//
[2025] NSWSC 459
General information, not legal advice.
Supreme Court of NSW
2025-05-14
Lindsay J
Original judgment source is linked above.
Zoe will write a short plain-English summary of this judgment and email it to you for free: what it was about, what the court decided and why. It can take up to a minute.
General information, not legal advice.
Or create a free account to save it and ask Zoe follow-up questions.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Balout v Touma; Dobro Dosle Pty Limited t/as Amalgamated Investments Trust v Balout [2025] NSWSC 459
Hearing dates: 25, 26, 27 March 2024; 2, 3, 4 April 2024; 8, 9, October 2024
Decision date: 14 May 2025
Jurisdiction: Equity
Before: Lindsay J
Decision: (1) In the Dobro Proceedings:
(a) Declare that the whole of the Deed of Settlement is void;
(b) Order that judgment be entered in favour of Mr Touma, against Mr and Mrs Balout, in the sum of $1 million, together with prejudgment interest calculated from 22 August 2019.
(c) Order that the cross claim of Mr and Mrs Balout be dismissed.
(2) In the Loan Proceedings, order that judgment be entered in favour of Mr Balout, against Mr Touma, in the sum of $54,500 together with prejudgment interest calculated from the date of commencement of the proceedings.
Catchwords: CONTRACT – Construction – Contracts successively made – Whether second contract terminates or varies first contract depends on intention of parties as disclosed in second contract
CONTRACT – Advance of money – Characterisation as loan – Onus of proof of character of loan borne by payer – Onus of proof of repayment on borrower
AUSTRALIAN CONSUMER LAW – Misleading and deceptive conduct – Express misrepresentation – Concealment of material fact – Intention to mislead – Reliance on misleading and deceptive conduct – deed procured by misleading and deceptive conduct declared void - Australian Consumer Law, section 18
Legislation Cited: Australian Consumer Law NSW
Civil Procedure Act 2005 NSW
Competition and Consumer Act 2010 Cth
Evidence Act 1995 NSW
Fair Trading Act 1987 NSW
Cases Cited: Browne v Dunn (1893) 6 R 67
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Concut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312; 176 ALR 693
Coshott v Sakic (1998) 44 NSWLR 667
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640
Federal Commissioner of Taxation v Sara Lee
Heydon v Perpetual Executors Trustees & Agency Co (WA) Ltd (1930) 45 CLR 111
Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
Masters v Cameron (1954) 91 CLR 353
Miller and Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Re Golden KT Ltd [2009] EWCA Civ 636
Simic v NSW Land and Housing Corporation (2016) 260 CLR 85
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Category: Principal judgment
Parties: 2020/00342863 (the Loan Proceedings)
Plaintiff: Alan Hisham Balout
Defendant: Joseph Anthony Touma
2020/00356080 (the Dobro Proceedings)
First Plaintiff: Dobro Dosle Pty Ltd t/as Amalgamated Investments Trust
Second Plaintiff: Joseph Anthony Touma
First Defendant: Alan Hisham Balout
Second Defendant: Karen Balout
Representation: Counsel:
2020/00342863 (the Loan Proceedings)
Plaintiff: Mr Pouyan Afshar and Mr J Pokoney
Defendant: Mr Callan O’Neill
2020/00356080 (the Dobro Proceedings)
Plaintiffs: Mr Callan O’Neill
Defendants: Mr Pouyan Afshar and Mr J Pokoney
Solicitors:
2020/00342863 (the Loan Proceedings)
Plaintiff: Mistry Fallahi Solicitors
Defendant: Hicksons Lawyers
2020/00356080 (the Dobro proceedings)
Plaintiffs: Hicksons Lawyers
Defendants: Mistry Fallahi Solicitors
File Number(s): 2020/00342863 (the Loan proceedings)
2020/00356080 (the Dobro proceedings)
Before the Court are two sets of proceedings (heard together) in which competing claims are made by the same principal protagonists in both proceedings.
On the one side is Joseph Touma (“Mr Touma”), and his company Dobro Dosle Pty Ltd (“Dobro”) trading as “Amalgamated Investments Trust”.
On the other side is Alan Balout (“Mr Balout”), and his wife Karen Balout (“Mrs Balout”).
The Touma side of the record claims payment of a $1 million “success fee” arising from an agreement with the Balout side of the record (dated 23 July 2014 and revised, or replaced, by an agreement dated 1 August 2014) to find a buyer for the Balouts’ residential property known as 127 Castle Hill Road, West Pennant Hills, in the State of New South Wales (“the Property”) above a nominated selling price, $16 million.
The Balout side of the record denies that “the July Agreement” relied upon by the Touma parties is enforceable and says that, if any such agreement constituted a binding contract, it was terminated by the later agreement (“the August Agreement”) or was, alternatively, the subject of a Deed of Settlement (executed on 13 July 2015), the validity of which the Touma parties challenge by reference to section 18 of the Australian Consumer Law (NSW) as applied by Part 3 of the Fair Trading Act 1987 NSW.
Throughout the parties’ dealings in relation to the Property Mr Balout spoke for his wife as well as himself.
Mr Balout separately claims $826,500 against Mr Touma in debt, or restitution, for loans allegedly made by Mr Balout to Mr Touma (between 27 July 2015 and December 2016 or thereabouts) and not repaid. That sum reflects the abandonment of several claims about other alleged loans made in the original statement of claim filed by Mr Balout on 3 December 2020.
For his part, Mr Touma contends that the particular “loans” ultimately relied upon by Mr Balout were either never made to him or were repaid. He contends that Mr Balout’s claims for repayment of loans are a contrived reconstruction of events intended by Mr Balout to counter the Touma parties’ claim for the payment of the disputed “success fee”.
The Touma parties’ claim to a success fee focuses essentially upon a documentary record, particularly the July Agreement and the August Agreement, subject to the effect (if any) of the Deed of Settlement.
Significant ancillary documents are a caveat (dealing number AJ589664) lodged against the title to the Property, ostensibly by Dobro, on 22 June 2015 (claiming an interest under the August Agreement), withdrawn on 10 August 2015; and a Put and Call Option Deed dated 1 July 2015 entered into by the Balouts 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 the Property at a price of $19.5 million. Jean Nassif was the owner of Toplace Pty Ltd.
The two sets of proceedings before the Court were commenced at about the same time (in December 2020) following correspondence in which the parameters of the parties’ disputes were foreshadowed.
Although the events the subject of the loan proceedings largely follow chronologically those relating to the Touma parties’ claim to a “success fee”, “the loan proceedings” were commenced first in time.
The “loan proceedings” as the parties have called them (numbered 2020/00342863) were commenced by a Statement of Claim filed on 3 December 2020 in which Mr Balout was named as the plaintiff and Mr Touma was named as the defendant.
The current pleadings in the loan proceedings comprise:
(a) an Amended Statement of Claim filed on 19 May 2021; and (b) a Defence filed on 12 July 2021.
The “Dobro proceedings” as the parties have called them (numbered 2020/00356080) were commenced by a Summons and a Commercial List Statement filed 16 December 2020 by Dobro and Mr Touma respectively as first and second plaintiffs, naming Mr and Mrs Balout respectively as the first and second defendants. The defendants on 22 October 2021 filed a Cross Claim against the plaintiffs.
The current pleadings in the Dobro proceedings comprise:
(a) an Amended Summons filed on 25 March 2024; (b) an Amended Commercial List Statement filed 25 March 2024; (c) the defendants’ Commercial List Response filed 19 March 2021; (d) the plaintiffs’ Reply (to the Commercial List Response) filed 14 April 2021; (e) the defendants’ Cross Claim filed 22 October 2021; and (f) the plaintiffs’ Defence to Cross Claim filed 8 November 2021.
On 20 March 2024 formal orders were made for the two sets of proceedings to be heard together, with the evidence in the one set of proceedings to be evidence in the other set of proceedings, so far as may be relevant.
On 25 March 2024 (the first day of the final hearing of the proceedings), in order to facilitate the joint hearing of the proceedings, the following designations were given to the parties:
(a) the plaintiff in the loan proceedings and the defendants in the Dobro proceedings (the Balout parties) were referred to as “the applicants”; and (b) the defendant in the loan proceedings and the plaintiffs in the Dobro proceedings (the Touma parties) were referred to as “the respondents”.
Those designations were for administrative convenience only and did not alter the constitution of the proceedings themselves.
On 4 April 2024 (the fourth day of the hearing) the parties invited the Court to make a formal notation that they had settled the proceedings “in principle” and were then engaged in the preparation of a formal deed of settlement.
On 10 April 2024 (to which date the proceedings were adjourned on 4 April 2024) the parties informed the Court that they were then agreed that there was no binding settlement of the proceedings and, so, the proceedings were listed before the Registrar for the allocation of further dates for the hearing.
The further hearing of the proceedings proceeded on 8 and 9 October 2024.
Although much contextual evidence has been adduced in these proceedings the evidence generally focuses attention on core documents relating to the Dobro proceedings (to which proceedings they relate directly), the events relating to the loan proceedings largely following those relating to the Dobro proceedings chronologically.
That said, a background to both sets of proceedings is that, shortly before the July Agreement was executed Messrs Balout and Touma met through a common connection (Mr Haiden Walsh) and very quickly established a close social relationship characterised by mutual interest in the identification and pursuit of commercial projects. Mr Walsh was at that time dating Mr Balout’s daughter and was a business partner of Mr Touma.
“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] 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 re-zoning 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.”
No party contends that the side agreement between Mr Touma and Mr Walsh materially affects the agreement between Mr Touma and Mr Balout.
It is common ground that the reference to “$14,000” was a clerical error that should be read as $14 million.
$14 million represented the highest offer that at that time had been made to the Balouts for the Property, and a price which Joan Darc was pressing the Balouts to accept despite their misgivings. The figure of $16 million as a threshold for the payment of a “success fee” to the Touma parties reflected a common understanding that, if the Balouts achieved a sale price of $16 million (or more), the parties would “share” the difference between $14 million and $16 million by allowing the Touma parties a success fee of $1 million.
Although Mr Balout’s evidence was that Mr Touma dictated the handwritten document dated 23 July 2024 he conceded in cross examination that he signed the document as an accurate record of the deal done between himself and Mr Touma and the contextual background of the deal.
Mr Balout’s resentment of pressure being placed upon him by Joan Darc was fed by an apprehension that, in her search for a buyer of the Property, she was dealing with only one developer and not casting about for alternative buyers. His calculation was that, by Mr Touma’s engagement, a higher price than $14 million could be obtained for the Property which, in the event, it was.
The final sentence of the July Agreement contemplated that “a more formal agreement” would be “done to reflect [the] terms [of the July Agreement]”. The parties never executed an agreement “more formal” than the August Agreement, but the August Agreement was within the contemplation of the July Agreement.
The August Agreement has a cover sheet that connects it with Reuben George Lawyers, then solicitors for Mr Touma.
The document is dated 1 August 2014 and expressed between Amalgamated Pty Ltd (as the “Investor”) and Mr and Mrs Balout (as “Alan”). The address given for Amalgamated Pty Ltd was known to Mr Balout as the business address of Mr Touma.
The Agreement contains a preamble and an acknowledgement of consideration in the following 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.”
The text of the August Agreement, as executed, appears to be incomplete in at least two respects. Clause 1 refers to a “definitions and interpretation clause at the back of this agreement” in the absence of any such clause. Clause 7.1 refers to “the Investor, having entered into the agreement relying on the following representations and warranties by Alan” in the absence of any elaboration of either representations or warranties.
