Romanous v Saleh - [2009] NSWSC 1166

CITATION: Romanous v Saleh [2009] NSWSC 1166

HEARING DATE(S): 3/06/09, 4/06/09, 5/06/09, 28/08/09, 31/08/09, 1/09/09, 30/10/09

JUDGMENT DATE :
20 November 2009

JUDGMENT OF: Forster J at 1

DECISION: See paragraphs 197 to 198 of the judgment.

CATCHWORDS: Sale of land for development in conjunction with neighbouring property - neighbouring property owned by male vendor's brother - representations made to purchasers by male vendor prior to contract relating to brother's attitude towards proposed development - substantial factual disputes as to what was said and other matters - promissory estoppel - collateral contracts - fraudulent representations - judgment for purchasers.

LEGISLATION CITED: Civil Procedure Act 2005
Conveyancing Act 1919

CATEGORY: Principal judgment

CASES CITED: Esanda Limited v Burgess [1984] 2 NSWLR 139
Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1
Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133
Maybury v Atlantic Union Oil Co. Ltd (1953) 89 CLR 507
Nassif v Fahd [2007] NSWCA 269; (2007) 13 BPR 24,999
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387

PARTIES: Plaintiffs: Harris Romanous and Philomena Romanous
Defendants: Michael Saleh and Rose Saleh

FILE NUMBER(S): SC 4516/06

COUNSEL: Plaintiffs: F. Kalyk
Defendants: D. Smallbone, D.W. Rayment

SOLICITORS: Plaintiffs: Thurlow Fisher Lawyers
Defendants: Woods & Day Solicitors

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

FORSTER J

FRIDAY, 20 NOVEMBER 2009

4516/2006 HARRIS ROMANOUS & ANOR v MICHAEL SALEH & ANOR

JUDGMENT

1 HIS HONOUR: In these proceedings the Romanous’, namely Harris Romanous and his wife Philomena Romanous, seek declarations and orders against the Salehs, namely Michael Saleh and Rose Saleh, his former wife. The Romanous’ claim to be entitled to be repaid, together with interest, the amounts of $67,000 and $200,000, which they paid to the Salehs. They also claim to be entitled to a further amount of $17,627.50, again together with interest, by way of remuneration for work done at the request of the Salehs. The Salehs deny any obligation to pay those amounts, and by their cross claim they seek orders for damages for breach of contract, also together with interest thereon.

2 In this judgment, and without meaning any disrespect, I propose to refer to Mr Romanous as “Harris”, Mrs Romanous as “Philomena”, their son Joseph Romanous as “Joe”, Mr Saleh as “Michael”, Mrs Saleh as “Rose” and Michael’s brother Edmund Saleh by his generally known name of “Eddie”.

Background facts

3 I propose first to set out my findings in relation to the background facts, which are in any event in the main uncontested.

4 In early 2002, Michael and Rose purchased a property situated at 163 Kissing Point Road, Dundas (“the Property”). Shortly thereafter, at Michael’s suggestion, his brother Eddie purchased the adjoining property at 165 Kissing Point Road, Dundas (“No. 165”) through a company, Jouneh Pty Limited, which was owned and controlled by Eddie. Michael then set about to obtain a development consent in relation to the two properties. The proposed development consisted of the demolition of the dwellings situated on those properties and the erection on the combined site of eight strata titled two-storey townhouses with attics and basement parking areas. The development application, which is in evidence before me, is dated 4 December 2002 and records the respective owners of the two properties as being Michael, Rose and Jouneh Pty Limited. In the space provided for the signature of the owners, evidencing their consent to the application, there appears signatures purporting to be those of Michael, Rose and Eddie.

5 On 30 July 2003 Parramatta City Council issued a development consent for the two properties. The development consent was a “deferred commencement consent”, that is to say, certain conditions had to be satisfied before the consent became operative. Those conditions included obtaining a grant of easement over an adjoining property for the drainage of water.

6 Michael and Rose had been engaged in various forms of property development, principally (but not exclusively) involving the purchase of underdeveloped sites, obtaining a development consent and then on-selling the site at a profit.

7 Harris was a licensed plumber and builder who had from time to time provided plumbing and related services to the Salehs in relation to properties owned by them.

8 Nothing appears to have happened in relation to the said two properties until about April 2004. Shortly before that time, in the course of a conversation between Michael and Harris, mention was made of the Property by Michael. There then followed a number of discussions, principally between Michael and Harris, which discussions lie at the heart of the current dispute. For present purposes, it suffices to say that on or about 13 May 2004, the Salehs entered into a contract for the sale of the Property to the Romanous’ (“the Contract”). The purchase price for No. 163 was $670,000 with a ten percent deposit of $67,000. The Contract provided for completion to occur on the 42^nd day after the contract date.

The $67,000

9 The purchase price of $670,000 had been arrived at as a result of negotiations that had taken place between Michael and Harris. It is clear that the amount was calculated by reference to the expected values of the planned townhouses and the anticipated costs of their construction. In other words, the purchase price was arrived at on the assumption that the Property would be developed along with No. 165 in accordance with the development consent.

10 On exchange, the Romanous’ paid to the Salehs the deposit called for under the Contract, that is to say the sum of $67,000.

11 The Contract contained various special conditions which are not relevant to the dispute between the parties, the only reference to the development consent being that contained in special condition 55 which is in the following terms:

“55. The Vendors have obtained consent from Parramatta City Council for Development of the property and the adjoining property at 165 Kissing Point Road, Dundas. A copy of the Development Approval is annexed to this Contract”.

12 Prior to the exchange of contracts, by their letter of 3 May 2004, the solicitors for the Romanous’ wrote to the solicitors for the Salehs seeking the insertion into the Contract of the following special conditions:

“No. 54 Notwithstanding any other condition it is a term and condition of this Contract for Sale that the Vendor obtain a Development Consent for eight townhouses to be erected on No. 163 and 165 Kissing Point Road Dundas. In the event such consent is not obtained within six (6) weeks from today’s date the Purchaser can rescind the Contract for Sale and the provisions of clause 19 hereof will apply.

No. 55 The Purchaser is hereby authorised to demolish the house on the property:

i) After exchange, and

ii) After the Development Consent is obtained by the Vendor in accordance with Special Condition 54 above.

13 By their letter in reply, dated 7 May 2004, the solicitors for the Salehs indicated that the Salehs did not agree to those proposed special conditions. As a consequence, they were not included in the Contract.

14 The other matter to which I should refer at this point is that prior to the exchange of contracts, Michael delivered to the Romanous’ a statutory declaration made by him on 10 May 2004, which I have set out below at [60].

15 The 42^nd day after the date of exchange was 24 June 2004. There is no dispute that the day for completion came and went without the Contract being completed. Eddie lived in Adelaide and there had been no direct contact between Eddie and the Romanous’ either before the exchange of contracts on 13 May 2004, or between that date and the date for completion provided for in the Contract. The Romanous’ did meet Eddie on two subsequent occasions, namely on 25 July 2004 and 13 September 2004. However no agreement has ever been reached between the Romanous’ and Eddie concerning the development of the properties in accordance with, or pursuant to, the development consent. Nor have the conditions of deferred commencement ever been satisfied.

16 On 14 September 2004 the Salehs served on the Romanous’ a notice to complete. They served a further notice to complete on 27 September 2004, but completion still did not occur.

17 In January 2005 the house on the Property was demolished in circumstances that are in dispute between the parties. What is not in dispute is that as a consequence of the demolition, No. 163 became, and it still is, a vacant block.

18 On 23 March 2006, the Romanous’ served on the Salehs a notice of rescission of the Contract. Thereafter on 30 August 2006 the Romanous’ commenced these proceedings. Then on 31 July 2008 (being the day after the expiry of the 5 year development consent given on 30 July 2003) the Salehs purported to terminate the Contract and bring it to an end. They filed their cross-claim shortly thereafter on 15 August 2008. The deposit of $67,000 has not been returned to the Romanous’.

The $200,000

19 Meanwhile, as a result of certain discussions which took place between Michael and Harris, a sum of $200,000 was paid by the Romanous’ to the Salehs. Although the substance of those conversations is very much in dispute, it is clear that the Romanous’ issued a cheque for that amount payable to the Salehs on 14 July 2004, which cheque they countermanded the following day.

20 However, on 26 July 2004 they issued a further cheque, also in the sum of $200,000, which was met on presentation. The proceeds of that cheque ultimately found their way into a bank account maintained by a company through which Rose conducted a separate business of her own, and were shown in the books and records of that company as a loan from Rose to that company.

21 It is also common ground that the said $200,000 has not been repaid to the Romanous’.

The $17,627.50

22 As a separate matter, the Romanous’ claim included a further amount of $17,627.50 for plumbing and building work performed at the request of the Salehs. The work is alleged to have been performed between April 2004 and January 2006, and it is agreed between the parties that the work the subject of those invoices has been satisfactorily performed.

