Amanda Duncan-Strelec & Ors v Thomas Richard Tate & Ors

Supreme Court of NSW|2010-08-06|Before: Nicholas J

CITATION : Amanda Duncan-Strelec & Ors v Thomas Richard Tate & Ors [2010] NSWSC 872

HEARING DATE(S) : 28.06.10, 29.06.10, 30.06.10, 01.07.10

DECISION : (1) The further amended statement of claim be dismissed. (2) The plaintiffs pay the defendants' costs.

Amanda Duncan-Strelec - first plaintiff David Strelec - second plaintiff PARTIES : Dunlec Pty Ltd - third plaintiff Thomas Richard Tate - first defendant Elizabeth Ruth Tate - second defendant Wamego Pty Ltd - third defendant

In person - first plaintiff In person - second plaintiff COUNSEL : David Strelec - third plaintiff R E Dubler SC/A P Lo Surdo - first, second defendants Wamego Pty Ltd - no appearance

In person - first plaintiff In person - second plaintiff SOLICITORS : David Strelec - third plaintiff Jackson Lalic Lawyers - first, second defendants Wamego Pty Ltd - no appearance

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

06/260312 Amanda Duncan-Strelec & Ors v Thomas Richard Tate & Ors JUDGMENT 1 His Honour: These proceedings concern the plaintiffs' claim against the first and second defendants for damages and other relief arising from the failure of a joint venture arrangement for the development of real estate located at Lavington. 2 Henceforth, for convenience, I refer to the first and second plaintiffs as Amanda and David respectively. They are directors of the third plaintiff (Dunlec) which is the trustee of the Strelec Family Trust. In these proceedings Amanda and David represented themselves. Dunlec authorised David to represent it under UCPR Pt 7, r 7.2. 3 Similarly, for convenience, I refer to the first and second defendants as Tom and Ruth respectively. At relevant times they were the shareholders of the third defendant (Wamego), and Tom was its sole director. 4 Wamego did not appear at the hearing. At the outset the plaintiffs stated they no longer maintained their claim against it. 5 The plaintiffs contend that on about 10 November 2005 Amanda, David and Tom made an oral agreement for a joint venture to acquire and develop a block of land at Lavington for residential sub-division (the land). The land was situated along the western boundary of a parcel of land owned by Dunlec for the purpose of residential sub-division. Under the agreement Wamego was to purchase the land and become the vehicle for its development. Tom was to fund the deposit, and to arrange finance, for its purchase. The plaintiffs were to reimburse Tom for one half of the deposit, with interest, upon refinancing their own assets. The costs of the joint venture were to be borne equally by the plaintiffs on the one hand, and by Tom on the other. Tom and Ruth were to cause half of the share capital in Wamego to be issued to Dunlec. It was proposed that the land would be developed, marketed, and sold in conjunction with the Dunlec land as an "englobo" [sic] development. Profits under the joint venture were to be shared equally. Amanda and David were to attend to the preparation and lodgement of the development application for the project. 6 In essence, the plaintiffs allege that in the events which happened, Tom and Ruth, wrongfully and in breach of the agreement, failed to cause shares in Wamego to be issued to Dunlec, and on about 30 November 2007 sold all of the issued shares in Wamego to another party. 7 David also makes a quantum meruit claim against Tom for professional services rendered in respect of the preparation and lodgement of a development application with the Albury City Council (council) for the development of the land. 8 Tom and Ruth deny the plaintiffs' claims under the agreement, and for quantum meruit. In short, their case was that, on about 10 November 2005, it was agreed that in consideration for the payment by the plaintiffs of one half of the deposit for the purchase of the land, and of one half of costs incurred by Wamego for its purchase and development, shares equivalent to fifty per cent of the issued capital would be issued to Dunlec, Wamego would develop the land, and the land would be marketed in conjunction with the Dunlec land. They contend that as the plaintiffs were unable to make the required payments, the rights and obligations of the parties were mutually released and discharged on about 26 February 2006. Further, they contend that subsequently no new agreement for the development of the land was entered into, either in similar terms, or at all. 9 It is relevant to note that, in my opinion, Amanda, David and Tom were persons not lacking in commercial experience. They impressed me as being well able to make decisions with regard to their best interests. Amanda has been a councillor on the Albury City Council for a number of years from 1991, and was mayor from September 1995 - September 1996, and from September 2006 - September 2007. David is a civil construction engineer by profession, and has managed about 12 residential subdivisions in the Albury area. He and Amanda have gained experience in the purchase, financing, and sale of investment properties, and conducted a business known as "Video Land". Tom is a civil engineer, and for some years has been in business with interests in property. 10 So far as is relevant the relationship between the parties concerning Wamego and the land began in November 2005 and terminated in September 2006. Identification and determination of the issues in these proceedings are facilitated by an analysis of the evidence of the relationship between the parties, firstly between November 2005 and February 2006 and, secondly, between May 2006 and September 2006. November 2005 - February 2006 11 The following is a summary of relevant events which happened between November 2005 and February 2006. It is supported by the oral evidence of Amanda, David and Tom, and the documentary evidence. 12 Having inspected the land and discussed prospects for its purchase and development on an earlier occasion, Amanda, David and Tom met in Albury on 10 November 2005. In readiness for the auction next day, there was discussion and agreement about the purchase of the land and the terms of a joint venture for its development. There was no significant difference as to the effect of the agreement, and its terms are fairly set out in pars 5 and 8 above. 13 On 11 November 2005 Wamego purchased the land at auction for the price of $970,000. Tom and Ruth paid the deposit of $97,000 on behalf of Wamego from their own funds. Settlement was fixed for 14 February 2006 to enable preparation and lodgement of the development application. 14 At this time Amanda and David were financially constrained and were seeking refinance. They were unable to contribute funds towards the purchase of the land or for development costs and expenses. They informed Tom of their situation. Whether they did so before or after the auction was disputed, but was an issue I found unnecessary to determine. In any event, at some time in November, Tom requested Amanda and David to send him a statement of assets and liabilities. 