The pagination of the document suggests that it was extracted from a larger document. The pagination of each of the five pages of the document suggests that those pages were originally part of a document comprising 27 numbered pages.
On the last page of the document appear the signatures of Mr Balout, Mrs Balout and (as the “sole director” of Amalgamated Pty Ltd) Mr Touma.
The “Operative Provisions” of the August Agreement comprise clauses 2-6 inclusive, which are in the following terms:
“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.
3.1 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 Joan Darc 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.
6. SECURITY AND SECOND MORTGAGE/CAVEAT
6.1 Guarantee
a. In consideration of the Investor entering into this Deed, Alan guarantees to the Investor:
i. payment of all money paid by the Investor under this Agreement in respect of Property 127;
ii. payment of all monies advanced now or in the future;
iii. the performance of Alan’s obligations under this Agreement.
b. Alan’s obligations under this clause are not released, or discharged unless the Investor gives it written consent and all monies and entitlements are paid to the Investor.
6.2 Security by Second Mortgage/Caveat
a. Alan charges Property 127 ("the Security") in favour of the Investor, and the Investor may lodge a second mortgage and/or caveat in registrable form on the title to Property 127 to give notice of its rights and interest under this Agreement.
b. The Investor must withdraw the caveat within 5 Business Days after the Investor is repaid in full;
c. In the event that the Investor gives notice of his intention to lodge a second mortgage and/or a caveat in registrable form over Property 127 mentioned above, Alan covenants to the Investor that he will do all acts and all things and execute all documents and instruments necessary to give effect to the lodgement of such documents.”
The property the subject of these proceedings is generally described as “127 Castle Hill Road” but sometimes (as in the preamble to the August Agreement) also as “127-129 Castle Hill Road”. I assume that nothing turns on this, or upon the Balouts’ description of their address in affidavits filed in these proceedings and elsewhere as “131 Castle Hill Road”.
Clauses 4.1(c), 4.1(d) and (noting the absence of any clause numbered 5(a), 5(b) or 5(c)), clause 5(e) appear to have been wholly aspirational in the absence of any immediate expectation that the Property could be sold for $30 million or more.
The August Agreement does not, in terms, refer to the July Agreement or the “trigger” of $16 million to which the July Agreement refers.
Clause 5(d) of the August Agreement ostensibly contemplates that “we” (Amalgamated Pty Ltd, if not also Mr Touma) “will receive, in addition to ‘all funds advanced’, either $1 million dollars [sic] or 50% of any sales proceeds over $22 million, whichever is the greater”.
As contemplated by both the July Agreement and the August Agreement, on 3 September 2024 the Balouts gave Joan Darc formal notice of termination of her exclusive agency agreement.
As contemplated by both the July Agreement and clause 4.1(b) of the August Agreement, on 5 September 2014 Mr Touma caused $140,000 to be paid into a bank account of Mr and Mrs Balout to fund Mr Balout’s repayment of his debt to Joan Darc.
As contemplated by the July Agreement and clause 4.1(a) of the August Agreement (speaking generally), on 27 November 2014 Mr Touma transferred $20,000 to a bank account of Mr Balout (“posted” by the bank on 28 November 2014) with an entry in Mr Balout’s bank statement reading “direct credit, from: J A Touma Ref: Loan Balout”. A second payment of $20,000 was paid into Mr Balout’s same bank account by Mr Touma on 1 December 2014 (with the same descriptor), “posted” by the bank on 2 December 2014.
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.
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.
The July Agreement was transcribed by Mr Balout personally but, he says, dictated to him by Mr Touma. There is no dispute that it represented an agreement, in substance, between Mr Touma and Mr Balout (speaking for himself and Mrs Balout), or that (as was expressly stated in the July Agreement) “[a] more formal agreement” was to “be done to reflect” the terms of the July Agreement. In terms, the Agreement was expressed to be between Mr Touma “or Nominee”, and Mrs Balout was not expressly named as a party although she and her husband were co-owners of the Property and he spoke for her as well as himself.
For what it is worth, Mr Touma thought the two agreements stood together. Whether or not that is the correct legal conclusion, 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 Balout parties maintain that the August Agreement implicitly terminated the July Agreement.
One difference between the two documents is that 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]”. The parties are at issue as to whether this difference is significant and whether the Touma parties were at any time in breach of an obligation to make a payment of $20,000 or some other sum.
Whether the August Agreement brought the July Agreement to an end and replaced it, or whether the August Agreement left the July Agreement standing subject to alteration, depends on the intention of the parties as disclosed by the August Agreement: Federal Commissioner of Taxation v Sara Lee H**ousehold & B**ody C**are (Australia) Pty Ltd (2000) 201 CLR 520 at [22]-[24]; C**oncut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312; 176 ALR 693 at [19].
The intention of the parties must be ascertained objectively, by reference to what a reasonable person would understand by the language used by the parties to express their agreement, recognising that this requires consideration, not only of the text of the August Agreement (and the July Agreement), but also the surrounding circumstances known to the parties, and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Pari**bas (2004) 218 CLR 451 at [22]; Tl (2004) 219 CLR 165 at [40].
Formal negotiations between the Balouts and Mr Nassif for what became the Put and Call Option Deed dated 1 July 2015 commenced no later than 30 March 2015. On that date a solicitor for the Balouts (Mr Karl Burnett of KB Legals) sent to the solicitor for Toplace Pty Ltd (Mr Mark Fitzpatrick) an email, expressly intended for Mr Nassif, attaching a draft contract for sale, incorporating an offer by the Balouts to sell the Property for $24 million. The draft contract named Joan Darc Realty as the vendor’s agent but left the identity of the vendor blank.
Following discussions between Messrs Balout and Nassif, Mr Burnett sent a follow up email to Mr Fitzpatrick on 14 April 2015 which elicited a reply via an email dated 28 April 2015 in which Kirby Projects Pty Ltd communicated a counter offer by reference to a draft option deed attached to the email. It provided for a base sale price of $19.5 million with provision for an “uplift payment” which might take the price to $22.74 million depending upon the number of lots approved on a development application.
It is common ground that Mr Balout did not disclose to Mr Touma at this time that he had been dealing with Mr Nassif in order to get this offer.
Between 28 April 2015 and 1 July 2015 the respective solicitors of the Balouts and Kirby Projects Pty Ltd negotiated the terms of what became the Put and Call Option Deed dated 1 July 2015.
Upon an exchange of counterparts of the Put and Call Option Deed on 1 July 2015 the Balouts received (from the option fee of $4.875 million) the sum of $4,611,740 after allowing for a payment of $214,500 to Joan Darc Realty and legal fees.
When Mr and Mrs Balout entered into the Put and Call Option Deed, which set parameters for their sale of the Property to Kirby Projects Pty Ltd, the contractual relationship (if any) between the Touma parties and the Balouts was governed by the July Agreement (to the extent it stood with the August Agreement) and the August Agreement.
In cross examination Mr Balout agreed that he signed the August Agreement intending to be bound by it.
The caveat (dealing number AJ589664) lodged against the title of the Property on or about 24 June 2015 in the name of Dobro was lodged by Kalantzis Lawyers and verified by a statutory declaration signed on 22 June 2015 by a solicitor from that firm.
It claimed an “equitable interest [in the Property] pursuant to Property Investment Agreement dated 1 August 2014” by virtue of the August Agreement.
An inference to be drawn from the form of the caveat is that the solicitor who caused it to be lodged relied upon clause 6.2 of the August Agreement, a provision without an equivalent in the July Agreement.
The caveat was lodged on the title to the Property 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.
The solicitor concerned did not generally act for Mr Touma or Dobro. He did not have a costs agreement with them. He did not send them a tax invoice. They did not pay him any fees. Mr Touma had no personal contact with him. Contact was via email, with authorisation of lodgement of a caveat effected by email correspondence between the solicitor, Mr Touma’s business associates (clients of the solicitor) and Mr Touma.
Mr Touma did not tell Mr Balout about the caveat, I infer because he did not doubt that Dobro had a contractual right to lodge a caveat and he had no appreciation that the existence of the caveat would cause any detriment to the Balouts who, he believed, were contractually bound to him or his nominee in the event that they sold the Property for $16 million or more.
When the caveat came to Mr Balout’s notice (via the Land Titles Office) and he confronted Mr Touma on or about 14 July 2015 (as discussed below) 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. Mr Balout’s solicitor (Mr Burnett) had in the meantime, on 14 July 2015, emailed to the solicitor a demand that the caveat be withdrawn, incorporating a denial that there was any contractual entitlement in Dobro to lodge a caveat.
Mr Touma did not know about the Put and Call Option Deed dated 1 July 2015 when he executed the Deed of Settlement on or about 13 July 2015 or when he acquiesced in withdrawal of the caveat on 14 July 2015.
Allowing for administrative steps taken by the solicitor for withdrawal of the caveat, it was formally removed from the title of the Property on 10 August 2015.
The Deed of Settlement, executed on or about 13 July 2015 in controversial circumstances, is itself a curious document.
On a cover sheet it is entitled “DEED OF SETTLEMENT” and expressed to be between Mr and Mrs Balout (“Balout”) and Amalgamated Projects Pty Ltd (“Investor”), not Mr Balout by name or the entity “Amalgamated Pty Ltd” identified in the August Agreement as the “Investor”.
At the top of each page of the text of the document appear the words “Put and Call Option Deed”, without reference to the expression “Deed of Settlement”.
The document bears no date against the entry for “Date”, but each page of the text, at the foot of the page bears the typed date 10 July 2015.
The first page of text identifies as “Parties” Mr and Mrs Balout (referred to as “Balout”) of the first part and Mr Touma (referred to as “Touma”) “of the second and final part”. 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).
After identification of parties, next follows a preamble against the marginal note “Background” which comprises six clauses (“A” to F” inclusive) in the following terms:
“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 ($140,000) (Loan).”
The typed version of clause F of the preamble referred to $140,000 in both words and figures. In the Deed as executed the figure “$140,000” is struck through and amended to read “$180,000” in the handwriting of Mr Touma.
The same amendment appears in references to $140,000 (in words and figures) in the other four places where the figure of “$140,000” appears in the Deed.
Mrs Balout’s affidavit affirmed 30 May 2022 (upon which she was not cross-examined) explains the circumstances in which these amendments were made, recounting a conversation between Messrs Balout and Touma in the following terms:
“Mr Balout: “I am not going to abandon our business or our friendship and walk away just because of this issue.”
Mr Touma: “The amount here is wrong. It should be $180,000, not $140,000.”
Mr Balout: “Just put the right amount and initial next to it. I’ll cancel this cheque [implicitly referring to a cheque for $140,000 held by Mr Balout] and go to the bank today and transfer the right amount to you.”
Mr Touma: “Okay”.”
Mrs Balout confirms that shortly after the Deed of Settlement was signed by the parties she and her husband went to the Castle Hill branch of the ANZ bank and caused $180,000 to be transferred to Mr Touma’s account. They waited at the bank until the transaction was processed by the bank officer.
The “Operative provisions” of the Deed appear (as typed) in clauses 1 to 4 (inclusive):
“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 ($140,000) 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 ($140,000) 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 forty thousand dollars ($140,000.00) 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 ($140,000.00) plus legal costs plus interest from the date of this Deed at the rate specified in Section 100 Civil Procedure Act.
