Raynik Pty Ltd v Gill No. DCCIV-96-1199 Judgment No. D3

RAYNIK PTY LTD v GAVIN GILL
[1999] SADC 3

Judge Lunn
Civil

Don Nikou (“Nikou”) went to school with the defendant, Gavin Gill (“Gill”), but thereafter they lost contact. The plaintiff is a company controlled by Nikou. In 1985 he ran a menswear business through the company which made substantial losses. Nikou was apparently personally liable for some of the unpaid debts of the plaintiff. Although he did not have any formal trade qualifications, he thereafter carried on business with his brother, Con, as a painter and decorator. In about 1990 he became a land agent and was employed by the real estate firm of Weeks & Macklin at its office at Grange. The debts of the plaintiff and Nikou were increasing because of accrued interest as he did not have sufficient income to service them fully. He had no significant assets. He became enthusiastic about being involved in residential property subdivision and re-development projects, which he saw as a way of making a substantial amount of money and thus alleviating his continuing financial difficulties. However, he had no capital to invest in such projects and no capacity to borrow money for them. His activities as a real estate agent made him conversant with opportunities for such property developments and gave him some expertise in pricings and costings which were necessary for carrying them out successfully. However, he did not have experience in actually carrying out any property re-developments. He spent a good deal of his time in his employment with Weeks & Macklin in searching out properties which would be suitable for subdivision and re-development of various kinds.
Gill became a plumber. He worked for his father who was a builder. After he married he and his wife bought a home which they renovated and sold. With the proceeds they bought another house at Meredith Avenue, Fulham (“Meredith Avenue”). By 1992 they owned it freehold. They had done some renovations to it. They had one child who had been born in 1990. They, and Mrs Gill in particular, planned to sell Meredith Avenue and to buy a better and more expensive family home. They also had about $70,000 in the bank which was available to be put into any future property which they purchased.
In about March 1992 Nikou and Gill became re-acquainted. Social contact between them increased in the next few months and by later in 1992 they were very friendly and seeing each other almost daily. Nikou was a frequent visitor at Meredith Avenue and they often went out together.