15 On about 17 November 2005 David arranged for the valuation of the land, and thereafter arranged for work to be done in preparation of the development application, including obtaining a flora and fauna survey, and attending to the preparation of layouts and development construction plans. He informed Tom accordingly. 16 By 22 November 2005 Amanda and David had been unsuccessful in obtaining refinance. On that day Amanda sent an email to Tom which included the following: "We could have a problem looming (not you - us). We are very cash poor at the moment and need to refinance urgently to free up some capital so we can pay the planners and design engineer who have done the work on our land as well as our share of the deposit and have some money to pay for design and associated costs with the new project. David is preparing an assets and liabilities statement to send to you but I think it would be a wise move for us to have our refinancing in place before Christmas if that is possible. We will talk more about this when you come down." 17 On about 29 November 2005 Amanda, David and Tom met officers of the council to discuss the project. 18 On about 19 December 2005 Tom paid $1,254 for the flora and fauna survey, and on 22 December 2005 paid Dunlec $5,020 to cover the payment of fees for the development application. On 31 December 2005 Tom paid $8,195 to Douglas Gow & Associates for work in respect of the project as arranged by David. 19 In her email to Tom of 9 January 2006 Amanda advised of the continuing inability to obtain refinance. 20 In early January 2006, at a meeting with Tom in Queensland, David suggested proceeding with the development of the Dunlec land and the land on an englobo basis to facilitate liaising with council in relation to the subdivisions. Tom invited David to put a proposal for consideration. 21 On 14 February 2006 settlement of the purchase of the land took place. It was funded by Wamego as to $665,000 borrowed from National Australia Bank and guaranteed by Tom and Ruth. An additional sum of $208,000 was provided by Tom and Ruth personally. 22 On, or shortly after, 14 February 2006 there was a conversation between Amanda, David and Tom on the subject of the purchase by Wamego of a one half interest in the Dunlec land. It is unclear as to who initiated the discussion, but it related to Amanda's proposal that the price would be equivalent to the amount of Dunlec's mortgage, namely $260,000. It was accepted that the discussion concluded when Tom said he would respond after discussing the matter with his accountant, and meanwhile the efforts for refinancing should continue. It was accepted (T p 59, 250) that no commitment was made by either party on this occasion. 23 Tom deposed (aff 26 March 2010, par 50) that he had a telephone conversation with David in late February 2006. His evidence was not challenged, and David was unable to contradict it, and it is consistent with the email of 26 February 2006 referred to below. I accept it. The conversation was as follows: "I said: David, as you know, I've been waiting for your share of the deposit since the auction day and I haven't received a cent. I have funded the purchase of the land where Ruth and I topped up the money. I have paid for all consultancy fees and council fees. When are you and Amanda going to come in on the deal or if you do not want to come in, just let me know so I know what to do? Could you let me know pronto? David said: I know that you've carried the financial burden. Amanda and I have got our own problems especially in trying to sell the shop. If we can sell the shop, we can get the refinance and we should be right. I said: But you've been working on the refinancing for months now. I've got to make a decision one way or the other. Talk to Amanda and get back to me. David said: Okay. I will speak to her tonight and get back to you." 24 On 26 February 2006 Amanda sent an email to Tom on the subject "Freedom to choose". It included: "David told me about the phone call with you yesterday and we have discussed a number of options. He hasn't asked me to send this. I'm doing it off my own bat (not off the cup) because of the respect I have for our friendship. I know David feels the same way. We both feel badly that due to economic circumstances we have not been able to uphold our end of the partnership for Wamego. Because of this, whatever decisions you make regarding Wamego have to be made in the best interests of you and Ruth, not David and I. If you decide to sell Wamego's land englobo, we do not expect to receive any profit you make, not one cent. We have benefited from the experience and I personally have learned skills I am bound to use to our advantage in the future. We still have the Dunlec land which, if Wamego does sell we will decide about then. Given all the effort we have put in to hang on to it, we really want to see it through to development but will probably do it a lot more slowly than we first planned if you decide to sell Wamego. … We have estimated that we have probably lost about $400k in the last three years because of the business but I can't be worried about that as we need to move on. That is one of the reasons we are determined to see Dunlec through to the final stage. At least we won't pay any tax for the next couple of years so we will get it back one way or another. I guess the reason for my email is to reassure you that whatever you decide regarding the land David and I understand and feel comfortable with. You are the one carrying the financial burden on Wamego, not us. Our friendship will always take precedent over everything else but I think you know that anyway ..." 25 Tom deposed (aff 26 March 2010, par 53) that later on 26 February 2006 he telephoned Amanda and had the following conversation: "I said: I will proceed with the development by myself. Don't worry about not being able to afford to come into the project, I will still be able to finance it and make a profit by myself. I am not exactly sure how I want to proceed at this stage, so I will let you know if I think there is a role for you in the project. Amanda said: I understand your predicament. Should you decide to go your own way, I have no hard feelings. I said: Okay, thanks." 26 Amanda denied Tom's version of the conversation. Her version (aff 21 June 2010, par 92) was that Tom said he would follow through with the Dunlec purchase as long as she and David kept working on finalising the approvals. 