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[2025] NSWCA 275
appellant. Appeal allowed with costs. Orders 1-4 of the primary judge made on 29 May 2025 set aside. Commercial List Summons dismissed with costs [103]-[104].
The Court of Appeal held that the later written agreement, not the earlier handwritten agreement, governed the parties’ arrangement. It required Mr Touma to pay $20,000 each month, and he did not do so after December 2014. Mr Balout had notified him of the default, and the promised catch-up payments were not made. The Court held that Mr Touma consequently lost his rights to the returns under cl 5, including the claimed $1 million. It allowed the appeal and dismissed the Respondents’ summons. Other issues about the settlement and alleged nondisclosure were not needed to reach that result, although the Court discussed them.
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2 cited instruments linked from this judgment.
2,188 words · generated 06/10/2026
The dispute arose from an arrangement to fund the rezoning and eventual sale of property at 127-129 Castle Hill Road, West Pennant Hills, referred to in the judgment as Property 127. The Respondents sought $1 million under a written agreement dated 1 August 2014, known as the August Agreement. The central contractual questions were whether an earlier handwritten agreement from 23 July 2014 continued to qualify the later agreement, and whether Mr Touma lost his rights to returns under the later agreement after failing to make monthly payments.
The July Agreement involved Mr Touma, Mr Balout and Mr Walsh. It recorded that Mr Touma would lend $140,000 and fund rezoning and living costs, capped at $20,000 per month. It provided for repayment of funds advanced and $1 million if the property sold for more than $16 million [15].
The August Agreement was signed by the Balouts and an entity identified as Amalgamated Pty Ltd, which the judgment records did not exist at the time. The primary judge treated Mr Touma as the relevant contracting party. The later agreement provided for a $140,000 loan and, under cl 4.1(a), funding of “the sum of $20,000 per month” until completion or sale of Property 127. Clause 4.2 provided that if the Investor failed to pay under cl 4.1 and did not rectify the default within two months after notification, it forfeited its rights to returns under cl 5 [16]-[17].
Mr Touma paid the $140,000 and made two monthly payments of $20,000, in November and December 2014. After a discussion about missed payments, Mr Touma recorded that double payments had been requested for February and March 2015. They were not made [27]-[30]. The Court treated the later failure to pay, after the notification and agreed catch-up arrangement, as the default engaging cl 4.2 [52]-[58].
The parties also disputed a Deed of Settlement, executed in July 2015, and whether the Balouts misled Mr Touma by not disclosing their dealings with a prospective purchaser. The primary judge found in favour of the Respondents, including by setting aside the Deed of Settlement for misleading or deceptive conduct. The Court of Appeal held that the construction and forfeiture issues resolved the claim, so it was unnecessary to decide the Settlement Deed’s efficacy [59]. It nevertheless addressed some additional appeal grounds for completeness.
The Court allowed the appeal with costs, set aside the primary judge’s orders 1-4, and dismissed the Commercial List Summons with costs [103]-[104].
The Court held that the August Agreement was not to be read together with the July Agreement in the way the primary judge had done. The August Agreement did not refer to the earlier agreement or its $16 million sale-price threshold. Further, the Respondents’ counsel had accepted at trial that the July Agreement had no continuing effect if the August Agreement stood, and the Respondents did not defend the primary judge’s construction on appeal [19], [31]-[37]. The Court considered that the later agreement’s repetition of the earlier arrangement’s subject matter was consistent with replacing and formalising it [34].
That conclusion mattered because the primary judge had relied on the July Agreement to qualify the monthly funding promise and to introduce a $16 million trigger for the $1 million. The Court read cl 4.1(a) according to its wording. The phrase “the sum of $20,000 per month” was a fixed amount, not a cap on expenses or an amount payable only if the Balouts demonstrated a need for funds [41]-[43]. The Court contrasted this wording with the July Agreement’s reference to costs not exceeding $20,000 per month [33], [42].
The Court separately addressed the sale-price trigger. It rejected the Appellants’ argument that the $1 million could not be triggered unless the property sold for more than $22 million. Clause 5(d) said “when the property of 127 is sold”, followed by a choice between $1 million and 50% of proceeds over $22 million, whichever was greater. The sale itself was the trigger; the $22 million figure was relevant to calculating the alternative return [38]-[40]. Thus the Appellants succeeded on the argument that the $16 million threshold was not part of the August Agreement, but failed on their alternative argument that the $22 million figure was a threshold condition.
The decisive issue was cl 4.2. The primary judge had found that a written demand was required, that time was not of the essence, and that the clause had not been engaged. The Court found no textual basis for requiring written notice. It also referred to the demand reflected in Mr Touma’s 31 October 2014 email, recording that double payments had been requested for February and March [28], [44]-[48], [52].
The Court construed cl 4.2 as requiring three things: non-payment under cl 4.1, notification of default, and failure to rectify within two months [56]. It rejected the argument that Mr Touma had to receive a fresh notification after the catch-up payments were not made. The clause did not say that an already-notified default had to be notified again [57]. The agreed extension for catch-up payments was relevant: a party allowing extra time could not insist on forfeiture before that extended period expired [56]. But the payments were never made. The Court concluded that Mr Touma forfeited his cl 5 rights, including the claimed success fee [58].
The judgment does not set out a comprehensive account of the law before the appeal. Its contribution is its application of contractual text and the specific notice-and-cure language in cl 4.2. The Court’s reasoning is tied to this agreement and the parties’ positions in this litigation. It should not be enlarged into a general rule that every later written agreement automatically extinguishes every earlier arrangement. The Court relied on the August Agreement’s wording, its coverage of the same commercial subject matter, the absence of any reference to the July Agreement, and the Respondents’ position at trial [31]-[37].
On monthly payments, the judgment confirms the importance of the actual words chosen. The phrase “the sum of $20,000 per month” was treated as a fixed promise. The primary judge’s attempt to read it as conditional on need or request could not be reconciled with the text, particularly when the earlier agreement used different wording to describe a cap on expenses [33], [41]-[43].
On default clauses, the Court applied cl 4.2 as written. It did not infer a written-notice requirement when the clause specified notification but did not specify its form. Nor did it infer an obligation to repeat notice of a default already notified. The Court did, however, recognise that the agreed extra time for rectification affected when forfeiture could be insisted upon [44]-[58]. The cited authorities, Louinder v Leis and Perri v Coolangatta Investments Pty Ltd, were referred to in support of the proposition that a notice requirement can make time essential following demand and a stipulated period to rectify [47].
The judgment also applies established appellate approaches rather than announcing a new general test. House v The King is cited in relation to review of a discretionary evidentiary ruling, and Fox v Percy is cited concerning appellate interference with factual findings [85], [93]. The Court found error in the evidentiary ruling on the Khouzame affidavit, but did not overturn the finding about when Mr Touma became aware of the negotiations [85]-[94].
At [41], the Court emphasised the words “the sum of $20,000 per month”. In plain English, the agreement promised a set monthly amount, not merely reimbursement of expenses up to that amount. At [42], the Court added that no separate proof of need or request for funds was required.
At [39], the Court read cl 5(d) as making the sale itself the trigger. In plain English, the $22 million figure did not have to be reached before the clause operated. Instead, it helped determine which return was greater: $1 million or the specified share of proceeds above $22 million.
At [56], the Court set out the three steps under cl 4.2: failure to pay, notification of default, and failure to rectify within two months. It also observed that if a longer period had been agreed, forfeiture could not be insisted upon before the extended period ended. The Court’s analysis therefore treated the catch-up arrangement as relevant to the timing of the consequence, not as erasing the payment obligation.
At [57], the Court stated that the clause did not require the defaulting party to be notified again of the same default. In plain English, once the default was notified, the clause’s two-month cure period ran without a second warning being required, on the Court’s reading.
At [58], the Court concluded that Mr Touma forfeited his rights under cl 5(d) after failing to make monthly payments after March 2015. The Court expressly noted that no claim for relief against forfeiture was before it. That qualification matters: the conclusion was reached on the contractual arguments and record presented in the appeal.
The most direct factual match is a dispute involving a later written contract that covers the same arrangement as an earlier informal or handwritten document, but does not expressly incorporate the earlier document. This judgment shows the significance of the later document’s wording, the relationship between the two instruments, and the parties’ litigation positions. Here, the later agreement contained different language and the Respondents did not maintain at trial that the earlier agreement continued to operate [31]-[37].
The payment analysis is particularly relevant where a contract promises a defined monthly amount but one party argues that the amount was merely a cap or depended on a request or demonstrated need. In this case, the Court relied on “the sum of $20,000 per month” and distinguished the earlier agreement’s capped-cost wording [33], [41]-[43].