2. Warranti****es 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) complete
(i) references to a person includes any other entity recognised by law; 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 “signing page” of the Deed records that the document was “executed as a Deed” and each signature appears against the formulaic words “signed, sealed and delivered … in the presence of” a witness. The signatures of Mr and Mrs Balout were ostensibly witnessed by Karyn Louisa Donaldson. The signature of Mr Touma was ostensibly witnessed by Senan Quain. No evidence was adduced from either of the named witnesses.
Mr Touma signed the Deed of Settlement without a close reading of it (beyond noticing that the figure of $140,000 needed amendment to read $180,000), casually treating it as no more than a receipt for the repayment of $180,000 (not being given a copy of it), accepting that the Balouts no longer required those funds as a loan because, as Mr Balout represented to him, the Balouts had recently received an inheritance which relieved them of the necessity of borrowing funds and permitted them to withdraw the Property from the market for an indefinite period.
On 13 July 2015, after the Deed of Settlement was executed by Mr Touma, Mr and Mrs Balout caused $180,000 to be transferred from a bank account of themselves to an account associated with Mr Touma.
On 10 August 2015 Dobro’s caveat was withdrawn (by registered dealing AJ 657597).
If the Balout parties were under a contractual obligation to pay the Touma parties a “success fee” of $1 million on a sale of the Property for a price above $16 million it is not disputed that the obligation crystallised no later than the Transfer of the Property to Kirby Projects Pty Ltd on or about 22 August 2019 for $20.2 million.
The Balout parties’ (contested) obligation to pay the Touma parties a “success fee” may have arisen as an inchoate right in the Touma parties on 1 July 2015, the date of the Put and Call Option Deed. With the Deed’s provision for both a call option and a put option, a sale was within the power of the Balout parties as well as within the power of the purchaser. However, simplistically, 1 July 2015 is the date upon which an agreement for sale was made, subject to completion. The sale was, in effect, completed at the time of payment of the purchase price to the Balout parties and their transfer of the Property to “the Buyer”. After he became aware of the Put and Call Option Deed (as I find, in August 2015) Mr Touma obtained informal legal advice from his solicitor that he would have to await a completion of the sale to be entitled to his success fee.
The central fact is that a sale was effected. On one view, the only thing that might turn upon whether an obligation to pay the “success fee” arose on 1 July 2015 (provisionally) or 22 August 2019 (finally) is the date from which pre-judgment interest should run if the Touma parties succeed in obtaining a judgment.
Forensically, the significance of the Balout parties’ entry into the Put and Call Option Deed and the date 1 July 2015 is that on that date the Balouts received from “the Buyer” an option fee of $4.875 million and, on the case of the Touma parties, the Balouts secured their execution of the Deed of Settlement about a fortnight later without disclosing the fact of the Put and Call Option Deed (or the Balouts’ receipt of the option fee).
The (July and August) Agreements upon which the Touma parties rely in support of their claim to that “success fee” are not conditioned upon their having been the “effective cause” of the sale. In retrospect, when trying to disclaim any liability to pay a success fee, Mr Balout asserted otherwise but he was corrected by Mr Touma who, with justification, reminded Mr Balout that it was he (Mr Touma) who had secured a fresh, specific and higher offer from Mr Nassif for purchase of the Property.
Mr Touma’s arrival on the scene prompted Mr Jean Nassif (the moving mind behind the eventual Buyer of the Property) to engage with Mr Touma. He evidently viewed Mr Touma’s engagement by Mr Balout, and the possibility that Mr Touma might have a broader interest in the development of land in the vicinity of the Property, as a competitive threat to his development plans. He sought to buy the Balouts’ Property and to buy off Mr Touma.
At a meeting between Mr Balout, Mr Touma and Mr Nassif (arranged by Mr Nassif indirectly with Mr Touma) in early September 2014 Mr Nassif orally agreed to purchase the Property for $20 million or $21 million, depending on how one characterises Mr Nassif’s promise to pay $1 million to Mr Touma to “walk away from the development”. This was described by Mr Balout as a “handshake deal”, which Mr Balout heard as an agreement on the part of Mr Nassif to pay $21 million.
“I refer to recent discussions between you and Jean Nassif, director of Toplace.
Jean has asked me to advise you that he will not enter into any arrangements or dealings with you concerning the acquisition of any land, or the future development of land, in the Cherrybrook precinct.
Jean regards his good name and reputation as his most valuable business asset. He will continue to work on his own behalf with the agent who has exclusivity with land owners in the area, to reach fair and reasonable terms with them for the proposed acquisition of land in the precinct.”
The allusion to an agent with “exclusivity” was probably intended to be a reference to Joan Darc, which is what Mr Balout understood to be the case.
Mr Touma’s version of what happened after receipt of the Toplace email is summarised in paragraphs [35]-[44] of an affidavit sworn by him on 8 December 2021:
“[35] A month or so later, Alan [Mr Balout] became very distant from me. He did not answer most of my calls and he was not emailing me as much as usual, if at all. I found it a little strange, but as I was very busy with my other business, I thought little of it.
[36] In or about November or December 2014, I called Alan. We had a conversation to the following effect:
Me: "Hi Alan, where are we up to in relation to the final agreement [the third form of agreement contemplated after the August Agreement]?"
Alan: "My solicitor is away and has been busy. The final agreement hasn't been prepared yet".
Me: "Okay, that is fine. However until we have the final agreement in place, I won't be releasing any further funds to you".
Alan: "Okay, but please be patient with me. I don't need money right now.
[37] I later found out that at or around the time of the above conversation, Alan was in negotiations with Jean [Mr Nassif].
[38] On or about 14 July 2015 Alan and I had a conversation to the following effect:
Alan: "Joe, why have you lodged a Caveat over my property. I never gave you permission”.
Me: Yes you did, it's in our agreement. But why are bring this up now?"
Alan: "Karen's grandmother [the grandmother of Mrs Balout] passed away. We have received an inheritance from her and we are going to use that to pay you back the money you have loaned me - can we agree to terminate our agreement? Can you please also remove the caveat that you have lodged over the Property?
We are just going to hang on to the property for a few years. We might renovate it and get some new furniture".
Me: "Sorry to hear about Karen's grandmother passing. Yes, for sure that is fine, we can terminate the agreement. If that's what you want, I'm happy to do that for you guys".
(the Inheritance Representation)
[39] I agreed to terminate the agreement and remove the Caveat once the loan amounts [$180,000] were repaid because of the Inheritance Representation. I believed the Inheritance Representation to be true because of my close relationship with Alan at that time. That relationship included discussions regarding us undertaking a number of business ventures together.
[40] On 29 June 2015 I met with Alan in Alexandria in his car. Alan said to me, words to the effect of, "the lawyers of Karen's Grandmother have agreed to release some of the inheritance funds to pay you, once I give them this receipt that confirms the funds aro going to you".
[41] I had no reason to believe Alan was lying to me so on the instructions of Alan, I signed a document which I understood to be a receipt for the payment of $180,000. Alan said to me words to the effect of “can you please sign this receipt now and I will transfer the funds to you this afternoon”.
[42] I did not read the document that Alan directed me to sign [the Deed of Settlement] as I trusted that he was being truthful that the document was a receipt. There was no-one else present with Alan and me when I signed the document, and it was not witnessed by anyone in my presence. I was also not given a copy of the document as Alan said words to the effect of "once Karen has signed the receipt I will give you a copy with all signatures on it after I pay you".
[43] I never received a copy of the receipt.
[44] I became aware after I agreed to terminate the August Agreement and remove the Caveat, that the defendants had been negotiating a put and call option for the sale of the Property to Toplace or Kirby Projects Pty Limited (Kirby) (as Toplace’s nominee) for a price in excess of $16,000,000 (Option).”
“Joe, I am going to hold on to the Property for a while and wait until the rezoning is complete. We will be able to sell our properties together and get about $40 million. Now that we have received the inheritance we can live off that and we do not need your financial assistance”.
The reference to “our properties” was understood by Mr Touma to be a reference to the Balouts’ Property at “127” Castle Hill Road and the property known as 133 Castle Hill Road in respect of which Mr Touma (to the knowledge of Mr Balout) had acquired in October 2014 the benefit of a put and call option.
Although I accept Mr Touma’s evidence that Mr Balout became relatively “distant” from him in or about October 2014 (at a time when Mr Balout was coming to terms with how to deal with Mr Fitzpatrick’s email of 11 September 2014) the two men, and their wives, continued to meet socially and Mr Balout introduced Mr Touma to his neighbours living at 133 Castle Hill Road, West Pennant Hills, which led to Mr Touma (through Dobro Dosle Pty Ltd as trustee for Amalgamated Investments Trust) on 17 October 2014 entering with those owners a deed entitled “Deed of Option to Purchase Land” in the nature of a Put and Call Option. The terms of the option are the subject of a confidentiality order not yet discharged.
This transaction is material to these proceedings in at least two respects. First, Mr Touma’s acquisition of a right to purchase 133 Castle Hill Road (nearby the Balouts’ Property) provided a foundation for a hope, and expectation, in Mr Touma that a sale of the two properties could be co-ordinated for the joint benefit of both parties, leveraging for higher prices on both properties.
Secondly, an endeavour by Mr Touma to engage third parties (Eric Christofi and Nick Brown) as partners with him in the acquisition of 133 Castle Hill Road led to him acquiescing in instructions to their solicitors for the lodgement in the name of Dobro of the caveat over the Balouts’ Property which on or about 14 July 2015 elicited a protest from Mr Balout, and an apologetic withdrawal of the caveat by Dobro under the direction of Mr Touma, at that time, unaware of the existence of the Balouts’ Put and Call Option Deed dated 1 July 2015.
The documentary record supports an inference, confirmed by Mr Balout’s evidence, that Mr Balout commenced direct negotiations with Mr Nassif before 30 March 2015. As earlier noted, on that date the Balouts’ solicitor (Mr Karl Burnett) sent an email to Mr Michael Fitzpatrick (the solicitor for Mr Nassif and Toplace Pty Ltd) which contained an offer on the part of the Balouts to sell the Property to Mr Nassif, or a nominee of Mr Nassif, for $24 million. The offer had been foreshadowed by Mr Balout to Mr Nassif before it was formally made.
That Messrs Balout and Nassif thereafter engaged in direct discussions is confirmed by a follow-up email sent by Mr Burnett to Mr Fitzpatrick on 14 April 2015 in which Mr Burnett resisted a proposal (implicitly advanced by or on behalf of Mr Nassif) for an agreement in the form of an option. At that point the Balouts favoured a contract of sale, not an option.
By an email sent by Mr Fitzpatrick to Mr Burnett on 28 April 2015 (copied to Joan Darc) Kirby Projects Pty Ltd made an offer to acquire the Property from the Balouts by way of a Put and Call Option (a draft of which was attached to the email) providing, , for a basic price of $19.5 million for the Property with “uplift payments” rising to $22.74 million depending upon the number of lots approved for the Property on a Development Application.
“Hi Karl [Mr Burnett]
It’s Joe Touma here. I loaned Alan [Balout] $180,000 and we had an agreement that I could lodge a caveat over the Property. I wish to confirm that Alan has repaid that loan yesterday and I will take all steps to remove the caveat. I have spoken to Alain [sic] today and it was just a misunderstanding.
Thank you for your time.
Joseph A Touma”
This email is consistent with Mr Touma’s evidence that he did not cause the caveat to be lodged against the title to the Property (but unrelated business associates did) and he executed the Deed of Settlement without knowledge of the existence of the Put and Call Option Deed (or the Balouts’ receipt of over $4 million as an option fee).