27 In cross-examination, Amanda agreed that her email recognised that Tom was free to proceed to sell the land, and that she and David were free to continue with the Dunlec land i.e. each party was free to go their separate ways, thus ending any joint venture. David's evidence was that the email was the product of discussion with Amanda, and was sent to inform Tom that their position was that the relationship with Wamego had ended, and that they intended to proceed with the Dunlec land, and he was free to proceed with Wamego and the land as he wished. His recollection was that at about this time Tom told him he would pursue the development application for the land. 28 Tom deposed (aff 26 March 2010, par 54) that he considered that any arrangement which may otherwise have existed to jointly develop the Wamego land was from that date at an end. 29 In my opinion, by her email of 26 February 2006, Amanda conveyed to Tom in unambiguous terms that as far as she and David were concerned the existing joint venture arrangement was at an end, and Tom was at liberty to proceed with Wamego and the land without further obligation to them. Although, in my opinion, the terms of the email did not call for any response from Tom which stated his acceptance that the arrangement had been terminated, he did in fact make his acceptance plain in his telephone conversation with Amanda later that day. In so finding, I accept Tom's evidence of the conversation. It seems highly probable that he would have promptly reacted to the email as he said he did, and it is consistent with the evidence of both Amanda and David that he told them he would pursue the development application for the land. At this stage, the agreement was mutually abandoned. 30 The conclusion that the parties regarded themselves as no longer bound by a joint venture arrangement is reinforced by the consideration that, until they obtained refinance in May 2006, there was no evidence that Amanda and David sought to preserve with Tom some entitlement to revive the joint venture upon becoming able to reimburse, and contribute one half of, the development costs of the land. In my assessment, Amanda and David were always astute for the protection of their interests. That there is no evidence that they sought to preserve their position pending refinancing indicates their recognition that the agreement was no more. 31 I have not overlooked David's evidence of his involvement with consultants and others between February and May 2006 in obtaining the development consent for the land, and of his communications with Tom about these matters. The explanation for this activity was that it facilitated the development of the land with the Dunlec land on an englobo basis which, as the parties had discussed, would have benefits for both owners, and was not dependent upon a joint venture arrangement. Relevantly, the costs incurred during this period were paid by either Tom or Wamego. It was also established that from about March 2006 Tom was in discussion about the sale of the land to another party, one Mr Francis Kovacevic. May 2006 - September 2006 32 On about 25 May 2006 the plaintiffs obtained refinance from National Australia Bank of $980,000, secured on the Dunlec land and another property. The sum of $390,000 was immediately drawn down by Dunlec. 33 In June 2006 there was a telephone conversation between Amanda and Tom when Tom was informed that refinance had been obtained. Tom's version (denied by Amanda) included the following (aff 26 March 2010, par 57): "Amada: We have finance. Before you deal with the Wamego Land we would like you to consider reverting back to our original arrangement where we each contribute to the cost of the project and we share the profit. We can buy into the Wamego Land and you can buy into the Dunlec Land. I said: I am concerned that you were unable in the past to contribute financially to the project and that is why we terminated the arrangement. How do I know you will be able to uphold your end of the arrangement? Amanda: I know we were unable to contribute in the past, but we will be able to now that we have refinanced. Have a think about it, but as a sign of good faith we will pay to you half of the expenses incurred by you to date in respect of the project. I said: Pay half of the expenses and I will have a think about what I want to do and I will also speak to Lee (my accountant). You will also have to pay $2,500 per month being a half share of the interest payable on the loan to the NAB until I make up my mind as to how I want to proceed. I will let you know what I want to do once I have spoken to Lee and made up my mind. If I decide not to proceed I will repay the money have have paid …" 34 The price for the Dunlec land was also discussed. Although some detail was disputed, it was common ground that Amanda stated that the price had increased from $260,000 to $390,000 being the amount of the mortgage following refinancing. When Tom stated that he thought the price was $260,000 Amanda replied that if he wanted a one half share he had to buy in for the amount of the mortgage. Tom indicated unhappiness, but said he would think about it. 35 On 13 June 2006 Tom caused an email to be sent to Amanda detailing expenses incurred to date in relation to the development of the land. 36 On about 20 June 2006 Amanda and David met Tom in Queensland to discuss the development of the land and the Dunlec land. 37 It was common ground that, soon after their arrival, Tom informed David that he had a potential buyer for the land for the price of $2,600,000 payable as to $1,600,000 in cash and $1,000,000 by way of forestry bonds. David's version (denied by Tom) was that Tom then proposed that once all project costs had been paid, and Amanda and David had paid their half share, the balance received could be split equally. David replied to the effect that he would respond after speaking to Amanda. 38 Then followed a conversation between Amanda, David and Tom. Amanda stated that she and David did not wish to sell the land. Her version (aff 28 October 2009, par 91) included the following: "Myself: David has discussed your offer with me Tom, we are not interested in selling the land. We are in it for the long haul. I have no superannuation to speak of and I want to put my kids through university without them starting life with a debt. This is our investment and our super fund. If you want to go ahead with this sale, tell us now before we give you our deposit and we will sort something out in relation to the Wamego Land and go it alone on our land but you need to tell us instead of dragging it out. Tate: No, no if that's the way you feel we will keep going as arranged. Have you got your deposit. Myself: Yes, David has the cheque book. How much do we owe you? Tate: Well, it turns out now that you need to pay fifteen per cent deposit. I could only borrow seventy per cent against the Wamego Land. Your deposit plus interest at about ten per cent works out to two hundred and five thousand dollars plus you will need to pay a monthly instalment to service your fifty per cent share of servicing the loan. Myself: That's not a problem. I had worked that out anyway when I was hunting around for re-financing on the Dunlec Land, so I borrowed more than you thought we would need. David will write the cheque now."

