Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2)
[2012] VSC 239
•8 June 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST C
S CI 2011 5977
| SUNLAND WATERFRONT (BVI) LTD SUNLAND GROUP LIMITED (ACN 063 429 532) | First Plaintiff Second Plaintiff |
| v | |
| PRUDENTIA INVESTMENTS PTY LTD (ACN 091 390 742) HANLEY INVESTMENTS PTY LTD ANGUS JOHN LUXMOORE REED MATTHEW JAMES JOYCE | First Defendant Second Defendant Third Defendant Fourth Defendant |
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JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 25, 28 - 30 November; 1, 5 – 8 and 12 December 2011; 27, 30 and 31 January; 1 and 2 February; and 7 March 2012 (by final written reply submissions); | |
DATE OF JUDGMENT: | 8 June 2012 | |
CASE MAY BE CITED AS: | Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 239 | |
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TRADE PRACTICES – Misleading or deceptive conduct – whether any representations were made by the Defendants in respect to the status, purchase and development of land in Dubai – execution of contract and payment of a fee by the Plaintiff – whether any conduct of, including any representations, of the Defendants was misleading or deceptive or otherwise in breach of statutory prohibitions - whether the Plaintiff relied on any conduct including misrepresentations to its detriment – causal connection between the conduct of the Defendants and the misapprehension of the Plaintiff – no reliance by the Plaintiffs on the alleged misrepresentations – whether First to Third Defendants a ‘person involved’ in a contravention for the purposes of accessorial liability – failure of Plaintiffs to establish loss or damage – Gould v Vaggelas (1985) 157 CLR 215; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; ACCC v Dukemaster Pty Ltd [2009] FCA 682 – Trade Practices Act 1974 (Cth) ss 5(1), 6(2), 52, 53, 53A, 75B, 82 – Fair Trading Act 1999 (Vic) ss 9, 12, 158, 159.
TORTS – Deceit – jurisdiction and choice of law - whether alleged representations were fraudulent – whether elements of deceit established - no evidence to support claim of deceit – Magill v Magill (2006) 226 CLR 551 – United Arab Emirates Civil Code (Law No. 5 of 1985).
CORPORATIONS – Corporate governance – Plaintiff’s announcements to Australian Stock Exchange (“ASX”) – Plaintiff’s failure to disclose market sensitive information in announcements to ASX – Board reporting.
EVIDENCE – Reliability of Plaintiffs’ witnesses – application of Jones v Dunkel (1959) 101 CLR 298 – application of Browne v Dunn (1893) 6 R 67 (HL) – Evidence Act 2008 (Vic) s 140.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr G.A. Thompson SC with Dr S. Monks | Thomsons Lawyers |
| For the First, Second and Third Defendants | Mr J.T. Rush QC with Mr H.R. Carmichael | Freehills |
| For the Fourth Defendant | Mr P.W. Collinson SC with Mr N.D. Hopkins | Norton Rose |
TABLE OF CONTENTS
Background 3
Evidence before the Court 5
Sunland’s misrepresentation claims 7
The D17 transaction 19
Land dealings and land information in Dubai 19
15 August 2007 27
16 – 20 August 2007 42
Late August and early September 2007 64
12 September 2007 80
13 September 2007 111
16 September 2007 119
17 September 2007 125
18 September 2007 126
Feasibility on 17 and 18 September 2007 135
Final Implementation Agreement or MOU 136
Nature of proposed premium 137
Negotiation of the SPA 144
Introduction of Hanley 144
The agreement with Hanley 147
Execution of the SPA for Plot D17 148
Payment under Implementation Agreement, the MOU 151
Communications involving Joyce 152
Och-Ziff 152
Evidence as to representations 155
Falsity of representations 156
Conclusions on representations 162
No reliance by Sunland 167
Alleged reliance on representations between 16 August and 12 September 2007 170
Alleged reliance on the representations after 12 September 2007 185
Alleged reliance on the Representations on 18 September 2007 192
Alleged reliance on Representations and the Hanley Representations 193
Reliance on Representations from 26 September 2007 and in relation to the Implementation Agreement or MOU 194
Administration Fee for Land Transfer 199
General position of Sunland 201
Conclusion 206
Reliability of Sunland witnesses 207
Brown’s evidence of introduction to Plot D17 208
12 September 2007 conversation and email 209
The bribery denial 211
Brown report for Eames 214
Abedian 215
The Joyce email of 16 August 2007 216
Reservation agreement 217
Contact with the Dubai prosecutor 220
The Plot D17 transaction 221
The price of Plot D17 222
The role of Abedian and Brown 222
Corporate governance issues for Sunland 225
ASX announcements 226
Board reporting 232
Jones v Dunkel 234
Trade Practices Act 238
Causation and reliance 244
Sections 53(aa), 53(g) and 53A of the TPA 251
Accessorial liability under the TPA 254
Jurisdictional issues 255
Extra territorial claims 255
Section 5(1) - extra territorial application of the TPA 256
TPA sub-s 6(2)(a)(i) – representations and Hanley Representations were made in trade or commerce between Australia and places outside Australia 261
TPA sub-s 6(3) – representations using telegraphic or telephonic services 263
Trade or commerce 266
Jurisdiction under the Victorian Fair Trading Act 271
Tortious liability in deceit 275
Jurisdiction and choice of law 275
Loss and damage 282
Bases of claim 282
No Transaction Case 286
Transaction Case 289
Joint Venture Case 290
Loss of reputation 290
Summary 290
Other matters 292
Conclusion 292
HIS HONOUR:
Background
This proceeding was cross-vested to the Supreme Court of Victoria from the Federal Court of Australia where it was being managed in that Court by Logan J in Brisbane. During the course of its management by the Federal Court of Australia, a variety of applications were made to and determined by Logan J and, in one instance, on appeal to the Full Court of the Federal Court of Australia. It is not necessary now to say more about the nature of these applications and their resolution as they did not leave any live issues before this Court on the cross-vesting of the proceeding. The trial in this proceeding was conducted in this Court, following cross-vesting. There were some preliminary applications prior to the commencement of the trial and some further applications made during the course of the trial - with respect to discovery, the adequacy of discovery and the production of documents (in redacted or non-redacted form) and some pleadings issues. During the course of the trial, an application was made by the first, third and fourth defendants, Prudentia Investments Pty Ltd (“Prudentia”), Mr Angus Reed (“Reed”) and Mr Matthew Joyce (“Joyce”), respectively to restrain the second plaintiff, Sunland Group Limited (“Sunland”) from taking any steps to prosecute the civil claim for compensation or civil remedy commenced by notice filed by Sunland in Dubai criminal proceedings number 2130/2009 against Reed and Joyce and from taking any steps to join Prudentia as a party to these civil proceedings. This application, which was made by two separate summonses, was heard on 19 December 2011 and judgment delivered on 25 January 2012.[1] The applications were successful and the anti suit injunctions, as sought, were granted.
[1]Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 1) [2012] VSC 1.
These proceedings relate to a piece of land situated in Dubai in the United Arab Emirates (“UAE”). This land, known as “Plot D17”, is a lot in a land development site known as “the Dubai Waterfront”. At the time Plot D17 was being created in the planning and development of the Dubai Waterfront, the Dubai property market was, as it was said, very “hot” and there was a great deal of speculation in land with plots being bought and sold with significant financial gains being made by buyers and sellers, whether or not the plot had actually been developed or was to be developed by a particular buyer or subsequent purchaser. The Dubai authorities were, it seems, somewhat concerned at the degree of land speculation, both generally and insofar as it may have inhibited the process of actual land development and building on these plots. Plot D17 remains a piece of sand near the shore of The Gulf.
Nakheel PJSC (“Nakheel”), is one of the major Dubai government development entities and the creator of several large scale projects, including the Palm Islands, the Dubai Waterfront and the World Islands. For each project Nakheel establishes a master developer entity which owns the land and arranges plot sales and infrastructure installation. Nakheel’s corporate entity for the project known as “The Dubai Waterfront” was Dubai Waterfront LLC (“DWF”). Joyce was the managing director of DWF in 2007. Other individuals with whom the Sunland entities dealt were Mr Jeff Austin (“Austin”), who was, in 2007, the Director – Project Control of DWF, Mr Anthony Brearley (“Brearley”), who, in 2007, was Senior Legal Counsel of DWF and Mr Marcus Lee (“Lee”), who, in 2007, was the Director Commercial Operations of DWF. Both Joyce and Lee are currently the subject of criminal proceedings in Dubai. Reed was, in 2007, the Managing Director of Prudentia and also a director of Hanley Investments Pte Ltd (“Hanley”). Reed is also currently the subject of criminal proceedings in Dubai. For convenience Prudentia and Hanley are referred to from time to time as “the Prudentia parties”.
The plaintiffs, the Sunland parties, are, with respect to the first plaintiff, Sunland Waterfront (BVI) Ltd (“SWB”), a company incorporated in the British Virgin Islands and owned by the second plaintiff, Sunland. Sunland is a public company which is listed on the Australian Stock Exchange (“ASX”). Mr Soheil Abedian (“Abedian”) is currently the Chairman of Sunland. In 2006, he moved to Dubai and took up the position of Managing Director of Sunland Group (Dubai branch), but was, in any event, employed by Sunland Group Limited. He is also a director of SWB. Mr David Brown (“Brown”) arrived in Dubai in March 2006 to establish a Sunland branch in the Emirate, in the role, of “International Design Director”. Brown continued in that role and became the Chief Operating Officer for Sunland Group (Dubai branch) on 13 September 2007. His main area of work and responsibility was the studying of the viability of projects. Brown worked closely with and reported to Abedian, who confirmed in evidence that “…almost everything that [Brown] did that involved significant events or decision making, he would always check with [Abedian]”.[2] The documentary evidence, particularly emails, supports this position. The Sunland parties plead that SWB was introduced by Sunland into the transaction for the purchase of Plot D17 on 14 September 2007,[3] though it is said that it was actually introduced on the preceding day.[4] In any event, SWB had no role prior to that date. Even after its introduction, SWB was treated as a wholly owned corporate vehicle of Sunland’s and it had no independent existence in the present context in any real sense. Consequently, and against this background, I have, unless indicated to the contrary, referred to the relevant Sunland party or parties simply as “Sunland”. Also, the word “it” where used with reference to Sunland connotes the singular or plural in such references, as appropriate.
[2]Transcript, p 300.33 - .35.
[3]Second Further Amended Statement of Claim, paragraph 26.
[4]Court Book, SUN.001.001.0280; cf Transcript, p 190.39 - .40.
In more recent years, the Dubai authorities became concerned about, what may be termed, the “propriety” of a number of land and associated transactions, particularly involving Dubai government entities such as Nakheel and DWF. As a result, investigations were commenced by Dubai authorities in relation to allegations of bribery in or associated with these transactions. As Logan J found in the course of these proceedings before the Federal Court, the Sunland entities were themselves under investigation by Dubai authorities in this context,[5] a position which was reinforced by the evidence before this Court, in the course of the trial.
[5]Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) [2010] FCA 312, at [39].
Evidence before the Court
The case was conducted on the basis of documentary and oral evidence. The documentary evidence is contained in an extensive electronic court book and includes various witness statements, letters, emails and other documents. The oral evidence is that solely of Sunland witnesses as the defendants chose to proceed immediately to closing addresses having heard the Sunland case. The defendants did, however, tender documents in the course of the Sunland case and rely upon various documents in the court book.
It was made clear at the commencement of the trial, and re-affirmed on a number of occasions during the trial, that the documents contained in the court book would stand as evidence in the case without the need to undertake any formal, specific, tender process but that I would have no regard to any documents contained in the court book unless they were referred to and relied upon, specifically, in the closing submissions of one or more of the parties. It was made clear that this arrangement was subject to the right of any party to object to any particular document or documents being treated as being part of the evidence on this basis. The arrangement did not preclude the tender of further documents and the objection to parts of witness statements sought to be relied upon – both of which occurred during the trial.