Mr Balout, for his part, contends that he did not disclose his negotiations with Mr Nassif, or the Put and Call Option Deed, to Mr Touma because, he believed, the July Agreement and the August Agreement had ceased, or would cease, to have any operative effect because of an alleged breach of an obligation of the Touma parties to provide funding of $20,000 a month.
I do not accept this explanation for Mr Balout’s non-disclosure of his dealings with Mr Nassif to Mr Touma. It was in Mr Balout’s interests, as he perceived them to be, to keep Mr Touma at arms’ length in relation to his dealings with Mr Nassif. This was because experience had taught him (in September 2014) that Mr Nassif would back away from any deal with the Balouts if they sought to deploy Mr Touma against him. Mr Balout recognised (as did Mr Touma) that Mr Nassif was the developer most likely, ultimately, to purchase the Property at a premium price if handled with care.
On 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.
I am satisfied, however, of the sequence of events. I am satisfied that Mr Balout concealed the existence of the Put and Call Option Deed from Mr Touma in a deliberate endeavour to extricate himself and his wife from their agreement to pay to Mr Touma or his nominee a $1 million success fee by procuring execution of the Deed of Settlement upon a (false) representation that the Balouts proposed to hold on to their Property pending a rezoning of the local area and (falsely) representing that they were able to do so because they had recently received an inheritance which relieved them of a need to borrow money from Mr Touma.
Mr Touma trusted Mr Balout and, in light of their friendship and their collaboration to date, not unreasonably relied upon Mr Balout to tell him of any sale of the Property, believing as he did that he and Mr Balout were engaged in a joint endeavour to procure a price of $16 million or more for the Property, that he had extracted an offer of $20 million from Mr Nassif, and that Mr Nassif remained a likely buyer of the Property and, he hoped, 133 Castle Hill Road.
Mr Balout’s concealment of the Put and Call Option Deed from Mr Touma was intentionally calculated by Mr Balout to mislead Mr Touma, and it did mislead Mr Touma, into executing the Deed of Settlement.
Mr Balout’s representation to Mr Touma that the Balouts proposed to hold onto their Property pending a rezoning of the local area was false because, as Mr Balout well knew but Mr Touma did not, the Balouts had committed themselves to the Put and Call Option Deed and had the benefit, not only of both a put and call option, but also a substantial option fee, with a prospect of an extension fee of the same order. The representation that the Balouts proposed to hold onto the Property pending a rezoning was intentionally calculated to mislead Mr Touma, and did mislead him, into executing the Deed of Settlement.
“I said: “Alan, I know that you have sold your Property without telling me. You have tried to hide it from me.”
Alan said: “No I didn’t. I only had to pay you if you sold my Property and you didn’t”.
I said: “Alan, the agreement wasn’t that I was to sell the Property for you. It was a funding deal. But anyway I did find you a buyer and got Jean Nassif to agree to buy the Property for $20,000,000. You said that you were going to hold onto the Property and wait for the rezoning to be done so that we could sell our properties together and make about $40,000,000. You lied about your inheritance so that you could go behind my back and sell the Property. We had a deal and you have really let me down”.
Alan said: “I did not go behind your back or lie to you Joe. I just changed my mind about selling the Property and I need the money. It is only an option at this stage anyway and might not even settle. But don't worry I will look-after you when this is all finished, if it settles. There is no point arguing about this now, it might not even settle. We can deal with this later”,
I accept this evidence, including evidence that Mr Balout gave Mr Touma an assurance that Mr Balout would “look after” him if and when a sale of the Property was settled (completed).
This is consistent with Mr Touma’s legal advice that the $1 million success fee was contingent upon completion of a sale of the Property; Mr Touma’s abiding hope that both he and Mr Balout could profit from a co-ordinated sale of “127” and 133 Castle Hill Road; Mr Touma’s belief (induced by Mr Balout) that the Balouts no longer had a need for any loan funds that they had previously obtained from the Touma parties; and Mr Touma’s belief in the possibility that further deals might be done between the parties if they remained engaged, bearing in mind that a rezoning of the local area (carrying with it a prospect of financial gain) remained a prospect, not a present reality.
The significance of the sequence of events is confirmed by a comparison of the evidence recorded in the extracts taken from Mr Touma’s affidavit with paragraphs 99-101 and 105-106 of the affidavit affirmed by Mr Balout on 30 May 2022.
The topics Mr Touma says were discussed on particular occasions are, in large measure, topics that Mr Touma agrees were the subject of discussion. Leaving aside differences of detail, a major difference between the two versions of events is that Mr Balout says that in June 2015 (apparently 29 June 2015) Mr Touma confronted him with a statement that he (Mr Touma) had “received information from a reliable source very close to me that you have been negotiating to sell your property to Jean Nassif” and sought to interrogate him about that topic, without any mention (until 13 July 2015) of the death (two years earlier) of Mrs Balout’s grandmother. Mr Touma placed the confrontation conversation in July (or, as I find, in August) 2015 and the grandmother inheritance representation on about 29 June 2015.
It is not necessary here to set out verbatim the text of Mr Balout’s affidavit. To the extent that it conflicts with the evidence of Mr Touma, I prefer the evidence of Mr Touma.
Mr Balout’s evidence does not sit comfortably with the fact that, within a period of two days after the date he attributes to a supposedly frank conversation with Mr Touma, he and his wife executed the Put and Call Deed dated 1 July 2015.
Mr Touma’s evidence, including his evidence about the sequence of events, is more plausible, particularly when assessed in the context of the parties’ respective perceptions of self-interest.
But for the Deed of Settlement (assuming that it is enforceable according to its terms), in my assessment Mr Touma became entitled under the August Agreement (read with the July Agreement), against the Balouts jointly and severally, to the payment of a success fee of $1 million on completion of the Balouts’ sale of the Property on or about 22 August 2019.
The question, then, is whether Mr Touma is entitled to relief by reference to sections 18(1), 236, 237 and 243 of the Australian Consumer Law.
Section 18(1), which is a provision of Chapter 2 of the Australian Consumer Law, provides that “[a] person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive”.
So far as is material, section 236(i) provides as follows:
“236. Actions for damages
(i) If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 …;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.”
The primary actor on behalf of the Balouts in relation to the preparation, execution and carrying into effect the Deed of Settlement was Mr Balout. However, Mrs Balout signed the August Agreement and was actively involved in the execution and carrying into effect of the Deed.
For the purposes of section 236, Mrs Balout was either, with Mr Balout, a person who engaged in the conduct said to have contravened section 18 or a person “involved in the contravention” within the meaning of section 236 (read with the definition of “involved” in section 4 of the Competition and Consumer Act 2010 Cth, to which the Australian Consumer Law is a Schedule). There is no dispute about that.
So far as is material, section 237(1) provides that a court may “on the application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because another person has engaged in conduct in contravention of a provision of Chapter 2 …, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. Section 237(2) provides that an order made under section 237 must be an order that the Court considers will compensate the injured person in whole or in part for the loss or damage suffered, or likely to be suffered, or prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person.
So far as is material, section 243 provides that, without limiting section 237(1), the orders that a court may make under section 237(1) against a person include a wide range of orders including an order declaring the whole or any part of a contract made between the respondent to a claim and an injured person, or of a collateral arrangement relating to such a contract, to be void.
In the present proceedings the Touma parties claim that the Balout parties engaged in misleading and deceptive conduct in contravention of section 18 of the Australian Consumer Law justifying an award of compensation under section 236 or an order that the Deed of Settlement be declared void pursuant to sections 237 and 243, the object in either case being to recognise the entitlement of Mr Touma (or nominee) to the claimed success fee of $1 million free of the provisions of the Deed of Settlement.
The circumstances in which the Deed of Settlement was presented to Mr Touma for execution, executed and implemented occurred in trade or commerce within the meaning of section 18.
The question whether the conduct of which the Touma parties complain was misleading or deceptive or likely to mislead or deceive is a question of fact in light of the course of conduct viewed as a whole: B**utcher v Lachlan Elder *Realty Pty Ltd (*2004) 218 CLR 592 at [109]; Campbell v (2009) 238 CLR 304 at [102].
(a) the Property having been sold (on 22 August 2019) for a price in excess of $16 million, Mr Touma personally is entitled in debt, or as damages, to a judgment in the sum of $1 million in the Dobro proceedings, together with an award of interest under section 100 of the Civil Procedure Act 2005 NSW from that date until the date of judgment; and (b) the Balouts’ cross claim must be dismissed.
Although the Loan Proceedings were commenced before the Dobro Proceedings they were commenced in response to a suggestion by Mr Touma that Mr Balout pay or allow him $1 million, referable to the August Agreement, in settling their broader affairs.
The road to litigation was not a clear path because Messrs Touma and Balout, between 2015-2020 or thereabouts routinely conducted joint business activities without attending to formalities that defined boundaries. There is a sense in which they appear to have intermingled their affairs, and to have spoken of each other as “partners”, in dealings with cars and real property.
A breakdown in the parties’ relationship appears to have taken a turn for the worst on 8 July 2020 when Mr Touma sent to Mr Balout an email containing an offer of settlement (of a broader dispute) made by reference to the August Agreement. That offer was followed up by Mr Touma with a further email to Mr Balout dated 15 July 2020.
Mr Touma’s emails dated 8 and 15 July 2020 were the subject of an email in reply dated 15 July 2020 addressed to Mr Touma by Mr Balout’s solicitor (Mr Karl Burnett). On behalf of Mr Balout, that email challenged the validity of the August Agreement in detail and disclaimed any interest on the part of Mr Balout in further business dealings with Mr Touma. It referred, in passing, to the Deed of Settlement, but did not attach a copy.
In the wake of Mr Burnett’s email, on or about 13 August 2020 Mr Balout served on Mr Touma a formal demand for repayment of a loan of $500,000 allegedly made to Mr Touma on or about 29 October 2015. The nature of that transaction, as Mr Balout subsequently pleaded it, was not simply a loan but allegedly a loan “repayable on demand”, “not documented”.
By a letter dated 24 August 2020 (dispatched via email) Mr Touma’s solicitors responded in detail to Mr Burnett’s email dated 15 July 2020 addressed to Mr Touma. In the course of outlining Mr Touma’s case, his solicitors:
(a) recorded their instructions “that on a date presently unknown to [Mr Touma], [Mr and Mrs Balout] entered into [a put and call option] and that the sale of the Property to Toplace or its nominee settled on or about 22 August 2019”. (b) recorded that [Mr Touma] was “unaware of such a document [as the Deed of Settlement to which Mr Burnett had referred] and denies knowingly executing such a document” and requested that a copy be made available. (c) made a formal demand for the payment of the $1 million success fee claimed by the Touma parties and reserved a right to commence “recovery action” in the event that the claimed sum was not paid within 21 days.
By a letter dated 18 September 2020 KB Legals (Mr Burnett’s firm), addressed to Mr Touma’s solicitors demanded that Mr Touma pay to Mr Balout a total sum of $1,317,000 for repayment of nine separate loans (one of which was the $500,000 loan allegedly made on 29 October 2015) said to have been made between 29 October 2015 and 15 November 2018 or thereabouts. The letter attached a copy of the Deed of Settlement, as requested.
The nine particularised loans were said to have been made by Mr Balout “at the request of [Mr Touma] and due to their then friendship, … not formally documented with written loan agreements nor with security. … The loans were payable on demand”.
The letter was expressed to be a “formal demand for payment of the claimed sum within 14 days of the date of the letter, failing which legal proceedings would be commenced”.
The statement of claim filed by Mr Balout on 3 December 2020 reflected his solicitor’s letter of demand dated 18 September 2020 but the nature, timing and quantum of his claim evolved in the course of the proceedings.