David's version (aff 9 November 2009, par 130) was in almost identical terms. 39 Tom's version (aff 26 March 2010, par 60) was denied by Amanda. He deposed: "Amanda: David says you are going to sell the Wamego Land. We don't want to sell it. I said: I am not sure what I want to do with the land, but I have received an offer from someone to buy it. I am thinking about it. Amanda: We don't want to sell the land. What if we pay our half share of the expenses? I said: Like we discussed the other day, how about you pay your half share of the expenses. That is $205,815. And I will have a think about what to do. If I decide to sell the land, I will give you your money back. If I decide to develop it, we will do that together." 40 David then provided Tom with two cheques payable to Wamego, one for $205,815, and the other for $2,500. Tom denied that he said he would arrange for the issue of shares in Wamego. 41 According to Amanda and David they had a conversation (denied by Tom) soon after the cheques were provided, in which Amanda said to Tom, in effect, that for the sake of the relationship the price for a one half share of the Dunlec land would be $260,000. They said that Tom indicated acceptance, and would arrange it through his accountant. 42 According to Tom, in July 2006 he had a telephone conversation with David as follows (aff 26 March 2010, par 65): "David: I have been speaking to Marion [their accountant]. She is not happy because we have paid to you that money and we have received nothing in return. She also said we should get $390,000 from you for the Dunlec Land. I said: Well, I will repay the money [referring to the moneys that Amanda and David had paid on 20 June 2006] then. As for you getting $390,000 for the Dunlec Land, you won't be getting that from us I have just arrived home and am getting out of my car. I've got to go. Bye."