In about mid 1992 Mrs Gill was interested in possibly purchasing a house in West Lakes as a new family home. Nikou, as a friend, assisted her and advised her about some of these houses, but nothing came of it. Shortly after mid 1992 Gill and his wife put Meredith Avenue on the market through an agent, George Kelleher, but it did not sell.
In the course of their friendship in the latter part of 1992 Nikou frequently discussed potential residential development projects with Gill who was also interested in the prospect of being able to make money out of such projects. Gill was amenable to the idea of investing in a suitable project. In about October 1992 they were both involved in preliminary discussions with Elvio Ferraro, an architect, who was also looking to be involved in such developments, and some other friends, Alan and Barry Skinner, about building a number of townhouses on a site at Seaview Road, Henley Beach, but nothing came of it because the Henley and Grange Council would not approve the concept of the development which they proposed. This project never reached the stage of sorting out precisely how much finance each participant would contribute and what interest Nikou might have in it without being able to contribute any finance to it. There was also another potential subdivision at Trimmer Parade, Seaton which was explored in a similar preliminary way, but it was not pursued when Barry Skinner lost interest in it.
On 20 December 1992 Nikou conducted an open inspection of the Meredith Avenue house for the purpose of gauging the possible market for the property. This led to the Gills agreeing to put Meredith Avenue on the market through Weeks & Macklin represented by Nikou. They wanted to sell the property and to combine the proceeds of sale with the $70,000 which they had in the bank before committing themselves to the purchase of any other property. On 16 January 1993 there was a meeting between Nikou and Gill at Meredith Avenue. It is likely that it was at this meeting that Gill agreed to the terms of the agency which was to be given to Weeks & Macklin for the sale of the house. There was also considerable discussion about what property the Gills might buy after Meredith Avenue was sold. In general terms the possibilities were the purchase of an established family home better, and worth considerably more, than Meredith Avenue, buying another older home to renovate to be the family home, purchasing a property which could be subdivided and developed or buying a block of land on which to build a new family home. The last option was the least preferred and was not actively pursued. Most of the discussion revolved around the third possibility of a development project, although no suitable site was then identified. Nikou was enthusiastic about this as it was a means of him apparently being able to become involved jointly with his friend in a development project from which he thought the plaintiff could make a significant amount of profit. In particular, there was joint enthusiasm for some type of corner cut-off development whereby an existing house on a corner with a large back yard would be purchased, a separate title would be obtained for the back yard, a new home built on it and then both houses would be sold separately, hopefully at a substantial profit. Although Mrs Gill was not actively involved in the meeting, her husband knew that her attitude was that while she would prefer to purchase another family home she was prepared to go along with a development project if it would generate substantial profits which could ultimately enable a more expensive family home to be purchased.
For reasons which I will give later, I do not accept the plaintiff’s contention that at that meeting, or otherwise, there was an oral agreement made between it and Gill on terms that they would enter into a joint venture to develop a property yet to be identified which would be financed by Gill, that they would each be credited for the work which they did on the project, that interest would be allowed to Gill on the moneys invested by him and that the nett balance of the sale price of the developed properties would then be split between them equally. I also do not find that any concluded legal agreement was ever entered into between them about a joint venture. All that the discussions on 16 January amounted to was an informal arrangement to make an agreement on terms to be negotiated if and when a suitable development property became available. It was arranged that Nikou would look for suitable properties and refer them to Gill, but there was nothing which obliged Gill to accept any such property or to develop it upon any particular terms. Nikou proposed that any such development should be carried on through the plaintiff company so that its accrued tax losses could be utilised. Gill referred this to Mr Hilton, his accountant, but he did not agreed to it. He obtained advice from Mr Hilton at some stage that he could successfully avoid capital gains tax on the profits of any development by living himself in each of the dwellings for at least twelve months.
At the meeting on 16 January 1993, or shortly afterwards, the Gills agreed that Weeks & Macklin represented by Nikou would have a sole agency to sell Meredith Avenue and that the commission payable to Weeks & Macklin on any sale would be 50% of the REI rate and 50% of the expenses. That was incorporated into the written agency agreement which was dated 20 February 1993. There was also a collateral oral agreement that in addition the Gills would pay the other 50% of the REI rate of commission to Nikou in cash. Each said that the idea of such a cash payment came from the other of them and that it was for the other’s benefit. I need not make any finding about that. However, it illustrates that both parties were dealing in the cash economy. Neither counsel suggested any sinister inference was to be drawn from the fact that the payment was to be in cash and that there was no record kept of it, but it is of some significance in relation to my findings about other later disputed cash transactions between them.