The notice analysis is relevant where a contract provides for a default, notice, and a cure period, but does not specify that notice must be written or that repeated notice is required. The outcome depended on the precise words of cl 4.2, the evidence of notification, and the agreed catch-up period. The Court did not state that oral notice will always suffice in other contracts; it found no written-notice requirement in this clause [44]-[58].
The precedent is also fact-sensitive on forfeiture. The Court noted the absence of a claim for relief against forfeiture [58]. It did not decide what the outcome would have been had such a claim been made, or what other contractual or factual circumstances might affect enforcement of a similar clause.
The judgment text supplied for analysis does not identify any later decisions that considered or applied Balout v Dobro Dosle Pty Ltd. It records the Court of Appeal’s own reliance on earlier authorities: House v The King, Browne v Dunn, Louinder v Leis, Perri v Coolangatta Investments Pty Ltd and Fox v Percy [47], [85], [90], [93]. Those citations explain the appellate and evidentiary reasoning in this judgment; they do not establish how subsequent courts have treated this decision.
Accordingly, the source supports describing Balout as a Court of Appeal decision applying the language of a particular agreement and addressing the appeal before it. It does not support a claim about later judicial reception, whether the reasoning has been followed, distinguished or criticised, or whether any subsequent decision has developed the points addressed.
The judgment does not decide how the result might differ if the contract expressly stated that notice must be written, required a fresh notice for each missed instalment, or defined how an agreed extension affected the cure period. Its conclusions arise from the wording of cl 4.2 and the evidence of notification and accommodation in this case [44]-[58].
The Court did not determine a claim for relief against forfeiture. It expressly qualified its forfeiture conclusion by noting that no such claim had been made [58]. The judgment therefore does not resolve what arguments or evidence might be relevant to such relief in another case.
The Court’s discussion of misleading or deceptive conduct was not necessary to its disposition. It said it would have upheld ground 7 if necessary, reasoning that nondisclosure would not have been misleading or deceptive if Mr Touma had already forfeited his entitlement, and noting that he did not assert an exclusive agency arrangement [97]-[102]. The Court did not finally determine the misleading-conduct issue as an independent basis for the orders.
The Court upheld the challenge to the exclusion of Ms Khouzame’s affidavit but did not use that conclusion to overturn the finding about when Mr Touma learned of the Put and Call Option Deed. It explained that the excluded evidence was relevant to that issue, while still declining to uphold ground 5 under the applicable appellate standard [85]-[94]. The relationship between the evidentiary error and the ultimate factual finding was therefore discussed, but did not determine the appeal’s outcome.
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Balout v Dobro Dosle Pty Ltd [2025] NSWCA 275
Hearing dates: 8 December 2025
Date of orders: 23 December 2025
Decision date: 23 December 2025
Before: Bell CJ at [1];
Ward P at [105]; and
Mitchelmore JA at [106].
Decision: 1. Appeal allowed with costs.
2. Orders 1-4 of the primary judge made on 29 May 2025 be set aside.
3. Commercial List Summons dismissed with costs.
Catchwords: CONTRACTS – Construction – Whether written agreement should be read together with earlier handwritten agreement – Where terms of both agreements related to the same transaction but were inconsistent – Where counsel for Appellant eschewed reliance on earlier handwritten agreement at trial
CONSUMER LAW – Misleading or deceptive conduct – Where Appellant failed to disclose agreement with third party prior to entering Deed of Settlement with Respondent
EVIDENCE – Admissibility – Credibility evidence – Where impugned evidence relevant to determining when the Respondent became aware of the undisclosed conduct which formed the basis of the misleading or deceptive conduct claim
Legislation Cited: Australian Consumer Law s 18
Evidence Act 1995 (NSW) s 135
Cases Cited: Browne v Dunn (1893) 6 R 67
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
House v The King (1936) 55 CLR 499; [1936] HCA 40
Louinder v Leis (1982) 149 CLR 509; [1982] HCA 28
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; [1982] HCA 29
Texts Cited: N/A
Category: Principal judgment
Parties: Alan Hisham Balout (First Appellant)
Karent Balout (Second Appellant)
Dobro Dosle Pty Ltd (First Respondent)
Joseph Anthony Touma (Second Respondent)
Representation: Counsel:
P Afshar, J Pokoney (Appellants)
C O’Neill, J Charlton (Respondents)
Solicitors:
MistryFallahi Lawyers (Appellants)
Hicksons Hunt & Hunt (Respondents)
File Number(s): 2025/215172
Publication restriction: N/A
[This headnote is not to be read as part of the judgment]
This appeal related to the construction of an agreement entered between Mr and Mrs Balout (the Appellants) and Mr Touma on 1 August 2014 (the August Agreement). The August Agreement contemplated Mr Touma finding a purchaser for the Appellants’ property (Property 127). The August Agreement required Mr Touma to loan $140,000 to Mr Balout and, until Property 127 was sold, “fund [Mr Balout] the sum of $20,000 per month” (cl 4.1(a)). In exchange, cl 5d provided that “when the property of 127 is sold [Mr Touma] will receive all funds advanced plus either $1 million dollars or 50% of any sales proceeds over $22 million, whichever is the greater”. However, cl 4.2 provided that Mr Touma forfeited his rights under cl 5 if he failed to make the $20,000 payments and rectify defaults within 2 months of being notified.
An earlier handwritten agreement had been entered on 23 July 2014 between Mr Touma and Mr Balout and Mr Walsh (the July Agreement). The July Agreement provided that in exchange for Mr Touma loaning $140,000 to Mr Balout and paying Alan’s monthly living costs not exceeding $20,000, Mr Touma would receive back all funds advanced, and $1 million if Property 127 sold for more than $16 million.
On 10 September 2014, Mr Touma procured from Mr Nassif a handshake deal to buy Property 127 for $20 million. Mr Nassif disclaimed that deal and renegotiated with Mr Balout without Mr Touma’s involvement. On 24 June 2015, a caveat was lodged by Mr Touma’s company against the title to Property 127. On 1 July 2015, Mr Balout and Mr Nassif executed a Put and Call Option Deed for the sale of Property 127 for $19.5 million. On 13 July 2015, Mr Touma and the Appellants executed a Deed of Settlement, leading to the caveat being withdrawn and Mr Touma being repaid $180,000. At that stage, Mr Touma had only made two monthly $20,000 payments, and had been notified of, and failed to rectify within two months, his defaults.
The Respondents commenced proceedings seeking payment of $1,000,000 under cl 5d of the August Agreement. The primary judge upheld the claim by construing the July and August Agreements together and setting aside the Deed of Settlement for misleading or deceptive conduct based upon Mr and Mrs Balout’s failure to disclose the Put and Call Option Deed to Mr Touma when entering the Deed.
The Court (Bell CJ, Ward P and Mitchelmore JA agreeing) held, allowing the appeal:
(1) The primary judge erred in finding that the July and August Agreements should be read together and that cl 4.1(a) did not establish a fixed liability for Mr Touma to pay Mr Balout $20,000 per month. Rather, the plain language of cl 4.1(a) of the August Agreement, and the Respondent’s concession at first instance demanded opposite conclusions: [31]-[46] (Bell CJ); [105] (Ward P); [106] (Mitchelmore JA).
(2) The primary judge erred in failing to find that Mr Touma had forfeited his rights under cl 5d of the August Agreement pursuant to cl 4.2 in respect of his failure to make monthly $20,000 payments after March 2015: [49]-[59] (Bell CJ); [105] (Ward P); [106] (Mitchelmore JA).
BELL CJ: This proceeding involves an appeal commenced by Mr Alan Balout and his wife Ms Karen Balout (the Appellants or Mr and Mrs Balout) against Mr Joseph Touma (Mr Touma) and Dobro Dosle Pty Ltd (Dobro) trading as “Amalgamated Investments Trust” (the Respondents) in respect of a decision by Lindsay J (the primary judge): Balout v Touma; Dobro Dosle Pty Limited t/as Amalgamated Investments Trust v Balout [2025] NSWSC 459 (PJ or the primary judgment).
Dobro’s claim relevantly was for the payment of $1 million pursuant to an agreement entered into on 1 August 2014 between Mr and Mrs Balout and an entity described as Amalgamated Pty Ltd (the August Agreement). It emerged that no such company of this name existed and the parties and, as explained below, the primary judge ultimately treated the August Agreement as one between Mr Touma and the Appellants.
