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Allspec Constructions and Project Management Pty Ltd v Jana Pty Ltd as trustee for the Azizi Family Trust - [2024] NSWSC 592 - NSWSC 2024 case summary — Zoe
[2008] HCA 28
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
[1987] HCA 15
Arnold v Britton [2015] AC 1619
[2015] UKSC 36
Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441
Australia and New Zealand Banking Group Ltd v Karam (2005) 64 NSWLR 149
[2003] HCA 18
Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1
Source
Original judgment source is linked above.
Catchwords
[2008] HCA 28
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549[1987] HCA 15
Arnold v Britton [2015] AC 1619[2015] UKSC 36
Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441
Australia and New Zealand Banking Group Ltd v Karam (2005) 64 NSWLR 149[2003] HCA 18
Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1[2019] HCA 18
Barton v Armstrong [1976] AC 104
Barton v Armstrong [1973] 2 NSWLR 598
Blomley v Ryan (1956) 99 CLR 362[1956] HCA 81
Bofinger v Kingsway Group Ltd (2009) 239 CLR 269[2009] HCA 44
Cherry v Steele-Park (2017) 96 NSWLR 548[2017] NSWCA 295
Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337[1982] HCA 23
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447[2009] NSWCA 407
Gissing v Gissing [1971] AC 886
HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634[2020] NSWCA 296
Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235
In re SherryLondon & Country Banking Co. v Terry (1884) 25 ChD 692
Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392[2013] HCA 25
Louth v Diprose (1992) 175 CLR 621
[1992] HCA 61
Meehan v Jones (1982) 149 CLR 571
[1982] HCA 52
Morton v Kim [2019] NSWCA 273
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
[2002] HCA 5
Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149
Smith v William Charlick Ltd (1924) 34 CLR 38
[1924] HCA 13
Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102
Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1
[2022] HCA 6
Thorne v Kennedy (2017) 263 CLR 85
[1968] HCA 8
Wilson v Anderson (2002) 213 CLR 401
Judgment (28 paragraphs)
[1]
Background
The plaintiffs are Allspec Constructions and Project Management Pty Ltd (Allspec) and Mr Joseph Elia. The plaintiffs provided subcontracting and project management services to Trinity Constructions (Aust) Pty Ltd (Trinity) and Trinco (NSW) Pty Ltd (Trinco).
Mr Azizi was the sole shareholder of Trinity. Trinity was incorporated on 22 January 2001 and carried on a construction business together with a number of related entities. Trinity was placed into external administration 1 September 2021 and remains in that position.
Trinco was an entity of which Mr Azizi's sister, Ms Robin Azizi, was the sole director and shareholder. Ms Azizi was the accounts manager for both Trinity and Trinco.
The first defendant is Jana Pty Ltd as trustee for the Azizi Family Trust (Jana). Jana was the registered proprietor of land on Stoney Creek Road, Bexley, which Trinity was in the process of developing pursuant to a development consent obtained in September 2018. Some of the construction projects undertaken by the Trinity group were undertaken as a contractor to other developers. Other projects were undertaken on its own behalf. The Stoney Creek Road development was being undertaken on its own behalf.
At some point in late 2019, the plaintiffs commenced providing subcontracting services to Trinity and Trinco. Mr Joseph (or 'Joe') Elia was engaged to provide defect rectification services to Trinity and to obtain the release of retention moneys from the developer for a construction project which Trinity had undertaken for that developer at Miranda. Mr Joseph Elia's brother, Mr Elie Elia, was already employed by Trinity as a defects manager. The introduction between Mr Azizi and Mr Joseph Elia was via him. At least at the Miranda site, Trinity subcontracted all trade works to Trinco. Mr Elia was successful in completing the defects rectification services and securing the release of retention moneys.
In January 2020, Mr Azizi and Mr Joseph Elia met to discuss the latter's appointment to provide project management services more generally for Trinity and Trinco. According to Mr Elia, whose account of this meeting was not contradicted, Mr Azizi offered Mr Elia a general retainer on the following terms:
1. The parties would enter into a deed outlining the retainer agreement.
2. Mr Elia would be paid as a subcontractor.
3. Trinity would pay Allspec and Mr Elia the sum of $250,000 per year, which would be invoiced weekly in the amount of $4,807.68. These amounts would be paid to two companies, namely Allspec and JK Elia Holdings Pty Ltd which was the trustee of the JK Elia Trust. The amounts would be paid by each of Trinity and Jana.
4. The retainer arrangement would commence on 3 February 2020.
There was also apparently some agreement about either Allspec or Mr Elia, or perhaps JK Elia Holdings as trustee, being entitled to purchase a three bedroom unit in the Stoney Creek Road development at cost.
Mr Elia commenced in his new role on 3 February 2020. For almost a year from 3 February 2020, Allspec issued invoices to Trinity (and occasionally to Trinco) in respect of the work that Mr Elia was providing. These invoices reflected a general rate of $4,807.68 per week. Allspec also issued a series of invoices for other costs, including for the construction of glass awnings at a development site on Pennant Hills Road totalling $385,000.
From late 2019 up to early January 2021, Allspec issued invoices to Trinity and Trinco totalling $1,107,350.73. Of this amount, Allspec had by early January received payment totalling only $625,485.22, partly from Trinity and partly from other entities who appear to have been the principals for whom Trinity was performing certain construction and head contracting services.
[2]
The drafting of the Deed
On 29 September 2020, Mr Elia met with Mr Azizi and Mr Raheb to discuss the fact that Allspec was owed a considerable amount of money. Mr Raheb is a solicitor and is Ms Robin Azizi's husband. He worked in-house or very closely with Trinity, Trinco and the Azizis. It is apparent that Mr Elia indicated from the start of their discussions that he wanted security for the outstanding invoices. Mr Elia gave evidence that Mr Azizi agreed at this meeting to provide real property security, guarantees and indemnities. Mr Elia was not cross-examined on that evidence but I am inclined to treat it with at least some circumspection where Mr Azizi was not represented and where he was otherwise adamant that he did not give a personal guarantee.
Nevertheless, the evidence shows that between October 2020 and early 2021 there was fairly regular correspondence between Allspec and Mr Elia, on the one hand, and Mr Azizi or Mr Raheb (or both), on the other, about the drafting of a deed. The first draft was prepared by Mr Elia and was forwarded to each of Mr Raheb and Mr Azizi on 25 October 2020. In it, Mr Azizi was described as "Guarantor".
There was a meeting among those three at lunchtime on 27 October 2020 at which the terms of the Deed were discussed, although no one has sought to recount what was said.
A further draft was sent by Mr Elia on 7 November 2020 under cover of an email which records "Chris [Raheb] has confirmed that the terms of the deed were fine". On 20 November, Mr Elia sent Ms Robin Azizi an updated accounting summary showing moneys due and payable. On 23 November, Mr Azizi arranged a further meeting for 25 November to discuss the Deed.
Immediately following the discussion arranged by Mr Azizi, Mr Elia sent an email to Mr Raheb dealing with the proposed contract for sale of the Stoney Creek Road unit. Other correspondence about this aspect of the arrangement followed. By this point, Mr Elia's solicitor, Mr Jakimoski, was also being copied on correspondence.
Throughout December there were several meetings and further email correspondence among the parties. I do not know what was said at all of those meetings but Mr Azizi did not contradict Mr Elia's account of some of the discussions. It is evident that there was ongoing discussion about how the cost price of the Stoney Creek Road unit, which had not yet been constructed, was to be calculated. There was also discussion about working out the extent of the existing invoices.
[3]
Circumstances relevant to the defence of duress
Mr Azizi did not seriously dispute any of the matters I have just described as to how the Deed and accompanying contract for sale of the Stoney Creek Road unit came to be drafted and executed. His case was rather that he executed those documents in circumstances of duress. However, Mr Azizi led no meaningful evidence as to what this duress consisted of. When given an opportunity to explain the nature of the duress in the witness box and in his final oral submissions, it became clear that in the final quarter of 2020 and in January 2021, he and the wider Trinity group of entities were under very significant financial pressure and that he felt that Mr Elia had taken advantage of his weakened circumstances to pressure him into entering into the Deed. He says, and I accept, that at the time the Deed was being negotiated, he was actively seeking to refinance his business. I infer that there was no real prospect that any of the money owed to Allspec or Mr Elia could be paid unless and until there was a refinancing, and that all parties knew this.
In fact, Trinity and some of the related entities went into some or other form of external administration in the period following entry into the Deed. Mr Azizi holds Mr Elia at least partly responsible for this turn of events, insofar as the caveats which Mr Elia placed on various properties had the unsurprising consequence of escalating the demands of his lenders and making it even more difficult to refinance.
It is nevertheless apparent that at the time the Deed was being discussed, Mr Azizi was keen to keep Mr Elia on and for his retainer to continue. I received no evidence as to the detail of the financial difficulties facing Mr Azizi at the time, but it seems that he saw the retention of Mr Elia as being at least some part of the solution to them. Why that is so is not obvious.
In his oral evidence, Mr Azizi said:
"During that period, it - it was - it was extremely stressful. We had, you know, the company going down. It was trying to save it, trying to do the best to try and, you know, resurrect during a difficult period. You had - you had your own staff members trying to put more - more pressure on you. It was - I - I just felt that - that they sniffed, you know, they had sniffed an opportunity to be able to find that was your - your weakest point, and then just drive that through."
[4]
Other matters relating to the defence of duress
An aspect of the defendant's case in relation to duress is that Mr Azizi was subject to illegitimate threats made by Mr Elia's brother, Mr John Elia. The evidence shows that in 2022 and 2023, Mr Azizi received a large number of text messages from Mr John Elia in increasingly abusive and threatening terms. The first such message was dated 2 September 2022 and was as follows:
"That's okay I'm not gonna keep busting your balls texting you I'm coming to see you very soon Please expect me there unannounced but you know I'm coming to speak to you thanks buddy didn't know you gonna turn out like this but thank you"
As time went by, the texts continued and the tone deteriorated. On 13 September 2022 at 9:38PM, Mr John Elia sent the following message:
"What's happening big man Anthony do you have my money that you have borrowed I'm still waiting for you mate I'm a gentleman we're mates are we if we're not mates just let me know I don't want you to lose something very valuable in your life"
On 11 August 2023 at 6:41PM, Mr John Elia sent this message, which I have somewhat sanitised:
"Where's my fing money you piece of shit you wanna fing play games you fing f wit I promise you. I'm gonna knock on your door and I'm gonna surprise your whole family. You fing piece of shit you wanna fing play games now. What do you think this is your thumb and take my fing money you borrowed my fing money and you don't want to fing pay me back you fing dog where's my fing money don't make me knock on your door I'm telling you I've text you and you haven't even got the hide to fing ring me like a gentleman."