David initially denied this version, but in cross-examination agreed with it except Tom's statement that he would repay the moneys. David said he was free to increase the price because no bargain had been concluded (T p 124, l 25). 43 With his letter to David of 25 July 2006, Tom enclosed two cheques from Wamego payable to Dunlec, one for $205,815 and the other for $2,500. The letter said: "I refer to our conversation regarding Lot 29 that the price has moved upward from $520,000 to $700,000. As you know this was unexpected, annoying and I will need to investigate other options. I will speak to Lee and get his advice on which way I should go and what would be the best financial solution. While these 2 parcels of land are up in the air I have enclosed 2 cheques being repayment of loan from Dunlec Pty Ltd to Wamego Pty Ltd. I will continue to bear the financial burden of Wamego's land and in turn you continue the financial burden of Dunlec's land. I will contact you on my return from overseas." 44 On 27 July 2006 Amanda responded by email to Tom on the subject "Decision time". It included: "When you first discussed Wamego buying into half of the Dunlec land it was explained to us that the rationale was so we could fully fund the purchase of both blocks using the englobo valuation of 2.3 million. You said we would then be able to pull out our deposits as we would be able to fully finance everything based on the borrowings. … When we visited in June with our share of the cost of Wamego, you told us you had an offer on the Wamego land for 1.6 million. You proposed to David that we accept the offer for a quick profit and then you would buy into the Dunlec land for the 260k that we had originally asked for even though that was no longer the cost of the mortgage. We did not want to do that as we had always wanted to see this project to completion, however we were happy for you to keep the Wamego land and take all the profit you might have made from selling it on. You said no that you wanted the project to go ahead and we handed over a cheque for 205k. You told David that on top of that we would have to pay monthly interest payments of 2,500 even though we were also servicing the full mortgage on Dunlec as you had not yet given us the money for Dunlec. You asked for extra time to talk to Lee before you paid $260 for Dunlec to work out the best way to do it. During this time we paid the interest payment required on the Wamego land as well as still paying the payments on Dunlec land. We again were in the situation of being stretched to the limit and had no spare money. That is why we were very worried when you said that Wamego should buy into Dunlec and that we would have to find another $260k. We just didn't know where we would be able to get it from. We had to go and see our accountant about our tax … She advised us against selling the land for $520 given that our mortgage was now $390 and that it owed us over $500k (not taking into account any profit for the last six years) … We came home and discussed it at great length, knowing you would be very angry if we increased the price of the land, but at the same time hoping you would understand the rationale. We were going to get you to take the difference between the two prices back as either cash or land once everything was picking up but obviously David didn't get the chance to explain that to you. He finds it hard to discuss things over the phone preferring to do it face to face and was intending to explain it in more detail when we came up there. Again in the interests of the partnership and the friendship, he told me his last words to you on Monday were, ok, we'll settle on the $520. But we still didn't know how we were going to do it. I went to the Post Office this morning and received your cheques and your letter and it appears to me that you do not wish to continue the partnership. You need to know that David has continued his role in the development and the detailed plans are now ready to go to Council for the final approval. We will continue to act in the best interests of the development whether it is in your name or all our names. We consider it to be business as usual and are still on track to start construction in November. … Tom, I know that is the biggest test our friendship and partnership has undergone yet but if you feel you no longer have faith in us or our integrity I do not wish you to try to make it work just for the sake of making money. There are a number of options to consider now and only you can make that decision. Whatever happens you are well placed to make a decent profit on the Wamego land so you won't be out of pocket financially and if you choose to sell it we will understand fully. We intend to keep on going as we always wanted to and develop, whether it is as an englobo or single. I hope you have taken the time to read this and understand where I am coming from. I will wait to hear from you one way or another." 45 On 28 July 2006 David sent an email to Tom which included: "… As she mentioned we received the cheques yesterday with your note, thank you. I am disappointed to find you annoyed by our telephone conversation as it was certainly not my intention to upset you, rather the contrary trying to impart a better understanding of our situation particularly after the telephone conversation I received from you last week which only succeeded in confusing me as I could not grasp where you were coming from accept [sic] that it appeared Amanda and I had to find another $260,000 to buy into a property that is already ours. As stated by Amanda the best way I find to deal with things is face to face rather than at a distance particularly if I am distracted by what I am involved in at the time rather than absorbing the content of a telephone conversation. As she also stated I picked up a full size set of drawings for the Englobo Development yesterday and am in the process of reviewing them prior to submission to the Council. This should happen early next week. From my preliminary observations last night a review of the second stage of the development is in order due to the varied location of the hydraulic services from opposite sides of the development to service the last few blocks. One thing you can assume through all of this is that Amanda and I have been and will continue to look after the best interests of the proposed development. I consider that the progress to date is testimony to that. Furthermore I am not sure you fully appreciate the benefit and streamlining offered to the current DA as a consequence of the last six years spent getting lot 29 to where it is now. I look forward to catching up when you return to plan where we go from here." 46 By email of 17 August 2006 David informed Tom of council's requirements for the development consent. Tom's reply approved continuation of the design work. 47 By email of 24 August 2006 David informed Tom of progress with the layout plan, and asked if he had spoken to his accountant and come to a decision about buying into the Dunlec land. He asked again by email of 28 August 2006. 48 On 29 August 2006 Tom sent David an email as follows: "I have met with my accountant and financial advisor, Mr Lee Chew. The points are summarised as follows: 1. Wamego Pty Ltd will have to decline the opportunity to purchase 50% of Lot 29 from Dunlec Pty Ltd. 2. On the Wamego block, it is still our intention to proceed with that development. 3. The latest design dated 14 July 2006 by Doug Gow is the current adopted design. 4. The main through road I suggest it be done as a joint venture between Wamego and Dunlec, if this is agreeable please advise on the costing of the road and the proposed contribution from each party. 5. Wamego would like to engage your services as the Project Manager. If this is agreeable, would you please forward me your management fee. Could you also please provide construction budget in the Wamego development. 6. Wamego's finance is well on its way and should be getting confirmation in the next couple of weeks. 7. Dunlec's (Lot 29) construction finance - if you'd like me to approach a funder, please advise. I will need the construction budget for Dunlec also. 8. Marketing of Wamego will be done independently. 9. Construction starting date October 2006. I'll await your response on items 4, 5, and 7."