In the course of the closing submissions stage of the trial, Sunland submitted that this arrangement was not the basis upon which documents were to be brought into evidence and objected to the defendants relying upon documents the authenticity of which was not strictly proved.[6] In this respect, Sunland made particular reference to the list of documents Sunland claimed to be false.[7] Sunland also provided lists of various documents which it says it tendered at various times, also acknowledging the tender of documents on behalf of Joyce and the tender of documents during the course of cross-examination of the Sunland witnesses.[8]
[6]See Plaintiffs’ Address (1 February 2012), paragraphs 7, 8 and 12; and see paragraph 14 as to the statements of witnesses which were tendered by Sunland but not challenged by cross-examination.
[7]Plaintiffs Reply to the Supplementary Written Submissions of the Defendants, Annexure A – Sunland submitted that the documents highlighted in green were false documents; also see Exh A.
[8]See Plaintiffs’ Address (1 February 2012), paragraphs 6 to 8.
As I said in the course of discussion of the state of the evidence in the closing stages of the trial, I understood the provision of these lists of documents by Sunland to be consistent with the evidentiary arrangements – being convenient lists of documents upon which it intended to rely and which would be referred to and relied upon in its closing submissions in accordance with the arrangements indicated previously. It was clear from these discussions that the defendants were of the same view. In any event, the question whether there are other documents in evidence and to be considered for the purpose of these reasons for judgment does not arise as a result of the position I have reached in relation to this case. This is because any documents referred to in these reasons that Sunland disputes and says “have not been proved or tested in cross-examination”[9] have not been relied upon to support any critical findings. In other words, excluding such documents from the evidence would not have affected the findings below. Similarly, no reliance has been placed in these reasons for judgment, on any basis, upon any document that Sunland alleges is false or a forgery and, in any event, excluding such documents from the evidence would not have affected the findings below.
[9]Plaintiffs Reply to the Supplementary Written Submissions of the Defendants, paragraph 6.
Sunland’s misrepresentation claims
In general terms, Sunland alleges that during 2007, Reed, a director of Prudentia and Hanley, and Joyce, the managing director of DWF, either as principal or as a “party involved”, made various representations concerning Plot D17. In reliance on the representations, it is alleged that SWB entered into an agreement with Prudentia which materially provided for the payment of a “consultancy fee” of AED44 million in consideration for which Prudentia agreed to transfer its right to negotiate and enter into a plot sale and purchase agreement with DWF for the acquisition of Plot D17 (“the Prudentia Agreement”). Some time later, following a decision by Prudentia to incorporate a subsidiary, Hanley, “as part of expanding its business into Asia”, SWB came to discharge its agreement with Prudentia and enter into a fresh agreement with Hanley (“the Hanley Agreement”). On 26 September 2007, SWB signed a sale and purchase agreement with DWF for the purchase of Plot D17 for a price of AED 120 per square foot. On 1 October 2007, Sunland authorised the release of a cheque payable to Hanley in the sum of AED 44,105,780 which Hanley then negotiated to its credit. Reed is alleged to have been an agent of Hanley, who was seized with the knowledge of the representations and their falsity.
More particularly, the basis of the claim by Sunland in this proceeding is that representations were made to Sunland concerning the status of Plot D17 and that those representations were false and misleading. As indicated previously, SWB was introduced into the impugned transaction on 13 or 14 September 2007.[10]
[10]See above, paragraph 4.
With respect to the claims against Reed, Sunland pleads that he made representations to Brown on two occasions. The first occasion was a telephone call on 16 August 2007[11] during which Reed is alleged to have told Brown words to the effect that:
[11]Second Further Amended Statement of Claim, paragraph 13.
(a) Reed was in Melbourne and would be flying to Dubai on Sunday;
(b) Prudentia was Reed’s company;
(c) through Prudentia I have the right over or I control Plot D17; and
(d) he would be willing to negotiate with Brown about undertaking a joint venture with Sunland for the development of Plot D17.
The second occasion was a meeting in Brown’s office in Dubai on 19 August 2007 when Reed is alleged to have told Brown words to the effect that:
(a) the price in the area in which Plot D17 is located is as high as AED 175 per sq ft;[12]
(b) I can obtain a price of AED 135 per sq ft from Dubai Waterfront;[13]
(c) I want compensation of AED 40 per sq ft as part of the terms of a joint venture;[14]
(d) It would be more tax effective for the compensation to be paid as a fee to Prudentia for consultancy services;[15] and
(e) the payment terms on which Reed was acquiring Plot D17, terms which were exactly the same as those that Joyce told Brown on 15 August 2007.[16]
It was also alleged by Sunland that at the 19 August 2007 meeting, Reed showed Brown exactly the same draft plan for the re-configuration of the land containing Plot D17 that Austin had shown Brown in their meeting on 15 August 2007.[17]
[12]Second Further Amended Statement of Claim, paragraph 15.1.
[13]Second Further Amended Statement of Claim, paragraph 15.2.
[14]Second Further Amended Statement of Claim, paragraph 15.3.
[15]Second Further Amended Statement of Claim, paragraph 15.4.
[16]Second Further Amended Statement of Claim, paragraphs 16.1 to 16.2.
[17]Second Further Amended Statement of Claim, paragraph 16.3.
Sunland claims that these representations were false and that it relied upon them in taking a number of steps in relation to the purchase of Plot D17. On this basis, Sunland claims that the making of the alleged representations constituted a breach of s 52 of the Trade Practices Act 1974 (Cth) (“TPA”) and a breach of s 9 of the Fair Trading Act 1999 (Vic) (“FTA”). Sunland also claimed that tortious liability in deceit flowed from such representations.
Additionally, Sunland claims that Reed made the representations as agent for Prudentia, and later Hanley, or as a person involved in the contraventions by Prudentia and Hanley under s 75B of the TPA. In relation to the alleged deceit, Reed is said to be liable to Sunland as a joint tortfeasor with Joyce. By reason of the conduct pleaded in the Second Further Amended Statement of Claim, Reed is also said to have engaged in conduct in breach of ss 53(aa), 53(g) and 53A of the TPA and also ss 9, 12(b), 12(k) and 12(n) of the FTA.
The first date upon which it is claimed that there was material reliance on the alleged representations by SWB, following the introduction of that company by Sunland Group Limited into the impugned transaction on 13 September 2007, is 18 September 2007.[18]
[18]Second Further Amended Statement of Claim, paragraph 29.
Sunland claims that each of Prudentia and Hanley breached s 52 of the TPA by reason of the alleged making of representations by Reed. Prudentia and Hanley are also alleged to have breached ss 53(aa), 53(g) and 53A of the TPA. Hanley is said to be a “person involved in” Prudentia’s contraventions under s 75B of the TPA.[19] Prudentia and Hanley are also said to be vicariously liable for Reed’s alleged deceit. Further, by reason of the conduct pleaded in the Second Further Amended Statement of Claim, Sunland claims that each of Prudentia and Hanley engaged in conduct in breach of ss 9, 12(b), 12(k) and 12(n) of the FTA.[20] By reason of the conduct pleaded against Joyce,[21] Sunland claims that Joyce contravened ss 52, 53(aa) 53(g) and 53A of the TPA. In relation to the alleged deceit, Joyce is said to be liable to Sunland as a joint tortfeasor with Reed. No claims were made against Joyce under the FTA.
[19]See below, paragraphs 371 and 372.
[20]See below, paragraphs 369 and 370; and paragraphs 408 to 414.
[21]See below, paragraphs 18.
Insofar as the pleaded conduct, the misrepresentations and related matters, may have occurred outside Australia, Sunland relies on ss 5(1), 6(2)(a)(i) and 6(3) of the TPA.[22]
[22]See below, paragraphs 373 to 407.
The allegations against Joyce, with respect to these statutory “misrepresentation” provisions and with respect to the claim in deceit turn on four communications alleged to have occurred between Joyce and Brown, as follows:
(a)Between March and July 2007 Joyce said to Brown and Abedian with words to the effect that: ‘there is no beachfront land left, it has all been sold to secondary developers’;[23]
[23]Second Further Amended Statement of Claim, paragraph 9. It was submitted on behalf of Joyce that it is unclear why this allegation is pleaded, as the statement was true and Sunland has never sought to prove to the contrary. In fact, Brown gave evidence that the statement was correct. (See Transcript, p 249.45- 249.46). Plot D17 is not beachfront land.
(b)On 15 August 2007 Joyce telephoned Brown and said words to the effect that:[24]
[24] Second Further Amended Statement of Claim, paragraph12.
(i) ‘a man named Reed is the contact for Plot D17’;[25]
(ii) ‘although I will need to check this with Anthony Brearley, Reed’s company will be paying DWF AED 135 per sq ft to purchase Plot D17’;[26]
(iii) ‘the terms of payment are more favourable than the standard terms, being 5% on execution of the contract, 10% at handover which is scheduled to take place in about 6 months, 10% at 6 months after handover, 20% at 12 months after handover, 20% at 18 months after handover, 20% at 24 months after handover, and 15% at 36 months after handover’; and[27]
(iv)‘a property speculator would be likely to pay about AED 175 per sq ft to purchase Plot D17’.[28]
(c)On 16 August 2007 Joyce replied to an email from Brown in which Joyce said in part:[29] ‘Anyway the issue for us is that you can come to an arrangement with them that allows you to deal directly with us’.
(d)On 29 August 2007, Joyce telephoned Brown and said words to the effect that:[30] ‘Sunland should come to an agreement with Reed as soon as possible because there were other buyers around including Russians who might offer Reed AED 220 per sq ft or more for the land’.
[25]Second Further Amended Statement of Claim, paragraph 12.1.
[26]Second Further Amended Statement of Claim, paragraph 12.2..
[27]Second Further Amended Statement of Claim, paragraph 12.3.
[28]Second Further Amended Statement of Claim, paragraph 12.4.
[29] Second Further Amended Statement of Claim, paragraph 14.2.2.
[30] Second Further Amended Statement of Claim, paragraph 18.
Sunland pleads that these communications made by Joyce, and those made by Reed referred to above,[31] conveyed three representations, namely that:[32]
(a)Reed or Prudentia or both of them had a right to acquire Plot D17 or the land on which Plot D17 was located;[33]
(b)DWF could not, without the agreement of Reed or Prudentia or both of them, sell Plot D17 or the land on which Plot D17 was located, or any rights in connection with the development thereof to Sunland;[34] and
(c)If Sunland wished to purchase Plot D17 or the land over which Plot D17 was located, or acquire any rights in connection with the development of Plot D17 it had to negotiate and make a contract with Reed or Prudentia or both of them.[35]
These representations as pleaded by Sunland are referred to as “the Representations”.
[31]See above, paragraph 12.
[32] Second Further Amended Statement of Claim, paragraph 19.
[33]Second Further Amended Statement of Claim, paragraph 19.1.
[34]Second Further Amended Statement of Claim, paragraph 19.2.
[35]Second Further Amended Statement of Claim, paragraph 19.3.
Sunland then alleges that the Representations as pleaded were false ‘in that’: [36]
(a) the Representations were untrue;[37] and
(b)statements were made to Brown by Mr Mohammed Mustafa Hussein Mohammed Kamel (‘Mustafa’) of the Dubai Financial Audit Department[38] and Mr Khalifa Mohammad (‘Khalifa’) of the Dubai Police[39] to the effect that Reed did not own Plot D17 and that there was “no record of Reed or his entity having any right over the plot”[40].
It was submitted on behalf of Joyce that it is unclear why statements made by Mustafa and Khalifa are pleaded other than because of Sunland’s ongoing desire to “keep in” with the Dubai authorities.
[36] Second Further Amended Statement of Claim, paragraph 21.
[37] Second Further Amended Statement of Claim, paragraphs 21.1, 21.2 and 21.3.
[38] Second Further Amended Statement of Claim, paragraph 21.4 and 21.6.
[39] Second Further Amended Statement of Claim, paragraph, 21.5.
[40]Second Further Amended Statement of Claim, paragraph 21.4.