In the statement of claim nine discrete loans were alleged, respectively on 29 October 2015 ($500,000); 31 May 2016 ($75,000); 16 June 2016 ($20,000); 22 November 2016 ($22,000); 14 December 2016 ($90,000); 16 February 2017 ($100,000); 13 April 2017 ($180,000); 24 August 2018 ($50,000); and 15 November 2018 ($100,000).
In an amended statement of claim filed on 19 May 2021 Mr Balout abandoned the last four of the alleged loans; added additional alleged loans ($75,000 said to have been made on 27 July 2015; $145,000 said to have been lent on 7 September 2015 and $99,448.66 said to have been lent on 30 June 2016) and recast various allegations, including particularly that relating to the alleged loan of $500,000 on 29 October 2015. Concessions ostensibly made in submissions included allegations that of the $200,000 allegedly lent on 16 June 2016, only $50,000 remains outstanding and of the $90,000 allegedly lent on 14 December 2016, only $54,500 remains outstanding.
In closing submissions Mr Balout confined his claim to a total of $826,500, comprising claims referable to the loans allegedly made on 27 July 2015 ($75,000); 29 October 2015 ($500,000); 31 May 2016 ($75,000); 16 June 2016 ($200,000, but only $50,000 outstanding); 22 November 2016 ($22,000); and 14 December 2016 ($90,000, but only $54,500 outstanding).
The dates of these alleged loans reflect transfers of funds found by Mr Balout on a retrospective examination of his bank statements, generally given colour by uncorroborated conversations with Mr Touma reconstructed by Mr Balout.
In cross examination of Mr Balout counsel put to him the proposition “[that] what actually occurred here is that Mr Touma made a claim on you for the million dollars owed under the August Agreement and what you did in response was review your bank statements to look at every amount that you had paid to him or a subsidiary of him?”
“Q: Do you agree with me this is what you did?
A: What?
Q: You received a demand from my client [Mr Touma]? …
A: Yes.
Q: … That he was owed a $1 million … ?
A: Yes.
Q: … Under the August Agreement?
A: Yes.
Q: What you then did in response, was you went through your bank accounts?
A: Yes.
Q: You reviewed every time money had gone out to either him or any one of the companies you say he controlled?
A: Yes.
Q: You put together a claim based upon your review of the bank statements?
A: Yes …
“Q: You didn’t instruct lawyers in respect of those loans [the subject of the loan proceedings], did you?
A: No.
Q: You took limited notes, if any, in respect of those loans, didn’t you?
A: Sorry?
Q: You took limited notes, if any, in respect of those [loans], didn’t you?
A: That’s right.
Q: You relied only on the bank accounts.
A: Yes.
Q: And then you reconstructed what had occurred based on those bank account statements. Do you agree with me?
A: Yes. I do agree with you.”
Implicit in presentation of Mr Balout’s claim for the “repayment” of any “loan” he contends he made to Mr Touma personally (rather than to a company with which Mr Touma was, to his knowledge, associated) is a fundamental contention that, as a matter of course, a transaction involving a payment made by him at the request or invitation of Mr Touma can, and should, be characterised as a loan to Mr Touma personally (not his company), paid to the company at Mr Touma’s direction, discounting entirely that, to Mr Balout’s knowledge, Mr Touma represented the company.
Each transaction must be analysed in its own particular context. Nevertheless, Mr Balout’s fundamental contention does not sit comfortably with a context in which at the time a particular transaction was effected Mr Balout was actively involved in the business of the recipient company (represented by Mr Touma), and was familiar with the company’s operations and understood that money the subject of the particular transaction was to be applied in the acquisition of an asset for the business of the company; no such transactions were formally documented; no such “loans” were attended by a request, or offer, of security; and most “loans” involved no agreement, express or implied, for the payment of interest.
Mr Balout shared with Mr Touma an interest in prestige cars, the acquisition (and his shared enjoyment) of which was a major focus of some of the transactions characterised as “loans” allegedly recoverable against Mr Touma personally. Although Mr Touma routinely represented the asset holding company associated with various businesses (Advanced Motor Dealers Group Pty Ltd, "AMDG") he was not the only person involved in the conduct of the affairs of the company and associated businesses.
Mr Balout’s claim is framed as a claim, in debt or restitution, for the recovery from Mr Touma personally of several distinct “loans”. Neither party has attempted anything in the nature of a taking of accounts between them, still less between them and the companies with which they were associated. Attention must, accordingly, be given specifically to the several “loans” identified by Mr Balout.
(a) a transfer of $75,000 from “AK Balout account” (business name “Highfields Aust”). (b) a transfer of that amount to an account in the name of “JA Touma”. (c) an entry against the words “message/reference” that reads “Porsche 911”; and (d) an instruction that the transfer was to be paid no earlier than 27 July 2015.
It appears that the source of the funds transferred was a joint account of Mr and Mrs Balout and the account to which funds were transferred was a joint account held by Mr Touma and his brother Charlie.
The characterisation of the transfer (as “Porsche 911”) is that of Mr Balout. It does not refer to a “loan”.
There is no contemporaneous documentation that characterises the transaction as a “loan”. Characterisation of the transaction as a loan depends upon acceptance of evidence given by Mr Balout in paragraph 28 of an affidavit affirmed on 21 March 2022 of an undocumented, disputed conversation between him and Mr Touma in which he asserts that Mr Touma requested, and he agreed to make, a loan.
In paragraph 36 of an affidavit sworn on 11 July 2022 Mr Touma offered an explanation of the transaction to the effect that the $75,000 was not a loan to him but a payment by Mr Balout for an interest in a car which was used in the operation of a business which provided “drive day” experiences for car enthusiasts. This accords, more or less, with a pattern of dealings found in later alleged loans.
In paragraph 26 of an affidavit affirmed by Mr Balout on 9 September 2022 in response to Mr Touma’s affidavit of 11 July 2022 Mr Balout recorded the following:
“In relation to paragraph 36 [of Mr Touma’s affidavit] in respect of the payment of $75,000 for Porsche 911 (also referred to as Porsche Carrera or Porsche 997 by its model) I say that:
(a) after a further review of my records, I found a copy of the receipt emailed to Joe [Mr Touma] on July 27 2015, which shows that the sum of $75,000 paid to Joe on that day (identified in my amended statement of claim filed May 19 2021 as Loan 1) was a payment for my share in the Porsche 911 … (b) until I found the payment receipt, I did not realise that the payment of $75,000 on 27 July 2015 was not a loan to Joe.”
I am not satisfied that Mr Balout’s transfer of $75,000 on 27 July 2015 was a loan or that its transfer placed Mr Touma under any obligation to repay it.
Mr Balout’s claim in respect of “Loan 1” must be dismissed.
In his amended statement of claim Mr Balout alleged that on or about 7 September 2015 he made an oral agreement with Mr Touma for him to lend $145,000 to Mr Touma 2015 (pleaded as “Loan 1A”) and for that money, at Mr Touma’s direction, to be paid to a third party car dealership, Chidiac Motor Group Pty Ltd.
In cross examination Mr Balout pointed to some text messages dated 2 September 2015 as being “the written agreement that records the loan” and “all of the loan’s terms”. When tested on that he agreed that the loan was a loan from him to the corporation, Advanced Motor Dealers Group Pty Ltd, known colloquially as “AMDG”. Mr Balout became a director of AMDG on 1 August 2017. Mr and Mrs Balout and their company Wisefox Holdings Pty Ltd were at one time shareholders in AMDG with Dobro.
There is no basis for a finding that “Loan 1A” was made to Mr Touma or that Mr Touma was under an obligation to repay it. The claim was not pressed in final submissions. It must be dismissed.
(a) a conversation Mr Balout says he had with Mr Touma on 28 October 2015 “over coffee” at Mr Touma’s home; (b) an email timed at 6:51pm on 28 October 2015 addressed by Mr Touma to Mr Balout; and (c) an entry in a bank statement of Mr Balout’s Police Bank account against the date 29 October 2025, that simply reads “SWIFT TFR 29/10 $500,000”.
Mr Balout says that during his conversation with Mr Touma “over coffee” Mr Touma requested a “short term loan” from Mr Balout pending the completion of the sale of a car yard. Mr Touma denies having such a conversation or in October 2015 engaging in the sale of a car yard. He suggests that Mr Balout may be mistaking the events of 2017 when (via an email dated 13 March 2017) he requested a short term loan of $230,000 to facilitate a sale of a car yard and, the loan having been paid, it was repaid by Dobro (ATF Amalgamated Investments Trust (as evidenced by Dobro’s NAB bank statement on 31 October 2017).
In the absence of corroboration of Mr Balout’s account of the conversation he says occurred on 28 October 2015 I am not persuaded that, if any conversation occurred, it occurred in the terms to which Mr Balout has deposed.
An impediment to a finding that no conversation occurred is the email dated 28 October 2015, which is consistent with some conversation having recently occurred. An impediment to a conversation having occurred in the terms to which Mr Balout has deposed is that Mr Balout says that Mr Touma wrote down some bank details (for a transfer of funds) on a piece of paper which Mr Touma gave to him (but which he has since lost). By reason of the fact that the funds were transferred to Dobro’s bank account, one might reasonably assume (in the light of Mr Touma’s email) that that piece of paper identified Dobro as the borrower.
The email of 28 October 2015 had as its subject “Short term loan”. It read as follows:
“Hi Alan
Thank you for offering to loan Amalgamated P/L the sum of $500,000.
The company has other alternatives in getting those funds, if you have any concerns or have simply changed your mind.
For any reason, we totally understand.
Just let us know tonight so I can organise the funds from the other party. I confirm the following:
Loan $500,000
Term 4 weeks
Interest 4.2%
If we do not pay the loan back within four weeks, I agree to pay you 7% p.a. til the 1 April 2016.
Secondly, if we decide to do the Kellyville deal together, We will make sure the $500,000 is available to you in a time frame required to do that deal.
BSB xxx-xxx
Acc no: xxxxxxxx
Thanks
Joseph Touma”
An inference from this email (which I draw) is that the borrower was not Mr Touma personally but Dobro as trustee for the Amalgamated Investments Trust. The reference in the email to “Amalgamated Pty Ltd”, coupled with a reference to details of the bank account of Dobro (ATF Amalgamated Investments Trust) point clearly to the borrower being Mr Touma’s family company, not him personally, as does use of the pronoun “we” instead of “I”.
Mr Balout says that (as he knew at the time of the Deed of Settlement dated 1 July 2015) the entity “Amalgamated Pty Ltd” did not exist. This email corroborates, if need be, Mr Touma’s evidence that when he referred to “Amalgamated Pty Ltd” in the August Agreement he had in mind the Amalgamated Investments Trust and that when he executed the Deed of Settlement he did not closely read the text of that document which recorded the non existence of “Amalgamated Pty Ltd”.
I am satisfied that this loan was not made to Mr Touma personally and he was not placed under any obligation as a debtor to repay the loan.
In these circumstances, Mr Balout’s claim for repayment of “Loan 1B” must be dismissed.
It is not necessary to explore alternative explanations for the transaction raised by Mr Touma in dealing with the imprecision of Mr Balout’s evidence. Suffice to say that one explanation may relate to a payment made by the plaintiff to the defendant for his stake in a business known as “Ultimate Sports Car Rentals”. An alternative explanation is that the payment may have been made by way of an investment by Mr Balout in a property deal that fell through in circumstances in which Mr Balout’s investment was repaid.