The obligation to make the $1 million payment was said to have been triggered by the sale of a property owned by the Respondents (Property 127) on or about 22 August 2019 to Kirby Projects Pty Limited, a company associated with Mr Jean Nassif, which had secured an option in respect of Property 127 on or about 26 June 2015 (Put and Call Option Deed).
Under the August Agreement, Dobro lent the Appellants the sum of $140,000 and undertook to fund the Appellants in the sum of $20,000 per month until completion or sale of Property 127 at which time $1 million would become payable to Dobro [Mr Touma] although whether this was dependent upon a particular sale price being achieved was in issue. Only two monthly payments of $20,000 were ever made, namely in November and December 2014.
An earlier handwritten agreement had been entered into between Mr Touma and Mr Balout and Mr Haiden Walsh (a business partner of Mr Touma who was at the time dating Mr Balout’s daughter) on 23 July 2014 (the July Agreement). An issue on appeal related to the interaction and relationship, if any, between the July and August Agreements.
The Appellants contended, contrary to the primary judge’s conclusion, that no liability to pay $1 million arose on the proper construction of cl 4.2 of the August Agreement but, in the event that it did, that claim was met by a Deed of Settlement entered into on 13 July 2015 between Mr and Mrs Balout and Mr Touma (the Deed of Settlement).
At first instance, the Respondents successfully resisted the Appellants’ contentions based on the construction of cl 4.2 of the August Agreement and also succeeded in setting aside the Deed of Settlement on the ground of misleading or deceptive conduct. The conduct alleged to have contravened s 18 of the included the non-disclosure of Mr and Mrs Balouts’ direct negotiations with Mr Nassif to sell Property 127 to him without Mr Touma’s involvement, and representations to Mr Touma that they did not require his financial assistance due to receiving an inheritance from Mrs Balout’s mother.
“Mr Balout (the moving mind of the Balout parties) signed the August Agreement and procured its execution by his wife intending to be bound by and looking to Mr Touma for performance of it. They both understood that ‘Amalgamated Pty Ltd’ was an entity owned by Mr Touma, an alter ego. The fact that ‘Amalgamated Pty Ltd’ was a non-existent company meant no more than that Mr Touma had not effectively nominated a ‘nominee’ and remained the sole contracting party on his side of the transaction.”
[67] … nothing ultimately turns on the fact that the text of the August Agreement, in terms, identifies Amalgamated Pty Ltd (as it happens, not then a registered corporation) as the “Investor”.
[68] … Mr Touma signed the August Agreement as the “sole director” of the entity. The agreement of the Balout parties was with Mr Touma “or nominee”. The important identity was that of Mr Touma personally. It was his expertise that the Balouts sought to engage. I read the expression “Joseph Touma or nominee”, not as “Joseph Touma or a substitute party”, but as “Joseph Touma by himself or an agent”. Reading the August Agreement in light of the July Agreement and the non-existence of “Amalgamated Pty Ltd”, Mr Touma was “the Investor”.
Mr and Mrs Balout both gave evidence and the sole witness for the Respondent was Mr Touma who swore two affidavits. The primary judge generally preferred the evidence of Mr Touma to the extent that it conflicted with the evidence of Mr Balout: PJ [134], [161]-[163].
The affidavit of a further witness, Ms Joandarc Khouzame (also known as Joan Darc), was sought to be read on behalf of the Appellants but the primary judge rejected it. She was the operator of a real estate business to which Mr Balout was indebted in the sum of $140,000 prior to entry into the July and August Agreements. Her further significance in the case will be explained later in these reasons.
“1 The primary judge erred in finding that the August Agreement was to be read together with the July Agreement (J[64])… with the consequence that his Honour erred:
a. in the construction of clause 4.1 of the August Agreement; and
b. in finding that the trigger for the payment of the $1M was achieving a sale price of $16M whereas the trigger under the August Agreement was a sale price of $22M.
2 The primary judge erred in his construction of clause 4.1 of the August Agreement by finding that the clause did not establish a fixed liability for the second respondent to pay the first appellant $20,000 per month from the date of the agreement until the sale of the Property 127 (as defined therein) (J[66]).
3 The primary judge erred in his construction of clause 4.2 of the August Agreement by finding that:
a. clause 4.2 required a written demand for payment of $20,000 by the appellants (J[53]);
b. time was not of the essence in relation to the payments of $20,000 per month (J[53]);
c. clause 4.2 did not operate to disentitle the respondents from any right, title or interest on any of the investments the subject of clause 5 of the agreement, in circumstances where the primary judge found that the second respondent had failed to make payment of $20,000 per month to the appellants (J[52], [55]).
4 The primary judge ought to have found that the second respondent was disentitled to the repayment of any monies advanced, or to any "success fee" under clause 5 of the August Agreement, by operation of clause 4.2 of the August Agreement…
5 The primary judge erred in finding that the second respondent did not become aware of the existence of the appellants' entry into the Put and Call Option Deed until August 2015 (J[131], [146], [156]) in particular in circumstances where the caveat was registered on the title of the subject property on 22 June 2015, being supportive of discovery in June 2015 rather than in August 2015.
6 The primary judge erred in declining to allow the affidavit of Joandarc Khouzame (Khouzame Affidavit) to be read (J[138]) …
7 The primary judge erred in finding that the failure to disclose the existence of the Put and Call Option Deed was in the circumstances misleading or deceptive (J[179]) in particular in circumstances where the primary judge erred in finding that the Deed of Settlement was ‘implicitly predicated upon a common understanding’ that the respondents were otherwise entitled to ‘a success fee of $1 million’ (c.f. J[177]) especially where his Honour found that the second respondent laboured under the understanding that he was required to pay the appellants $20,000 per month and had failed to do so from December 2014 onwards.
8 The primary judge erred in attributing any misleading or deceptive conduct to the second appellant (J[170], [179], [181]) in crcumstances where:
a. the second appellant was not cross-examined;
b. the appellants did not concede that the second appellant was a person who engaged in any of the relevant conduct, or was otherwise "involved in the contravention" (c.f. J[170]);
c. the respondents did not plead that the conduct of the first appellant was or should be attributed to the second appellant.”
“Funding and loan Agreement
Between
Joseph Touma or Nominee
and
Alan Balout
and
Haiden Walsh
Alan owns a property known as 127 Castle Hill Rd, West Pennant Hills. Alan has been offered $14,000 [sic, agreed to be $14,000,000] to sell the property. Alan believes the property is worth over $20 million.
Alan has been getting a lot of pressure from Joan Darc to accept the offer. For this reason and other reasons Alan is upset with Joan Darc and wants to terminate an agreement and loan he has with her.
Alan has offered Joseph Touma an opportunity to get involved in the rezoning of his property. Alan wants Joseph to loan him $140,000 to pay out Joan Darc’s debt. He also wants Joseph to fund Alan’s share of the rezoning costs and assist with further funds to help cover Alan’s regular living costs. In return Alan has agreed to repay Joseph all funds advanced and One Million Dollars.
The loan will only be paid back from the sale of the Property. The One Million Dollars is only payable if the Property is sold for over $16 Million Dollars.
Joseph has agreed to loan Alan the $140,000 to pay Joan Darc and the funds required for the re zoning and Alans living costs on the condition these costs do not exceed $20,000 per month.
Joseph agrees to give Haiden $50,000 from the One Million Dollars if he assists with the rezoning and for introducing him to Alan.
A more formal agreement [will] be done to reflect these terms.”
“BACKGROUND
A. Alan is the owner of the property located at 127-129 Castle Hill Road, West Pennant Hills NSW (‘the Property 127’) which is subject to rezoning.
B. Alan and the Investor wished to jointly rezone and redevelop Property 127 Castle Hill Road, West Pennant Hills NSW.
C. The Investor has offered to invest all funds necessary to rezone and obtain DA for the Property 127.
D. The rezoning is currently being prepared by Grimshaw Architects and will be submitted by MECONE. Grimshaw propose to submit a rezoning proposal to accommodate 165 units on Property 127.
E. Alan has accepted the Investor’s offer upon and subject to the terms and conditions of this agreement.
OPERATIVE PROVISIONS
IT IS AGREED in consideration of the Investor agreeing to invest at the request of Alan that the parties are bound by the terms and conditions of this agreement.”
“2. THE INVESTMENT
Subject to the terms of this agreement, the Investor agrees to invest monies with Alan on account of the rezoning of Property 127.
3. CONDITION PRECEDENT TO INVESTMENT
3.1 The Investor may, in its absolute discretion, decide to invest if:
a. Alan has provided satisfactory replies to all the Investor's enquiries in respect of the Security;
b. Alan holds the Security in form and substance satisfactory to the Investor;
c. the Investor has received such ancillary documents to this agreement as the Investor or its solicitors deem necessary;
The Investor may waive any one or more of these conditions.