A number of criticisms were made of the pleaded claim against Joyce, particularly focusing on an argument that the Representations as pleaded are capable of a number of meanings. For example, with respect to the second of the Representations, it was said that if Sunland and Prudentia had entered into a joint venture arrangement, and this was known to DWF, it would not have been misleading for DWF to point out that it could not sell Plot D17 or the land on which Plot D17 was located, or any rights in connection with the development thereof, to Sunland without the agreement of Reed or Prudentia. Such a statement would have been unsurprising, it was submitted, as DWF would have wanted to ensure that it did not embroil itself in any dispute between Prudentia and Sunland. It is only if the second of the Representations[41] meant that DWF could not sell the land at all to Sunland (or to any other party) without Prudentia’s approval, that it would have been misleading or deceptive. Additionally, a distinction would have to be made between any representation by DWF that it would not, as opposed to could not, sell Plot D17 to Sunland. If DWF had formed the view that it wanted to sell Plot D17 to Prudentia and not to Sunland then, as owner of Plot D17, that was its prerogative. It was submitted that similar points can be made about the third of the pleaded representations. For example, if Sunland wished to purchase Plot D17 or the land over which Plot D17 was located as part of a joint venture with Prudentia, then there was a need to negotiate and make a contract with Reed or Prudentia or both of them.
[41]Second Further Amended Statement of Claim, paragraph 19.2.
Further, despite these problems, it was submitted on behalf of Joyce, that it is apparent that the plea of falsity set out in paragraph 21 of the Second Further Amended Statement of Claim[42] and the evidence of Brown and Abedian indicates that the case put by Sunland is that Joyce represented that Reed or Prudentia had some sort of legal interest in, or right to, Plot D17 and it was on that basis that Sunland paid the fee of AED 44,105,780 to Hanley. The same applies to the manner in which the claims by Sunland are pleaded against Reed.
[42]And the same follows from the pleading of the representations in paragraph 19 of the Second Further Amended Statement of Claim.
Sunland confirmed in its written and oral closing submissions that its case was put on the basis that Reed and the Prudentia parties (at least in the earlier stages of the Plot D17 transaction, Reed and Prudentia) and Joyce misrepresented that there was “an agreement which conferred upon Prudentia a ‘right’ [to Plot D17] which was capable of transfer to Sunland”.[43] Consistently with this position Sunland submitted:[44]
“… Your Honour will see the written representations relied upon do go that far and so we can put our case on the basis that the representation did involve a representation to the effect that there existed as pleaded a contractual right to acquire Plot D17 as alleged in Sub-paragraph A of the pleading - as summarised in Sub-paragraph A of our Paragraph 39, Your Honour” [emphasis added in paragraph 1, Reply Submissions of the Fourth Defendant (Joyce)].
[43]Closing submissions of Sunland Plaintiffs’ Address (1 February 2012), paragraph 40. In any event this follows from the pleading of falsity in the particulars to the Second Further Amended Statement of Claim, paragraph 21. Those particulars allege in substance that the representations were false because Reed did not “own” Plot D17 or have any “right” over Plot D17. See also Joyce’s Defence to the Further Amended Statement of Claim (8 April 2010), paragraph 21, and see, below, paragraphs 232 to 246.
[44]Sunland’s oral closing submissions: Transcript, p 925.20 -.27. The point was made by Sunland in its Plaintiffs Reply to the Supplementary Written Submissions of the Defendants, paragraph 11 that the passage quoted from the Sunland oral closing submissions omitted some prefatory words which changed the sense of the quoted material. In order to make the position clear, I now set out the two paragraphs from the transcript of these closing submissions which put the quoted material set out above in its context (Transcript, p 925.12 - .27):
“Paragraphs 12 to 19 are the paragraphs which plead the representations. Our learned friends have made a submission - that is Mr Collinson has pleaded it would be necessary for Your Honour to find that there was a formally binding contract entitling Reed or Prudentia to the plot or that that was the subject matter of the representation.
We submit it’s not necessary for Your Honour to go that far. But in any event as Your Honour will see the written representations relied upon do go that far and so we can put our case on the basis that the representation did involve a representation to the effect that there existed as pleaded a contractual right to acquire Plot D17 as alleged in Sub-paragraph A of the pleading - as summarised in Sub-paragraph A of our Paragraph 39, Your Honour.” [emphasis with respect to the transcript material not set out in the above quote, at paragraph 23].”
On this basis it, was submitted on behalf of Joyce that in order to succeed in this case Sunland must establish against some or all of these parties that:[45]
(a)there were representations to the effect that Reed or Prudentia had a contractual right to acquire Plot D17;
(b)the representations were false because neither Reed nor Prudentia held a contractual right to acquire Plot D17; and
(c)Sunland had a state of mind, induced by those representations, that Reed or Prudentia had a contractual right to acquire Plot D17.
[45]Reply Submissions of the Fourth Defendant (Joyce) (21 February 2012), paragraph 2.
It was submitted against Sunland that on the case as pleaded it could not, on the evidence, possibly succeed. Thus it was submitted:[46]
[46]Reply Submissions of the Fourth Defendant (Joyce) (21 February 2012), paragraphs 3 to 8.
“3. … The relevant admissions by Brown are contained in a number of places. However, most strikingly he said the following:[47]
[47]Transcript, p 192.23.
‘HIS HONOUR: Are you saying that the hold is contractual? ... I don’t know what the hold was. We weren’t told what type of hold it was, but there was a hold.’
4. It is of signal importance to observe that the plaintiffs’ case was not the following:
(a) Joyce (and/or the other defendants) represented that Reed or Prudentia had a ‘hold’ or ‘control’ over D17;
(b) the representations were false because neither Reed nor Prudentia had a ‘hold’ or ‘control’ over D17;
(c) the plaintiffs had a state of mind, induced by those representations, that Reed or Prudentia had a ‘hold’ or ‘control’ over D17.
5. This latter case was:
(a) not pleaded;
(b) not proved because the plaintiffs never sought to establish that the representations in those terms were false – in other words, that Reed or Prudentia did not have a ‘hold’ or ‘control’ over D17 by a means other than a legal right (for example, that there was no political control as a result of contacts between (1) Och‑ Ziff or the Prudentia parties and (2) DWF or other political authorities in Dubai).[48]
6. The plaintiffs’ witnesses confused the pleaded case with the unpleaded case by mixing up evidence about a state of belief as to a ‘hold’ or ‘control’ over D17 with a case concerned only with an alleged state of belief that the Prudentia parties held a contractual right to acquire D17.[49]
7. The plaintiffs’ closing submissions add to the confusion. Evidence relating to a ‘hold’ or ‘control’ is cited as if it supported the pleaded case concerning “contractual right to acquire”.[50] Submissions are advanced which elide the distinction between ‘control’ and ‘a legal right to acquire’. Thus, it is said to be inherently unlikely that Brown would say ‘we wish you all the best with this site’ if he did not believe at the time that Reed/Prudentia had some control or right over the site.[51] In the context of this proceeding there is a world of difference between ‘control’ and a ‘right’. Elsewhere in the oral and written submissions there is reference to an ‘impediment’.[52] An impediment might derive from a legal right to acquire D17 – equally it might derive from something else.
8. Overwhelmingly, at its highest the evidence established that Brown’s state of mind was that an entity (Och‑Ziff certainly not Reed or Prudentia) might have had some kind of inchoate standing or relationship with DWF or other political authorities in Dubai in respect of D17 which was less than a contractual right to acquire D17.[53] The pleaded case must fail. The unpleaded case need not be considered.”
[48]Witness Statement of David Scott Brown (6 August 2010), paragraph 142.
[49]Witness Statement of David Scott Brown (6 August 2010): DB1[81] (“Reed had a ‘hold’ on the land”); DB1[84] (“Indicated that there was some sort of contract in existence”); DB1[92] (“He said to me words to the effect of either ‘we have the rights over that land’ or that ‘Prudentia controlled that land’ ”); DB1[92] (“I understood them to mean that Prudentia had control over Plot D17”); DB1[121] (“Prudentia had the right over or controlled Plot D17”); DB1[142] (“Reed probably had a contact high-up in Nakheel and that it was through this contact that Reed had obtained control of Plot D17”); DB1[185] (“I also did not know how long Reed’s control over the property would last for”); DB1[274] (“I believed Prudentia…had control and rights over Plot D17”); DB1[279.4] (“At all times I believed that Prudentia had control or rights over Plot D17”); Reply witness statement of David Scott Brown (27 June 2011): DB2[24] (“As I had been told by Joyce and by Austin that Prudentia had control of the land”).
Witness statement of Soheil Abedian (6 August 2010): SA[45] (“I was informed by Brown and believed that he had been told that a block of land behind D5B was controlled by an Australian individual named Reed”); SA[50] (“My understanding of the email was quite clear: Reed had control over the plot”); SA[61] (“I understood this to mean exactly what it says, that Prudentia had come to an agreement with the master developer and that it was in control of the property”); SA[84] (“However we did not know the precise terms of that control by Prudentia and Reed”); SA[116] (“There is no reason why Sunland would pay any premium or consultancy fee to a party that had no control over that plot”). Prior to giving his oral evidence Abedian must have realised that it was insufficient for Sunland to establish a belief that the Prudentia parties merely “controlled” D17. He altered his evidence to contend that references to “control” meant “rights under a reservation agreement”: Transcript, p 318.36; Transcript, p 335.14.
[50]Plaintiffs’ Address (1 February 2012), paragraphs 80, 87, 89, 99, 101, 122 and 149.
[51]Plaintiffs’ Address (1 February 2012), paragraph122.
[52]Plaintiffs’ Address (1 February 2012), paragraph126; Transcript, p 1058.25.
[53]Closing Submissions of Fourth Defendant (27 January 2012), Section G.
Sunland responded, submitting that none of the Representations which it alleged[54] require Sunland to show that the representations by Reed or Prudentia or Joyce were to the effect that Reed or Prudentia had a “contractual right”. Further, it submitted that the representations pleaded in paragraphs 19.2 and 19.3 of the Second Further Amended Statement of Claim were made out by the email from Joyce on 16 August 2007, pleaded as a representation in paragraph 14.2 of the Second Further Amended Statement of Claim,[55] which included the words: “Anyway, the issue for us is that you can come to an arrangement with them that allows you to deal directly with us”. It was said that this email should also be read in context with the statements which Joyce made earlier on 15 August 2007, the telephone conversation with Brown where it is alleged, inter alia, that Joyce used words to the effect that: “A man named Reed is the contact for Plot D17”.[56] Further, it was submitted that the submissions on behalf of Joyce misstated Sunland’s pleading.[57] Further, Sunland submitted that, contrary to the submission made on behalf of Joyce:[58]
“… in the language of non-lawyers in a practical commercial context there is not ‘a world of difference’ between the expressions ‘right’ and ‘control’, or the expressions ‘hold on’ or ‘hold over’. The common or ordinary meaning of the word as appearing in the Oxford English Dictionary is: Control – ‘4. To exercise restraint or direction upon the free action of; to hold sway over, exercise power or authority over; to dominate, or command’.”[59]
Reference was also made by Sunland to an email communication between Reed and Mr Alexis Waller, a solicitor employed by Klein and Co, the Dubai legal advisers to Prudentia in 2007.[60] There is no evidence that Sunland was privy to this communication prior to any payment pursuant to the Hanley Agreement. [61]
[54]Second Further Amended Statement of Claim, paragraph 19; and see, above, paragraph 19.
[55]See below, paragraph 72.
[56]Second Further Amended Statement of Claim, paragraph 12.1. This conversation and the events surrounding it are discussed further below, see particularly, paragraph 51.
[57]Plaintiffs’ Reply to the Supplementary Written Submissions of the Defendants, paragraph 16; referring to paragraphs 4 and 5 of the Reply Submissions of the Fourth Defendant (Joyce) (21 February 2012), which are set out above, paragraph 25:
“(a) SOC paragraph 13.3 pleads that Reed represented: ‘I have the right over’ or ‘I control’ Plot D17;
(b) SOC paragraph 12.2, pleads Joyce said words to the effect: ‘Reed’s company will be paying Dubai Waterfront AED135 sq/ft to purchase Plot D17’;
(c) SOC paragraph in 14.2 pleads the email from Joyce stating: ‘Anyway the issue for us is that you can come to an arrangement with them that allows you to deal directly with us’.
