Allspec Constructions and Project Management Pty Ltd v Jana Pty Ltd as trustee for the Azizi Family Trust

Background

1. 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).
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.

The drafting of the Deed

1. 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.
2. 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".
3. 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.
4. 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.
5. 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.
6. 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.

Circumstances relevant to the defence of duress

1. 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.
2. 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.
3. 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.
4. 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."

Other matters relating to the defence of duress

1. 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"
2. 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"
3. 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."
4. 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"

The Deed

1. 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.
2. 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."
3. 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.

Legal Principles

1. 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.
2. 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."
3. 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.

Surrounding circumstances

1. 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).
2. 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."

How did the Deed operate?

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

The plaintiffs' claims

1. 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.
2. 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.
3. Mr Azizi did not dispute these calculations.

Duress

1. 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).
2. 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].
3. 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."
4. 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."

Unconscionable conduct

1. 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.
2. 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."
3. 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.

Unconscionable conduct - principles

1. 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).
2. 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.
3. 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).
4. 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.'"

Unconscionable conduct

1. 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.
2. 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."
3. 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.
4. 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.
5. 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.

Legal principles

1. 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].
2. 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…"
3. 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).

Who are the guarantors?

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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".

Guarantee Debt

1. 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.
2. 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.
3. 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".
4. 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.

Guaranteed Moneys

1. It is next necessary to consider the definition of Guaranteed Moneys in clause 8.35, set out at [57] above.
2. 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.
3. 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).
4. 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.

Did the Guarantee Debt or the Guaranteed Moneys become due and payable?

1. 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.
2. 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.
3. 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)."
4. 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.

To whom was the guarantee given?

1. 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.
2. As with everything else, this is unclear.
3. 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".
4. 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.
5. 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.

Conclusions about the guarantee claim

1. 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.

Indemnity

1. 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].
2. 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."
3. 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."
4. 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.
5. 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.

Conclusions as to the scope of the indemnity

1. 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.
2. 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.
3. 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.
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.

What loss must be indemnified?

1. Mr Azizi's liability under the indemnity potentially extends beyond the scope of the obligations which he guaranteed.
2. 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.
3. 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."
4. 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.
5. 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.
6. 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.

Were Mr Azizi's obligations subject to any conditions which did not occur?

1. The next aspect of the defendants' case was that any obligations as guarantor or otherwise were subject to a refinancing occurring.
2. 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.

Calculation of the amounts owing

1. Allspec has claimed $795,772.76 plus interest.
2. 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.
3. 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.
4. 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.
5. 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.

Interest

1. Finally, it is necessary to say something the plaintiffs' claim for interest.
2. 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."
3. 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."
4. 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.
5. 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.
6. 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.

Conclusions

1. 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.
2. Mr Elia's claims fail altogether, as he is not entitled to the benefit of either Mr Azizi's guarantee or the indemnity.
3. The claim against the First Defendant fails entirely.
4. 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.
5. I will also give the parties an opportunity to put on short submissions as to costs or otherwise agree them.
6. 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.

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