4. THE INVESTOR FUNDING
4.1 Funding
a) From the date of this Agreement, and to completion or sale of Property 127, the Investor has agreed to fund Alan the sum of $20,000 per month to account for Alan's current loans, including the Property 127.
b) On the date of this Agreement, the Investor has agreed to loan Alan the sum of $140,000 on account of Alan's debt to Joandarc of JRD Realty & Grimshaw Architects.
c) The investor has also agreed upon the sale of property 127 - 129 achieving the sale value above $32 million, the investor shall not be entitled to be paid any funds advanced to Alan and Karen Balout for the purpose of rezoning and DA excluding the deposit of $1.2 million.
d) The investor has also agreed to purchase a brand new Mercedes Benz S65 AMG fully optioned. If the model is not available at the time of purchase then an equivalent car of equal value be chosen by Alan Balout in lieu, if the sale of the Property achieves $30 million.
4.2 Defaults by the Investor
In the event that the Investor fails to make payment in accordance with clause 4.1 of this agreement, and the Investor fails to rectify the payment within 2 months of Alan notifying the Investor of the default, then the lnvestor forfeits all his rights, title and interest on its return on investments pursuant to clause 5.
5. PROPERTY 127
5. Investor’s Return on Investment
d. In consideration of the Investor entering into this Agreement, when the property of 127 is sold we will receive all funds advanced plus either $1 million dollars or 50% of any sales proceeds over $22 million, whichever is the greater
e. lf the property is sold for over $30 million within the first 5 years, the investor will only receive 50% of all sales proceeds over $22 million and shall forfeit any right to request any funds advanced prior to the sale of the property of 127 - 129 excluding the deposit of $1.2 million.
His Honour observed at PJ [58] that “the immediate commercial object of the parties in executing the August Agreement appears to have been to bring “Amalgamated Pty Ltd” and Mrs Balout expressly into the contractual relationship between Mr Touma and Mr Balout contemplated by the July Agreement”.
The primary judge construed the July and August Agreements as standing together (PJ [64]) notwithstanding that the Respondents abandoned any reliance on the July Agreement in closing submissions as indicated by the following exchange:
“AFSHAR: …your Honour would find the August agreement to be the only extant agreement between the parties subject--
HIS HONOUR: I think that was more or less conceded.
AFSHAR: I think that was and fairly so.
HIS HONOUR: We’re right about that, aren’t we?
O’NEILL: You are. I think that--
HIS HONOUR: If the August agreement stands as an agreement, the July agreement--
O’NEILL: I think as a matter of principle, I can’t go back to the July agreement.
HIS HONOUR: Okay.”
“[64] On my reading of the August Agreement (in the context of the July Agreement), viewed objectively, it was not intended to terminate the July Agreement but, rather, to be read with the July Agreement.
[65] The August Agreement did not displace the threshold of $16 million for which the July Agreement provided.”
“[62] In my assessment, subject to ongoing discussions each of the July Agreement and the August Agreement was one in which (to paraphrase Masters v Cameron (1954) 91 CLR 353 at 360) the parties had reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms, but at the same time proposed to have the terms restated in a form which would be fuller and more precise but not different in effect.
[63] Both Agreements served the same purpose and object: to enlist Mr Touma (personally and, if he chose to do so, through a nominee of his choice) with a view to securing a price over $16 million on a sale of the Property as a development site, with Mr Touma lending to the Balouts: (a) $140,000 to enable them to pay out a debt owed to Joan Darc for her marketing of the Property to date; and (b) funds required for rezoning expenses and living expenses, not to exceed $20,000 per month.”
“the July Agreement provided for Mr Touma ‘to loan [Mr Balout] … the funds required for the re zoning and [Mr Balout’s] living costs on the condition these costs do not exceed $20,000 per month’ whereas clause 4.1(a) of the August Agreement is expressed in terms of ‘the Investor’ agreeing ‘to fund [Mr and Mrs Balout] the sum of $20,000 per month to account for [the Balouts’] current loans, including [the Property]’.”
“On my reading of the August Agreement (read with the July Agreement), the Touma parties’ agreement to “fund” $20,000 per month (whether expressed as a “loan” of “funds required” or as an agreement “to fund” the Balouts “to account for their current loans”) did not establish a fixed liability in Mr Touma to pay $20,000 per month, or any other sum, independent of an established need or a request by the Balouts for funding to meet their expenses. In my opinion there was no entitlement in the Balouts to a fixed periodical payment of $20,000, or any other specific sum, although Mr Touma appears for a time to have apprehended that there would have been but for conversations between him and Mr Balout that relieved him of any obligation to pay any $20,000 sums pending the preparation by Mr Balout’s solicitor of a third version of the parties’ agreement.”
“Whatever the proper construction of the parties’ written agreement(s) with regard to payment of $20,000 sums, time appears not to have been of the essence in the making of any such payments because Mr Touma was reluctant to make payments until Mr Balout’s solicitor produced a promised third version of the parties’ written agreement(s) and Mr Balout either acquiesced in a pause of payments or, in any event, refrained from seeking payments. No written demand for a payment of $20,000 (or a multiple of that sum) was ever made by the Balouts. The procedure for which clause 4.2 of the August Agreement provides was never engaged.” (emphasis added)
The primary judge’s conclusion at PJ [66] together with his Honour’s reading of the two agreements together forms the basis of the first two appeal grounds. These grounds in turn feed into grounds 3 and 4. His Honour’s conclusion in PJ [63] as to the $16 million remaining a sale threshold under the August Agreement notwithstanding the absence of any reference to it is also an aspect of appeal ground 1.
For completeness, his Honour noted at PJ [46] that cll 4.1(c), 4.1(d) and 5(e) of the August Agreement appeared “wholly aspirational in the absence of any immediate expectation that the Property could be sold for $30 million or more”.
On 5 September 2014, consistent with cl 4.1(b) of the August Agreement, Mr Touma caused $140,000 to be paid into a bank account of Mr and Mrs Balout.
In late October 2014, a conversation took place between Mr Balout and Mr Touma about the non-payment of the monthly amounts provided for under the August Agreement. On 31 October 2014, Mr Touma sent an email to Highfields (a company associated with Mr Balout) and copied to himself noting that “Alan has request[ed] double payments in Feb and March”. It may be inferred that this was to make up for the non-payment of the $20,000 payments in August and September or October, with the arrangement being for the non-payments to be made up with double payments in February and March 2015. The request for double payments in February and March plainly followed a demand having been made in respect of non-payments in breach of the August Agreement. As matters transpired, these payments were never made.
At PJ [52], the primary judge held that in or about November 2014 Mr Balout called Mr Touma on two occasions and requested a transfer of $20,000 for payment of his bills, which requests led to the payments of $20,000 on each of 27 November 2014 and 1 December 2014, both times with an entry in Mr Balout’s bank statement reading “direct credit, from: J A Touma Ref: Loan Balout”.
No further payments were made after 1 December 2014, including (as noted above), the double payments that were requested and due to be made in February and March 2015.
Ground 1 has been set out at [13] above. As noted at [19] above, counsel for Mr Touma appeared to abandon any reliance on the July Agreement in the proceedings at first instance, or at least any reliance on its continuing operation and effect. Moreover, contrary to the primary judge’s finding at PJ [66], reproduced at [23] above, Mr Touma positively pleaded that the August Agreement imposed an obligation to fund Mr Balout $20,000 a month.
In my view, there was no warrant for his Honour’s finding that, objectively, the August Agreement was not intended to terminate the July Agreement but, rather, the intention was that the August Agreement be read together with the July Agreement, even putting to one side the fact that this was not the construction contended for by either party. The Respondents advanced no written argument on appeal supporting his Honour’s construction.
As to his Honour’s construction of cl 4.1(a) of the August Agreement and his conclusion that it “did not establish a fixed liability in Mr Touma to pay $20,000 per month, or any other sum, independent of an established need or a request by the Balouts for funding to meet their expenses”, that construction is not sustainable in light of the plain language of cl 4.1(a) and the reference to “the sum of” which may be contrasted with the expression “living costs on the condition these costs do not exceed $20,000” as per the July Agreement. Again, the Respondents advanced no written argument on appeal supporting his Honour’s construction.
There was no indication in the August Agreement that the payment obligation in cl 4.1(a) was somehow intended to be qualified by the July Agreement. In point of fact, the execution of the August Agreement and the broad repetition of the subject matter of the July Agreement was only consistent with an objective understanding that, by the August Agreement, the parties intended to replace what they had informally agreed in the handwritten July Agreement and to regularise the parties to their commercial arrangement by that new agreement.
