less what he has paid of $127500.00) plus the $500,000.000 (which was paid by Ken Slaveski towards Vista Street which is sitting in account.

Payable is $52000.00 (Ken) plus $1,402,000.00 (Tom)

Total $1,454,000.00 (excluding the penalty fee for late settlement)”

96. On 3 August 2015, Mr Glamcevski wrote to Ken, Biljana and the proper officer of Nanevski Developments referring to the settlement of “Your purchase” of Vista Street. Mr Glamcevski’s evidence, which the Court accepts, was that he was instructed by all of them to send the information, which included the settlement sheet, to both the Nanevski and Slaveski interests. The letter included a document headed “Cheques on settlement”:

“CHEQUES ON SETTLEMENT

Proceeds in respect of abovementioned settlement were provided as follows.

1.   Stockman & Evans Trust Account

(NANEVSKI DEVELOPMENTS PTY LTD)      $996,570.00

2.   Stockman & Evans Trust Account

(NAB LOAN)                  $4,332,895.22

3.   Stockman & Evans Trust Account

(MR & MRS SLAVESKI)            $171,654.65

4.   Stockman & Evans

(VENDORS SOLICITORS COST FOR

EXNTESION OF TIME AND RESCISSION

OF CONTRACT)               $4,501.20

5.   Kogarah Council (NAB)            $4,076.42

6.   Sydney Water (NAB)               $177.93

7.   Department of Trade and Investment (NAB)      $139.70

8.   Office of State Revenue

(MR & MRS SLAVESKI)            $364,010.00”

97. On 18 August 2015, Ms El-Turk sent an email to Tom, copied to Ken with the subject heading “Reconciliation” and including:

“Attached please find reconciliation for the purchase of Vista Street.

After everything has been taken into account the total that is owed by you to Ken is $475992.44.

I trust the attach (sic) will assist and should you require further information please do not hesitate to contact me.

Also can you let me know when you will be making payment and I will give you the account details for the transfer.”

98. The attachment set out a reconciliation in relation to Ken and Tom’s respective contributions in relation to the purchase of Vista Street, premised upon an obligation upon each of them to contribute as to 50% including as to their liability for any loans. This reconciliation refers to $500,000 as “advanced by Ken to Tom for Lawson”.

99. On 19 August 2015, Grace El-Turk sent an email to Tom, copied to Ken with the subject line “NAB Loan documents”:

“Hi Tom,

Please find attached loan documents for both Vista and Riverside.

1/. Vista … NAB valuation came in at $5.45m…80% was $4.360m

As mentioned last at the time, $17381.00 for mortgage stamp duty was incorrectly deducted by the NAB on settlement but then re-credited (as per attached latest statement shows the $17381.00 going back in). It has been shown in the spreadsheet as a cost on settlement which it was. However, we have the $17381.00 available now to re-draw.

2/. Vista … I attach a letter from the NAB dated 14^th August advising their home loan rate will increase to 4.45% despite there being no increase by the reserve bank.

3/. Riverside … attached is the NAB loan document for $1.960m

Please note the $500k advance and the balance of the deposit $302500.00 which was paid from Mega-Top Cargo overdraft which is the reason for the interest charge. It was billed at 4.5% which is at cost.

Mega-Top Cargo has also funded $809k being the balance required on settlement for Riverside less the $67500.00 being your deposit … Balance $741500.00. Interest per annum $33368.00 (50/50 $16684.00 each, $1390.00 per month paid by each party)

I have also asked the bank for details of the loan payment and the date it will be due and will email you once I receive the reply.”

100. On 3 September 2015 Mr Glamcevski, acting on instructions he received from Ken and Tom, wrote to another solicitor in relation to Vista Street:

“Thank you for your email of 3 September 2015. My clients are not interested in granting an easement and require a response to their request for the removal of the encroachment and what steps your client proposes in relation to same.

My clients are a Joint Venture partnership. On title however pursuant to the agreement between my clients are Mr and Mrs Ken & Biljana Slaveski who are registered on Title to the property.”

101. Mega-Top’s bank statement for 9 September 2015 records a deposit of $100,598.04 and then two deposits on 10 September 2015 totalling $910,000.

102. On 3 December 2015, Ken emailed Tom, including:

“Really need to settle the freight account for the steel (Tony’s portion of $40k) and also the balance of the Vista st settlement ($278k) so I can pay back $100k of this I borrowed from Mega-Top overdraft and the balance $178k to Biljana as I promised her several months ago.

The Macedonia window shipments will only get Mega-Top into further debt …. Duties, freight, GST and delivery.

Can you look into it as a matter of urgency so I can clear things up and get rolling on the windows ASAP”

103. The evidence included a copy of a cheque drawn on Nanevski Developments bank account dated 8 April 2016 payable to Ken for $275,000. It was signed by Ivan and Tom said that the cheque was written out by him in Ken’s presence.