In any event, any dispute about the alleged entitlement of Mr Balout to enforce repayment of a loan of $500,000 made by him on 29 October 2015 was settled on or about 24 August 2018 when Mr Balout transferred to Mr Touma the sum of $50,000 and performance of an agreement that he would pay that sum and forgive the loan of $500,000 (making a total consideration of $550,000) for ownership of a Lamborghini motor vehicle which Mr Touma, in the course of negotiations about the price of the car, said was worth $600,000, not merely $550,000.
In cross examination, Mr Touma agreed that, by reason of the agreement for the purchase of the Lamborghini on 24 August 2018, as at that date the loan identified as “Loan 1B” had been repaid.
In cross examination, Mr Balout agreed that he took possession of the car and it was placed in the ownership of his company as his car.
Mr Balout retained possession of the car for what he describes as “a couple of months from August 2018”, after which a dispute not the subject of these proceedings erupted. That dispute was not the subject of these proceedings. Mr Balout’s claim was for repayment of a loan. That claim must be dismissed.
(a) a series of text messages sent by Mr Touma to Mr Balout on 30 May 2016. (b) a conversation between Messrs Touma and Balout later that day. (c) a transfer of $75,000 from Mr Balout’s Police Bank, bank account to a bank account of Advanced Motor Dealers Group Pty Ltd (AMDG) on 31 May 2016.
The context in which Mr Balout’s transfer of $75,000 to AMDG is to be considered is that in around 2015 Mr Balout became involved with Mr Touma in the sports and luxury car business and, over time.
Mr Balout, or a corporate vehicle of Mr Balout, acquired an interest in a number of businesses with which Mr Touma and others were related.
One of those businesses, known as Ultimate Sportscar Rentals Pty Ltd, operated a business that rented vehicles to the public. Some of those vehicles are owned by Mr Touma or an entity associated with him and some were owned by Mr Balout. The deal in that business was that each of Mr Touma and Mr Balout had a 50% interest in the business because they each brought cars to the business. The company was registered on 29 October 2015 (and deregistered on 22 March 2019). The directors of the company were Mr Balout and Mr Touma. The shares of the company were held equally by Wisefox Holdings Pty Ltd (associated with Mr Balout) and Dobro (associated with Mr Turner).
A different business to that of Ultimate Sportscar Rentals was conducted by Ultimate Drive Days Pty Ltd, It was incorporated in June 2014 as a corporate vehicle of four people, one of whom was Mr Touma and another one of whom was his brother Charlie. Mr Balout became involved in the conduct of the business of that company over time and on 1 June 2017 became a director. At some earlier time his company Wisefox Holdings Pty Ltd became a shareholder.
Mr Touma offered the following description of the business of Ultimate Drive Days in the course of cross examination by counsel for Mr Balout and in response to an inquiry by me:
“Q: (by counsel) … the business of Ultimate Drive Days was slightly different to the business that was being operated by Ultimate Sports Car Rentals. You accept that?
A: Yes, it’s different.
Q: And that the difference was that Ultimate Drive Days rented cars to the public on a shorter term basis.
A: No.
Q: And that was typically for only one day. Is that right?
A: No.
Q: That was as part of driving experiences …
A: Yes.
Q: … so they would experience with …
A: Experience a day drive, yes.
Q: but that was on a shorter term basis.
A: It wasn’t a rental of a car. It was a … a … a … They paid for experience of driving five cars at once, for the day. Not renting that car …
Q: Sure, but they rented the cars to drive them. Isn’t that right?
A: Well, I don’t call it rental because they … they weren’t renting each individual vehicle. They were paying for an experience.
Q: You don’t call it rentals.
A: No, it was drive day experience.
His Honour:
Q: What is it that people wanted to have a turn at driving a luxury car?
A: So what we do, your Honour, we’d have five supercars, a Lamborghini, a Ferrari, a Porsche, and an Audi, and people dream about driving these cars. So what we set up is you pay $599 and you come and you get to drive all five cars that day. So you rock up in the morning. We’ll give you a coffee. We’ll brief you where we’re going for the drive day. Will tell you where we’re going to stop off and change over cars, and then once we get to the location, will give you a nice lunch, and then we get back in the vehicles and on the way back will stop again. So through that course of the day, you get to drive all these beautiful super cars and experience them.
Q: It’s a fantasy experience.
A: Exactly - exactly. That’s what I - so I don’t actually call it a rental because rental means you take the car, it’s your car and you go off in it. You can do what you want with it. They can’t. We’ve got one car in front of them, one car behind them and we go in a convoy and we have a drive day experience. So I’m not sure what he’s trying to get me to say, but it’s not rental.”
From that exchange, counsel for Mr Balout put to Mr Touma, and Mr Touma agreed, that Mr Balout or the company Wisefox, at some stage, acquired an interest in a number of businesses (from Mr Touma’s brother Charlie) identified as a seafood restaurant that traded as “Blue Fish”; AMDG; Ultimate Drive Days; and an Italian restaurant that traded as “Bar Angola”.
Precisely when Messrs Touma and Balout became involved together in the operation of various businesses is not clear on the evidence. But, in light of the chronology of events in the Dobro proceedings, it is of interest to note that Mr Balout became a director and shareholder of RJ Randwick Pty Ltd (of which Dobro was already a shareholder) on or about 21 August 2015. That company was intended, for a time, to be used for the purpose of acquiring vehicles for another company to lease to the public, but did not, in the event, proceed with early plans.
Seen in context Mr Balout’s transfer of $25,000 to AMDG was not a loan to Mr Touma. If it was a loan at all, it was a loan to AMDG. In substance, however, it was one of several contributions made by interested parties to finance a fleet of luxury cars one of which was a Lamborghini. It was with respect to that car that Mr Balout (or his company Highfields Australia Pty Ltd) was invited to make a contribution to enable AMDG to “pay out” a lease.
The entry for 31 May 2016 in Mr Balout’s bank statement records a transfer of $75,000 “to Advance Motors Group Ref-Lamborghini”. There is no mention of a loan or Mr Touma, only AMDG, a company operating (as an asset holding company), a business with which Mr Balout was involved. The fact that, in their common interest, Mr Touma was given the task of soliciting contributions provides no foundation for characterising him as a borrower.
It is not necessary here to explore in detail the process by which Mr Touma explained that Mr Balout’s contribution of $75,000 was brought to account in his favour by Charlie Touma when he sold his shares in the business to Mr Balout.
Mr Balout’s claim to “Loan 2” must be dismissed.
As “Loan 3” Mr Balout claims from Mr Touma $50,000 said to be the outstanding balance of a loan of $200,000 Mr Balout alleges that he made to Mr Touma on 16 June 2016 and paid to AMDG at Mr Touma’s direction.
In his original statement of claim (verified and filed on 3 December 2020) Mr Balout asserted that a loan of $200,000 had been made to Mr Touma and not repaid.
In his amended statement of claim he conceded that on 20 October 2016 he received $150,000 by way of a repayment. Hence, the amount now claimed is $50,000.
The form of Mr Balout’s original statement of claim and his amendment of it reflect the process of reconstruction in which Mr Balout engaged in the preparation of his claim to be Mr Touma’s creditor . This transaction, similar to the transaction alleged in respect of “Loan 2”, reflects Mr Balout’s engagement with AMDG in the car business. What he claims to have been a loan to Mr Touma was, if a loan, a loan to AMDG, with the business of which both Mr Touma and Mr Balout, amongst others, were involved.
Mr Balout’s Police Bank bank statement records a non-descript transfer of $200,000 on 16 June 2016. AMDG’s NAB bank statement records receipt of that amount on the same date with the descriptor “Alan Balout”.
Mr Balout relies upon that transfer and a conversation he says he had with Mr Touma “on or around 16 June 2016”. That conversation is denied by Mr Touma who explains the transaction, not as a loan to him, but as concerning the business of AMDG.
On Mr Balout’s account, in that conversation, the funds he was invited to provide were a contribution to a refinancing by AMDG of a Ferrari 430 motor vehicle as a preliminary to its sale. He was expressly invited to transfer funds to the bank account of AMDG, and he did so.
AMDG’s NAB bank statement records a transfer of $150,000 to Mr Balout on 20 October 2016 with the descriptor “Refund Alan F430”, reflecting the sale of the Ferrari 430.
The balance of $50,000 otherwise due to Mr Balout is said by Mr Touma to have been retained by his brother Charlie as part of Charlie’s agreement to sell his share in the (AMDG) business to Mr Balout. It is not necessary to explore that territory.
In any event, Mr Touma did not personally borrow $200,000 from Mr Balout or receive or retain any part of the sum of $200,000 Mr Balout transferred to AMDG.
If Mr Balout’s transfer of $200,000 to the account of AMDG is to be characterised as a loan, the borrower was AMDG, not Mr Touma.
Mr Balout’s claim against Mr Touma for “Loan 3” must be dismissed.
The nature and provenance of a claim made by Mr Balout against Mr Touma, described in the pleadings as “Loan 3A”, merits notice as indicative of Mr Balout’s modus operandi in preparing his case against Mr Touma even though it was not, in final submissions, pressed.
The claim in respect of “Loan 3A” was introduced into Mr Balout’s amended statement of claim (verified on 19 May 2021) as an allegation by Mr Balout that, pursuant to an “oral agreement” between himself and Mr Touma “on or around 30 June 2016” he provided a loan of $99,448.86 to Mr Touma. That amount was recorded as a credit entry in AMDG’s NAB bank statement for 30 June 2016 with the descriptor “Highfields Austral C Apfinsubs”.
Mr Balout’s evidence is that he caused payment of that amount “from a bank account held under the name of “Highfields to the bank account of AMDG”. Highfields Australia Pty Ltd was a company of which Mr Balout was a shareholder and director.
Paragraph 91 of the affidavit affirmed by Mr Balout on 21 March 2022 (under the heading “Loan 3A - 30 June 2016 - $99,448.66) is in the following terms:
“At the time of preparing this affidavit, I cannot precisely recall the reason for this payment. However, based on the conversations I had with Joe [Mr Touma] and the loans I gave to Joe in May 2016 and June 2016 as described in this affidavit above, I verily believe that Joe personally requested me to loan him an additional $99,448.66 to assist him in refinancing an AMDG vehicle”.
In cross examination Mr Balout agreed that the entry relating to a credit of $99,448.66 on 30 June 2016 in AMDG’s bank statement related to business he had conducted on behalf of “Highfields” and was not referable to a loan to Mr Touma.
“Loan 3A” is an explicit example of Mr Balout’s construction of a claim against Mr Touma by reconstructing bank records available to him. In this particular case he based his claim on AMDG’s bank statement in the absence of any corresponding entry in the bank statements available to him in the conduct of his affairs.
“Loan 4” is alleged by Mr Balout to have been made to Mr Touma in the sum of $22,000 on 22 November 2016. It has its foundation in AMDG’s purchase in November 2016 from a Western Australian company, PAG (WA) Pty Ltd trading as “Xoticar”, of a vehicle described in the vendor’s tax invoice dated 21 November 2016 as a “2012 Ferrari California Red Convertible Automatic 8- cyl (Petrol)”.
The invoice recorded that the purchase price of the vehicle was $220,000 and that a deposit of $22,000 had been taken. The purchase of the vehicle, and the payment of a 10% deposit in anticipation of the balance of the purchase price being paid within 14 days, had been arranged by an email exchange between the vendor and Mr Touma (speaking in the first person plural “we” rather than in the singular, I) on 21 November 2016. The vendor’s tax invoice was addressed to AMDG and recorded that the car was to be delivered to AMDG. The vendor was plainly dealing with Mr Touma as a representative of AMDG, not personally.
