RAD Building Pty Ltd v Nasser Pty Ltd
[2005] FCA 1498
•20 OCTOBER 2005
FEDERAL COURT OF AUSTRALIA
RAD Building Pty Ltd v Nasser Pty Ltd [2005] FCA 1498
CONTRACT – oral agreement – compromise agreement – debt owing pursuant to compromise agreement
CONSUMER PROTECTION – misleading or deceptive conduct – representation as to a future matter – ss 4, 9 and 159 of Fair Trading Act 1999 (Vic)
RAD BUILDING PTY LTD (ACN 074 649 755) v NASSER PTY LTD (ACN 061 974 954) and ISSA NASSER (ALSO KNOWN AS CHRIS NASSER)
VID 525 OF 2003
WEINBERG J
20 OCTOBER 2005
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VID 525 OF 2003
BETWEEN:
RAD BUILDING PTY LTD (ACN 074 649 755) trading as MONARK HOMES
APPLICANTAND:
NASSER PTY LTD (ACN 061 974 954)
FIRST RESPONDENTISSA NASSER (also known as CHRIS NASSER)
SECOND RESPONDENTAND:
BETWEEN:
NASSER PTY LTD (ACN 061 974 954)
FIRST CROSS CLAIMANTISSA NASSER (also known as CHRIS NASSER)
SECOND CROSS CLAIMANTAND:
RAD BUILDING PTY LTD (ACN 074 649 755) trading as MONARK HOMES
FIRST CROSS RESPONDENTMICHAEL JOVIC
SECOND CROSS RESPONDENTJUDGE:
WEINBERG J
DATE OF ORDER:
20 OCTOBER 2005
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.There be judgment in favour of the applicant against the first respondent in the sum of $570,385.13, together with interest in the sum of $165,708.60.
2.There be judgment in favour of the applicant against the second respondent in the sum of $717,326.47, together with interest in the sum of $208,398.07.
3.The respondents pay the applicant’s costs of the proceeding, including reserved costs.
4.The cross-claim be dismissed with costs, including reserved costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VID 525 OF 2003
BETWEEN:
RAD BUILDING PTY LTD (ACN 074 649 755) trading as MONARK HOMES
APPLICANTAND:
NASSER PTY LTD (ACN 061 974 954)
FIRST RESPONDENTISSA NASSER (also known as CHRIS NASSER)
SECOND RESPONDENTAND:
BETWEEN:
NASSER PTY LTD (ACN 061 974 954)
FIRST CROSS CLAIMANTISSA NASSER (also known as CHRIS NASSER)
SECOND CROSS CLAIMANTAND:
RAD BUILDING PTY LTD (ACN 074 649 755) trading as MONARK HOMES
FIRST CROSS RESPONDENTMICHAEL JOVIC
SECOND CROSS RESPONDENT
JUDGE:
WEINBERG J
DATE:
20 OCTOBER 2005
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
On approximately 21 August 2001, the applicant RAD Building Pty Ltd, trading as Monark Homes, and the first respondent Nasser Pty Ltd, entered into an agreement pursuant to which the first respondent agreed to pay the applicant “costs”, plus $400,000 builder’s profits, plus goods and services tax (“GST”), to build 18 townhouses at a site known as 44 Leo Close. The agreement was oral. In order to satisfy the requirements of the Commonwealth Bank which was to finance the development, the second respondent Mr Issa Nasser (also known as Chris Nasser), requested that the applicant and the first respondent enter into a written contract for the construction of the 18 townhouses.
The contract price stated in the written contract was $2,750,000. However, this did not reflect the true agreement between the parties which was for a “cost plus” contract, as referred to earlier. Despite the terms of the written contract, the second respondent represented and warranted that the applicant would receive from the first respondent the costs he expended on building the townhouses, plus $400,000 as a builder’s profit, plus GST.
Between November 2001 and January 2003, in reliance on the representations made by the second respondent, the applicant performed the building works required to construct the 18 townhouses at Leo Close. In January 2003, certificates of occupancy issued with respect to the townhouses.
At some stage from about August 2002, the directors of the applicant became concerned that it would not be paid, or paid in full, for the work done. On 14 November 2002 a meeting was held at the office of the applicant. Present at that meeting on behalf of the applicant were, Mr Michael Jovic, his wife Helen, and Mr David Morris, a financial and accounting consultant. Mr Nasser attended on behalf of the first respondent. There was a discussion as to the amounts then owing. Agreement was reached that the dispute be compromised on the basis that the first respondent pay the applicant $2,750,000, together with GST on that amount, plus approximately $83,000 which, at that stage, was thought to reflect the amount owing on various loans that the first respondent had received from the applicant.
The compromise agreement was recorded in writing at the end of the meeting by Mr Morris. A copy of that agreement is appended to the affidavit prepared by Mr Morris in this proceeding, and was exhibited before me. The document drawn by Mr Morris does not identify the loans per se. However, the unchallenged evidence is that the compromise agreement was intended to, and did, include a component whereby the first respondent repaid the applicant the full amount of the loans previously made.
Mrs Jovic and Mr Morris subsequently instructed a solicitor to prepare a formal document reflecting the compromise agreement. That formal document referred to the loans component in terms. However, it was never executed by the first respondent.
The applicant has received payments totalling $2,529,444.43 from the first respondent. It now seeks to recover the difference between that sum, and the amount that ought to have been paid pursuant to the compromise agreement. It also seeks from the second respondent the difference between the amount owing under the compromise agreement and the full amount that would have been owing under the original contract.
As against the first respondent, the applicant claims the difference between the amount owing under the compromise agreement and the amount actually paid to it. That is, $2,750,000 being the cost of the building, $275,000 being GST on the building costs, $74,829.56 being the correct figure for the loan amounts (not the $83,000 previously referred to) less the sum of $2,529,444.43 actually paid to the applicant. That makes a total of $570,385.13.
In addition, the applicant seeks interest in relation to the debt claimed under the compromise agreement. The amount in question has been calculated in accordance with the usual formula applied in such matters, and comes to $165,708.60.
There is an alternative claim for a lesser sum against the first respondent. However, as I am satisfied that the primary claim for debt under the compromise agreement is established, I need not say anything further regarding that claim.
As against the second respondent, the applicant alleges that Mr Nasser represented that the sum of $2,750,000 specified in the written contract did not reflect the true contract price. The applicant claims that Mr Nasser represented that the first respondent would instead pay the applicant the costs of building the Leo Close development, together with $400,000 as a builder’s profit, plus GST on the profit.
The evidence before the Court is that, in reliance on these representations, the applicant performed the works required to build the Leo Close development. The representations in question either were, or are deemed to be, misleading. They were representations made with respect to “a future matter”. As such, by reason of s 4 of the Fair Trading Act 1999 (Vic) (“the Act”), the representations are deemed to be misleading unless the second respondent had a reasonable basis for making them. By reason of the same section, the second respondent bears the onus of proving that he had reasonable grounds for doing so. No evidence has been adduced by or on behalf of the second respondent in this proceeding. Accordingly, that onus has not been discharged.
It follows that the applicant has demonstrated that the second respondent has contravened s 9 of the Act. So far as the actual claim against the second respondent for loss or damage pursuant to s 159 of the Act is concerned, the applicant identifies the loss suffered as follows: $400,000 being builder’s profit not paid; $40,000 being GST on builder’s profit; and $277,326.50 being the difference between the actual cost of the Leo Close development, namely, $2,806,770.90, and the amount paid to the applicant, namely, $2,529,444.43. That makes a total claim against the second respondent in the sum of $717,326.47.
In addition to that amount, the applicant claims interest. The interest has been calculated, in accordance with the formula normally applied to such matters, as $208,398.07. In my view, there should be judgment in favour of the applicant against the second respondent for the sum claimed, together with the interest sought.
There are various cross-claims brought by Nasser Pty Ltd, as first cross-claimant, and by Mr Nasser, as second cross-claimant. No evidence has been adduced to support those cross-claims. No admissions of any kind have been made in relation to them, and nothing emerges from the evidence adduced on behalf of the applicant that could conceivably be relied upon to establish their validity. Accordingly, the cross-claims should be dismissed.
I should indicate that, as I understand the way in which the applicant puts its case, although judgment is sought against both the first respondent on the claim for debt, and against the second respondent, in the claim for breach of s 9 of the Act, the applicant accepts that whatever sum or sums can be recovered from either respondent, if any, they will in effect be set off against the debt or debts owed by the other respondent.
The orders of the Court therefore will be as follows. There will be judgment in favour of the applicant against the first respondent in the sum of $570,385.13, together with interest in the sum of $165,708.60. There will be judgment in favour of the applicant against the second respondent in the sum of $717,326.47, together with interest in the sum of $208,398.07. The applicant will entitled to its costs of this proceeding, including any reserved costs. The cross-claims will be dismissed with costs, including any reserved costs.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. Associate:
Dated: 25 October 2005
Counsel for the Applicant: Mr A Strahan Solicitor for the Applicant: John G Feldman Counsel for the Respondents: There was no appearance for the Respondents Counsel for the First and Second Cross-Claimants: There was no appearance for the Cross-Claimants Counsel for the First and Second Cross-Respondents
Mr A Strahan Solicitor for the First and Second Cross-Respondents: John G Feldman Date of Hearing: 20 October 2005 Date of Judgment: 20 October 2005
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