As will be seen when appeal ground 4 is reached, his Honour’s misconstruction of the cl 4.1(a) obligation was critical to his finding that the non-payment of the monthly $20,000 instalments did not cause Mr Touma to forfeit his rights under cl 4.2 by reason of non-payment.
Another feature of his Honour’s running of the July and August Agreements together was the fact that $16 million was treated as the trigger point for the payment of the $1 million under the August Agreement although there was no such reference to that being the trigger as opposed to the sale of Property 127 being the trigger, with a further bonus if a sale price of greater than $22 million was achieved. Again, Mr Touma did not plead that the trigger was $16 million and did not place any relevant reliance on the July Agreement.
For these reasons, appeal ground 1a should be upheld.
“when the property of 127 is sold we will receive all funds advanced plus either $1 million dollars or 50% of any sales proceeds over $22 million, whichever is the greater” (emphasis added)
noting that it was common ground that “we will receive” was a reference to Mr Touma (who was responsible for the preparation of the August Agreement). The trigger for the obligation was the sale of Property 127 simpliciter (and not for a sum greater than $16 million, as held by the primary judge). Nothing could be clearer from the language of the clause and the parties must be taken to have intended that the trigger was irrespective of the actual sales price which both parties had an interest in maximising and which, it may be inferred, they had a reasonable idea would be for a considerable amount, potentially exceeding $30 million. But the point is made even clearer by the use of “either” and “or” in the drafting of the clause, identifying a regime for a bonus referable to a sale of Property 127 for a sum either under $22 million or over it.
“[f]rom the date of this Agreement, and to completion or sale of Property 127, the Investor has agreed to fund Alan the sum of $20,000 per month to account for Alan’s current loans, including the Property 127” (emphasis added)
as well as being in the face of the Respondents’ pleading and their acceptance at first instance that the July Agreement had no continuing efficacy after the August Agreement had been entered into; see also [32] above. Once again, the Respondents advanced no written argument on appeal in support of this aspect of the primary judge’s construction.
Clause 4.1(a) clearly contemplated a fixed monthly payment, and such payments were made in November and December 2014 and double payments were agreed to be made (by way of partial catch up and discharge of the ongoing monthly obligations) in February and March 2015: see [28] above. Further, there was no requirement for an “established need or request by the Balouts for funding to meet their expenses”, as the primary judge held.
Appeal ground 2 should be upheld.
The primary judge proceeded on the basis that the demand for payment contemplated by cl 4.2 was required to be in writing although his Honour, with respect, gave no reason for this conclusion at PJ [53]: see [24] above and the Respondents advanced no argument on appeal in support of such a construction. In fairness, they had not argued that any demand needed to be in writing. Rather, the Respondents’ sole argument in relation to appeal grounds 1-4 was that Mr Touma “never relevantly notified [Mr Balout] of a breach” of his obligations under the August Agreement.
This was contested but, for present purposes, there was no basis for his Honour to construe the August Agreement as requiring a written demand for payment of $20,000 on a monthly basis. The Agreement does not in terms require any demand to be in writing, and there was no reason to imply such a requirement.
It follows that appeal ground 3a should be upheld.
Appeal ground 3b involved a challenge to the primary judge’s finding, also in PJ [53], that time was not of the essence in relation to the payments of $20,000 per month. That may have been so but cl 4.2 contained a notice requirement which had the effect, as a matter of law, of making time of the essence following a demand for payment or rectification of a breach within 2 months of the demand (or, it might be added, any further time that might be agreed to by Mr Balout). So much is consistent with well established authority: Louinder v Leis (1982) 149 CLR 509 at 518-21; [1982] HCA 28; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 554; [1982] HCA 29.
Again, the Respondents did not seek to defend this aspect of the primary judge’s reasoning. In fairness to the primary judge, his finding that time was not of the essence may have been dictated by his view that a written demand for payment on breach was required and that, because no such written demand had been made, time did not become of the essence. That analysis fails with the fact that a demand for payment was in fact made, albeit not in writing: see [28] above. Appeal ground 3b must be upheld.
Appeal grounds 3c and 4 are the mirror image of each other. Both relate to cl 4.2 of the August Agreement which, if engaged, would have disentitled Mr Touma to any payment of $1 million pursuant to cl 5d of the August Agreement.
Clause 4.2 provided as follows:
“In the event that the Investor fails to make payment in accordance with clause 4.1 of this agreement, and the Investor fails to rectify the payment within 2 months of Alan notifying the Investor of the default, then the lnvestor forfeits all his rights, title and interest on its return on investments pursuant to clause 5.”
The $1 million payment was one of the “returns on investments pursuant to clause 5” of the August Agreement.
It was not seriously disputed that Mr Balout had notified Mr Touma of default of his obligations under cl 4.1 and that this was what had led to Mr Touma’s email to Highfields and himself on 31 October 2014 that “Alan has request[ed] double payments in Feb and March”: see [28] above. It was a necessary aspect of the primary judge’s analysis that, as this request was not in writing, it did not engage cl 4.2 but, for reasons already given, there was no requirement for any demand or notification to be in writing.
The primary judge held at PJ [53] that “Mr Balout either acquiesced in a pause of payments or, in any event, refrained from seeking payments.” This conclusion is inconsistent with what Mr Touma recorded in his own email of 31 October 2014 referred to at [28] above.
To the extent that there was any acquiescence or refraining in insisting upon the monthly $20,000 payments, it was conditional, that is to say, the acquiescence was conditional upon double payments being made in February and March 2015 to make up for past shortfalls. As earlier noted, no such payments were made.
The only argument which then separated the parties was as to whether, when no payments, let alone the double payments, were made in March 2015 by Mr Touma, Mr Balout had to notify Mr Touma again of his default with the consequence that a further two months would run until his rights under cl 5d were forfeited, it being submitted on behalf of Mr Touma that there were no further demands made of him by Mr Balout after those in late October 2014 and no notification to him that he had not rectified his earlier defaults as he had been required to do, and thus forfeited his rights.
I do not accept this construction of cl 4.2 of the August Agreement. It is inconsistent with its clear and simple operation. It requires:
the failure to make payment in accordance with clause 4.1 (which occurred in September and October 2014);
notification to the Investor of the default (which happened by late October 2014); and
failure to rectify the payment within 2 months of notification.
Of course, where the parties had agreed to a longer period for rectification, as appeared here, a party which had granted that further accommodation would be estopped from insisting on forfeiture prior to the extended period for rectification.
There is no basis in the text of cl 4.2 for the defaulting party to be given further notification of his own default. Such a construction would not accord with either the text of the clause or commercial common sense.
It follows from the above, and in the absence of any claim for a relief against forfeiture, that Mr Touma forfeited his rights under cl 5d upon his failure to make any monthly payments after March 2015 and, consistent with appeal ground 4, his Honour should have so held.
It follows from this conclusion that the appeal must be upheld. The question of the efficacy of the Deed of Settlement and whether his Honour erred in setting it aside for misleading or deceptive conduct does not arise given that the Deed was being relied upon by the Appellants in the alternative to their answer to Mr Touma’s claim in reliance upon cl 4.2 of the August Agreement.
For completeness, however, I will deal with grounds 5-8, albeit more concisely than may otherwise have been the case given that it is strictly not necessary to address them in view of the Appellants’ success on grounds 1-4.
To address grounds 5-8, it is necessary to set out a little further detail in relation to events anterior to entry into the Deed of Settlement and the essence of the primary judge’s reasoning.
The starting point is that on 10 September 2014, Mr Touma procured from Mr Nassif a “handshake deal” to buy Property 127 for approximately $20,000,000. Mr Nassif subsequently disclaimed that deal, but renegotiated with Mr Balout when, in the primary judge’s language, Mr Touma had been “sidelined” by Messrs Balout and Mr Nassif.
On 24 June 2015, a caveat was lodged on behalf of Dobro against the title to Property 127, claiming an “equitable interest [in the Property] pursuant to Property Investment Agreement dated 1 August 2014”. The primary judge held at PJ [85] that the caveat was lodged with “Mr Touma’s permission but at the request of business associates of Mr Touma (and, through their solicitor) for the purpose of securing the business associates’ interests in connection with a deal with Mr Touma (relating to a property known as 133 Castle Hill Road, West Pennant Hills) that did not involve the Balouts”.
It was a hotly contested issue at trial as to whether Mr Touma authorised the lodging of this caveat when he did because he had, by that time, become aware of Mr Balout’s negotiations with Mr Nassif for entry into a Put and Call Option Deed to acquire Property 127. This Deed was entered into on or about 1 July 2015.