(d) SOC paragraph 18 pleads Joyce said words to the effect: ‘Sunland should come to an agreement with Reed as soon as possible because there were other buyers around including Russians who might offer Reed AED220 sq/ft or more for the land’.”
Further, it was submitted that paragraph 5(b) of the submissions on behalf of Joyce that Sunland never sought to establish that the representations in the terms in which they were put by Sunland were false ignores admissions made by the defendants (see Plaintiffs’ Reply to the Supplementary Written Submissions of the Defendants, paragraphs 18-20. For the reasons indicated below, I do not accept that this is the case (see below, paragraphs 234-239).
[58]Reply Submissions of Fourth Defendant (Joyce) (21 February 2012), paragraph 7; set out above, paragraph 25.
[59]Plaintiffs’ Reply to the Supplementary Written Submissions of the Defendants, paragraph 21.
[60]Plaintiffs’ Reply to the Supplementary Written Submissions of the Defendants, paragraph 22; the email being an email from Reed to Alexis Waller, date 13 August 2007 (Court Book, PRU.001.007.0005) ; see below, paragraph 55.
[61]As to the irrelevance of communications with third parties to which Sunland was not privy at any relevant time, see below, paragraphs 445 - 446.
For the reasons which follow, I am of the opinion that the submissions on the part of Joyce that it was necessary for Sunland to establish representations with respect to a legally enforceable right, “contractual” or otherwise, correctly state the position; but, in the present circumstances, the issue is not, in my view, critical because Sunland’s case evidences no misrepresentation with respect to something less than an enforceable right, “contractual” or otherwise.
Sunland pleads that it relied upon the Representations to:
(a)negotiate with Reed about a joint venture;[62] and
(b)later – after other communications were made to it by Lee and Brearley[63] - execute an agreement with Prudentia;[64] and
(c)later – after further misrepresentations were made to it by Reed, Prudentia and Hanley[65] - execute an agreement with Hanley and pay it the sum of AED 44,105,780.
[62] Second Further Amended Statement of Claim, paragraph 22.
[63] Second Further Amended Statement of Claim, paragraph 24.
[64] Second Further Amended Statement of Claim, paragraph 30.
[65] Second Further Amended Statement of Claim, paragraph 33.
The nature and effect of the Representations alleged by Sunland must be viewed in the context of the circumstances in which they are alleged to have been made including – particularly – in the context of land dealings and land information available in Dubai at the relevant time or times.[66]
[66]See below, paragraph 33 to 44.
Sunland alleges that the Representations were made in “trade or commerce” and that the result was misleading or deceptive conduct in breach of s 52 of the TPA.[67] Sunland also pleads a multitude of alternate claims under the TPA against Joyce arising from the same facts,[68] as well as a claim in deceit as a joint tortfeasor with Reed.[69] It was submitted on behalf of Joyce that it is clear that Sunland alleges that a fraud was perpetrated against it.
[67]Second Further Amended Statement of Claim, paragraph 41.
[68]Second Further Amended Statement of Claim, paragraph 57.
[69]Second Further Amended Statement of Claim, paragraph 47.
In relation to the joint tortfeasor’s claim, it is alleged by Sunland that Reed and Joyce acted in concert, an allegation based on the alleged knowledge by each of Reed and Joyce that representations had been made (as alleged) and of their “joint purpose”.[70] Sunland also relies, in this context, on matters such as the attendance of Reed and Joyce at the same school, Geelong Grammar, their failure to disclose this to Brown and the “coincidence” of the representations which are alleged to have been made separately.
[70]Second Further Amended Statement of Claim, paragraph 46.
Sunland seeks damages equal to AED 44,105,780 and also damages for “loss of reputation”.[71]
[71]See below, paragraph 425 to 442.
The D17 transaction
Land dealings and land information in Dubai
The D17 transaction involves the purchase of Plot D17 which, in turn, raises issues in relation to the law of real property and conveyancing in Dubai. In this context, care must be taken to avoid the temptation of drawing analogies, unquestioningly, with the law of real property and conveyancing in Victoria and Australia more generally. There are, however, some general analogies which might usefully be drawn. First, it is clear that a distinction is drawn in Dubai law between contractual and proprietary rights in relation to real property and that before any piece of real property can be dealt with it must, in both jurisdictions, be created and defined as a separate parcel of land which can be dealt with as such. Secondly, the property development process appears not too dissimilar in that plots or parcels of land are, in the course of the development process, created and defined within a larger development area. Once they are created and defined in Dubai, they may be purchased from the “master developer”, the entity undertaking the development project and in which the defined or subdivided plots or parcels are vested in, what may be described, as fee simple ownership. A purchaser of one of these plots or parcels must enter into a “sale and purchase agreement” (commonly referred to as a “SPA”) which will, as would a contract for the sale of land in Victoria, lead to a conveyance of the “fee simple” ownership in the plot to the purchaser upon payment of the purchase price in accordance with the provisions of the SPA. Although an intending purchase may proceed straight to a SPA with the master developer of the relevant project, an alternative course in Dubai is to enter into a “reservation agreement” with respect to a particular plot of land which has the effect of conferring something in the nature of an option to purchase on the intending purchaser which is exercisable during, and only during, the term of the reservation agreement. As with options to purchase in Victoria, a fee would be payable in consideration for this right, a fee which may or may not be payable in addition to the purchase price if a SPA is subsequently entered into. In Victoria, one would expect an optionee, properly advised, to lodge a caveat under the Transfer of Land Act 1958 where the land was subject to the Torrens system as established by that legislation. Here, a difference lies with respect to the D17 transaction because the area of Dubai in which that plot is situated is not subject to any Torrens system type of land registration scheme. This means that a person intending to deal with a plot or parcel of land in that general area is not able to search any public land ownership register, as is generally possible where Torrens registration systems are applicable.
More specifically, with respect to Dubai and the circumstances of this case, it was uncontroversial that:
(a)the register of land titles held at the Dubai Land Department is not, and at all material times was not, capable of being searched by the general public, including companies such as Sunland, or lawyers acting on their behalf;
(b)until 31 August 2008, records of all off-the-plan sales of land in master communities were kept by the master developer for that master community, not by the Dubai Land Department; and
(c)records kept by master developers of land sales and land titles are not, and at all material times were not, capable of being searched by the general public, including companies such as Sunland, or lawyers acting on their behalf.[72]
[72]Plaintiffs’ Address (1 February 2012), paragraph 35.
As in Victoria, land subject to a contract to purchase may be on-sold by the original purchaser, or, for that matter, a subsequent purchaser to a further subsequent purchaser. In Victoria, the evils of “chains” of terms purchase contracts became clear in the land speculation days of the 1950s and 1960s where land in broadacre subdivisions of outer suburban land in Melbourne was on-sold by speculators. As a result, the process was prevented in favour of a sale and mortgage back process under the Sale of Land Act 1962. The Victorian experience was, of course, not unique to Victoria. In the Australian context, and similar issues arose in other States, particularly New South Wales and Queensland. Dubai, apparently in a massive land development phase, recognised these potential problems and addressed them by requiring a purchaser under a SPA who wished to on-sell to obtain the consent of the master developer, that purchaser’s vendor, by entering into a cancellation agreement with respect to that SPA in consideration of the payment to it by the further purchaser of a sum of money, which may be the difference between its purchase price and the on-selling purchase price; with the further purchaser entering into a new SPA directly with the master developer. Thus, it is possible to buy on “terms” and re-sell on “terms”, but without the evils of a chain of terms contracts or SPAs, in the case of Dubai, because the original vendor (the master developer) and the actual purchase maintain a direct contractual relationship at all times.
The absence of any public land register in Dubai for the area in which Plot D17 is situated was relied upon by Sunland in support of its case. In particular, Sunland submitted on the basis of the expert evidence of Mr Duane Keighran (“Keighran”), a senior lawyer in the firm of Simmons & Simmons Middle East LLP that:[73]
“… the unchallenged expert evidence of Mr Keighran (who was not cross-examined) was that the plaintiffs had no alternative but to rely on what they were told by Joyce (or other officers of Dubai Waterfront) as to who owned, or had rights over, plot D17”.
[73]Plaintiffs’ Address (1 February 2012), paragraph 209 (apparently a reference to the witness statement of Duane Keighran (8 August 2010), paragraph 41.5).
It is, nevertheless, clear that the expert evidence of Keighran relied upon by Sunland in this respect is directed to a situation in which a prospective purchaser is “dealing directly with a master developer”.[74] The Sunland case in this proceeding is, however, that it could not, and consequently did not, deal directly with DWF, until it came to an arrangement with Prudentia. Instead, the Sunland case is that it negotiated with Reed and the Prudentia parties to obtain a transfer of a right to acquire Plot D17.[75] The expert evidence of Keighran does, however, deal with the situation of a purchaser dealing with a seller who is not the master developer of the subject land in circumstances where there is no public land register available.
[74]Plaintiffs’ Address (1 February 2012), paragraph 209 (apparently a reference to the witness statement of Duane Keighran (8 August 2010), paragraph 41).
[75]See Plaintiffs’ Address (1 February 2012), paragraph 40; and Transcript, p 925.19.
Keighran’s expert evidence in relation to the purchase of land from a seller which is not the master developer of that land requires careful consideration in the context of the Plot D17 transaction. Addressing the process in general terms, Keighran said:[76]
“It is necessary to check that the entity the purchaser is negotiating with had the Contractual Right (as I noted above, the contractual right to purchase the land from the master developer). If not, purchasers may run the risk of inadvertently dealing with fraudulent parties. In order to prove that the Seller had the Contractual Right, I would usually request (or advise the purchaser to request) a copy of the SPA (or a reservation contract) and any relevant correspondence from the master developer. I would also usually make an appointment (or more often, the purchaser would do this directly) with the Seller to attend the master developer's offices to check the Contractual Right details registered with the master developer's internal registry.”
Continuing, Keighran said:[77]
“Due to the fact that it can be very difficult to confirm the Contractual Right, there is a risk that that you could be negotiating with a party that does not actually possess the Contractual Right. Such a party may demand some sort of payment (such as an ‘introduction fee’) before the transaction is finalised. Some of these ‘introducers’ act essentially as brokers and had no intention of ever holding the Contractual Right themselves. For example, I advised a Western client who was attempting to purchase a plot at the Palm Jebel Ali. My client was attempting to contract with a Seller who was a speculative investor who was a number of contracting parties removed from the master developer. The person who brought the deal to my client would not allow my client to deal directly with the person who allegedly held the Contractual Right. However, the Seller could not provide any evidence that he had the Contractual Right to the plot, other than producing some plot drawings of the plot that the Seller possessed. As I discuss below, this is not sufficient. Therefore, I advised the client not to proceed without establishing further evidence.”
[76]Plaintiffs’ Address (1 February 2012), paragraph 209 (apparently a reference to the witness statement of Duane Keighran(8 August 2010), paragraph 42.2), .
[77]Plaintiffs’ Address (1 February 2012), paragraph 209 (apparently a reference to the witness statement of Duane Keighran (8 August 2010), paragraph42.4).
Sunland submitted that Joyce had misstated the effect of Keighran’s expert evidence and that the quoting from his witness statement was selective. In particular, Sunland submitted that paragraph 42.3 of that witness statement was omitted and that in that paragraph, Keighran deals with the situation where a potential purchaser is dealing with a secondary seller, that is not the master developer, and attempting to confirm that seller’s status with the master developer. Paragraph 42.3 of the Keighran witness statement is as follows:
“It is possible that the purchaser may not necessarily be provided with any documentary proof of the Seller’s Contractual Right prior to attending the meeting to transfer the Contractual Right. As there is no prescriptive way for undertaking such transactions in Dubai and each master developer has different procedures, it is indeed possible that neither the master developer nor the Seller would ever provide any documentary evidence of the Seller’s Contractual Right for a particular transaction to the purchaser in which case the only assurance that the purchaser would have as to the Seller’s Contractual Right would be the participation of the master developer in the transaction.” [underlining added by Sunland]
Sunland noted that paragraph 42.4 of Keighran’s witness statement had been quoted by Joyce in which Keighran gave an example of advising a client where a broker or introducer of land “would not allow my client to deal directly with the person who allegedly held the Contractual Right”. Sunland submitted that:
“The equivalent scenario would be a broker/introducer acting on behalf of Reed not permitting Brown to deal with Reed. Keighran advised his client not to proceed without obtaining further evidence of who in fact had the right to the land. In that example, clearly the best evidence would have been confirmation from the master developer - which is exactly what Brown obtained from Joyce, and Clyde-Smith obtained from Brearley (Brown paragraph 126)”.[78]
[78]Plaintiffs’ Reply to the Supplementary Written Submissions of the Defendants, paragraph 88.