23 The parties have now reached a partial agreement in relation to this claim. The Salehs admit that an amount of $4,776 is payable to the Romanous’. The Romanous’ accept the correctness of that figure but claim to be entitled to a further $12,000, bringing the amount now claimed to $16,776.00. The Salehs dispute that additional liability as follows:

(a) As to the sum of $2,000, the Salehs claim that the claim for plumbing and building work had been reduced by a payment of that amount by them to the Romanous’. By contrast, the Romanous’ say that this amount was not paid on account of this claim, but on account of interest on the $200,000; and

(b) As to the sum of $10,000, the Salehs claim that this amount has already been notionally paid in that the purchase price for the Property had been originally agreed at $680,000, but had been reduced to $670,000 by reason of the Romanous’ releasing their claim by $10,000.

The cross claim

24 By their cross claim, the Salehs seek an order for damages occasioned by the Romanous’ alleged failure to complete the Contract in accordance with its terms. It is common ground that the Property remains unsold and that the Salehs continue to be its registered proprietors. The Salehs claim an amount calculated by reference to the difference between the purchase price under the Contract (namely the sum of $670,000) and the value of the Property as at the date at which they purported to terminate the Contract, namely as at 31 July 2008. They offer credit for the $267,000 paid to them, calculating their claim at $163,666 plus interest from 31 July 2008 pursuant to section 100 of the Civil ProcedureAct 2005.

Facts in dispute

25 Before turning to the various legal issues raised by the parties, there are a large number of factual disputes which require resolution. The principal areas of dispute are the following:

(i) what was said by Michael to Harris before 13 May 2004;

(ii) Eddie’s attitude to the proposed development;

(iii) the events leading up to the payment of the $200,000;

(iv) the demolition of the house on the Property;

(v) the subsequent conduct of the parties; and

26 Before dealing with each of the foregoing matters, it is necessary first to say something about the witnesses.

Witnesses

27 Apart from whom I may refer to as the principal players, the only witnesses who were cross-examined were Mr Ochudzawa, an architect, Mr Ellis, a valuer, Mr Soulos, a solicitor who formerly acted for Michael or Eddie or both, and Mr Woods, who is the Salehs’ current solicitor. I accept the evidence given by each of these gentlemen. I found them all to be careful and accurate professional men who gave their evidence honestly and carefully.

Harris Romanous

28 I found Harris to be a somewhat complex witness. I formed the view that he was not a person of commercial sophistication and at times found it difficult to understand matters of any complexity. He appeared to defer to people he considered to be more sophisticated or experienced than himself, such as his solicitors, who, as he understood it, instructed him what to do rather than the other way around. Consistently with that view he was also liable to be influenced by someone like Michael, whom he regarded as a successful developer, and to whom I consider he would have deferred.

29 I found Harris to be both gullible and yet, at the same time, of a suspicious nature and very careful to protect his interest and that of his wife. He was not capable of drawing sophisticated distinctions and saw the world in relatively simple terms. All these traits must have been obvious to Michael.

30 In the witness box, Harris was obsessed with his claim and kept repeating his version of events, whether or not his answers were responsive to the questions he was being asked. He did not strike me as someone who was intentionally evading answering questions, but rather as someone who, when confronted with something he did not fully understand, reverted to repeating the mantra that he has clearly come to believe most fervently.

31 I do not intend these comments to be hurtful. Overall, I did form the view that he was, on the whole, a relatively honest witness. Although his recollection of events was not entirely accurate, I consider that he did recall events he considered important and that he was not intentionally telling falsehoods.

Philomena Romanous

32 Philomena’s role was far more limited than that of Harris. She played no active role in the pre-contractual negotiations between Harris and Michael and simply went along with what Harris decided. She left the ultimate decisions for Harris to make, and that included the decision to enter into the Contract.

33 I found her to be far more alert and having a better recollection of events than did her husband. Unfortunately, like her husband, she too kept repeating her version of events at every opportunity. She also presented as unsophisticated in business matters, and her role was principally that of a recorder of events.

34 Overall, I found her evidence to be more or less reliable but, as with her husband, I did feel more comfortable where her evidence was independently corroborated.

Joe Romanous

35 Joe is the son of Harris and Philomena and is a young man who has been working with his father. Like his parents, he also presented as a person of limited ability to understand matters of complexity and, like them, he also kept repeating the Romanous’ view of the case at every possible opportunity.

36 I did not think that his recall of events was as particularly good, but I do not consider that he was intentionally telling falsehoods. I place some, albeit not unlimited, reliance on his evidence.

Michael Saleh

37 Michael was the principal witness for the Salehs, he having been the person with the principal role in this transaction. I regret to say that I found Michael to be a most unsatisfactory witness, whose evidence I am not prepared to accept unless it is uncontroverted or corroborated by other, credible evidence.

38 Like the other principal witnesses in the case, Michael kept repeating his version of events at every possible opportunity, whether or not it was responsive to the question asked. That of itself does not condemn the credibility of his evidence, given that every other witness exhibited the same penchant for wanting to repeat their view of the world as often as possible. However, I also formed the view that he was prepared, without any apparent compunction, to give any answer which he considered assisted his case so long as he believed that he could do so with impunity.

39 One example of this is referred to below in the context of the $200,000. Another example arose in the context of a series of questions which were being put to him on the basis of file notes contained in his own solicitor’s file recording attendances on him by his solicitor. As it appeared unlikely, at least at that point of time, that his solicitor would be called to give evidence, Michael simply denied the veracity of each and every such entry in his own solicitor’s file. I am not prepared to accept, without more, that the solicitor’s file is so totally inaccurate or fabricated that almost all of the entries in it are wrong. I am more inclined to the view that, not being certain what consequences might flow from his agreeing with the contents of those notes, Michael considered it safer simply to deny their accuracy. I noted that he showed no hesitation in doing so.

40 In my opinion, Michael’s evidence was unsatisfactory and unreliable and I considered it unwise to place any substantial reliance on it.

Rose Saleh

41 Likewise, I found Rose’s evidence similarly to be unreliable. Like Philomena, she was not directly involved in the various negotiations, which she left to Michael, but her evidence, which dealt mainly with subsequent events, was strident, emotional and prone to exaggeration. She too kept repeating, over and over again, the Salehs’ view of the case and her whole attitude in the witness box was such that I am not prepared to place any reliance on her evidence.

Eddie Saleh

42 Eddie, Michael’s brother, also gave evidence and was cross-examined at some length. He was the most credible of the Salehs’ witnesses. He was somewhat evasive, particularly his answers in relation to matters where he thought he might undermine his brother’s case, but generally I thought that his evidence was truthful.

Generally

43 Accordingly, in the absence of objective or other credible corroborative evidence, I prefer the evidence of Harris, Philomena and Joe over that of Michael and Rose where there is a conflict between them. Insofar as there is a conflict between the evidence of Harris, Philomena and Joe of the one part and the evidence of Eddie of the other part, I again prefer the evidence of Harris, Philomena and Joe.

44 Particularly having regard to the foregoing, in attempting to resolve the factual disputes between the parties, I do not propose to restrict myself to my impressions of their credibility as witnesses. I propose to take into account any objective evidence which is before me and also to consider the overall likelihood as to whether or not a particular thing was said or done.

Resolution of factual disputes

45 I turn then to considering and resolving the principal factual disputes between the parties.

(i) What was said by Michael to Harris before 13 May 2004?

46 There is no dispute that Michael told Harris that he and Rose owned the Property, his brother Eddie owned No. 165, and that the two properties had the benefit of a development consent permitting the demolition of the existing buildings and the erection of eight townhouses. Nor is there any dispute that Michael told Harris that Eddie was then living in Adelaide.

47 Where the parties’ evidence differs is that, according to Harris, at some time in April 2004, Michael said to him inter alia words to the following effect:

“ (a) Michael Saleh said ‘If you’re buying 163 Kissing Point Road, I want $175,000 per site, for four sites. My brother Eddie will pay you half the cost of supervising the building work on both sites. I’ll get you the construction certificate from Council. You will do the building. You will get three quotes for the building work, and Eddie will pay for half the cost of building work’.

(b) I said ‘When do we get to meet Eddie’.

(c) Michael said ‘Leave Eddie up to me. I’m taking responsibility for Eddie.

If Eddie doesn’t want to build you don’t have to buy and you’ll get your money back’

.”

48 Harris also says that a few days later (but still prior to 13 May 2004) he had a further conversation with Michael, in the course of which the following exchange took place:

“(c) I said ‘How do we do this joint venture, and when do we meet your brother to talk about the building costs and building supervision’.

(d) Michael replied ‘You will do the building and Eddie will pay you half the cost of construction and the cost of you supervising his share of the building, and you will both get four units. I’ll be getting the construction certificate so you both don’t pay any money to council or architects or engineers to get the certificate’.

(e) I said ‘When do we get to meet Eddie’.

(f) Michael said ‘Leave Eddie to me, you don’t need to meet Eddie’.

(g) I said ‘It will cost roughly $180,000 for us to build each townhouse. Are you sure your brother is willing to build?’

(h) Michael said ‘Yes he wants to build, Why don’t you trust me? If you don’t go partners with Eddie to build, you don’t have to buy the house and you’ll get all your money back’.

(i) I said ‘Okay then we trust your word’.”