The caveat was withdrawn on 10 August 2015. The primary judge held at PJ [88] that “[w]hen the caveat came to Mr Balout’s notice (via the Land Titles Office) and he confronted Mr Touma on or about 14 July 2015 …, Mr Touma, without hesitation, instructed the solicitor who had lodged the caveat to lodge a notice of withdrawal of it with the Land Titles Office.”
On the day before, on or about 13 July 2015, the parties (Mr Touma and Messrs Balout) executed the Deed of Settlement, noting that the references to $140,000 in the Deed were amended by hand to refer to $180,000 representing the $140,000 that had been advanced and the two $20,000 instalments paid in November and December 2014. (Mr Touma in his first affidavit said that he signed this document on 29 June 2015 without reading it.)
The preamble to the Deed of Settlement provides:
“A. Balout entered into an Investment Agreement dated 1 August, 2014 with a party described as Amalgamated Pty Ltd A.C.N. of 25 Lees St, Rhodes NSW.
B. Balout for the purposes of entering into the Investor Agreement negotiated with Touma
C. The only company known as Amalgamated Pty Ltd at the time the Investment Agreement was entered into was Amalgamated Pty Ltd A.C.N. 079 194 317 which was de-registered on 18 February, 2002 (De-Registered Company).
D. Touma did not indicate that he was acting for and on behalf of an unincorporated company nor did he indicate that he was contemplating a pre-incorporation contract.
E. No company was incorporated after the De-Registered Company and no ratification of the Investment Contract as a pre-incorporation contract ever took place in accordance with the requirements of Section 131 Corporations Act 2001.
F. Touma lent to Balout a sum of one hundred and forty thousand dollars ($180,000) (Loan).”
“1. Repayment of Loan Advance
(a) Touma hereby acknowledges, warrants and declares to Balout that Touma lent to Balout the sum of one hundred and forty thousand dollars ($1[8]0,000) and that the debt arising from such loan is due and owing to him upon entering into this Deed (“the Debt”).
(b) Touma hereby acknowledges receipt of the sum of the sum of one hundred and forty thousand dollars ($1[8]0,000) being the amount advanced by him following Balout entering into the Investor Agreement.
(c) Touma indemnifies Balout for all monies claimed and legal costs and disbursements on a solicitor/client basis should any other claim be made by any other person or party claiming that the loan was advanced by them to Balout.
(d) Subject to cleared proceeds being obtained or any cheque tendered for payment of the monies referred to in (a) above Touma acknowledges and agrees that the loan referred to in (a) above is fully discharged an no further monies are due and owing by Balout to Touma.
(e) Subject to cleared proceeds being obtained for any cheque tendered for payment of the monies referred to in (a) above Touma hereby indemnifies Balout for any loss or damage Balout may suffer or sustain by reason of any action, claim or suit seeking recovery of the loan of one hundred and [eighty] thousand dollars ($1[8]0,000.00) or any part thereof advanced to Balout on or around the time of entering into the Investor Agreement.
(f) In the event the cheque for payment of the monies referred to in (a) above is dishonoured then Touma may sue and recover the debt of one hundred and forty thousand dollars ($1[8]0,000.00) plus legal costs plus interest from the date of this Deed at the rate specified in Section 100 Civil Procedure Act.
2. Warranties by Touma
(a) Touma hereby acknowledges, warrants and declares to Balout that:-
(i) the Investor did not exist at the time of the Investment Contract;
(ii) that a reasonable time to incorporate a company known as Amalgamated Pty Ltd has lapsed;
(iii) that a reasonable time to ratify and adopt the Investment contract as a pre incorporation contract has lapsed.
(iv) a reasonable time to incorporate a company and to ratify and adopt the Investment Contract as a pre-incorporation contract in accordance with Section 131 Corporations Act 2001 has now lapse and expired.
3. Mutual Releases
(a) Touma hereby mutually agrees to terminate the Investor Agreement and covenants and agrees to release Balout from all actions, claims, suits, demands he has or any principal of him may have (including any unincorporated entity promoted by Touma contemplating a pre-incorporation contract) under the Investor Agreement and without limiting the generality of the termination and release of Balout from the Investor Agreement Touma releases Balout from clauses 4, 5, 6 and 7 of the Investor Agreement or from any liability in regard to any alleged performance or non-performance of such clauses.
(b) Without being construed as any form of admission that the Investment Contract is valid and binding on Balout, Balout hereby mutually agrees to terminate the Investor Agreement and covenants and agrees to release Touma and the Investor from all actions, claims, suits or demands he or his principal has or may have under the Investor Agreement and in particular releases Touma and the Investor from clauses 4, 5, 6, and 7 of the Investor Agreement or from any liability in regard to any alleged performance or non-performance of such clauses.
(c) Touma here by indemnifies and holds harmless Balout from all actions, claims, suits, demands it has or may have or any principal under a pre-incorporation contract may have under the Investor Agreement.
(d) Balout hereby indemnifies and holds harmless Touma from all actions, claims, suits, demands it has or may have under the Investor Agreement.
(e) The Parties acknowledge and covenant that the terms of this Deed may be pleaded in bar to any claim or action they may have in contravention of this Deed.
(f) Balout enters into this Deed on the basis that there are no admissions that the Investor Agreement is valid or binding on Balout.
4. Definitions and interpretation
4.1 Interpretation
In this Deed, unless the context otherwise requires or permits:
(a) where any word or phrase is given a defined meaning, any other grammatical form of that word or phrase will have a corresponding meaning;
(b) references to legislation or legislative provisions will include modifying, consolidating or replacing legislation or legislative provisions;
(c) references to months and years means calendar months and years;
(d) the use of headings are only for convenience and do not affect interpretation and any headings, underlinings or marginal notes are only included for ease of reference;
(e) if any part of this Deed is void or unenforceable or would be so unless severed, then the rest of the document will continue to have full force and effect;
(f) if the day on which any act, matter or thing is to be done under or pursuant to this Deed is not a Business Day, that act, matter or thing may be done on the next Business Day;
(g) references to a party will include as the context requires respective executors, administrators, successors and permitted assigns;
(h) references to a person includes any other entity recognised by law;
(i) words denoting the singular number include the plural and vice versa;
(j) words denoting one gender include every gender;
(k) every covenant or provision applying to or binding more than one person will bind them jointly and each of them severally;
(I) references to clauses, subclauses, paragraphs, annexures and schedules are references to clauses, subclauses, paragraphs, annexures and schedules in this Deed.”
The primary judge held that “Mr Touma signed the Deed of Settlement in a casual manner believing it to be nothing more than a formal receipt for the repayment of the $180,000 the Balouts had borrowed”: PJ [152]. The fact that Mr Touma picked up the need to change the document in five separate places (to amend $140,000 to $180,000), each of which he amended in hand and initialled, with respect sits somewhat uncomfortably with this conclusion.
On 13 July 2015, Mr and Mrs Balout transferred the sum of $180,000 to Mr Touma as required by the Deed of Settlement.
The primary judge held that the Mr Balout failed to disclose to Mr Touma prior to entry into the Deed of Settlement that, on 1 July 2015, he and his wife had entered into the Put and Call Option Deed with an entity associated with a developer (Kirby Projects Pty Ltd, a company of Jean Nassif), named in the Deed as “the Buyer”, for a sale of Property 127 at a price of $19.5 million.
His Honour also held that Mr Balout positively represented to Mr Touma that he no longer required Mr Touma’s financial assistance because he and his wife had received an inheritance from Mrs Balout’s mother.
The primary judge’s holding at PJ [126] that at no time before the Deed of Settlement was executed did Mr Touma have knowledge of the Balouts’ entry into the Put and Call Option Deed was also a hotly contested issue at trial. The primary judge recorded the three arguments advanced by the Balouts as follows:
“[128] First, they invite the Court to infer that Mr Touma caused Dobro to lodge its caveat over the title of the Property on 22 June 2015 because Mr Touma (who was actively watching market developments) had become aware of, or suspected, the Balouts’ negotiations with Mr Nassif.
[129] Secondly, Mr Balout contends that I should accept his evidence that on 29 June 2015 (two days before the date of the Put and Call Option Deed), in one of several conversations with Mr Touma on that date, he disclosed to Mr Touma that he was in negotiations with Mr Nassif.
[130] Thirdly, the Balout parties contend that the Court should accept that documents received by Mr Touma anonymously in his letterbox, disclosing the fact of the Balouts’ negotiations with Mr Nassif, were received one or two days after the date of the last of those documents (17 June 2015), not (as Mr Touma insists) in July or August 2015 only after Mr Touma, at the request of Mr Balout, had caused Dobro’s caveat to be withdrawn.”