On 11 November 2022, a day on which Mr Azizi attended Court for an interlocutory hearing in this matter, he received the following message from Mr John Elia:
"Good Afternoon Anthony you look very cute today dressed what's happening with my money you really want to keep going you take my money and you don't want to give it back to me is that how it is and you don't want to reply to my text messages I thought you were a gentleman I thought we were mates"
[5]
The Deed
The parties to the Deed were all of the parties to these proceedings together with Trinity, Trinco and JK Elia Holdings. On the first page, Trinity was called the Head Contractor, Jana was called the Landowner, Mr Azizi was called Guarantor, Allspec was called Subcontractor, JK Elia Holdings was called Purchaser, and Mr Joseph Elia was called Employee of Subcontractor. All of the errors contained in the following reproduced parts of the Deed were in the original.
The recitals were as follows:
"A JANA PTY LTD ACN: 158 982 122 ATF Azizi Family Trust ("Landowner") is the registered proprietor of the Property known as Lot 30 which is an unregistered Lot 30 / 8-18 Stoney Creek Road Bexley NSW 2207 which is Lot 30 in an unregistered plan which is part of Folio Identifiers A/"363190, B363190, C/921789, B/921789, A/921789, 11191076 & 68/667002.
B Trinity Constructions (AUST) Ply Ltd ACN: 095 666 710 ("Head Contractor'');
C Allspec Constructions and Project Management Pty Ltd ("Subcontractor"); and
D Mr Joseph Elia ("Employee of Subcontractor''), who will be performing various construction works for the Head Contractor and its associated entitles.
E The Head Contractor, Anthony Azizi and Jana Pty Ltd are related and associated entities. Jana Pty Ltd will transfer its property by way of Contract for Sale of Land to the purchaser pursuant to a direction of the Subcontractor.
F Over time the Subcontractor has loaned the Head Contractor and or its associated entities various sums of money which have never been repaid with interest, or at all.
G Over time the Subcontractor has performed various tasks for the Head Contractor for which it has not received payment in full as agreed ("Retainer").
H The Head Contractor has agreed to use the services of the contractor and the contractor has agreed to provide those services on the terms and conditions set out in this agreement.
I The Head Contractor and the Subcontractor have agreed to crystallize the amount owing to the Subcontractor by the Head Contractor as at the date of this Deed.
J The Anthony Azizi, the landowner and the guarantors guarantee the terms and conditions set out in this Deed."
Clause 2 is entitled "Acknowledgement of Debt". In Clause 2.1, the Head Contractor acknowledges and agrees that from the date of execution of the deed, the sum of $481,865.51 is a debt owing to Allspec. In this paragraph, this debt is defined as the "Guarantee Debt". The clause states that the Head Contractor and the "Guarantors" agree not to dispute the Guarantee Debt.
[6]
Legal Principles
The principles that apply to the interpretation of deeds are the same as those that apply to the interpretation of contracts, see: Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5 at [9]-[10]. The role of the Court in interpreting a contract is to discern the common intention of the parties to the agreement "by reference to what a reasonable person would understand by the language used" within the agreement: Wilson v Anderson (2002) 213 CLR 401; [2002] HCA 29 at [8] citing Gissing v Gissing [1971] AC 886 at 906 (Lord Diplock); Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 at 502 (Lord Diplock); Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540.
The plaintiffs invited me to approach the construction of the Deed in the particular light of what was said Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 ('Mount Bruce') at [47]-[49]:
"In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals."
They also referred me to the summary of propositions in the reasons of Leeming JA in Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [72]-[74]. I especially note the primary emphasis which must be given to the text.
[7]
Surrounding circumstances
The task of construction involves more than the identification of the ordinary meaning of the words as they are written down: Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 348 (Mason J); [1982] HCA 23; and see the reasons of Meagher JA and Ball J in HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 at [23]. Recourse may be had to surrounding circumstances, not only where ambiguity has first been found: Cherry v Steele-Park at [71] (Leeming JA) (though the Deed in this case does not want for ambiguity).
In Mount Bruce, French CJ, Nettle and Gordon JJ said at [50]:
"What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations."
[8]
How did the Deed operate?
Leaving aside the critical question of who if anyone actually gave a guarantee or indemnity under the Deed and the question of what the content of any such obligation was, it can be seen that the general gist of the Deed was that it contained an acknowledgement of debt in relation to amounts invoiced by Allspec up to the date of the Deed; it formalised the proposal for Jana to sell the Stoney Creek Road unit to JK Elia Holdings; and it made provision for payment of a retainer in respect of Mr Joe Elia's services in addition to all of the amounts already invoiced. On one view, it also contained a guarantee, and possibly also an indemnity, of some kind.
It is relevant to notice the way Trinity's principal obligations under the Deed were intended to bite. So far as the so-called "Guarantee Debt" was concerned, being the acknowledged outstanding sum of $481,865.51, there was an acknowledgement that that sum was owing (clause 2.1) but that it was to be paid at "settlement or in the alternative at the discretion of [Allspec] and by agreement offset any balance of secured monies from the further sale by the Land owner of Real Property to the Purchaser or from the refinance of the property" (clause 2.3). The reference to "settlement" must in context be to the settlement of the sale of the Stoney Creek Road unit referred to in the immediately preceding clause.
In other words, as Mr Azizi correctly submitted, the agreed outstanding debt of $481,865.51 was not payable except (a) at settlement of the unit or (b) at settlement of other property sales by Jana to the Purchaser, or (c) from the proceeds of a "refinance of the property". It is common ground that none of those things occurred.
So far as the "Retainer" was concerned, the position was more complicated. The total amount per annum was $450,000 plus superannuation but this was broken into two parts. As to the first $250,000, this was to be invoiced weekly just as it had been previously (clause 4.3). To that extent, it would be due and payable as invoiced.
As to the balance, being the $200,000 plus superannuation, the Deed contains conflicting provisions. On the one hand, clause 4.4 says that this amount is "due and payable on the anniversary of the Retainer". It also says that this amount "could" be used as contractual set-off "against unit purchase's" or at settlement of the sale of the Stoney Creek Road unit. On the other hand, clause 4.7 defines the "accrued" $200,000 portion of the Retainer moneys as the "contractual set-off" and describes it, whether invoiced or not, "as a debt due and payable for the purpose of the purchase price under the contract only" (my underlining). The reference here to the "contract" is to the contract for sale of the Stoney Creek Road unit.
[9]
The plaintiffs' claims
It is at this point relevant to identify the amounts claimed by the plaintiffs and how they relate to the principal obligations I have just mentioned. Allspec has claimed a total of $795,772.76 plus interest. I will deal with the interest claim in due course.
The sum of $795,772.76 includes the acknowledged debt (that is, the Guarantee Debt) of $481,865.51 as well as the sum of $313,907.25 which was said to be owing under clause 4 of the Deed and was made up as follows:
1. $4,807 per week in "salary" for the 2021 year pursuant to clause 4.3 of the Deed up to the time Mr Elia resigned on 31 March 2021. This portion of the claim totals $49,038.05 according to the particulars provided in the amended statement of claim.
2. $181,818.18 in respect of the accrued retainer monies of $200,000 for the period 3 February 2020 to 3 February 2021.
3. $27,972 in respect of the accrued retainer monies for year two, i.e., from 4 February to 31 March 2021.
4. $34,100 in respect of reimbursement for costs and expenses associated with providing some formwork. There was an invoice for these expenses dated 26 February 2021 in evidence.
Mr Azizi did not dispute these calculations.
[10]
Duress
A contract or deed may be set aside on the basis of duress where illegitimate pressure has been applied in order to induce someone to enter into the agreement: Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 46 (McHugh JA) ('Crescendo Management'); Barton v Armstrong [1973] 2 NSWLR 598 at 617-618 and Barton v Armstrong [1976] AC 104 at 120 (Lord Cross). The general position at law is that duress renders an agreement voidable, meaning that the innocent party can elect whether to depart from the contract or not: JD Heydon, Heydon on Contract (2019, Thomson Reuters) at [16.50]. If the contract is vitiated as a result of duress, the innocent party has recourse to a restitutionary remedy if required (Universe Tank Ships Inc of Monrovia v International Transport Workers Federation [1982] 2 All ER 67 (Monrovia); Smith v William Charlick Ltd (1924) 34 CLR 38 at 56; [1924] HCA 13).
There is debate over whether illegitimate pressure can only be constituted by unlawful acts, like threats to harm persons or property, or whether it can extend to other kinds of pressure. However, the law in Australia has for a considerable time recognised a category known as 'economic duress', namely illegitimate economic pressure: see Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 106 (Kirby P); Australia and New Zealand Banking Group Ltd v Karam (2005) 64 NSWLR 149; [2005] NSWCA 344 at [57].
The issue resides in determining what pressure is illegitimate in the circumstances. In Crescendo Management, McHugh JA said at 46:
"A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress."
Examples of illegitimate pressure in the context of economic duress include threats to commit crimes or certain torts and threats to breach some contracts or other legal duties: Heydon on Contract at [16.270]. In Australia and New Zealand Banking Group Limited v Karam, Beazley, Ipp and Basten JJA said at [66]:
"The vagueness inherent in the terms "economic duress" and "illegitimate pressure" can be avoided by treating the concept of "duress" as limited to threatened or actual unlawful conduct. The threat or conduct in question need not be directed to the person or property of the victim, narrowly identified, but can be to the legitimate commercial and financial interests of the party. Secondly, if the conduct or threat is not unlawful, the resulting agreement may nevertheless be set aside where the weaker party establishes undue influence (actual or presumptive) or unconscionable conduct based on an unconscientious taking advantage of his or her special disability or special disadvantage, in the sense identified in Amadio."
[11]
Unconscionable conduct
In their written outline of submissions delivered shortly prior to the hearing, the defendants submitted in the alternative that the Deed should be set aside on the basis of the unconscionable conduct of the plaintiffs. They referred to Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 (Amadio) and to Blomley v Ryan (1956) 99 CLR 362; [1956] HCA 81.
There is some doubt as to whether the defendants actually pleaded unconscionable conduct as a basis for relief, as distinct from the defence of duress. However, on balance, I am satisfied that the Defence to the Further Amended Statement of Claim filed on 20 March 2023 sufficiently identified unconscionability as a basis for denying the relief sought by the plaintiffs. Paragraph 44 pleaded a defence of duress but included the following:
"e. it would be unconscionable for the plaintiffs to obtain relief claimed on the purported obligations set out in the Deed, it being a Deed entered into in circumstances of duress; and
f. the Deed to the extent it is legally operative and binding at all, is liable to be set aside."
I note that the plaintiffs did not submit at the hearing that I should reject the claim of unconscionability on the basis that it had not been pleaded. I will therefore proceed on the basis that the question of unconscionability must be determined separately from and in addition to the defence of duress.