49 According to Harris, at about that time Michael also said words to the following effect:

“You don’t speak to Eddie you speak to me. I’ve been speaking to Eddie and he is happy and up to date with everything.”

50 Under cross-examination, Harris maintained his evidence that Michael had subsequently confirmed to him that if no joint venture with Eddie came into existence, the Salehs would return the deposit and the Contract would be at an end.

51 Joe also gave evidence under cross-examination to the effect that Michael had said, before the Contract was entered into, that if no agreement could be reached with Eddie, the Romanous’ money would be returned.

52 At transcript pages 243-244 the following exchange occurred in the course of Joe’s cross-examination:

“Q. I want to suggest to you, that, in conversations that you were present at before, with Michael Saleh before the contract of sale was entered into, so, these were in April or in March and April 2004 Mr Saleh did not say that he would be getting the construction certificate. What do you say to that?

A. That's false.

Q. Did he did not say, that he the contract - in those conversations that if your father could not get a deal with Eddy he could get his money back from Michael in respect of the contract did he?

A. Michael. He did say that. If there was no deal with Eddy with his brother Edmund that we would be getting back all of our money.

…

Q. In the conversations at which you were present in March and April 2004 and up to the time of making the contract by which your parents agreed to buy 163 Kissing Point road, Michael didn't ever say in your hearing any words to the effect that it was certain that your father would be able to reach an agreement with Eddy?

A. Yes he did. He did say that. “

53 Michael denies saying anything to the effect of the foregoing. What Michael says is that in response to an enquiry by Harris about wanting to undertake a development project, he replied in words to the following effect:

‘I have property which might suit you. I have an approval for a development of 8 townhouses at Kissing Point Road Dundas. I own 163 and my brother Edmond owns 165. I want to sell my property at 163, because of my other developments which include 173 and 175 Kissing Point Road, Dundas, just down the road.

However, my brother Edmond is keen to develop both properties and will do so with an incoming purchaser, if the right deal can be struck between them.

’

54 According to Michael, at a later point of time he said to Harris words to the following effect:

“If you are interested in purchasing the property I have the plans of the proposed development.

55 Michael and Harris then negotiated a price and, according to Michael, there was no discussion about the sale of the Property being subject to Eddie’s agreement to enter into a joint venture with the Romanous’. Nor, according to Michael, was there any mention or agreement that required the return of the deposit paid on the Property if the Romanous’ and Eddie could not agree on terms in relation to any joint venture discussions.

56 On the contrary, according to Michael there was a further discussion between himself and Harris in words to the following effect:

He said:

‘When are we going to meet Edmond?’

I said:

“Edmond now lives in Adelaide. I have and will continue up to date of settlement, to do the day to day things required for the development, obtaining quotes, looking at finances etc on behalf of us. Anything that you need to know or discuss, it is best you ask me, because Edmond has given me the authority to talk to you about the proposed development. However, I cannot bind Edmond. He should be coming to Sydney in a couple of months’.

He said:

‘I would like to meet him and discuss the development’.

I said:

‘That’s fine. However the purchase of my property is not conditional on any agreement with Edmond over the development’.”

57 Mr Smallbone of Counsel, who appeared with Mr Rayment for the Salehs, placed considerable significance on the correspondence passing between the respective parties’ solicitors in the course of their negotiations in relation to the terms of the Contract. As I have already noted, the development consent was conditional inter alia upon there having been obtained an appropriate easement to drain water. By their letter of 3 May 2004, the solicitors then acting for the Romanous’ sought to have inserted into the Contract a special condition that would have made the Contract conditional upon obtaining an unconditional development consent, so that if the development consent had not become unconditional within six weeks from the date of the Contract, the purchasers would be entitled to rescind the Contract.

58 By the same letter, the solicitors for the Romanous’ sought the insertion of a further provision entitling the purchasers to demolish the house on the Property after exchange (but before completion) once the development consent had become unconditional.

59 By their response dated 7 May 2004 the solicitors acting for the Salehs rejected those proposed amendments.

60 However, presumably pursuant to a conversation between the parties, by letter dated 10 May 2004, the solicitors for the Salehs forwarded to the solicitors for the Romanous’ a copy of a document, described as a “Statutory Declaration of Michael Saleh” which was in the following terms:

“I, Michael Saleh, of 5 Volmer Street, Oatlands in the State of New South Wales state:

1. I am one of the Vendors of the property known as 163 Kissing Point Road, Dundas being the land in folio identifier 1/656059.

2. My brother Eddie Saleh is the registered proprietor of 165 Kissing Point Road, Dundas being the land in folio identifier 1/656060.

3. Eddie Saleh has appointed me as his agent for negotiating with Harry Romanous concerning the development of both 163 Kissing Point Road, Dundas and 165 Kissing Point Road, Dundas together, pursuant to the approval for Development issued by Parramatta City Council on 30 July 2003, being Development Application No. JE/02919/02.

4. All communications and correspondence concerning the Development are to be made me (sic), Michael Saleh.”

61 In his affidavit, Harris swore as follows:

“When proceeding with the exchange of contracts to buy 163 Kissing Point Road, Dundas I relied upon Michael’s statutory declaration and his statements to me that if a joint venture with Eddie did not go ahead then I did not have to purchase the property, and I would get any money I had paid back”.

62 It is obvious that the evidence given by Michael and that given by Harris and Joe are inconsistent with each other. I prefer the evidence given by Harris and Joe to that given by Michael for a number of reasons.

63 First, I have already noted that where they conflict, I prefer Harris’ and Joe’s evidence to that given by Michael.

64 Secondly, having regard to my impression of Harris’ wary nature, I think it most unlikely that he would have been prepared to enter unconditionally into a contract to purchase the Property at a price which I find had been calculated on the assumption that the Property would be developed in conjunction with No. 165. There is no specific evidence before me of what the value of the Property would have been in 2004 without the benefit of a development consent, the only formal evidence before me being the value of the Property as a vacant block in July 2008 without the benefit of the development consent, namely $375,000. I am prepared to find that the value of the Property in May 2004, without the benefit of the development consent, would have been less than $670,000 and that Harris believed that to have been the case.

65 Michael gave evidence that his practice was to purchase properties, obtain development consents in relation to them and then on-sell them at a profit. Clearly obtaining a development consent had added value to the Property. I am further comforted by the fact that the Salehs waited to purport to terminate the Contract until 31 July 2008, which was one day after the development consent had lapsed, and have sought to recover damages calculated on that basis. I cannot think that this was simply a fortuitous coincidence. I am prepared to infer that the decision to delay the purported termination until the development consent had lapsed was intentional, presumably in order to recover damages based on a reduced value of the Property upon the lapse of the development consent.

66 I am satisfied that Harris wanted to develop the Property and would have had no interest in buying it at the price of $670,000 unless he had been assured that he would be able to do so, or to get his money back. I consider it most unlikely that Harris would have been prepared to proceed solely on the basis of the very limited assurances that Michael claims he gave about Eddie’s interest in developing the property. Contrary to the submissions made on behalf of the Salehs, in my opinion Harris would not have been prepared to take the commercial risk of a joint venture agreement not being reached with Eddie, whom he had never met or even spoken to, particularly as there were any number of matters that required agreement concerning the details of the development and the terms of any joint venture.

67 It would only have made commercial sense for Harris to enter into the Contract if he had believed that Michael was bound by his promise that if no joint venture agreement was reached with Eddie, the Contract would be brought to an end and the Romanous’ would get their money back.

68 Thirdly, I find that Harris was concerned at not having reached any agreement with Eddie prior to the Contract, and that he had received only verbal assurances from Michael to the effect that the Romanous’ would not have to proceed with the Contract if no agreement was reached with Eddie. That was why the Romanous’ sought some form of written confirmation from Michael, which came in the form of the statutory declaration. It was only when they received the statutory declaration, the terms of which I have already set out, that the Romanous’ were prepared to enter into the Contract.

69 It has been submitted on behalf of the Salehs that the statutory declaration by its terms is far narrower than that put forward on behalf of the Romanous’. The Salehs submit that on its true construction, the effect of that document is only that Eddie had appointed Michael as his agent for negotiating with Harris concerning the proposed development, but that by its terms, the document did not authorise Michael to enter into any contractual relationship on behalf of Eddie.

70 For present purposes, I do not need to determine the correct construction of that document. Suffice it to say that there is much to be said for the construction contended for on behalf of the Salehs, and if that construction is correct, and the document goes no further than to authorise Michael to negotiate with the Romanous’ on behalf of his brother Eddie, then it is but a pale shadow of what I find the Romanous’ understood its effect to be.

71 Whatever may be its true construction, I find that the Romanous’ drew significant comfort from the statutory declaration, believing it to record and confirm Michael’s verbal assurances to the effect that they were fully protected in the event that no agreement was reached with Eddie, and that in such circumstances, they would receive their money back.

72 I should pause at this point to note that, based on their oral evidence, English is clearly not the first language of either the Romanous’ or of Michael. I am not certain about Rose, Eddie or Joe.