A bank statement from Mr Balout’s Police Bank account records a debit entry dated 22 November 2016 with a descriptor in the following terms:
“TFR TO XXXXX
To-PAG WA P/L Tr as Xoticar Cama Ref-Ferrari California”
There is no dispute between the parties that Mr Balout paid the deposit or that he did so on the account of AMDG, the purchaser of the vehicle. At that time Mr Balout was actively involved in the business of AMDG. Mr Touma says that Mr Balout provided the funds for the deposit because at that stage he owed AMDG money and it was convenient for Mr Balout to make the payment direct to the vendor as a set off from what he owed AMDG.
The fact that Mr Balout paid the deposit on the vehicle, on the account of AMDG, does not lend itself to characterisation of the payment as a loan to Mr Touma personally, who had no personal interest in the vehicle. (Incidentally, Mr Touma deposes that the vehicle was sold by a receiver of AMDG on or around 2 February 2021 and the proceeds of that sale were transferred to the receiver of AMDG, a company of which Mr Balout was then a director and his corporate vehicle was a shareholder).
I am not satisfied that Mr Balout’s transfer of $22,000 to the vendor of the vehicle, on the account of AMDG, was a loan to Mr Touma personally or that he had any obligation to repay it to Mr Balout. The claim for “Loan 4” must be dismissed.
By his original statement of claim Mr Balout claimed (as “Loan 5”) to have lent Mr Touma $90,000 on 14 December 2016.
By his amended statement of claim, Mr Touma limited the claim to $54,500, by a pleading to the effect that “[Mr Touma] repaid [Mr Balout] $35,500 of “Loan 5” by paying, in accordance with [Mr Balout’s] direction, those monies towards a deposit payable by [Mr Balout] for [Mr Balout’s] purchase of an investment property”.
In each of the statement of claim and the amended statement of claim Mr Balout particularised the claim by asserting that the loan had been made by way of a transfer on 14 December 2016 from his account with the Police Bank to “the bank account of Bilpin Projects Pty Ltd bearing the account number 575853354”. In fact, that account (No 575853354) was an NAB bank account in the name of Mr Touma and his brother Charlie Touma.
Where Bilpin Projects Pty Ltd fits in in the context of “Loan 5” (if at all) is unclear on the evidence.
In his cross-examination Mr Balout was tied to his pleadings so as to have him confirm that the $90,000 was transferred into an account owned by Bilpin Projects Pty Ltd and was, in fact, paid to Bilpin; but he also gave evidence that he thought Bilpin Projects Pty Ltd was a company of Mr Touma and that Mr Touma had told him to “put it [the $90,000] in my Bilpin account”.
The evidence does not include an ASIC search of Bilpin Products Pty Ltd but an email dated 29 November 2019 addressed by Mr Karl Burnett (the solicitor for Mr Balout) to Mr Balout and copied to Mr Touma, identified Mr Touma with “Bilpin Projects Pty Ltd ATF Bilpin Project Trust”. The subject of the email is in the following terms:
“WISEFOX HOLDINGS PL ATF WISEFOX FAMILY TRUST LOAN TO BILPIN PROJECTS PTY LTD FOR ITS PURCHASE OF MORTGAGE BETWEEN CRUCIS PTY LTD (LENDER/MORTGAGEE) AND PDM PROPERTY INVESTMENTS PTY LTD (BORROWER/MORTGAGOR).”
Wisefox Holdings Pty Ltd was Mr Balout’s company. Bilpin Projects Pty Ltd was associated with Mr Touma. The other companies mentioned were unrelated to either Mr Touma or Mr Balout.
The email recorded that, upon settlement of the transaction effected pursuant to a “loan agreement”, Mr Touma “wanted the balance of the net monies [after payment of the lender’s costs] to be paid to his bank account”.
That bank account was identified in the following terms:
“Bilpin Projects Pty Ltd ATF Bilpin Project Trust
BSB Number: xxx
Account Number: 10475603”
Whether that was an account (or the account) of Bilpin Projects Pty Ltd in December 2016 is a matter of speculation. However, it is not an account to which Mr Balout transferred $90,000 on 14 December 2016. The transfer was clearly directed to the joint account of Mr Touma and his brother.
What is common ground is that the $90,000 was transferred by Mr Balout, at the invitation of Mr Touma, for a particular purpose. That purpose was to facilitate the payment of deposits for the purchase of two shops in Edgecliff (one for Mr Touma, the other for Mr Balout) which Mr Touma was negotiating for the two of them.
Paragraph 120 of Mr Touma’s affidavit sworn on 11 July 2022 is in the following terms:
“On 14 December 2016 Alan [Mr Balout] transferred $90,000 to my personal account for the purchase of shops 3 and 4 of XX New South Head [Road] Edgecliff NSW 2027. The deposit required for Alan’s shop (shop 3) was $35,500. The remaining $54,500 was used as part of my deposit for shop 4.”
In paragraph [123] of the same affidavit, Mr Touma deposes that on 23 December 2016 he “made the relevant payments to LJ Hooker”, which I assume to be the well known real estate agency of that name.
The same bank statement of Mr Touma and his brother that records the receipt of $90,000 from Mr Balout’s Police Bank account on 14 December 2016 records two debit entries (without a narrative description) made by way of “Internet banking transactions” on 23 December 2016. One was for $50,000. The other was for $35,500.
There is no dispute between the parties that the sum of $35,500 paid out on 23 December 2016 represents that part of the $90,000 attributable to the purchase of an Edgecliff shop by Mr Balout.
Despite the course of cross-examination of Mr Balout, Mr Touma does not dispute that, of the $90,000 paid out by Mr Balout on 14 December 2016, $54,500 represented a loan to him.
Paragraph [125] of Mr Touma’s affidavit sworn on 11 July 2022 represents, in bare assertion, the substance of his response to Mr Balout’s claim for repayment of “Loan 5” as amended:
“The $54,500 was paid back to Alan [Mr Balout] through offsets or part of the funds transferred back to Alan through our number of businesses together.”
Mr Touma’s elaboration of this defence refers to the transaction, the subject of Mr Burnett’s email dated 29 November 2019, implicitly accepting that “Bilpin” was his company.
Paragraph [82](b) of Mr Touma’s “written closing outline” (MFI R43) is in the following terms:
“[Mr Balout’s] evidence is inconsistent with his subsequent actions in loaning Bilpin, the very company he now says failed to repay him, a substantial amount of money, almost $160,000 in order to pay out a mortgage/debt which it owed. … Simply put, if [the defendant] [which I take to be an error, intending to refer to Mr Balout] was really still owed money by Bilpin, it makes no sense for him to then advance a sum nearly three times larger than the existing debt.”
Having conceded that he was on 14 December 2016 lent $54,500 by Mr Balout, Mr Touma bears the onus of proving repayment. I am not satisfied that he has done so. The course of dealings between the parties does not lend itself to the conclusion that Mr Balout would never lend more money until repaid an earlier loan. Proof of a repayment by Mr Touma requires something more than an assumption about Mr Balout’s economic rationality.
Accordingly, I find that Mr Touma is indebted to Mr Balout in the sum of $54,500 on “Loan 5”.
(a) In the Dobro Proceedings:
(i) Declare that the whole of the Deed of Settlement is void; (ii) Order that judgment be entered in favour of Mr Touma, against Mr and Mrs Balout, in the sum of $1 million, together with prejudgment interest calculated from 22 August 2019; (iii) Order that the cross claim of Mr and Mrs Balout be dismissed.
(b) In the Loan Proceedings, order that judgment be entered in favour of Mr Balout, against Mr Touma, in the sum of $54,500 together with prejudgment interest calculated from the date of commencement of the proceedings.
**********
(2004) 218 CLR 592
(2009) 238 CLR 304
(1998) 44 NSWLR 667
(1992) 39 FCR 31
(2014) 251 CLR 640
(1930) 45 CLR 111
(2000) 201 CLR 520
(1954) 91 CLR 353
(2010) 241 CLR 357
(2004) 218 CLR 451
(2016) 260 CLR 85
(2004) 219 CLR 165
(1956) 99 CLR 560
The Option Deed provided for “the Buyer” (upon payment of an option fee of $4.875 million) to have the benefit of a call option for 18 months, with a right of extension for another 18 months upon payment of an extension fee of $4.875 million, and payment of a deposit of $195,000 upon the Buyer’s exercise of the call option, with the possibility of an “uplift fee” depending upon the number of lots approved for development of the Property.
Mr Touma contends, and the Balouts deny, that his execution of the Deed of Settlement was procured by a trick of Mr Balout in misrepresenting the personal circumstances of the Balouts and in failing to disclose to him their entry into the Option Deed. Mr Touma says that when he discovered the existence of the Option Deed Mr Balout assured him that, upon settlement of a sale of the Property, the Balouts would pay the “success fee” that the Touma parties claim. If that reassurance was given it was not honoured.
“The Buyer” (named in the Option Deed) on or about 22 August 2019 took a transfer of the Property at a sale price of $20,200,000. A Memorandum of Transfer dated 22 August 2019 was registered (as dealing number AP484601) on 26 August 2019.
The “loans” claimed by Mr Balout against Mr Touma are admittedly based upon his reconstruction of events based upon bank account statements. They are not based upon documented loan agreements.
The first of the alleged loans relied upon by Mr Balout was said to have been made on 27 July 2015, funded by the option fee received by the Balouts under the Option Deed. Subsequent loans are alleged by Mr Balout to have been made by him (pursuant to oral agreements) on or about 2 September 2015; 29 October 2015; 31 May 2016; 16 June 2016; 30 June 2016; 22 November 2016; and 14 December 2016.
I proceed on the basis that the burden of proving the fact that an advance of money was made by way of a loan is borne by the person who makes the advance (Heydon v Perpetual Executors Trustees & Agency Co (WA) Ltd (1930) 45 CLR 111 at 113) and that, once it is admitted or established that an advance was made by way of a loan, the onus of proving that the loan has been repaid is borne by the borrower (Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 569-570): Coshott v Sakic (1998) 44 NSWLR 667 at 671D-F.
An assertion by Mr Balout of an entitlement to a fixed, regular payment of $20,000 really only emerged as an allegation of a breach of contract asserted by Mr Balout as an answer to such, if any, entitlement the Touma parties might have to a $1 million success fee.
No payments of $20,000 other than the two in November-December 2014 were made by the Touma parties to the Balouts referable to one or the other of the July Agreement or the August Agreement.
The endeavour by Mr Touma to have Mr Balout execute a third version of their written agreement(s) came to nothing. In retrospect, Mr Touma suspects that delay in attending to preparation of a third version (through Mr Balout’s solicitor) was deliberate on the part of Mr Balout because, unbeknown to Mr Touma, Mr Balout was engaged in, or proposing to engage in, separate negotiations with Mr Nassif. That is an available inference.
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.
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.
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.
The August Agreement did not displace the threshold of $16 million for which the July Agreement provided.
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.
On my reading of the August Agreement (read with the July Agreement), 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”.
The address recorded in the August Agreement for that entity was, as was known to Mr Balout, a business address of Mr Touma. 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 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.
The preamble to the “Deed of Settlement” (prepared by or on behalf of the Balouts) is consistent with characterisation of Mr Touma as the party with whom the Balouts contracted, though (with the validity of the Deed under challenge) the Touma parties have not suggested that some form of estoppel arises from execution of the Deed.