Tom deposed (aff 26 March 2010, par 72) that thereafter he had no further telephone conversations with either Amanda or David. 49 By email of 31 August 2006 to Tom, David replied as follows: "In response to your email dated 29 th August, we have taken advice and wish to advise the following in answer to the nine points you raised. 1. Noted. 2. Agreed, on the proviso that the Strelec Family Trust is a 50% partner in Wamego. 3. Agreed, but this will also be contingent upon The Strelec Family Trust holding a 50% share in Wamego. 4. Agreed, again based on the above. 5. Agreed, depending on the response to point 2. If this is agreed, fees and construction budget will be forthcoming once paperwork on Company has been settled to the satisfaction of both parties. 6. Amanda and I have held discussions with finance providers on a number of issues, including construction budget and should be ready to proceed. 7. As per 6. 8. Again, this will be subject to the response given by Wamego on point 2. 9. Agreed. We feel at this point in time and given the advice we have received, the only way we can continue with this project is one of three ways. 1. We buy into Wamego as originally agreed and continue with the current design. 2. We go our separate ways and Dunlec goes back to our original design which we still have approval for. 3. The Strelec Family Trust buys Wamego out at an agreed fair and equitable price. Please advise which of the three options you prefer so we can make the arrangements accordingly."

The email was drafted by Amanda after discussion with their accountant Ms Marian Adams.

In cross-examination, David accepted (T p 132, 133) that he was deliberately indicating that Tom had a choice either to allow the plaintiffs to buy into Wamego or, alternatively, to go his own way, and said this reflected the reality of the situation. 50 By email of 4 September 2006 to David, Tom replied: "We'll go with option 2." 51 In response, on 4 September 2006 Amanda sent Tom an email which included: "David just rang me to tell me that you have decided to go it alone on the development. He is very disappointed that you have chosen this course given that he, of all parties, has spent countless hours on all our behalf to get this right. To date he has not asked for one cent in recompense, yet has added thousands of dollars in value to the project. As a result he has called a halt to all progress on the development while we seek legal advice. We intend to pursue our original deal with you that we purchase half of the property as agreed at the outset, and our initial advice to date has been that we do have legal rights in this regard. If you no longer wish to continue in partnership with us we respectfully reserve the right to buy you out at an agreed amount, taking into account issues such as interest, work carried out to date, added value due to work done by David and monies paid out and still owed. I am bitterly disappointed that the relationship has ended up this way … I feel you have betrayed our trust in you and all over 30 pieces of silver. … David and I will go on with the development in spite of this. It will just take us a little bit longer yet again. I am very angry at the way you have treated David as he is a very honourable man and has done the right thing by you all the way through. Any further contact with you from this date will no doubt be through our respective legal advisers. This is now a matter of principle to me Tom and I will fight this to the bitter end." 52 On 5 September 2006 Amanda sent an email to Tom which included: "I'm trying to understand where all this went wrong. Yes I did ask you to liaise with David, but that was on the engineering side of it and any day to day issues. When it comes to the future of the project it is a matter for all partners to discuss jointly. It needs to be said that when David sent the email with the three options (which I was aware of and fully supported), it wasn't with the intention of giving a choice, it was that it appeared there were only one of three ways to go from here on in.

I was hoping your response would be "let's go with the original plan" which was joint partnership, on everything, or, failing that, "let's go ahead with joint partnership on the Wamego land". Unfortunately, you chose the stand alone option, which, while it might be your preferable option, given all the time and effort Dvid [sic] and I have put into it to date, is not our choice.