73 Nor do I consider that the Salehs’ solicitors’ refusal to include in the Contract the proposed special conditions referred to above assists the Salehs. Those proposed special conditions did not seek to include in the Contract any confirmation of Michael’s assurance given to Harris. I do not consider that Harris viewed the Salehs’ solicitors’ refusal to agree to the proposed special conditions as a refusal by Michael to confirm the oral assurances that he had given him.

74 Fourthly, the conduct of the parties after it had become clear that it was most unlikely that the Romanous’ and Eddie would enter into a joint venture agreement also supports the conclusion that the discussions between Michael and Harris were as claimed by Harris and Joe. For the reasons that I discuss below, I find that contrary to the evidence given by the Salehs, when the Romanous’ kept insisting on the return of the amounts paid by them, they did not receive denials by the Salehs of any obligation to do so, only excuses, promises and procrastinations as to when those amounts would be repaid. I do not accept the Salehs’ claim that the Romanous’ kept asking for more time to obtain the necessary funds to complete the contract.

75 In my view, Michael saw the transaction effectively as a contingent or defeasible one—he hoped that the Romanous’ and Eddie would be able to reach agreement, the Romanous’ thereby taking the Property off his hands at a good price. However, he also accepted that if he was unable to achieve that result, he would have to refund the deposit and bring the Contract to an end. The Salehs had nothing to lose by entering into such a Contract and everything to gain in the event that an agreement could successfully be reached involving Eddie. However, the prospect of the sale having to be reversed must have been a very real possibility in Michael’s mind. Accordingly, I find that Michael did give the assurances set out at [47], [48] and [52] above.

(ii) Eddie’s attitude to the proposed development.

76 According to Michael, what he said was, as I have recorded at [53] and [54] above, that Eddie was “keen” to develop the subject properties.

77 Before considering this disputed area of fact, it is necessary to refer back to the pleadings. Amongst the representations alleged by the Romanous’ as representations upon which they relied was a representation, as alleged in paragraph 5(b) of the second further amended statement of claim, that Michael had represented that:

“Edmond Salehould (sic)

join with the Plaintiff (sic) in a development of both properties at 163 and 165 Kissing Point Road Dundas.”

78 Although on its face, that representation appears to be a representation with respect to a future matter, there is no express reference in the pleading to section 51A of the Trade Practices Act, or to the corresponding provision in the Fair Trading Act. However, there is an allegation in paragraph 10C in the following terms:

“The Second (sic) Defendant had no reasonable grounds for the representations”.

79 The term “the representations” is defined so as to include the representation referred to in paragraph 5(b), set out above.

80 In the context of the second further amended statement of claim, as well as in the context of its various predecessors, I would have thought that the reference in paragraph 10C was always intended to be a reference to Michael, who is the first defendant, rather than to Rose, who is the second defendant. When this apparent anomaly was pointed out to him in the course of the hearing, Mr Kalyk, Counsel for the Romanous’, informally sought leave to amend paragraph 10C so as to make it refer to the first defendant, not to the second defendant.

81 That application was opposed by Counsel for the Salehs inter alia on the grounds that the Salehs had, in their pre-trial submissions, adverted specifically to this anomaly in the pleadings, but the point had not been taken up by the Romanous’. It was submitted on behalf of the Salehs that granting leave in the middle of the hearing to so amend would prejudice the Salehs, who had intentionally held off adducing evidence to the effect that the first defendant, namely Michael, did have reasonable grounds to make that representation.

82 Given that opposition, Counsel for the Romanous’ asked me not to deal further with his informal application, and that, if the Romanous’ were so advised, a formal application would be made for such leave to amend. However, no such formal application has been forthcoming.

83 The Romanous’ have also alleged in paragraph 8A of the second further amended statement of claim that the representation referred to in paragraph 5(b) was:

“made by the First Defendant as aforesaid, knowing [it was] untrue or without (sic) recklessly indifferent to whether [it was] true”.

84 In the course of final submissions, and with the consent of the Salehs, I granted leave to the Romanous’ to delete the word “without” from paragraphs 8A. Thus in this respect, the factual issues that I have to determine are, first, what Michael said and, secondly, whether he knew that what he said was untrue, or whether he was recklessly indifferent as to whether it was true.

85 In his affidavit evidence, Michael said that he spoke to his brother Eddie about having to sell the Property as he did not think he could afford to develop it. He said that Eddie replied:

“Well, I am still interested in developing 165 and maybe if there is a buyer for 163, I

might

have to think about entering into a joint venture with them if we can agree on terms”

86 By contrast, as I have earlier noted, according to Michael’s evidence, he told Harris that Eddie was “keen” to develop the subject properties.

87 As I have earlier found, I do not accept Michael’s evidence that this was the full extent of the representation he made to Harris. However, if I am wrong on that issue, and that was all that Michael said to Harris, then I would also have to consider the evidence given by Eddie on this issue.

88 In his affidavit, Eddie said that when he was told by Michael that Michael had an interested purchaser on the Property, who was a licensed builder and plumber and who was interested in doing the development of the eight townhouses, he replied:

“That’s good. I will leave it with you to talk to him about the development. Do not commit me in any way. Let him know that if a deal can be reached between us I am happy to do a joint venture with him, in the development of the properties.”

89 Under cross-examination Eddie agreed that his attitude was that, provided an attractive proposition was put to him, he would be interested in entering into a joint venture. He accepted that before that could happen, he would first have needed to have a number of matters agreed on, such as the schedule of finishes, the cost of the development, and the identity and details of the developer. He said he had not previously considered dealing with anyone other than his brother Michael.

90 Eddie’s view was that if a deal could be reached, he would be prepared to enter into a joint venture agreement. However, he first wanted to see what the purchaser had to offer. He said he was neither keen nor not keen but was prepared to see what was put to him.

91 The impression that I gained was that, consistently with what he said, Eddie did in fact take a passive role and waited to be contacted by the Romanous’ in late June or early July. He showed no particular enthusiasm, and took no initiative to approach the Romanous’, nor to pursue them to obtain a deal. At its highest, he was prepared to consider such proposal as might be put to him and, if he found it to be satisfactory, he would be prepared to go along with it.

92 As events transpired, when subsequently negotiating with the Romanous’, he showed no eagerness to accept the Romanous’ proposals. According to the evidence given by Eddie, Eddie instructed his own solicitor, namely Mr Soulos of Spanko Soulos & Co., to send an offer to the Romanous’ setting out the terms upon which he was prepared to enter into a joint venture with them. I note that, even accepting this evidence, the first time that Eddie put forward a proposal for the joint venture was in a letter dated 24 August 2004, which was more than three months after contracts had been exchanged.

93 However, I find that the letter of 24 August 2004, which purported to set out his offer, was never sent to the Romanous’.

94 Mr Soulos’ file is in evidence. He also gave oral evidence, which evidence I accept. Based on his file and on his evidence, I am satisfied that on the instructions of Michael or Eddie or both, the letter of 24 August 2004 was not sent to the solicitors for the Romanous’ who, by way of confirmation, say that they never received it.

95 The foregoing behaviour is not what one would expect from someone who is “keen” to enter into a joint venture for the development of his property. There is no evidence that would enable me to find, and I do not find, that Michael believed Eddie was keen to do so. On the contrary, at its highest, Michael had been told by Eddie that Eddie was prepared to enter into a transaction if what amounted to a favourable proposal was made to him.

96 Accordingly, if it was relevant, and if I found that Michael did make the representation that he claims he made, I would find that at the time Michael made such representation, he knew that the representation was untrue, or at least he was recklessly indifferent whether it was true.

97 Nevertheless, the Romanous’ face the following difficulties. First, I have not made a finding that Michael did say to Harris that Eddie was “keen” to develop the subject properties. I recognise that Michael says so in his own affidavit, but there is no corroborative evidence from Harris to that effect. In the absence of such corroborative evidence, I have significant reluctance to accept Michael’s evidence, even if it ultimately turns out to be against his own interest.

, and perhaps more significantly, there is no allegation contained in the second further amended statement of claim alleging that Michael represented that Eddie was “keen” or that such representation was made by Michael knowing it was untrue or recklessly indifferent as to whether it was true. Finally, there is no allegation to the effect that Harris relied upon that more limited form of representation.

(iii) The events leading up to the payment of the $200,000

99 As I have already noted, the Contract was exchanged on 13 May 2004 and contained a 42 day completion period which expired on 24 June 2004. It is common ground that the Contract was not completed on that day.

100 It is also common ground that on 2 July 2004 there was a meeting between Michael, Harris and Joe and that at that meeting Michael asked for $200,000. However, the parties are in total disagreement as to what was said on that occasion.

101 Michael’s evidence was that as the date for completion had passed, he was pressing Harris to complete the Contract in accordance with its terms. His evidence was that he told Harris that he proposed to issue a notice to complete and that if the Romanous’ failed to complete the Contract in accordance with it, he would cause the Contract to be terminated and the Romanous’ would lose their deposit. He claims he told Harris that if the Romanous’ wished to avoid the issue of a notice to complete they would have to pay the sum of $200,000 on account of the purchase price under the Contract, which he claimed Harris agreed to do.