It is not necessary to do more than to notice a contention of the Touma parties that the reference in the August Agreement to “Amalgamated Pty Ltd” should be read (by a process of construction or rectification) as a reference to the “Amalgamated Investments Trust” (constituted by a “Discretionary Trust Deed” dated 7 April 2014) of which Dobro was the Trustee. The “beneficiaries” named in the Trust Deed included the wife of Mr Touma (but not Mr Touma himself) and members of Mr Touma’s extended family with the surname “Maskaric”. The Deed was executed on behalf of Dobro by Dalibor Maskaric in his capacity as a director and secretary of the company. He was Mr Touma’s brother-in-law, the brother of his wife. Mr Touma was not formally a director of Dobro at the time the August Agreement was executed (he replaced Mr Maskaric on 17 August 2020). But he says, and I accept, that he had Mr Maskaric’s authority to transact business on behalf of Dobro.
A case sought to be made by the Touma parties in these proceedings has some passing similarity with that determined by the High Court of Australia in Simic v NSW Land and Housing Corporation (2016) 260 CLR 85. There the High Court declined to correct the misdescription of a party in a written commercial contract by a process of “construction” but saved the operation of the contract by an order for its rectification. The facts of the present proceedings differ substantially from those considered by the High Court, which was concerned with a formal contractual document ostensibly prepared by lawyers. These proceedings involve consideration of two intersecting commercial documents, largely the product of non-lawyers, in which the non-existent party was a “nominee”, alter ego, of a principal party and the other parties placed reliance upon the fact that they were contracting with him personally.
Nevertheless, in approaching questions of construction in the present proceedings notice should be taken of the High Court’s confirmation that the proper construction of a contract is to be determined objectively by reference to its text, context and purpose, and that, in the construction of a commercial contract, unless a contrary intention is indicated, a court is entitled to approach the task of giving the contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result, and a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience: Simic v NSW Land and Housing Corporation at 111 [78], citing Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640 at 656-657 [35] and, through that reference, Re Golden K**T Ltd [2009] EWCA Civ 636 at [28].
The parties’ entry into the August Agreement was quickly carried into execution by Mr Touma. On 5 September 2014 he caused the Balouts to be paid $140,000 as promised and, at about the same time, he procured from Mr Nassif a “handshake deal” to buy the Property for $20 million (or thereabouts), which Mr Nassif subsequently disclaimed but later re-negotiated with Mr Balout when Mr Touma had been sidelined by Messrs Balout and Nassif.
The parties appear not to have discussed whether, under this deal, Mr Touma would receive $2 million ($1 million from Mr Nassif and $1 million from the Balouts) but Mr Touma did contemplate that possibility, as an entitlement.
The Nassif handshake deal did not come to pass. By an email timed at 11.49 am on 11 September 2014 Toplace Pty Ltd’s in-house counsel (Mark Fitzpatrick) addressed Mr Balout and Mr Touma in the following terms (with editorial adaption):
At no time before the Deed of Settlement was executed did Mr Balout disclose to Mr Touma anything about his direct negotiations with Mr Nassif, the prospect of the Balouts’ entry into a contractual relationship with Mr Nassif or a nominee of Mr Nassif or (when it occurred) the Balouts’ entry into the Put and Call Option Deed.
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.
The Balout parties resist these findings on three bases.
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.
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.
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.
I do not accept that Mr Touma had knowledge of the Balouts’ entry into the Put and Call Option Deed before Dobro’s caveat was withdrawn. 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.
I also accept Mr Touma’s explanation that the caveat lodged against the title to the Balouts’ Property in the name of Dobro was not lodged on his initiative but (with his acquiescence) at the instigation of his prospective partners in acquisition of 133 Castle Hill Road.
I accept Mr Touma’s evidence that he did not receive the “anonymous” documents in his letterbox until after he had given instructions for the caveat to be withdrawn, and certainly not before lodgement of the caveat on or about 22 June 2015.
I also prefer the evidence of Mr Touma in his denial of the evidence of Mr Balout that there was a disclosure of the Balouts’ direct negotiations with Mr Nassif when, on 29 June 2015, Mr Balout requested Mr Touma to release him from their (July and August) Agreement(s) because the Balouts had decided to retain their property until after it was rezoned. I accept that in this conversation (as in the conversation on or about 14 July 2015) Mr Balout told Mr Touma that he was able to hold on to the Property for an extended time because he had received an inheritance. I infer from this, and Mr Touma’s hope of marketing “127” and 133 Castle Hill Road together, that it was more likely than not that Mr Touma executed the Deed of Settlement and withdrew Dobro’s caveat without knowledge of the Balouts’ Put and Call Option Deed or suspicion about the existence of any such deal between the Balouts and Mr Nassif. I accept Mr Touma’s evidence that Mr Balout mentioned his wife’s inheritance more than once. It is plausible that he would have done so in the course of justifying his change of course with Mr Touma.
Because of the course of evidence in these proceedings closer attention must be given to controversy about the timing of Mr Touma’s receipt of “disclosure documents”, mysteriously, in his letterbox following a tip off from an anonymous telephone call (from an unidentified female who asserted that Mr Balout had “ripped him off” and he should check his letterbox). The documents he found in his letterbox comprised: email correspondence, principally passing between Messrs Burnett and Fitzpatrick, some of which was copied to Joan Darc, between 14 April and 16 June 2015, but including an email dated 12 May 2015 sent by Joan Darc to Mr Burnett and concluding with an email sent by Mr Balout to Mr Burnett on 17 June 2015 with the subject heading “Balout proposed sale of [the property]”.
Mr Touma maintained that he received those documents from an anonymous source (which, controversially, he says he subsequently identified as Joan Darc) in about July or August 2015, after he had executed the Deed of Settlement. Drawing on the fact that the last of the emails was dated 17 June 2015, counsel for the Balouts contended that Mr Touma must have received the documents sometime between 17 and 22 June 2015, putting him squarely on notice that the transaction later embodied in the Put and Call Option Deed was on the cards.
In the course of his cross examination, Mr Touma said that the day after he received the documents he had a conversation with Joan Darc in which she revealed herself as the anonymous source of the documents placed in his letterbox. Only after the conclusion of his cross examination was Mr Touma made aware that the Balout parties had procured an affidavit from Joan Darc in which she denied being the source of the documents.
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.
In any event, the suggestion that Mr Touma would have freely and voluntarily executed the Deed of Settlement had he known that there was a distinct possibility, if not the fact, of a concluded agreement between the Balouts and Mr Nassif is objectively implausible.
Mr Balout’s evidence was that he did not learn of Dobro’s caveat until 14 July 2015, after the Deed of Settlement had been executed. Nothing appears to turn on this but an email exchange between Mr Balout and Mr Burnett (on 14 July 2015), a text message from Mr Balout to Mr Touma (on or about 13 July 2015) and a notation on a search copy of the caveat (bearing the date 14 July 2015) suggest that the caveat may have come to the attention of Mr Balout and his solicitor at or about the time Mr Touma executed the Deed of Settlement, possibly just after that time.
The fact that Mr Touma secured a withdrawal of the caveat without protest is consistent with his evidence that he had no knowledge of the Put and Call Option Deed until after he had signed the Deed of Settlement.
At 11.10 pm on 14 July 2015 he sent an email to Mr Burnett in the following terms:
Mr Balout’s representation that the Balouts had recently received an inheritance from Mrs Balout’s grandmother which relieved them of a need to borrow money from Mr Touma was false because the grandmother had not died recently (but two years earlier), they had not received a substantial inheritance of the order that would relieve them of a need to borrow money and their repayment of $180,000 to Mr Touma was funded, not from any inheritance, but from the option fee received upon execution of the Put and Call Option Deed. Mr Balout’s representation was intentionally calculated to mislead, and did mislead, Mr Touma into executing the Deed of Settlement.
I am satisfied that, relying on Mr Balout’s representations and knowing nothing of the existence of the Put and Call Option Deed but reasonably believing he would have been told by Mr Balout of any deal the Balouts had made for a sale of the Property, 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.
I am satisfied that, had Mr Touma known of the existence of the Put and Call Option Deed, he would not have signed the Deed of Settlement. I am satisfied, also, that Mr Touma would not have signed the Deed of Settlement had he known of the falsity of Mr Balout’s misrepresentations.
Mr Touma’s reliance on what Mr Balout represented to him was critically connected with Mr Balout’s concealment of the vital fact that the Balouts had executed the Put and Call Option Deed.
Mr Touma was receptive to Mr Balout’s request that he execute the Deed of Settlement because, not only of ties of friendship, but because (as Mr Balout well knew) he had acquired an option over 133 Castle Hill Road and he had high hopes of joining with the Balouts in common negotiations for the sale of both “127” and 133 Castle Hill Road for their mutual advantage. Had he known of the existence of the Put and Call Option Deed or of the falsity of Mr Balout’s representations, he would not have executed the Deed of Settlement or otherwise acted to prejudice his claim for a $1 million success fee under the August Agreement (read with the July Agreement).
When Mr Touma read the anonymous documents (as I find, in August 2015) he was upset and angry. He confronted Mr Balout in a conversation to the following effect (recorded in paragraph 31 of his affidavit sworn on 7 September 2022):
If (absent a grant of relief to Mr Touma under the Australian Consumer Law) the Deed of Settlement were be given operation according to its terms, it would be fatal to Mr Touma’s claim. Clause 3(a) of the Deed evidences an agreement to terminate the August Agreement (and implicitly the July Agreement) and records mutual releases.
Concealment of a material fact (being a fact material to a decision to be made) which a decisionmaker has a reasonable expectation would be disclosed if it exists can constitute conduct on the part of the party who conceals the fact which is misleading or deceptive or likely to mislead or deceive: D**emagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32; Miller and A**ssociates I**nsurance B**roking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 368 [14]-371 [23].
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.
The fact that the Balouts had entered the Put and Call Option Deed (and received a substantial option fee) which, by an exercise of an option, as a practical matter, rendered a sale of the Property at a price greater than $16 million commercially certain was a fact highly material to any decision to be made by Mr Touma to execute the Deed of Settlement or not to do so. Concealment of the fact of the Put and Call Option Deed, and an option fee sufficient to repay the Touma parties $180,000, was masked by Mr Balout’s false representations that the Balouts had received an inheritance from Mrs Balout’s grandmother and that, with the benefit of that inheritance, they had decided to withdraw the Property from the market for the time being.
The Balouts’ concealment of the fact of the Put and Call Option Deed and the option fee paid to them (reinforced by false representations about the source of funds available to them and their decision to take the Property off the market) was intended to mislead and deceive Mr Touma and it did so.
Relying upon Mr Balout’s false representations, ignorant of the critically material fact that the Balouts had entered the Put and Call Option Deed, Mr Touma executed the Deed of Settlement and thereby, according to the terms of the Deed of Settlement, gave up any claim to the success fee which, not unreasonably, he thought remained in play. The fact that he subsequently acquiesced in Dobro’s caveat being withdrawn from the title of the Property corroborates his claim of ignorance of the Put and Call Option Deed and reliance upon Mr Balout’s false representations.
In my opinion, the conduct of the Balouts in presenting the Deed Of Settlement to Mr Touma, procuring his execution of it and purporting to implement its terms constituted conduct in contravention of the Australian Consumer Law, section 18.
That conduct was such as to justify, and require, a remedy.
In my opinion, the appropriate remedy is that the Deed of Settlement be declared void, leaving Mr Touma to his contractual entitlements under the August Agreement, read with the July Agreement.
That proposition was not answered in terms, but it was broken down in the following exchange between counsel and Mr Balout: