Solicitors: Laurence & Laurence Commercial Lawyers (plaintiff)
JD Law Group Pty Ltd (defendant)
File Number(s): 2018/383865
[2]
Judgment
The Court delivered judgment in this matter on 25 May 2021: Anjoul v Anjoul [2021] NSWSC 592.
Save for the outline that I will give of the findings in the primary judgment, these reasons will assume knowledge of the content of that judgment.
As was the case in the primary judgment, without meaning any disrespect to the parties, I will refer to them by their first names given that they have the same surname.
The plaintiff, Jerry, and the defendant, Ashley, were related by marriage, as at the time that the events the subject of the principal judgment occurred. Jerry's brother, Anthony, was married to Ashley. Anthony and Ashley are now divorced.
Jerry's claim against Ashley arose out of work done by Jerry in carrying out a substantial renovation of a residential property solely owned by Ashley at Winston Hills.
Because of the claims that both parties made at the hearing and the forensic decisions that they made concerning the evidence that was tendered, a number of issues that were important to the proper determination of the dispute were not the subject of evidence, so that reliable findings could not be made.
It was, however, clear that a substantial and well-executed renovation of the property had been undertaken.
In essence, the Court found that Jerry had made an informal family agreement with Ashley and Anthony that he would cause the renovation to be undertaken by supplying his own work and materials where that was practicable, but otherwise Jerry would, to the extent that he could, arrange for subcontractors known to him to do the remainder of the work, on the basis that they would accept cash payments, or that they would be content to be remunerated by work done by Jerry for the subcontractors on a contra basis. That way, the renovation could be undertaken in a professional way, but the cost to Ashley and Anthony would be significantly less than if they had entered into an arm's length building contract with a commercial builder. There was also an arrangement that, although Jerry would make payments for materials as the job went along, he would be reimbursed by Ashley and Anthony from time to time, and when the value of the property had been increased by the completion of the renovation, Ashley would, with Anthony's assistance, increase her loan on the security of the property to repay Jerry.
There was no evidence that Ashley had ever made any repayments to Jerry.
In the circumstances explained in the primary judgment, on 14 November 2013, Jerry and Ashley entered into a deed under which Ashley agreed to pay Jerry $700,000 as the price of the renovation undertaken by him.
Jerry's primary claim in the proceedings was for orders to enforce the deed.
It is not necessary to mention all of the details of the claims made by the two parties. Ashley attempted to resist being ordered to make any payment to Jerry based upon the provisions of the Home Building Act 1989 (NSW). That defence failed.
Ashley relied upon a cross claim the primary claims in which were that the Court in its equity jurisdiction should make an order setting aside the deed on the ground of undue influence or unconscionable conduct by Jerry. Further, Ashley sought an order under s 7 of the Contracts Review Act 1980 (NSW) declaring the deed invalid.
The Court decided that, in principle, the deed should be set aside on the ground that it would be unconscionable for Jerry to enforce it, given the circumstances in which it was entered into by Ashley. The Court also decided, in principle, that an order should be made that will have the effect under the Contracts Review Act that the deed is not enforceable against Ashley.
The problem that the Court faced in doing justice between the parties was that, on Jerry's side, he had attempted to enforce the deed which would have entitled him to a payment of more than $700,000, but, even though he had sought an order for restitution in the alternative, the evidence that he had led was not adequate to enable the Court to make a reliable finding as to reasonable compensation for Jerry, having regard to the particular terms of the informal agreement between the parties.
The Court accepted that, in part, that result flowed from the fact that Jerry had trusted Ashley and Anthony and not kept proper records of the costs that he incurred. Furthermore, it would have been a difficult matter for him to try to prove the value of the contract work that he undertook for various subcontractors. On the other hand, Jerry did put forward incomplete evidence of the costs that he had incurred, and that evidence was found to be defective for reasons dealt with in the principal judgment.
On the other hand, Ashley also ran an all or nothing case. That was primarily on the basis that the provisions of the Home Building Act denied Jerry any entitlement to be remunerated for the costs that he incurred and the work that he did. Ashley also attacked the adequacy of Jerry's attempt to prove the reasonable value of the costs that he incurred and the work that he did. As noted, Ashley enjoyed some success in that attack.
However, Ashley's claim has always been that she is entitled to the increase in value of her property as a result of the renovation work without being required to pay anything for that benefit.
The equitable jurisdiction of the Court to set aside the deed on the ground that it was entered into in unconscionable circumstances is discretionary. It is a cardinal rule of equity that parties who seek equity must do equity. The Court will not order that the deed be set aside because it would be unjust to enforce it, if the result will be to produce injustice because Jerry does not receive reasonable remuneration for his costs incurred and work done, and Ashley will enjoy the increase in the value of her property for free.
As the learned authors of Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th edition) say, at [3-050], in relation to the maxim "those who seek equity must do equity" (footnotes omitted):
This is one of the most important of the maxims of equity. It prescribes that justice shall be reciprocal between the parties to an equity suit. Since time beyond memory, it has applied to plaintiffs who seek relief in a court of equity; it still does so today. No plaintiff can get an equitable remedy unless that plaintiff fulfils his or her own legal and equitable obligations arising out of the subject matter of the dispute. This maxim draws attention to the origins of equity in a 'court of conscience'. It serves to point to a very important distinction between equity and the law, namely the ability of equity to give conditional relief… Equity, on the other hand, is flexible. Equitable remedies are discretionary. Thus, equity may mould its orders and decrees to suit ever-varying circumstances…
The effect of s 8 and Schedule 1 of the Contracts Review Act is that, where the Court makes an order under s 7 to set aside a contract, the Court may also make such orders as may be just in the circumstances, including orders for the payment of money to a party to the contract.
The position that the Court ultimately reached in the primary judgment was that it had found that, in principle, the deed should be set aside, but that such an order should only be made if Ashley paid a reasonable amount of compensation to Jerry.
The principal judgment concluded with the following paragraphs:
354 Ashley has strenuously opposed the proposition that Jerry should be given any further entitlement to quantify an appropriate amount of compensation. She takes the stance that it was for Jerry to make out his alternative case for compensation and to quantify the appropriate amount at the hearing. Ashley submits that as he has not done that, the proper course for the Court to take is to simply dismiss Jerry's claim.
355 There are a number of reasons why I am not at this time prepared to take that course.
356 The first reason is that Ashley has come to equity but has never offered to do equity. Ashley's case was that the Home Building Act had the effect of excluding Jerry's right to receive any compensation, and Ashley has failed in that claim.
357 Ashley has not at any time proffered an alternative basis for Jerry to receive any compensation or made any offer to compensate him.
358 As an ancillary matter, Jerry's solicitors made a request to Ashley's solicitors that Ashley give access to the property to a quantity surveyor retained by Jerry for the purpose of the preparation of evidence as to the reasonable cost of the work done in the renovation of the property. Ashley's solicitor rejected that request. That rejection had the consequence of inhibiting Jerry's ability to make out an alternative case for compensation to his reliance on the enforcement of the deed. Although it is true that Jerry did not implement the threat made by his solicitor that Jerry would file a notice of motion seeking an order that the quantity surveyor be given access to the property, it remains the fact that Ashley's denial of access to the property by the quantity surveyor was not in my view reasonable.
359 It is appropriate for the Court to take into account a number of factors relevant to the forensic reality of Jerry conducting an alternative case for payment of compensation to his case based upon the enforcement of the deed.
360 First, the substantial forensic effort necessary to conduct and defend the alternative case and the consequent legal costs incurred would have been wholly wasted if Jerry had succeeded in his primary claim for the enforcement of the deed, or Ashley had succeeded in her claim under the Home Building Act that Jerry was not entitled to recover any amount in respect of the renovation works for the property.
361 Secondly, the exercise in proving the payments made by Jerry and the value of the work done by him are inherently extremely complex. It is obvious that Jerry has been confronted by substantial forensic difficulties. That reality must be understood in the context that I have found that Jerry did not agree to participate in the renovation works at his own cost. It is more probable than not that Ashley and Anthony agreed to make the necessary payments for the renovation works given that the arrangement was that the various aspects of the works would be carried out in a way that reduced the costs as much as possible. Over a period of a number of years, Ashley failed to make any payments to Jerry, and as I have noted above, it is to some extent understandable that Jerry did not retain all of the records that he would have kept if the arrangement was at arm's length. Furthermore, it is possible that the passage of time during which Ashley did not make any payments towards the costs of the renovation works reduced the availability of records to Jerry.
362 I doubt that it was ever realistic for Jerry to attempt to quantify an alternative claim for reasonable compensation in the proceedings to date. That is because the cost of the forensic effort necessary to quantify the compensation would likely have been wasted unless the basis for the assessment of quantification was first established judicially. There are too many potential alternative ways to determine an amount of compensation that would be reasonable to justify Jerry being required to bring forth evidence at the hearing to quantify the potential different approaches to the determination of compensation.
363 The reality of this observation is in some respects demonstrated by Jerry's proposal in his final written submissions that the Court make case management orders for the assessment of equitable compensation to be paid by Ashley to Jerry as a condition to any order setting aside the deed.
…
368 In these circumstances, I will not at this stage determine the question of whether the deed should be declared void or set aside unconditionally or upon a condition that Ashley pay an appropriate amount of compensation to Jerry.
369 I will give the parties an opportunity to make submissions on this subject after they have been given time to consider these reasons for judgment. For that purpose, I will arrange for my Associate to fix a time for a directions hearing to consider the future of these proceedings.
After some subsequent discussion between the parties and the Court in which Jerry suggested orders that did not meet with the Court's approval, it became apparent that the only way that finality could be reached was for Jerry to be given leave to file a notice of motion seeking leave to file additional evidence that would permit the Court to make a determination as to what would be required of Ashley to ensure that she does equity in return for the relief that she seeks.
On 20 October 2021, Jerry filed the notice of motion that is the subject of these reasons. The notice of motion seeks the following relief:
The plaintiff be granted leave to:
a. adduce evidence relating to any conditions that may be imposed on the relief to set aside the deed between the plaintiff and the defendant, such evidence to relate to the value of the benefit received by the defendant by reason of the works carried out on [the Winston Hills property]; and/or
b. re-open his case for the purpose of adducing evidence in relation to the value of the benefit received by the defendant by reason of the works carried out on [the Winston Hills property].
As appears from prayer 1(a), the application is not merely one to reopen. The primary application is for leave to adduce evidence relating to the condition that the Court should impose on granting the relief sought by Ashley, being an order setting aside the deed. The application to reopen Jerry's case is in the alternative.
By order made on 6 October 2021, Jerry was required to prepare and serve upon Ashley the evidence that he would seek the leave of the Court to lead. Jerry did this in the form of a report of a quantity surveyor, Mr Mark Seeto, dated 19 October 2021, and a report by real estate valuers, Mr Grant Phillips and Mr Barry Coad, dated 12 October 2021.
The objective of the quantity surveyor's report was to determine the reasonable cost of the renovation of Ashley's property on the assumption that all of the services and materials were either paid for by cash or pursuant to contra deals arranged by Jerry, in a manner consistent with the arrangement that the Court found existed between Jerry and Ashley and Anthony. Mr Seeto calculated that amount at $515,278.16 plus GST, as opposed to an arm's length commercial price of $706,406.12 plus GST. Mr Seeto also costed the reasonable value of the works on the basis that they had been carried out by an owner builder at $636,187.38 plus GST.
The valuation report gives two values for the property, as at 2009 and at present, with and without the renovation having been carried out. The valuers reached the conclusion that, as at 2009, the value of the property without renovation was $490,000 and $725,000 with renovation, so that the value that was added was $239,000. As of 2021, the value of the property without renovation is said to be $1,250,000 and with renovation $1,875,000. The value added is $625,000.
Jerry's solicitor affirmed an affidavit on 19 October 2021, in which he sought to explain why Jerry had not obtained the new expert evidence before the hearing that led to the delivery of the primary judgment. One reason given was that Ashley had refused to give access to her property to enable a quantity surveyor to inspect it for the purpose of giving an expert report. As is recorded above, I observed in the primary judgment that that was an unreasonable course for Ashley to have taken. The reasons included the number of directions hearings that occurred and that, notwithstanding that Jerry's statement of claim was filed on 13 December 2018, Ashley did not file a notice of motion seeking leave to file a cross claim until 29 February 2020. The point of this evidence appears to be that the solicitor was concerned about the length of time that it was taking to get a hearing date and he did not want the further delay that would be caused by the determination of a notice of motion filed by Jerry to have access to the property by a quantity surveyor for the purpose of providing evidence in Jerry's case.
The solicitor relied upon the fact that Jerry served a notice to admit facts and authenticity of documents dated 4 December 2019, which Ashley did not dispute. One of the facts that Ashley was asked to admit was that on or about 31 October 2013 Ashley signed the deed. The deed contained in Recital D an acknowledgement that: "The cost to Jerry of carrying out the works to the property was $700,000". Although the solicitor may have thought that Jerry could rely upon this admission, Ashley was not asked directly in the notice to admit facts to admit that the cost of carrying out the works was $700,000. She was only asked to admit that she executed the deed. Consequently, the admission as to the cost of the works would fall if the deed was set aside in the proceedings.
One of the additional reasons given was that the quantification of the costs of the renovation works and the benefit to Ashley only related to an alternative claim, which would not have arisen if Jerry had succeeded in obtaining relief enforcing the deed.
Ashley responded to Jerry's notice of motion by serving an affidavit sworn by her on 11 November 2021. Ashley explained that the continuation of these proceedings is exacerbating the anxiety and depression that were described in the principal judgment, and that she is continuing to require psychological counselling. Ashley is a single unemployed mother with daughters who are eight and 10 years old. The legal costs incurred by Ashley to date are more than $230,000 and have been financed by a family loan that is secured over the Winston Hills property. Ashley and her children are living on JobSeeker payments and Anthony is in default with the minimal child support payments he is required to pay to Ashley.
Ashley's solicitor swore an affidavit on 12 November 2021 in which he explained aspects of the history of these proceedings.
Ashley's solicitor estimated that the total costs that Ashley would incur in the further conduct of these proceedings if Jerry is successful on his notice of motion would be $148,390. Even if Ashley is successful and receives an order that Jerry pay her further costs, her shortfall in recovery on a party/party basis is likely to be about $45,000.
Ashley's solicitor annexed a proposal by a quantity surveyor for the preparation of an expert report in answer to Mr Seeto's report that I understand would cost $12,000 plus GST.
Jerry's notice of motion was heard on 15 November 2021, when the parties provided oral submissions in addition to the written submissions that counsel for both parties had previously prepared.
As I have explained above, Jerry's primary position was that he sought leave to call additional evidence on the condition that should be imposed by the Court on the grant of equitable relief to Ashley and relief under the Contracts Review Act.
It appears from the submissions made by Ashley's counsel that she treats Jerry's application as solely one for leave to reopen his evidence in the case.
Ashley's position is that the hearing was conducted on the basis that all issues were to be finally determined, so that if the evidence led by Jerry to substantiate his claim in restitution for reasonable compensation was not adequate to enable the Court to determine the amount payable by Ashley with confidence, Jerry had lost his opportunity to be awarded compensation, and that was the end of the matter.
Ashley also submitted that the evidence contained in Jerry's new expert quantity surveyor report missed the point, because the quantity surveyor had estimated the reasonable costs of the renovation work on the basis of the arrangement that the Court found in the principal judgment was made between Jerry on the one hand and Ashley and Anthony on the other hand. Ashley submitted that the evidence that would actually be relevant required Jerry to identify with precision all of the payments for materials that were made and all of the contra arrangements that were made. According to Ashley, what was required was evidence concerning the reasonable costs of all of the actual contra arrangements that were entered into considered separately, not a global estimation of reasonable costs.
The problem as I see it with Ashley's position is that she is still trying to get the renovation for free. Not only has Ashley not ever made an open offer to do equity, but she is still fighting the need to do so.
The reality of the position is not that there was no evidence at all before the Court at the original hearing upon which the Court could make some estimate of the reasonable compensation that Ashley should be required to pay to Jerry in return for an order setting aside the deed. There was some evidence, but it was not adequate for the purpose of the Court making an estimation that it considered would necessarily be fair. As Mason CJ and Wilson J said in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83; [1991] HCA 54 (footnotes omitted):
The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can. Indeed, in Jones v Schiffmann Menzies J. went so far as to say that the "assessment of damages … does sometimes, of necessity involve what is guess work rather than estimation". Where precise evidence is not available the court must do the best it can. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages.
This principle applies no less to the determination of equitable compensation than it does to the assessment of damages at common law. Difficulty in quantifying equitable compensation or damages is not a proper reason for the Court to decline to order that they be paid. The Court is obliged to do the best that it can on the available evidence.
If the evidence in the proceedings concerning the reasonable value of the renovation work carried out by Jerry remains as it was when the Court reserved judgment at the end of the hearing, the result will not be that the Court does not make any order for compensation. It cannot do that, because Ashley would not then be required to do equity. The problem that the Court faces is that, because of the forensic decisions made by both parties, the evidence put before the Court was inadequate. The Court was left with the unsatisfactory choice of either making a guess about the fair amount of compensation to be ordered, or alternatively taking the view that it should decline to set aside the deed because it was unable to fairly determine what was required to be done by Ashley to do equity.
The present application is not in reality an application by Jerry to reopen his case. Rather, it is an application, encouraged by the Court in its primary judgment, for leave to put some additional evidence before the Court that will enable it to make the orders that it considers are truly appropriate having regard to the findings in the principal judgment. Those orders are that an order is made setting aside the deed, but Ashley is ordered to pay a fair amount of compensation to Jerry.
Consequently, I have decided that the proper course to be taken is for the Court to make order 1(a) sought in Jerry's notice of motion. The leave to be granted will not be open-ended but will be limited to the additional expert evidence that Jerry has served on Ashley.
It appears that Ashley's legal representatives have taken the view that a consequence of the Court making this order will be that the contest must be renewed, with Ashley incurring the expense of formal expert evidence in reply, and that in due course it will be necessary for the proceedings to be set down for a further formal hearing. It is a matter for Ashley how she wishes to respond to the orders that will be made.
However, it would be wise for both parties to bear in mind that what is at stake is the assessment by the Court of a reasonable amount of compensation that Ashley should be required to pay for the benefit of the renovation of her property.
It is most unlikely that that exercise will involve a precise assessment based upon detailed, contested expert evidence.
As I explained to Jerry's counsel during the hearing on the notice of motion, Jerry's claim for reasonable remuneration has already been compromised by forensic decisions that he has taken and the evidence tendered in the proceedings, as well as the findings made in the primary judgment. First, Jerry's attempt to prove by evidence which subcontractors carried out the works was unsuccessful. Jerry was unable to prove who did the work. Secondly, it was Jerry's case that he paid for materials and work where immediate payment was required by providing cheques to Ashley, who Jerry claimed managed the renovation. Jerry claimed that Ashley used the cheques to pay supply invoices. The Court rejected that claim.
Most significantly, however, the Court was unsatisfied with the evidence given by the parties concerning the involvement of Anthony. At the time the renovation was undertaken, Anthony was cooperating with Ashley. By the time of the hearing, Anthony was in Jerry's camp and gave evidence in Jerry's case. Ashley gave evidence that she thought Anthony was financing the renovation. Jerry's case, supported by Anthony, was that Anthony provided no money for the redevelopment.
The Court was entirely unsatisfied about where the truth lay, and it is not prepared to accept Anthony's evidence. In particular, as a result of the way the parties conducted the hearing, the Court has doubts about whether or not Anthony was in a position to and did contribute to some of the costs of the renovation. There is no realistic way that the parties can now resolve those doubts.
I therefore put to Jerry's counsel in the course of argument on the notice of motion that it may be that the proper course is for the Court to take the formal evidence concerning the reasonable cost of the renovation on the basis of the arrangement actually made by the parties as a starting point, and to determine a level of discount that is appropriate in the circumstances to reflect the inadequacy of the evidence, and the consequent uncertainty, that Jerry either paid for the renovations or gave value by way of incurring the costs of performing contra arrangements.
While counsel is free to submit at any final hearing that the Court should not take that course, he properly conceded that, as a matter of principle, it was available for the Court to proceed in that way.
If that is ultimately the approach that the Court takes, then it is likely that much of any additional expenditure by the parties on obtaining and litigating further expert evidence for the purpose of inviting the Court to make relatively minor adjustments to the evidence given by Mr Seeto will be a waste of time and money.
I would add that there is scope for further consideration of the significance of the expert valuation evidence served by Jerry, as the amount by which the renovation added value to Ashley's property may be relevant to the determination of the reasonable amount of remuneration, as well as the estimate of the reasonable costs.
The parties should confer for the purpose of providing to my Associate draft short minutes of order to give effect to these reasons and also to provide for the future case management of the proceedings.
I will reserve the costs of the notice of motion and deal with those costs when the Court is in a position to make final orders in these proceedings.
I can only urge on the parties that if they cannot reach a suitable compromise position concerning the final orders to be made, it will be in their interests to try to agree an evidentiary framework that minimises the necessity for future expenditure of legal costs. If the reality is that the Court will determine an appropriate amount of compensation to be paid to Jerry based upon a broad assessment that provides for discounts from any costs that may be determined objectively, concerted forensic efforts directed at the details are likely to be futile.
[3]
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Decision last updated: 01 December 2021