104. On 13 April 2016, there was this text exchange between Ken and Tom:

Ken: “I managed to have the cheque not go through I asked my business banker and she said she will not process it

Tom: Ok thanks just needed to sort a tax bill you will be able to bank it on Monday plus I need to give you more cheques to cover the steel”

105. On 13 April 2016, Tom emailed to Ken an estimate for the demolition of the existing house at Riverside of $15,004.

106. On 14 April 2016, Ken submitted a building approval form in relation to Riverside. This described Ken as the applicant and was signed by Ken and James as the owners. It indicated that Tom would be carrying out the work. However this gave as a builder’s licence number Tom’s Certificate IV Building & Construction number rather than a builder’s licence number. The estimated cost of the development was recorded as $850,000 and described as “demolish existing 3 bedroom house and construction of two storey attached dual occupancy”.

107. On 25 May 2016, a construction certificate was issued in relation to Riverside by Camile Haddad, referring to Nanevski Developments as the applicant and attaching the application completed by Tom including being signed by him as the owner. The work the subject of the application and certificate was recorded as having an estimated cost of $830,000 and being for “bulk excavation, piling and shoring only”.

108. By an invoice dated 29 July 2016 (with the due date being the same date) CF Piling Group Pty Ltd (CF Piling) sent a bill to Nanevski Developments addressed to Riverside for “design and install a secant pile wall and capping beam including bracing and dewatering” for $862,400.

109. On 1 August 2016, Ms El-Turk emailed Tom on the subject of “Land tax” including:

“Attached you will find the reconciliation for the Land Tax. The bill for Vista Street is $29454.67. Could you please transfer 50% of $14727.32 to Ken’s bank account so that I can arrange payment.”

110. There was in evidence a search of Nanevski Developments builder’s licence which commenced on 19 September 2016 for a three year period. The licence class was “builder” and it was subject to conditions that it was “only for contracts not requiring insurance under the Home Building Compensation Fund”, that condition being in place from 19 September 2016 to 31 December 2017.

111. In early 2017, Tom organised a surveyor to provide a report in relation to Vista Street. Mr Glamcevski’s evidence, which the Court accepts, is that this occurred after Mr Glamcevski had spoken to both Ken and Tom on site and indicated that he needed a survey.

112. In January 2017, Mr Glamcevski arranged for Ken and Tom to attend a conference with Mr Michael Tanevski of Counsel concerning an encroachment issue in relation to Vista Street. On 17 January 2017, Mr Tanevski wrote to Mr Glamcevski providing his advice and referring to “our conference with Mr Slaveski and his joint venture partner, Mr Nanevski, on 13 January 2017”.

113. On 10 February 2017 Ken emailed Tom on the subject “Tom Balance”:

“Hello Tom,

As discussed yesterday, below is the breakdown of the outstanding at settlement for Riverside, Vista and the Megatop account as at Feb 2017.

I need this settled as I have over $763k more invested in a 50/50 partnership.

I have requested the valuation on Vista street to see where we are at and how much extra funding we can secure.

Once the payment of $763k is made and the partnership is even, we should then request for a construction loan on Riverside so we can complete the project ASAP. At the moment the slow progress is costing us interest unnecessarily for both of us.

There is so much at stake, it is in our best interest that both the projects are completed as fast as practical.

Additionally, I need to know what the building costs will be (quotation) for Riverside as it was estimated between $1.3 and 1.35m but need confirmation and also the time frame so I can plan over the next 12-24 months on future projects/investments.

Also, can you tee up a time and date to visit the architects and town planners for Vista street. We need to fully understand the costs and the time frame towards this project. There is $6.0m invested which we need to move fast to achieve maximum benefit/profit.

I am free now to work on both projects so let me know what is required and I can assist.

1/.    Megatop account

Steel imports $51190.57

plus

$5334.12 Cartage for Steel, storage for steel (month of October, November, December 2015) and delivery for wood from Wetherill park (as per attached invoices and statement)

2/.   Balance of 50/50 Riverside settlement $369790.60

plus

Interest for Riverside up till Feb 2017 $30126.00 on the $369790.60

3/.   Balance of 50/50 Vista $275992.00

Plus

Interest on Vista up to Feb 2017 $19663.00 (the balance on day of settlement was initially $475992.00 then reduced to $275992.00 after received two separate payments of $100,000.00 each).

4/.   Payment to Schembri financial $11000.00

Summary as follows:$51190.57

$5334.12

$369790.60

$30126.00

$19663.00

$11000.00

$275992.00

Total $763095.00

Regards

Ken”

114. On 3 March 2017, Mr Glamcevski emailed the surveyor in relation to Vista Street, including:

“Thank you for the survey reports in relation to the abovementioned property. The surveys are very helpful in allowing us to properly advise the current owners.

It is noted however that the survey report is addressed to Nanevski Developments Pty Ltd.

We advise that the property is registered in the names of Ken & Biljana Slaveski who have a joint venture agreement with Nanevski Developments Pty Ltd in relation to development of the site.

For our purposes in respect to both the said reports that you have provided us we would be pleased if you would readdress the said survey reports to the registered proprietors Ken and Biljana Slaveski of 32 Plimsoll Street, Sans Souci.”

115. On 4 May 2017, Ken emailed Tom forwarding an email from Ms El-Turk of 1 May 2017. The subject was “Outstanding owing on Riverside and Vista”. Ken’s email said:

“Thank you for sorting out the old accounts last week it was much appreciated.

The balance owing is now just the principal and interest.

Below is a summary.

Let me know if you need anything. I have borrowed money from Mega-Top overdraft and need to pay it back by the end of financial year.

If you can pay cash or cheque for $150k by next Weds (before I leave for overseas) it would be great”

116. The summary referred to in Ken’s email was an email from Ms El-Turk to Ken of 1 May 2017 which included:

“2/. Balance of 50/50 Riverside settlement $369790.60

FW: Outstanding owing on Riverside and Vista

…plus

Interest for Riverside up till end of April 2017 $34776.57 on the $369790.00

3/. Balance of 50/50 Vista $275992.00

….plus

Interest on Vista up to end of April 2017 $22849.85 (the balance on day of settlement was initially $475992.00 then reduced to $275992.00 after receiving two separate payments of $100,000.00 each).”

117. On 2 July 2017, there was this text exchange between Tom and Ken:

“TOM: Ken when your truck is not busy can you send it to Lawson st so the windows for the duplex can be taken back to warehouse so they don’t get damaged

KEN: Ok probably Tuesday or weds”

118. On 3 July 2017, Ken sent Tom this text:

“KEN: Hey tom

Did you get a chance to get a loan to settle the balance owing which is now reduced to an around $660k (I’ll check the exact figure)

I need to pay back to Mega-Top cargo before I lodge the 17 financials.

Can you let me know as a matter of urgency please”

119. On 7 August 2017, Ken sent an email to Tom asking him to look into something which had been received from Council. What had been received from Council was a letter dated 2 August in relation to Riverside enclosing a notice of intention to give an order about the works being carried out on Riverside as not being in accordance with Council’s approval.

120. On 15 August 2017, Ken sent Tom a text which included:

“KEN: Hi Tom

Did you managed to get finance to pay the balance owing which is now down to $510k My accountant keeps asking He can’t close the accounts for Megatop cargo for the last financial year until I pay the loan back to Megatop.

Can you see what you can do in the next few days

Thanks”

121. By a notice dated 2 November 2017, the certifier for Riverside sent a notice to Ken setting out an order requiring, among other things, the demolition or removal of two swimming pools said to have been erected without prior development consent at Riverside and otherwise to cease work on the site until various matters were complied with.

122. On 15 November 2017, Mr Glamcevski sent a tax invoice addressed to both Ken and Tom in relation to a dispute with a neighbour concerning Riverside.

123. On 22 December 2017, Ms El-Turk sent an email to Tom, copied to Ken concerning “payment” and stating “Please find bank receipt for payment made today”. The bank receipt showed a payment from Mega-Top Cargo to Nanevski Developments of $50,000.

124. On 3 January 2018, Ms El-Turk sent an email to Tom, copied to Ken, with the subject matter “expenses” and a message “Please see the attached spreadsheet regarding the expenses. You can call me if you need to go through it.” The spreadsheet is a reconciliation of liability for expenses premised upon each of Ken and Tom being liable for 50%.

125. On 9 January 2018, Ken sent Tom this text message:

“Hi tom

The private lender peter is asking for the size of the land as well as how many beds, rooms, square meters of the building, number of (sic) levels, kitchens, parking, etc basically as much info as possible to they can get a clear picture of the size of the project.

He suggests that we do a bogey sales contract (for example $10m, 12 or 15,) and he will use this to secure 55% private funding based on the sales contract price. This will at least give you an option B if John encina’s application does not go through”

126. On 17 January 2018, Ken sent this text to Tom:

“Hi Tom

Can you include the balance of the capital $530k owed for the both properties when applying for the loan from the private lenders. I have the balance on spreadsheet which I will email across it’s as per previous emails. This will enable me to pay back Mega-Top the loan so I can then get a construction loan from the NAB for riverside.”

127. On 9 February 2018, Ms El-Turk sent an email to Ken and Tom with the subject “Payment” and attaching a payment report. This records a payment from Mega-Top to Nanevski Developments with the reference “Ken Slaveski” for $40,000.

128. On 4 May 2018, Ken sent an email to Tom on the subject of “Riverside Drive project” which included:

“As discussed earlier this week, we need to complete the Riverside project in the next 12 months.

The standard building time after DA approval should have been 12-14 months.

I also have a building company working on a quote (as a back up) but would prefer if you could handle and build the project.

There is also the matter of the investment capital which was agreed at the time would be 50/50. There is a balance outstanding of $593k (including what’s owed to Mega-Top for the windows for Lawson St which has now been transferred to the loan). I have the breakdown and will email it to you early next week.

You mentioned you have finance in place which you are waiting on the green light. If the finance money is not forthcoming for the balance of the capital investment of $593,000.00 we also have the option of adjusting the shareholding.

I understand you have been busy with the nursing home but we really have to make our investment work as both of us have heavily invested money in this venture.

To minimise potential ongoing issues with the neighbours, lawyers and councils, it’s a good reason why we need to complete the project quick to avoid future problems. Not to mention the bank interest on Riverside which is over $100,000.00 each so far and the project is still at the early stages.

I have approval for a construction loan in place already to enable at least the first half of the construction of Riverside drive to be completed. The bank has already approved this loan. They will release the loan once we have poured the slab.

In the meantime, can you address the issue of the balance of the investment/partnership owing of approximately $593,000.00. This needs to be sorted out ASAP so that I can pay Megatop Cargo the loan I have taken out. I cannot lodge the 2017 and 2018 financials until this loan is cleared up.

This is money (sic) has been borrowed by Ken and Biljana from Megatop which I need to return it ASAP. Megatop has taken an extended loan for $500,000.00 with the NAB for its cash flow because we have it tied up in the project.

I understand that you have the approval for a loan from a private lender. Megatop Cargo is paying 7.85% interest on the $600k overdraft to the NAB but charging ken/tom 5% interest.”

129. There was in evidence a building contract dated 8 May 2018 between Ken and Tom in relation to Riverside where the contract price was varied from $850,000 to $749,000.

130. On 16 July 2018, referring to a meeting “mediated” by Mr Glamcevski at an RSL Club, Ken sent an email marked “without prejudice” to Grace El-Turk, but intended as a draft then to go to David Glamcevski, which included:

“Thank you for attending the meeting at the RSL and I always appreciate your advice on all matters legal and in particular this situation regarding the duplex project.

The purchase of the property was intended to 50/50 and Nanevski Developments to build the project.

However, as it stands, all the capital investment is from K B Slaveski…

The agreement prior to the purchase of Riverside was that both parties would invest an equal amount of our own money to secure the property and then borrow the balance from the bank…

FYI, I have unsuccessfully tried to re-value Vista Street so that we can secure additional funding…”

131. It then goes on with various matters that have now become the subject of dispute between the parties. I record that while marked “without prejudice”, the document was included in the evidence without objection and referred to by both parties.

132. Ken sent a copy of this “without prejudice” email to David Glamcevski on 16 July 2018. On 23 July 2018, Mr Glamcevski responded to Ken:

“Hi Ken

Thank you for your recent email the contents of which are noted.

As you may well appreciate I am unable to comment or express an opinion as to the contents of the email due to conflict.

All that I can say is that if you and Tom are not able to resolve the matter, then being Joint Venture Partnership both of you will end up in the Supreme Court of NSW in which jurisdiction in cases like this the Court will order what is known as Taking of Partnership Accounts. This process involves the Court appointing an independent Accountant/Auditor to compile all the financials of the Joint Venture Partnership, work out who’s owed what, who contributed what and thereafter dissolve the partnership by selling the partnership properties, paying debt, paying themselves which in any liquidation/dissolution of partnership can be very expensive and thereafter what is left return capital contributions to the respective partners.

I cannot therefore be involved in the matter and if it is the case that you and Tom will proceed to Court proceedings then you will have to get another Solicitor as will Tom to deal with this particular matter.

All other matters I can continue to act for both you and Tom.”

133. The draft “without prejudice” letter subsequently formed the text of an email from Ken to Tom on 31 July 2018 regarding and setting out Ken’s assertions regarding the dispute between them.

134. On 3 August 2018, Tom sent an email to Ken concerning Riverside which included:

“I am very surprised by this email you have sent me. I do not agree with your email. Especially, after the meeting we had with David Glamcevski over dinner at Ramsgate RSL a few days before he went overseas. In which you agreed to release funds so Riverside drive can move forward. Again, David was a witness to this conversation.

The initial agreement that we had in place between us has not been adhered to by you.

All the costs up until now I have paid for. I have not sent you a lot of the invoices that have been paid for both Riverside and Vista Street. I have tried to contact you many times via phone or text and you have not replied.

I will respond more fully to your email after Mr David Glamcevski returns.

If you wish to discuss or meet please contact me as i wish for Riverside Drive to commence immediately.”

135. By letter date 20 September 2018, solicitors acting for Ken and James wrote to solicitors acting for Nanevski Developments. That letter, the subject matter of which was specified as Riverside, included:

“In the circumstances, our clients hereby terminate any arrangement between themselves and Nanevski Developments in respect of the building of the proposed development. In our view there is not and has never been any valid building contract but, for the avoidance of doubt, any such contract is hereby terminated.”

136. On 18 October 2018, Mr Glamcevski sent an email to someone by the name of “Alex” who, according to Mr Glamcevski’s evidence, may have been an architect. That email included Mr Glamcevski saying that “I confirm that I acted for and on behalf of Ken and Biljana Slaveski and Nanevski Developments Pty Ltd as a Joint Venture Purchase of [Vista Street]”.

137. These proceedings were commenced by a summons filed on 16 May 2019.

Fact finding – legal principles and Jones v Dunkel

138. In Maria Saravinovska v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964 (Saravinovski (No 6)), I set out a summary of the principles relevant to fact finding where there are disputed facts:

“464   First, at the forefront of the Court’s approach has been the oft cited statement of McClelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318–319:

Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as ‘misleading’) within the meaning of s 52 of the Trade Practices Act (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction … rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, often subconsciously, constructed. All this is a matter of ordinary human experience.

216. It was Tom’s evidence that he entered into a barter arrangement with Mr Derham that the invoice for $862,400 would be satisfied by sheet piles which Tom had ordered from China for Riverside. Dr Peden SC submitted that there was no reason why contribution by an “in kind” payment should be treated any differently from a cash payment. She contended that because the cost of the piling work was $862,400, Nanevski Developments should receive the benefit of $862,400 in any partnership accounting because the sheet piling was provided in exchange for piling work of that value.

217. The Court accepts the first part of that submission, namely that on any final accounting of the parties’ contributions to the Partnership, Nanevski Developments should be credited for the arrangement which it entered into with CF Piling. However, the Court does not accept the second part of the submission. The amount for which Nanevski Developments should be credited is not the value of the invoice. What Nanevski Developments contributed was the sum of money it paid for the sheet piling, which it then happened that CF Piling accepted in full and final satisfaction of the invoice.

218. While the Court was not expressly taken to it, the evidence included a list of expenses prepared on behalf of Nanevski Developments in relation to Riverside. This included a reference to “Shunli Enterprise International Limited” for “sheet pile supplier in China” with an amount of $125,475.60 recorded as the expense. If the Court has misunderstood that evidence, Nanevski Developments will be entitled to draw that to the Court’s attention as part of the working out of this judgment. On the assumption that the Court has understood the evidence correctly, on any winding up of the Partnership Nanevski Developments should be given a credit of $125,475.60 to reflect its contribution to the Partnership by making the barter arrangement with CF Piling.

An allowance for work performed by Ken?

219. It was submitted for Tom that no allowance should be permitted for any time expended in management by Ken because Ken had no skill or experience as a builder and worked in a full time job approximately 40-50 hours a week.

220. Unlike the position in relation to Nanevski Developments where rates for Tom’s services, the Court has found, were agreed between the partners, there is no suggestion that there was any agreement that Ken was to be remunerated. Ken’s role was primarily as an investor.

221. The answer to this issue is provided by s 24 of the PA, which sets out the rules for the conduct of the partnership subject to any express or implied agreement otherwise. Section 24(1)(6) provides that “No partner shall be entitled to remuneration for acting in the partnership business”. There being no agreement otherwise, Ken is not entitled to an allowance in respect of his time in relation to the affairs of the Partnership.

An allowance for alleged defects?

222. The closing submissions on behalf of Ken raised an issue concerning claims of defective work by Nanevski Developments at Riverside. While there were references to such claims in the evidence, they were not the subject of the proceedings. In those circumstances, it is not appropriate for this Court to express any view about what whether or not such matters can be raised by either party in the winding up of the Partnership by the receiver. That will be a matter for the receiver.

Rent at Vista Street

223. I did not understand it to be seriously in contention, but for the avoidance of doubt make clear that insofar as Vista Street has been rented, that rental is income to the Partnership and should be accounted for as such on the winding up.

Allowance for expenses after April 2019

224. It was submitted for Tom that the Slaveski parties should not be entitled to claim costs incurred after April 2019 when Nanevski Developments were excluded from the Partnership. I do not agree. As I have found elsewhere (see paragraph [175] above) the partnership has not been terminated. In the absence of agreement, it will be a matter for the receiver to determine what are proper partnership costs which each party is entitled to claim after April 2019.

The Slaveski parties’ cross claim – account

225. There ultimately did not appear to be any dispute between the parties that, if the Court was satisfied that there was a Partnership, there should be an accounting. Any such accounting should be performed by the receiver as part of the winding up of the Partnership.

Slaveski parties’ cross claim – debt claim

226. The Slaveski parties’ cross claim included a prayer for judgment in favour of Megatop against Nanevski Developments for $590,000 plus interest at the rate of 4.5% per annum. This was a reference to three advances (the making of which was not in contest) to Nanevski Developments on 25 May 2015 of $500,000 (see paragraph [73] above), 22 December 2017 for $50,000 (see paragraph [123] above) and 9 February 2018 for $40,000 (see paragraph [127] above). This was a claim in debt.

227. It was contended for the Nanevski parties that these three advances were not a loan on special terms from Megatop to Nanevski Developments but were rather contributions by Ken to the Partnership. By the end of the hearing, when it came to final submissions, Mr Robinson made no submissions in support of this claim beyond noting in his written submissions:

“29.    A relatively straightforward claim is made by MegaTop Cargo Pty Ltd to recover a principal sum of $590,000 lent to Tom Nanevski with interest, and which remains outstanding. There is no dispute that this amount was paid but it is said by the plaintiff to be a “partnership contribution” by one or other of the defendants. This remains a matter of contest between the parties.”

228. With respect, Mr Robinson was right to emphasise other aspects of his client’s case rather than this one. The Court accepts Dr Peden SC’s submission that the totality of the evidence makes it clear that these amounts were advanced by Ken (albeit sourced from Mega-Top) to Nanevski Developments in the course of the Partnership. Before turning to specific aspects of the evidence, the Court also notes that Ken never had any conversation with Tom that a loan was being made for $500,000 (or the later amounts) to be charged at a particular interest rate. Even under cross-examination, Ken did not positively suggest that he had reached such an agreement with Tom (Tcpt, 6 October 2021, pp 334(47) – 335(7)):

“Q. You also say, "Interest will be charged at 4.5%, paid at the end of the term." Do you see that?

A. Yes.

Q. That's inconsistent with your SMS to Tom saying there'd be no interest?

A. Yes. Because because there wasn't because it the the directors and Grace they suggested there should be interest charged in that period.

Q. So you changed the deal with Tom without telling him?

A. Within that for that period, yes. I may have told him afterwards. I'm not sure, Doctor.”

229. Turning to the specific evidence:

1. There was no written loan agreement.

2. Ken’s text message to Tom of 20 May 2015 that no interest would be payable (see paragraph [68] above).

3. While the purported minutes of a meeting of Mega-Top dated 22 May 2015 (see paragraph [70] above) refer to a loan to Nanevski Developments of $500,000 for the purposes of Lawson Street, the Court accepts Dr Peden SC’s submission that this appears to be an example of Ken telling Tom one thing and Biljana and Ms El-Turk another. So much appears from Ken’s email to Ms El-Turk on 25 May 2015 (see paragraph [71] above) which is clearly directed to Vista Street and says “I will throw in $500k now and another $500k when I get the NAB money”.

4. Mega-Top’s records record the three payments comprising the $500,000 advance by reference to “Ken Slaveski” suggesting that these were personal rather than business expenses and were described in Grace’s emails to Tom as “payment” rather than “loan”. Similarly, the entry for the $40,000 advance on 9 February 2018 has the reference “Ken Slaveski”).

5. Ken’s email to Tom and Biljana of 28 July 2015 (see paragraph [95] above) describes the $500,000 as “(payment by Ken to Tom to secure Vista Street)”.

6. The reconciliation which Ms El-Turk sent to Tom copied to Ken on 18 August 2015 (see paragraph [98] above) is described by Ms El-Turk as the “reconciliation for the purchase of Vista Street” and includes a reference to the $500,000 as “advance by Ken to Tom for Lawson”. This appears to make clear that it was an advance by Ken and that even if had originally been intended for Lawson Street it had come within the Partnership as falling within a reconciliation for the purchase of Vista Street.

7. The next day, 19 August 2015, Mr El-Turk sent an email to Tom, copied to Ken with the subject line “NAB Loan documents” (see paragraph [99] above) attaching “Loan documents for both Vista and Riverside”. This explains that the “500k advance and the balance of the deposit of $302,500 which was paid from Megatop Cargo overdraft which is the reason for the interest charge. It was billed at 4.5% which is at cost”. This clearly treats the $500,000 as an advance to the Partnership but appears to be a unilateral attempt to charge the interest to reflect the fact that such interest was being paid by Mega-Top on its overdraft as the source of the funds. There is no suggestion in the email, or anywhere else in the evidence, that Tom had actually agreed to any such interest charge.

230. For these reasons, the Court concludes that there was never any loan of the kind alleged from Mega-Top to Nanevski Developments. The relevant advances were advances by Ken to the Partnership and in respect of which he should receive credit on the winding up. It follows that this aspect of the Slaveski parties’ cross claim fails.

The Slaveski parties cross claim – misleading and deceptive conduct

231. This was another aspect of the proceedings to which little attention was given, especially in closing submissions. It turned on three alleged representations:

1. That Tom had represented to Ken in about January 2015 that if the two of them bought Riverside together, Tom would use Nanevski Developments to do the construction works to build the proposed duplex at Riverside and this his estimate of the construction cost of developing the site into a duplex was approximately $800,000 (the first representation);

2. On or about 8 May 2018 Tom, on behalf of Nanevski Developments, represented to Ken that the construction costs of the duplex on Riverside were $749,000 to $850,000 and/or approximately $800,000 (the second representation); and

3. On and from February 2015 and again in April 2016 and July 2018, Tom for and on behalf of Nanevski Developments represented to Ken that Nanevski Developments was licensed and/or insured within the requirements of the Home Building Act 1989 (NSW) to carry out the works under the contract that had been entered into between Ken and Nanevski Developments (the third representation).

232. Before turning to consider briefly these representations, the Court concludes that, whatever else may be said about them, these claims must fail for want of proof of loss. As Dr Peden SC submitted, the particulars of damage pleaded in relation to the first and second representations (the pleading refers to the third representation but this must be an error) was that “The cross claimants will provide evidence from a Quantity Surveyor of what an accurate estimate of the cost of the Works would have been”. No such evidence was tendered.

233. Furthermore, particulars were given in relation to the whole of the misleading and deceptive conduct claim including “cost of rectification works, the actual cost to construct the duplex above $800,000 and additional holding and borrowing costs”. However, no attention to these matters was given in the evidence.

234. The final paragraph of the cross claim, while not pleading a material fact, asserted that “particulars of the actual loss and damage will be incorporated into the forensic accountant’s report used for the account to be taken with respect to paragraphs 1 to 18 of this cross-claim”. No such forensic accounting report was in evidence.

235. Finally, conscious presumably of this complete lack of evidence of damage, Mr Robinson’s closing written submissions included:

“34.   The effect for the defendants of relying upon the representations was proceeding with the development of a duplex at all, to be constructed by the plaintiff, by reason of which the defendants have suffered the following damage:

a.   the cost of rectification of defective and incomplete work at Riverside;

b.   the additional cost to the defendants of constructing the duplex with an alternative builder;

c.   additional holding costs due to the extraordinary delays;

d.   Council penalties and fines imposed upon the legal owners; and

e.   lost rent due to the demolition of the dwelling on the Riverside site earlier than was required for construction works to begin.

35.   Should the Court find for the defendants on this claim an application that the matter be stood over for an assessment if that proves necessary is foreshadowed.”

236. The course “foreshadowed” in those submissions is one which the Court neither could nor should entertain. UCPR Part 29, r 29.4 provides that “Unless the Court orders otherwise, proceedings are to be listed for trial generally, that is, for hearing of all questions and issues arising on every claim for relief in the proceedings”. The proceedings were listed before me for trial generally. No application had been made for damages to be quantified separately from and after the determination of all other issues in the proceedings. At least so far as the Court is aware, the first suggestion that any such application might be made was in Mr Robinson’s closing written submissions provided for the last day of the hearing.

237. Dr Peden SC was entitled to conduct the hearing on the basis that there was no evidence of the particularised losses in relation to this part of the claim, such that the claim must therefore fail. That is the Court’s conclusion.

238. Were it necessary to do so, the Court would in any event have concluded:

1. As to the first representation, this is not made out because it required the Court, contrary to its findings as to his credit, to accept the uncorroborated evidence of Ken.

2. As to the second representation, this is alleged to have been made in May 2018, well after Riverside had been purchased on 8 May 2015. Furthermore, by reason of a construction certificate dated 25 May 2016 (see paragraph [107] above), Ken must have known that the estimated cost for the piling, excavation, plumbing, electrical work and formwork for two slabs in the basement at Riverside was $830,000, such that there could be no reliance on the alleged representation as to the total cost of construction of the duplex in 2018.

3. As to the third representation, no attempt was made by the Slaveski parties to demonstrate why that representation, even if it was made, was false or to demonstrate that Nanevski Developments was required to be licensed under the home building legislation for the specific tasks it was undertaking.

The Local Court proceedings – formwork claim

239. Megatop sued Nanevski Developments for $14,048.61 in relation to formwork.

240. Nanevski Developments did not dispute that the formwork was supplied, or delivered, or paid for by one or other of the Slaveski parties. However, Nanevski Developments’ defence was that the formwork was purchased for work on Riverside, in particular the construction of swimming pools.

241. Tom was not cross-examined on this evidence in his affidavit and, consistently with its view of Tom’s credit, the Court accepts it to be true:

“228.   The construction formwork was to be used on Riverside only. It was used for forming up the two swimming pools and to form up the capping beam. As the conditions at Riverside are sand, most of the form work for the swimming pools cannot be reused. This is because the shotcreting of the pools in sandy conditions makes the formwork lose its form.

229.   At the time the formwork was ordered, Ken and I had telephone conversations:

Tom:   “Ken, I have ordered the form work we need for the pools and capping at Riverside. Can you pay for these and see that they are collected.”

Ken:   “No problems. They are for the partnership. I will keep the receipts.”

230.   This construction formwork was not used at Lawson St. At no point did I say to Ken that it was to be. Nanevski Developments did not receive any Mega-Top invoices for this formwork. The letterbox at Lawson St was demolished in 2014 and it still does not have one.”

242. It follows that Mega-Top does not have a cause of action against Nanevski Developments in relation to the formwork. Mega-Top has a claim against the Partnership which will have to be taken into account as part of the winding up. In reaching this conclusion, I have not overlooked the evidence called by the Slaveski parties from a truck driver for Mega-Top, Mr G Ivanovski. He was not required for cross-examination and his evidence was that he delivered the formwork to Lawson Street. However, the Court accepts Dr Peden SC’s submission that the fact that the formwork (and in this case not all of it, only so much as constitutes $3,765 of the claim relating to what was delivered on 5 February 2016) was delivered to Lawson Street does not mean that it was used at Lawson Street instead of Riverside.

The Local Court proceedings – windows claim

243. This is a claim by Mega-Top against Nanevski Developments in respect of a large number of windows imported from Macedonia by Nanevski Developments. The claim is for $20,636.18 for freight and delivery services and $79,828.67 for storage.

244. Beyond noting the existence of this claim in his closing written submissions, Mr Robinson did not advance any written or oral submissions specifically directed to this claim beyond answering a question from me as to whether whatever windows were left could be collected by the Nanevski parties (the answer was yes). As with the formwork claim, the Court accepts Dr Peden SC’s submission that insofar as the windows related to Riverside, Mega-Top’s claim is against the Partnership and will need to be accounted for in the winding up.

245. The basis of this conclusion is that the evidence demonstrates that, contrary to Mega-Top’s pleading, not all of the windows were for Lawson St, and that Ken was aware of this:

1. There was this text exchange between Ken and Tom on 3 May 2015 (see paragraph [62] above):

“TOM: I’ve also asked Paul to prepare the window schedule for riverside so I can order them and bring back at the same time for lawson is clear anodised aluminium good with you in colour

I have a sample I can show you that I brought back from maco [Macedonia]

KEN: Sounds good. Ok with me. There will be a lot of windows so it should be a good saving.

TOM: Of course

Just need your warehouse if possible to store them

KEN: Ok”

2. Tom texted Ken on 20 May 2015 (see paragraph [68] above): “I’m getting the window schedule for Riverside emailing to maco [Macedonia] so they can send with the nursing home ones”.

3. The email referred to in paragraph [102] above of 3 December 2015 which refers to the “Macedonia window shipments” that “will only get Megatop into further debt”. The Court accepts Dr Peden SC’s submission that this suggests that Ken knew that at least some of the windows were for the Partnership because there would be no reason for Mega-Top to go into debt for windows related to Lawson Street.

4. A text message from Tom to Ken of 2 July 2017 (see paragraph [117] above) which records a request by Tom for Ken’s truck to be sent to Lawson Street so that “the windows for the duplex can be taken back to warehouse”. The Court accepts this as evidence that the windows for Lawson Street and for Riverside were shipped together and could be stored at Ken’s warehouse.

246. Insofar as some of the windows covered by these shipments and charges were imported for Riverside, then the Court finds those shipping, storage and handling costs were incurred by Mega-Top for the Partnership. Contrary to the submission put for the Nanevski parties, the Court accepts that those storage costs, insofar as they relate to windows for use by the Partnership, would be attributable to the Partnership even after the breakdown in the relationship between them to the extent those costs were not the product of unreasonable delay thereafter on the part of Ken. If delay was an issue, it would be one for the receiver on the winding up of the Partnership. However, it is not an issue because of the Court’s conclusion in paragraph [249] below.

246. Insofar as some of the windows were imported for use at Lawson Street, there was no dispute that these would not fall into any accounting for the Partnership to the extent there was any liability for them in Nanevski Developments to Mega -Top.

247. However, the Court finds that Nanevski Developments satisfied whatever obligations it had to Mega-Top in relation to the windows that were purchased for Lawson Street. That finding is based on acceptance of Tom’s evidence that a container of windows was delivered to Lawson Street on or about 10 May 2017, corroborated by a Mega-Top invoice of 8 May 2017 and a Nanevski Developments cheque butt evidencing payment of that invoice on 9 May 2017.

248. Finally, insofar as the claim includes storage costs, the Court was not taken to any evidence that Ken reversed his earlier position (evidenced by his text message of 3 May 2015 referred to in paragraph [245(1)] above) that the windows could be stored in his warehouse. In the absence of such evidence, the Court concludes that Mega-Top is not entitled to charge for storage of the windows for Riverside or Lawson Street at its warehouse because the Court draws the obvious inference from the text exchange that Ken was permitting storage of all of the windows at his warehouse gratis as a simple and obvious gesture of goodwill and to the benefit of the Partnership. It is clear that at that time there was still a relationship of trust between the parties such that there would have been no reason for Ken to differentiate between storing windows only for Riverside as opposed to Lawson St. In other words, he was happy to do a favour to Tom insofar as he also agreed to store windows intended for Lawson Street.

249. For these reasons, Mega-Top’s windows claim in the Local Court proceedings fails.

Conclusion

251. The parties will be given an extended opportunity to agree short minutes of order to give effect to these reasons, including it is to be hoped as to the identity of a receiver and as to costs. They are also at liberty to draw to the Court’s attention if there is any specific finding as to amounts in dispute which they contend was sought and has not been made, or which they now seek on the evidence before the Court (and only that evidence), that may be of assistance in the accounting that must take place as part of the winding up of the Partnership.

252. Finally, the winding up of the Partnership, including the sale of Riverside and Vista Street, and the detailed accounting as between the parties that will be essential to any winding up, will almost certainly be complex, extended and expensive. That is an outcome which, to my observation and with no disrespect intended, is something which the parties to this case will only find to be a further burden they are ill equipped to bear. I therefore urge the parties, with the assistance of their legal advisers, to give serious consideration to whether the winding up of the Partnership including the allocation of credits and debits to each partner’s account, can be agreed through mediation or some other informal process with the benefit of the Court’s findings in these reasons. Such a process will necessarily involve broad strokes and concessions on both sides, but experience suggests is likely to be to the parties’ overall economic and emotional advantage.

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Decision last updated: 09 August 2022