In my opinion, paragraph 42.3 of Keighran’s witness statement does not stand alone, but needs to be read with paragraph 42.4; though, having said that, I do not regard paragraph 42.4 as in any way unhelpful or misleading if read on its own as, if anything, it emphasises the need for a seller in the circumstances postulated to obtain evidence from the seller of a contractual right to sell the particular plot, even if that were, as indicated in paragraph 42.3, the assurance in this respect from the master developer in the transaction. In the present circumstances, Sunland’s submissions and reference to these parts of the Keighran witness statement serve to emphasise, in my view, the importance of it establishing a “contractual right” for the purposes of its case[79] and the need for the basis of that right to be clearly stated. Keighran’s advice is, without that evidence, that the potential seller ought not to proceed. It was submitted that such evidence was obtained by Sunland, with reference to paragraph 126 of Brown’s witness statement.[80] In my view, as indicated in these reasons, exactly what Sunland did not obtain was confirmation from the master developer DWF as to the “Seller’s Contractual Right”, or any other right which Sunland was able to articulate with any precision.[81]
[79]See above, paragraphs 25-27.
[80]Witness Statement of David Scott Brown (6 August 2010), paragraph 126, which reads:
“I was informed by Stringer [ie Clyde-Smith] and believe that she phoned Brearley to confirm that Prudentia had development rights over Plot D17, which Brearley confirmed.”
[81]See, particularly, below, paragraphs 240 to 246; and noting that the reference to paragraph 126 of the Witness Statement of David Scott Brown (6 August 2010) is but one example of the confusion in this respect, noting that the reference at this point was to Prudentia having “development rights” over Plot D17.
Sunland also relied upon Keighran’s expert evidence for the proposition that he was not aware of any “policy or practice” whereby master developers tried to avoid engaging in or the appearance of engaging in gazumping purchasers.[82] In my view, this submission by Sunland is not supported by Keighran’s evidence. First, in the last paragraph of point 3.1 in the letter from Hadef & Partners DLA Phillips Fox on behalf of to Sunland, which is annexed to Keighran’s expert witness statement and with which he apparently agreed,[83] it is written that:[84]
[82]Plaintiffs’ Address (1 February 2012), paragraph 212.
[83]Witness Statement of Duane Keighran (8 August 2010), paragraph 96 (with one proviso not presently relevant).
[84]Witness Statement of Duane Keighran (8 August 2010), Annexure DK-1 (pp 52 – 58) (Letter Hadef & Partners (Dubai) to DLA Phillips Fox (Brisbane).
“It is our experience that master developers did try to avoid the appearance of ‘gazumping’ and they would generally try to negotiate with an interested party where the party was an experienced developer that the master developer wanted in the project or where deposits or security payments had been paid. It is important to note that master developers sometimes distinguished between experienced developers who build versus speculators looking to on-sell at a profit, and this might influence any decision to keep negotiating”.
Secondly, Keighran also said:[85]
“As a matter of commerciality, it may be that the master developer may elect not to negotiate with another party. However, in my experience, in that situation the master developer would require a security deposit to be paid for the plot”.
Thirdly, in point 3.4 of the same letter from Hadef & Partners, it is also written that:
“… Our experience is that security cheques (which may be refundable) are usually required in order to get negotiations started with the master developer. The situation might be different where the person looking to buy was of particular interest to the master developer. It is our experience that the master developers were not in the business of conducting extensive negotiations with potential buyers without the buyer having something on the table to lose if they did not proceed or without the buyer being a serious developer of interest to the master developer. At the time in question (August – September 2007) the market was very hot and there were a huge number of speculators in the market and therefore master developers (whilst always being polite and entertaining some discussion) didn’t have the resources to negotiate with every person that expressed an interest in a plot”.
Thus, the evidence establishes that a master developer, such as DWF, might well choose not to negotiate with every person who expressed an interest in a particular piece of land and might generally try to negotiate instead with an interested party, such as Prudentia, if that party was an experienced developer which the master developer wanted in the project.
[85]Witness Statement of Duane Keighran (8 August 2010), paragraph 94.
Sunland submitted that there was no evidence about whether DWF had any practice in relation to gazumping and that Keighran’s evidence was that he was not aware of any master developer, including DWF, that had any policy or practice about gazumping.[86] Sunland continued:[87]
“Keighran went on to say (paragraph 94) that a master developer may elect not to negotiate with another prospective purchaser, but that ‘in my experience, in that situation the master developer would require a security deposit to be paid for the plot’. In other words the first purchaser would be required to put a hold on the lot, or take control of the lot, or acquire a contractual right against Dubai Waterfront (Keighran paragraphs 24-25, 82-83 and 94-95).”
In my view, this does not detract from my conclusion on the evidence as stated at the end of the preceding paragraph and, rather, tends to detract from Sunland’s case in that it emphasises the need for a purchaser to obtain some definite right with respect to land which was to be purchase.
[86]Plaintiffs’ Reply to the Supplementary Written Submissions of the Defendants, paragraph 90, referring to Witness Statement of Duane Keighran (8 August 2010), paragraph 93.
[87]Plaintiffs’ Reply to the Supplementary Written Submissions of the Defendants, paragraph 90.
It is against this general backdrop that the dealings between the Sunland, DWF and its officers and Reed must be viewed. In this respect it should also be kept in mind that it has not been suggested that Sunland as a sophisticated property developer, itself and through its entities in Australia and Dubai, would not be, or is not, aware of these type of general issues and the manner in which they are addressed in Australian jurisdictions, with which it must be taken to be very familiar. The position is similar in Dubai where Sunland apparently had a significant presence and was the recipient of advice from Ms Julianne Clyde-Smith (nee Stringer) (“Clyde-Smith”) who was General Counsel of the Dubai branch of Sunland in 2007 and is currently employed in the Dubai law firm, Clyde and Co, which was retained by Sunland as its legal advisers.
In this respect, it should also be kept in mind that, at least from November 2006 to August 2007, Brown had been involved in negotiating the acquisition of another plot in the Waterfront Project on behalf of Sunland, namely Plot D5B. He had also been involved in unsuccessful negotiations for the purchase of Plots A10C and A3B in the Waterfront Project. In my opinion, it would be absurd to suggest that Sunland, Brown or Abedian, were not sophisticated participants in property development in Dubai or that they were unfamiliar with the process of development and purchase of development plots. Additionally, there is nothing in the evidence to suggest that legal advice of a well-informed and sophisticated kind was not available to them, whether from Sunland’s corporate counsel or private law firms in Dubai – or Australia for that matter, depending upon relevant expertise. There is also nothing in the evidence to indicate that Sunland, through its officers and legal advisers, was in any way precluded from making inquiries of senior officials of Nakheel or DWF. In fact, as is discussed in more detail below, the evidence is that there were a number of discussions, and, by inference, ample opportunity for discussions, with senior legal and other officers of these entities who would be in a position to provide detailed information as to the state of proprietorship and contractual arrangements (if any) with respect to Plot D17.
15 August 2007
Brown, together with Mr Carl Bennett (then Sunland’s project manager in Dubai), met with Austin at the Sunland office in Dubai in connection with Plot D5B. It appears that prior to this meeting, Brearley had sent Reed a draft SPA for Plot D17.[88] In relation to this meeting, Sunland pleads that, amongst other things, Austin showed Brown a draft plan for the reconfiguration of an existing plot (known as D8B) in the Dubai Waterfront Project that would lead to the creation of a new plot that would have beach views and which could be named Plot D17.[89] Sunland further pleads that Austin told Brown no title plan had been prepared for Plot D17 because the redesign of the existing plot had not then been completed.[90]
[88]Transcript, p 194.35 - .45; Court Book, MJJ.009.001.0092.
[89]Second Further Amended Statement of Claim, paragraph 11.1.
[90]Second Further Amended Statement of Claim, paragraph 11.2.
The evidence indicates that it was at the end of the meeting that Austin showed Brown plans for a reconfiguration of some of the plots behind D5B and asked for his opinion.[91] Brown said in his oral evidence that he understood the plans to be confidential as “nobody had seen them”[92] and that “D17 was being created as a different format from a series of other plots that existed there”[93] and “wasn’t created” in August 2007.[94] Further, Brown’s evidence was that Austin indicated that the redesign of the existing plan was not yet officially complete.[95] Brown understood that the plans had been shown to him because “we’d just finished a design exercise for him on the foreshore and he admired our design ability and when he showed us this plan, one of his first questions was, ‘What do you think of it?’”.[96] Brown said that the plans gave a fairly good indication of the potential nature of the D17 plot[97] and he agreed that the FAR (Floor Area Ratio) at 9.5 was a good number for a developer.[98]
[91]Witness statement of David Scott Brown (6 August 2010), paragraphs 76 and 77.
[92]Transcript, p 34.04.
[93]Transcript, p 23.01 - .02.
[94]Transcript, p 23.10; see also witness statement of David Scott Brown (6 August 2010), paragraphs 76 and 77.
[95]Reply witness statement of David Scott Brown (27 June 2011), paragraph 17.
[96]Transcript, p 34.12 - .15
[97]Transcript, p 34.23 - .24; and see Court Book SUN.002.008.0006.
[98]Transcript, p 34.34.
Brown said in his oral evidence that Austin “was the first person who told me about [D17]”.[99] Brown expressed interest in Plot D17, particularly it seems because it lay immediately behind Plot D5B, which Sunland owned. He said that Austin may have said words to the effect that “Reed had a hold on D17”; and Austin also gave him Reed’s name and telephone number.[100] Brown had also said that Austin had told him “… that Plot D17 was already taken”, and that Austin said that Reed was the person who had “taken it”.[101] This oral evidence of Brown contradicted statements and sworn testimony which he had given to the Dubai authorities in the course of an investigation into the acquisition of Plot D17 in December 2008 and through to 2009.[102]
[99]Transcript, p 37.32 - .33.
[100]Transcript, p 35.20 - .23 ; and see the other references to Brown saying that Austin said Reed had a “hold” on the land in Plaintiffs’ Address (1 February 2012), paragraph 76. Reference was also made in Sunland’s submissions to emails of 20 and 22 August 2007 from Lee to Joyce and from Joyce to Austin, respectively, as follows (Plaintiffs’ Address (1 February 2012), paragraphs 123 and 124):
[101]Transcript, p 35.07 to .15.
[102]See below, paragraphs 304to 320.
Brown’s evidence was also that Austin told him, when showing him the new plans on 15 August 2007, “that Plot D17 was already taken by a person called ‘Andrew Angus Reed’ … who was an international developer” and that Austin gave him Reed’s mobile phone number.[103] Brown also confirmed that Austin was the first person to give him this name and that Austin told him “[i]f you are interested in contacting the fellow that’s got the hold on this plot, here is his phone number.[104] Brown agreed that he left the meeting with the impression that Austin had been talking to Reed and agreed that “the first thing you did when the clock, the 24-hour clock went around, was to ring Andrew Angus Reed”.[105] Brown also agreed that “[f]undamental, … in relation to the discourse concerning D17, is the introduction to D17 by Mr Austin, [although] it was only a very brief introduction.[106]
[103]Witness statement of David Scott Brown (6 August 2010), paragraph 81.
[104]Transcript, p 35.22 - .23.
[105]Transcript, p 35.30 - .31.
[106]Transcript, p 38.4 - .07.
The meeting between Brown and Austin is recorded in Brown’s notebook.[107] Brown’s notebook entries need to be viewed from the perspective of Brown’s use of his notebook. In this respect, he said that he used his notebook “[t]o record conversations and meetings, to have to-do-lists so I wouldn’t forget things, so I could plan my day”[108] and agreed that generally he “made the notes in [his] workbook contemporaneously [and] normally during a meeting or on a phone call, I’d be writing down at the same time”.[109] Brown agreed that the general purpose of his notebook was to record important matters concerning meetings or phone calls or the like.[110] In relation to the note of the meeting with Austin, it is significant that Brown does not record that Austin used the words “Plot D17 is already taken by Angus Reed” as alleged by Sunland in paragraph 11.3 of the Second Further Amended Statement of Claim, where the allegation with respect to this aspect of the meeting alleges these words but qualifies them with the allegation that they were “words to the effect that”. Consequently, given the lack of any unequivocal reference to or recording of words used by Austin in these terms, and Brown’s oral evidence that Austin may have said words to the effect that “Reed had a hold on D17”, the probability is, in my view, that Austin and Brown had a discussion in relation to the likely creation and possible development of Plot D17 and that Austin, in effect, informed Brown that Reed or Prudentia had expressed an interest in the Plot to DWF – which was concerned to see the plot sold to a desirable developer; a position consistent with the manner in which master developers of land in Dubai sought to achieve land development, rather than land speculation.[111] In any event, given the nature of Brown’s conversation with Austin and his version of that conversation, one might have expected him to have asked Austin what he meant by “a hold on the plot”. In cross-examination, Brown admitted that he had not asked Austin this question,[112] but sought to explain the position as follows:[113]
“So you accepted that there was a hold on the plot and then the next day rang Mr Reed?‑‑‑I accepted that Austin knew that Angus Reed had a hold on this plot, yes; he was the government, he was the City Relations manager, he would know.
He would know, a hold on the plot?‑‑‑He would know. He was dealing with clients every day.”
This answer raises further doubts. As discussed below in relation to other discussions between Brown and senior officers of DWF, there is no evidence of any embarrassment on the part of Sunland in asking senior officers, such as Austin, for further details and information in relation to the rights that any other individual or entity might have held with respect to Plot D 17 at any time. In this answer, Brown confirms that Austin would have known the position and there is no suggestion that, if asked, Austin would not have provided sufficient information and details at that time. In this respect, it should also be noted that Austin was, according to Brown, reliable and was not criticised or questioned by Sunland in these proceedings.
[107]Court Book SUN.002.007.0096 (Notebook page 112); and see Transcript, p 36.31 - .32.
[108]Transcript, p 36.04 - .06.
[109]Transcript, p 44.41 - .46.
[110]Transcript, p 36.04 - .05 . Brown said that he kept his notebooks in a drawer behind his desk in his office in Dubai (Transcript, p 143.35 - .40); thus, as was not denied, the notebooks were readily accessible to him at all relevant times.
[111]A position consistent with the expert evidence of Keighran, referred to above, paragraphs 36 to 42.
[112]Transcript, p 39.35.
[113]Transcript, p 39.41 - .46.
In the course of this conversation, Brown did, however, understand that Plot D17 did not then exist and, consequently, DWF or Nakheel still owned the land in question.[114] For the same reason, Brown knew that Reed (or Prudentia) had no legal right to Plot D17, which is probably why he did not ask Austin what “a hold” meant. Nevertheless, it was clear to Brown from this meeting that Austin had already been talking to Reed about Plot D17[115] and that this meant that Prudentia was in a better commercial position than Sunland to acquire Plot D17. The negotiating position of Reed on behalf of Prudentia was important and of great value to Sunland.[116] Consequently, Brown was keen to explore the purchase of Plot D17 in a joint venture with Reed on behalf of Prudentia.[117]
[114]Transcript, p 23.04 - .28.
[115]Transcript, p 35.25 - .26.
[116]Transcript, p 86.39 - .42.
[117]Transcript, p 86.01, p 128.15 - .16 ; see Court Book SUN.009.007.5554.
On 15 August 2007, after his meeting with Austin, Brown and Joyce had a telephone conversation. Sunland pleaded that during this conversation Joyce said words to the effect that:
(i) ‘a man named Reed is the contact for Plot D17’;[118]
(ii) ‘although I will need to check this with Anthony Brearley, Reed’s company will be paying DWF AED 135 per sq ft to purchase Plot D17’;[119]
(iii) ‘the terms of payment are more favourable than the standard terms, being 5% on execution of the contract, 10% at handover which is scheduled to take place in about 6 months, 10% at 6 months after handover, 20% at 12 months after handover, 20% at 18 months after handover, 20% at 24 months after handover, and 15% at 36 months after handover’; and[120]
(iv)‘a property speculator would be likely to pay about AED 175 per sq ft to purchase Plot D17’.[121]
[118]Second Further Amended Statement of Claim, paragraph 12.1.
[119]Second Further Amended Statement of Claim, paragraph 12.2..
[120]Second Further Amended Statement of Claim, paragraph 12.3.
[121]Second Further Amended Statement of Claim, paragraph 12.4.
Brown had not had many discussions with Joyce since June 2007 when Joyce had complained to Brown that Sunland had, in the context of prospective joint venture between DWF and Sunland, misused confidential information about Plot A10C or that Sunland; to use Brown’s words, had “betrayed their [DWF] confidences”.[122] Nevertheless, Joyce gave Brown some information about the terms on which Plot D17 might sell, including at a price of AED 135 per square foot, but said that he would need to check the terms with Brearley. Joyce left Brown with the clear understanding that Prudentia had no signed SPA in respect of Plot D17,[123] nor that it had paid any deposit.[124]
[122]Transcript, p 205.46.
[123]Transcript, p 32.07 - .08 and p 198.01 - .12.
[124]Transcript, p 32.10 - .11.
Issues arose as to the veracity of the claims of Sunland and Brown’s evidence in relation to this conversation with Joyce. Sunland pleaded that after the meeting between Austin, Brown and Bennett on 15 August 2007, Joyce called Brown.[125] Brown’s oral evidence was that there was a telephone conversation with Joyce on the afternoon of 15 August 2007, but contrary to Sunland’s pleading, Brown says in his written statement that he cannot recall who called whom.[126] In cross-examination, Brown’s evidence was that it was more likely that he called Joyce.[127] It was submitted on behalf of Joyce that at the time the pleading was drafted, Brown was maintaining the façade, with Sunland’s lawyers, that it was Joyce who instigated the telephone call. It was submitted on behalf of Prudentia, Hanley and Reed that Brown’s evidence of what Joyce said in this conversation was both uncertain and unreliable. Brown, in his witness statement, said that Joyce told him that a “man named Andrew Reed was the contact for Plot D17 and that Reed’s company was partners with Och-Ziff”,[128] but in cross-examination, Brown’s evidence on this point was as follows:[129]
[125]Second Further Amended Statement of Claim, paragraph 12.
[126]Witness statement of David Scott Brown (6 August 2010), paragraph 82.
[127]Transcript, p 174.36 - .39.
[128]Witness statement of David Scott Brown (6 August 2010), paragraph 82.
[129]Transcript, p 175.26 - .47 – 176.06 - .10. .
“Mr Brown, you realise it is fundamental in this proceeding what words were spoken to you by Mr Reed and Mr Joyce on critical occasions?---Yes.
And one of the conversations that’s pleaded in the statement of claim in this proceeding occurred on 15 August 2007?---Yes.
You understand that, don’t you?---Yes, I do.
Are you now saying to his Honour that Mr Joyce said more than that a man called Andrew Reed was the contact for D17, in your conversation with him on 15 August?---The notes that were taken in my notebook don’t obviously cover everything that was discussed that day, but Joyce did confirm what Austin had told me and that was that Reed had the plot behind D5B and that he was the contact for that plot.
So your recollection to his Honour now is, is it, that Mr Joyce said to you on 15 August that Mr Reed was the person who had plot D17, used that expression?---Words to that effect.
Well, why didn’t you say so in paragraph 82?---I think sometimes when you’re describing something, you don’t necessarily put all the words in there, but that was the gist of what he was telling me.
When you use the word ‘gist’, it immediately becomes ambiguous, Mr Brown. What do you recollect Mr Joyce actually said to you about the relationship between Mr Reed and D17 on 15 August?---That he had a plot behind D5B, that he had serious partners in the States, Och-Ziff, and talked about - - -
No, I don’t need to hear any more. You say to his Honour, do you, that he said that Mr Reed had plot D17?---Well, he identified the plot that Mr Reed controlled, yes. He confirmed what Austin had told me the same day.
You’re just making it up, aren’t you?---No, I’m not; it’s my recollection.”
[1408]Hamade Statement, paragraph 5.2.
On the basis of these submissions, it was further submitted that the requirement under Article 285 of the UAE Code to prove deliberate falsehood, inducement and bad faith are relevantly the same as the elements (two and three) of the tort of deceit as stated in Magill. Similarly, it was said, Sunland must prove that any loss and damage suffered was caused by the conduct of the defendants.
In relation to the standard of proof, reference was made to sub-s 140(1) of the Victorian Evidence Act 2008 which prescribes the standard of proof in civil proceedings; namely, that the Court must be satisfied that the plaintiffs have proved their case on the balance of probabilities. Sub-section 140(2) prescribes certain non-exhaustive matters the Court may take into account in deciding if it is satisfied. This includes the “gravity of the matters alleged”.[1409]
[1409]See sub-s 140(2)(c).
In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd, the majority of the High Court said:[1410]
“The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary ‘where so serious a matter as fraud is to be found’. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. As Dixon J commented in Briginshaw v Briginshaw:
‘The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved …’
This statement of the High Court concerned the position at common law. Since that case, the Full Court of the Federal Court decided that his is also the correct approach with respect to the standard of proof under s 140 of the Evidence Act 1995, (Cth) (which is in the same terms as the Victorian Evidence Act provisions).[1411]
[1410] (1993) 67 ALJR 170 at 170-1 (Mason CJ, Brennan, Deane and Gaudron JJ); (1992) 110 ALR 449, at 449.
[1411]Qantas Airways Ltd v Gama (1992) 247 ALR 273 at 309.
For the reasons indicated previously in the detailed discussion of the D17 transaction, conduct and related events, there is no evidence against the defendants in support of any of the elements of the tort of deceit as set out in Magill. Crucially, this is because there was no representation made of the kind relied upon by Sunland.[1412] Moreover, to the extent that any such representation was made, it was not relied upon by Sunland and, in any event, the evidence would not support a finding that it was false. This position is reinforced when regard is had to the higher standard of proof required and the more onerous elements constituting the tort of deceit, by comparison with the elements necessary to establish the application of the statutory provisions upon which Sunland relied. Additionally, the elements of the tort of deceit require Sunland to establish not only that the representations relied upon were made but, further, that the person or persons making them knew them to be false.[1413] In the absence of a finding that any relevant representations were made, it is unsurprising that there is no such evidence of knowledge. Neither would Sunland’s allegations of “joint purpose” assist its case in this respect. Even assuming that, absent a finding in Sunland’s favour of any representations or conduct in breach of the statutory provisions or something in the nature of a fraudulent representation, evidence could be led against the defendants, or some of them, of some “joint purpose” adverse to Sunland’s interests, this could not amount to evidence of fraudulent intent or knowledge in the absence of such a finding. This follows because the base element for the statutory breach(es) or deceit is not established.
[1412]And see, above, paragraphs 355 - 357.
[1413]See Magill v Magill (2006) 226 CLR 551 at 567, [37] (Gleeson CJ); and also Article 285 of the UAE Civil Code (and, above, paragraph 419).
Loss and damage
Bases of claim
Sunland alleges that it suffered the following loss and damage:[1414]
(a)payment by Sunland to Hanley (by Sunland Group Limited on behalf of Sunland Waterfront (BVI) Ltd) of the fee of AED 44,105,780; and
(b)loss of reputation by Sunland in Dubai for having been party to a transaction characterised by the Dubai authorities as illegal.
[1414] Second Further Amended Statement of Claim, paragraph 37.
Sunland seeks to recover these alleged losses as compensatory damages pursuant to s 82 of the TPA and as damages for the tort of deceit. As indicated previously, the nature of damages awarded pursuant to s 82 of the TPA is usually assessed by reference to the detriment suffered as a consequence of reliance upon the contravening conduct, rather than the amount required to make good the expectation created by that conduct.[1415] Consequently, although both the statutory and tortious causes of actions are pleaded, they would, if established in terms of liability, lead to an award of damages on the same basis. For the reasons already set out, I am of the opinion that Sunland has failed to establish any basis of liability against any of the defendants in either the pleaded statutory causes of action or the claim in tort for deceit. Consequently, issues of loss or damage do not arise, but it may, nevertheless, be helpful if I express my views in this respect in case this proceeding is taken further.
[1415]See above, paragraph 360
The contradictory evidence given by Brown and Abedian makes it difficult to discern or understand the basis upon which Sunland puts its case in relation to loss and damage. As submitted against Sunland, does it allege that, if not for the Representations and the Hanley Representations, it would have:
(a)Withdrawn from all negotiations to acquire Plot D17 with the result that Sunland would not have become the owner of that plot (“the No Transaction Case”);
(b)Successfully negotiated with DWF to purchase Plot D17 in its own right, such that Sunland would have become the owner of D17 without paying the Fee to Hanley (“the Transaction Case”); or
(c)Negotiated some form of joint venture with Prudentia but on different terms to the final Implementation Agreement (“the Joint Venture Case”)?
Sunland alleges that, had the Representations and the Hanley Representations not been made, Sunland would not have entered into the Hanley Agreement or the Prudentia Agreement and would not have paid the fee.[1416] As a matter of pleading, it was submitted on behalf of Joyce that only the Transaction Case is open to Sunland on its pleadings, because the No Transaction Case and the Joint Venture Case are not pleaded. In my view, this is correct as a matter of pleading, but for the reasons which follow, it makes little difference in the ultimate result because Sunland fails to establish loss and damage however its case is made.
[1416]See Second Further Amended Statement of Claim, paragraphs 36 and 37.
The confused, inconsistent and contradictory evidence of Brown and Abedian is particularly clear when one comes to examine Sunland’s allegation that, but for the alleged representations, it would not have entered into the Agreements and would not have paid the fee.
Turning first to Brown’s, clearly contradictory, evidence:
(a)In paragraph 282 of his first witness statement,[1417] Brown said:
“If I had been told (or believed) that the basis for Reed’s ‘control’ of Plot D17 (or the status of Reed / Prudentia as ‘a preferred negotiator’) was Joyce had resolved that he would personally attempt to ensure that Plot D17 was sold to Reed, then Sunland would not got involved in the sale. Also, given the earlier encounter with Joyce on Plot A10C, I would not want to upset him again as Sunland (and I) saw him as someone who held substantial power at Dubai Waterfront. Therefore, Sunland would have just backed out and let Reed buy the site.”
(b)However, in paragraph 275 of his first witness statement,[1418] Brown said that Sunland would have negotiated directly with DWF to acquire Plot D17:
“If I had been told (or believed) that Prudentia (or its subsidiaries) did not have control and rights over Plot D17, I would not have negotiated with Reed (and SWB would not have entered into the agreements with Prudentia and Hanley) but would have negotiated directly with Dubai Waterfront.”
(c)Then, in paragraph 5 of his second witness statement,[1419] Brown gave the following evidence:
“Had Reed said to me that he would not talk to me unless I promised not to attempt to buy D17 directly from Dubai Waterfront, I would not have agreed to that. Had Reed said that to me, it would have flagged to me that Prudentia were just looking for sites as Sunland was, and had no legal rights over D17. In that case, I would not have given up Sunland’s ability to purchase D17 directly from Dubai Waterfront. In that case, I would still have been willing to talk to Reed about a JV on a non-exclusive basis, because you never really know what a prospective JV partner may be able to bring to the table.”
(d)In paragraph 26 of his second witness statement,[1420] Brown gave the following further evidence:
“If I had known at the time that Prudentia did not in fact control the land but was merely a prospective purchaser who also had the ability to arrange funding for the project, then we would have explored a different JV model with them. The negotiations would have been very different, as Sunland would have been able to pursue the purchase of the land itself, on the basis that if it was unable to negotiate a JV with Prudentia providing the finance, it could have looked for an alternative JV partner. Because I thought that Prudentia had control of the land, the attraction for Sunland of negotiating a joint venture with Prudentia, rather than simply offering to pay Prudentia a premium in order to be able to buy D17 for itself, was that it seemed that Prudentia was able to fund the land instalment payments.”
[1417]Witness statement of David Scott Brown (6 August 2010).
[1418]Witness statement of David Scott Brown (6 August 2010).
[1419]Reply witness statement of David Scott Brown (27 June 2011).
[1420]Reply witness statement of David Scott Brown (27 June 2011).
In this respect, Abedian gave the following evidence:
(a)In paragraph 116 of his first witness statement,[1421] Abedian said that the plaintiffs would have negotiated to purchase Plot D17 directly from DWF and would have sought out other joint venturers at the same time:
“If I had been told that information by any representative of the Dubai Waterfront management at the time, I would never have caused Sunland to enter into any agreement with Prudentia, Hanley or Reed. There is no reason why Sunland would pay any premium or consultancy fee to a party that had no control over that plot. Instead I would have caused Sunland, through Brown and me, to negotiate directly with Dubai Waterfront for the purchase of Plot D17. At the same time or following the purchase of the land from Dubai Waterfront, I would have caused Sunland to enter into JV negotiations with appropriate parties so as to find an appropriate JV partner to participate in the funding of the project.”
(b)In paragraph 117 of his first witness statement,[1422] Abedian stated that the plaintiffs would have abandoned all negotiations regarding Plot D17 and would have instead attempted to purchase Plot A10C or any other plot that was then available:
“If I had been told (which I was not) that the position was that Reed and Prudentia’s ‘control’ of Plot D17 was not due to Prudentia having any legal right over the plot but rather was because Joyce had made a personal decision that he wanted Dubai Waterfront to sell Plot D17 to Reed, then I would have resolved that Sunland should abandon its negotiations in relation to Plot D17 and should instead attempt to negotiate a purchase of Plot A10C or any other plot that might have been available.”
(c)In paragraphs 9 and 10 of his second witness statement,[1423] Abedian said that if he had been told at the outset that Sunland could acquire Plot D17 directly from DWF, then he would have negotiated for a SPA to purchase Plot D17 directly and would have sought out alternative joint venture partners. However, in paragraph 11 of that statement, he said that Sunland’s preferred approach to its projects was to establish a joint venture in which the other joint venture party brought the land to the joint venture and Sunland was responsible for project design, obtaining development approval, sales and marketing and seeking and obtaining finance for construction costs.
[1421]Witness statement of Soheil Abedian (6 August 2010)
[1422]Witness statement of Soheil Abedian (6 August 2010).
[1423]Reply witness statement of Soheil Abedian (16 June 2011).
Compensatory damages under the TPA are, as in tort in the present circumstances, measured as equivalent to the amount of money that would put a party in Sunland’s position back into the position it would have been in but for the misleading or deceptive conduct and the like under the statutory provisions or the fraudulent misrepresentations in the context of the tort of deceit. This requires a comparison of the actual position of the party with a hypothetical position. Consequently, whichever case is advanced by Sunland, it must establish what its actual position is as a result of entering into the transaction in respect of Plot D17.
No Transaction Case
If Sunland’s case were put on this basis, it would need to establish that it would have withdrawn from negotiations to acquire Plot D17 had it known the true position. The result would have been that it would not have become the owner of that piece of land. This does, however, appear to be a most unlikely position having regard to the enthusiasm of Brown and Abedian for that land and the close proximity of Plot D17 to Plot D5B, the high profitable feasibility studies prepared by Brown and the likelihood of Sunland being able to sell part of the project to a joint venturer such as Likeitalot Investments Pty Ltd (ACN 122 604 326) at a very significant profit.[1424] Moreover, even if one assumes that this is a likely outcome, it is unclear whether Sunland could have undertaken The Atrium project[1425] with Plot D5B alone. Sunland led no evidence as to what other project they would have done on Plot D5B.
[1424]See above, paragraphs 208, 242, 259, 298, 299 and 303.
[1425]The proposed development of Plot D17.
A further difficulty is that on the evidence adduced by Sunland, it is not possible to determine its actual net financial position as a result of its having acquired Plot D17. For example, if Sunland made a profit as a result of purchasing Plot D17, it follows that it is not suffering any loss as a result of entering into the D17 transaction. Thus, it was submitted against Sunland that its merely seeking a return of the Fee is a simplistic approach to its loss and damage claim, and one not supported by authority.
In La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd,[1426] Finkelstein J (with whom Jacobson and Besanko JJ agreed) said that the proper approach where a plaintiff is alleged to have received a benefit as a result of the wrongdoer’s act is to consider the following questions:
(a) Should the benefit be taken into account at all in assessing damages?
(b) If yes, how should the benefit be taken into account?
It follows that one must keep in mind that the goal or purpose of the assessment of damages is to compensate, which means that both losses and benefits accruing to Sunland as a result of purchasing Plot D17 should be taken into account in assessing damages.[1427] Consequently, it is artificial to ignore a benefit simply because it is of a different character to the loss pleaded by a plaintiff if the broad aim of an award of damages is to restore that plaintiff to its position but for the wrongdoer’s breach.[1428]
[1426] La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants (2011) 190 FCR 299.
[1427] La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants (2011) 190 FCR 299 at [22] – [23].
[1428]La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299 at [26].
A similar position is adopted under the law of Dubai. Damages under Part 3 of the UAE Code are compensatory[1429] and Article 292 of that Code provides that losses that that are considered to be a natural result of the harmful act are those for which it was not possible for the aggrieved party to avoid by exerting reasonable efforts.[1430] The expert evidence of Ms Hamade on Dubai law was that if a party reduced its loss by taking actions in mitigation, then this is a matter to be taken into account by the judge.[1431]
[1429]Hamade Statement [SUN.013.001.0771], paragraphs 5.1 and 5.2. Hamade Statement, Appendix 7, pages 199 to 201.
[1430]Hamade Statement, paragraph 6(b).
[1431]Hamade Statement, paragraph 5.2.
In this context, the Sunland evidence is as follows:
(a)After SWB acquired Plot D17, it entered into a joint venture with another party known as “EWM”.[1432] Brown could not recall the amount of the premium payable to Sunland by EWM under this joint venture and a call was made for documents to establish the quantum of that premium.[1433] Sunland produced a Shareholders’ Agreement[1434] for SWB between Sunland Development Dubai (BVI) Limited and Likeitalot Investments Pty Ltd ACN 122 604 326, pursuant to which:
[1432]Transcript, p 106:10; Likeitalot Investments Pty Ltd.
[1433]Transcript, p 106:21.
[1434]Exhibit D17, “Shareholders Agreement between Sunland Development Dubai (BVI) Limited and Likeitalot Investments Pty Ltd dated 31 October 2008”.
(i)In consideration for a 40% interest in the joint venture company (which was to develop Plot D17), the ‘Scott Entity’ would pay to Sunland an amount of AED 225,000,000 (clause 4.2(d)). At October 2008, this was approximately $90 million AUD (i.e. more than the purchase price of D17 to Sunland).
(ii)In addition to this fee, Sunland would receive AED 140,000,000 for “project supervision services and construction management services” (clause 7.1(a)) and another AED 20,000,000 for “specialist design services” (clause 7.2(a)). At October 2008, the total of these additional fees was approximately $64 million AUD.
(b)On 27 March 2009, Sunland issued a release to the ASX advising that EWM had defaulted on the joint venture terms but that Sunland had retained AUD $14 million already paid to SDG by EWM.[1435]
(c)The plaintiffs’ evidence showed that it is usual for them to fund development in Dubai through pre-sales.[1436] However, the plaintiffs failed to lead evidence as to the value of pre-sales obtained by them in respect of The Atrium project on Plot D17.
(d)Sunland is currently exiting its Dubai investments.[1437] It is not clear from the plaintiffs’ evidence what benefits the plaintiffs have obtained from their joint venture partners, by virtue of SWB’s ownership of Plot D17, in exiting those investments.
(e)The plaintiffs allege that the additional BUA received on Plot D17 was compensation for the Fee paid to Hanley and wording to that effect appears in the letter authored by Brown regarding the extra BUA.[1438] If that is the plaintiffs’ argument then it follows that they would not have received that BUA if they had not paid the Fee to Hanley. Accordingly, the value of this additional BUA would be considered a benefit received by the plaintiffs as a result of the alleged wrongdoing and would need to be taken into account in assessing damages.
[1435][MJJ.011.001.0001]; Tab TT of Cross-examination Tender Bundle (David Brown).
[1436]Transcript, p 302; Transcript, p 368 – 369; [SUN.001.006.0010].
[1437]Transcript, p 251.
[1438]DB[215]; [SUN.001.005.0027] and [SUN.001.005.0028].
It was submitted against Sunland that it had not adduced evidence to enable the Court to determine its net financial position with respect to Plot D17. It may be, it was said, that Sunland has made a net return in respect of Plot D17, in which case it has suffered no compensable loss. It is, however, a matter for Sunland to establish; something which it did not seriously attempt to do. It follows that it is not possible for the Court to compare that current net position with what would have been the position under any of the hypothetical alternatives advanced by Sunland, a difficulty which is compounded by the lack of evidence as to what Sunland’s alternative position would have been under the hypothetical alternatives.
Transaction Case
If this were the case pursued, it would be on the basis that Sunland successfully negotiated with DWF to purchase Plot D17 in its own right without paying the fee to Hanley. Nevertheless, to the extent that any finding could be made based on the evidence adduced by Sunland, that evidence, in my view, suggests that, given its apparently superior negotiating position, Prudentia would have entered into a SPA with DWF and then on-sold the plot to Sunland for a premium in the usual way. There was no dispute between the parties that it was a matter for DWF to determine to whom Plot D17 would be sold.[1439] In my view, Sunland’s evidence fails to establish that DWF would have sold Plot D17 to Sunland and not to Prudentia.
[1439]Notice Disputing Facts (and Authenticity of Documents) dated 26 October 2010 [SUN.008.004.0004]: “At any time prior to 1 October 2007 Dubai Waterfront was able to sell Plot D17 to someone other than the applicants if Dubai Waterfront so chose”.
Further, in this hypothetical situation, it is unknown what price Sunland would have paid for Plot D17. Brown’s evidence was that Sunland could not have obtained Plot D17 for the 120 sq/ft by dealing directly with DWF and bypassing Prudentia because “all indications were it would be sold to somebody at a higher price.”[1440] Consequently, if Sunland would have had to pay a higher price to purchase Plot D17 because of competition for the plot, assuming Prudentia walked away, this would mean that the hypothetical alternative position may be no better than the actual position. In any event, Sunland led no evidence that would allow the Court to determine this point.
[1440]Transcript, p 73:42.
Joint Venture Case
In this hypothetical situation, Sunland would have negotiated some form of joint venture with the Prudentia parties, but on different terms to the final Implementation Agreement or MOU. This possibility was contemplated in paragraphs 5 and 6 of Brown’s Second Witness Statement,[1441] a position broadly consistent with paragraph 11 of Abedian’s Second Witness Statement.[1442] Sunland did not, however, adduce any evidence to enable the Court to determine what the terms of this other joint venture agreement would have been and, consequently, determination of loss and damage on this basis is not possible.
[1441]Reply witness statement of David Scott Brown (27 June 2011).
[1442]Reply witness statement of Soheil Abedian (16 June 2011).
Loss of reputation
Sunland led no evidence in support of its claim for loss and damage on this basis. In fact, the evidence as it stands, indicates that it has successfully persuaded the Dubai authorities that it is a “victim” of a fraud perpetrated against it and further, this is the message which it has apparently been disseminating to the world through the ASX releases to which reference has already been made.[1443] In any event, as submitted against Sunland, any loss or damage to its reputation would not crystallise unless or until there was a ruling in the Dubai courts in relation to the legality or otherwise of the D17 transaction, and a finding in relation to Sunland’s involvement in that transaction.
[1443]See above, paragraph 334 - 339.
Summary
As Sunland has not led evidence that enables the Court to determine whether, in fact, it did suffer any loss and damage and, if so, how it should be assessed, it might be expected that its case would also fail in this respect. Sunland did, however, make submissions in support of the position that a court should nevertheless make a general award of damages in circumstances where no evidence has been led that can enable the court to quantify a specific amount for such damages. By way of example in support of this submission, reference was made to the judgment of Foster J in FAI General Insurance Co Ltd v RAIA Insurance Brokers Pty Ltd where his Honour said:[1444]
“Doing the best I can on what is extremely exiguous material I think it appropriate that I award damages in the sum of $15,000. In arriving at this award I have accepted that it is open to award damages for vindication of commercial reputation under s 82: see Brabazon v Western Mail Ltd (1985) ATPR 49-549 at 46,453; Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500 at 525; Typing Centre of NSW Pty Ltd v Northern Business College Ltd (1989) ATPR 40-943 at 50,290.”
It was also submitted that two judgments of Merkel J are also relevant: Acohs Pty Ltd v RA Bashford Consulting Pty Ltd[1445] and Nixon v Slater & Gordon,[1446] where two surgeons were held to be entitled to payments of $200,000 and $100,000, respectively, both for defamation and by way of damages under s 82 TPA for misrepresentations published about them. These cases do not, however, advance Sunland’s position for two reasons. First, the possible No Transaction Case, the Transaction Case and the Joint Venture Case raise matters necessary for consideration for the purpose of quantifying any award of loss and damage which cannot fairly be addressed by some arbitrary award of a global sum by way of general damages which is not calculated by reference to any relevant facts and circumstances. Secondly, in relation to loss of reputation, there is no evidence upon which any reasonable assessment could be based, even assuming that there is any loss of reputation which, for the reasons indicated previously, I discount entirely on the basis of the evidence before the Court. For these reasons, Sunland’s case does, nevertheless, fail in this respect.
[1444](1992) 108 ALR 479 at 509.
[1445](1997) 144 ALR 528 at 538.
[1446](2000) 175 ALR 15 at [84] and [88].
Finally, I should stress that the loss and damages issues discussed only follow for consideration if Sunland established its case in terms of liability, a position which has not been reached. For all these reasons, it is not necessary to consider apportionment issues with respect to Sunland’s damages claim.[1447]
[1447]See Closing Submissions of the First to Third Defendants (31 January 2012), paragraph 18.4.
Other matters
As discussed in considerable detail in the preceding pages the Sunland case is one founded, on the one hand, on alleged prohibited conduct under various statutory provisions contained in the TPA and the FTA. In broad terms, the statue-based case relies on allegations of misleading or deceptive conduct on the part of the defendants. The other aspect of the case, the case in tort, relies on establishing the elements of the tort of deceit. In neither case do communications between defendants, or the defendants and non-parties, to which Sunland was not privy at any relevant time – so which could not affect the impact of any alleged conduct, including representations, on Sunland or influence in any way its reliance or otherwise on such conduct – have any relevance to its case, on either basis. The same applies to flows of money or any other conduct which was not within Sunland’s knowledge at the relevant time.
Sunland’s attempt to rely on these matters in support of its case is merely another exercise on its part in the post hoc, ergo propter hoc fallacy.[1448] There can be no “joint purpose” or “joint tortfeasors” without first establishing the “purpose” or the “tort”. For the preceding reasons Sunland has failed to establish any base upon which any of the internal communications, subsequent dealings or flows of money could possibly become relevant; either for the purpose of its statute-based case or its case in deceit.
[1448]See above, paragraph 301.
Conclusion
For these reasons, Sunland’s case fails in all respects and will be dismissed.
Additionally, I will forward a copy of these reasons (and make any papers available) to the Australian Securities and Investments Commission with a request that the Commission consider the corporate governance issues for Sunland (including its ASX announcements) which are raised by these proceedings and take such further action as considered appropriate.
Nothing in these reasons affects the continuing operation of the orders I made in this proceeding on 27 January 2012, which were consequent on my reasons for judgment published on 25 January 2012.[1449]
[1449]Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 1) [2012] VSC 1.
I will hear the parties in relation to the question of costs and final orders.
“MJJ.008.001.0066 … is an email dated 20 August 2007 from Lee to Joyce that refers to putting ‘pressure’ on Brown, stating ‘…Omniyat was also in the running but I am not sure what they will be able to do’. Omniyat owned a plot which also adjoined plot D17.
In response Joyce instructs Austin: ‘Jeff, these plots are not for sale, so I suggest you do not refer customers to our sales department as it will confuse everybody’ (MJJ.008.001.0023) ….
These are, however, communications internal to DWF, communications to which Sunland was not a party. Consequently, they do not assist Sunland’s statutory and tortious “misrepresentation” claims. If Sunland had been a party, I am of the view that their contents would not assist Sunland’s case as they, in effect, confirm Austin’s statements to Brown and are consistent with the Prudentia parties’, including Reed, being in negotiations with DWF for the purpose of Plot D17, but having no better position than that. The same applies to the communications referred to in the Plaintiffs’ Address (paragraphs 56 to 72; Reply Submissions of the First to Third Defendants to the Closing Submissions of the Plaintiffs (22 February 2012), paragraphs 8 and 16; and see the responsive submissions set out in Reply Submissions of the Fourth Defendant (Joyce) (21 February 2012), paragraphs 86 to 96.
“242. Accordingly a number of IT witnesses made statements to the effect that the relevant emails would have passed over internet cable infrastructure located in Australia, en route from Prudentia’s email server in Melbourne to Sunland’s email server on the Gold Coast, and from Joyce’s computer in Dubai to Sunland’s email server on the Gold Coast.
243. Mr Vitali Parkhomenko is an IT manager at DLA Phillips Fox, the plaintiffs’ former solicitors. He has 13 years’ experience in the IT industry, and holds a masters degree in mathematics from the State University, Rostov-on-Don in Russia. He used publicly available search tools, and a document discovered by the first respondent entitled ‘Prudentia Investments Computer System Documents’, to conclude that the first respondent’s email server was physically located in Dorcas Street, Southbank, Melbourne when the relevant email was sent by Reed.
244. In relation to the receipt of Joyce’s email and Reed’s email by Brown, Mr Dumka gave evidence that prior to June 2008, all email to or from Sunland employees, wherever in the world they were, passed through Sunland’s Exchange mail server located in Sunland’s offices on the Gold Coast. He states that the only internet service provider used by Sunland for its Gold Coast premises was GCOMM.
245. Mr Michael Bellears of GCOMM has worked in the IT field for over 13 years. His evidence is that in August 2007, all of Sunland’s internet traffic passed through two cable services, known as x.163 or E1 services, which GCOMM provided to Sunland, having obtained them from its wholesale supplier, a company called PacNet, which was previously known as AsiaNetcom.
246. Mr Craig Deutscher of GCOMM has over 14 years’ experience in the IT industry. Mr Deutscher’s evidence is that he personally configured and maintained Sunland’s email server, and so knew that it was physically located at Sunland’s Gold Coast offices during 2007. His evidence is that any email sent to Brown’s email address [email protected] in August 2007 would have passed through GCOMM’s cable infrastructure between GCOMM’s data centre and Sunland’s premises.
247. Notice was given before and during the trial of an intention to subpoena a witness from PacNet, to give evidence to the effect that the cable infrastructure for the x.163 or E1 services provided to Sunland’s offices is ultimately owned by Telstra, but leased by PacNet for on-sale to its customers, and a statement of anticipated evidence (SUN.013.002.0001) was served on 14 July 2011.
248. On 16 November 2011, the Prudentia parties gave notice that they wished to cross-examine the IT witnesses, including the PacNet representative. However on day three of the trial, Mr Joyce’s counsel indicated that he did not intend to cross-examine any IT witnesses produced by Sunland (T169 L39), and the Prudentia parties indicated that was also their position. In those circumstances, the defendants can be taken to have conceded the point.”
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