In the succeeding months Nikou referred numerous potential development sites and projects to Gill. It is not necessary to make specific findings about them. Many were outside the general parameters of what had been discussed as a potential developments. While Gill looked at them all he did not show any real interest in them. Nikou also made some enquiries about building costs, but little of those related to any property in which Gill had shown an interest. At the time Nikou was also referring some properties to other developers as potential development sites. At the same time Gill himself was looking for a suitable development property and he referred some sites to Nikou for his comment. It is also likely that in this period Gill spoke generally to some other land agents about development possibilities.
On 31 March 1993 Nikou procured a contract for the sale of Meredith Avenue for $212,000, and it settled on 22 April 1993. The proceeds of sale were paid into bank accounts apparently in the name of Mrs Gill. Nikou arranged for Gill and his wife to lease a property at 601 Grange Road, Grange for eighteen months. They moved into that house to await whatever further purchase of a property they might make.
On 1 June 1993 Weeks & Macklin terminated the employment of Nikou because he had been spending too much time pursuing possible development projects. Later that month he obtained a similar position with L J Hooker at West Lakes, and he continued there for the period relevant to this action.
On Saturday 12 June 1993 Toop & Toop advertised for sale in the Advertiser a house at 366 Henley Beach Road, Lockleys for $128,000. It was the former Lockleys Police Station and it was on the corner of Malurus Avenue. Each of Nikou and Gill saw the advertisement and each went to the site that morning and became excited about the prospect of it as a potential development site. I do not accept Nikou’s evidence that he referred Gill to the property. Together they went to the open inspection that afternoon and spoke with the vendor’s agent, Mr Threadgold. Both believed that it was the development site for which they had been looking. They discussed whether the block could be subdivided and agreed that it could be. Other developers were obviously interested and they both realised they would have to act quickly if they were to purchase the property. Nikou enquired of Ferraro that afternoon whether he was interested in taking a financial interest in a development of the property, but he declined. Mrs Gill was on holidays in Melbourne at the time. Gill rang her on the Saturday evening in some excitement to tell her about the prospect. There were discussions over that weekend between Nikou and Gill about how to obtain the property. Gill accepted Nikou’s advice that an offer should be made for more than the asking price and that it should be unconditional. The following Monday was a public holiday, but on the next business day, being Tuesday the 15th, Gill, without Nikou, went to the offices of Toop & Toop where he made an unconditional offer for the property for $128,500, which was accepted. The only purchaser named in the contract was Gill. Apparently Mrs Gill was not included as a joint purchaser because she was in Melbourne and was unavailable to sign the contract. During the cooling off period Nikou made enquiries of the local council to satisfy himself that the backyard could be subdivided off into a separate title. In the excitement of finding a suitable property, and in the rush to obtain it, there were unfortunately no further discussions between Nikou and Gill about their respective future roles in the development of the property. Each made certain assumptions which were not explicitly communicated to the other of them. As good friends they each believed it was unnecessary to spell out formally, or in detail, what, if any, their respective interests and roles in the project would be. Nikou assumed that because in his view he had initiated the project and had expertise for its planning and implementation, which he believed was necessary for its success, it was to be a joint development project in which the plaintiff would be entitled to a share of the ultimate profits over and above any payment for labour which he contributed. He believed that considerable value attached to his expertise in settling up the project, but Gill did not share that view. He did whatever he could to assist the project and he expected that in due course he would negotiate with his good friend Gill to gain a share of the profits and Gill would then be morally obliged to agree to it. Nikou intended to use the plaintiff company as his vehicle for the project, but nothing turns on that. To the contrary Gill believed that the benefit of the project belonged wholly to himself and his wife as they were the sole financial contributors, and that while various assistance from his friend Nikou would be of benefit to him in carrying it out, he did not see it as entitling Nikou to a share of the ultimate profit, albeit with some benefits to Nikou by way of commissions and cash payments in recognition of his necessary assistance. Because of the extremely friendly and informal nature of the relationship between Nikou and Gill the inevitable collision in the respective courses which they were taking did not occur until the project was completed.
Shortly after the contract was signed Nikou and Gill met with Ferraro at the property to discuss details of the subdivision. Ferraro went ahead and prepared the necessary documents which enabled subdivision approval to be obtained from the council. Interestingly, although Nikou had already offered Ferraro the architectural work for the project, Gill also consulted another architect about doing the work, although he ultimately employed Ferraro because his quote was cheaper. Ferraro treated Gill alone as his client. He thought there was some arrangement between Gill and Nikou about the project, but he did not enquire into what it was. The property was transferred into the name of Gill alone. Apart from the purchase of paint, which will be mentioned later, all of the transactions relating to the development of the property were carried out in the name of Gill alone and the names of neither the plaintiff nor Nikou appeared on any documents. Gill’s money was used to pay all of the expenses, and neither the plaintiff nor Nikou contributed any of their money to them.