The primary judge rejected the first two of these contentions and, in this context, preferred the evidence of Mr Touma over that of Mr Balout.
The third contention related to evidence given by Mr Touma, namely that a series of documents was deposited in his letterbox relating to Mr Balout’s negotiations with Mr Nassif in relation to sale of Property 127 following an anonymous tip-off by telephone from an unidentified female who asserted that Mr Balout had “ripped him off” and that he should check his letterbox: PJ [135]. The last of these documents was dated 17 June 2015. The timing of the tip-off was important. Critically, Mr Touma placed it as having occurred after execution of the Deed of Settlement on 13 July 2015 whereas the Balouts emphasised that the lodging of the caveat on behalf of Dobro and Mr Touma on 24 June 2015 was consistent with the “letterbox documents” having come to Mr Touma’s evidence at some time between 17 and 22 June 2015, this last date being the date of the solicitor’s statutory declaration in relation to the lodging of the caveat.
At PJ [146], the primary judge held that “[o]n the whole of the evidence, it is more likely than not that Mr Touma received the anonymous documents in August 2015 rather than July 2015, but the precise date remains unclear”.
The importance of the timing of Mr Touma having become aware of the “letterbox documents” was reflected in the primary judge’s observation at PJ [131] that:
“It is highly unlikely that Mr Touma would have executed the Deed of Settlement or withdrawn the caveat in mid-July 2015 had he been aware of a deal between the Balouts and Mr Nassif which emanated from the “handshake deal” he had secured from Mr Nassif in September 2024.”
“45 In or about July or August 2015, I received a call from an anonymous number. The person on the phone said to me words to the effect of ‘Alan has ripped you off. You should check your letter box’**. Following that phone call, I went to my letter box and found copies of emails about the Property. …
46 Once I had read the emails, I immediately met with Khouzame [Joan Darc] in Alexandria and confronted her with the matter. Khouzame [Joan Darc] and I had a conversation to the following effect:
Me: *‘*What are these emails? Is Alan selling his property to Toplace?’
Khouzame: ‘Yes, but what did you expect from Alan? Look at what he did to me. Those documents that you were provided are real*’.*”
Mr Touma was squarely challenged in cross examination in relation to these paragraphs of his first Affidavit and his evidence in cross examination in relation to Joan Darc revealing herself as the anonymous source of the documents. Thus, it was expressly put to Mr Touma in cross examination on 8 August 2024, and he denied, the following propositions:
his evidence that the anonymous caller said to him, “Alan has ripped you off. You should check your letterbox” was untrue;
his evidence that he went and checked his letterbox and found the copy of the emails was untrue;
his claim to have had a meeting with Joan Darc and his evidence as to what she said to him was untrue;
his evidence that Joan Darc had told him that she was the person who had called him was all made up;
his evidence as to his conversation with Joan Darc or the terms of that conversation were not true; and that
Joan Darc did not have any interaction of the kind alleged with him at all.
Against this background, it is convenient, first, to deal with appeal ground 6.
“The primary judge erred in declining to allow the affidavit of Joandarc Khouzame (Khouzame Affidavit) to be read (J[138]) in particular in circumstances where:
a. the substance of the Khouzame Affidavit had been put to the second respondent under cross-examination (c.f. J[138]);
b. the substance of the Khouzame Affidavit was not only relevant to the credibility of the second respondent (c.f. J[138]) but directly affected the assessment of the probability of when the second respondent had become aware of the existence of the Put and Call Option Deed;
c. the second respondent had revealed the conversation with Ms Khouzame during cross-examination; and
d. the probative value of the Khouzame Affidavit was substantial in circumstances where the time at which the second respondent became aware of the Put and Call Option Deed was a critical issue in the case.”
Before turning to the primary judge’s reasoning, it should be noted that the affidavit was sworn on 9 April 2024 and that it was served on Mr Touma’s solicitors on or about that date. In this context, it should also be noted that Mr Touma gave evidence in chief and was cross examined on 2 and 3 April 2024 and was due to return to the witness box on 4 April 2024 but that, on that day, the parties sought to have the matter stood down by reason of settlement discussions and, later that day, informed the primary judge that the matter had settled in principle. His Honour stood the matter over until 10 April 2024 “for further consideration or directions as the case may require”. As matters transpired, the “in principle” settlement fell over and the matter had to be relisted to resume in October 2024.
As already noted, Ms Khouzame’s affidavit was sworn on 9 April 2024 and served shortly thereafter. It was relevantly in the following terms:
“Response to Joe Touma's Evidence
Paragraph 46 of the Affidavit
12 I refer to paragraph 46 of the Affidavit. I deny the statements made by Joe Touma in that paragraph. I deny having met with Joe Touma in my offices in Alexandria or anywhere else in Alexandria in July or August 2015 or at any time.
13 I only saw Joe Touma in my former offices in Camperdown. I do not recall the exact date, but I think sometime in 2016, but the purpose of his visit was Didier, whom he was acquainted with.
14 On that occasion, I asked Joe Touma to leave my office. I was not happy about Joe Touma's efforts to remove me from the Project.
15 I also deny the conversation set out in paragraph 46. I say it never occurred. He never said the words he says he told me. He never showed me any documents. I never said the words he has attributed to me.
16 In 2016, this was the second time I met Joe Touma. This was after the meeting between Joe Touma and Jean Nassif that occurred at Jean Nassifs offices in Concord. I was waiting for Joe Touma's and Jean Nassifs meeting to finish before attending my separate meeting with Jean Nassif.
17 The last time I saw Joe Touma was in 2016, at the offices of Grimshaw, located in the city. At that time, we had a meeting with the vendors to update them on the Project. Joe Touma was one of the vendors that attended the meeting.
Paragraph 45 of the Affidavit and Transcript Statements
18 In paragraph 45 of the Affidavit, Joe Touma refers to an anonymous telephone call that occurred in July or August 2015. After reading the Transcript at pages 422 - 430, I understand that Joe Touma has given evidence that I gave him the Emails.
19 I did not call or speak with Joe Touma on the telephone about any documents placed in his letterbox (that is, I was not the 'anonymous number' that Joe Touma describes in his affidavit).
20 I categorically deny Joe Touma's statements made in paragraph 45 and as recorded in the Transcript. I did not say anything to Joe Touma on the phone like the words set out in paragraph 45.
21 I also deny I ever placed or caused to be placed the Emails into the letterbox of Joe Touma. I did not give him the Emails. Nor did I facilitate the Emails being provided to Joe Touma.
22 I did not speak to him about Alan. Nor did I ever make statements to him or to anyone else about Alan to the effect described by Joe Touma in paragraph 45 of his affidavit.”
“I declined to allow that affidavit to be read in circumstances in which, in my assessment, its subject matter had not been fairly put to Mr Touma in cross examination (as required by the “rule in Browne v Dunn” (1893) 6 R 67) and it was relevant only to Mr Touma’s credibility so that, by virtue of section 102 of the Evidence Act 1995 NSW, it was not admissible, or alternatively, its probative value was substantially outweighed by the danger that it might be unfairly prejudicial to the Touma parties or, at least, cause or result in an undue waste of time so as to warrant a determination under section 135 of the Act that it not be admitted into evidence.”
His Honour’s decision to refuse to allow the affidavit to be read was a discretionary decision, only amenable to appellate interference on House v The King (1936) 55 CLR 499; [1936] HCA 40 terms. However, the appellate restraint dictated by that case does not apply where the decision is vitiated by an error of fact. Here, with respect, the first strand of his Honour’s reasoning at PJ [138], namely that “its subject matter had not been fairly put to Mr Touma in cross examination (as required by the “rule in Browne v Dunn” (1893) 6 R 67)”, was wrong, as the cross examination summarised at [79] above makes apparent and as counsel for Mr Touma in fact conceded before the primary judge. Indeed, a more direct and thorough challenge could not have been imagined.
Further, and again with respect, I disagree with his Honour’s characterisation of the affidavit as being “relevant only to Mr Touma’s credibility”. A fact centrally in issue was the timing of Mr Touma becoming aware of the fact or possibility that Mr Balout was in negotiations with Mr Nassif in relation to Property 127 without disclosing that to him. Mr Touma’s evidence was that he was wholly unaware of this until sometime after entry into the Deed of Settlement and he linked his knowledge and its timing to a conversation and subsequent meeting with Ms Khouzame or Joan Darc. While there is no doubt that acceptance of Ms Khouzame’s evidence would have been highly adverse to Mr Touma’s credibility, the proposed evidence was also relevant to a fact or facts in issue.
It was relevant to when and how Mr Touma became aware of the Put and Call Option Deed or of Mr Balout’s negotiations with Mr Nassif in relation to it. If Ms Khouzame’s affidavit had been admitted and accepted, with the consequence that there had been no meeting immediately following Mr Touma’s claimed discovery of the “letterbox documents”, the inference contended for by the Balouts arising from the temporal coincidence of the emails plainly in Mr Touma’s possession, the last of which was dated 17 June 2015, and the lodging of the caveat shortly thereafter would have been extremely powerful, and would not have been rebutted, as his Honour must have found it was, by Mr Touma’s linking of his first knowledge to a meeting with Ms Khouzame at all and, in particular, after the date of entry into the Settlement Deed.
Insofar as his Honour rested his decision on s 135 of the Evidence Act 1995 (NSW), that aspect of the decision was wholly conclusory. No prejudice was identified nor weighed against the undoubted probative value of the proposed evidence.
In submissions, counsel for Mr Touma submitted that “long gone are the days when commercial litigation was conducted by ambush” but this objection was not apposite when the affidavit was served some 8 months before it was sought to be relied upon and arose, in part at least, from evidence first given by Mr Touma in cross examination only a week before the affidavit was served.
“The primary judge erred in finding that the second respondent did not become aware of the existence of the appellants' entry into the Put and Call Option Deed until August 2015 (J[131], [146], [156]) in particular in circumstances where the caveat was registered on the title of the subject property on 22 June 2015, being supportive of discovery in June 2015 rather than in August 2015.”
The primary judge’s conclusion as to when Mr Touma became aware of the Put and Call Option Deed was undoubtedly affected by his Honour’s preference for the evidence of Mr Touma over that of Mr Balout who gave evidence, rejected by the primary judge, that he told Mr Touma of his dealings with Mr Nassif on or around 29 June 2015. As such, his Honour’s findings, including his acceptance of Mr Touma’s evidence in relation to the circumstances surrounding the lodging of the caveat, would need to be “glaringly improbable” or “contrary to compelling inferences”: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [28]-[29].
Were it not for his Honour’s acceptance of Mr Touma’s evidence in relation to his conversation and meeting with Ms Khouzame after he had entered into the Deed of Settlement (a matter affected by the ruling in relation to Ms Khouzame’s affidavit), I would have found his Honour’s acceptance of Mr Touma’s evidence as to when he became aware of the existence of the Put and Call Deed or at least as to the negotiations in relation to it “glaringly improbable”. That acceptance, however, did not make the challenged finding “glaringly improbable”, and thus I would not uphold ground 5.
“The primary judge erred in finding that the failure to disclose the existence of the Put and Call Option Deed was in the circumstances misleading or deceptive (J[179]) in particular in circumstances where the primary judge erred in finding that the Deed of Settlement was ‘implicitly predicated upon a common understanding’ that the respondents were otherwise entitled to ‘a success fee of $1 million’ (c.f. J[177]) especially where his Honour found that the second respondent laboured under the understanding that he was required to pay the appellants $20,000 per month and had failed to do so from December 2014 onwards.”
“In substance, the text of the Deed of Settlement presented to Mr Touma for his execution provided (by way of mutual releases and indemnities) to extinguish any entitlement the Touma parties might then have had, or have, to a success fee (under the August Agreement, read with the July Agreement) arising from or connected with the arrangement by which Mr Touma caused $180,000 to be lent to the Balouts. It was implicitly predicated upon a common understanding that the Touma parties ostensibly had an entitlement to a success fee of $1 million if the Property was sold by the Balouts for $16 million or more.”
I respectfully disagree with the primary judge’s conclusion that the Settlement Deed was implicitly predicated on a common understanding that the Touma parties “ostensibly had an entitlement to a success fee of $1 million if the Property was sold by the Balouts for $16 million or more”.
First, this conclusion was itself predicated upon a reading of the August Agreement with the July Agreement. That view was misplaced for reasons already given earlier in this judgment.
Perhaps more significantly, though, the conclusion ignores the terms of cl 4.2 of the August Agreement and the forfeiture of all of Mr Touma’s interests in circumstances of non-payment of the monthly $20,000 amounts and the failure to rectify the breach. The entitlement to a $1 million payment had been lost or at least very arguably so. Further, in this context, the Settlement Deed referred not only to entitlements but also to “claims” and “demands”. Why the parties would be taken to have a common understanding of an entitlement to a $1 million success fee in circumstances where Mr Touma had ceased to make the monthly contributions he had promised was not explained by his Honour.
In this context, it is necessary to say something of his Honour’s statement that “[i]t is highly unlikely that Mr Touma would have executed the Deed of Settlement or withdrawn the caveat in mid-July 2015 had he been aware of a deal between the Balouts and Mr Nassif which emanated from the “handshake deal” he had secured from Mr Nassif in September 2024”: PJ [131]. That supposition may be doubted in circumstances where Mr Touma was able to secure, as a result of the Deed of Settlement, repayments of amounts, namely the $140,000 and the two $20,000 instalments, which, as a consequence of the operation of cl 4.2 of the August Agreement, he would otherwise not have had any entitlement to recoup.
If Mr Touma had forfeited his entitlement to the $1 million payment by reason of his non-payment of the monthly instalments of $20,000, it would not, in my view, have been misleading or deceptive for Mr Balout not to disclose to him his dealings with Mr Nassif in relation to the sale of Property 127. Mr Touma, in submissions, eschewed any suggestion that the August Agreement created some sort of exclusive agency agreement in relation to the sale of Property 127. It was Mr Balout’s property to sell and, according to the terms of the August Agreement – an agreement Mr Touma had drafted or caused to be drafted – Mr Touma was “out of the money” by his non-payments. In these circumstances, it was not misleading or deceptive for Mr Balout not to refer to his dealings with Mr Nassif.
For these reasons, had it been necessary to do so, I would have upheld this ground of appeal. This conclusion also makes it unnecessary to deal with appeal ground 8.
For the above reasons, the appeal should be allowed with costs.
Orders 1-4 of the primary judge made on 29 May 2025 should be set aside and, in lieu thereof, it should be ordered that the Commercial List Summons should be dismissed with costs.
WARD P: I agree with Bell CJ.
MITCHELMORE JA: I agree with Bell CJ.
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Balout
Dobro Dosle Pty Ltd [2025] NSWCA 275
(2003) 214 CLR 118
(1936) 55 CLR 499
(1982) 149 CLR 509
(1982) 149 CLR 537
(1954) 91 CLR 353
Appeal allowed with costs. Orders 1-4 of the primary judge made on 29 May 2025 set aside. Commercial List Summons dismissed with costs [103]-[104].
The primary judge held that a fair inference from the Deed of Settlement “read as a whole and in the context of the July Agreement and the August Agreement, is that the identity with whom the Balouts contracted on each occasion they executed an Agreement involving the interests of Mr Touma was Mr Touma personally and, provided he performed the contractual obligations imposed on him or his nominee, they were indifferent to his deployment of a nominee to take the benefit of the contract(s)”: PJ [95]. This aspect of the primary judgment was not challenged.
Accordingly, the primary judge held that the $1 million was owing under the August Agreement and that the Deed of Settlement should be set aside for misleading or deceptive conduct engaged in by Mr Balout, in which Mrs Balout was held to have been involved. The primary judge ordered that the $1 million be paid to Mr Touma, explaining this at PJ [96]:
Appeal ground 1b asserted that the primary judge erred in finding that the trigger for the payment of the $1 million was a sale of Property 127 for a sum greater than $16 million as opposed to the $22 million referred to in cl 5d of the August Agreement. The forensic purpose for this contention was that, when Property 127 was sold, it was for an amount less than $22 million such that, on the Appellants’ construction, the obligation to make the $1 million payment never arose because the $22 million sale price was never achieved.
This argument and appeal ground 1b is not supported by a plain reading of cl 5d of the August Agreement which provided:
It was also submitted that “the fact that Ms Khouzame was going to provide sworn evidence contradicting [Mr Touma] was not put to him in cross-examination”. This submission reflects a misstatement or misunderstanding of the rule in Browne v Dunn (1893) 6 R 67. What that rule requires is a challenge to propositions in the deponent’s evidence. This obligation was discharged. The deponent is to be given an opportunity to stand by his or her evidence, and the deponent’s obligation to tell the truth should not be affected by his or her knowledge that a witness may be called in reply to contradict it.
In these circumstances, appeal ground 6 should be upheld. If the Appellants had succeeded on this ground alone, a retrial would regrettably have been necessary.