102 Harris denies that anything to that effect was said. His evidence was that Michael told him that a container of shoes, which was to be delivered to Rose’s exclusive shoe shop in Double Bay, had been lost and that the loss was uninsured. Harris claims that Michael told him that those funds were urgently required by Rose to buy further stock, but that the funds would only be required for one month. Harris said that Michael told him the Salehs would pay interest on the loan at six percent for the term of the loan.

103 Before attempting to resolve that conflict of evidence, I note that on the same day, namely on 2 July 2004, Philomena drafted a three page agreement for execution between the Romanous’ and Eddie relating to the proposed joint venture. The document has all the appearance of one which was drafted by a lay person and, not surprisingly, it is drawn in a manner that clearly favours the Romanous’. On its last page, it provides for execution by Eddie.

104 According to Harris, the draft agreement was sent by the Romanous’ to the solicitor then acting for them, namely Monica Kanaan, with instructions to send it to Eddie. The evidence satisfies me that on 8 July 2004, Monica Kanaan sent to Michael a five page facsimile, consisting of Philomena’s three page draft agreement, a document entitled ‘Whom it May Concern’, and a cover sheet which contains the words “Enclosed please find documents requested”. An activity report of Ms Kanaan’s fax machine is also before me, which shows that a fax comprising five pages was sent on 8 July 2004 to fax number 9683 1192, which Michael agreed was his fax number at the time. I am satisfied that the fax was sent to that number. In making that finding, I have not overlooked the fact that the number of pages shown on the cover sheet itself suggest that there were 6 pages comprising the facsimile. I consider that the number “6” was inserted in error.

105 Michael said he did not recall receiving those documents. I should add that he did so only after examining in the witness box the copies of the documents in question (which constitute pages 44 to 49 of Exhibit 17), which copies do not bear any facsimile transmission imprint on any of the pages. He also drew attention to the fact that just because a document is sent, it does not mean that it was received on the other side. I do not accept Michael’s evidence to the effect that he did not recall receiving those documents. In so concluding, I do not overlook what I consider to have been rather unsatisfactory evidence by Michael that domestic problems and relocations may have been the reason for his alleged non-receipt of that document.

106 My rejection of Michael’s evidence is supported by the fact that on 14 July 2004 the Romanous’ received, through their solicitors, Philomena’s draft agreement, purportedly signed by Eddie and bearing date 14 July 2004. The signature, which appears under the typed name “Edmund Saleh” purports to be “E Saleh”. It is quite legible and has superimposed on it some decorative swirls and twirls. The Romanous’ say, and I accept, that they believed the signature to be that of Eddie.

107 Eddie has since denied that it is his signature, which denial I accept.

108 Before going further, it seems appropriate for me to digress to an earlier event and review the evidence relating to the application for development consent dated 4 December 2002, a copy of which is before me as Exhibit 18. That document required the signature of the owners of the properties in question, namely the Property and No. 165. In the place provided for those signatures, there appear the signatures of Michael and Rose, both of which are acknowledged by them as their respective signatures. There is also a third signature appearing as “E. SALEH”, which is again quite legible, and which is also adorned by swirls and twirls which are similar to, albeit not identical with, the signature on Philomena’s draft agreement. Under cross-examination, Eddie said that the signature on the application is not his signature, but conceded that he had left it to Michael to look after the application for development consent for him. He indicated that he could think of no person other than Michael who might have affixed that signature to that application. I accept Eddie’s evidence on this issue.

109 I have compared the signature purporting to be Eddie’s signature on Philomena’s draft agreement with the signature on the application for the development consent. Although they are by no means identical, the two signatures are markedly similar to each other.

110 I have also reviewed the signatures which appear on Eddie’s affidavit sworn in these proceedings. There are five such signatures appearing on that affidavit and they are all very similar to each other. I have compared those signatures with the two signatures purporting to be that of Eddie, one on Philomena’s draft and the other on the application for development consent. While there is some degree of similarity between those of Eddie’s signatures as appear on his affidavit and those that appear on the other two signatures, it is quite apparent that the two lastmentioned signatures are significantly different from those appearing on Eddie’s affidavit and are much more similar to each other than they are to those on Eddie’s affidavit.

111 Based on the above evidence, I find that the signature on Philomena’s draft agreement purporting to be that of Eddie was placed thereon almost certainly by Michael or possibly by Rose, being the only two persons into whose possession that document might have come once it was dispatched by Ms Kanaan on 8 July 2004.

112 This finding is also supported by the evidence given by Harris (which I accept) to the effect that after their meeting on 2 July 2004, Michael telephoned him on two or three occasions asking for the $200,000. Harris says he replied with words to the effect of:

“I can’t. I’m waiting to hear from Eddie”.

113 According to Harris, on receiving on 14 July 2004 Philomena’s draft agreement apparently signed by Eddie, he agreed to provide a cheque for $200,000 payable to the Salehs, but required from Michael a written loan agreement to the effect that the funds would be treated as a loan and would be repaid. Harris says Michael orally agreed to provide such an agreement and, accordingly, a cheque was issued the same day. However, it was stopped by the Romanous’ before it could be cashed.

114 I do not accept the Salehs’ submission that the reason for cancelling the cheque was that the Romanous’ did not have sufficient funds. I accept the Romanous’ evidence that the reason for stopping the cheque was that, on reflection, they wanted something in writing from Michael.

115 My findings relating to the circumstances in which the draft agreement was returned to the Romanous’ with Eddie’s signature having been forged either by Michael or, to his certain knowledge by someone else, has a seriously detrimental effect on Michael’s credibility. I should add, however, that even without my findings on this issue, for the reasons I have earlier stated, I do not accept Michael to have been an honest or reliable witness. My findings relating to that document only go to reinforce the strong impression that I gained that Michael was prepared to say anything that advanced his case so long as he was of the view that his falsehood could not be proved to be such.

116 Returning then to the conversation which took place on 2 July 2004, I find that it was substantially to the effect deposed to by Harris and that the basis upon which the $200,000 was sought and provided was that the Salehs were in urgent need of funds by reason of the loss of the container. I do not need to find whether or not any container was ever lost or for that matter, what the Salehs’ real reasons were for wanting the money. Quite possibly they needed it because they were under financial pressure from their bank. There is some support for this conclusion by the evidence given by Rose to the effect that the bank “wanted the settlement finalised” and was “waiting for settlement”. However this point was not taken up in cross-examination and I am not in a position to make any firm finding in that regard. What I do note, however, is that the Salehs must have been desperate for funds for them to have purported to affix Eddie’s signature to the draft joint agreement.

117 In any event, I do not accept that the Salehs sought the $200,000 on account of the purchase price in order for the Romanous’ to avoid the issue of a notice to complete. Instead, I find that the money was provided as a separate transaction, by way of a loan, for a period of one month.

(iv) The demolition of the house on No. 163

118 There is no dispute that in January 2005 the house then standing on the Property was demolished by Mr Abdul El Masri. The factual dispute between the parties relates only to how that event came about, and particularly on whose instructions it occurred. There is evidence before me that attempts have been made to find Mr El Masri, but that those attempts have been unsuccessful.

119 According to Harris, he only learnt about the demolition of the house at the time it was being demolished when he was speaking to Mr El Masri about another project. His evidence is that by the time he arrived at the Property, the house had been demolished and there was rubble on the ground. Harris denied that he requested Mr El Masri to demolish the house, or that he asked Michael or anyone else to do so. He says that it was a surprise to him to learn that the house had been demolished and that when he confronted Michael about this, he was told that the house had been demolished because “it was damaged and no good”.

120 By contrast, Michael’s evidence was that the house was in a dilapidated condition and that Parramatta Council had issued a works order for it. The works order is not in evidence before me. In his affidavit sworn on 2 July 2007, Michael’s evidence was that before he had Mr El Masri demolish the house, he spoke to Harris and said to him:

“The house is damaged and no-one can live in it. I think we should demolish it.”

121 According to Michael, Harris replied:

“If you do you will save me some money.”

122 In Michael’s subsequent affidavit sworn on 15 September 2008, he recalls the events somewhat differently. He says that he received a phone call from Harris and that Harris said to him words to the following effect:

“Our excavator is apparently demolishing 157, 159 and 161. He has told me that he can demolish the house on 163 now and it would be cheaper because he already has his equipment at 161 Kissing Point Road.”

123 According to Michael’s second affidavit, he replied:

“If it is going to be cheaper ask him to do it.”

124 Although, as I have indicated, I am not prepared to place reliance on evidence given by Michael unless it is corroborated in some satisfactory manner, on this issue I am prepared to accept his version of events in light of other evidence which is before me. While it may be the case that Harris was unaware of precisely when the house was being demolished and that he was surprised to learn that the house was then already in the course of demolition when he spoke to Mr El Masri, I consider it more likely that he had previously been consulted by Michael concerning the proposal to demolish the house and that he had agreed that this should occur. Although I note that Michael has given two different versions of what occurred and what was said, both versions have in common an enquiry by Michael whether Harris agreed to the demolition of the house and the agreement of Harris that this should occur.