[12]
Unconscionable conduct - principles
The circumstances in which the Court will grant relief on the ground of a claimant's unconscionable conduct were explained in the judgments of Mason and Deane JJ in Amadio at 461 (Mason J) and 474 (Deane J). See also Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25 ('Kakavas') at [6] (French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ) and Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1; [2022] HCA 6 ('Stubbings v Jams') at [45] (Kiefel CJ, Keane and Gleeson JJ). I also note Dalton and Schaeffer as Executors of the Estate of the Late John Herman Schaeffer v Naegeli [2024] NSWCA 51 at [135] (Stern JA).
The circumstances are broadly as follows:
1. The "weaker" party to the impugned agreement must be suffering under a special disadvantage which affects their capacity to protect their own interests; and
2. the "stronger" part must have actual or constructive knowledge of that special disadvantage; and
3. the "stronger" party must have unconscientiously took advantage of the opportunity presented by the special disadvantage.
A special disadvantage in this context is a "condition or circumstance… that seriously affects the ability of the innocent party to make a judgment as to [their] own best interests": Amadio at 462 (Mason J) approved in Stubbings v Jams at [40] (Kiefel CJ, Keane and Gleeson JJ) and in Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49 at [38] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
In Amadio, Mason J said at 461-462:
"It goes almost without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. As Fullagar J said in Blomley v. Ryan:
'The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other.'
Likewise Kitto J spoke of it as 'a well-known head of equity' which-
'… applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.'"
[13]
Unconscionable conduct
Given those conclusions, it is not strictly necessary to address the question of whether the plaintiffs engaged in unconscionable conduct. However, because it was addressed, I will indicate my conclusions about that matter.
The defendants made the following submissions as to the plaintiffs' conduct:
"[Mr Elia] was aware as [Mr Azizi] was vocal regarding the shortage of time and unfair terms. Additionally, [Mr Azizi] voiced that they needed an extension of time to change the Deed as they were not happy with the terms. [Mr Elia] left the building and did not return to work for two weeks. The intimidation and threats continued from [Mr Elia's] brother John Elia after this with threats to sign the Deed being made to [Mr Azizi].
[Mr Elia] exploited their position, as he stated that [Mr Azizi] has to sign the deed and no amendments were allowed to be made. [Mr Elia] stated that if [Mr Azizi] did not sign the Deed then [Mr Elia] would shut all of [Mr Azizi's] sites down. [Mr Elia] took advantage of [Mr Azizi] as he made the latter believe that there was no other option."
There is an overlap between the matters said to constitute the unconscionable conduct and the matters said to demonstrate Mr Azizi's special disadvantage, which is understandable. Nevertheless, when the limited evidence is considered as a whole, I am unable to find that Mr Elia's conduct in connection with the execution of the Deed was unconscionable.
It is true that Mr Elia walked off the job for two weeks because the Deed was not signed. This is perhaps the high point of Mr Azizi's claim that Mr Elia acted unconscionably. It must however be remembered that, at this point, and as Mr Azizi has always accepted, Mr Elia had not been paid for many months and was on any view owed a significant amount of money.
Mr Azizi also gave uncontradicted evidence that he actually feared Mr Elia and that he had always been "forceful, threatening and demanding". He gave evidence that he felt physically threatened by him and his brother (Mr John Elia, the author of the abusive and threatening emails set out earlier in these reasons). As to Mr John Elia, I have already noted that the evidence does not allow me to conclude that any of the abusive and threatening emails in evidence were sent in relation to the present dispute. Nor were any of them sent in relation to entry into the Deed. There was in fact no specific evidence of any threatening or abusive behaviour by either of the Elia brothers in connection with Mr Azizi's entry into the Deed.
[14]
Legal principles
In construing the terms of the Deed that relate to a guarantee I have had regard to the principles of construction I set out earlier at [61]-[67].
In the case of contracts of guarantee it is necessary also to keep in mind what was said by Lord Selborne LC in In re Sherry; London & Country Banking Co. v Terry (1884) 25 ChD 692 at 703, quoted in in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561; [1987] HCA 15 ('Ankar'):
"At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety. The doctrine of strictissimi juris provides a counterpoise to the law's preference for a construction that reads a provision otherwise than as a condition. A doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety…"
This proposition was further explained in Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2008] HCA 28 ('Andar') at [20]-[23]; see also Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44 at [53]; and also Morton v Kim [2019] NSWCA 273 at [13] (Basten and Payne JJA).
[15]
Who are the guarantors?
As I noted at the outset, the Deed is very, very badly drafted. A threshold question made particularly difficult by the drafting concerns the identification of who, if anyone, actually gave a guarantee under the Deed.
So far as the identification of any guarantor is concerned, the plaintiffs particularly rely on clauses 8.31 and 8.34. The first of those provisions is headed "Guarantee Absolute and Unconditional". Yet that provision is drafted in terms of the "Guaranteed Obligations" owed to each "Guaranteed Party", both being expressions which I have not been able to find defined anywhere in the Deed.
The critically important definition of "Guarantors" in clause 8.34 is almost meaningless unless one guesses at and then reads in additional words. Even when one does that, the result is a clause which describes what the guarantors do, not who they are.
The plaintiffs submitted that the foregoing difficulties of construction were mere infelicities of expression and that the Deed nonetheless made clear that Mr Azizi and Jana gave a guarantee in favour of each plaintiff for the payment of, at least, Trinity's and Trinco's obligations under the Deed. They submitted that the definition of "Guarantors" expressed a sufficiently clear intention that each of Mr Azizi and Jana were "Guarantors". It was pointed out that Mr Azizi was described as "Guarantor" in the heading on the first page of the Deed. My attention was also drawn to Recital J, set out at paragraph [42] above.
The traditional rule is that recitals do not form part of the operative provisions of deeds and are akin to extrinsic materials: N Seddon, Seddon on Deeds (2nd ed, 2022, Federation Press) at [5.3]. There has been some criticism of this rule, particularly in the judgment of Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [379]-[390]. In the present case, however, the recitals seem to have been intended to do more than merely describe the background to the execution of the Deed. Rather, they are drafted in such a way as to describe (at least in some respects) how the Deed was intended to operate. When the Deed is read as a whole, it is not possible (as it often is) to treat the recitals as being mere background to the "operative" parts of the Deed.
Mr Azizi submitted that the language about a guarantee in the operative parts of the Deed was so unclear and poorly drafted as to be meaningless. The law imposes a high bar for construing contractual terms as being so uncertain that they are unenforceable. In Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [53], French CJ, Kiefel and Bell JJ held that to be uncertain, the contractual language in question must be "so obscure or imprecise as to be incapable of supporting attribution… of any particular contractual intention".
[16]
Guarantee Debt
There is also difficulty in identifying the nature and extent of Mr Azizi's obligations under the guarantee. As I have already noted, the Deed contains conflicting definitions of "Guarantee Debt". On the one hand, it is defined in clause 2.1 to mean, essentially, the acknowledged unpaid debt owing to Allspec as at the date of the Deed. On the other hand, it is defined in clause 8.32 to mean all moneys owed by Trinity, Jana "and its associated entities and Anthony Azizi" to the subcontractor "in connection with the Retainer Agreement, loans and this deed." The plaintiffs urge me to accept the latter definition as the operative definition of the expression.
There is an element of circularity in the clause 8.32 definition. Mr Azizi does not have any payment obligations under the Deed save to the extent that he may be a Guarantor. Yet those obligations, on the plaintiffs' argument, are themselves part of the Guarantee Debt which Mr Azizi is guaranteeing.
A further difficulty with adopting the clause 8.32 definition is that it is so imprecise. On the plaintiffs' construction, each guarantor guarantees "all money and obligations" owed by "associated entities" of Jana to Allspec "in connection with the Retainer Agreement" (yet another undefined expression, although Retainer is defined), loans (undefined) and "this deed".
These inconsistencies and uncertainties are troubling. Ultimately, the principle explained in Andar and Ankar leads to the conclusion that the expression "Guarantee Debt" must have its clause 2.1 meaning. That approach resolves the ambiguity concerning the meaning of the expression in favour of Mr Azizi. It is true that adopting the clause 2.1 definition makes the definition in clause 8.32 redundant, but in circumstances where the document contains competing definitions and where one of those definitions (clause 8.32) is already very imprecise in its scope, the need to resolve any ambiguity in favour of the guarantor means that clause 2.1 prevails.
[17]
Guaranteed Moneys
It is next necessary to consider the definition of Guaranteed Moneys in clause 8.35, set out at [57] above.
As with most other provisions relating to the guarantee, this clause is unclear. Just what is meant by amounts "from time to time due at the settlement and owing by the Head Contractor, Landowner and its associated entities to the Subcontractor and or its nominees under or pursuant to this Deed" is not obvious. The clause might be attempting to identify those amounts due by Trinity or Jana at the time of (or perhaps in connection with) settlement of the contract for sale, should it occur. But it could also be attempting to identify amounts due at any time under the deed, including on a refinancing. The first sentence seems to be susceptible to both of these constructions. The second sentence is rather cryptic. On balance, the second sentence seems to suggest that the guaranteed moneys may be those moneys due either at settlement or subsequently.
The conclusions I reached above as to the principal obligations under the Deed were, relevantly, that some amounts would be due and payable as and when invoiced (ie, the first $250,000 per annum of the Retainer) but that other amounts would be due and payable only by way of set-off (ie, the acknowledged $481,865.51 and the balance of the Retainer).
Consistently with those conclusions, the definition of "Guaranteed Moneys" should be construed as a reference to the funds payable by way of set-off at the time of completion of the contract of sale of the Stoney Creek Road unit and to funds otherwise payable by way of set-off against property purchases, or on refinancing. It also extends to the funds payable from time to time in respect of the weekly invoiced component of the Retainer.
[18]
Did the Guarantee Debt or the Guaranteed Moneys become due and payable?
Save for the issuing of weekly invoices for the Retainer, it is common ground that none of things just mentioned occurred. The contract for sale of the Stoney Creek Road property never completed, nor were there any other property sales, nor was there a refinancing.
This creates yet further difficulty. If Trinity or Jana were actually under an obligation to ensure that the Stoney Creek Road unit was sold to the Purchaser or to cause a "refinancing" (a concept not usefully defined in the Deed), I would find that the guarantee extended to performance of that obligation. However, I am unable to discern a clear obligation to do either of those things. Clause 5 referred to Jana having "agreed" to sell the apartment to the Purchaser and contained an acknowledgement that the deposit had been paid "by way of contractual set off" (although it was not clear how or when that occurred). The front page of a contract for sale of the Stoney Creek Road unit was in evidence, as was an execution page signed by Mr Azizi on behalf of Jana. The balance of the contract was not in evidence.
There was no evidence as to when and on what terms Jana was obliged to complete the contract for the Stoney Creek Road unit, save to the extent that matter was addressed in the Deed itself. In that respect, I note Clause 8.64:
""Settlement Date of the Contract for Sale"- means for an off the plan purchase, the settlement period runs parallel with the construction program, progress of the subject property, the occupational certificate being granted authorizing the property to be habitable and strata plan registration with the NSW Land Registry Services.
a. The Vendor will as soon as practicable and with due expedition lodge such plan for the approval of the proper authority or authorities and for registration at the Land and Property Information NSW as a Deposited Plan and all costs and expenses of and incidental to the preparation, approval and registration of the said plan shall be borne by the Vendor. Completion of the contract for sale to take place 21 days after receipt of notice by the Vendors or Purchasers solicitors or a date referred to in the contract for sale of land for notice (the earlier date will apply)."
It follows that there was no firm stipulation as to completion of the sale. In those circumstances, and given that there was neither a refinancing nor any other property transaction against which the Guarantee Debt (ie, the $481,865.51) and the "contractual set-off" amount (being the $200,000 plus superannuation) might be off-set, it appears that the conditions to payment of those amounts never occurred.
[19]
To whom was the guarantee given?
It is next necessary to consider the identity of the parties to whom a guarantee was given. The plaintiffs say that they are both entitled to sue on the guarantee.
As with everything else, this is unclear.
The "Guarantee Debt" is a debt due to Allspec. "Guaranteed Moneys" refers to obligations due to the subcontractor, Allspec, or its nominee. The obligation in relation to the Retainer is to pay to Allspec or its nominee. The expression "Guaranteed Moneys" does refer to moneys owing "to the Subcontractor and or its nominees under or pursuant to this Deed", but that does not take matters anywhere because there is no evidence that Allspec has nominated anyone for these purposes. The definition of "Guarantee" suggests that the guarantors (although, as explained, I have found that there is only one) guarantee the payment by Trinity and or its associated entities to Allspec, "upon demand by Allspec or its nominated nominee".
These provisions, taken together, suggest that the guarantee was given to Allspec alone. Allspec might have nominated Mr Elia as someone who could make a demand under the Deed, but that did not occur and in any event would only lead to Mr Elia making a demand on behalf of Allspec.
In these circumstances, I find that the guarantee was given to Allspec to support the payment obligations owing to it or its nominee under the Deed. The guarantee was not given to Mr Elia. It follows that Mr Elia's claim under the guarantee must be dismissed.
[20]
Conclusions about the guarantee claim
My conclusions about the claim under the guarantee are that:
1. Mr Azizi gave a guarantee;
2. The guarantee was given to Allspec; and
3. The extent of Mr Azizi's liability under the guarantee is to those moneys that became due and payable pursuant to clause 4.3, being only the invoiced portion of the first $250,000 of the Retainer.
[21]
Indemnity
It is next necessary to consider the extent of the indemnities given under the Deed. I note at the outset that the principles applicable to the interpretation of contracts of guarantee apply equally to contracts of indemnity: Andar at [68].
It is convenient to set out the two clauses that particularly bear on this issue one more time. The first is clause 3.4:
"The Head Contractor and the Landowner and its associated entities will indemnify the Subcontractor and its associated entities to the Deed for any loss suffered as a result of a breach of this Deed on a full indemnity basis."
The second is clause 8.38, found within the definitions section:
""Indemnities"
Nature
The guarantors indemnifies the Purchaser, Subcontractor and or its nominees on demand against any liability, loss, cost or expenses caused or contributed to by:
(a) any failure of the guarantor's to comply with any obligation under this Deed and contract for sale of land;
(b) any event of default or breach of this Deed;
(c) any act by the purchaser in reliance on any communication purporting to be from the guarantors or to be given on behalf of the guarantors.
(d) If the obligation of the Head Contractor or Guarantors to pay the Guaranteed Moneys to the Subcontractor is or becomes void or unenforceable for any reason, each Guarantor as a separate undertaking unconditionally and irrevocably indemnifies the Subcontractor and the purchaser against any loss, damage, costs or expenses incurred by the Subcontractor or purchaser in respect of the failure by the Head Contractor to pay to the Subcontractor and or its nominee the Guaranteed Moneys."
Yet again, one is struck by the poor drafting of the Deed. The capitalised expression "Indemnities" does not seem to be used anywhere. Yet at the same time, it is drafted like an operative provision which only makes "guarantors" liable to provide an indemnity. It seems to have been drafted without any regard whatsoever to clause 3.4.
The plaintiffs submitted that this was a mere infelicity of drafting and that if all of the persons identified in clause 3.4 were guarantors, clause 8.38 would make more sense. I am not so sure. For a start, I have already found that the Deed does not make anyone other than Mr Azizi a guarantor. I am not prepared to find that the Deed makes all of the persons identified in clause 3.4 guarantors on the basis that that conclusion resolves a difficulty of construction as between clause 3.4 and clause 8.38. On its proper construction, the Deed does not make Jana and Trinity and all of their "associated entities" guarantors, even taking the tension between clauses 3.4 and 8.38 into account.
[22]
Conclusions as to the scope of the indemnity
The two critical provisions of the Deed dealing with the indemnity are inconsistent and that inconsistency is not easily resolved. It is not possible to read the provisions together in some harmonious fashion other than by resolving all ambiguity in the plaintiffs' favour, which I am not prepared to do. Nor is it appropriate to pick and choose parts of each provision with a view to crafting some compromise provision.
I have given consideration to whether the Deed should be construed as containing two separate indemnities, namely that granted by Mr Azizi in clause 8.38 as well as that granted by Jana and Mr Azizi in clause 3.4. However, this leads to yet more awkwardness because, at least so far as Mr Azizi is concerned, the clauses overlap significantly. It is in my view unlikely that the parties here intended Mr Azizi to be subject to two separate but overlapping indemnity obligations. In my view, having regard to the language of the Deed as a whole, the far more likely explanation is that the two provisions were drafted without regard to one another.
That being so, the appropriate although somewhat unpalatable course is to identify the clause that best gives effect to the parties' intentions so far as an indemnity is concerned. In my view, that clause is 8.38 rather than 3.4. I reach this conclusion on the basis of the language of the Deed as a whole but draw attention to two particular matters. First, from Jana's point of view, the uncertainty about the operation of these two clauses should be resolved in its favour (Andar). Since it is not within the scope of clause 8.38, this tends to favour treating that provision as the relevant expression of the parties' intentions. Secondly, the scope of the indemnity under clause 8.38 is far clearer than that under clause 3.4. The latter speaks of an indemnity in favour of Allspec "and its associated entities" which suggests a very wide and uncertain class of potential beneficiaries of the indemnity. From the point of view of Mr Azizi, who is caught by both provisions, this is a reason to favour clause 8.38 over clause 3.4.
Doing the best I can to discern the intentions of the parties as disclosed in the poor language of the Deed and having regard to the circumstances in which it was entered into, I therefore find that clause 8.38 is the most reliable expression of the parties' intentions so far as an indemnity is concerned.
[23]
What loss must be indemnified?
Mr Azizi's liability under the indemnity potentially extends beyond the scope of the obligations which he guaranteed.
However, it is necessary to identify the loss actually suffered by Allspec. The conclusions I reached above as to the scope of Trinity's and Jana's primary obligations under the Deed were that, with regard to the events which actually happened, the weekly invoiced portion of the Retainer was due and payable by reason of clause 4.3 but that neither the Guarantee Debt nor the "contractual set-off" ever became due and payable. As noted above, I cannot discern a promise by either Trinity or Jana (or any other party) that those amounts either were or would become due and payable except on the happening of conditions which, it is agreed, never occurred.
It could be argued that the indemnity in clause 8.38 was intended to cover losses arising from "defaults", as defined. The Deed contains a definition of "Default" in clause 8.22, although that expression (at least, the capitalised expression) is not used in clause 8.38 or indeed any other operative clause. It provides:
""Default"- The Head Contractor and its associated entities must ensure that an Event of Default does not occur. A default under this deed will exists when: (a) the weekly services of the subcontractor are not paid; (b) the payment of the Guarantee Debt on demand within 14 days; (c) the Vendor does not complete the Contract for Sale of Land Settlement on the Settlement Date."
The first part of that clause is readily understood. The second part refers to a demand for payment of the Guarantee Debt, but that is something that could never occur unless the Stoney Creek Road unit were transferred or if there were a refinancing, which never happened. The third part refers to a failure to complete on the Settlement Date but that date never occurred and the obligation to complete never arose.
It seems most unlikely that the parties intended the defined expression "Default" to have any particular application to the scope of the indemnity. I am therefore inclined to treat the language of clause 8.38, particularly the language of paragraph (b) of that definition, as having its ordinary meaning.
I find that there has been a breach of the Deed within the meaning of clause 8.38 only in respect of one matter, being the failure to pay the invoices for weekly services issued after the date of the Deed. Those invoices were due and payable at the time they were issued and Allspec was entitled to be paid those amounts. That did not occur. It has to that extent suffered a loss.
[24]
Were Mr Azizi's obligations subject to any conditions which did not occur?
The next aspect of the defendants' case was that any obligations as guarantor or otherwise were subject to a refinancing occurring.
As I have explained, many of the primary obligations under the Deed were subject to conditions which did not occur. However, not all of the primary obligations were subject to a condition. The weekly invoices for the Retainer became due and payable immediately by reason of clause 4.3. Payment of these amounts was guaranteed. The failure to make those payments gave rise to loss for which Allspec is entitled to be indemnified.
[25]
Calculation of the amounts owing
Allspec has claimed $795,772.76 plus interest.
As I have already noted, that sum includes the acknowledged debt (that is, the Guarantee Debt) of $481,865.51 as well as the sum of $313,907.25 which was said to be owing under clause 4 of the Deed.
However, on my construction of the Deed the only amounts that ever became due and payable were the amounts of $4,807 per week in "salary" for the 2021 year. The defendants admit that no payment has been made in respect of these invoices.
For the reasons I have already explained, the sum of $481,865.51 was never due and payable and there was no breach of the Deed in failing to pay it. Nor were the amounts of $181,818.18 and $27,972, being amounts which the Deed called "contractual set-off", ever due and payable and there was no breach of the Deed in failing to pay them.
For reasons I have also explained, Allspec is also not entitled to recoup the sum of $34,100 in respect of formwork supplied in February 2021 under the Deed.
[26]
Interest
Finally, it is necessary to say something the plaintiffs' claim for interest.
Clause 8.40 is entitled "Interest". It employs what the reader will by now recognise as Mr Elia's signature drafting style. It is as follows:
""Interest"- The Guarantors must pay interest on the debt and all secured monies owing at the rate of 10% per annum which accrued daily from the date of this Deed until the date the Debt and all secured money is paid in full."
There are several things to note about this. It purports to make interest payable on amounts not due and payable. It uses the expressions "debt" and "Debt" but does not define or otherwise explain them. The expression "Interest", as defined, does not seem to be used in any other provision. It uses the expression "secured money", but that expression is defined in clause 8.62 in a way that (at least when read literally) makes all secured money owing "either payable on demand or immediately due for payment", which is a concept entirely at odds with the operation of the primary obligations under the Deed. On no view of the Deed were all obligations secured by the Deed intended to be "payable on demand or immediately due for payment."
Even the plaintiffs have not attempted to claim interest in accordance with the literal meaning of clause 8.40. So far as the weekly invoices are concerned, they have claimed simple interest, not compound interest, and have done so from the date of the invoices, not from the date of the Deed.
I am not prepared to gloss over the difficulties of construction of clause 8.40 in that way. When read as a whole, as it must be, it introduces a thicket of ambiguities and difficulties that the plaintiffs have not addressed. I have striven to give effect to other clauses of the Deed despite similar difficulties, but I have been able to do so because the intention of the parties was tolerably clear in the context of the Deed as a whole. So far as interest is concerned, however, there is very little by way of guidance save for the language of the definition itself.
Doing the best I can, I find that the references to "debt" and "Debt" must be to the "Guarantee Debt". I have already concluded that that expression has the meaning given to it in clause 2.1, namely it is the sum of $481,865.51 that had already accrued and was owing at the date of the Deed. The interest provision, therefore, seems to be saying that interest will run on that amount from the date of the Deed. This construction avoids a major difficulty inherent in the literal construction, namely of charging interest on amounts from the date of the Deed even though the amounts are not owing, let alone due, until invoiced.
[27]
Conclusions
Allspec has succeeded in its claim but Mr Elia has failed. Allspec is entitled to indemnity from Mr Azizi but only as to the unpaid portion of amounts invoiced under clause 4.3. This means that Allspec is entitled to be paid the amounts referred to at paragraphs (i) to (xi) of the particulars to paragraph 24 of the Statement of Claim. These amounts include weekly invoices totalling $49,038.05. Allspec will be entitled to statutory interest on these amounts.
Mr Elia's claims fail altogether, as he is not entitled to the benefit of either Mr Azizi's guarantee or the indemnity.
The claim against the First Defendant fails entirely.
Allspec has succeeded only as to the sum of $49,038.05, plus interest. I will make an order that the first plaintiff is entitled to judgment in that amount. However, it is preferable that the parties perform the interest calculations. When that is done, I will make an additional order for interest in the amount so calculated.
I will also give the parties an opportunity to put on short submissions as to costs or otherwise agree them.
The orders of the Court will be:
1. Judgment for the first plaintiff against the second defendant in the sum of $49,038.05.
2. Direct the parties to bring in short minutes of order as to the amount of pre-judgment interest on the amount referred to in order (1) by 4pm on Friday 24 May 2024.
3. Direct the parties to file and serve submissions of no more than three pages on the question of costs by 4pm on Friday 24 May 2024.
4. Otherwise dismiss the proceeding.
[28]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 17 May 2024
Parties
Applicant/Plaintiff:
Allspec Constructions and Project Management Pty Ltd
Respondent/Defendant:
Jana Pty Ltd as trustee for the Azizi Family Trust
Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235
In re Sherry; London & Country Banking Co. v Terry (1884) 25 ChD 692
Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25
Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61
Meehan v Jones (1982) 149 CLR 571; [1982] HCA 52
Morton v Kim [2019] NSWCA 273
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1997] FCA 1107
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5
Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149
Smith v William Charlick Ltd (1924) 34 CLR 38; [1924] HCA 13
Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102
Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1; [2022] HCA 6
Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49
Universe Tank Ships Inc of Monrovia v International Transport Workers Federation [1982] 2 All ER 67
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429; [1968] HCA 8
Wilson v Anderson (2002) 213 CLR 401; [2002] HCA 29
Texts Cited: JD Heydon, Heydon on Contract (2019, Thomson Reuters)
N Seddon, Seddon on Deeds (2nd ed, 2022, Federation Press)
Category: Principal judgment
Parties: Allspec Constructions and Project Management Pty Ltd (ACN 617 645 788) (First Plaintiff)
Joseph Elia (Second Plaintiff)
Jana Pty Ltd (ACN 158 982 122) as trustee for the Azizi Family Trust (ABN 44 290 667 496) (First Defendant)
Anthony Charbel Azizi (Second Defendant)
Representation: Counsel:
The Deed was finally complete and ready for execution by 17 January 2021. On that day, Mr Elia emailed Mr Raheb with a final draft, together with two documents that would become Appendix 1 and Appendix 2 to the Deed. Appendix 1 was a summary of outstanding invoices. Appendix 2 was a handwritten note which, Mr Azizi accepted, was in his handwriting and which recorded at least some of the main matters that were eventually dealt with in the Deed.
The Deed was executed in counterparts. On 19 January 2021, Mr Elia and Mr Raheb had the following discussion:
"Mr Elia: Chris, have you had a chance to finalise the deed?
Mr Raheb: Yes, its complete.
Mr Elia: Can we go through the deed one final time together now, that way I can execute my part now and Robin and Anthony when they come in. I can have Elie witness my signature on the deed and witness me signing the contract for sale of land.
Mr Raheb: Yes that is fine, I will explain it to Anthony and Robin when they come in and have them execute their respective parts of the deed and contract."
Mr Elia executed the Deed in the presence of his brother, Elie, who witnessed it. Mr Azizi was not present at that stage, however Mr Raheb said that he would catch up with Mr Azizi and Ms Robin Azizi later and that he would provide an executed copy of both the Deed and contract for sale to which it referred.
Mr Raheb delivered the original executed contract for sale and the original executed Deed to Mr Elia on either 19 or 20 January 2021.
Mr Azizi said this in his final submissions:
"DEFENDANT: Your Honour, I prolonged it as much as I could. You could see from the time from October to the end of January that it took to get this deed signed. I didn't want to sign this deed. The debts were outstanding. I understood that. I always knew what the agreement was going to be with the apartment from Bexley. I didn't want to sign any deed, but I just felt pressured. There was a lot of pressure in the end there, you know, from Joe daily being in the office, from external family members as well putting pressure on as well.
HIS HONOUR: Is what Mr Bolster says correct that at that time you wanted Mr Elia to stay on?
DEFENDANT: He went, and I didn't push. He took two weeks off.
HIS HONOUR: No, before the deed was signed, so in the lead up to the deed being signed, was that your state of mind, that you wanted Mr Elia to stay on?
DEFENDANT: Look, at the time, I needed personnel, but I didn't need this pressure as well. That was forced to sign a deed. I don't want to be signing deeds with my staff as well. If Mr Elia ended up leaving, which he did not long after signing the deed, I'd just given up at that point, yeah, but at the time, I did need personnel, obviously, to keep the sites moving and whatnot."
On 31 March 2021, having issued some further invoices, Mr Elia resigned from the retainer described in the Deed. By that point, he had not been paid for about 25 weeks of work.
From May 2021, Allspec started to take action to demand and recover the amounts which the plaintiffs claim were and remain due and payable to them under the Deed. It soon became apparent that neither Trinity nor Trinco had any ability to meet those demands. Allspec also lodged caveats over the Stoney Creek Road property and other properties held by Jana. The existence of these caveats only worsened the situation for Mr Azizi and Trinity, because it made attempts to refinance all the more difficult.
In February 2022, Jana and Mr Azizi took action to remove the caveats lodged by Allspec. The plaintiffs rely on the consent orders made at the conclusion of those proceedings as evidence of an acceptance by both Mr Azizi and Jana that they were in fact guarantors under the Deed. For that reason, it is necessary to note the terms of the judgment and the associated undertakings given by the plaintiffs.
The parties to the proceedings were Jana and Mr Azizi, as plaintiffs, and Allspec, as defendant. On 22 February 2022, Rein J made orders by consent in the following terms:
"Upon the undertakings given by the Plaintiffs and annexed to these orders and marked "A" (the Annexure) the Court orders:
1. The Plaintiffs have leave to file in Court the Summons dated 22 February 2022 and Affidavit of Anthony Charbel Azizi sworn 21 Februrary 2022.
2. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) and the inherent jurisdiction of the Court that the Defendant forthwith withdraw caveat AR424354 registered over land title interests being, A/363190, B363190, A/921789, B/921789, C/921789, 68/667002, and 1/191076.
3. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) and the inherent jurisdiction of the Court that the Defendant forthwith withdraw caveat AR 457338 registered over land title interests being, 1/SP72259, 3/SP72259, 13/SP72259 and 15/SP72259.
4. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) and the inherent jurisdiction of the Court that the Defendant forthwith withdraw caveat AR469774 registered over land title interest being, B/18086.
5. Simultaneously with the withdrawal of caveats and refinance contemplated by these Orders and the attached undertakings, the Plaintiffs are to direct, out of the monies to be paid by Vanguard Capital Management Pty Ltd, the sum of $481,865.51 to the trust account of the solicitors for the Defendant, and of that sum, $40,000 is to remain in that trust account, and not to be depleted pending further order of this Court.
6. As contemplated by the undertakings proffered by the Plaintiff, the Defendants have leave pursuant to s 74O of the Real Property Act to lodge, or relodge, as appropriate, caveats that have been withdrawn as contemplated by the above orders.
7. That the proceedings are stood over for further directions on 15 March 2022 before the Registrar at 9.30am.
8. Costs be reserved."
The consent orders attached undertakings signed by Mr Azizi on behalf of himself and Jana. They were as follows:
"1. The Plaintiffs undertake to pay all associated filing fees related to these proceedings, so as to file into Court the Summons and Affidavit of Anthony Charbel Azizi sworn 21 February 2022.
2. The Plaintiffs to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.
3. The First Plaintiff undertakes to not dispose of any interest in land title interests being, A/363190, B363190, A/921789, B/921789, C/921789, 68/667002, and 1/191076, until further order of the Court and in any event during the course of the refinancing of the encumbrances over those interest, such that the Defendant will be able to lodge a further caveat with leave of this Court pursuant to s 74O, on that refinance being completed.
4. The Second Defendant undertakes not to dispose of any interest in land title interest 1/SP72259, 3/SP72259, 13/SP72259 and 15/SP72259 until further order of the Court and in any event during the course of the refinancing of the encumbrances over those interests, such that the Defendant will be able to lodge a further caveat with leave of this Court pursuant to s 74O, in that refinance being completed.
5. The Second Defendant undertakes not to dispose of any interest in land title interest B/180806 until further order of the Court and in any event during the course of the refinancing of the encumbrances over those interests, such that the Defendant will be able to lodge a further caveat with leave of this Court pursuant to s 74O, on that refinance being completed."
No other details about the proceedings are in evidence.
There were many other such messages in evidence.
In clause 2.2, the owner of the land (in context, a reference to Jana as owner of the property at Stoney Creek Road) agrees to charge its property to the Subcontractor "or its nominee" and consents to the lodgement of a caveat "as security for all moneys owed pursuant to this deed."
Clause 2.3 provides:
"The landowner and guarantors acknowledge and confirm that all amounts due to the subcontractor will be paid at settlement or in the alternative and at the discretion of the Subcontractor and by agreement offset any balance of secured monies from the further sale by the Land owner of Real Property to the Purchaser or from the refinance of the property."
The expression Real Property is not defined. The notion of refinancing referred to here is not meaningfully defined. There is no representation or warranty as to whether and, if so, when and on what terms there would be a "refinance of the property".
Clause 3 is headed "Operative Provisions". It provides as follows:
"3.1 Trinco and Trinity owes the Subcontractor for works, various loans and building and construction services at the various sites in the sum of $481,865.51. A copy of the $481,865.51 is at (Appendix 1).
3.2 The parties acknowledge that Trinco, the Head Contractor and Jana Pty Ltd will be making the payments that will be applied against the reduction of the debt. These payments will be taken to have been made on account on behalf of the Head Contractor to the Subcontractor for the purpose of the Guarantee Debt and this Deed."
Clause 4 is headed "EMPLOYMENT CONTRACT AGREEMENT ("Retainer")". Clauses 4.1 to 4.5 are as follows:
"4.1 On the 3 February 2020 ("commencement date"), the Subcontractor and Joseph Ella ("Employee of Subcontractor'') commenced contractual works as directed by Trinity Constructions (AUST) Pty ltd ("Head Contractor'') and or by its associated entities on a Full Time basis as a Senior Project Manager. The Employee of the Subcontractor to provide Construction Management and procurement services amongst other duties ("Services"). The Subcontractor would Invoice the Head Contractor and or other related entities for services pursuant to the Retainer.
4.2 Pursuant to the Retainer, the Head Contractor and or its nominee will pay the Subcontractor and or its nominee for the services of Joseph Elia a salary of $450,000.00 (GST inclusive) per annum plus Superannuation ("the Salary"). A copy of the Azizi hand written minutes prior to the commencement date of the retainer agreement is at (Appendix 2).
4.3 Pursuant to the Retainer, the Head Contractor and its associated entities and the Subcontractor and it's associated entities have agreed that from the annual retainer of $450,000.00 (GST inclusive) per annum plus Superannuation as noted at paragraph (4.2) above have agreed that $250,000.00 (GST Inclusive) per annum of the salary will be invoiced weekly which is due and payable from the date of the invoice.
4.4 The Accrued Retainer monies of $200,000.00 (GST inclusive) per annum plus superannuation are due and payable on the anniversary of the Retainer in the event that the retainer is terminated or ends before the anniversary date, the balance of the $200,000.00 (GST inclusive) plus superannuation becomes due and payable on the termination date or end date, calculated on a pro rata basis from the commencement date which could be used as a contractual set off against unit purchase's or at settlement of the unit referred to in (clause 4.6).
4.5 The Subcontractor and Joseph Elia are related or associated entities, that will provide the Head Contractor or its related entities a tax invoice for services rendered on a weekly basis."
Clause 4.5A then deals with a grab-bag of concepts under the headings "The Subcontractor's warranties", "Intellectual property", "Termination by notice", "Termination without notice" and "Delivery up on termination".
Clause 4.6 includes the following stipulation
"The parties identified at page one of this deed ("the parties"), have agreed pursuant to the Retainer, will also include the sale of a 3 bedroom plus study unit Lot 30 Unit 406 at the property known as 8-18 Stoney Creek Road Bexley ("the unit") to the purchaser at cost".
The balance of clause 4.6 contains a description of the "background" of the "Land Acquisition Sale price". In summary, the clause sets out how the purchase price of the unit was arrived at. The bottom line is that the purchase price was to be $516,517.55 (GST inclusive) which reflected the parties' assessment of what it would actually cost to build.
It is then necessary to note clauses 4.7 and 4.8 in full.
"4.7. The parties have agreed that from the commencement date, the subcontractor will be entitled to a proportioned amount of the accrued Retainer monies amount of $200,000.00 (GST inclusive) per annum ("contractual set-off'), plus superannuation on accrual accounting basis notwithstanding that it has been invoiced or not as a debt due and payable for the purpose of the purchase price under the contract only, monies that are due and payable for the purpose of contractual set -off will also include monies pursuant to the Retainer on a pro rata basis in the event that the settlement date of the Contract for Sale of Land takes place prior to the anniversary date, then the parties agree that any retainer monies owed to the Subcontractor and at the discretion of the Subcontractor could be used as a contractual set -off by the purchaser or its nominee as payment towards any unit purchase or towards the purchase price of the unit referred to in clause (4.6) above and clause (5.4) below.
4.8 The parties agree that the contractual set-off is a continuing obligation of the Head Contractor during the term of the Retainer. The contractual set-off at the expiry of the first 12 months of services will be either paid to the Subcontractor or its nominee or set off by other means as agreed or by way of contractual set - off against Real Property purchase's."
Clause 5 is entitled "Contract for Sale of Land". It records that the Landowner (Jana) as vendor has agreed to sell the Stoney Creek Road unit to the Purchaser (ie, JK Elia Holdings as trustee) at the price mentioned above "less any contractual set-off at the discretion of the Purchaser".
There are additional clauses dealing with the proposed settlement of this contract for sale. I will deal with them below in the context of the plaintiffs' contention that there was a breach of the Deed. For the moment, it is sufficient to note that there was no representation or warranty as to whether and, if so, when the contract for transfer of the Stoney Creek Road unit would complete.
Several clauses of the Deed deal with the general notion of a guarantee. Section 8 of the Deed is entitled "General" and ostensibly operates as a definitions section. Each of the clauses in that section provides a definition for a capitalised term in bold and within quotation marks. In addition to the meaning of "Guarantee Debt" contained in clause 2.1, there is a separate definition of that same expression in clause 8.32:
""Guarantee Debt" is defined as all monies and obligations owed by the Head Contractor, the Landowner and its associated entities and Anthony Azizi to the Subcontractor in connection with the Retainer Agreement, loans and this deed."
Clause 8.34 is as follows:
""Guarantors" means jointly and severally guarantee unconditionally and irrevocably the obligations of the Head Contractor, Trinco, the Landowner, all directors and trusts and its associated entities and the guarantor."
There is also a definition of "Guaranteed Moneys" in clause 8.35:
""Guaranteed Moneys" means all amounts from time to time due at the settlement of the Contract for sale of land and owing by the Head Contractor, Landowner and its associated entities to the Subcontractor and or its nominees under or pursuant to this Deed. The Guarantors unconditionally and irrevocably guarantee payment, their obligation to pay any and all amounts owed from time to time and the interest on the accrued monies and the guaranteed monies will continue after settlement of the contract for sale of land."
The expression "Guarantee" is defined in clause 8.30 as follows:
""Guarantee" - means each Guarantor unconditionally and irrevocably guarantees the payment by the Head Contractor and or its associated entities to the Subcontractor of the Guarantee debt and Guaranteed moneys upon demand by the Subcontractor or its nominated nominee and the punctual performance by the Guarantors of all the Guarantors other obligations under this Deed. This guarantee is a continuing indemnity and extends to all of the Additional Amount, and any accrued Interest and other money payable under this document. Each Guarantor waives any right It has of first requiring the Secured Party to commence proceedings or enforce any other right against the Company or any other person before claiming from the Guarantor under this document."
The expressions Additional Amount, Company and Secured Party used in this clause are not defined.
It is also relevant to note the definition of "Indemnities" in clause 8.38 which, rather oddly, is as follows:
"Nature
The guarantors indemnifies the Purchaser, Subcontractor and or its nominees on demand against any liability, loss, cost or expenses caused or contributed to by:
(a) any failure of the guarantor's to comply with any obligation under this Deed and contract for sale of land;
(b) any event of default or breach of this Deed;
(c) any act by the purchaser in reliance on any communication purporting to be from the guarantors or to be given on behalf of the guarantors.
(d) If the obligation of the Head Contractor or Guarantors to pay the Guaranteed Moneys to the Subcontractor is or becomes void or unenforceable for any reason, each Guarantor as a separate undertaking unconditionally and irrevocably indemnifies the Subcontractor and the purchaser against any loss, damage, costs or expenses incurred by the Subcontractor or purchaser in respect of the failure by the Head Contractor to pay to the Subcontractor and or its nominee the Guaranteed Moneys."
It is also relevant to note authority on the construction of poorly drafted instruments. As will become clear, the Deed in question in these proceedings is in a risible state, full of inconsistencies and opacities. In Arnold v Britton [2015] AC 1619; [2015] UKSC 36, Lord Neuberger (with whom Lords Sumption and Hughes agreed) said at [18]:
"…when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning."
I am mindful of the warning inherent in that final sentence.
Clause 4.7 also dealt with the circumstance that the settlement of the Stoney Creek Road unit might occur before the anniversary of the Retainer. In that event, it seems to say that whatever was owing at that point could be used as a contractual set-off against the purchase price of the Stoney Creek Road unit or other properties.
Clause 4.8, in yet another twist, provides that the "contractual set-off" is a continuing obligation "during the term of the Retainer". It provides that after the first 12 months, the contractual set-off "will be either paid to [Allspec] or its nominee or set off by other means as agreed or by way of contractual set-off against Real Property purchase's".
The parties' intention as to exactly when the various portions of the Retainer were due and payable is not easily discerned. In my view, the position is as follows. The first $250,000 of the Retainer was due and payable as invoiced in weekly instalments. This much is clear from clause 4.3. The balance of $200,000 plus superannuation was due and payable only by way of set-off against property purchases or on refinancing. This construction gives precedence to clause 2.3 and to the language in clause 4.7 which states that this amount, which it calls the "contractual set-off", is "only" payable by way of set-off.
There is some awkwardness in this conclusion because on one view it deprecates the reference in clause 4.8 to the contractual set-off being "paid to the Subcontractor". I accept that one available construction of the Deed is that the balance of the Retainer would be payable even absent completion of the Stoney Creek Road unit or a refinancing. Nonetheless, that construction is one which would necessarily deprecate both clause 2.3 and clause 4.7, which make it quite clear that amounts would not be due and payable except as a set-off for transfer of real property or on refinancing. I also note that Appendix 2 to the Deed, which is the original handwritten note recording the arrangement, provides:
"- $250k package + Remainer in units totalling $450k + Super
- on settlement the costs of the unit is to be paid."
This further supports the conclusion I have reached as to how the balance of the Retainer was to be paid. It suggests that the "remainder" or balance of the total retainer was to be payable "in units", not cash.
Finally, I note that the Deed does not deal with the reimbursement of expenditure incurred by Allspec in carrying out work. Such expenditure incurred prior to entry into the deed was acknowledged to be owing and makes up part of the acknowledged debt to which I have referred. But there seems to be no provision which requires Trinity (or its related parties) to reimburse ongoing expenditure. The only provision which I have been able to identify which deals with this issue is paragraph (c) under the heading "Termination without notice" in clause 4.5A. That provision is as follows:
"On termination of this agreement, and after receipt of an appropriate invoice from the subcontractor, the Head Contractor will pay to the subcontractor the amount of any fee and reimbursement of approved expenses owing pursuant to this agreement, up to and including the date of termination. The Head Contractor may set-off and deduct from any amount owed to the subcontractor including payments made in advance against unfinished works that the Head Contractor will require to be completed by others."
Neither party addressed any submissions to the question of whether and if so why Trinity was obliged to reimburse expenditure pursuant to this provision or at all.
As to the claim of duress generally, I would not set the Deed aside on that ground unless I were satisfied that Mr Azizi had been subjected to illegitimate pressure in connection with his entry into the Deed on his own behalf or on behalf of Jana: Barton v Armstrong; Monrovia; Crescendo; Australia and New Zealand Banking Group v Karam.
The evidence, however, falls short of establishing duress of that kind. Mr Azizi's evidence about duress fell into several categories, including the text messages from Mr John Elia, some evidence to the effect that Mr Joe Elia had threatened Mr Azizi's solicitor, and evidence about the overall circumstances in which the Deed was entered into.
As to Mr John Elia's text messages, Mr Azizi accepted in cross examination that he had separate dealings with Mr John Elia and that he did owe him money from time to time. He was unwilling to accept that these text messages related only to those dealings. However, I am unable to conclude that the messages related to anything other than Mr John Elia's own claims. I am unable to conclude that they related in any meaningful way to Mr Joe Elia's claims or to Allspec's claims in these proceedings, although Mr Azizi may have perceived them in that way. There was no evidence that Mr Elia knew about them at them at the time. They all appear to post-date entry into the Deed in any event.
Mr Azizi also led some evidence to suggest that Mr Joe Elia had improperly threatened his (Mr Azizi's) former solicitor in these proceedings with a view to having him cease to act. In fact, his solicitor did cease to act. The evidence showed that Mr Elia threatened to report him to the Office of the Legal Services Commissioner on at least two occasions. Mr Elia's explanation as to why he had made those threats was utterly inadequate: he said that the solicitor had requested particulars of the plaintiffs' (i.e., Mr Elia's and Allspec's) claims and the production of documents relating to these proceedings in circumstances where, according to Mr Elia, he should already have had that information.
When asked if he had reported the solicitor, Mr Elia said "there's actually a case coming up against the solicitor and his firm which is crystallised for us". That is, Mr Elia is apparently planning to bring proceedings against Mr Azizi's former solicitor to recover damages for some kind of loss. When asked further about why he was planning to sue the solicitor, he said: "I think it was just a bit of the frustration of asking for documents over and over, which they already had in their possession."
At the same time, Mr Elia said that he had never been in touch with the Office of the Legal Services Commissioner about the solicitor. When pressed about the matter, he said that he had not taken the complaint any further.
Mr Azizi's case involves, to some extent, the proposition that Mr Elia is rather free with his accusations and threats. Mr Elia's evidence, including his manner in dealing with questions from the bench about his proposal to sue Mr Azizi's former solicitor, confirms that to be the case.
Nevertheless, the evidence again does not allow me to find that any such improper pressure was actually applied by Mr Elia leading up to or at the time of entry into the Deed.
As to the circumstances generally, there can be no doubt that Mr Azizi felt strongly pressured to enter into the Deed, but the pressure he felt was a product of the financial circumstances affecting him and the Trinity group of companies at the time. Mr Joe Elia would have known full well that Mr Azizi was not really in a position to bargain and that if he wanted him to stay on, then Mr Azizi would not really have any option but to agree to enter into the Deed. Mr Elia would also have known full well that if he did not secure Mr Azizi's execution of the Deed, then neither he nor Allspec would have had any prospect of recovering the money he was owed for his work since February 2020. It is important in assessing all of this evidence to note that Mr Joe Elia and his brother Mr Elie Elia were working at the Trinity offices and were in regular contact with Mr Azizi, his sister and her husband. The most likely explanation for why Mr Azizi executed the Deed is that he considered it to be a financial necessity at the time. If he was to trade out of his difficulties, he needed personnel and that included Mr Joe Elia. Mr Elia, in turn, was hardly going to stick around if he remained unpaid. Certainly there was a lot of pressure on Mr Azizi in all of this, but I am unable to conclude that Mr Joe Elia was the source of illegitimate pressure so far as entry into the Deed was concerned.
I therefore find that neither Mr Joe Elia, nor his brother John, applied any illegitimate pressure on Mr Azizi to secure his execution of the Deed. The claim that the Deed is vitiated by duress is not made out.
In Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18 at [147], Nettle and Gordon JJ said that "it is not possible to identify exhaustively what amounts to special disadvantage." However, inequality in bargaining power is not of itself a special disadvantage: see Amadio at 462 (Mason J); Thorne v Kennedy at [64] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ); and see Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18 ('Berbatis') at [15] (Gleeson CJ).
On the other hand, in Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1997] FCA 1107, Davies J found that the directors and shareholders of the Phontos group of companies had a special disadvantage in their dealings with the Commonwealth Bank due to the precarious financial state of the group and its imminent descent into liquidation.
In the present case, the special disadvantage was said in submission to consist of the following:
"The Second Defendant was under a special disadvantage as there was a lack of assistance or explanation where assistance or explanation was necessary. As stated above, the Second Defendant did not have time nor monies to engage an independent solicitor to review the deed due to the Plaintiff claiming that the deed had to be agreed with, and that there was no room nor time to negotiate the terms, to one more favourable towards the Defendant."
There are two things to say about this. The first is that I do not regard these contentions, if they are made out, as amounting to a relevant disadvantage. Mr Elia had no obligation to provide "assistance" and "explanation" to Mr Azizi. The second is that the contentions are not borne out by the evidence. The Deed was the subject of back and forth between Mr Azizi (and sometimes Mr Raheb), on the one hand, and Mr Elia and his solicitor, on the other. Even accepting that Mr Raheb was principally concerned with the transfer of the unit in the Stoney Creek Road development, the evidence does not establish that Mr Azizi was unable to obtain advice in relation to other aspects of the Deed in the months that elapsed between the draft being presented to him and his eventual grudging execution of it. It certainly does not demonstrate that Mr Elia knew that Mr Azizi was unable to obtain independent advice. To the contrary, given the volume of correspondence about the Deed, Mr Elia would have been justified in thinking that Mr Raheb, who he knew to be a solicitor, was advising Mr Azizi in relation to the Deed generally.
The other evidence as to Mr Azizi's circumstances at the time of execution of the Deed was sparse. Apart from very general assertions about the Trident group being in financial difficulty, and very general assertions about Mr Azizi fearing Mr Elia and his brother, the evidence does not demonstrate circumstances that amount to special disadvantage.
Even the limited evidence led by Mr Azizi on this issue is somewhat two-edged. On the one hand, he said that he did not want to sign the Deed and held out for as long as he could, which might suggest that he appreciated full well what its effect would be. On the other hand, he said that its effect had not been explained to him, which might suggest that he did not understand what its effect would be.
At the same time, he said that his understanding of the effect of the Deed was that both he and Jana would be liable for the debt of $481,865.51 under clause 2 when there was either a refinance of the Stoney Creek Road development or else when construction was completed, and that the amount owing (i.e., $481,865.51) could at that point be applied by Allspec towards the purchase of a unit.
But if this was his actual understanding at the time, then what was the difficulty about executing it? If, as he believed, the Deed operated in that way, then on the case he now presents it was an agreement he would have been more than willing to sign as soon as it was offered to him. In my view, the more likely explanation for his unwillingness to sign the Deed was not a lack of understanding of what was in it, rather the very opposite: he understood it involved the giving of a personal guarantee of some kind and he did not wish to do so if he could avoid it.
I have no doubt Mr Azizi was under a large amount of pressure in late 2020 and early 2021 but I am unable to conclude based on the evidence that he was at a special disadvantage relative to Mr Elia. I find that he broadly understood that the Deed involved the giving of a personal guarantee that could be called on even if there was no refinancing of the Stoney Creek Road development and therefore was alive to his own interests.
I have also given some consideration to whether Mr Joe Elia's conduct in walking off the job for two weeks in order to induce Mr Azizi to enter into the Deed might itself have been a circumstance that gave rise to a special disadvantage, much like Ms Louth's confection of a "false atmosphere of crisis" was held to give rise to a special disadvantage for Mr Diprose: Louth v Diprose (1992) 175 CLR 621 at 637 (Brennan J); [1992] HCA 61. However, the evidence does not support such a conclusion. Mr Elia was justified in walking off the job at that point because of the funding crisis that already existed and because he was owed so much money. It was not a crisis confected by him. No doubt his absence at that critical time caused Mr Azizi a lot of anguish which added to his existing woes, but it was not unconscionable of Mr Elia to act in the way he did at that time.
This last conclusion is to be understood in the context of my earlier conclusion that Mr Azizi was not in a position of special disadvantage in relation to Mr Elia and in connection with the entry into the Deed. If it had been established that he were in that position, and if Mr Elia were aware of this, then I may have reached a different conclusion as to whether Mr Elia's conduct in creating additional commercial pressure by walking off the job and pressuring him to give the personal guarantee was unconscionable.
Nevertheless, on the basis of the limited evidence before me, I find that unconscionable conduct is not made out.
Furthermore, as Gibbs CJ said in Meehan v Jones (1982) 149 CLR 571 at 578; [1982] HCA 52, the fact that particular clauses might be construed as having multiple meanings does not in itself give rise to uncertainty, "if the Court, in construing the contract, can decide which of the two possible meanings is that which the parties intended, there will be no uncertainty." Gibbs CJ relied on Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436; [1968] HCA 8 where his Honour said:
"But a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. So long as the language employed by the parties is not so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention the contract cannot be held to be void for uncertainty or want of meaning. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved."
Courts will generally strive to "adopt a construction which will preserve the validity of the contract": Mason J in Meehan v Jones at 589. Furthermore, "where the contract in question is of a commercial nature, the court should adopt a commercial approach so that everything that can be done is done to give effect to an agreement": Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 at [97] (Young CJ in Eq, with whom Hodgson JA and Stein AJA agreed).
When the task of construction is approached in the light of these statements of principle, it seems tolerably clear that Mr Azizi was intended to be the guarantor of at least something under the Deed. He is described as "Guarantor" in the heading. The fact that Recital J seems to place him in a different category to the other "guarantors" might tend against this conclusion. The fact that the definition of "Guarantors" is so confused might also tend against this conclusion. Nonetheless, for all its many and significant faults, the Deed does at least suppose that something is guaranteed by someone, and the front page suggests that that someone is, or at least includes, Mr Azizi.