We are prepared to either continue as a partnership on Wamego or, if that is not acceptable to you, we would ask you to give us an amount you would be prepared to accept to buy you out. There are a number of issues to be considered whichever way we go… … How do you wish to proceed from now on? Do you wish us to seek legal advice or do you think we can sort it out between us. I await your considered response." 53 On 7 September 2006 the plaintiffs' solicitors wrote to Tom proposing resolution of the dispute, failing which their rights were reserved. 54 On 30 November 2006 Tom and Ruth signed an agreement for the sale of the shares in Wamego to Mr Kovacevic. Determination 55 The plaintiffs argue that at the meeting on about 20 June 2006 Tom agreed to issue fifty per cent of the shares in Wamego to Dunlec for the development of the land on a joint venture basis. They submitted that the cheques payable to Wamego represented the payment of one half of development costs to date, and a contribution for interest, and were handed over on the understanding that the parties would proceed in accordance with the arrangement made in November 2005. 56 The defendants denied any such agreement was made on this occasion, or at all. Their case was that the cheques were provided as a loan to Wamego as a sign of good faith, whilst Tom decided whether to sell the land and get out, or whether to proceed under a joint venture to develop the land through Wamego on an equal basis. 57 The evidence of Amanda and David of the relevant conversations conflicted with Tom's account. In my assessment, Tom's evidence is to be preferred where it conflicts with the evidence of Amanda and David, and I accept it. Over the course of the hearing I came to the view that Tom's recollection was more reliable than Amanda's and David's, and was consistent with the probabilities, having regard to the circumstances in which the November agreement was terminated on 26 February 2006, and the history of the relationship overall. I also took into account the close similarity of the versions of Amanda and Tom of the conversation of 20 June 2006, and the following passage from Amanda's evidence (T p 83, l 26-l 35): "Q. And I want to suggest that in and about discussing events with David, including his recollection of conversations and the like, you have coloured your recollection so as to be consistent with David's recollection? A. There is always that possibility, and I would be a liar if I denied that there is always going to be bias and interpretation of recollections of conversation. But at no stage was there ever any deliberate attempt to make sure that the recall of events were carbon copies of each other. I guess the short answer is, yes, there could be bias as to my interpretation of the events. It is very hard to recall clearly after five years." 58 On the other hand, there was no effective challenge to Tom's evidence, and there was no rational basis for rejecting it. It did not appear that his memory was faulty. It was common ground that he had received an offer to buy the land. I find it entirely plausible that he required time to consider the offer, given his evidence that a sale would relieve Ruth and himself from their borrowings secured on land which was producing no income, and thereby enable them to get out of the development. It is also plausible that he stated his intention to consider the competing proposals for sale to another, or for development with Amanda and David, and to inform them when he had made a decision. 59 Further support for Tom's denial of an agreement is derived from an objective analysis of the communications of and after 25 July 2006 when the payments were returned. As the documents show, no protest was made that in rejecting the joint venture proposal Tom was in breach of an agreement, or for example, to question his assertion that the monies were received as a loan to Wamego. I have no doubt that Amanda and David would have reacted strongly had they feared that their commercial interests in the development were at risk. In my opinion, had they genuinely believed there was a binding agreement which bound Tom to issue the shares in Wamego, Amanda and David would have promptly confronted him with an assertion that he was not entitled to proceed as he indicated he would. The fact that they failed to do so in respect of an issue of financial significance to them supports the finding, which I make, that they accepted that no final agreement had been reached. 60 For these reasons I hold that the plaintiffs have failed to establish the agreement claimed to have been made on 20 June 2006. In light of this conclusion it is unnecessary to consider the communications between the parties between July and September 2007. However, in deference to the submissions concerning them, it is appropriate that I express my opinion as to their effect and outcome. 61 In his letter of 25 July 2006 Tom stated he would continue to bear the financial burden of Wamego's land and, in turn, Dunlec would bear the financial burden of its land. In evidence, David said that he understood Tom's position was that the acquisition of any interest in Wamego and in the Dunlec land was up in the air, and that the parties were to attend to their respective properties whilst Tom reviewed the matter and spoke to his accountant, Mr Lee. David accepted (T p 127) that this was inconsistent with the existence of a joint venture agreement in respect of Wamego. 62 In her email to Tom of 27 July 2006, Amanda informed him that, if he chose, it was open to him to sell the land, and she and David intended to develop the Dunlec land "… whether it is as an englobo or single". 63 In his email of 29 August 2006 Tom put nine propositions to David. The text of the email is at par 48 above. David replied by his email of 31 August 2006 the text of which is at par 49 above. It included: "…We feel at this point in time and given the advice we have received, the only way we can continue with this project is one of three ways. 1. We buy into Wamego as originally agreed and continue with the current design. 2. We go our separate ways and Dunlec goes back to our original design which we still have approval for. 3. The Strelec Family Trust buys Wamego out at an agreed fair and equitable price. Please advise which of the three options you prefer so we can make the arrangements accordingly." 