125 I also accept that the initiative for the demolition came from Michael, which perhaps explains why, on his own evidence, he paid Mr El Masri an amount of $20,0000 for demolishing the house but has not sought an re-imbursement from the Romanous’.

126 Michael’s evidence is, in the present context, to some extent corroborated by various diary entries made by the Romanous’, as contained in Exhibits 13 and 17. I find it difficult to accept that the entries made in red at the top of the pages in respect of 16, 18 and 20 December 2004 were made on those respective days. Each of those entries are in fact dated 28 January 2007 and I reject the suggestion by Philomena that she may have made a mistake in placing that date on those documents. I cannot imagine that on each of 16, 18 and 20 December 2004, entries were made in a different colour pen, each such entry being dated 28 January 2007. I suspect that those entries were in fact made on 28 January 2007 at the time the Romanous’ were preparing their evidence for this case. Philomena would have been far better to have admitted that to have been the case, rather to attempt to use those entries to corroborate the Romanous’ version of evidence.

127 Further, in the Romanous’ diary entry for Saturday 8 January 2005 there is a reference at 10am in the following terms:

“163 Kissing Point Rd Dundas waiting for Michael Saleh. Michael Saleh paid backhoe driver $300. Want Harris to do the steel fence for demolition”

128 There is a further entry for 5pm on that day which reads:

“pick up Arthur. Went 163 Kissing Point Rd Dundas got steel from next door for the temporary front fence.”

129 Even more telling is the entry for 11 January 2005 at 3pm which, on its face, reads as follows:

“went to 163 Kissing Point Rd clearing of trees not started”

130 However, the words “clearing of trees” appears to have been superimposed on white liquid paper. Underneath that liquid paper, instead of the words “clearing of trees” the word “demolition” appears. This seems to me a rather unsophisticated attempt to hide the fact that the Romanous’ were expecting the demolition to occur before it actually did.

131 In those circumstances, I do not accept the evidence given by Harris to the effect that the demolition of the house came as a surprise to him.

(v) The subsequent conduct of the parties

132 There is yet again a stark conflict between the evidence given by the Romanous’ and the evidence given by the Salehs as to what happened once it became clear that Eddie and the Romanous’ would not reach agreement in relation to the development of the Property with No. 165. According to the Salehs, they had been pressing, and at all times continued to press, the Romanous’ to complete the Contract in accordance with its express terms but that the Romanous’ kept asking the Salehs for more and more time to complete the purchase, having regard to their lack of funds.

133 By contrast, the evidence given by the Romanous’ was to the effect that they were pressing the Salehs for the return of the moneys they had advanced, namely the sum of $267,000, and that it was the Salehs who were seeking the Romanous’ indulgence for more time as they did not have the funds to do so.

134 It is clear that either the Romanous’ or the Salehs (or conceivably both) were telling untruths. The two versions of events cannot be reconciled in any other way.

135 On balance, I accept the evidence of the Romanous’ in preference to that of the Salehs for a number of reasons.

136 First, I have already expressed my view on the credibility of the various witnesses. Applying those conclusions I have much greater faith in the veracity of the Romanous’ than in the veracity of the Salehs.

137 Secondly, because I have accepted Harris’ evidence of what Michael had said to him prior to their entry into the Contract, it follows that the Salehs would have to have realised, at least by that stage, that the moneys would have to be repaid, unless of course they were able successfully to deny having made any promise to that effect prior to the executor of the Contract. It is therefore more likely that the real pressure would have come from the Romanous’ for the repayment of the moneys advanced rather than from the Salehs for the completion of the Contract.

138 Thirdly, Michael agreed that at one point of time he paid the Romanous’ the sum of $2,000 on account of the moneys he owed them for work they had done at his request. He said that he paid that amount because he could not spare any more at that time, conceding that he still owed some money for the work done by the Romanous’. I am prepared to accept that evidence, but consider that it is consistent with the Salehs having reached the conclusion that the monies received from the Romanous’ would have to be repaid. Were it otherwise, and had the Salehs truly believed that they were entitled to retain the $267,000 and that the Contract was enforceable in accordance with its terms, there would have been no point in paying the Romanous’ the sum of $2,000, when it could simply have been off-set against the further amounts that would become payable by the Romanous’ to the Salehs either on completion of the Contract, or by way of damages for its breach.

139 Fourthly, despite the evidence given by Rose of her own magnanimous nature, I did not form the impression that she would have been likely to exercise forbearance to the Romanous’ for such an extensive period of time before making a claim against them. In that context, I note that it was the Romanous’ who commenced these proceedings on 30 August 2006, seeking to recover the monies they paid to the Salehs. Yet it was not until 15 August 2008, almost two years later, when the Salehs filed their cross-claim, and then only for damages, not for an order for specific performance.

140 While no doubt the date on which the Salehs purported to terminate the Contract, namely 31 July 2008, was chosen with an eye on the date on which the development consent expired, I still find it of significance that the Salehs did not take the litigious offensive at a much earlier point of time either to enforce the Contract or for damages if they were genuinely of the view that they were entitled to do so.

141 One subsidiary question that needs resolution is the identification of the time when it could be said that it became clear that Eddie and the Romanous’ would not reach agreement in relation to the development of the two properties. I do not consider that this stage had been reached as at the time the house on the Property was demolished. Based on my earlier finding, Michael had consulted Harris in relation to the proposed demolition, something he need not have done if there was no longer any doubt that the anticipated transaction would not occur. As I have earlier noted, the Romanous’ served a notice of rescission on 23 March 2006, over a year after the house was demolished, and yet nothing had happened. In my view, it was only at that time when all realistic hope of an agreement can be said to have vanished and it became clear that no such agreement would be reached.

(vi) The claim for remuneration for work done

142 In paragraphs 23 to 25 of the second further amended statement of claim, the Romanous’ claimed to be entitled to payment pursuant to invoices issued by them for the reasonable cost of building work performed at the request of the Salehs. The amount claimed is $17,627.50, plus interest. As I have already noted, there is no dispute that the work was performed and that it was performed in a satisfactory manner.

143 As a result of discussions between the legal representatives of the parties, there has now been a measure of agreement reached in relation to this issue. Subject to the defence of set-off, the Salehs agree that there is an amount of $4,776 payable to the Romanous’ in respect of work performed by them. The only further claims that the Romanous’ now make (but the Salehs dispute) is the sum of $12,000, bringing the amount claimed by the Romanous’ to $16,776.

144 The $12,000 in dispute between the parties is made up as follows:

(a) the Salehs claim that the Romanous’ must give credit for the $2,000 paid to them by Michael Saleh in circumstances to which reference has already been made. By contrast, the Romanous’ contend that the sum of $2,000 was paid on account of interest on the $200,000, and not on account of the amount owed for work performed; and

145 As to the first of those items, namely the sum of $2,000, I am prepared to accept the case put forward on behalf of the Salehs, namely that the said sum was paid in partial satisfaction of the amounts owing for work performed. I do so not so much in reliance upon the evidence given by Michael, but because while undoubtedly there were disputes and uncertainties concerning whether or not the Contract would have to be performed, there appears to have been no dispute between the parties that monies were owing by the Salehs to the Romanous’ for work performed.

146 In light of the conclusion that I have reached in this case, this finding does not affect the ultimate liability of the parties.

147 As to the sum of the $10,000, it is clear that there was a considerable amount of negotiation between Michael and Harris as to the purchase price to be paid for the Property. It is also clear that Michael wanted the purchase price to be $680,000, which Harris negotiated down to $670,000. According to Harris, this was because he told Michael that the property was not worth that much and that he would not be prepared to go above $670,000. He claims that Michael agreed. By contrast, Michael’s evidence is to the effect that he agreed to the reduction to $670,000 on the basis that the Romanous’ would not charge for work performed by them at the Saleh’s request on the property at 11/150 Old South Head Road, Bellevue Hill, which work was performed in April 2004 and which was estimated by both parties to be around $10,000.

148 Although the contrary was put to him in cross-examination, Harris firmly rejected this suggestion, and maintained that the $10,000 reduction in the purchase price was the result of negotiations having nothing to do with the work performed at 11/150 Old South Head Road.

149 In the absence of other corroborative evidence, I am not prepared to accept Michael’s evidence on this point. I do not consider that the correspondence between the solicitors, to which reference has been made, constitutes relevant corroboration. Nor am I prepared to place any particular emphasis on the fact that invoice number 100, which relates to the said property, was only issued on 13 February 2006. It was only about then, and not earlier, that it became clear that the joint venture was not going to proceed and that, more than likely, there would be litigation between the parties. I should also add that the other invoices relied upon by the Romanous’ in relation to work performed were also issued on the same day, namely 13 February 2006, even though the works in question had been performed in September 2004 and January 2005.

150 Accordingly, I find that the reduction from $680,000 to $670,000 in the purchase price for No. 163 was not the consequence of the Romanous’ agreeing to forego their claim for remuneration for work done on the property at Old South Head Road. Accordingly, they are entitled to the said sum of $10,000 in addition to the agreed amount of $4,776, bringing the total to $14,776.

151 Having regard to the date of the invoices in question, in my opinion interest thereon can also conveniently be calculated from 23 March 2006.