The plaintiffs stressed that the Deed refers throughout to Guarantors in the plural and that there therefore must be more than one. In many cases, there would be much to commend that submission. Usually, a contract demonstrates some semblance of grammatical consistency which provides a relatively firm foundation upon which to discern the legal meaning of the expressions which it uses. So, for example, a contract that spoke of "guarantors" in the plural might ordinarily be thought to contemplate more than one "guarantor". This, however, is not such a case. The Deed exhibits all manner of grammatical inconsistencies. In addition to those I have already mentioned, it sometimes uses "guarantors" as if there were only one guarantor, such as in clause 8.38 where it says that the "guarantors indemnifies the Purchaser" and also speaks of the "guarantor's" failure to comply with obligations. In the circumstances, I am not willing to draw any firm conclusions on the basis of an assumption about the grammatical consistency of the Deed.
I accept that the Deed does seem to contemplate that there would be more than one guarantor, hence for example the language in clause 8.31(d) about the pursuit of claims against individual guarantors. However, there is still real difficulty in reaching a conclusion about who those other guarantors are. So far as concerns Jana, it is far from clear that it is a guarantor within the meaning of the Deed. It is described as Landowner on the front page and it has readily identifiable and separate principal obligations under the Deed to transfer the Stoney Creek Road unit pursuant to the contract of sale. It is not referred to as a guarantor (or Guarantor) anywhere.
The plaintiffs submit that the reference to "Landowner" in the definition of Guarantors in clause 8.34 demonstrates that Jana was intended to be a Guarantor. I disagree. To the extent clause 8.34 makes any sense, it is as a clumsy description of the persons whose obligations are guaranteed, jointly and severally, by the Guarantors. It is not a list of the Guarantors. It says that whoever the Guarantors may be - a matter about which it is silent - they jointly and severally guarantee the obligations of Trinity, Trinco, the Landowner, all directors and trusts and its associated entities "and the guarantor".
The plaintiffs also referred me to Recital J. This recital contains a reference to the landowner (lower case) guaranteeing the "terms and conditions set out in this Deed". But at the same time, it is described separately from "the guarantors". This recital tends not to resolve anything. It just raises the question as to what the terms and conditions set out in the Deed really are.
The plaintiffs submitted that, properly understood, the language of clause 8.34 made each of the parties associated with Mr Azizi including "all directors and trusts" a guarantor. As already indicated above, I do not see clause 8.34 as being of any assistance in identifying who the guarantors are.
The Deed does not give up much in the way of clues to resolving this issue. Read as a whole it makes about as much sense if "Guarantors" is a reference to one, two, three, or four guarantors. The surrounding circumstances do not point to the conclusion that there must be two (or some other number) of guarantors. I can accept that Mr Elia in fact wanted a guarantee from Jana, but it is extremely difficult to discern this intention from the language of the Deed. The plaintiffs point to the later conduct of Jana and Mr Azizi in the caveat proceedings as evidence from which it may be inferred that they both accepted their liability as guarantors under the Deed. In doing so, they relied on the decision in Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149. However, that decision is not authority for the proposition that subsequent conduct of the parties can be used as aid to construction generally. Sagacious seems to say no more than that subsequent conduct forms part of the relevant surrounding circumstances only to the extent that it might assist in determining whether or not a contract, or a certain part of a contract, was formed: see Feldman v GNM Australia Ltd [2017] NSWCA 107 at [90] (Beazley P, McColl and Macfarlan JJA) and Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 at [68] (Bell CJ, Hammerschlag CJ in Eq and Adamson JA).
It is also relevant to note Clause 8.28 of the Deed:
""Entire understanding"
(a) This Deed contains the entire understanding between the parties as to the subject matter of this Deed.
(b) Notwithstanding any previous negotiations, understandings, representations, warranties, memoranda or commitments concerning the subject matter of this Deed are merged in and superseded by this Deed and are of no effect. No party is liable to any other party ln respect of those matters.
(c) No oral examination or information provided by any party to another:
(i) affects the meaning or interpretation of this Deed; or
(ii) constitutes any collateral agreement, warranty or understanding between any of the parties."
In any case, I do not find the defendants' conduct in either bringing or resolving those proceedings as necessarily involving an acceptance that both entities were bound as guarantors under the Deed. The evidence about this matter is slight. The plaintiffs relied only on the consent orders and undertakings, set out above. So far as concerns the commencement of those proceedings, neither Jana nor Mr Azizi needed to be bound by the Deed in order to bring the proceedings. They were proceedings for the removal of caveats over land held by Jana. I do not know why Mr Azizi was a plaintiff, but his presence as plaintiff is not explicable only by an acceptance by him that he had a liability under the Deed.
So far as concerns the settlement of those proceedings by the giving of undertakings and the making of consent orders, the plaintiffs particularly point to the fact that Jana and Mr Azizi agreed that they "are to direct, out of the monies to be paid by Vanguard Capital Management Pty Ltd, the sum of $481,865.51 to the trust account of the solicitors for [Allspec], and of that sum, $40,000 is to remain in that trust account, and not to be depleted pending further order of this Court." They also point to the notes to those orders, set out above.
These matters, it was submitted, necessarily involved an acceptance that both Jana and Mr Azizi had a liability under the Deed as guarantors.
I cannot accept that submission. There is no doubt that both Jana and Mr Azizi acknowledged that Allspec was owed the sum of $481,865.51. They had agreed that much in clause 2.1 of the Deed. They had also agreed that that sum would be payable on a refinancing. But it was not necessary for them to accept their own liability as guarantors under the Deed in order to give the undertakings or enter into the consent orders on the terms described. I note that the consent orders do not specify whose funds they would be directing towards Allspec. It is not clear whether they were funds that would be available to Trinity, Trinco or anyone else under the proposed refinancing. The only conclusion I can draw from the consent orders and undertakings is that Jana and Mr Azizi accepted that Allspec was entitled to the sum of $481,865.51 on a refinancing, but that any claim greater than that sum was in dispute.
I therefore find that Mr Azizi is a guarantor within the meaning of the Deed. I am not satisfied that Jana or anyone else also meets that description. In my view, the Deed must be construed as containing only one guarantee: that of Mr Azizi.
I therefore find that the only obligation in relation to which the guarantee bites is the invoiced portion of the $250,000 Retainer. The Retainer was, to that extent, due and payable from the dates of the invoices. The balance of the Retainer (being the $200,000 plus superannuation) and the Guarantee Debt (ie $481,865.51) never became due and payable. Indeed, they are still not.
The differences between the two indemnity provisions are significant. Both the persons giving the indemnity and the persons to whom the indemnity is given are different in each.
The plaintiffs contended that Mr Elia is entitled to the benefit of the clause 3.4 indemnity on the basis that he is an "associated entity" of Allspec. The plaintiffs contend that the expression "associated entities" in clause 3.4 includes Mr Elia as an associated entity of Allspec. Clause 8.38, however, could only entitle Mr Elia to an indemnity if he can demonstrate that he was a nominee of Allspec, and that does not appear to be the case. The expression "Associated Entities" is defined but, as with so many of the "definitions", the definition only seems to complicate matters. The definition is as follows:
"'Associated Entities' is a term used in the Corporations Act 2001 (Cth). The Corporations Act details much of the law which regulates companies in Australia. Basically, an associated entity is an entity that is in some way related to another entity."
The ambiguity in the definition here is troubling, because it has the potential to affect the scope of the persons giving and those benefiting from an indemnity. The definition could be thought to consist in the words "Basically, an associated entity is an entity that is in some way related to another entity". Alternatively, the intention may have been, as the plaintiffs submitted, to adopt the Corporations Act definition. I will proceed on the basis that it is the latter, because this seems to resolve the issue in Mr Azizi's favour, consistent with the principle in Ankar. The Corporations Act 2001 (Cth) definition is found in s 50AAA of that Act.
On the basis of the s 50AAA definition, I accept that Mr Elia is an associated entity of Allspec for the purposes of clause 3.4. However, absent some evidence of being "nominated" by Allspec, he is not entitled to claim indemnity under clause 8.38.
It follows that:
1. Mr Azizi gave an indemnity but Jana did not. This may seem incongruous in circumstances where Jana is expressly mentioned in clause 3.4 and where Mr Azizi is not. But, equally, Jana is not mentioned in clause 8.38. When all of the language touching on the indemnity is read as a whole, it seems clear enough that there would be an indemnity in addition to the guarantee. Beyond that, however, it is difficult to say that anything is "clear" unless one chooses between the two provisions describing the indemnities.
2. Because I favour clause 8.38 as an expression of the parties' intention as to the scope of the indemnity, I do not consider that Mr Elia is entitled to claim under it.
I note that plaintiffs also claim the sum of $34,100 invoiced on 26 February 2021. That invoice is apparently a claim for reimbursement of expenditure relating to formwork. There was however no evidence or argument directed to the question of how that claim arises. On my reading of the Deed, expenditure of that kind was simply not dealt with. There is no evidence that this expenditure was "approved" for the purpose of clause 4.5A.
The more likely explanation for this sum having been incurred by Allspec is that it was incurred pursuant to the parties' pre-existing arrangement outside the Deed itself. This is consistent with clause 2.1, where it is said that the previously accrued "Guarantee Debt" of $481,865.51 includes "payments to subcontractors and suppliers on behalf of the Head Contractor".
I am otherwise unable to identify any breach of the Deed by Trinity, Trinco, Jana or Mr Azizi that has given rise to a loss to Allspec. It never had an entitlement to be paid the balance of the moneys owing under the Deed unless and until there was a refinancing or there were property purchases against which those amounts could be set off. It is true that none of things occurred, but there was never any promise that they would.
There is no evidence that Trinity, Trinco, Jana or Mr Azizi failed to use their best endeavours to try to secure a refinancing or to complete the development. None of Trinity, Trinco, Jana or Mr Azizi made a representation as to when a refinancing would occur or as to when the Stoney Creek Road development would be completed.
I therefore find that Trinity's (and Trinco's) failure to pay the pro-rata portion of the $250,000 component of the Retainer was a breach of the Deed within the meaning of clause 8.38, for which Allspec is entitled to be indemnified.
I find that Allspec has not otherwise demonstrated any loss referable to a breach of the Deed.
That being so, clause 8.40 has no operation here. None of the amounts which were due and payable and which I have found were either guaranteed or subject to the indemnity are within the meaning of Guarantee Debt.
In the result, it is appropriate that the plaintiffs should have interest under s 100 of the Civil Procedure Act 2005 (NSW) from the dates on which each of the weekly invoices for the Retainer were issued.