64 On 4 September 2006 Tom informed David that he accepted option 2. Amanda's response the same day included: " … As a result he [David] has called a halt to all progress on the development while we seek legal advice. We intend to pursue our original deal with you that we purchase half of the property as agreed at the outset, and our initial advice to date has been that we do have legal rights in this regard. If you no longer wish to continue in partnership with us we respectfully reserve the right to buy you out at an agreed amount, taking into account issues such as interest, work carried out to date, added value due to work done by David and monies paid out and still owed …" 65 In my opinion the correspondence to which I have referred established that, since the return of the cheques, the plaintiffs' position was that Tom was free to choose his course without obligation to provide a fifty per cent interest in Wamego. David, in unambiguous terms in his email of 31 August 2006, offered three distinct options. As invited, on 4 September 2006 Tom advised his preference, and accepted option 2. In my opinion the outcome of this exchange was to put beyond doubt the termination of whatever arrangement may have been made earlier. 66 For the above reasons the plaintiffs' claims against Tom and Ruth based on a joint venture fail, and must be dismissed. The quantum meruit claim 67 David's claim for services provided on a quantum meruit basis was pressed against Tom. In the further amended statement of claim it was pleaded in the following terms: "23. Further, or in the alternative, the First Defendant either on his own account or, alternatively, as agent for the Third Defendant, requested the Second Plaintiff to provide his professional services as an engineer and project manager to the Third Defendant. Particulars The request was oral and was made by the First Defendant in or about November 2005. The Second Plaintiff was asked to prepare and lodge a development application with Albury City Council in relation to the development of the Land." 68 It was alleged that David prepared and lodged the development application for which the council granted approval on or about 28 April 2006. 69 The background to the claim was uncontroversial. 70 On 30 June 2005 council granted development approval for the subdivision of Dunlec's land, following which David arranged for the preparation of construction plans for the subdivision. 71 During the conversation with Tom on 10 November 2005 it was agreed that David should arrange to prepare and lodge a development application for the land, and to manage the project. In the weeks following the auction on 11 November 2005, David arranged with a number of consultants for the preparation of valuations, reports and the like to support the application. Invoices for costs and expenses for this work were paid from time to time by Tom. 72 On 22 December 2005 David lodged with the council the development application for a 92 lot subdivision of the land. 73 During January 2006 David and Amanda provided services for the marketing and sales of the blocks after completion of the subdivision of the land. At about this time David proposed to Tom that there would be benefits for both blocks if development proceeded on an englobo basis. Tom requested David to submit details for consideration. 74 In cross-examination David agreed (T p 104) that he did this work on a pro bono basis to progress the deal. He said he volunteered to do the leg work, not expecting to get a fee on an hourly basis, or to put in an invoice for it. He accepted that work done in respect of the development of the land had potential cost benefits for the development of the Dunlec land, for example, by way of economies of scale in costs savings for the installation of sewerage, water, and road works. 75 The evidence supports the finding, which I make, that David's services were provided gratuitously, and in circumstances where he had no expectation of payment for them. His claim is for remuneration for the preparation and lodgement of Wamego's development application, an exercise which was completed on lodgement on 22 December 2005. Furthermore, there is no evidentiary support for a finding that either Tom or Wamego was obliged to provide a reasonable remuneration for these services, over and above the costs and expenses for fees and consultants which David sent on for payment. 76 In my opinion, David has failed to establish any entitlement to reasonable remuneration on a quantum meruit basis, and the claim must be dismissed. 77 Furthermore, in my opinion it is consistent with the terms of Amanda's email of 26 February 2006 that David's involvement with the development application was gratuitous. The relevant statements in the email "… We both feel badly that due to economic circumstances we have not been able to uphold our end of the partnership for Wamego. Because of this, whatever decisions you make regarding Wamego have to be made in the best interests of you and Ruth, not David and I. If you decide to sell Wamego's land englobo, we do not expect to receive any profit you make, not one cent. We have benefited from the experience and I personally have learned skills I am bound to use to our advantage in the future. We still have the Dunlec land which, if Wamego does sell we will decide about then. Given all the effort we have put in to hang on to it, we really want to see it through to development but will probably do it a lot more slowly than we first planned if you decide to sell Wamego. … I guess the reason for my email is to reassure you that whatever you decide regarding the land David and I understand and feel comfortable with. You are the one carrying the financial burden on Wamego, not us. Our friendship will always take precedent over everything else but I think you know that anyway ..."

effectively negate the suggestion that the services were provided and accepted on the basis that they would be paid for. 78 In any event, for the reasons stated earlier (par 29) the effect of the email was to free Tom of any further obligations to the plaintiffs. Conclusion 79 The plaintiffs have failed against the first and second defendants, and the second plaintiff has failed in his separate claim against the first defendant. The plaintiffs did not maintain their claim against the third defendant. 80 Accordingly, I make the following orders:

(1) The further amended statement of claim be dismissed.

(2) The plaintiffs pay the defendants' costs. **********

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Judgment (20 paragraphs)

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