Issues of law

152 The Romanous’ put their case in various ways. These include submissions to the effect that:

(b) the Salehs breached their obligations under a collateral contract; and

(c) the Salehs were guilty of making a fraudulent representation.

153 There are also claims based on abandonment, frustration, innocent misrepresentation, misleading and deceptive conduct, repudiatory breach of the Contract, relief against forfeiture in relation to the $200,000, relief against forfeiture under section 55(2A) of the Conveyancing Act in relation to the $67,000, claims based on unjust enrichment and a claim in debt for the recovery of the $200,000 said to have been advanced by way of a loan. As I have already noted, they also claim remuneration for building work performed at the Salehs’ request.

154 In each case, the Romanous’ also seek an order for interest and costs.

155 I do not propose to deal with all of the ways in which the Romanous’ put their case. Nor do I propose to deal with the legal issues raised by the cross-claim, including the issue relating to the assessment of damages. Rather, I propose to deal first with the submission made on behalf of the Romanous’, by virtue of which I propose to uphold their claim, and then deal, albeit more briefly, with two of their other submissions in view of the care and detail in which they have been put forward by the parties’ respective Counsel.

(a) Estoppel

156 It is on this basis that I propose to uphold the Romanous’ claim.

157 The seminal case in this area is the decision of the High Court in Waltons Stores (Interstate) Limited vMaher (1988) 164 CLR 387.

158 In that case, Waltons entered into negotiations with Mr and Mrs Maher with a view to Waltons leasing certain property owned by the Mahers’. The Mahers proposed to demolish existing buildings on the site and erect a new building suitable for Waltons’ purposes. Waltons’ solicitors sent a form of lease to the Mahers’ soliticitors and the Mahers commenced to demolish the old building on the site. The solicitors for the Mahers so informed the solicitors for Waltons and said that it was essential that the agreement be concluded within the next day or so because otherwise the Mahers would not be able to organise labour and order supplies as the suppliers shut down for Christmas.

159 The solicitors for Waltons told the solicitors for the Mahers that they had received verbal instructions from Waltons to the effect that the amendments that had been suggested on behalf of the Mahers were acceptable and that they would submit to the Mahers’ solicitors an amended copy of the lease. They said that in the meantime they would get formal instructions from Waltons. On the same day, the solicitors for Waltons did send to the solicitors for the Mahers an amended lease with a covering letter stating that they would let them know the next day whether Waltons disagreed with any of the amendments incorporated in the re-draft. No such information having been received, the solicitors for the Mahers forwarded to the solicitors for Waltons “by way of exchange” the amended form of lease, executed by the Mahers. Thereafter the Mahers commenced to demolish another part of the building.

160 Subsequently, Waltons had second thoughts about proceeding with the lease and having been advised that they were not bound to proceed, instructed their solicitors to “go slow”. The Mahers completed the demolition and commenced to build a new building in accordance with plans earlier approved by Waltons. Only subsequently did the solicitors for Waltons write to the solicitors for Mahers saying that Waltons did not intend to proceed with the lease. Until that time, there had been no further communication from the solicitors for Waltons, who retained the copy of the lease signed by the Mahers.

161 When the dispute finally came before the High Court, at 399 Mason CJ and Wilson J said:

Promissory estoppel certainly extends to representations (or promises) as to future conduct: Legione

(CLR at 432). So far the doctrine has been mainly confined to precluding departure from a representation by a person in a pre-existing contractual relationship that he will not enforce his contractual rights, whether they be pre-existing or rights to be acquired as a result of the representation: Ajayi v Briscoe [1964] 1 WLR 1326 at 1330 ; All ER 556 at 559; Bank Negara Indonesia v Philip Hoalim [1973] 2 MLJ 3 at 5; State Rail Authority of New South Wales v Heath Outdoor Pty Ltd

(1986) 7 NSWLR 170 at 193, per McHugh JA. But Denning J in Central London Property Trust, Ltd v High Trees House, Ltd [1947] KB 130 at 134–5, treated it as a wide-ranging doctrine operating outside the pre-existing contractual relationship; see the discussion in Legione

(CLR at 432–5). In principle there is certainly no reason the doctrine should not apply so as to preclude departure by a person from a representation that he will not enforce a non-contractual right: Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd [1968] 2 QB 839 at 847, per Donaldson J; Attorney-General v Codner

[1973] 1 NZLR 545 at 553.

162 After reviewing a number of authorities, their Honours continued, at page 404:

“One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has “played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it”: per Dixon J in Grundt, at 675; see also

, at 547. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption. “

163 Their Honours finally concluded their review of the doctrine of promissory estoppel in the following terms at page 406:

“The foregoing review of the doctrine of promissory estoppel indicates that the doctrine extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable. As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. Humphreys Estate

suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party.”

164 Brennan J concluded in the following terms on pages 428-429:

“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed or expected that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.“

165 The other members of the Court, namely Deane and Gaudron JJ took similar views.

166 In my opinion, the principles enunciated by the High Court in Waltons apply in the present case, entitling the Romanous’ to the relief they seek.

167 I turn first to the formulation of the elements of promissory estoppel listed by Brennan J (as his Honour then was), in the passage which I have set out above at [165].

168 In the present context, the first requirement listed by his Honour is that the plaintiff must prove that he expected that a particular legal relationship would exist between the parties and that the other party would not be free to withdraw from the expected legal relationship. In the present case, based on my findings, I am satisfied that Harris expected that the Romanous’ would be entitled, as a matter of contractual right, not to proceed with completion of the Contract in the circumstances stated by Michael, and that the Salehs would not be free to withdraw that contractual right. In other words, I am satisfied that as at the time the Contract was entered into on 13 May 2004, Harris expected that the Romanous’ would be entitled to have their deposit returned to them and for them to not have to complete the Contract if Eddie did not want to build on No. 165 or if they did not enter into a partnership with him.

169 The second requirement that the Romanous’ have to prove is that it was the Salehs that induced them to adopt this expectation. I have already found that Harris’ expectation of having this right was the result of the representation or promise made to him by Michael.

170 The third requirement that must be proved is that the Romanous’ acted in reliance on that expectation. In my opinion that requirement is also satisfied in that I find that the Romanous’ entered into the Contract on that expectation. I accept Harris’ evidence in that respect, which evidence I have set out above at [61]. It has been submitted on behalf of the Salehs that the representations were made some considerable time before the Contract was entered into and that its effect, if any, had evaporated by the time the parties came to executing the Contract.

171 I do not agree with that submission. In my opinion, notwithstanding the fact that the parties do not appear to have informed their respective solicitors that such promises or representations had been made by Michael, I am satisfied that those assurances were paramount in Harris’ mind when he and Philomena signed the Contract. There is no evidence whether Michael had informed Rose of the representation that he had made and the evidence suggests that Harris did not so inform Philomena. However, I find that in respect of all of the transactions in this matter, Michael was the agent of Rose and that Harris was the agent of Philomena. Further, I find that at a discussion involving Michael, Harris and Philomena, which took place subsequent to the Contract being entered into, it was still foremost in Harris’ mind, and indeed in Michael’s mind, that such a promise had been made, and was expected to be complied with.

172 The Salehs also submitted that even if the representations that I have found were made had been relied upon, such reliance was not reasonable because it departed from any reasonable view of the limits and scope of what a reasonable person would understand to have been conveyed.

173 Again, I do not accept that submission. In the understanding of a reasonable person, the representations in question would have reasonably conveyed that the vendor would not insist on the contract going ahead if the events the subject of the representations did not occur.

174 As I see it, the Salehs were keen to sell the Property given that for whatever reason, they no longer wished to develop it, and certainly they could not develop it without the co-operation of Michael’s brother, Eddie.

175 The fourth requirement listed by Brennan J is that the court must be satisfied that the Salehs knew or intended that the Romanous’ act in reliance on that expectation. It is clear to me, and I find, that that was indeed Michael’s intention when making the promise or representation to Harris.

176 Then fifth requirement requires proof that the Romanous’ action in entering into the Contract will occasion them detriment if the Salehs were entitled to withdraw from what Michael had represented. In my opinion that requirement is also satisfied in that if the Salehs are found to be entitled not to honour the promise or representation made by Michael, the Romanous’ will have purchased the Property at a price greater than its market value, something they would not have done had it not been for the promise made by Michael.

177 Finally, the sixth requirement is also satisfied in that the Salehs have sought not to fulfil the expectation they created in the Romanous’ by refusing to permit the Romanous’ to withdraw from the Contract and have not been prepared to repay the deposit.

178 In my opinion, the formulation of the doctrine of promissory estoppel as stated by Mason CJ and Wilson J at pages 404 and 406 (which I have set out above [163] and [164]) is also satisfied. Having regard to my findings, in the present case, it was Michael whose representations Harris accepted, leading him to believe that the Romanous’ would be permitted to bring the Contract to an end and to recover their deposit. In my opinion, it would be unfair and unjust if Michael were left free to ignore that promise. Indeed, in my opinion, it would be unconscionable for the Salehs to renege upon the representation or promise made by Michael to Harris in order to induce him and Philomena to enter into the Contract on the terms set out therein.

179 In those circumstances, I consider that the Salehs are estopped from denying their obligation arising from Michael’s promise to repay the moneys advanced by the Romanous’ and are also estopped from enforcing the Contract and from suing the Romanous’ for its breach.

180 In those circumstances, it does not greatly matter whether the $200,000 paid by the Romanous’ to the Salehs in July 2004 was paid on account of the purchase price under the Contract or as a separate loan transaction. Either way, it is repayable by the Salehs to the Romanous’. The only difference is the rate of interest which is payable and the date from which such interest began to accrue.

181 As I have said above, it is probably unnecessary for me to consider the various other bases upon which the Romanous’ have sought to recover the funds payable by them. However, I propose to deal briefly with two of those other grounds.

(b) Collateral contract

182 The Romanous’ also alleged that the pre-contractual representations that I have found were made to Harris by Michael constituted a collateral contract between the parties. The Romanous’ alleged that they are entitled to damages for breach of that collateral contract, the damages being the aggregate of amounts of $67,000 and $200,000, plus interest.

183 This formulation of the Romanous’ claim suffers from serious difficulties. In order for the alleged collateral contract to be enforceable, it must be supported by consideration. What renders the contract “collateral” is that the consideration for its enforceability is the promisee’s entry into the principal agreement. In the present case, the manner in which the Romanous’ put their case is that it was in consideration of the representation made by Michael that they entered into the Contract.

184 However, the authorities are unanimous to the effect that a provision contained in the collateral contract cannot be enforced insofar as it is inconsistent with a provision of the principal contract. In Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 at 147-8 Isaacs J said:

“The truth is that a collateral contract, which may be either antecedent or contemporaneous (per Erle C.J. and Byles J. in Lindley v . Lacey [17 C.B. (N.S.) at 586 and 587] and per Cockburn C.J. in Angell

. Duke [L.R. 10 QB at 177]), being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the

; consequently where the main contract is relied on as the consideration in whole or part for the promise contained in the collateral contract, it is a wholly inconsistent and impossible contention that the other party is not to have the full benefit of the main contract as made; and the appellant's first contention is therefore unsound. If in any case the Court finds two enforceable agreements executed in such circumstances that one is intended to affect the other, no doubt such effect will be given to them as the superimposing operation of the governing contract requires; but in that case it is not collateral, but dominant. (See the observations of Fry J. in Gartside v . Silkstone and Dodworth Coal and Iron Co

[21 Ch D 762 at 767–8].)”

185 Subsequently, in Maybury v Atlantic Union Oil Co. Ltd (1953) 89 CLR 507 at 517, Dixon CJ said:

“A collateral agreement made in consideration of a main agreement cannot effectively subsist unless it is consistent with the main agreement. Once an agreement is made in writing it is treated, unless the parties are shown otherwise to intend, as the full expression of their obligations. If it is established that the writing was intended to contain only part of a fuller agreement it may be otherwise. That, however, is not the present case. But it may be established that an entirely separate agreement was made by the parties. One of them may give a collateral promise in consideration of the other entering into the principal agreement. But if such a collateral agreement is to have effect as a contract it must be consistent with the provisions of the main agreement, the making of which by the other party provides that consideration. If the promise sought to modify, control or restrict the principal agreement it would detract from the very consideration which is alleged to support the promise.”

186 The above principles were applied by the High Court in Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 and by the Court of Appeal in Esanda Limited v Burgess [1984] 2 NSWLR 139 and again in Nassif v Fahd [2007] NSWCA 269; (2007) 13 BPR 24,999.

187 In the present case, there is a clear inconsistency between the provisions of the alleged collateral contract whose terms include the representations that I have found were made by Michael, and the provisions of the Contract, to which that agreement is collateral.

188 The Contract required completion to occur within the relevant 42 day period. That requirement was unconditional. By contrast, the collateral contract provided that the Romanous’ did not need to complete the Contract if Eddie did not want to build or if the Romanous’ did not go partners with him. It would have been an implied term of the collateral contact that completion did not need to occur unless and until one or other of those events transpired. That provision seems to me to be inconsistent with the provisions of the Contract and, in accordance with established principles, the alleged collateral contract submission must fail.

(c) Fraudulent misrepresentation

189 In paragraph 8A of the second further amended statement of claim, the Romanous’ allege that the representations referred to in paragraph 5 of that document and the provision of the statutory declaration referred to in paragraph 7 were made by Michael, knowing they were untrue or recklessly indifferent to whether they were true.

190 I have already dealt with the representation referred to in paragraph 5(c) of the second further amended statement of claim and have found that such representation had been made by Michael. That finding is central to my conclusion based on estoppel, but for the purposes of paragraph 8A, which alleges of fraudulent misrepresentation, I do not see how that representation could be said to be true, or for that matter, to be false. It is in the nature of a promise relating to a future matter.

191 In the same context I have dealt with Michael’s evidence to the effect that he merely said that Eddie was “keen”. If I had accepted that evidence, and if there had been an appropriate pleading to that effect, I would have been prepared to find that those representations were made by Michael knowing they were untrue or recklessly indifferent whether they were true. However, for the reasons I have earlier indicated, that claim is not pleaded and, in any event, I am not satisfied that that is what Michael represented in the first place.

192 So far as the representation alleged in paragraph 5(b) is concerned, namely that Eddie would join with the Romanous’ in a development of the properties, that too is a representation as to a future matter, and as I have already noted, there is no allegation to the effect that Michael (as distinct from Rose) had no reasonable grounds for making it. In those circumstances, the onus rests upon the Romanous’ to establish both that the representation was made and that it was made by Michael knowing that it was untrue or recklessly indifferent to whether it was true.

193 I am not satisfied that Michael made such a representation. The representation I find he did make is that contained in paragraph 5(c). The evidence before me does not establish that he made a positive representation to the effect that Eddie would join with the Romanous’ in such a development. The thrust of Michael’s representation was not that certain things would happen; rather it was to the effect that if those things did not happen, the Romanous’ would be entitled to walk away from the Contract.

194 Similarly, I am not satisfied that Michael made the representation referred to in paragraph 5(a) of the second further amended statement of claim, namely that he had authority to represent and bind Eddie in negotiations. Nor, at least in my tentative view, did the statutory declaration, on its true construction, so state.

195 For those reasons, I do not consider that the Romanous’ claim as framed on the basis of a fraudulent misrepresentation can succeed.

(d) Other issues.

196 As I indicated above, it is unnecessary for me to deal with all of the other bases upon which the respective parties’ claims were made. Hopefully I have made findings on sufficient of the significant factual issues, as may be required to determine the other bases as well, should it become relevant to do so.

Orders

197 Accordingly, I propose to make orders to the following effect:

(a) an order that the Salehs repay to the Romanous’ the sum of $67,000 together with interest thereon pursuant to section 100 of the Civil Procedure Act from 23 March 2006 to the date of payment;

(b) an order that the Salehs repay to the Romanous’ the sum of $200,000, with interest thereon at the rate of six percent per annum from 26 July 2004 to the date for payment;

(c) an order that the Salehs pay to the Romanous’ the sum of $14,776 together with interest thereon pursuant to section 100 of the Civil Procedure Act , from 23 March 2006 to the date of payment;

(d) an order that the Salehs’ cross-claim be dismissed; and

198 I direct the parties to attempt to agree on the amounts involved and to provide to my Associate within 7 days a form of orders giving effect to my proposed orders. I will then make those orders in Chambers. Insofar as they are unable to agree, I direct the parties to provide to my Associate likewise within 7 days their respective draft orders, together with their submissions in support.

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CITATION:	Romanous v Saleh [2009] NSWSC 1166
HEARING DATE(S):	3/06/09, 4/06/09, 5/06/09, 28/08/09, 31/08/09, 1/09/09, 30/10/09
JUDGMENT DATE :	20 November 2009
JUDGMENT OF:	Forster J at 1
DECISION:	See paragraphs 197 to 198 of the judgment.
CATCHWORDS:	Sale of land for development in conjunction with neighbouring property - neighbouring property owned by male vendor's brother - representations made to purchasers by male vendor prior to contract relating to brother's attitude towards proposed development - substantial factual disputes as to what was said and other matters - promissory estoppel - collateral contracts - fraudulent representations - judgment for purchasers.
LEGISLATION CITED:	Civil Procedure Act 2005 Conveyancing Act 1919
CATEGORY:	Principal judgment
CASES CITED:	Esanda Limited v Burgess [1984] 2 NSWLR 139 Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 Maybury v Atlantic Union Oil Co. Ltd (1953) 89 CLR 507 Nassif v Fahd [2007] NSWCA 269; (2007) 13 BPR 24,999 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
PARTIES:	Plaintiffs: Harris Romanous and Philomena Romanous Defendants: Michael Saleh and Rose Saleh
FILE NUMBER(S):	SC 4516/06
COUNSEL:	Plaintiffs: F. Kalyk Defendants: D. Smallbone, D.W. Rayment
SOLICITORS:	Plaintiffs: Thurlow Fisher Lawyers Defendants: Woods & Day Solicitors