It was the joint understanding of Nikou and Gill that the old Police Station house on the property would first be extensively renovated. Gill and his wife would then move into that house and live there for a year to avoid any capital gains tax. Mrs Gill was again pregnant and it was understood that the old house, suitably renovated, would be available for her to live in with her new child after she had had the baby at about the beginning of October 1993. A new courtyard home was then to be built on the subdivided block at the back of the property. The renovated old house would then be sold through the agency of Nikou and the Gills would move into the new house and stay there for at least twelve months so as to avoid capital gains tax. The new house would thereafter be sold through the agency of Nikou and the project would be completed. There was conflicting evidence about whether it was intended that this development project would be the only development project which would be carried out by the parties and whether its profits would be reinvested by them in further similar but larger projects. There was certainly considerable talk about possible future projects, but no definite plans or agreement were ever finalised. In any event Mrs Gill almost certainly would not have agreed to any further development projects.
Between July and September 1993 substantial renovations were carried out to the old house. An entirely new bathroom was installed, a pantry was converted into an ensuite, a reinforced concrete holding cell was removed, various doorways and walls were repositioned, the kitchen was refurbished, the whole of the interior was painted and other work was done. Much of the work, and in particular all of the plumbing and tiling, was done by Gill, who worked on every weekend and most nights after his normal employment until late. Nikou also did a considerable amount of the work. Initially Gill did not intend that Nikou would do any great amount of the work, but Nikou came to the house frequently and volunteered to help in various ways, including doing all of the painting, and Gill accepted this. The extent of Nikou’s work was disputed. It is unnecessary, and in any event impossible, to make precise findings about it, but it was far more than the Gills conceded, but probably somewhat less than Nikou claimed. In that period Nikou prepared and painted all of the ceilings and prepared part of the walls for painting. He assisted Gill in much of his work as a general labourer. He was at the property most nights and most weekends, although his work there, particularly on weekends, was interrupted by commitments in his employment as a land agent. Gill regarded Nikou as a good friend giving him a hand, and particularly as the renovation work was being done to a tight deadline of about the beginning of October. However, Nikou saw his work as a contribution of labour to the development project which should entitle the plaintiff to a share of the ultimate profits, although that was never explicitly communicated to the Gills. Some of the work was done by contractors who were employed and paid by Gill. Small amounts of casual work were also done by Mrs Gill and other friends who occasionally dropped in.
The plaintiff, Raynik Pty Ltd, had an account with Solver Paints. Nikou allowed this account to be used for the purchase of much of the painting materials which were used in renovating the old house. The materials purchased on this account were paid for by Mrs Gill out of moneys in her investment accounts, but mainly in cash. While I accept that Mrs Gill paid some of the accounts direct to Solver, there are probably other instances of where cash was given to Nikou for payment for these materials. The only records kept of expenditure on the project were those of Mrs Gill. (Gill said that he was hopeless at paper work.) Those records are not in accordance with the principles of proper bookkeeping. They are fairly rough and incomplete, although in fairness to Mrs Gill, she did not expect ever to have to make a formal accounting for all of the expenditure on the project. The position is further complicated because much of the expenditure was in cash and without receipts being obtained. On many occasions Mrs Gill withdrew substantial sums in cash from the bank and then disbursed it to various persons for both family and project expenses and made some brief note of what had been paid out in cash in her record book. The Gills maintained that during the course of the renovation work on the old house several cash sums totalling $2,150 were paid at various times to Nikou as in effect gratuities for the work which he was doing for them. Some of these moneys, but not the major part of them, could have been payments for materials purchased on the account of the plaintiff with Solver. Nikou denied receiving any cash except as reimbursement for materials which had been bought on the plaintiff’s Solver account. The only evidence apart from the testimonies of Nikou and the Gills about such cash payments are brief entries which Mrs Gill made in her record book of amounts designated as cash to Nikou. In at least one instance it is unclear whether the payment may have been on account of painting work done by Nikou’s brother. I accept the evidence of Gill and his wife that some such cash payments were made to Nikou in respect of the work which he did in renovating the old house. I do not consider that Mrs Gill lied about it, although she may not have been entirely correct in all of the details. As mentioned earlier the parties seemed quite comfortable with such cash transactions and it is not inconsistent with the general course of their dealings that they should have been made. I cannot find precisely how much was so paid to Nikou in cash, but it was probably somewhere between $1,000 and $1,500 over and above what was reimbursed for materials.

As the birth of Mrs Gill’s child approached it became clear that Nikou was not going to be able to finish the internal painting work for the house which he had said that he would do in the time available. Accordingly, Nikou’s brother, who was in business as a painter, was employed by Gill to paint the internal walls and woodwork for an undisclosed sum, which was paid in cash. The Gills moved into the old house in about late September 1993. The kitchen was not then completed but it was shortly afterwards. Various work on renovating the outside of the old house continued until about the end of January 1994. After October Nikou painted much, but not all, of the outside of the house and assisted in some other work which Gill carried out. The cash payments to Nikou mentioned earlier continued until January 1994.
In relation to the new house to be built on the back block, Nikou assisted in spraying weeds on that block and in helping to clear wood from felled trees. The foundations for that house were laid in about November 1993. Gill acted as the builder and did the plumbing and tiling work. He employed and paid subcontractors to do most of the other work. While Nikou visited the building site regularly, he did little work in constructing the new house. It was completed soon after mid 1994.
On 21 June 1994 Gill executed a sales agency agreement with L J Hooker represented by Nikou for the sale of the old house at 366 Henley Beach Road, Lockleys. Similarly to the Meredith Avenue sale the agency agreement provided for the commission payable to L J Hooker to be 50% of the REI rate and expenses and there was an oral undocumented arrangement for Gill to pay the other half of the commission to Nikou in cash, which is what occurred. On 13 September 1994 Nikou procured a sale of the property for $160,000, but with settlement not being until 14 November 1994. In October 1994, which was after they had been in the old house for just over twelve months, the Gills moved into the new house. On settlement on the old house the whole of the purchase price was received by Gill.
There was some evidence that there was a deterioration in the relationship between Nikou and Gill towards the end of 1995, but it is impossible to make any particular findings about it. Certainly by then they were not seeing each other as often as they had in earlier times. By October 1995 the development project could have been wound up by the sale of the new house as the twelve months’ occupation to avoid capital gains tax had expired. However, Gill took no steps then to put that property on the market. Nikou did not complain about it, but as he was expecting a share of the profits he was probably irritated by the delay. On 19 April 1996 Gill executed a sales agency agreement in favour of L J Hooker represented by Nikou for the sale of the new house. Again the agreement stated that the commission to L J Hooker was to be half the previous REI rate and there was an oral arrangement that Gill would pay to Nikou the other half of the commission in cash. At this time the relationship between Nikou and Gill was apparently still quite good because a family plumbing business in which Gill had an interest employed the plaintiff to obtain new business premises for it for which the plaintiff was paid $2,000 in about May 1996. On 2 August 1996 Nikou procured a contract for the sale of the new house for $220,000 with settlement to occur on 6 September 1996.
The Gills invited Nikou and his girlfriend, and a few other close friends, to a party at the new house which was to be held on 17 August 1996 to celebrate its sale. Nikou was due to go to New South Wales on 18 August for some weeks on a course which he was taking in the Army Reserve. For reasons which are not readily apparent, shortly before 17 August he consulted a lawyer about his position in the development and arranged for a caveat to be lodged over the title to the new house claiming that the plaintiff had an interest in the land. There is no evidence that he had prior to this visit to the lawyer any particular reason to believe that Gill would not honour what he was maintaining was the alleged agreement between them about the joint venture for this Henley Beach Road property. He accepted that under that agreement nothing would become payable to him until settlement on the sale of the new house. As Nikou was leaving the party on 17 August he asked for a private conversation with Gill. I prefer Gill’s account of what was then said. Nikou said words to the effect of, “Have you pencilled anything in for me?” Gill replied, “Your other half of the commission of $4,000.” Nikou said, “Anything else?” Gill said, “No - do you need some money?” Nikou said, “We’ll talk about it later.”
Gill only found out about the caveat lodged by the plaintiff on 5 September, which was the day before settlement. He then rang Nikou who was still in New South Wales and a heated discussion ensued between them. I prefer Nikou’s version of this conversation supported as it was by reasonably contemporaneous notes. Nikou said, inter alia, in answer to a question of why he had lodged the caveat, “Protection for the work I have done on your property and the agreement we had. As I said to you Saturday night before I left we need to sit down and discuss it in detail as you refuse to acknowledge you owed me anything.” Nikou suggested that the caveat could be withdrawn if $50,000 was put into a trust account, but Gill refused to agree to this or to discuss the matter at all and vehemently said he would never speak to Nikou again. However, after taking legal advice Gill later did agree to allow the settlement to proceed on 6 September on condition that $50,000 of the proceeds of sale were kept in trust by the landbroker in effect pending the resolution of this action. The actual amount of the profit on the project is in dispute, but it could well be in the vicinity of $100,000. Shortly before settlement the Gills had moved out of the new house into a rental property. Gill did not pay the other half of the commission which was due to Nikou in cash. On 20 December 1996 Nikou wrote to Gill demanding payment of that sum of $4,090, but the letter did not mention anything about the claim by the plaintiff to a share in the profits of the joint venture. Subsequently, Nikou sued Gill for the commission and Gill paid the amount into Court.
The evidence of each of Nikou, Gill and Mrs Gill had underlying it a strong sense of outrage and betrayal. As is often the case when good friends fall out animosity takes the place of friendship. All three were almost obsessively seeking to obtain vindication for their respective stands in the dispute. The evidence of none of them was objective or dispassionate and their particular views of what they perceived to be their rights in the matter coloured much of what they said. I am unable to accept any of them as wholly truthful and reliable witnesses. Gill and his wife were both unconvincing about many details. Gill’s plea in his Defence that Nikou provided only occasional voluntary labouring assistance in renovating the old house was a gross distortion of the true position. Nikou was not telling the whole truth in saying that he had not received any cash payments for labour which he had performed in renovating the old house. I find the other witnesses to have been generally honest and reliable but their evidence only went to peripheral matters. I make my findings on the balance of probabilities by accepting some, but not all, of what each of Nikou, Gill and Mrs Gill said and as to what is plausible and probable in the whole of the circumstances as I otherwise find them to have been.
The plaintiff’s primary claim was based on the alleged oral agreement which Nikou said he had reached with Gill on 16 January 1993. I make my finding that what then occurred between the parties did not amount to a concluded agreement between them for the following reasons:

·.. Nikou’s evidence on the point stood alone and its essential term that there was concluded agreement to share equally the ultimate profit was not substantiated unequivocally by any document or other piece of independent evidence.

·.. Nikou’s version of the agreement is inconsistent with Gill’s subsequent conduct. If there was a formal agreement that Nikou would undertake all the necessary research and administrative work to find and purchase the property, and obtain the necessary approvals for subdivision and development, it is strange that Gill would, as he did, have looked for other properties himself, have consulted other people and have done as much as he did in setting up the development for the Henley Beach Road property.

·.. It is inconsistent with Mrs Gill’s position. I accept her evidence that she was only prepared to go along with a development project if it would generate substantial profits for her and her husband so that ultimately they could afford a better family home than would otherwise be the case. While this was not known to Nikou, it is unlikely that Gill would have agreed to allowing half the profits to the plaintiff particularly as Nikou had no proven track record in development projects and he could almost certainly have been able to keep more of the profits for himself and his wife if he had used some other adviser for such a project.

·.. Nikou’s invitation to Ferraro on 12 June 1993 to take up a financial interest in the project seems contrary to there already having been a concluded agreement with Gill. If there had been such a concluded agreement, it is more likely that Nikou would have discussed the matter in detail with Gill before making any such invitation to Ferraro. It is more consistent with the financial arrangements for the project still having to be worked out between Nikou and Gill than it is that there would be a variation of previously agreed arrangements.

·.. At the outset, and during the course of the project, various rough calculations were done about anticipated expenses, realisations and ultimate profits. It may well be that all of such calculations were not produced in evidence, but it is of some significance that the few which have been produced, which are all in the handwriting of Gill, do not show any allowance for labour contributions by Gill or Nikou, a credit of interest to Gill or an ultimate of division of the profits between the plaintiff and Gill as would have been expected if there had been an agreement of the nature alleged by the plaintiff. Nikou alleged that there had been such calculations, but said they had been left in Gill’s possession. That may or may not be so, but it is still of some weight that Gill in the early stages of the project in his own calculations was not acting in accordance with what Nikou claimed were the terms of the agreement. It is unlikely that at that stage Gill would have been fraudulently disregarding what he knew to be a concluded agreement as then they were still very good friends.

·.. If there was an agreement as alleged by the plaintiff that each of Nikou and Gill would be credited with the value of the work carried out by each of them on the redevelopment at an hourly rate, it is somewhat incongruous that Nikou did not ensure that some records were kept to enable those credits to be assessed. None at all were kept by anyone. Even if Nikou was relying upon Gill as a good friend to do the right thing in any final calculation of such entitlements, it still would have been prudent for him to have ensured that some records were being kept as the final calculation of the profits could not take place for about two years after most of the work had been done.

·.. The actions of Nikou when the matter came to a head in August and September 1996 were not particularly consistent with there having been a concluded agreement in the terms he alleged. His actions were more consistent with there being no agreement, but him believing that he was morally justified in seeking a share of the profits and hoping that Gill would do the right thing by him as a friend. At no stage did he make an express request for a half of the profit calculated according to any agreed formula. He merely asked for something to be pencilled in and wanted to talk generally about what was to be paid to him. His general reference to an agreement in the telephone call of 5 September is consistent with some agreement to make an agreement on 16 January 1993, but it is not explicitly referable to an agreement to share half of the profits calculated on a particular formula. His failure to ever make any explicit and formal demand for a share of the profit on the terms of the alleged agreement suggests that he really was seeking to negotiate an agreement at that late stage for some entitlement to some of the profits based on what he believed was his moral right to them in light of his perceived contributions to the success of the project.

Accordingly, I reject the plaintiff’s claim for an account of the profits of the development and for damages for breach of contract.

Alternative claim on quantum meruit

The relevant law on whether the plaintiff can recover for the work done by Nikou on a quantum meruit is as stated by Byrne J in Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 in the following passages which were cited with approval by our Full Court in Angelopoulos v Sabatino (1995) 65 SASR 1 at 10-11:
“In such a case, the gist of the claim is that the defendant has actually or constructively accepted the benefit of the plaintiff’s services in circumstances where it would be unjust for that party to do so without making restitution to the plaintiffs. .... The circumstances in which the law considers it unjust to accept the benefit without payment are to be discerned from the principles to be extracted from the decided cases .... the Court is not concerned with the actual state of mind of the parties or either of them .... Moreover, the enquiry must in my view be principally directed to the position of the party to be charged, for the thread running through this area of law is the injustice of the enrichment of that party. In my opinion the appropriate enquiry is whether the recipient of the services, as a reasonable person, should have realised that a person in the position of the provider of the services would expect to be paid for them and did not take a reasonable opportunity to reject those services ....”
The claim was in two parts. The first was a claim for $12,000 for the work which Nikou did between 16 January and 15 June 1993 in seeking out suitable development properties for Gill. The simple answer to this claim is that Nikou was remunerated for this work in accordance with the common understanding which he always had with Gill that he would be employed as the agent to sell the subdivided properties and that he would be paid commission on such sales. That was the normal practice among agents and developers. A reasonable person in the position of Gill would not have realised that the plaintiff or Nikou was expecting to be paid anything more than those commissions for that work in seeking out suitable development properties. If the plaintiff was to be allowed some share of the profits from any development in addition to the commission that still remained to be negotiated if and when a suitable development site was found.
Furthermore, the plaintiff or Nikou should not be in any better position on this head of claim if a suitable development property was found than if one was not found. It was always possible that Nikou would not ever find any suitable property which would be acceptable for Gill in spite of his best endeavours to do so. In those circumstances there is no basis to infer or imply that Nikou would have been entitled to any remuneration for his work. It should be borne in mind that Nikou was not acting exclusively for Gill in his searches for development properties and there was nothing to stop him from referring potential sites to other developers and taking whatever benefits for himself which he could negotiate with those developers.
The second part of the quantum meruit claim was for $21,000 for the work which Nikou did in the renovation of the old police station. Gill accepted Nikou’s offers to do this work on the basis that Nikou was acting as a friend in making the offers. Prior to, and in the course of, the work Nikou did nothing to indicate to Gill that he was performing the work in an expectation of a share in the ultimate profits of the development. If a friend expects to be paid, it is the usual and proper thing for him to say so. The most probable reasons why he did not say so were that he thought he would be in a better negotiating position subsequently to have Gill agree to pay him some of the ultimate profits if he already had morally obligated Gill to him by his labour and that he realised that if he raised the question before he did the work there was a risk that Gill would reject his proposals for a share in the profits and would not accept the benefit of his labour. A reasonable person in the position of Gill would not have realised that the plaintiff or Nikou were expecting to be paid for Nikou’s labour by a share of the ultimate profits.
Furthermore, as I have found above, Nikou was paid some cash for his work in the renovations. At the time when he received such cash payments he did not suggest that they were not adequate recompense for his labour or that he was expecting something more later by a share of the overall profits. It is impossible to say whether what Nikou was paid was proper remuneration for the work that he did, but such payments make it unlikely that it was unjust in the circumstances for Gill to accept the benefit of Nikou’s services. Accordingly, the claims on the quantum meruits fail.
The plaintiff’s claim is dismissed.

[1999] SADC 3

15 January 1999